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Transition for Managed Investment Schemes October 2013 Financial Markets Conduct Act.

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Presentation on theme: "Transition for Managed Investment Schemes October 2013 Financial Markets Conduct Act."— Presentation transcript:

1 Transition for Managed Investment Schemes October 2013 Financial Markets Conduct Act

2 1.Transition timing 2.Key transitional workstreams tasks 3.Wholesale unit trusts/super schemes 4.Selected aspects of new governance regime 5.Categorisation of superannuation master trusts 2 Topics for today

3 3 Effective Date timing 1 December December 2016 Notification DateEffective Date Twenty working day notice period Manager can pick any Effective Date between 1 December 2014 and 1 December 2016 Effective Date may align with prospectus rollovers or investor mail out FMA / Registrar require 20 working days’ notice of Effective Date

4 4 What happens on the Effective Date? 1 December December 2016 Notification DateEffective Date Twenty working day notice period Scheme registered – regulated offer PDS registered Governing documents registered SIPO registered Other documents registered Order in Council applies Scheme subject to FMCA

5 5 What must be in place before Notification Date? 1 December December 2016 Effective Date Twenty working day notice period Manager licence PDS/register entry prepared Order in Council for superannuation scheme categorisation Amendments to governing document (incl FMA approval if req) SIPO review completed Supervisor licence extended to superannuation scheme Related party transaction compliance Manager internal procedures/Supervisor protocols developed Investor notification Wholesale scheme registered

6 FMA approval not mandatory Review of proposed amendments against existing amendment power –implied terms –conforming with FMCA FMA approval process different from KS restructure? FMA to provide guidance? 6 Governing documents - process

7 Governing documents – scope of amendments 7 Key clausesPotential amendmentsAffected Schemes PurposeAmend for new statutory purposeKS, SS Manager functions and duties Check consistent with FMCA manager functions and duties KS, SS, UT Trustee responsibilities and duties Check consistent with FMCA supervisor functions and duties KS, SS, UT CustodianshipCheck consistent with s156KS, SS, UT Related party transaction Amend to be consistent with s173 restrictionsKS, SS, UT IndemnitiesCheck consistent with limitations in s136KS, SS, UT Appointment/removal of Manager and Supervisor Check consistent with s185 and s193KS, SS, UT Meeting provisionsConsider whether to include or use default provisions KS, SS Valuation/PricingEnsure contains adequate provisionsKS, SS

8 Supervisor involvement required for all deed amendments 8 Governing documents - timing Allow 2 months no FMA Allow 3+ months with FMA

9 New offer document - highly prescribed content Could be issues at the margins for schemes that do not fit template Go through internal due diligence processes Update of due diligence planning processes Requirement to register all other “material information” 9 PDS and register entries Allow 3-4 months

10 Public document Ensure informal text/guidance removed Some minimum content requirements Must comply with frameworks/methodologies issued by FMA Be aware of limit break requirements 10 SIPO Allow 4 weeks

11 Light handed approach – means what? Key content in FMC Regulations If insurer/QFE, may have useful licensing materials Can apply from 1 April 2014 Financial adequacy 11 Manager licensing Allow 4-5 months

12 Needed for superannuation scheme categorisation – flows into transition planning Presumably OIC obtained late in process, but FMA certainty required earlier? Need to understand timing/process from FMA 12 Order in Council Allow [?] months

13 SUB-CATEGORIES NEWNEW 13 MIS categorisation KiwiSaver Superannuation scheme Unit trust Restricted Superannuation scheme Workplace savings KiwiSaverOther MIS Restricted Restricted Legacy LegacyRestricted CURRENTCURRENT

14 14 Strawman timeline Notification DateEffective Date6-7 months minimum Allow 2 months no FMA Allow 3+ months with FMA Allow 3-4 months Allow 4 weeks Allow 4-5 months [3 months] OIC FMA certainty 2 weeks Governing Document PDS/register entries Manager licensing SIPO Scheme categorisation Internal procedures/ supervisor protocols Investor notification

15 Reasons to register? Consequences of doing so Transition – align with related retail schemes 15 Wholesale schemes

16 Act in best interests of scheme participants Prudent, professional practice S 152(1)(a) supervisory functions Financial adequacy of manager 16 Selected new governance functions/duties – Overview

17 “In exercising any powers or performing any duties a manager/supervisor must act in the best interests of the scheme participants” (ss143/153) Core obligations, principally addressing conflicts of interest Manager examples: –Related party transactions –Other decisions, such as scheme closure –IOSCO Case Studies (2000) Supervisor example - manager as “client” 17 Best interests of scheme participants

18 Conflicts of interest policy – APRA Prudential Standards Culture Training Leadership 18 Best interests of scheme participants ctd

19 Manager/supervisor must “in exercising any powers, or performing any duties, exercise the care, diligence, and skill that a prudent person engaged in [that profession] would exercise in the same circumstances” About policies, processes and controls; not just actions, decisions? For example: –Investment governance –Conflicts of interest controls –Valuation/unit pricing 19 Prudent, professional standard of care

20 Body of knowledge to be developed –Existing practices –FMA guidance –Industry bodies –Overseas examples – e.g. APRA prudential standards Mutual understanding by Managers/Supervisors 20 Prudent, professional standard of care ctd

21 Supervisor is responsible for : “acting on behalf of scheme participants in relation to: i.the manager; and ii.any matter connected to the governing document or the terms of any regulated offer; and iii.any contravention or alleged contravention of the issuer obligations; and iv.any contravention or alleged contravention of this Act by any other person in connection with the scheme” (s 152(1)(A)) 21 New supervisory functions/duties – Selected aspects

22 Supervisor is responsible for: “supervising the financial position of the manager and the scheme …to ascertain that it is adequate” (s 152(1)(b)(ii)) 22 New supervisory functions/duties – Selected aspects ctd

23 SUB-CATEGORIES NEWNEW 23 MIS categorisation KiwiSaver Superannuation scheme Unit trust Restricted Superannuation scheme Workplace savings KiwiSaverOther MIS Restricted Restricted Legacy LegacyRestricted CURRENTCURRENT

24 Focus on master trusts – assumed objective to obtain “retirement scheme” status. Employer section should qualify as a workplace savings scheme Check criteria incl: –Purpose(not principal purpose) – retirement/leaving service benefits –Other benefits incidental or secondary –Requirements prescribed in regs OK to have a “holding section” for leaving service benefits 24 Master Trusts – FMCA Categorisation

25 Two main options for personal section (if open to non- employees) Close – legacy scheme (remains super scheme and retirement scheme) Leave open – general MIS (not super scheme or retirement scheme) May be other iterations 25 Master Trusts – FMCA Categorisation ctd

26 Engagement with FMA Order in Counsel may be required 26 Master Trusts – FMCA Categorisation ctd

27 Significant changes to the supervisory regime. In particular: –New and potentially wide-ranging requirements –High FMA expectations –Very member-centric approach Uncertainties as to how the new regime will operate in practice to be worked through. 27 Supervisor commentary

28 Key drivers of our approach include: –Embrace the changes - not in denial as to their implications –Adopt a leadership approach –Work collaboratively with stakeholders –Be pragmatic and sensible Underlying objectives - promote financial markets confidence and facilitate efficient markets. 28 Supervisor commentary (cont)

29 For the Managers we supervise, a Supervisor that: –Is pro-active and does its share of the heavy lifting in terms of understanding these reforms –Is tough but commercially sensible –Provides real and commercially valuable assurance around your business practices –Enhances your standing with the FMA and trusted and respected partner for your brand 29 Supervisor commentary (cont)


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