The Ministry of Business, Innovation and Employment (MBIE) has released a discussion paper "Discussion document: Discretionary Investment Management Services and Custody" to seek stakeholder views on potential regulations relating to discretionary investment management services (DIMS) and custody in light of the proposed amendments for the Financial Advisers Act 2008 (FAA) under the Financial Markets Conduct Bill (FMC Bill).
The FMC Bill will change how DIMS and custodians are regulated under the FAA. In particular, the FMC Bill will require providers of class (non-personalised) DIMS to be licensed and require all DIMS providers to use an independent custodian, unless otherwise permitted by their authorisation or licence conditions.
MBIE are proposing to, where appropriate, align the obligations of Authorised Financial Advisers (AFAs) who offer personalised DIMS under the FAA with those that will be applied to DIMS providers licensed under the FMC Bill. This would involve changes to the eligibility, disclosure, reporting and client agreement requirements for AFAs who wish to continue to offer DIMS under the FAA regime.
The discussion paper also proposes standardising options to mitigate risks to investors through requirements for custodians under the FAA obligations for brokers. These proposals are based on suggestions MBIE received from submitters on the Financial Market Conduct Regulations discussion paper in March this year and on overseas regulatory requirements. The aim is to ensure custodians have appropriate control systems in place to minimise risks to clients' assets and that clients are provided with sufficient information to allow them to monitor their assets.
MBIE anticipate that any regulations resulting from this consultation process will be approved prior to the greater part of the FMC Bill coming into force around April 2014. However, MBIE acknowledge that AFAs and custodians will require additional time to change some of their operations, and is seeking stakeholders' views on transitional measures that may be needed.
Submissions on the discussion paper close on 23 August 2013.
Further details on this consultation are available here.