Consultation paper: Proposed financial reporting exemptions for small and medium-sized DIMS providers

First published 16 March 2015

Update

5 June 2015

Notice granting financial reporting exemptions for certain DIMS licensees finalised

A notice providing financial reporting exemptions for certain DIMS licensees has now been finalised.  The Financial Markets Conduct (Financial Reporting – DIMS Licensees) Exemption Notice 2015 was published in the NZ Gazette on 4 June 2015 and came into force on 5 June 2015. 

In March we published a consultation paper on a proposed class exemption for DIMS licensees Consultation Paper: Proposed financial reporting exemptions for small and medium-sized DIMS providers.  This was a public consultation to seek feedback from the market on proposals for financial reporting relief available in a graduated manner to three levels of exempt DIMS licensee. Following the initial consultation, we sought further input from submitters on revised options for the application and scope of the proposed exemptions.

On 5 May we announced the FMA had approved two categories of exemptions that will be available to DIMS providers who have up to $250m retail funds under management and who are licensed under Part 6 of the Financial Markets Conduct Act 2013 (the Act). 

The exemptions are a result of industry feedback received through consultation by the FMA.  Please see our Regulatory Impact Statement that includes a summary of the key themes raised in submissions. We would like to thank everyone who provided feedback on this matter. 

General effect of the exemption notice

The exemptions in the notice apply to certain providers of discretionary investment management services (DIMS) who are licensed to provide DIMS under Part 6 of the Act.  The exemptions in the notice apply according to whether a DIMS licensee falls into one of two levels.  The levels are based on the amount of retail funds under management (FUM) under the DIMS provided by the DIMS licensee.  Retail FUM are calculated at the start of the provider’s financial year.

The exemptions do not apply if:

• a DIMS licensee is an FMC reporting entity for any reason other than because it holds a DIMS license, or
• there is no independent custodian.

The exemptions will apply to accounting periods that commence before the exemption is granted (including periods that end before the exemption is granted) if the exemption is granted before financial statements would (but for the exemption) be required to be lodged under the Act. It will also apply to subsequent accounting periods.

Exemptions for Level 1 licensees (licensees with less than $100m retail FUM)

The notice exempts Level 1 licensees from certain financial reporting requirements under the Act relating to accounting records, the preparation of financial statements that comply with generally accepted accounting practice (GAAP), and the audit and lodgement of those statements.  These DIMS licensees are still required to keep certain accounting records and to meet any company or tax financial reporting obligations that would apply to the DIMS licensee if it were not an FMC reporting entity.

Exemptions for Level 2 licensees - (licensees with between $100m and $250m retail FUM)

The notice exempts Level 2 licensees from the requirement under the Act to have financial statements audited by a licensed auditor.  The DIMS licensees are still required to comply with any company or other audit requirements that would apply to the DIMS licensee if it were not an FMC reporting entity.

For enquiries on this please contact us at [email protected]