You are providing Discretionary Investment Management Services (DIMS) when an investor gives you the authority to make decisions about buying and selling financial products on their behalf. To provide DIMS under the FMC Act you must hold a DIMS market services licence issued under the FMA Act.
There are exemptions for two DIMS licensee categories from having to prepare financial statements that meet GAAP, have them audited by a licensed auditor, and lodge them with the registrar. The table below lists current DIMS financial reporting exemptions:
Level 1 DIMS Providers managing < $100m of retail funds
Level 2 DIMS Providers managing $100m to $250m of retail funds
preparing GAAP-compliant financial statements
auditing financial statements and lodging them with the registrar
prepare financial statements to meet their other existing company or tax reporting obligations
prepare accounting records
prepare GAAP-compliant financial statements and lodge them with the registrar
May need to:
prepare financial statements to meet their other existing company or tax reporting obligations
Licensing and registration
Before you apply for a licence
There are some things you can do to ensure your application runs as smoothly as possible:
review the licensing guides and documents below as they contain all the information you need to know so you can complete and submit your application
set up your RealMe®login details early
focus on the minimum standards – we will assess your business against them when processing your application
This guide contains information about the licensing process and includes many FAQs you might have and explains how to use our online application form (currently unavailable); create a RealMe® identity, if you don't already have one and pay your licensing fee.
This guide contains all the specific questions you’ll be asked and the minimum standards you’ll need to show you meet. It also details the information and supporting documents you’ll need to provide when you submit your application.
In your application, you'll need to demonstrate how you can meet the minimum standards and conditions for your licence - or ask us for a limit or variation using the forms below. This is very important because when a licence is granted, they contain conditions that support your licensee obligations. They include conditions imposed by the FMC Act, the regulations, and any conditions imposed by the FMA.
This document is for providers of Discretionary Investment Management Services (DIMS) to retail clients. It may also be helpful for people providing custody services to DIMS providers, and to those providing financial advice about DIMS. It contains some key terms and common questions, as well as practical examples and scenarios to help explain our approach to regulating DIMS.
A licensing fee of $10,695 (excl. GST) which includes 70 assessment hours is payable to the FMA.
We may charge an additional fee at the FMA hourly rate where our assessment of an application exceeds the included number of hours stated above. If an additional fee is charged for your application we will let you know in advance and provide you with the reasons for this. We may also invoice you for any costs of external advice or assistance.
Fees for variations to an existing licence
The fee payable to the FMA when you apply to vary an existing licence is $115 (incl. GST). This does not apply to adding a new licence type. Additionally, the FMA will invoice you for time spent assessing the variation application based on the FMA hourly rate $230 per hour for an FMA board member and $178.25 per hour for FMA staff.
Note: We will not issue a new or varied licence until the fee is paid in full. Licence fees are not refundable if an application is rejected.
DIMS licencees are obliged to act professionally; meet financial and investor reporting requirements; disclose a wholesale service and provide the FMA with reporting required by the Act.
All notifications should be emailed to the FMA at firstname.lastname@example.org noting the relevant obligation in the subject line of your email.
As a DIMS licensee, you must be honest in how you conduct and provide your service, always acting in your client’s best interest.
You must not use information gained as a DIMS licensee to benefit yourself or any other person or cause harm to your client.
You must also exercise care, diligence and the skill of a professional in carrying out your duties.
Check s433and s435of the Act for details of the conduct expected.
DIMS licensees need to make sure their retail clients have all the information about investment decisions, how the investments have performed, and what the fees are. Refer to reg210 and reg 211 for the full list of the information you need to report to retail investors. Your ongoing reporting requirements are:
Transaction information:record of all transactions, name of issuer, the price of the financial products transacted, the amount and date transacted
Assets profile:name of each class of financial product in the investor’s portfolio, who issued the financial products, and the number of products held
Portfolio administration profile:record of all dividends paid, distribution or income received during the period, all percentage-charges paid, individual action fees paid, and other corporate information that might affect an investor’s portfolio (eg, a bonus issue)
Portfolio valuation:current and most-recent valuation of all financial products in the investor’s portfolio; how and when the valuation is done (eg, the market price of the quoted product), and the total value of the financial products in the portfolio.
The investment objective
The investment mix
Any material changes to the strategy during the year
Investor’s portfolio return
Annual and five-year return of the portfolio (pre-tax but after fees)
A bar graph of the portfolio’s return (pre-tax but after fees) with a bar for each disclosure year since the investor started using the service
Name each class of the financial products in the investor’s portfolio, the products’ issuers, and the number of products in the portfolio
The current or most-recent value of each of those financial products
Statements of when and how the valuation was done
The value of the portfolio at the beginning and end of the disclosure year
Details of the amount of cash held for the investor at the close of disclosure year
Details of dividends paid, all interest paid, and other distribution or income received
The total percentage-based charges paid for the investor’s portfolio during the year expressed as a percentage of the investor’s portfolio
The total amount of other charges the investor has paid for the portfolio
The individual action fee paid during the disclosure year for the investor’s portfolio
A pie chart segregating all financial products, by asset category, of the investor’s portfolio at the end of the disclosure year
You need to tell investors if your DIMS is a wholesale service
DIMS licensees need to let their investors know if they are receiving a wholesale service. This is a requirement ofreg194
DIMS licensees must not buy or sell a financial product for a retail investor under a wholesale service unless they have given a prior warning to the retail investors. The retail investors must also acknowledge and authorise the service.
The warning must be prominently displayed on a document telling the investor:
the service is not a retail service
the service is not covered by the licence and FMA Act protections might not apply.
Reporting to the FMA
Required reporting to the FMA
Tell us if you breach a limit break
As a DIMS licensee, you are governed by what the investor allows you to do, based on the investment authority - sees437
The investment authority spells out the nature and type of investments you can make, and the amount in each asset type you can invest in
You have obligations to do limit break reporting quarterly (reg 231) and annually, and when your limit break is not corrected (reg 230) within five days of the break happening
As a DIMS licensee, you have to avoid transactions that lead to related-parties benefit (s440).
There are exceptions if you can certify that:
the service is provided to a class of investors, and in the best interests of the investors
the service is provided to only one investor, in the best interests of that investor
Under reg236 you must notify us within 10 working days of the end of each quarter, whether any certificates have been given, and if so provide us with copies of those certificates.
Tell us if you break a service agreement
As a DIMS licensee, you need to make sure you are able to meet the licence obligations (see s412 for details).
You need to tell us if you:
think you have broken any of your licence obligations
have a change in circumstances affecting your licence
have provided misleading material to investors.
All DIMS licensees are FMC reporting entities. FMC reporting entities need to prepare financial statements that comply with generally accepted accounting practice (GAAP), have them audited by a licensed auditor, and lodge them with the registrar.
Annual regulatory return
All licensed DIMS providers are required to complete and submit an annual regulatory return. The return is a series of questions about your business and how your licensed service is used.
The initial reportable period will be 1 July 2021 to 30 June 2022. Completed returns will be due by 30 September 2022. We will notify all licensees when it is time to complete and submit the first regulatory return.
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.
The information you provide us through the annual return helps us to:
better understand your business and the services you offer
ensure the information we have on your business is current