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FMA Update - 19 May 2016

Helping businesses adapt to a new regulatory environment

I joined the FMA as General Counsel in February and I’m excited to be at the forefront of the continuing evolution of New Zealand’s financial regulatory regime. As General Counsel, I have responsibility for our policy and governance, litigation and enforcement, corporate legal and internal audit teams. These teams contribute to fulfilling the FMA’s objectives and engage with industry in a variety of ways.

In readiness for the FMC Act regime, we’re working closely with businesses and market professionals to utilise the new legislative tools at our disposal. Exemptions, frameworks and methodologies for disclosure and governance processes, public accountability notices, and designations all support businesses with their compliance requirements.  They also help strengthen public confidence and support vibrant markets – key to the Government’s growth agenda. 

We have published a Regulatory Update that summarises the various legislative notices we have issued, decisions we’ve made and matters we’re currently considering.  In choosing if and how to utilise these tools, we always seek to balance regulatory burden with benefit – mindful that the point of all of this is to achieve positive investor outcomes.

Unfortunately, there will be instances where firms fall short of regulatory requirements and expectations. When this happens, we will consider an appropriate response. As part of our regulatory toolkit, we have a range of options available to us to raise standards of behaviour, deter misconduct and hold those who fail to meet the requirements to account.

We recently issued a formal warning to Craigs Investment Partners Limited (Craigs) for certain deficiencies within their AML/CFT compliance programme. It is important firms ensure their internal compliance programmes fully meet the regulatory requirements. We encourage firms to proactively engage with us where potential problems are identified, and take appropriate remedial steps to address the issue - as Craigs have done in this instance.

Nick Kynoch
General Counsel, FMA

Investor confidence survey results in

Yesterday we released the results of our annual survey into New Zealanders’ attitudes to financial markets. While confidence in New Zealand’s markets fell slightly in the last 12 months, confidence is higher among investors.

Reminders

1 June

Some amendments to the FMC Act Regulations take effect. Read more

30 June

MIS manager licensing - plan to submit your application by the end of June.  Read more

1 July - 31 August

Annual AML/CFT reports - reporting entities supervised by the FMA are required to submit their annual AML/CFT report on their risk assessment and compliance programme through our online system between 1 July 2016 and 31 August 2016. Read more

Regulatory update

To support businesses implementing the FMC Act, we have been consulting with industry on various legislative tools to ensure compliance requirements are balanced, reasonable and cost-effective.

Read our latest Regulatory Update: FMA legislative notices supporting the FMC Act regime that summarises the legislative notices we’ve issued, decisions we’ve made and matters we’re currently considering. More

Upcoming consultation

Later this month we will carry out two targeted consultations on the following matters:

  • Relief  for issuers of employee share purchase schemes who have allotted      securities under Securities Act.
  • Designation of shares that are in substance managed investment products.

If you would like to be included in those consultations, please contact us at questions@fma.govt.nz

Licensing - time is running out to get your MIS manager application in

Licensing managed investment scheme (MIS) managers is a key priority for us but there is a danger that late applications will not be processed in time before the end of the transition period.

As some applications take longer than others, we strongly encourage all those who have yet to file their application to do so as soon as possible.

To ensure we can give you the right level of support, and you can achieve your licence by 1 December, talk to your supervisor and to us about your application.

Plan to submit before the end of June.

Check our tips on the MIS manager licence resources page of our website to make your application easier. More

Property and forestry investment schemes need a licence too

Businesses providing property investment schemes or property syndication funds, or forestry managed investment schemes, also need to get their licence application in as soon as possible.

While standard licensing and governance obligations apply for property investment schemes, we have recently granted exemptions from some compliance obligations.  Find more information about these exemptions.

For forestry managed investment schemes (MIS) we have just published a licensing guide to help businesses get started. The guide also explains when a scheme is not an MIS, and does not have to have a licensed manager.

We have also recently granted some exemptions for forestry MISs and their custodians from some compliance obligations.  If you would like to find out more about these, see page 13 of our Regulatory Update: FMA legislative notices supporting the FMC Act regime or contact us at exemptions@fma.govt.nz More

Latest guidance

Licensing guide for MIS managers of forestry schemes. More

AFA adviser business statement annual confirmation

We are still receiving emails from AFAs letting us know that their written adviser business statement (ABS) is up-to-date and current.  While this is an important part of your standard conditions, sending us an email is no longer required. This is because we have included this confirmation in your AFA Information Return that you must complete each year.  All you need to do is simply tick a box (question 40) and it’s done!

Don’t become a victim of fraud.

Investment scams can happen to anyone. They’re often very sophisticated and can be hard to tell apart from a genuine investment opportunity.

Certain investments put you at a much higher risk of becoming a victim of fraud. They’re often only available online, and are marketed as simple products or services with little or no risk. They also promise very high returns.

Below are two examples of complaints we often receive from people losing money.

Foreign exchange (forex) trading

Foreign exchange (forex) trading for profit is the buying and selling of foreign currencies through websites. More

Binary options

Binary options are online tools that say you can make money from predicting the short-term movements of a share price, commodity, currency or an index. More

New online services

Our new e-services portal will go live a bit later than expected, in June/July. AFA renewals will be the first services available on the new portal. Additional services will be added once the portal is running.

We will publish guides for the new online processes soon – look out for further information in our June FMA Update.

Coming soon

Look out for the following publications we’ll be releasing before the end of June.

  • A report on life insurance products sold through financial advisers
  • NZX general obligations review
  • Guide to good conduct

Auditor oversight and regulation plan 2016-2019

FMA news

19 May - Licensing obligations for property investment schemes imminent

18 May - Market wobbles dent confidence but investors are positive about regulation

 3 May - FMA issues formal warning to Craigs

 28 April - Cross-border trade agreement means more investment choices for New Zealanders

 21 April - Three things that stop you from making good investment decisions – and four that can help

Industry insights

Accenture Finance & Risk blog - How financial firms can create value through complaints and feedback

Financial Conduct Authority - Smarter consumer communications discussion paper

CNBC - The world wants financial therapy more than financial advice

Finance Magnates - SpotOption founder: Israel should follow major regulators on binary options 

Harvard Business Review - The impact of the blockchain goes beyond financial services

Fortune Magazine - How LendingClub's scandal echoes the financial crisis