Supervisors

The application forms below need to be completed for a new license or replacing an existing one. Licensed supervisors must, between nine and 12 months before the expiry date of a current licence, make an application for a new licence. We will make a decision on the application no later than three months before the expiry date.

1. Supervisor Application form (TRU1.1)

This form helps you start processing your application. It contains information about how to submit your application, the fee, and how to pay it.

2. Supervisor Information checklist and statutory declaration form (TRU2.1) 

This form contains:

- a checklist of supporting information that you must submit with the application form
- an appendix of cover sheets to help us track the information you provide
- a list of all directors and senior managers who need to submit director/senior manager statutory declaration forms (DIR1.1) - see below.

3. Director/senior manager statutory declaration form (DIR1.1)

Every director and senior manager named in the information checklist and statutory declaration form (see above) must separately complete one of these forms. 

Fees

The application fee for a new or replacement licence is determined by the Financial Markets Authority (Fees) Regulations 2011 and is $8,021.25 (inclusive of GST). Where time worked on an application by members and employees of FMA exceeds 52 hours, we will write to tell the applicant why, and charge the applicant (additional) hourly fees:

• for each hour of work by a qualified or professional employee of the FMA - $178.25
• for each hour of work by a member of the FMA - $230 13.

The same fee applies to all application types irrespective of the number or type of supervisor’s roles being applied for. The fee must be paid at the time the application is made. We will only consider an application after the licence fee has been paid. The fee is not refundable if the licence application is rejected. Refer to our Guidance Note: Supervisor Licensing for payment options and instructions.

Application assessment

To issue a supervisor licence, we must be satisfied that the applicant is capable of effectively performing the functions of a supervisor, including meeting any conditions imposed on the licence.

We assess the application against the requirements set out in section 16 of the Financial Markets Supervisors Act 2011 and in the Financial Markets Supervisors Regulations 2014.

We will fully review all material submitted by applicants. This includes taking into account any information from our monitoring of the applicant where the applicant holds an expiring licence.

Licensed supervisors can apply to vary an existing licence, for example, to add or remove a licence class. The process to vary a licence is similar to the process you used when you applied for your initial licence. 

Application forms

1. Form TRU1.1 Var is the application form. It has the detail to help you start your application. The form contains:

- information about how to submit your application
- the application fee and how to pay it.

2. Form TRU2.1 Var has a checklist of the supporting information and the statutory declaration form that you must submit with your application.

It contains an appendix of cover sheets to help us track the information you provide. It also requires you to list all directors and senior managers who will be submitting DIR1.1 Var forms.

3. Form DIR1.1 Var collects the information and statutory declarations by directors and senior managers. A separate DIR1.1 Var form must be completed for every director and senior manager named in form TRU2.1 Var.

Fees

The application fee to vary a licence is determined by the Financial Markets Authority (Fees) Regulations 2011, and is $115 (inclusive of GST). We will also charge an hourly rate:

• for each hour of work by a qualified or professional employee of FMA $178.25
• for each hour of work by a member of FMA $230

The same fee applies for all applications to vary a licence. The fee must be paid at the time the application is made. A licence application will not be considered until the licence fee has been paid. The licence fee is not refundable if the licence application is rejected. Refer to our Guidance Note: Supervisor Licensing for payment options and instructions.

A licensed supervisor should not assume they will be granted an extension for a class licence simply because they hold a licence in one or more than one class of licence. Any request for an extension into a new licence class must be fully assessed against the statutory tests (under section 16).

In practice, we must be satisfied that the applicant can effectively perform the role of supervisor (for the new class), and that adding the new class will not adversely impact their existing activities. The request to vary an existing class licence should therefore include:

• written operational procedures tailored to the new class
• proof to show the applicant understands the different reporting requirements of the new class, and how the applicant will adapt its existing monitoring procedures to encompass these
• details of how staff and management have updated skills to make sure they have the right skills to effectively carry out supervisory functions for the new class
• details of the peer review and supervisory processes for any new class
• levels of staffing resources 
• confirmation that work on existing supervised entities will not be adversely affected.

We expect the licensee to have clearly identified the risks associated with any new class of licence and how they will adapt their existing monitoring processes to address these risks. We expect this exercise to be more than a simple transfer of existing processes to another class.

Review your original licensing application

You should review your original licensing application and any supplementary material provided, or disclosures made to us when the original licensing application was made.

Where there are changes, please submit amended or updated material for those sections. To help you with this, refer to the licensing Guidance Note: Supervisor licensing, Part C. Where there has been no change to the information already submitted as part of the initial licensing application, please note the relevant sections on the application form.

Assessment of the application

To vary a licence, the FMA must be satisfied that the applicant is, or will be, capable of effectively performing the functions of a supervisor, including any imposed conditions, after the licence variation. We assess the variation application on the same basis as the initial licence application. What we will assess is set out in section 16 of the Financial Markets Supervisors Act 2011 and in the Financial Markets Supervisors Regulations 2014.

We will review all material received and will also take into account information we gather from our monitoring of the licensee’s operations. We might ask you to provide more information, update previously submitted material or verify the information you provided.

We will assess whether the licence duration and the current conditions are still appropriate. As a result, we may reduce the duration, vary current conditions or add new conditions.

Reporting issuer breaches

Disclosing contraventions or potential contraventions by issuers is an important part of the licensing regime. It enables us to monitor the extent and nature of non-compliance by the issuers being supervised; assess whether the supervisor has adequate plans to respond to a breach; monitor the effectiveness of that action; if necessary work collaboratively, where appropriate, with supervisors to ensure they take steps to address any breach.

When to report

Under section 203 of the FMC Act, the supervisor of a debt security or registered scheme must report to us a material contravention, or a possible material contravention, of an issuer’s obligations. The supervisor must also tell how they plan to act, and the timeline for the action. The obligation to report contains a materiality threshold, which requires a judgment to be made. We recommend a supervisor takes a precautionary approach and matters are reported where they have begun an internal discussion between supervisor staff as to whether the matter is material or not. This approach is consistent with: 

• the purpose and function of section 203 reports
• a focus on investor protection
• the development of a mutually supportive relationship between us and supervisors.

In particular, if a potential contravention relates to a matter that may result in a statutory penalty for the issuer, the contravention should only go unreported if deemed immaterial, and the supervisor is comfortable that the relevant regulator will not take action. 

If a supervisor thinks a contravention or likely contravention has occurred which may adversely impact the investors' interests, the contravention should be reported. It may be helpful to view the matter from an investor's perspective (ie, if you were an investor in the licensed entity, would you consider the contravention to be material?). 

Following a section 203 report to us, we might not necessarily direct the supervisor to take a course of action, unless we see a clear need to do so to protect investors. There have been concerns that a supervisor could be liable to action (from a supervised entity) should a contravention reported be found to be immaterial. Both sections 203 and 204 of the FMC Act have provisions detailing that the protections of section 214 of the FMC Act apply to reports made in good faith.

What to report

We expect each report under section 203 to fully comply with sections 203(1)(a) and 203(1)(b) to tell us:

• what steps the supervisor plans to take when there is a contravention or possible contravention
• what date the steps are to be taken.

A date range can be provided. You need to tell us if you do not plan further action. 

Following the initial section 203 notification, we may ask the supervisor for reports on the progress and success of the action taken by the supervisor to ensure the supervised entity is taking remedial action. We should be told if the supervised entity does not respond to the supervisor's plan.

Under the FMS Act, the High Court may fine a supervisor up to $600,000, if the supervisor contravenes a licensee obligation. Licensee obligations mean an obligation imposed on a supervisor by one, any or all of the following:

• every governing document
• the financial product’s terms of offer
• a court order on a supervised interest
• the FMS Act 2011
• the Financial Markets Conduct Act 2013
• the KiwiSaver Act 2006
• the Non-bank Deposit Takers Act 2013
• the Retirement Villages Act 2003.

Supervisors may also be liable to compensate investors as a result of the contravention. Under the FMS Act, anyone acting as a supervisor without a licence or claim to hold a licence may be fined up to $600,000.

With managed investment schemes

For managed investment schemes, you must actively supervise the manager’s performance of its functions and issuer obligations, and the financial position of the manager and the scheme. This is overlaid with the need to act on behalf of scheme participants in relation to the manager, the governing document, and issuer obligations. FMA’s licensing of MIS managers does not take away from your need to fulfil these requirements. Different MIS product classes will have different supervisory approaches and documentation. This reflects the need for a ‘fit for purpose’ tailored supervisory focus.

With debt issuers

For debt issuers, you must supervise the issuer’s performance of its issuer obligations. You must also satisfy yourself that the issuer’s assets are sufficient to discharge the amounts of the debt securities as they become due. Again this is overlaid with the responsibility to act on behalf of the debt security holders in relation to the issuer and the trust deed. Since debt securities are fundamentally different products with different risks, and with governing documents that serve a number of purposes, we expect that your supervisory approach to debt issuers will be different to that of MIS.

With the FMA

• As a supervisor, you have the core supervisory and compliance monitoring role for your supervised interests. 
• To avoid any duplication in the supervision of MIS, our focus will be on monitoring supervisors to ensure you meet your general obligations under the FMC Act.
• The business of detailed day-to-day supervision of specific MIS is the role of the supervisor. We believe this is the best way to build investor trust and achieve greater regulatory efficiencies, improved compliance standards, and consistency across the industry. 
• We will check you are meeting your obligations and hold you accountable for the proper discharge of frontline supervisory functions through the FMC Act, the Financial Markets Supervisors Act, and licence conditions.

As an FMC reporting entity, you must do all of the following:

• keep proper accounting records to help you prepare compliant financial statements — records must be kept in English and a copy must be kept in NZ
• prepare financial statements for your group's operations — those financial statements must comply with a generally accepted accounting practice in NZ
• have your financial statements audited by a licensed auditor or registered audit firm
• lodge your financial statements and the auditor’s report on them with the Companies Office within 4 months after your balance date

The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act) imposes several obligations: 

• You must provide a written risk assessment of the money laundering and financing of terrorism activity you could expect in the course of running your business.
• You are required to implement an anti-money laundering and countering financing of terrorism programme that includes procedures to detect, deter, manage and mitigate money laundering and the financing of terrorism.
• You are required to appoint a compliance officer to administer and maintain your programme.
• You are required to perform due diligence processes on your customers. This includes customer identification and verification of identity.
• You are required to report suspicious transactions. 

Read more about your AML/CFT reporting obligations

The FMC Act sets out minimum compliance standards of behaviour for people operating in the financial markets. It prohibits:

• Misleading or deceptive conduct
• False or misleading representations
• Unsubstantiated representations
• Offers of financial products in the course of unsolicited meetings

Read more about the Financial Markets Conduct Act

The FMA completed a review of the licensed supervisors during the process to update their license status in 2017. Following the re-licensing application process, the FMA assessed the supervisors’ submissions, specifically reviewing their approaches to monitoring MIS managers. We wanted to determine whether supervisors were taking a consistent approach to their obligations.

Download Key Findings Report.