Paying the piper, discussion document on regulator funding released

Friday 10th June 2011

Commerce Minister Simon Power today released a discussion document on third-party funding options for the Financial Markets Authority (FMA), the External Reporting Board (XRB), the companies Office and the Insolvency Trustee Service.

"New Zealand needs well-functioning financial markets to entice investors back so businesses have access to the capital they need to grow, and a key component of that is for the regulators to be at the top of their game," Power said.

"We've given the main financial market regulator, the Financial Markets Authority, more grunt and it needs resources to deliver on that.

"In particular, the FMA has taken on new regulatory functions to help life the bar in terms of market behaviour, and drive a culture of visible, proactive and timely enforcement.”

The discussion document proposes two levies to cover the cost of these extra functions, and of administering the Financial Advisers Act.

"The Government recognises that in order for the FMA to do its job it needs to be adequately resourced, and market participants, who stand to benefit from operating in the stronger regulatory environment, should contribute to that."

The Government has previously announced that from 2014/15 the FMA's budget will be around $26 million – an increase of around 44% over the $18 million budget for the current regulators.

The discussion document also proposes:

- New charges to fund the FMA’s responsibilities for the new auditor oversight regime, which is a core element of financial market confidence.

- A levy to cover some of the operational costs of the additional functions of the XRB, which is responsible for all financial reporting, audit and assurance setting standards.

- Changes to the fee structure of the Companies Office and the Insolvency and Trustee Service, to cover the costs of providing these services to companies.

The FMA's new powers include the ability to exercise an investors’ right to take civil action against a financial market participant, the ability to prevent products from being structured to avoid being supervised by the FMA and enhanced powers to deal with low-ball unsolicited offers.

The discussion document is available online at: http://www.med.govt.nz/templates/MultipageDocumentTOC____46014.aspx

Submissions close on July 8.

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