New disclosure requirements designed to promote comparability between KiwiSaver schemes and more transparency of information will come into effect on 1 July 2013.
We comment on the new KiwiSaver (Periodic Disclosure) Regulations 2013 and on their implications for KiwiSaver providers.
KiwiSaver schemes (unless restricted) will be required to report quarterly and annually on each fund within a scheme, including:
- fund performance and returns
- fees and costs
- asset allocation and portfolio holdings
- liquidity and liabilities, and
- key personnel, policies, and conflicts of interest.
The Regulations prescribe a simple, standardised form to enable potential (and current) investors easily to compare schemes or different funds within a scheme so that they can make an informed investment choice.
The disclosure statements must be posted on the scheme provider’s website and each must contain a hyperlink to a downloadable data file in relation to the relevant fund. The intention is that the data file can be reused.
The data file will contain information additional to the disclosure statements (such as liquidity and debt ratios for the scheme or fund) and is required to be set out in a specified table format.
Copies of both the data file and the disclosure statements are required to be posted online and provided to the Financial Markets Authority:
- for quarterly disclosure statements, within 15 working days after the end of each quarter of the tax year, and
- for annual disclosure statements, within 60 working days after the end of the tax year.
Copies of the relevant documents need to be available from the scheme provider in hard copy on request and free of charge.
Disclosure and data file requirements
The Regulations require the following disclosures:
- the total value of the fund and number of members as at the date of the disclosure statement
- graphs showing the investment return after fees and taxes for each tax year and the average annual return since the fund started or over the last ten tax years (whichever is shorter)
- the make-up of total fund fees (including the percentages of members’ investments that related to the annual management fee, performance-based fees and other fees/costs)
- the membership fees (fixed dollar charges) charged to members
- a link to where information can be found about fees for member-specific actions or decisions
- the impact of fees on a member’s returns, using as an example a member with $10,000 in the fund at the start of the year and no further contributions
- a pie chart showing the investment mix of the fund
- a table showing the target investment mix of assets
- a list of the top ten investments of the fund, including the type of investment, the country in which it is made, and (if applicable) the credit rating of the investment
- a list of the five directors or employees with the most influence on the investment decisions of the fund (and information on their roles), and
- for quarterly statements only, information about conflicts of interest and changes since the last disclosure statement:
- in the nature and scale of the fund’s related party transactions
- to the fund’s trade allocation, execution and proxy voting policies, and
- to the fund’s valuation methods.
All returns in the disclosure statements are to be expressed after tax at the highest prescribed investor rate (currently 28%).
The Regulations contain an exemption from the prohibition in the Securities Regulations 2009 against stating in an “advertisement” the net assets of a scheme where those amounts have not been taken from the most recent audited financial statements.
Scheme providers are also exempted from the requirement to have an advertising certificate signed in respect of each disclosure statement and data file and – where the investment statement pre-dates 1 July 2013 – from the need to refer in an investment statement to the disclosure statements and data files as information that is available to investors on request. Investment statements issued on or after that date will be required to contain such references.
Short time for scheme providers to prepare
The first quarterly disclosure statements and data files are required by 21 October 2013 (relating to the 12 month period ending 30 September 2013).
The first annual disclosure statements and data files are required by 27 June 2014 (relating to the 12 month period ending 31 March 2014).
What should scheme providers do now?
Scheme providers are advised to review their systems and processes now to ensure that they can easily extract the required information from the system following the completion of the next quarter.
Our thanks to Emma Harding for writing this Brief Counsel. For further information, please contact the lawyers featured.