FMA changes tack on AFA reporting requirements
In a new consultation paper the FMA has changed the proposed requirement for AFA annual reports after criticism from the industry.
Monday, March 24th 2014, 6:00AM 
5 Comments
by Susan Edmunds
The FMA is planning to make it compulsory for all AFAs to produce an annual report, called an Information Return, each year.
However, its first draft received strong criticism from AFAs and institutions such as banks.
A number of AFAs took exception to the requirement to provide the FMA information about how much they earned from their business each year, arguing it was not the FMA’s business to ask about this when the purpose ot the report was to help it with regulatory monitoring.
Organisations which run QFEs, such as ANZ, argued their AFA members should be exempted from producing individual annual reports.
Another theme which came through in the responses to the first draft of the paper was that there was an overlap between what was required in the return and in an ABS.
As could be expected there was concern expressed about the amount of time it would take an AFA to complete the form. The FMA suggested it would be three hours, however some respondents said it would take much longer and Craigs Investment Partners said it would require significant system changes within its business.
In response the FMA has drafted a shorter return which, it says, would be more efficient.
“Detailed questions that focused on such areas as income and remuneration, discretionary investment Management Services (DIMS), portfolio quality and continuous personal development hours have either been removed or significantly scaled back in the information return.”
Among the other changes are that advisers who do not advise clients, or who work for QFEs, or who only provide certain services, will only have to answer questions that are relevant to their businesses.
The FMA said it had removed, where possible, questions that overlapped or duplicated information contained in ABS documents.
The FMA now wants the guide to come into effect on June 26. Submissions on the second consultation paper are due on April 9.
AFAs would have to complete the first return relating to their business as at June 30 by September 30. After that, they will have to submit a return each year.
The FMA said it wanted feedback including whether there would be any significant costs as a result of the information return, whether advisers had concerns about the timing and whether there were any questions advisers would not be able to answer.
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Comments from our readers
Back on track now: The whole premise of the "return" question is flawed. Instead of asking how it is to be done, we should be looking at why they are creating a whole new process. Why not just enhance the ABS requirements?
So as a matter of principle, shouldn't the Annual Report questions be limited only to matters that are "expected".
Otherwise the FMA is extending the ABS guide by its reporting requirements.
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