FMA’s attention shifts to DIMS when investigation finds fault

The Discretionary Investment Management Services (DIMS) sector has come under increased scrutiny following recent regulatory intelligence gathering efforts.

In an update released last week, the Financial Markets Authority (FMA) said in its recent survey of retail DIMS providers that “there are several implications for the interpretation of obligations and actions that could adversely affect investors. There may be a gap,” he said.

“Areas of particular focus include risks related to conflict of interest management, excessive portfolio turnover, inappropriate position limits and benchmarks, misclassification of services and lack of control over financial advice,” the FMA memo said. is described.

“Our next step is to monitor DIMS entities given the risks we have identified.”

The regulator had scheduled a “risk assessment” for the DIMS sector in the previous financial year after the problems faced by the project. Last few delays – More recently, in the era of lockdown due to COVID-19.

However, the FMA began this process during fiscal year 2022/23 with a survey of approximately 55 DIMS providers licensed for retail purposes.

The survey probed companies in detail about how various factors such as governance, policies and systems work together with their compliance obligations to “achieve positive investment outcomes” for investors.

The regulator now lists 52 licensed DIMS providers, ranging from individual advisory firms to large institutions such as banks and broker-based wealth management firms, according to the FMA’s website.

Detailed DIMS data are scarce, but Reserve Bank of New Zealand figures put the size of the sector at around $45 billion, compared to the over $50 billion retail fund market (excluding kiwi savers and superannuation). ) is slightly smaller than .

The government amended the DIMS rules after the Loss Asset Management Ponzi scandal revealed holes in the disclosure system. Unlike portfolios managed by individual advisors, all companies that offer fund-like “class” retail DIMS Licensed by November 2015.