We have regulatory powers to grant financial reporting exemptions and vary financial reporting public accountability designations.
We use these powers to support the purposes of the Financial Markets Conduct Act 2013 (FMC Act). Our aim is to find a balance between ensuring the provision of appropriate financial information for those who need it and, minimising undue costs for those providing it.
This page provides an overview of:
What’s changing for financial reporting under the FMC Act?
The FMA grants two types of exemptions - individual exemptions for a specific entity or related entities, and class exemptions that cover a broad type of entities.
Under the Financial Reporting Act 1993 (FR Act) we could only grant exemptions to overseas issuers and recipients of funds from conduit (typically special purpose vehicles) issuers. Overseas entities who were issuers in New Zealand could also lodge overseas financial statements in New Zealand if the Registrar considered their financial reporting to be broadly equivalent to New Zealand financial reporting.
Under the FMC Act, the Registrar’s discretion to accept overseas financial reporting for FMC reporting entities has been removed. However we have the power to grant financial reporting exemptions to any FMC reporting entity (including New Zealand entities). This includes the ability to grant exemptions for accounting periods that have already ended, provided the exemption is in place before the deadline for lodging the financial statements with the Registrar.
Unless an entity needs to comply with FMC reporting, it can continue to rely on any relevant FR Act exemptions, if they are still applicable and have not expired.
Entities currently relying on individual FR Act notices will also need to consider whether they are able to comply with the FMC financial reporting requirements, rely on an FMC Act class exemption, or have a good basis to apply for an individual exemption under the FMC Act.
Our financial reporting exemptions policy
Our general regulatory policy for financial reporting exemptions under the FMC Act is outlined in our January 2014 consultation paper which was approved by FMA’s Board.
Below is an overview of our key policies.
Exemptions for overseas entities
We may grant overseas issuers an exemption from the requirement to prepare financial statements under New Zealand generally accepted accounting practice if:
- the entity is required to prepare high quality financial reporting
- the entity is subject to appropriate financial reporting regulation
- we can get co-operation from their overseas regulator if we need to.
The table below presents the accounting standards that, based on our assessment provide high quality information to investors (specified GAAP) and the jurisdictions with appropriate financial reporting regulation (specified jurisdictions).
- Australian IFRS
- US GAAP
- Canadian IFRS
- EU IFRS
- IFRS (unmodified international standards)
- Singapore Financial Reporting Standards
- Hong Kong FRS
- United States of America
- Ontario, Canada
- United Kingdom
- Republic of Ireland
- The Netherlands
- South Africa
We will consider additional GAAP and jurisdictions based on demand.
We also need to determine whether we can get co-operation from the relevant overseas regulator. Our view is we are likely to get cooperation if the relevant overseas regulator is a signatory to the International Organisation of Securities Commissions’ Multilateral Memorandum of Understanding on Consultation and Cooperation (IOSCO MMOU). A list of signatories is available here.
Overseas entities that have made incidental offers or have a secondary listing in New Zealand may be exempted from having to use a New Zealand licensed auditor.
Exemptions are unlikely to be granted for offers made solely or primarily in New Zealand, unless we are satisfied that both your entity and your auditor have the same level of regulation and oversight as a New Zealand issuer and its auditor. Overseas auditors can apply to become licensed by us here.
Overseas entities that have made offers that involve relatively few New Zealanders, may be exempted from having to lodge financial statements in New Zealand.
Branch financial statements
Overseas entities carrying on business in NZ will still be required to prepare, have audited and lodge branch financial statements for their NZ operations. This information is used by Inland Revenue and the Reserve Bank for the entities they monitor.
Other exemptions for New Zealand and overseas entities
Recipients of funds from conduit issuers
Sometimes entities make regulated offers through special purpose vehicles or finance subsidiaries known as ‘conduit issuers.’ These conduit issuers loan most of the funds to related parties. In these situations, the related parties are considered ‘recipients of the funds from a conduit issuer’ and become FMC reporting entities in their own right. The cost of complying with the FMC reporting requirements for all the related parties can be extensive and unnecessary, when more relevant information for investors can be provided or is already available.
For example a finance subsidiary raises debt and on-lends the funds to its parent and other subsidiaries. All the entities provide unconditional unlimited cross-guarantees and the group financial statements are audited and publicly available. In this case, the group financial statements are likely to be a good representation of the group’s ability to meet the interest and principal payments, and we may exempt the other subsidiaries from having to each prepare, have audited and lodge financial statements.
Exemptions to extending lodgement deadlines
Our powers of exemption allow us to extend the deadline for lodging financial statements. However thresholds are high and exemptions are rare.
Lodgement deadlines are shorter under the FMC Act. But you’ll need to have a compelling reason why you can’t comply with the four-month period, or specific circumstances that make it inappropriate. While overseas entities may have longer timeframes to prepare financial statements under overseas law, we don’t consider this sufficient reason on its own to grant exemptions.
Exemptions are not available if you haven’t made arrangements to comply with the timeframes in the FMC Act.
Partial and technical exemptions
We may consider exemptions to financial reporting requirements if there are:
- technical difficulties complying with the requirements
- difficulties with specific aspects of the requirements.
Applications are rare and usually arise from specific circumstances.
Class FMC Act exemptions in place
The descriptions below are only a summary of the relevant class exemptions notices. Before relying on an exemption, you will need to meet all the conditions. See the link for the full notice.
If you apply for a financial reporting exemption under the FMC Act, you may find it useful to use other financial reporting exemptions under the FMC Act as your starting point to draft the exemption notice that must be included with your application. These can be found under the heading 'Financial Markets Conduct Act exemptions'. These exemptions reflect our approach under the financial markets regime and can be adapted to your individual circumstances.
Financial Markets Conduct (Financial Reporting – DIMS licensees) Exemption 2015
This exemption relieves small- and medium-sized providers of discretionary investment management services (DIMS) from certain financial reporting obligations. The extent of the exemptions depends on the size of the licensees’ business based on the retail funds under management (FUM). The exemptions do not apply if a DIMS licensee is a FMC reporting entity for any other reason, doesn’t have an independent custodian, or the licensee has more than $250 million in retail FUM.
Financial Markets Conduct (Derivatives Issuers — Link to Financial Statements) Exemption 2015
This is a very short-term transitional exemption for licensed derivative issuers with a balance date within the period 1 February 2015 to the close of 31 May 2015. When making offers, the derivative issuers are usually required to include audited NZ GAAP financial statements that comply with the FMC Act. However, some issuers may not previously prepare that information or are not yet required to register that information. This exemption allows derivative issuers to use financial statements they were required to prepare prior to being licensed (if any) for their initial FMC regulated offers. Once an issuer has registered FMC Act compliant financial statements, those new financial statements will replace any previous reporting.
Financial Markets Conduct (Dual-listed FMC Reporting Entities) Exemption Notice 2015
This exemption applies to overseas-incorporated entities that have a primary listing in specified jurisdictions and a secondary listing in New Zealand. The exemption allows those entities to use their overseas financial reporting to comply with the main financial reporting requirements of the FMC Act. The exemption also allows overseas entities to use a specified overseas GAAP and their overseas auditor to meet their financial reporting obligations for their New Zealand business (if any).
The specified jurisdictions are Australia, Ontario (Canada), Singapore, the UK, and the US.
Financial Markets Conduct (Overseas Registered Banks and Licensed Insurers) Exemption Notice 2015
This exemption permits certain overseas banks and insurers that are registered / licensed in New Zealand to use their overseas financial reporting to comply with the financial reporting requirements of the FMC Act. The exemption does not remove any obligation to prepare and have audited separate branch financial statements for their New Zealand business. The auditor may be an overseas auditor or a New Zealand auditor.
Financial Markets Conduct (Financial Reporting: Balance Dates of Managers and Registered Schemes) Exemption Notice 2015
The FMC Act requires managers to register scheme financial statements within four months of their balance date. Where a manager's balance date is not the same as its various schemes’ balance dates, this makes compliance difficult or impossible. This exemption permits managers to register scheme financial statements within four months of the balance date of the scheme.
Class FMC Act exemptions being considered
A summary of the financial reporting exemptions that are being considered is included in our Update: Development of legislative tools to support the FMC Act regime. This updates also summaries the circumstances where we have determined that an exemption is not necessary, including in relation to the timing requirement for ‘wind-up’ financial statements.
FMC public accountability designations
The concept of ‘FMC reporting entity’ under the FMC Act is wider than the concept of an ‘issuer’ under the FR Act. To reflect this, and the different reasons FMC reporting entities are required to report, Parliament introduced the concept of different levels of public accountability.
All FMC reporting entities have a designated level of public accountability. This influences which tier of the External Reporting Board Accounting Standards Framework the entity must report in, and, in turn, whether it must use full accounting standards (eg, NZ IFRS) or reduced accounting standards (eg, NZ RDR) when preparing its financial statements.
The FMC Act identifies classes of entities it deems to have higher public accountability — all other classes of entities have lower public accountability. These are default designations set out in the FMC Act. The Act also allows the FMA to vary designations for either individual FMC reporting entities, or classes of FMC reporting entities. Generally speaking entities to which investors have a direct investment in have higher public accountability than other entities.
Public accountability at a glance
Higher public accountability
Based on XRB Accounting Standards Framework full accounting standards will apply
Full NZ IFRS for for-profit entities, or full PBE standards for public benefit entities
- Equity issuers who make a regulated offer (and have more than 50 shareholders)
- Debt issuers who make a regulated
- Licensed derivative issuers*
- Licensed MIS managers (in respect of the financial statements of the MIS they manage)
- Listed issuers
- Recipients of money from a conduit issuer*
- Registered banks
- Licensed insurers
- Credit unions
- Building societies
Lower public accountability
Based on XRB Accounting Standards Framework reduced accounting standards will apply
NZ IFRS RDR for for-profit entities, or PBE standards RDR for most public benefit entities
- Licensed MIS managers (in respect of the manager’s own
- financial statements)
- Licensed providers of DIMS (under the FMC Act)
- Licensed peer-to-peer lending service providers
- Licensed crowd funding service providers
- Licensed supervisors
- Licensed market operators (domestic)
*FMA has issued a notice to re-designate recipients of funds from conduit issuers and licensed derivative issuers to having higher public accountability. See page 4 on our Update: FMA legislative notices supporting the FMC Act regime for more.
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