by Susan Edmunds
The FMA said it needed to adjust its funding because the $28.7m it currently gets from a combination of Government funding and industry levies is no longer enough.
Without more money, from July next year it would strike significant trouble.
It was argued that it was appropriate for participants to pick up the tab, rather than taxpayers, because they stood to benefit most from consumers’ trust in a better-regulated financial market.
Government gave the final sign-off to the increase in levies last week. Commerce Minister Paul Goldsmith said while most levy-payers would end up paying more, the consultation process had given consideration to the structure of the model so it did not pose barriers to entry or growth for levy-payers.
It had originally been suggested that under the enhanced funding case, which has now been adopted, AFAs could have their annual levy increased from $348 to $520.
Instead, with the changes announced, AFAs will have their levy drop to $330.
MBIE noted that a key theme of submissions received had been that the burden on small financial service providers needed to be reduced, and barriers to entry or growth for new entrants and small financial markets participants needed to be addressed.
AFAs and their associations argued that they wanted the changes to the levy postponed until after it was clear what the full impact of the new Financial Advisers Act would be on their business. But MBIE said that was not possible.
“Uncertainty around the full impact of compliance costs on their operating model is affecting their ability to make investment decisions and grow. Consequently there was a strong desire for regulatory changes in the financial sector to be coordinated to minimise the impact on business. The FMA levy changes will take effect from July 1, 2017, by which stage the full impact of FA Act changes will not be known. However, the FMA needs additional funding from that date, so aligning the timeframes of the FMA’s funding and levies review with the FA Act review is not possible. However, in consideration of the impact on AFAs we are proposing to keep the AFA levy unchanged.”
DIMS providers, both class and personal, are set for a bigger levy increase but also not as big as had been expected.
At present, they pay either $304 a year or, for those who have a class license, $1739 in levies.
Those who have FUM under $50 million will now pay $950, those between $50m and $100m will pay $2400 and those $100m to $500m will pay $4800.
Previously, it had been suggested those with FUM under $100m would pay $6500 in the enhanced case, between $100 m and $250m $13,000 and above that $38,000.
DIMS providers submitted that the proposed changes were unfair and would make their business operations unsustainable, forcing businesses out of the market.
The biggest DIMS providers will now have to pay $36,000 a year nut that does not kick in until they have $2 billion under management.
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