In our last 2015 FMCA tip and insight, we looked at the journey so far towards implementation of a new regulatory regime for securities offerings and capital markets under the Financial Markets Conduct Act (FMCA). It seemed that, although the journey had already been a long one, some light was appearing at the end of the tunnel. So, with only another five months to go until the finish line of 1 December 2016, it's time to ask - have we really hit the home straight? And will all starters reach the finish line?
In November 2015, only 11 Managed Investment Scheme manager licences had been granted and none of the licensed managers had transitioned their schemes to the new regime.
As of 1 July 2016, 31 Managed Investment Scheme manager licences have been granted and, of them, only 11 have transitioned any (or all) of their schemes to the new regime. It isn't hard to do the maths - even with a serious contraction in the number of managers operating in the retail space, there are a significant number of applications yet to be filed and/or approved.
The Financial Markets Authority (FMA) has recently reinforced that licensing these managers will be its major focus through to 1 December, saying, "The FMA wants to engage with fund managers now and talk them through the minimum standards and level of compliance they will need to continue offering managed investment schemes to consumers." (FMA News release, MR no. 2016 – 02, 26 February 2016)
But FMA has made it abundantly clear it has no 'Plan B' to deal with any bottleneck of managers who leave it too late to apply for a licence in 2016. The stark reality is that if you're not licensed by 1 December, your scheme(s) will be off market. Notably, FMA has recently said that 1 August is the latest date for lodging applications for approval by 1 December.
So, as we near the finish line for transition, what tips can we offer to those who have stalled at the hairpin bend or, even more worryingly, haven't even made it over the start line?
- Pick up the phone to your professional advisers and your Supervisor immediately. Both we and the Supervisors have now had a lot of experience with transitions, and solutions to the issues managers are facing.
- Get your licence application into reasonable shape as a matter of urgency and then lodge it, so you at least get yourself onto the FMA's radar.
- Engage proactively with your service providers as soon as you can.
- Start pulling together your transition plan so that even if you receive your licence late, you're able to transition very soon afterwards.
At the same time, don't forget to consider alternatives that may mean you don't need to be licensed at all or will reduce your regulatory obligations:
- Restrict your offer to wholesale clients. But note the wholesale investor exceptions have been significantly amended, so make sure you check whether your investors still fall within the definition.
- Look carefully at the options the FMCA gives for restructuring and amalgamations - using these practical opportunities can help rationalise your book and reduce compliance obligations and cost.
- Explore the new range of 'bright line' exceptions and exclusions. These include those for small schemes (five or fewer investors) and for offers of financial products of the same class as quoted financial products.