The Financial Markets Authority (FMA) booked an almost $6 million surplus for the 12 months to June 30 despite staff costs soaring more than $7 million over the period.
According to the FMA annual report released last week, the regulator came in well under budget as both revenue and expenses fell short of forecast for the financial year.
Year-on-year total costs rose from $58 million in the 2022 year to almost $67.3 million but remained well shy of the budgeted $73 million set aside to keep the regulatory lights on.
Employee expenses represent almost 70 per cent of FMA costs, breaching $46.4 million in the latest 12-month period ($39.3 million in 2022) compared to the forecast $49.9 million.
As at June 30, the regulator reported total staff numbers of 326 (289 permanent employees), up from 311 (267) last year and 212 (188) in 2019.
“We continued to deliver on our multi-year transformation, which seeks to lift the organisation’s capabilities, to ensure we are best positioned to accelerate our growth and expansion plans for overseeing a broader remit, and pivot to an outcomes-focused approach to regulation,” the annual report says.
Close to 200 of the FMA workforce earn more than $100,000 with chief executive, Samantha Barrass, fetching between $610,000 to $620,000 in annual remuneration.
Revenue, meanwhile, landed about $1.4 million ahead of target on the back of higher interest income and other fee-generating activity such as licensing.
The government jacked-up industry levies last year to fund the FMA’s enhanced regulatory duties in areas such as financial advice, climate-reporting and the now under-a-cloud Conduct of Financial Institutions (COFI) legislation.
Industry levies cover more than 80 per cent of FMA budget allocations.
FMA annual budgets have steadily climbed over the last five years or so from under $30 million to $73 million in the most recent period with further rises projected.
The report details a busy year for the regulator with a wide range of industry engagements, enforcement actions, serious misconduct investigations (718) and ‘thematic reviews’ such as the discretionary investment management service (DIMS) study conducted earlier this year.
“We conducted a survey of DIMS providers licensed to provide services to retail investors, to understand how their governance, culture, policies, processes, systems, and controls are used to meet compliance obligations and achieve positive investor outcomes. We found there may be some gaps in their interpretation of obligations and conduct that may negatively impact customer outcomes,” the report says.
“Areas of specific focus include risks relating to conflicts of interest management, excessive portfolio turnover, inappropriate position limits and benchmarking, misclassification of services, and lack of controls around financial advice. The risks identified will help to inform our future monitoring of the sector.”
Chief Barrass also highlights in the report the recent FMA proposed shift to a ‘fair outcomes’ regulatory style.
“… I want to reiterate the message we have been taking to industry recently, and that our transformation work throughout the year has been in aid of. Namely, that an enhanced approach to outcomes-focused regulation will be progressively more apparent in all facets of our work over the coming years,” she says.
“We will be encouraging entities to see this approach as an opportunity, engage with us openly, and be willing to have constructive discussions about outcomes for consumers and investors.”
The FMA put its fair outcomes proposal out for consultation last month with submission due by March next year.