Regulatory returns to come into effect for MIS managers

A recent update from the Financial Markets Authority (FMA) has progressed the topic of regulatory returns for licensed derivatives issuers, Managed Investment Scheme (MIS) managers and Discretionary Investment Management Service (DIMS) providers. The FMA have now confirmed that regulatory returns will soon be introduced.

On 25 March, three years after they opened consultation, the FMA released their response to submissions on regulatory returns and the regulatory return data form template. The first return period will run from 1 July 2021 to 30 June 2022. Licensees must submit the completed return by 30 September 2022. In subsequent years, licensees will be required to complete an annual regulatory return for the 12-month period ending 30 June and submit it to the FMA by 30 September of that year. While the consultation and proposed questions occurred some time ago, licensees must now become familiar with the process and prepare for their first regulatory return period.

In this update we focus on the content of the return for MIS managers. The FMA states that the purpose for the introduction of regulatory returns for MIS manager is to enable it to identify changes in risk profile and broad industry themes amongst managed investment schemes. In turn, this allows the FMA to implement more effective risk-based monitoring of these services. The Financial Markets Conduct Act 2013 already requires licensees to report to FMA when a material change of circumstances that adversely affects the licensee’s capacity to perform its services in an effective manner has occurred, may have occurred, or is likely to occur in relation to the licence. However, the granular detail and scope of the regulatory returns will reach significantly further.

The returns cover the following key areas which are included in the regulatory return data form template:

• General information
• Detailed complaints data (including number of complaints received and resolved over the reporting period an the categories of complaints)
• Outsourcing providers
• Summary financials
• Provision of financial support
• Investment team staff
• Distribution channels

The content that must be included in the return relates only to the MIS manager's licensed business, unless the context indicates otherwise. For example, the manager may be required to provide information beyond the scope of their licensed business in the context of financial statements or when providing information about any financial support provider.

With only three months until the first return period commences, it is important that MIS managers begin setting up systems to record information efficiently and effectively during the return period. Please don't hesitate to contact us if you have any queries about the introduction of regulatory returns, the content of returns for derivatives issuers and DIMS providers or how the returns may affect your business.