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FMA UPDATE

FMA'S ROLE COMPLIANCE CONSUMERS NEWS CONTACT US

Better disclosure – making sense to investors

Garth Stanish, Director of Capital Markets, FMA

Capital markets only work properly if investors receive accurate and timely information. That information must also be understandable and engaging to investors. It should form an accurate, clear and compelling story about how a company is performing.

Company financial statements are a vital part of the information investors receive. However, in the financial statements of many companies you’ll find phrases like ‘underlying earnings, ‘normalised profit’ or ‘cash earnings’. Information disclosed this way can sometimes confuse more than clarify. The information can be misleading if it is presented inconsistently, is not adequately defined, or used to hide bad news.

For information to be helpful to investors, and give them a better understanding of a company’s financial performance, it needs to be disclosed clearly. It should reflect an honest assessment of the performance of the company.

As part of our ongoing work to improve the quality of disclosure we have just published updated guidance on disclosing non-GAAP financial information. It sets out principles to help companies report alternative profit measures clearly - which should make information clearer for investors.

We’ve also added some more FAQs on Fund updates to help fund managers explain or display information more clearly for their investors.

We’re conscious we have to practice what we preach about clarity. So we have tried to make the measures we use for our own performance clearer and more meaningful in our latest Statement of intent and Statement of performance expectations.

Garth Stanish

Director of Capital Markets, FMA

Changing a director or senior manager? You need to tell us

As part of your licence conditions, you must tell us when you appoint a new director or senior manager. To notify us, please complete the simplified notification form on our website. Once completed, please sign, scan and email it to us at compliance@fma.govt.nz.


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Reminders

19 July

Consultation closes – Proposed exemption to facilitate personalised robo-advice

3 July - 31 August

Annual AML/CFT reports – Reporting entities we supervise are required to submit their annual AML/CFT report on their risk assessment and compliance programme through our online system before 31 August 2017.

Guidance recently published

Disclosing non-GAAP financial information

Following our consultation paper about disclosing non-GAAP financial information, we have now released updated guidance. This outlines our expectations on how to present non-GAAP financial information, including pro-forma financial information.

AML/CFT Sector risk assessment 2017 (SRA)

Our SRA provides information and specific examples to assist reporting entities (REs) in the nine sectors we supervise meet their obligations for AML/CFT. It identifies our expectations about awareness and management of any potential risks. We expect all REs to use the SRA as a guide when they prepare and implement their individual AML/CFT programmes.

Other publications

Auditor regulation and oversight plan 2017/2020
This is our three-year auditor plan setting out our intentions and expectations to auditors.
Read more >

NZX general obligations review 2017

This is our annual review of how well NZX is meeting its statutory obligations covering the 2016 calendar year.
Read more>

ICE Futures reports

These are our first ICE Futures U.S. Inc. (IFUS) and ICE Futures Europe (IFEU) reports. We are required to report at least once every two years on how well IFUS and IFEU met their licensed market operator obligations, and whether the Commodity Futures Trading Commission and Financial Conduct Authority were satisfied they complied with their obligations during review period (1 December 2014 to 31 December 2016).

All reports

What's on the horizon - coming soon

Guidance

KiwiSaver fees methodology notice - Next week we will issue our final guidance, the methodology notice and regulatory impact statement for KiwiSaver annual statements. The notice prescribes how to calculate the total fees charged to each investor, for disclosure in annual statements.

Consultation

Look out for the following consultation we’ll be releasing soon:

Market index - We will be consulting on potential exemption relief for MIS managers. The proposed exemption is for managers who cannot provide an ‘appropriate market index’ for managed funds, where these funds have significant direct or underlying investment into alternative asset classes. Any relief would be on the basis of alternative requirements, such as a peer group index.
Consultation on content of regulatory returns for DIMS, MIS and DI licensees - As part of the licence conditions, we will consult on the questions we will ask in annual regulatory returns. The consultation will also include an updated proposal for the annual compliance declaration for all FMC Act licensees.

Exemptions granted

We have issued the following list of exemptions. These will be published on our website in July or August:

Bundled unit trusts and other notional registered schemes: We decided to exempt managers from providing scheme financial statements for these registered schemes. They comprise a number of funds registered together as a scheme where each fund is a separate legal entity with no cross-liabilities.
Schemes in wind-up: We decided to grant exemptions for some companies that had issued debt securities, and for superannuation schemes, unit trusts and group investment funds that had issued managed investment products from the ongoing disclosure requirements of the FMC Act, where the managers of those companies/schemes had commenced, but not completed, wind-up before 1 December 2016. As we noted last month the notice providing relief for companies in wind-up came into force in May, and the notices for superannuation schemes and unit trusts and group investment funds have now been granted and will come into force on 14 July.
Irrigation companies: We decided to exempt irrigation companies operating under co-operative principles (but not legally a co-operative structure) from some disclosure, governance, and financial reporting requirements. The relief will vary depending on whether the per-shareholder investment is small and/or the annual revenue low. This is the same as the relief currently available to co-operative companies.
Multi-participant scheme managers: We decided to exempt managers of multiple-participant schemes from registering participation agreements on the Disclose register.
Transitional exemption relief for brokers client money requirements: We decided to exempt brokers who are not NZX participants from having to keep client money and property separate from their own money and property to allow limited use of the brokers own money as a buffer. We are also working with MBIE on a more permanent legislative solution through the reform of the financial advisers’ regime.