New Zealand Law Society - Licensing obligations for property investment schemes imminent

Licensing obligations for property investment schemes imminent

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The Financial Markets Authority (FMA) is reminding businesses of all sizes which provide property investment schemes or property syndication funds to get licensed now.

Under new regulations brought in by the Financial Markets Conduct Act 2013, managed investment schemes (MIS) must meet new governance standards and managers of schemes need to be licensed before 1 December 2016. 

The FMA says it has licensed four property investment schemes under the Act so far and, with a growing interest in property schemes recently, would like to start the process of licensing managers of any new or existing schemes that want to be doing business at 1 December 2016.

In general, the FMA considers that property schemes can and should comply with the same licensing and governance requirements under the Act as other MIS.  

However there are some specific detailed requirements where, given the characteristics of property schemes, the costs of full compliance may be unnecessary and are likely to outweigh benefits for investors.

To address these matters the FMA has approved class exemptions for property schemes and their custodians. These relate to the custody of real property assets and the frequency of cash reconciliations, which tend to be a lot lower in volume than for other MIS.  

The FMA says it wants to engage with property scheme managers now and talk them through the minimum standards and level of compliance they will need to continue offering property investment schemes to consumers.

Individual exemptions for property schemes actively winding up their business over the coming months may also be available but schemes should notify the FMA as soon as possible if they want to apply for these.

More information on the exemptions is available here, and general information on MIS licensing requirements is available here.

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