FMA: Pressure on finances
FMA expects pressure on its budgets from staff numbers as it adapts to its role with new regulation, it says in its latest annual report.
Friday, November 21st 2014, 5:59AM 
4 Comments
by Susan Edmunds
It published its annual report for the 12 months ended June 30 yesterday.
During the period, the regulator started implementing the Financial Markets Conduct Act, described as the largest statutory change in financial services in the past 30 years.
Chief executive Rob Everett said after its third full year in operation, the FMA was established as a respected regulatory.
“Our focus remains on building confidence in the robust framework that supports the financial markets. We’ve built our capability, processes and expertise so we can administer the FMC Act over the long term.”
He cited undertaking extensive monitoring of advisers as an achievement in its role, and the new code of conduct for advisers.
“Financial advisers are a priority area of focus for our team. This is because New Zealanders need access to advisers who can provide quality advice that is appropriate to the products or services they are buying, or the investments they are making.”
The report said the FMA was managing its finances prudently because it anticipated ongoing pressure on staff numbers and capital expenditure on systems to support staff.
“This pressure includes increased monitoring of markets and our interactions with participants as the FMC Act takes full effect over the next two to three years. In turn, we will be subject to a steady demand on our funding, including our accumulated funds.”
The FMA’s income in 2014 was $31.2 million, including a Government grant, interest and third-party revenue from directly-provided services. This was $400,000 ahead of budget due to new fees introduced for reviews of audit firms.
Total expenses were $29.4 million, slightly lower than the budget of $29.7 million.
“Our personnel costs, which are our single biggest area of expenditure, were 8% over budget at a total of $19.3 million. This was due to the additional staff we hired, many of them with highly sought-after financial markets and ICT skills. These skill sets are required to implement the FMC Act.”
FMA spokesman Andrew Park said the further implementation of other aspects of the FMCA, such as DIMS licensing for advisers, would not put undue pressure on the FMA’s finances. “The FMA has been preparing for the implementation of the FMC Act for the last 18 months and this work will continue for the next two years at least. We have been resourced appropriately. Our mandate has increased and as well as licensing AFAs we have been taking on responsibility for much broader populations within the markets. We have built our capability to deal with this and do not have concerns about the levels of funding available.”
In the year to June 30, the FMA received a total of 2701 inquiries and 839 complaints. Inquiries related primarily to the implementation of the FMCA and AML regulation.
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Comments from our readers
No smart drug dealer is going to go near an AFA
Money launderers run from my office daily at question 3 of my 60 "know your client" questions
I have a much loved close relative who nearly died from drugs
I reiterate - I would happily donate $5,000 pa to front line drug policing if the FMA would release me from wasting my time filling in forms and wasting my money paying for AML audits
I liken AML (as it relates to my work) as "chasing shadows that I cannot see"
Regulatory thinking is that the beneficiaries of a better regulated market should fund the FMA - and these beneficiaries are fund managers and financial advisers (because investors are more willing to invest with the benefit of greater protection). Why should should only local fund managers and financial advisers pay for this - Australian managers distributing product here receive identical benefits for free. If the FMA needs more funding don't levy existing local participants harder - widen the net to capture offshore participants like Aussie fund managers who benefit from our regulated market (and are currently free riders).
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FMA Chief Executive Officer NZD $500,000 +
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Chairman of Federal Reserve USD $199,700 (2013)
President of United States of America USD$400,000 (2014)
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