Paying the piper – how much you could have to pay for the FMA
[UPDATED] AFAs could face annual levies of up to $1,715 and RFAs $1,140 under proposals to fund the new Financial Markets Authority (FMA).
Friday, June 10th 2011, 4:28PM 
14 Comments
by Benn Bathgate
A Financial Adviser Act levy on AFAs, RFAs, QFEs and the advisers they are responsible for is one of the options outlined in the Ministry of Economic Development discussion paper on funding the FMAs $26 million budget.
Other proposals include an FMA levy on either financial service providers and certain issuers, an FMA levy on all companies and other entities or a combined FAA/FMA levy on all companies and other entities.
When the Financial Advisers Act was passed, Cabinet decided that the associated regulatory work, which costs the FMA around $6.2 million per year, would be fully third party funded.
Fees are charged under the FAA for the authorisation of financial advisers and other direct services, and an FAA levy "will recover the portion of the appropriation that is not covered directly by the FAA fees revenue," the paper says.
The paper outlines a number of varied levy structures with differing levels of fees.
Under the one of the proposed FAA levy structures, charges of $680 will apply to AFAs not associated with a QFE, AFAs associated with a QFE and QFE Category One advisers.
QFEs will be charged $8,000, QFE Category Two advisers and RFAs $140.
The outline for a combined FAA/FMA levy - the preferred option - would see AFAs operating through a limited liability company charged $1,715, RFA sole traders $1,140 and QFEs $69,435.
The FMA proposals includes two options, the preferred option of a $910 levy for all financial service providers under the Financial Service Providers (Registration and Disputes Resolution) Act 2008, or a $20 levy on all companies, limited partnerships, building societies, credit unions, industrial and provident societies, friendly societies and contributory mortgage brokers.
The document says the fee levies was worked out after the March 31 registration deadline when numbers of AFAs and QFEs were better known.
In support of its levy assumptions, the paper approximates the number of AFAs as 720, AFAs associated with a QFE (1,180), RFAs (5,000), QFEs (75), QFE Advisers Category One (3,500) and QFE Advisers Category Two (20,000).
The document also outlines how product complexity was a guiding factor is setting the levies.
"The preferred basis for charging the FAA levy is either per adviser or per entity, and the amount of the levy is varied. Where the FAA levy is applied per adviser, the amount of the FAA levy reflects the regulatory costs relating to the risks associated with the complexity of the products advised upon, and not the organisational structure within which the individual is providing the advice."
Citing the "uncertainty inherent in introducing fees and levies to fund new Government services" the document says any fee and levy options arising from the proposals will be reviewed two years after implementation, "once the number of entities levied and the regulatory and operating changes have been more firmly established and their costs are clearer."
Download FMA FUNDING DISCUSSION DOCUMENT
Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz
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Comments from our readers
Well, maybe I am wrong. With lesser advisors, there will be lesser audit to do, so some of these auditors could be made redundant, thus, lowering the cost of administering advisors.
Also, I stand corrected, before this whole regulation thing came into effect, it was also assumed that there will be something like 5000 AFAs? To-date, there are only 15%?
In conclusion, advisors just have to pay for somebody's mistake, pay someone to audit them, and be prepared to pay for whatever.....then transfer the costs to clients if you need to. Hopefully FMA will ask you to justify your fees charged to clients.
In reality - it wasn't our fault that the FMA made a massive miscalculation on the projected number of respondents. Hang - I am sure that if I had made such a colossal error in the budget, and THEN tried to recoup my losses from my clients without having disclosed the fees beforehand, I would be up for a pretty hefty fine!
Excellent; anti-spam code was "take".
I have been doing some research to see what may be going on here. The Sunday Star Times gives me an indication. The employment agency company had a full page advert for just the key staff required to run this new Government Department. Here is a summary;
1) Head of Strategic Intelligence responsible for a team of around 12!
2) Head of Enforcement leading around 20 staff
3) Head of Primary Regulatory Operations leading around 35 staff
4) Head of Compliance Monitoring leading around 25 staff
5) Head of Stakeholder Management leading ' a small team'. Lets assume 5.
6) Head of Legal leading a small team. Lets assume 5.
7) Head of Business Performance leading around 20 staff.
Thats a total of 122 personnel. Add in large salaries, cars, entertainment falsh office space and you'll see where millions of dollars go. I will, watch with interest to see how all these personnel can keep themselves busy.I
Their ordeal should not be trivialised by anti semitic comments like these.
You should be ashamed of yourself
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