8 Definitions relating to kinds of financial products

(1)

In this Act, subject to subsection (5)(a) and (b), debt security

(a)

means a right to be repaid money or paid interest on money that is, or is to be, deposited with, lent to, or otherwise owing by, any person; and

(b)

includes—

(i)

a security commonly referred to in the financial markets as a debenture, bond, or note; and

(ii)

a convertible note; and

(iii)

a redeemable share in an entity that would otherwise be an equity security (except a share redeemable only at the option of the entity or a redeemable share in an industrial and provident society); but

(c)

does not include—

(i)

a share in a co-operative company that is issued or transferred to a transacting shareholder and that is, or may become, subject to the right of a transacting shareholder to surrender the share under section 20 of the Co-operative Companies Act 1996; or

(ii)

a derivative of the kind referred to in subsection (4)(b); or

(iii)

a unit, proportionate interest, or membership interest in a registered scheme.

(2)

In this Act, subject to subsection (5)(a) and (b), equity security

(a)

means—

(i)

a share in a company; and

(ii)

a share in an industrial and provident society; and

(iii)

a share in a building society; but

(b)

does not include a debt security.

(3)

In this Act, subject to subsection (5)(a) and (b), managed investment product

(a)

means the interest in a managed investment scheme referred to in paragraph (b) of the definition of that term in section 9(1); but

(b)

does not include—

(i)

an equity security; or

(ii)

a debt security.

(4)

In this Act, subject to subsection (5)(a) and (b) and section 10, derivative

(a)

means an agreement in relation to which the following conditions are satisfied:

(i)

under the agreement, a party to the agreement must, or may be required to, provide at some future time consideration of a particular kind or kinds to another person; and

(ii)

that future time is not less than the time, prescribed for the purposes of this subparagraph, after the time at which the agreement is entered into; and

(iii)

the amount of the consideration, or the value of the agreement, is ultimately determined, is derived from, or varies by reference to (wholly or in part) the value or amount of something else (of any nature whatsoever and whether or not deliverable), including, for example, 1 or more of the following:

(A)

an asset:

(B)

a rate (including an interest rate or exchange rate):

(C)

an index:

(D)

a commodity; and

(b)

includes a transaction that is recurrently entered into in the financial markets in New Zealand or overseas and is commonly referred to in those markets as—

(i)

a futures contract or forward; or

(ii)

an option (other than an option to acquire by way of issue an equity security, a debt security, or a managed investment product); or

(iii)

a swap agreement; or

(iv)

a contract for difference, margin contract, or rolling spot contract; or

(v)

a cap, collar, floor, or spread; but

(c)

does not include—

(i)

an agreement for the future provision of services; or

(ii)

a debt security, an equity security, or a managed investment product; and

(d)

does not include an agreement in relation to which all of the following subparagraphs are satisfied:

(i)

a party has, or may have, an obligation to buy, and another party has, or may have, an obligation to sell, property (other than financial products or New Zealand or foreign currency) at a price and on a date in the future; and

(ii)

the agreement does not permit the seller’s obligations to be wholly settled by cash, or by set-off between the parties, rather than by delivery of the property; and

(iii)

neither usual market practice nor the rules of a market permit the seller’s obligations to be closed out by the matching up of the agreement with another agreement of the same kind under which the seller has offsetting obligations to buy.

(5)

A financial product of a particular kind defined in subsection (1), (2), (3), or (4)—

(a)

includes—

(i)

a security declared to be a financial product of that kind under subpart 3 of Part 9; or

(ii)

a right attaching to, or a legal or an equitable interest in, a financial product of that kind; or

(iii)

an option to acquire, by way of issue, a financial product of that kind; but

(b)

does not include—

(i)

a security that is declared under subpart 3 of Part 9 to be a financial product of a different kind:

(ii)

a security that is declared under subpart 3 of Part 9 not to be a financial product.

Section 8(1)(b)(iii): amended, on 9 April 2019, by section 6 of the Financial Services Legislation Amendment Act 2019 (2019 No 8).