Costs of regulation explained
Leaders in the financial services industry were surprised to find in the Budget that the industry would be paying millions of dollars for the regulation of the sector.
Thursday, June 5th 2008, 7:18AM
Finance Minister Michael Cullen said in the Budget, that $9 million will be provided over the next four years to speed up the introduction of new laws governing financial advisers in a bid to ramp up protection for investors.
The government will spend:
- $6.1 million of operating funding over the next four years
- $2.9 million of capital funding for the implementation of new laws to improve the supervision of financial advisers and institutions.
The operating cost of $6.1 million over the next four years is predominantly additional funding for the Securities Commission to operate its new functions relating to supervising non-bank deposit-takers, trustees and financial advisers.
However, $1.05 million of that allocation goes to the Ministry of Economic Development to pay for additional capacity to support the legal reforms in the sector, such as regulation of financial advisers and financial service providers.
The capital cost of $2.9 million is split in two. Around $1.5 million is flagged for the establishment of a register of advisers and institutions.
The other $1.4 million "is funding (that) will initially be provided by the Government and will be available to industry to assist in setting up APBs," Commerce Minister Lianne Dalziel says. "The APBs will be expected to repay these start-up costs over time, hence the cost will ultimately be borne by industry. I should clarify that the industry funded $1.4 million is actually part of the $2.9 million, rather than additional."
With regards to the operating cost of $5.1 million, this is the estimated operating cost for the first four years of the financial services provider register which will be provided through the Companies Office.
"The costs of the financial services provider register will be passed on to industry in the same way as the costs of other registers. This cost recovery is common practice among a number of registries, such as those with which the financial services provider register is being integrated."
She says these register costs were previously flagged.
"Industry will get a chance to submit on it at Select Committee. It is also important to note that implementation is some time away and there will of course be all due consultation prior to implementation."
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