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Financial Markets Conduct Act 2013

Licensing and other regulation of market services - Additional regulation of discretionary investment management services - Duties of DIMS licensee

438: Action that must be taken on limit breaks

You could also call this:

"What to do when you break the investment rules"

Illustration for Financial Markets Conduct Act 2013

If you are a DIMS licensee and you break the investment rules, you must take action. You break the rules if you invest in the wrong type of things or if you invest too much in one type of thing, this is called a limit break. This can happen in two ways: investing in the wrong type of assets or investing too much in one type of asset.

If a limit break happens, you must tell the FMA about it in the right way and at the right time. You need to report the limit break when it is serious, which is also called a material breach. The FMA has rules to help you decide if a limit break is serious, which are explained in notices issued under subpart 4 of Part 9.

You must follow these rules when a limit break happens, and you must report it to the FMA as required. The rules about what to do when a limit break happens are connected to the investment authority rules in section 437. You have to report the limit break in the way that the rules say you should.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM4091642.

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Part 6Licensing and other regulation of market services
Additional regulation of discretionary investment management services: Duties of DIMS licensee

438Action that must be taken on limit breaks

  1. This section applies to a DIMS licensee if there is a material breach of any limits under an investment authority referred to in section 437 on either of the following (a limit break):

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

      1. If this section applies, the DIMS licensee must report the limit break to the FMA 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).