The FMA’s 100 billion dollar challenge: Raising confidence in the managed funds industry

News release
MR no. 2016 – 02
26 February 2016

The final phase of implementing the Financial Markets Conduct Act (FMC Act) involves the Financial Markets Authority (FMA) licensing a sector responsible for about $100 billion of New Zealanders’ wealth.

From now until 1 December 2016 a major focus for the FMA will be licensing funds management firms. From then on the FMA will shift to supervising all the businesses that are licensed under the FMC Act, and fund managers will be one of the FMA’s largest and most important ongoing responsibilities.

Important both for the regulator and the NZ economy, because more than half of the country’s population rely on fund managers to grow and protect their wealth either through KiwiSaver, superannuation, managed funds or PIE funds for example.

Under new regulations brought in by the FMC Act managed funds will now be called managed investment schemes and managers of these schemes need to be licensed.

People are becoming more familiar with the idea that when they put money into their KiwiSaver account, that money is invested into a managed fund. Fund managers make decisions about where the money is invested and therefore have a responsibility for an increasing portion of household balance sheets, and the economy as a whole. There are broader economic benefits in the way these funds are invested in financial markets as the flow of money into productive assets helps businesses to develop and fosters economic growth.

Following the Capital Markets Development Taskforce Report, Parliament recognised the increasing scale and importance of the sector by introducing the requirement for managed investment scheme managers to be licensed under the FMC Act. This reflects the closely linked need for consumers to be protected and for the industry’s reputation to be upheld. Licensing also brings New Zealand into line with the way other countries regulate this part of the financial services sector.

“Licensing is about instilling confidence in the industry by helping to manage provider conduct and monitor major risks across the sector. It is just the beginning of a transformation in the relationship between the industry and the regulator,” said Rob Everett, FMA chief executive.

“The big change in the licensing framework is our continuous and ongoing role in supervising the conduct of providers to ensure they are putting the interests of their customers at the centre of their operations.”

The FMA wants to engage with fund managers now and talk them through the minimum standards and level of compliance they will need to continue offering managed investment schemes to consumers. Expectations about the critical role that conduct plays under the FMC Act will be part of that engagement.

Ends

For media enquiries contact:

Andrew Park
Phone: 09 967 1215
Mobile: 021 220 6770
[email protected]

Notes: For information and application details for mangers of investment schemes, visit www.fma.govt.nz

For consumers, resources on different types of investments and what firms are licensed, visit www.fma.govt.nz/consumer