The Financial Markets Authority (FMA) turned in a more than $2.8 million surplus during the 12 months to June 30 despite spending about $3.5 million above budget.
FMA reported revenue of almost $80.7 million over the financial year against the expected $73.4 million on the back of higher interest income, windfall gains from court decisions and a reclassification of government capital contribution as operating revenue.
At the same time expenses for the corporate cop hit a record high of $77.8 million versus the budgeted $74.4 million, the accounts show.
Total staff costs came in at $53.6 million for the 12-month period, more than $2 million above target (and $7 million more than the previous year) “due to overspending on salaries”, the FMA report says.
“The overspend is driven by a lower vacancy rate than expected and the conversion of contractors into permanent staff.”
Spending on contract staff rose from $4.2 million in the previous financial year to almost $5.8 million in the 2023/24 period while regular employee salaries reached close to $43.9 million (up from $37.6 million last year).
FMA employed 382 people as at June 30, representing a year-on-year increase of 56 and a massive jump from the 212 staff on the books in 2019.
Of the current employee roster, 224 earn more than $100,000 per year including chief executive, Samantha Barrass, who moved up a notch to the $630,000 to $640,000 salary bracket.
“A fall in staff turnover during 2023/24 meant personnel expenditure came in over budget,” Barrass said. “The FMA does not regard this as material, but steps are being taken to ensure these costs are brought down.”
During the last five years the FMA has taken on a number of new responsibilities including an expanded financial adviser licensing population, climate-reporting, the Conduct of Financial Institution (COFI) regime with consumer credit oversight due soon.
However, last week the government revealed the FMA (along with the Reserve Bank of NZ) would lose its anti-money laundering (AML) policing duties as the task shifts to the sole control of the Department of Internal Affairs. The FMA has been involved in several AML spats in one of the more contentious – and time-consuming – regulatory pursuits.
But while costs climbed last year, the FMA government revenue (mostly sourced from industry levies) increased to $71 million against the budget $69.7 million after COFI capital spending was redefined as revenue.
‘Other’ revenue also came in at $3.3 million compared to the budgeted $444,000 “due to one-off cost recoveries from successful litigation cases that were not budgeted for at the time of SPE, namely CBL, Kiwi Bank, Vero and Medical Assurance Society”.
The report lists more than a dozen FMA court ventures during the financial year including the take-down of wholesale property empire, Du Val.
Barrass also says in the report that a “variety of actions against [Financial Advice Providers] have sent a clear message that even though we are taking a collaborative approach in the early days of the new regime, there is never room for egregious misconduct”.
“And the proceedings filed against Booster for alleged breaches in relation to investment management decisions are a signal that good governance is a perennial priority for us, and we will always take a closer look into potential poor conduct where warranted,” she says.
During the year the FMA completed investigations into 1,118 ‘misconduct cases’ (sometimes sourced from external tips), of which 993 were dealt with in the ‘compliant’ timeframe, the report shows.
However, the regulator failed to meet some of its own internal targets based on industry survey responses including for ‘ease of doing business’ and producing ‘clear, concise and effective’ communication – both factors recording significant year-on-year declines.
“The survey provides limited insight into the reasons behind people’s responses and we do not want to speculate or draw conclusions from limited data as to the reasons for not meeting the target and the drop from last year’s result,” the report says. “We will be working to understand why sentiment has changed.”
Craig Stobo, recently installed FMA chair, says while the fall in certain performance metrics are “a concern”, the findings also point to “an opportunity for improvement, and will be a focus for the Board over the coming months”.
Stobo says the government move to streamline financial services regulation “absolutely resonates with us”.
The FMA is also due to provide more detail on its ‘outcomes-focused’ take on regulation next year that he says “have the potential to create pathways to greater prosperity and efficiency in our financial markets, and fairer financial services for New Zealanders”.
Among a raft of other data, the FMA report reveals, too, that the regulator reviewed seven of the 15 new NZ investment offers registered over the financial year: only five of the fresh product batch were managed investment scheme offers.
But during the same 12-month period, 130 Australian investment products (including 103 managed funds) were registered in NZ under the trans-Tasman mutual recognition regime.