A Cabinet paper outlining recent policy decisions which will change the information KiwiSaver providers are required to give to investors in their annual statements has been released by the Ministry of Business, Innovation and Employment (MBIE).
As a result of the changes, annual statements will be required to include:
- the total fees paid by the investor that year in dollar values;
- the total amount the investor's account grew (or decreased) over the year; and
- summary transaction figures detailing money that has gone in and out of the investor's account during that year.
The method for calculating the total fees figure will be subject to further consultation between MBIE, the Financial Markets Authority and KiwiSaver providers.
The full set of changes will be required in all 2018 KiwiSaver annual statements. However, a transitional period of one year applies to KiwiSaver providers who cannot disclose fees in dollar values in their 2017 annual statements. These providers may include “total fund charges" in percentage form, and the membership fee in dollars, as they appear in the most recent Quarterly Fund Update.
The changes outlined do not currently affect workplace savings and superannuation schemes or non-KiwiSaver registered managed investment schemes.
Chapman Tripp expects these changes signal the beginning of further changes to the KiwiSaver regime. Further changes have been foreshadowed in responses to the Retirement Commissioner's tri-ennial report on retirement income policies. The recommendations from that report have already been flagged in the media.
Cabinet has also authorised the Minister of Commerce and Consumer Affairs to decide whether annual statements should be required to include information on retirement savings projections, after considering further advice and evidence on this issue.
FMA reminder on quarterly fund updates
The Financial Markets Authority (FMA) has released a reminder that the requirements for managed investment scheme quarterly fund updates introduced by the Financial Markets Conduct Amendment Regulations 2015 (FMC Amendment Regulations) must be factored into quarterly fund updates.
The FMC Amendment Regulations made a suite of amendments to the Financial Markets Conduct Regulations 2014 (FMC Regulations) which came into force periodically on 1 December 2015, 17 December 2015 and 1 June 2016. This included amendments to Part 4 of Schedule 4 of the FMC Regulations, which prescribe the content of quarterly fund updates for managed investment products in a managed fund.
The key amendments identified in the FMA's reminder are:
- Market update section: A fund update may, after the section headed “Description of this fund", also have a section headed “Market update" that provides a brief update on market conditions relevant to the particular fund's performance and risks
- Additional statement when fund has performance fees: When performance fees are changed, the fund update must include a statement in the following form: “See product disclosure statement for more information about the basis on which performance fees are charged" or set out the information in relation to performance-based fees which must be included in the PDS
- Classification of interests in unrelated underlying funds: If an individual asset is an interest in a fund that is not a related underlying fund and there is no one asset type that is judged to be most appropriate, the asset must be classified as an interest in a diversified fund
- Currency hedging: The fund update must include a statement of the extent of currency hedging if that information is material for the particular fund
This is not a comprehensive list, and the FMA has recommended that managers seek a full legal review of their next fund update to ensure compliance going forward. If you would like assistance with this, or a checklist, please let us know.
Future compliance focus
1 December 2016 was a significant milestone, seeing the end of the transition period under the Financial Markets Conduct Act 2013.
However, the FMA's reminder highlights just one of the significant number of obligations under the FMCA with which managers of registered managed investment schemes must comply on an on-going basis.
The on-going compliance obligations under the FMCA are by no means static, with the FMA continuing to publish guidance on those obligations.
With the FMA signalling its intention to actively visit managers in 2017; it is a prudent time for managers to ensure that they understand and are meeting their on-going compliance obligations, and that their policies, procedures and internal control environment are in order.
Chapman Tripp can advise on the full suite of on-going compliance obligations under the FMCA, including providing compliance plans, board certificates, and quarterly fund update reviews, and assisting with improving managers' policies, procedures and governance obligations.