Inside Money: Blank pages and novel regulations - Why the FMC is a must-read later

Photo / Thinkstock

At only 623 pages the unofficial almost-final draft of the Financial Markets Conduct Act (FMC) regulations, released last week, is light reading by historical novel standards.

According to Wikipedia, the world's longest novel, 'Artamène ou le Grand Cyrus' by Georges and/or Madeleine de Scudéry, spans 13,095 pages, or 2.1 million words.

Another French novelist, better known to modern readers, Marcel Proust, churned out over 1.2 million words in his classic 'À la recherche du temps perdu' - variously translated as 'Remembrance of things past' or 'In search of lost time'.

By contrast, the FMC regs consume a mere 172,950 words, or thereabouts. Don't read them, it will only waste time that can never be recovered.

However, behind the scenes, lawyers and other professionals are clocking up many billable hours trying to translate the FMC regs into practice.

A peek at the FMC transitional provisions for KiwiSaver (which faces "significant changes" under the new law) gives a horrifying picture - in an 18-page table format covering more than 230 separate items - of the massive regulatory architecture that underpins the savings regime.

There readers will discover how the FMC will affect the "completion of allocation" and find the answer to such questions as "What happens when initial back-dated validation ends, with no confirmed back-dated validation?".

However, the Ministry of Business, Innovation and Employment (MOBIE) admits that FMC phase two, due to go live on December 1 this year will not be the end of the matter.

"Given the size of the regulations, their complexity, and the many different ways in which they affect different businesses, we anticipate that many technical issues will emerge following the making of the regulations and their coming into force. Some issues may not be identified until market participants start preparing disclosure documents," MOBIE says. "We expect that we will need to monitor implementation of the regulations closely through the two-year transitional period."

For example, financial product manufacturers may initially struggle to meet the length restrictions on the new Product Disclosure Statement (60 A4 pages or 30,000 words) and Key Information Summary (ranging from 2-4 A4 pages or 1-2,000 words).

But the FMC regs offer very detailed guidance to PDS and KIS authors, including this rule about nothing:

"Blank pages must be disregarded when determining whether the KIS or PDS complies with the length restrictions that apply under regulations 22 to 29."