A lot can change in five years even in the fusty world of corporate trustees.
New legislation, technological development, market growth and an increasingly enthusiastic regulator have all conspired to shake-up the NZ corporate trustee sector (now officially known as licensed supervisors) since its first five-yearly review in 2017.
And the small but influential band of supervisors will adopt a revised point-of-view as they emerge from round two of the statutory relicensing process, according to Angus Dale-Jones, executive director of the Corporate Trustees Association (CTA).
Dale-Jones said the Financial Markets Authority (FMA) enhanced focus on ‘conduct’ over technical compliance has seen supervisors evolve practices to meet the new requirements.
“The top-down emphasis on conduct now permeates everything,” he said, “and supervisors are responding.”
Dale-Jones said the impending implementation of the Financial Markets (Conduct of Institutions) Amendment Act 2022, or COFI, is also starting to ping on the supervisory radar.
First licensed in 2012 under the Financial Markets Conduct Act, the now five NZ supervisors act as ‘frontline’ quasi-regulators to ensure licensed investment managers (and the smaller subset of retirement villages) stay in their lanes.
The group includes the three main supervisors – Guardian Trust, Public Trust and Trustees Executors – as well as niche providers, Covenant (part of the Guardian group) and Anchorage, which specialises in the retirement village space.
All five are currently up for relicensing as per the legislation with a couple yet to complete the process: Anchorage is due to renew by November 17 while the rest are licensed until early next year.
During the previous review in 2017, the FMA set a few improvement tasks for supervisors including “a stronger overall risk-based approach to monitoring”.
“This would help to understand the most significant risk and harms, and identify potential systemic issues,” the review says.
While supervisors have taken the risk-based message on board, Dale-Jones said the conduct tilt plus a raft of new regulatory guidance and legislation will keep the sector busy for some time.
He said supervisors form an important vertex of the industry triangle connecting managers with regulators (primarily the FMA).
In addition to ensuring managers abide by the rules, Dale-Jones said supervisors act as a kind-of interpreters between regulator and industry – translating regulations into effective solutions and explaining the practical difficulties of any guidance, for example, to the FMA.
Unsurprisingly, the controversial FMA value-for-money guidance is top of the agenda for both supervisors and fund managers as they attempt to comply with the broad-sweeping regulatory guidance on fees, benchmarks etc.
But Dale-Jones said the industry also has other big issues on its plate such as environmental, social and governance (ESG) and looming climate-related disclosures.
The supervisor sector is evolving to meet the extra challenges with change happening, too, at the industry body level.
In a reversal of initials, the CTA adopted the new name this August after dropping the historic Trustees Corporation Association (TCA) moniker.
“The new name reflects the clear purpose of the organisation to focus on regulatory responsibilities and the underlying aim of enhancing investor confidence,” he said.
Dale-Jones, who has a consultancy business in addition to other industry roles, took on the part-time CTA executive director role in July.