Shortly before Easter the long-awaited KiwiSaver (Periodic Disclosure) Regulations 2013 (Regulations) were rolled out. These set out the financial reporting requirements that will apply to KiwiSaver providers, and are intended to assist comparability between providers. The Regulations have been the subject of ongoing discussions with industry, and this update comments on what the new regime will bring.
Who has to comply, and by when?
All KiwiSaver managers must comply with the Regulations, for each of their KiwiSaver funds. The Regulations will come into force on 1 July this year, and the first disclosure documents required under the Regulations will need to be registered in October.
The Regulations create new reporting requirements for KiwiSaver funds. Managers must produce a quarterly disclosure statement (QDS) within 15 working days of the end of each quarter, and an annual disclosure statement (ADS) within 60 working days of the end of the year (the KiwiSaver disclosure year runs from 1 April to 31 March). The Regulations contain a waiver so that a QDS is not required for the first quarter of the 2013-2014 disclosure years.
The QDS is intended to provide key information in the following areas: performance and returns of the KiwiSaver fund; fees and costs; asset allocation and portfolio holdings; key personnel; policies; valuation and pricing methodologies; and conflicts of interest. In addition to this information, the ADS must also provide disclosure regarding liquidity and debt levels. The information is intended to be provided in tabular and pie-chart form where possible. The Regulations contain templates of how this information is likely to appear (see Schedules 3 and 4).
To aid investors in accessing the disclosure statements and comparing the performance of different providers, QDSs and ADSs must be displayed on the manager's website, and will be available in hard copy upon request. The QDS and ADS information must also be provided in the form of a downloadable file, to enable users to prepare charts or tables of this information directly comparing managers' performance.
What's changed from earlier versions of the Regulations?
There have been a number of changes to the Regulations. An ongoing subject of discussion between industry and officials was the means for facilitating charts or tables of KiwiSaver performance. The final solution reached in the Regulations will enable interested persons to use the downloadable data files to do so themselves.
The final version of the Regulations has removed the requirement to include portfolio turnover information and disclosure of historic fees. The Cabinet paper for these changes suggest these have been removed on the grounds of providing limited benefit for investors and the difficulty of comparing funds that directly hold their assets with those operating on a fund-of-funds basis.
Further, whereas the earlier draft of the Regulations left several areas for the Financial Markets Authority (FMA) to publish guidance and methodologies, these are now dealt with directly in the Regulations. This greater degree of specificity is likely to be appreciated by managers, and the FMA still has the option to publish guidance if considered necessary.
What might happen in the future?
From a regulatory point of view, KiwiSaver is a 'shop window' for investor confidence, and the Regulations are an important step in seeking to boost investor confidence and informed participation in the capital markets. Cabinet has agreed that the disclosure regime created by the Regulations would be carried over into the new regime under the FMC Bill. In addition, if they are well received by the marketplace, they may provide the basis for periodic reporting requirements for other managed fund type products.