The Financial Markets Authority (FMA) scooped up more licensing fees than expected over the 12 months to June 30, according to the regulator’s just-released annual report.
“Other revenue was above budget due to higher than anticipated revenues from licensing and application fees across a range of categories,” the FMA report says.
Over the year almost $890,000 flowed into FMA coffers from industry imposts, the report shows, during a period that included the final phase of Financial Markets Conduct Act (FMC) manager licensing.
However, the 2017 fee-take was well below the previous year’s figure of almost $1.6 million, which covered the initial licensing of about 50 discretionary investment management service (DIMS) providers and close to 40 managed investment scheme (MIS) managers. Almost 70 MIS licences have now been issued by the FMA.
The FMA report also reveals the $400,000 penalty dished out to former Milford Asset Management portfolio manager, Mark Warminger, late this June is now sitting in the regulator’s accounts.
“These monies were paid to the FMA on the 5th September 2017, and the Crown is currently deciding how these funds will be applied,” the report says.
Warminger, who formally left Milford earlier this year, retains a 1.35 per cent stake in the $4 billion Auckland-based funds management firm.
The FMA report also highlights the success of the Warminger prosecution – among a raft of other legal forays – for its “deterrence effect”.
“It also provides real-world examples for market participants to test their processes and systems against and understand ‘what not to do’,” the report says. “Firms have tightened processes and provided further training following these cases to prevent these issues arising.”
It is understood the FMA is currently doing the rounds of fund managers presenting its views on expected compliance standards in the wake of the Warminger win.
According to the annual report, the regulator also found “some providers” were not meeting their FMC licence conditions. The report name-checks poor compliance procedures and unclear monitoring of third-party service providers (such as fund managers and custodians) as examples of licence breaches.
“While we accept that overall conduct and conduct regulation is at an early stage of maturity in New Zealand, a provider not fulfilling a condition of licensing is not satisfactory, and we expect that to improve,” the FMA says.
Given the freshness of the FMC regime, the regulator has until now given firms in breach of licence conditions a fixed period – “typically, three to six months” – to remedy.
“Where there is a supervisor (for example for a fund manager), we require them to monitor compliance,” the report says.
“If progress has not been made within the timeframe, we expect the entity – and its supervisor if there is one – to report that as a breach. At that point, we will review our options, including using FMC Act measures such as imposing tighter licence conditions, formal direction orders or even removing licences.”
The FMA is also considering how to improve the accessibility of licensed fund and scheme information on the Disclose website.
“We have started drawing data from the [Disclose] register to help with our reporting, and are currently exploring releasing KiwiSaver fees and performance information in a more publicly accessible format,” the report says.
Rob Everett, FMA chief, says in the report that the regulator’s focus on good conduct – including the publication of a guide earlier this year – has set the tone for how it intends to engage with the industry.
“We expect debate, and some resistance, to the influence we want to exert on how providers engage with their customers,” Everett says. “But we are committed to contributing to high standards of behaviour. We encourage, guide, and occasionally compel, providers and intermediaries to think about how they are serving their customers.”