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Financial Markets Conduct Act 2013

Governance of financial products - Governance of managed investment products - Management of scheme

167: Action that must be taken on limit breaks

You could also call this:

"What to do when a scheme's investment limits are broken"

Illustration for Financial Markets Conduct Act 2013

If you are in charge of a registered scheme, you must follow certain rules. You have to check if the scheme's investments are within the allowed limits. These limits are about what types of investments can be made and how much of each type can be invested. If these limits are broken, it is called a limit break.

If a limit break happens, the manager of the scheme must tell the supervisor or the FMA about it. They have to report it in a specific way and at a specific time. You can find out what makes a limit break important by looking at the frameworks and methodologies in notices issued by the FMA under subpart 4 of Part 9.

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Part 4Governance of financial products
Governance of managed investment products: Management of scheme

167Action that must be taken on limit breaks

  1. This section applies to a registered scheme if, under the scheme's statement of investment policy and objectives, there is a material breach of any limits on either of the following (a limit break):

  2. the nature or type of investments that may be made; or
    1. the proportion of each type of assets that may be invested in.

      1. If this section applies, the manager of the registered scheme must report the limit break to the supervisor or to the FMA (if there is no supervisor) in the prescribed circumstances and in the prescribed manner.

      2. Whether or not a limit break is material must be determined in accordance with the frameworks and methodologies specified in notices issued by the FMA under subpart 4 of Part 9 (if any).