Higher FMA levies on the way, but relief for unlisted Code companies
Proposed increases to Financial Markets Authority levies
Financial service providers are facing significant increases in their levies under proposals released last week by the Financial Markets Authority (FMA) and the Ministry of Business, Innovation and Employment (MBIE).
The FMA’s operations are currently funded by a mixture of public funds and levies on financial industry participants. As a result of its increased regulatory activity in the past couple of years with the introduction of the new financial advisers regime and the “conduct and culture” reviews into banks and life insurance companies, the FMA has found its resources diverted from its traditional areas. An independent review at the end of 2019 found that the FMA was not “right sized” and that new funding options are needed.
The Discussion Paper issued by the FMA and MBIE on 28 January 2020 proposes three different potential funding options. MBIE’s preferred option would see an extra $25m in funding for the FMA, which would mostly be used for a significant staff recruitment drive. The additional funding will come mostly (or, potentially, entirely) from increased levies on market participants.
This is the first review of FMA levies since 2016 and will impact on all registered Financial Service Providers. In many cases, levies will almost double if the preferred option is adopted by the Government.
Submissions on the Discussion Paper are open until 28 February 2020. If you would like to discuss how these proposals affect your business or would like assistance with making a submission, please don’t hesitate to get in touch.
Medium-sized Code companies now outside Takeovers Code
A new “medium size” threshold now applies before a company becomes subject to the Takeovers Code.
We commented last year on the relevant Bill when it was being debated in Parliament. The amendment has now been in effect since 13 January 2020. As a result of the change, an unlisted company must now have at least $30m in total assets, and/or at least $15m in total revenue, before it becomes a “Code company”. These financial thresholds are assessed from the company’s two most recent accounting periods.
In addition to meeting the thresholds, the company in question must also have at least 50 shareholders and 50 share parcels on issue.
The Takeovers Panel has released an updated guidance note on how the new threshold will be applied in practice.
Listed companies will automatically be subject to the Code, whether or not they meet the “medium-size” thresholds.
We are excited to see this change become law, as it reduces costs and increases flexibility for many start-up companies and SMEs (especially with capital raising) who had been inadvertently caught by the Code in the past.
If you have any questions about what this law change may affect your business and its compliance requirements, please do not hesitate to contact us.
Business Law Team
Gerard Dale, Claire Evans, Graeme Crombie, Evelyn Jones, Anna Ryan, Joelle Grace, Nicola Hardy, Peter Orpin, Ellen Sewell, Matt Tolan, Kristina Sutherland, Jacob Nutt, Danita Ferreira, Whitney Moore, Stephanie Bode, Carlo Wan, Alex Stone, Ben Cooper, Lisa Catto, Cameron Hart
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Partner, Lane Neave
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