Supervision of Regulated Offers
and Retirement Villages
Under the Financial Markets Conduct Act 2013, an independent, licensed Supervisor must be appointed in respect of certain financial products. Under the Retirement Villages Act 2003, an independent, licensed Supervisor must be appointed in respect of retirement villages. Licenses for both types of appointment are granted by the Financial Markets Authority (FMA) under the Financial Markets Supervisors Act 2011.
The FMA has issued Supervisors with licences in respect of the following:
- KiwiSaver schemes
- Non-fund schemes
- Specified managed funds (includes unit trusts)
- Superannuation schemes
- Debt securities
- Retirement villages
The FMA website (www.fma.govt.nz) provides a copy of each Member’s licence which includes the terms and conditions associated with the licence and the securities the Member can supervise.
Licensed Supervisors play an important role as front-line supervisors of issuers of financial products (for example finance companies and managed funds) and retirement village operators. The Supervisor role includes monitoring the activities of the issuer or operator on behalf of investors and residents of retirement villages.
A Supervisor of financial products is required to:
1. act honestly in acting as a Supervisor;
2. exercise its power and performing its duties as a supervisor, act in the best interests of investors;
3. exercise the care, diligence, and skill that a prudent person engaged as a Supervisor would exercise; and
4. do all the things it has the power to do to cause any contravention of the issuer’s obligations and any other person in connection with the registered scheme to be remedied.
A Supervisor of a retirement village is required to:
1. provide a stakeholder facility for intending residents and residents who pay deposits or progress payments in respect of occupation right agreements or uncompleted residential units or facilities at the retirement village;
2. monitor the financial position of the retirement village;
3. report annually to the Registrar of Retirement Villages and residents on the performance of its duties and the exercise of its powers; and
4. perform any other duties imposed by the Retirement Villages Act 2003 or other law, and any documents of appointment.
Supervisors must also regularly report to the FMA which monitors the performance of the functions of the Supervisor.
Corporate Trustees undertake a range of roles in respect of non-regulated products including:
1. Securitisation structures: roles include Trustee of a trust, Security Trustee (holding the security on behalf of the secured creditors), registry and paying agent in respect of the note holders;
2. Escrow agent where funds are held on behalf of third parties;
3. Trustee for non-regulated debt issues;
4. Trustee for non-regulated managed funds;
5. Custodian, and
6. Security agent.
Unlike the regulated products, these roles can be treated as primarily contractual in nature and therefore the undertakings of the Trustee or agent can depend on the requirements of the parties.