Strict rules for disclosure

More detail has been revealed about the disclosure requirements for managed funds, including KiwiSaver schemes, equity securities, debt securities and derivatives under the Financial Markets Conduct Act.

Thursday, May 22nd 2014, 6:00AM 1 Comment

The Ministry of Business, Innovation and Employment has issued a third exposure draft and commentary and is seeking submissions.

From December 1, disclosure documents will have to be shorter and follow standard formats. They will be accompanied by a key information summary that will have to be no more than two or four pages, depending on the product type. Other material information will be stored on an online register of offers of financial products.

MBIE says the moves are intended to make offer documents and information relating to financial products much more accessible to investors, their advisers, market analysts and commentators.

Managed funds, including KiwiSaver schemes, will have to keep their documents to 12 pages or 7200 words. Equity securities will get 60 pages, debt 30 pages, managed investment schemes - other than managed funds - 60 pages and derivatives 30 pages.

MBIE says lengthy compliance-focused PDS documents undermine investor decision-making.

An FMA survey released this week showed that 47% of investors who received information about their investments did not find it helpful in deciding whether to invest or not.

MBIE said: “Excessively long documents (and perhaps more fundamentally, a legal compliance focus to those documents) is a significant feature of the current disclosure regime. Over 200 pages was almost the norm for IPO offer documents in 2013. However FMA have had a strong focus on trying to shift current issuer and legal approaches towards shorter disclosures.”

The FMA said in an earlier submission that it was keen to avoid the market relying too heavily on it for guidance or ongoing clarification, and strict page limits were necessary.

Commerce Minister Craig Foss said the successful implementation of the Financial Markets Conduct Act would build high-performing capital markets. “This final consultation round will address any remaining technical issues before the regulations come into force on December 1.”

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Comments from our readers

On 23 May 2014 at 11:49 am Doctor said:

Ironically, it was government regulators that necessitated all those lengthy documents in the first place, due to their onerous compliance obligations. So now they're belatedly acknowledging that investors never wanted lengthy documents with a legal compliance focus. Thanks MBIE and FMA, where would we be without you?

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