New Zealand’s Financial Markets Authority regulates the country’s financial services providers under the Financial Markets Conduct Act 2013. The Act, which came into effect last year, sets out six types of financial licence issued in New Zealand. The base costs of these licences run from NZ$2,139 to NZ$10,695, with additional hourly costs if assessing the application requires more time than allotted to that licence type.
This guide explains what each of the licence types covers, the key compliance requirements, the licence cost and the usual amount of time taken to process them.
Discretionary Investment Management Service Provider (DIMS)
What it covers: Companies that make decisions on buying and selling financial assets on their Clients’ behalf require a DIMS licence. The licence also includes providing financial advice in the course such discretionary fund management, so regulated businesses can share their expertise and advice with Clients without the need for an additional licence. The requirements of the DIMS licence apply whether or not the Client retains some level of control over the asset manager’s decisions.
DIMS applies to segregated management accounts, rather than to pooled funds. Pooled funds require a Managed Investment Scheme Manager licence, below.
Key compliance requirements: The licence requires suitably competent and experienced directors and obliges licensed financial firms to:
Use a written Client agreement for all engagements;
Obtain written authority from Clients to carry out the full scope of investment objectives;
Appoint an independent, suitably qualified custodian to hold Client funds;
Comply with KYC, reporting obligations and broker obligations under New Zealand’s Financial Advisers Act 2008; and
Register under the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
Managed Investment Scheme Manager (MIS)
What it covers: Investment funds made up of money pooled by investors require MIS authorization. This includes pension fund providers, unit trusts, property funds and other similar investment vehicles. However, there is no licence requirement if the scheme is restricted only to professional investors and not offered to retail investors.
Key compliance requirements: Managed Investment Schemes require adequately experienced directors and senior managers. The licence also obliges regulated businesses to:
Reflect the scheme’s investment policy and objectives in an offering document and follow the terms therein;
Register the scheme with the FMA prior to offering units in the fund to investors; and
Comply with KYC, reporting obligations and broker obligations under New Zealand’s Financial Advisers Act 2008.
The fund supervisor may hold Client money and the fund property on trust, but an independent custodian may be appointed if preferred.
Base cost: NZ$3,565
Processing time: 25 hours of FMA staff time
Derivatives issuer
What it covers: Companies offering derivative products including options, swaps, futures and margin contracts need a Derivatives Issuer licence if making regulated offers to investors in New Zealand. No licence is required to sell derivatives to wholesale investors, but offers to retail investors require regulation.
Key compliance requirements: Regulated derivatives issuers must:
Have adequately experienced directors and senior managers;
Provide Clients with product disclosure statements and other relevant disclosure materials; and
Comply with KYC and reporting obligations.
Base cost: NZ$10,695
Processing time: 70 hours of FMA staff time
Independent trustee of a restricted scheme
What it covers: Individual trustees of restricted investment schemes (which include KiwiSaver, superannuation or workplace saving scheme) regulated as an MIS and listed as ‘restricted’ on that register.
Key compliance requirements: Regulated trustees must prove that they have:
Good character, which consists of integrity, probity, trustworthiness and reputation;
The competence, skills and experience necessary to carry out the work of a trustee; and
Professional indemnity insurance in place sufficient for the nature and scale of the trusteeship(s).
Base cost: NZ$2,139
Processing time: 15 hours of FMA staff time
Peer-to-peer lending service
What it covers: Businesses that act as an intermediary between borrowers and lenders in New Zealand, rather than providing credit themselves. The licence allows these services to operate without the need to supply product disclosure statements to borrowers.
Key compliance requirements: Peer-to-peer lending services must:
Comply with the Financial Markets Conduct Act’s fair dealing provisions;
Have a written Client agreement with lenders;
Give disclosure statements to retail lenders; and
Comply with KYC and reporting obligations.
Base cost: NZ$6238.75
Processing time: 40 hours of FMA staff time
Crowdfunding services
What it covers: Platforms matching private companies issuing shares with investors wanting to buy them. Charitable fundraising businesses are not regulated here as no shares are issued.
Key compliance requirements: Crowdfunding services must:
Have adequately experienced directors and senior managers;
Comply with the Financial Markets Conduct Act’s fair dealing provisions;
Provide information to investors to assist them with share buying decisions; and
Comply with KYC and reporting obligations.
Base cost: NZ$6238.75
Processing time: 40 hours of FMA staff time
More information
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