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A Cabinet paper released by the ministry last week shows that participants are picking up the tab as the regulator’s budget increases significantly over the coming years.
The paper said the FMA has faced an expansion of its regulatory remit and broader cost pressures in recent years.
In April, Cabinet agreed to increase the FMA’s appropriation over three years to $60.805 million by 2022/23.
Cabinet agreed that the majority of this increase – $23.501 million per annum by 2022/23 – would be funded via an increase in the existing levy on financial service providers.
“This will enable the FMA to meet its existing operational pressures, be better prepared to respond to unexpected market developments or events, and be able to undertake effective and swift implementation of the new financial advice regime. It will also enable more cross-agency collaboration to improve coordination and efficiencies in the financial system,” the paper said.
As at 2019/20, the Crown contributed approximately 25% of the FMA’s funding, with the remaining 75% recovered via a levy on financial markets participants.
Cabinet confirmed through Budget 2020 that $1.304 million per annum of the $24.805 million increase would be funded by the Crown on an ongoing basis and the remaining $23.501 million would be met by industry through increases in the FMA levy.
With the fully phased-in increase in the FMA’s funding and the Crown’s contribution, the new split of the FMA’s operational funding will be approximately 17% Crown and 83% levy from 2022/23 onwards.
The funding and levy increases are now being phased in over three years instead of two.
“This is to lessen the impact of increased levies on financial services businesses at a time when revenues may be lower because of the economic impact of Covid-19. This adjustment complements the other lines of support the Government has been providing businesses to cushion the impact of Covid-19,” the paper said.
The paper also confirms that registered financial service providers that are financial advisers will pay a fixed levy of $400 when the changes are fully implemented. Licensed financial advice providers will pay a fixed levy of $340 with an additional $300 for every nominated representative and $1,180 if the advice provider gives advice on its own account.
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