Dated at Auckland this 24th day of July 2019.
Nick Kynoch,
General Counsel.
Statement of reasons
This notice comes into force on 1 August 2019 and is revoked on the close of 31 July 2024.
Every manager of a registered scheme that is a managed fund is required to provide the following information:
a list of the 10 highest-value individual assets of the fund and certain information against that list, including the name of the individual asset, in both the register entry for the offer and each quarterly fund update:
a complete list of the individual assets of the fund and certain information against that list, including the name of the asset, in the register entry for the offer. This information must also be updated within 40 working days after 31 March and 30 September in each year.
For assets such as loans secured by first ranking registered mortgages over property, the name of the individual asset would need to reference the name of the borrower under that loan.
This notice exempts the managers of managed funds that invest in these assets from the requirement to provide the name of the borrower. Instead, under the conditions of the exemption, the manager must include the following alternative information:
a description of the principal property secured by the mortgage as either residential, commercial, or rural and the geographical region in which the principal secured property is located:
the composition of the fund’s assets expressed as a percentage according to specified asset types, the composition of the loans according to geographical region, details regarding the value of impaired loans (if any), and the composition of those impaired loans expressed as a percentage according to each geographical region and each specified asset type, together with details of the maximum loan-to-value ratio for each type of loan.
While this notice exempts managers from providing the name of the borrower, there is no exemption from the requirement to disclose all material information. Therefore, the manager must still disclose any circumstances relating to the borrower that are material (eg, the borrower is a discharged bankrupt).
The Financial Markets Authority (the FMA), after satisfying itself as to the matters set out in section 557 of the Financial Markets Conduct Act 2013 (the Act), considers it appropriate to grant the exemptions, subject to conditions, and to revoke the existing exemption notices because—
disclosing the name of an individual borrower would require fund managers to amend their documentation and business processes to seek the borrower’s consent to disclosure, which would have a compliance cost. However, disclosure of the individual borrower’s name would generally not provide investors with the most meaningful information about the assets of a managed fund, as it is unlikely that an investor would be able to assess the credit risk of a borrower if there is little or no publicly available information on that borrower:
the alternative information that is required to be provided in place of the name of the individual borrower as a condition of the exemptions will better assist investors to assess and understand the nature of the fund’s investments and the investor’s exposure to risk.
As such, the FMA is satisfied that—
the granting of the exemptions is desirable in order to promote the purposes of the Act, specifically to promote the confident and informed participation of businesses, investors, and consumers in the financial markets, to provide for timely, accurate, and understandable information to be provided to persons to assist those persons to make decisions relating to the financial products, and to avoid unnecessary compliance costs:
as the exemptions will apply only to managers of managed funds that invest in loan assets secured by first ranking registered mortgages, and will exempt those managers only from the requirement to name individual borrowers, the exemptions proposed are not broader than is reasonably necessary to address the matters that gave rise to them.
Issued under the authority of the Legislation Act 2012.
Date of notification in Gazette: 29 July 2019.
This notice is administered by the Financial Markets Authority.