by Niko Kloeten
The levy, which is charged to registered financial services providers to help fund the FMA’s activities, does not apply to Australian fund managers who use the mutual recognition of securities agreement to sell products here.
John Berry, executive director of Pathfinder Asset Management and co-founder of the boutique fund manager forum, said that was not fair on New Zealand-based managers.
“The purpose of the levy is to fund regulatory projects in New Zealand. The view of the regulator is the people who benefit from confidence in the markets should pay for the overheads, and in their view the people who benefit most are the issuers like New Zealand fund managers,” he said.
“But all issuers in the New Zealand market benefit from improved regulation and improved confidence, not just those that are based here.
“Our argument is the Australian unit trusts are piggybacking our regulations. The burden of cost for regulatory development and improvement should be shared by all participants.”
Berry said New Zealand fund managers faced much greater costs to sell products in Australia than Australian firms faced in New Zealand.
“You can’t just go over there and start selling your product. It’s quite an expensive process.
The cost structure of the FMA levy is decided by the Ministry of Business, Innovation and Employment (MBIE).
MBIE spokeswoman Helen O’Leary said mutual recognition operated on the basis that the host jurisdiction relied on the home jurisdiction’s regulatory system relating to the offer of the financial product.
“Under the arrangements, the costs in administering the regime are consequently primarily borne in the home jurisdiction.”
O’Leary said that while Australian managers don’t have to pay the levy in New Zealand, they are subject to regulatory costs in Australia such as registration fees and licensing fees.
“This funding helps to recover the costs of administering the Australian regulatory system.”
She said there were differences in how financial services were regulated in Australia and New Zealand.
“As a result, there are differences in the distribution costs associated with financial products sold in New Zealand compared to the distribution costs in Australia.”
A review of the FMA levy is planned for later this year.
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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