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KiwiSaver fund managers to be directly responsible to investors

Thursday 29th April 2010

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KiwiSaver fund managers will become indirectly accountable to their investors, instead of being able to hide behind auditors, under changes announced tonight by Commerce Minister Simon Power.

In one of a raft of decisions tonight, Power moved on the circumstances that allowed former head of Huljich Investments, Peter Huljich, to make cash injections to Huljich Wealth Management KiwiSaver funds to boost returns, and for liability for disclosure ultimately lying with the trustees.

Coverage of trustees by a new super-regulator, to be called the Financial Market Authority, was another of the major shake-ups of securities regulation announced tonight by Power at the INFINZ annual awards dinners for finance industry professional.

The FMA will also take on responsibilities currently covered by a variety of public and private agencies including the Securities Commission, NZX, Companies Office, Government Actuary, and the Institute of Chartered Accountants.

 

Major securities regulatory changes announced tonight are:

·         a fundamental rewrite of parts of the Financial Advisers Act 2008 to remove its impact on areas clearly unintended;

·         a six month extension to July 1, 2010 for registered financial advisers to gain qualifications, although they must still register by December 1 this year, recognising industry concerns that the

·         a new “super-regulator” Financial Markets Authority, an agency encompassing the Securities Commission, elements of the NZX regulatory function, and various government agencies’ corporate oversight functions;

·         the inclusion of auditors under the FMA rather than regulated by the New Zealand Institute of Chartered Accounts – a big change of heart for Power, reversing views expressed just over six months ago; and

·         changes to the law covering KiwiSaver providers, making the fund managers rather than the trustees liable for loss.

·         a shake-up in the leadership of securities enforcement with the creation of the FMA.

Power said the new regime would make the KiwiSaver fund manager the issuer, a role currently filled by the trustee, and would be required to make continuous investment performance disclosures matching the “default” funds nominated by the government to invest on behalf of KiwiSavers who do not choose a provider themselves.

“Right now, fund managers have few direct duties to investors and it’s difficult to hold them to account, despite the fact that they are responsible for the investments of the scheme,” said Power.

“The government will move to a regime where the fund manager becomes the issuer, with primary responsibility for the disclosure documents under the Securities Act, and with a direct duty of care to investors.”

Trustees would also owe a duty of care, and be “supervisors of the fund manager” and be subject to the new trustee supervision regime that is currently before Parliament, although Power acknowledged conflict of interest issues would need to be addressed.

“This regime will also ensure that the securities market regulator ca monitor trustees under the new trustee supervision regime.”

Non-retail, employer-based and vocational-based KiwiSaver schemes would not be covered, nor would superannuation schemes.

“However, the government will consider bringing all other superannuation schemes within the trustee supervisory model as part of the wider review of securities law,” said Power, who stressed KiwiSaver would never carry a government guarantee, but that the changes should improve investors’ ability to judge their fund “without wondering if the figures have somehow been doctored”.

 

 

Businesswire.co.nz



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