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The Financial Markets Authority (FMA) is looking to grant a class exemption for managed investment schemes in wind-up from certain reporting, audit and assurance obligations under the Financial Markets Conduct Act 2013 (FMC Act) and the Financial Markets Conduct Regulations 2014 (FMC Regulations).
Submissions on the FMA consultation close on 12 May 2025.
Options
The changes would be made to Part 7 of the FMC Act, dealing with financial reporting and audit obligations, and to Parts 3 and 4, regarding disclosure and governance.
Part 7 - Relief from financial reporting and audit obligations
Four options are offered for feedback:
- maintaining the status quo, with individual relief granted on a case-by-case basis,
- relief from the requirement to prepare financial statements in the first year of wind-up, if the wind-up effective date is within four months of the scheme’s balance date,
- relief from the requirement to audit financial statements during wind-up, if the balance date occurs after the wind-up effective date and before the final distribution and deregistration of the scheme, and
- relief from both financial reporting and audit requirements, conditional on preparation of a six-monthly Wind-Up Report to be prepared by the manager (or the supervisor where there is no manager), and to include (among other things):
- financial statements,
- a statement of changes in scheme property,
- a description of actions taken or expected to be taken to realise scheme assets and resolve scheme liabilities,
- information about distributions,
- the status of any legal action involving the scheme,
- contact details for queries and where the Exemption Notice may be accessed, and
- a statement that the Wind-up Report has been prepared with care diligence and skill in accordance with the exemption notice.
Parts 3 and 4 - Relief from disclosure and governance obligations
Options include relief from the requirements to:
- prepare and make available an annual report after the wind-up effective date (because much of the information may be of diminished value to investors and other stakeholders),
- prepare, make publicly available, and lodge fund updates on the Disclose Register (because the information may not be relevant during wind-up),
- report limit breaks that occur from the wind-up effective date (because the investment strategy is no longer being followed),
- provide the supervisor (or FMA in the case of restricted schemes) with quarterly reports of related-party transaction certificates where the report would be a nil report,
- audit the financial product register annually during wind-up (because the register should not change after the wind-up effective date),
- obtain a custodian assurance report from the wind-up effective date, provided certain criteria are met (because the custodian's role remains unchanged during wind-up), and
- lodge biannual portfolio holdings reports on the Disclose Register (because the holdings will change rapidly during wind-up and will quickly be outdated).
These exemptions will have a range of conditions that need to be met to rely on them. The FMA has also indicated that the relief will likely be subject to further requirements, including that:
- the scheme has a clearly defined wind-up effective date and that the wind-up complies with the requirements of the scheme’s governing document and sections 212 and 213 of the FMC Act,
- the manager or supervisor provides written notice to the Registrar, the FMA, and scheme participants that they intend to rely on the exemption in respect of the relevant scheme,
- managed investment products are no longer offered or issued by the scheme, and
- if the scheme ceases to be in wind-up, the exemption no longer applies.
Context
This consultation is part of a wider package of relief measures for schemes and entities in wind up, receivership or voluntary administration (see here and here) and follows recent FMA guidance for scheme supervisors and managers in relation to the scheme wind-up requirements in sections 212 and 213 of the FMC Act.
The FMA has noted that during wind-up, a scheme’s objectives and priorities shift, and the purpose of some compliance obligations will either not be met or will be met only partially.
The proposed exemptions aim to strike a balance between reducing unnecessary compliance costs and promoting flexibility while ensuring that appropriate governance arrangements continue to apply and that stakeholders continue to receive relevant information.
Next steps
Submissions close at 5pm on Monday 12 May 2025. If you would like help with making a submission or more information on how the exemption options might operate in practice, please get in touch with one of our experts.
