FMA needs more money

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The Financial Markets Authority expects to collect $1.2 million in licensing fee revenue as it works through the process of granting FSLAA licences over the next year, a new document shows.

Thursday, January 30th 2020, 6:00AM 3 Comments

The Ministry of Business, Innovation and Employment has released a discussion document as part of a review of the regulator's funding.

It said the FMA was coming under increased pressure as its remit grew and was forecasting a deficit of $4 million in the year 2019/2020, in part because of the work required to develop the new financial advice regime.

"The new regime will require the FMA to license a large number of entities (estimated at approximately 2,300) and will increase the number of entities that are subject to the FMA’s supervision. Many of those who are expected to operate in the new regime will be subject to licensing and monitoring by the FMA for the first time and thus will require more intensive engagement from the FMA. The FMA’s view is that significant work is required of it to assist the sector to understand and meet the requirements of the new regime.

"To date, the FMA has not received any additional funding to prepare for implementation of the new financial advice regime or the conduct and culture reviews. This has required the FMA to utilise existing cash reserves and divert resources from other areas including, in some cases, reducing or deferring usual monitoring activities of some regulated populations."

The document lays out three scenarios for increased funding – an increase of $9.215 million a year to a total of $45.215 million, an increase of $20.081 million to a total $56.081 million or the FMA's preferred option of $24.805 million a year, to a total of $60.805 million.

It said the smaller amount would be the bare minimum required for the new regime and would not address broader cost pressures. It could affect consumer confidence.

A mid-range increase would allow a moderate increase in resources and medium-to-high intensity based monitoring for financial advice.

The top-level increase would give the FMA the ability to conduct broader and deeper activity with a more proactive approach to the financial advice regime.

The document also asks whether the increase should be met by the Crown increasing its contribution proportionally or if it should remain the same and levy-payers pick up more of the tab. 

“As the financial markets regulator, the FMA plays a crucial role in ensuring New Zealand’s financial markets are fair, efficient and transparent,” Sharon Corbett, manager of financial markets at the Ministry of Business, Innovation and Employment, said.

“The FMA’s funding was last reviewed in 2016. Since then, the FMA’s remit has broadened and now is the right time to look at its funding. The FMA and MBIE, as the FMA’s monitoring agency, are consulting on proposed options to ensure the FMA’s funding, including its levy settings, is proportionate to its workload.

“An MBIE-commissioned review by PwC noted that the FMA is a high-performing organisation that delivers a lot for the funding it receives, with good alignment between its activities and its main statutory objective.

“We want to find the right balance between ensuring the FMA has the resources it needs to continue delivering those benefits in the face of future demands, while setting levies that are fair and proportional.

“Consultation with industry plays a critical role in achieving this balance.”

The consultation process ends on February 28.

Tags: fees FMA FSLAA licensing

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