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 and then the regulator 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.
As 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, it is an important step both for the regulator and the NZ economy.
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.
The FMA stated that 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, the managers of which then 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.
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 FMA chief executive Rob Everett
“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.