Fund admin business MMC is leading the charge to set industry standards on unit pricing error-reporting.
Nicola Tait, MMC head of client services and marketing, said a working group convened by the firm – comprising administrators (both third-party and in-house), fund managers and supervisors – had agreed on thresholds for when unit-pricing mistakes require down-the-line notification.
“It’s been a challenge to ensure supervisors have sufficient oversight without burdening the industry, and ultimately the investor, with costly administration,” Tait said.
She said some managers and trustees (now officially known as ‘supervisors’) have interpreted the rules as requiring them to report any unit-pricing mistake, which, can lead to the FMA dealing with petty admin matters.
“If it’s just a small error, the FMA will say ‘why did you send this to us?’,” Tait said.
However, in its latest newsletter, MMC says the FMA had indicated any guidance on unit-pricing error reporting should come from the supervisors rather than the regulator.
MMC says the working group produced a draft guidance document, that was up for consideration by the Trustees Corporations Association (TCA).
“In line with MMC’s Error Reporting and Compensation Policy, the document sets out that all unit pricing errors greater than or equal to 0.05% for cash funds and 0.30% for other funds are considered as material and are to be reported to supervisors as soon as reasonably practicable,” the MMC newsletter says.
In addition to adding clarity to the question of what constitutes a material error, the document sets out an assurance reporting framework to assist with supervisory oversight.
“The document currently sits with the supervisors (via the TCA) but they are starting to circulate it to clients with an understanding that they will formally implement the guidelines in due course.”
Tait said an agreed unit-pricing error-reporting threshold would ease compliance concerns across the NZ funds management industry.