The Financial Sector Conduct Authority (FSCA) has published a draft Prudential Standard introducing quarterly reporting requirements under Regulation 28 of the Pension Funds Act. Regulation 28, which gives effect to Section 36(1)(bB) of the Act, sets limits on how retirement funds may invest across different asset classes, such as equities and offshore investments, in order to protect members. While the proposed requirements are primarily directed at pension funds, they are also highly relevant to Financial Services Providers (FSPs), especially those involved in administration, investment management, advisory, compliance, and reporting functions.
The draft standard reflects the FSCA’s intention to move toward more proactive supervision of retirement fund investments. Currently, funds are only required to report when a breach of Regulation 28 has occurred. The FSCA has identified shortcomings in this reactive approach, noting that some funds failed to report non-compliance during the year, with breaches only being discovered later through annual audits. This limits the regulator’s ability to identify risks early and intervene effectively. As a result, the FSCA considers the current framework insufficient for proactive supervision.
To address these concerns, the draft introduces a comprehensive quarterly reporting regime. Pension funds will be required to submit detailed information not only on breaches, but on all assets held under Regulation 28 on a quarterly basis. Although these submissions will not need to be audited, they must present a complete and accurate view of the fund’s investments and exposures. The FSCA believes this broader reporting will improve transparency, allow earlier detection of potential risks, and encourage fund boards to address issues before they become formal breaches.
Operationally, funds will be required to submit reports within 90 days after each quarter-end. Further detail on reporting formats and submission processes will be provided through FSCA guidance notices. This change means that FSPs should begin reviewing their systems, data collection processes, and operational capabilities to ensure readiness once the standard is finalised.
The draft also introduces more detailed reporting requirements for funds that exceed Regulation 28 limits without having obtained exemptions. In such cases, funds will need to disclose their overall investment structure, largest exposures by asset class and issuer, and details of breaches at both fund and member level. This will increase the need for accurate data, enhanced monitoring systems, and stronger governance. Consequently, FSPs can expect higher expectations from clients regarding data accuracy and timely reporting.
During the consultation process, industry bodies such as ASISA and IRFA raised concerns about implementation challenges, particularly around operational capacity, data access, and reliance on third-party providers. Many funds depend on investment managers and insurers for the required data. Despite this, the FSCA maintains that funds should already have sufficient visibility of their Regulation 28 positions and that any required system upgrades should be manageable. The regulator emphasised that improved reporting is essential for a more risk-based supervisory approach.
Certain funds will be exempt from quarterly reporting, including those in liquidation, terminating funds, and funds that have completed full transfers. Where exemptions from Regulation 28 apply, reporting will only be required for non-exempt areas.
For FSPs, the implications are significant. They will need to assess whether their systems can produce accurate quarterly reports within tight timelines, enhance monitoring processes, and coordinate closely with service providers. Investment managers and insurers may also face increased demand for detailed, standardised data.
In conclusion, the draft Prudential Standard represents a major shift from reactive to proactive supervision. By requiring full quarterly reporting, the FSCA aims to strengthen transparency, governance, and risk management in retirement funds. FSPs should begin preparing now to meet these heightened regulatory expectations.