NZ investment managers, crowdfunders, discretionary investment management service (DIMS) providers et al could be up for some light regulatory relief under a new Financial Markets Authority (FMA) proposal to ditch the current five-year licensing term.
As per the original Financial Markets Conduct (FMC) regulations all ‘licensed providers’ – which covers a broad church including fund managers, DIMS providers, supervisors and independent trustees – were scheduled to reapply for the legal right to operate after five years.
In a statement, the FMA says it is considering switching to an “open-ended term” for all FMC licence-holders “both existing and new”.
The regulator is sifting through industry responses after launching a “targeted consultation” late last year.
Liam Mason, FMA director of regulation, says the licensing move was intended to balance a “proportionate and appropriate” regulatory burden against the regulator’s mandate to ensure “fair, efficient and transparent markets”.
Mason says the original five-year licence term was a “conservative” measure to monitor industry standards that may no longer be required as the FMA oversight techniques have matured.
“Re-licensing imposes significant direct and indirect costs on all market participants, regardless of risk,” he says in a release.
“On balance, the FMA view is that the costs associated with re-licensing would not be matched by the benefits to be gained from the activity, taking into account the intelligence we have gathered through our entity-based and thematic monitoring.”
However, the regulator would retain the right to set licence term-limits “on a case-by-case basis”, the FMA statement says.
Excluding the 1,800 or so authorised financial advisers (AFAs), the FMA oversees more than 270 licensees across 11 sectors, covering: crowdfunding; derivative issuers; settlement systems; robo-advisers (an interim measure); DIMS; independent trustees; managed investment scheme managers; market operators; peer-to-peer lending firms; qualifying financial entities (QFEs); and supervisors (formerly known as trustees).
Both the QFE and AFA designations will be retired once the in-transit Financial Services Legislation Amendment Bill (FSLAB) comes into force.
However, FSLAB will foist heavier monitoring duties on the FMA with the legislation set to usher many thousands of financial advisers (housed under a yet-to-be-determined number of licensed entities) into the regulatory ring.
Consultation on removing the five-year licence term is “ongoing”, the FMA says, with no firm end date in sight.
The regulator has another busy year ahead beginning with the insurance industry conduct report – a collaboration with the Reserve Bank of NZ (RBNZ) – due to be published this Tuesday. It is understood the insurance report will take a harder line than last year’s companion bank report that found room for improvement but no systemic rot across the nation’s financial institutions.
The FMA is also spearheading another review of NZ capital markets, announced last week. To be co-funded by the regulator and the NZX, the Capital Markets 2029 project will cover “early-stage capital raising and investment opportunities all the way up to main board listings and institutional investor appetite”, FMA chief Rob Everett said in a statement.
Undoubtedly, too, the NZ regulator will be parsing the final report from the Australian Royal Commission into financial services – due any day now – for local implications.
