Fund managers are going to have to get licences if they want to stay in the business of managing other people’s money.
The Financial Markets Authority (FMA) said it was entering the final phase of implementing the Financial Markets Conduct Act, laws designed to make the financial services industry better serve the interests of the public.
The final phase involves issuing licences to fund management firms, which collectively invest around $100 billion of money for savers.
FMA chief executive Rob Everett said: “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”.
New Zealand had been unusual in not licensing fund managers, Everett said.
Being able to issue, and rescind licences gives a regulator power to prevent unsavoury operators from managing other people’s money, as well as setting minimum standards and getting fund managers to meet them.
Licensing also allowed the FMA to issue licences with conditions where it had concerns that it wanted fund managers firm to address.
A licensing regime also enables a regulator to gather information about fund managers, which means it knows more about what is happening in the sector, lessening the likelihood of a shock, like a rogue operator emerging.
Fund managers have until December 1 to get licences from the FMA.
Already funds managers are subject to regulations, especially KiwiSaver providers, but managed funds are becoming increasingly important to households as a place where they save and invest.
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“We do think KiwiSaver will open the door for people to start investing in managed funds alongside KiwiSaver,” Everett said.
Already more than half of the country’s population relied on fund managers to grow and protect their wealth either through KiwiSaver, superannuation, managed funds or PIE funds, he said.
“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.”.
FMA wanted to engage with fund managers now and talk them through the minimum standards and level of compliance they would need to continue offering managed investment schemes to consumers, Everett said.
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