The Ministry of Economic Development (MED) has released a discussion document on the fees and levies to fund the Financial Markets Authority (FMA), External Reporting Board, Companies Office and Insolvency and Trustee Service.
The amounts involved are significant, and the basis for calculation is contestable, so we recommend that you take the opportunity to have your say.
Submissions are due by 5pm, 8 July. The new fee scale will take effect from 1 February, 2012 and will be reviewed after two years.
MED is not seeking feedback on the split between state and user-pays funding as that decision was taken in the budget.
The fees proposed for Authorised Financial Advisers (AFAs) and Qualifying Financial Entities (QFEs) under the Financial Adviser Act (FAA) are:
AFA, both associated with a QFE or independent, and QFE Category 1 adviser.
QFE Category 2 adviser and Registered Financial Adviser (RFA).
QFE (invoiced according to the number of Category 1 and 2 advisers it has).
All fees would be paid on registration and then annually.
There will also be an FMA levy to fund the FMA’s general monitoring, supervision, surveillance and investigative roles. Four options are offered.
Option One (MED’s preferred option) would take a narrow focus and would levy only providers who are required to be registered under the Financial Service Providers (Registration and Dispute Resolution) Act (FSPA) and issuers who are required to file financial statements under the Financial Reporting Act (FRA).
Option Two would be broad-based and would capture all companies, limited partnerships, building societies, credit unions, industrial, provident and friendly societies and contributory mortgage brokers.
Options Three and Four would reflect this distinction but would wind the FAA and the FMA levies into a single payment.
The cost differences generated by these different approaches are significant.
Providers registered under the FSPA and issuers under the FRA.
All companies, limited partnerships, building societies, credit unions, industrial, provident and friendly societies, contributory mortgage brokers.
As per Option One.
As per Option Two.
The critical issue for submission is whether the levy catchment should be broad or focused on those firms which are most heavily involved in New Zealand’s financial markets. Other issues are:
- whether Option One is correctly targeted as it will not catch all financial market participants or issuers (for example, private companies trading through platforms such as Unlisted), and
- whether the Option One levy should be graduated according either to the relative benefit groups derive from operating in a well-regulated market or to the level of risk they create for the FMA.
The main advantage of Options Three and Four are that they reduce dramatically the amount payable by each FAA entity or individual. But this is at the cost of other financial providers, companies and entities. The MED also says that a combined levy would put a disproportionate burden on smaller operators.
The FMA will also have an auditor oversight function from 1 July 2012. Proposed fees are $7,900 a year for each licensed auditor plus the actual costs of conducting the practice reviews mandated by the Auditor Regulation Act. MED anticipates auditors will pass on the auditor levy to issuers as part of the fee charged for their services.
External Reporting Board (XRB)
The XRB will replace the Accounting Standards Review Board on 1 July, 2011 and will be responsible for all financial reporting and audit and assurance standard setting. The proposed levy is $10 a year, to be paid by all companies, limited partnerships, building societies, credit unions, industrial, provident and friendly societies, and contributory mortgage brokers, at registration and with their annual return.
The document proposes restoring a company annual return fee. This would be levied at $22.50 for companies and $40 for limited partnerships, building societies, credit unions, industrial, provident and friendly societies and contributory mortgage brokers.
The revenue from this would finance reduced registration fees (from $153.33 to $110 for companies and from $276 to $250 for the rest).
Proposed Personal Property Securities Register (PPSR) fees are:
- search fees: 50c for wholesale clients and $1 for retail clients (both down from $1.02), and
- financing statements/renewals: $4 for wholesale clients and $9 for retail clients (both up from $3.07).
Insolvency and Trustee Service
The proposed fee is $2.50 a year for each registered company for liquidation services provided by the Official Assignee.
Summary of annual outcomes
The document contains a summary table giving some hypothetical examples of the costs for different types of entities under its preferred model. Some of the examples include:
|QFE (company) with 200 advisers (60 Category 1; 140 Category 2)
|AFA (operating through a company)
|RFA (sole trader)
|Trading company (not a financial service provider)