1. Compliance
  2. DIMS
  3. FMC Act DIMS

FMC Act DIMS

 

Licensing

To provide DIMS under the FMC Act you must hold a DIMS market services licence issued under the FMA Act.

For more information on the process involved, please see our licensing page.

Ongoing obligations

DIMS licensees are obliged to:

  • act professionally
  • meet financial and investor reporting requirements
  • disclose a wholesale service
  • provide the FMA with reporting required by the Act.

Investor reporting

DIMS licensees need to make sure their retail clients have all the information about investment decisions, how the investments have performed, and what the fees are.

Refer to reg210 and reg 211 for the full list of the information you need to report to retail investors.

Your ongoing reporting requirements are:

  • Transaction information: record of all transactions, name of issuer, the price of the financial products transacted, the amount and date transacted
  • Assets profile: name of each class of financial product in the investor’s portfolio, who issued the financial products, and the number of products held
  • Portfolio administration profile: record of all dividends paid, distribution or income received during the period, all percentage-charges paid, individual action fees paid, and other corporate information that might affect an investor’s portfolio (eg, a bonus issue)
  • Portfolio valuation: current and most-recent valuation of all financial products in the investor’s portfolio; how and when the valuation is done (eg, market price of the quoted product), and the total value of the financial products in the portfolio.

You will also need to provide the following annual reporting to your investors:

Investment strategy  
  • The investment objective
  • The investment mix
  • Any material changes to the strategy during the year
Investor’s portfolio return
  • Annual and five-year return of the portfolio (pre tax but after fees)
  • A bar graph of the portfolio’s return (pre tax but after fees) with a bar for each disclosure year since the investor started using the service
Portfolio profile Name each class of the financial products in the investor’s portfolio, the products’ issuers, and the number of products in the portfolio
Portfolio valuation
  • The current or most-recent value of each of those financial products
  • Statements of when and how the valuation was done
  • The value of the portfolio at the beginning and end of the disclosure year
Cash held Details of the amount of cash held for the investor at the close of disclosure year
Dividends paid Details of dividends paid, all interest paid, and other distribution or income received
Fees
  • The total percentage-based charges paid for the investor’s portfolio during the year, expressed as a percentage of the investor’s portfolio
  • The total amount of other charges the investor has paid for the portfolio
  • The individual action fee paid during the disclosure year for the investor’s portfolio
  • A pie chart segregating all financial products, by asset category, of the investor’s portfolio at the end of the disclosure year

 

You need to tell retail investors if your DIMS is a wholesale service

DIMS licensees need to let their retail investors know if they are providing a wholesale service. This is a requirement of reg194.

DIMS licensees must not buy or sell a financial product for a retail investor under a wholesale service unless they have given a prior warning to the retail investors. The retail investors must also acknowledge and authorise the service.

The warning must be prominently displayed on a document telling the investor:

  • the service is not a retail service
  • the service is not covered by the licence and FMA Act protections might not apply.

Tell us if you breach a limit break

As a DIMS licensee, you are governed by what the investor allows you to do, based on the investment authority - see s437.

The investment authority spells out the nature and type of investments you can make, and the amount in each asset type you can invest in.

You have obligations to do limit break reporting quarterly (reg 231) and annually, and when your limit break is not corrected (reg 230) within five days of the break happening.

Please read the DIMS limit breaks under the FMC Act information sheet

Tell us if you made a related-party transaction

As a DIMS licensee, you have to avoid transactions that lead to related-parties benefit (s440).

There are exceptions if you can certify that:

  • the service is provided to a class of investors, and in the best interests of the investors
  • the service is provided to only one investor, in the best interests of that investor

Under reg236 you must notify us within 10 working days of the end of each quarter, whether any certificates have been given, and if so provide us with copies of those certificates. 

Tell us if you break a service agreement

As a DIMS licensee, you need to make sure you are able to meet the licence obligations (see s412 for details).

You need to tell us if you:

  • think you have broken any of your licence obligations
  • have a change in circumstances affecting your licence
  • have provided misleading material to investors. 

All notifications should be emailed to the FMA at compliance@fma.govt.nz noting the relevant obligation in the subject line of your email.

Financial reporting

All DIMS licensees are FMC reporting entities.

FMC reporting entities need to prepare financial statements that comply with generally accepted accounting practice (GAAP), have them audited by a licensed auditor, and lodge them with the registrar.

Exemptions

There are exemptions for two DIMS licensee categories from having to prepare financial statements that meet GAAP, have them audited by a licensed auditor, and lodge them with the registrar. 

This table lists current DIMS financial reporting exemptions:

  Exempted from Must still May need to
Level 1 DIMS Providers managing  <$100m of retail funds
  • preparing GAAP-compliant  financial statements
  • auditing financial statements and lodging them with the registrar 
  • prepare accounting records
  • prepare financial statements to meet their other existing company or tax reporting obligations
Level 2 DIMS Providers managing $100m to $250m of retail funds
  • having financial statements audited
  • prepare GAAP-compliant financial statements and lodge them with the registrar
 

DIMS’ professional conduct

As a DIMS licensee, you must be honest in how you conduct and provide your service, always acting in your client’s best interest.

You must not use information gained as a DIMS licensee to benefit yourself or any other person, or cause harm to your client.

You must also exercise care, diligence and the skill of a professional in carrying out your duties.

Check s433 and s435 of the Act for details of the conduct expected.

Guidance