FMA seeks feedback on new exemptions and financial reporting designations

The Financial Markets Authority (FMA) has announced it’s seeking feedback on how to exercise its regulatory designation and exemption powers for reporting entities under the Financial Markets Conduct Act.  

“When the Financial Markets Conduct Act 2013 comes into effect on 1 April, 2014 we will have regulatory powers to vary the financial reporting obligations of FMC reporting entities by:

• Varying public accountability designations, and
• Granting exemptions.

We are now seeking feedback on how we intend to apply our new powers, and the immediate changes we propose to make to both designations and exemptions under these powers. We invite you to review our policies and the proposed changes and share your feedback on them with us. This is our chance to work together to shape the future for our industry.”

Submissions close on 28 February 2014.

According to Chapman Tripp spokespersons, the designations will influence which tier of the External Reporting Board (XRB) Accounting Standards Framework an entity will be in and what standard it must report to. 

“FMA will be able to vary a designation on either an individual entity basis or for classes of entities. Currently all ‘issuers’ must prepare financial statements under full accounting standards.  FMA is proposing a three tier system with disclosure requirements calibrated to the level of public accountability.”

The firm adds that FMA intends to take the existing exemptions into the new regime, except where these are judged to be no longer appropriate or necessary. 
“Even if they are to go, however, they will still be available during the transition period for entities which continue to report under the Financial Reporting Act 1993, subject to any amendments or expiries.

FMA’s proposed exemptions policy is not significantly different to the status quo, although amended to align it with the FMCA and to reflect FMA’s new powers. However, the proposed structure of the class exemptions is likely to be significantly different to the current one.”

Key dates

• February – FMA holds consultation workshops.
• 28 February – submissions due.
• March 2014 – FMA to publish transitional guidance for FMC reporting entities.
• 1 April 2014 - Financial Reporting Provisions (Part 7) of the FMCA comes into effect.
• April 2014 - FMA to publish final policies on and initial notices for exemptions and higher public accountability designations.

“Entities will become FMC reporting entities at different points in time.  In March 2014 FMA will publish transitional guidance on which Act entities need to report under for each financial year during the transitional period.”