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FAQ: Is interest payable on funds held in a trust account as envisaged in section 21 of the Financial Markets Market (FMA)?

Section 21 of the FMA requires that every authorised user must open and maintain a trust account at a bank designated for client funds. The client funds held at the designated bank accrues interest which is payable by the trust to the individual owners of the funds after the deduction of any fees owed to the authorised user. As the interest paid to the foreign person is by the trust and not the bank the exemption under section 50D(1)(a)(i)(bb) would not be applicable. However, section 50D(1)(b) specifically provides for the exemption from the WTI any interest paid as envisaged under section 21 of the FMA. Therefore, requirement that interest is only exempt from the WTI if it is paid directly to a non-resident by a bank is not applicable in this instance.

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