Proposed Fee and Levy Changes for the FMA, External Reporting Board, NZ Companies Office, and Insolvency and Trustee Service
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Submission Excerpt
TCA's General Comments
TCA notes that Cabinet has decided that the additional funding required for the institutions that regulate New Zealand’s corporate environment and financial markets will be sourced from third party fees and levies. While TCA appreciates the concept of industry levies, there is an aspect of the policy which has received no mention. Accountability. In view of the level of funding being sought from industry, accountability and transparency are required from the institutions receiving the levies proposed. As noted, there are no mechanisms suggested that would enable levy-payers to hold the FMA to account for how well the funds were used although work programmes were mentioned. Some accountability is strongly recommended. Typically levy-payers would expect as a minimum an annual business plan, budget and reporting against budget.
The fee for AFA’s associated with a QFE being the same as the fee for those AFAs not associated with a QFE does not take into account the different risk and cost profiles and the differing risks for FMA supervising AFAs associated and not associated to QFEs. QFEs have invested heavily in compliance systems so their AFA’s levy should be reduced to reflect that investment and the reduced risk profile. The wider issue is that the entity and the entity-systems should be the regulator’s focus. Those institutions which had invested heavily in systems to become a QFE are being penalised by the proposed fee structure which ignores the much reduced risk profile of AFAs working for a QFE.
Those financial service providers which have decided not to seek QFE status, not only have to meet their employees’ AFA and RFA annual fees ($680 and $140 respectively) but also have to meet the FMA levy required from financial service providers, ie a further $910 per AFA (and RFA?).
The activities of the regulator that are funded by the FMA levy and those that are funded by the FAA levy, overlap substantially. Both levies cover surveillance and enforcement activities for example, so in effect advisers are being double charged, first for FAA-related surveillance and enforcement and then for surveillance and enforcement conducted by the FMA on non-adviser work. The only cited activity funded solely by the FMA levy is the intelligence function.
As a final comment, TCA notes ultimately the consumer will end up bearing the costs imposed on advisers, further reducing the affordability of professional advice.