Financial Markets Conduct Bill

  • enacted

Financial Markets Conduct Bill

Government Bill

342—2

As reported from the Commerce Committee

Commentary

Recommendation

The Commerce Committee has examined the Financial Markets Conduct Bill and recommends that it be passed with the amendments shown.

Introduction

The main purposes of the Financial Markets Conduct Bill are to promote and facilitate the development of fair, efficient, transparent financial markets and to promote the confident and informed participation of businesses, investors, and consumers in the financial markets. The bill seeks to achieve these ends by reforming the regulation of financial market conduct. It seeks to govern the way financial products are offered, promoted, issued, and sold, and the ongoing responsibilities of those who offer, issue, manage, supervise, deal in, and trade them. It also seeks to regulate the provision of certain financial services.

This commentary covers the key amendments that we recommend to the bill. It does not cover the large number of minor or technical amendments proposed to improve workability, drafting, clarity, and legal efficacy. These amendments include

  • an exception to the prohibition of offers in the course of unsolicited meetings, to allow authorised financial advisers to continue their established business practice in this respect (clause 26A(2)(b))

  • allowing requests for relevant information to be made all the way up the chain of ownership to trace interests in listed issuers, and allowing requests to be made for purposes other than substantial security holdings (clause 284)

  • removing the requirement in clauses 287 to 290 for public issuers to maintain a register of substantial product holder disclosures for public inspection

  • a new general offence for false or misleading statements, based on section 377(1) of the Companies Act 1993 (clause 498A)

  • specific requirements for market operators of domestic financial product markets, licensed providers of market services under Part 6 of the bill, and supervisors under the Financial Markets Supervisors Act 2011 to be registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (see proposed changes to clauses 314(c), 322(ba), 394(f), and 646(2) and Part 1 of Schedule 4)

  • amendments to section 14 of the Financial Service Providers (Registration and Dispute Resolution) Act to extend the current bans on persons being directors, senior managers, or controlling owners to include overseas bans (see Part 1 of Schedule 4 of the bill)

  • new transitional provisions for participatory securities that would not be financial products under the bill and for interests in contributory mortgages (clauses 31 and 46 of Schedule 5)

  • shifting various provisions, including shifting provisions on accounting records to a new Part 6A, and shifting transitional provisions to a new Schedule 5.

Liability regime (criminal and civil)

The liability regime proposed in the bill sets out the circumstances where liability would arise for contraventions of its provisions, including those in which investors could seek compensation and in which company directors and others could be criminally prosecuted. While the regime in the bill is fundamentally sound, we recommend a number of amendments to make clear the precise circumstances where liability would arise under this regime.

Criminal liability

We recommend amendments to Part 7 of the bill to establish a separate criminal liability for a director where there is a disclosure defect (for example, a false statement in a product disclosure statement) that is materially adverse from an investor’s point of view. The offence would be committed if the offer took place with the director’s authority, permission, or consent, and the director knew of, or was reckless as to whether there was a defect (see clause 488(1A)). This would function in a very similar way to section 242 of the Crimes Act 1961.

A key change proposed by the bill is to make the offerors of products and the directors of companies criminally liable for inaccurate statements about products in disclosure documents, but only if the Crown could prove a “guilty mind”. This would move the focus of criminal liability towards the offeror; it includes fault elements for significant offences, generally knowledge or recklessness, in line with the Crimes Act offence for a false statement made by a promoter. We understand that recklessness is also a fault element in the equivalent Australian legislation.

In the case of criminal accessory liability, we consider that the ordinary rules under Part 4 of the Crimes Act should apply. Under these rules a person who promotes an offer would be liable for a false statement made by an offeror if, for example, the promoter committed or omitted an act for the purpose of aiding any person to commit the offence.

We believe that the liability regime should not discourage capable prudent people from becoming directors with overly punitive sanctions, and companies should be able to attract directors with diverse skills and backgrounds. Although directors should supervise capital raising and exercise due diligence regarding offer documents, they should be able to focus mainly on business strategy and supervising management, rather than on compliance and liability. Directors should be liable for civil pecuniary penalties and to compensate investors that lose money if they fail to perform their duties, but should not be liable to imprisonment where there is no fault element.

Civil liability—liability of accessories

We recommend that a new term (“involvement in a contravention”) be used to refer to the behaviour of accessories in the civil context (clause 509). This would clarify how the application of the bill applies to people who were, for example, knowingly concerned in, or party to, the contravention. We are satisfied that “involvement in a contravention” is an appropriate test with a sufficiently high threshold.

We are aware of concern that professional advisers might risk being involved in a contravention in the course of their normal activities. We do not expect this to happen. This test is consistent with equivalent provisions in the Australian Corporations Act 2001 and in other New Zealand laws, including the Commerce Act 1986 and Fair Trading Act 1986, and reflects the rules for parties under the criminal law. For a person to be involved in a contravention, it would need to be proved that he or she was an intentional participant in the primary contravention with knowledge of all the essential facts.

In addition, some of the defences in the bill are more suitable for the primary person in a contravention than for accessories. This uncertainty could lead to expensive and inefficient efforts to limit liability risk. We therefore recommend amendments to broaden the range of defences available to accessories, including defences for reasonable reliance and taking reasonable and proper steps to ensure compliance (clause 482E).

In addition, we recommend changes to the Financial Markets Authority’s order powers to provide for orders to be made preventively when provisions are likely to be contravened (clauses 448, 453, and 455). This would allow the Financial Markets Authority to take a proactive approach in situations in which provisions of the bill might be contravened.

Defences to civil liability

The defences part of the civil liability regime specifies the minimum standard of behaviour or actions that must have been demonstrated to avoid liability. We recommend amendments to include defences that apply to disclosure contraventions and more general defences for other kinds of contraventions (clauses 482A to 482C).

We consider it is necessary for the primary contravener to have a defence if it reasonably relied on a person other than their director, employee, or agent; if (in relation to disclosure) it made all the enquiries that were reasonable in the circumstances and believed on reasonable grounds that the disclosure was not defective; and, in the case of a new circumstance that should have been disclosed, if it was not aware of the matter. Our recommended amendment would give a director of the contravener access to these defences, and to a defence if he or she took all reasonable and proper steps to ensure that the company complied.

We consider that these amendments to the provisions for defences to civil liability would provide certainty for those who might be liable under the bill, and make it clear how the defences would work under the legislation. However, we do not consider that making out a defence should be easy. A defendant who wants to rely on a defence under the bill would have to prove it—they could not simply claim that the defence applies.

Presumption that contravention caused loss

As introduced, the bill presumes that when financial products decline in value as a result of a material defect in disclosure (such as a materially misleading statement), the investor would be treated as suffering a loss unless the decline in value was proved to have had another cause. We consider that clause 480 is an appropriate response to the difficulty for investors of proving that defective disclosure caused them loss. However, the provision should relate only to causation, and we recommend amendments to make it clear that the amount of the investor’s loss that should be compensated for is not determined by the clause; it would be up to a court to decide how much compensation would be awarded.

Indemnities and insurance

We recommend amendments to the indemnity and insurance provisions set out in clauses 503 to 506 of the bill, so that indemnity and insurance restrictions regarding New Zealand companies and their directors and employees would be governed by the Companies Act, rather than these provisions in clauses 503 to 506. This would remove duplication and potential conflict in legislation. We believe these amendments would provide a simple regime that would aid compliance.

The provisions would continue to apply to the auditors of New Zealand companies, and to overseas companies and other non-company entities.

We also recommend that the indemnity and insurance provisions be extended to cover licensees (including supervisors) to ensure that the regime is comprehensive, and certain other changes for consistency with the Companies Act.

Directors’ assets

We are aware of concern that directors might be unable to pay penalties or compensate investors, since most directors’ assets can be transferred to trusts. The use of trusts in commercial and asset-protection contexts has implications beyond the scope of this bill.

Relationship with Fair Trading Act 1986

Part 2 of the bill replicates key parts of the Fair Trading Act and applies them to financial services and products. We recommend amending Part 9 (clause 567) so that equivalent provisions in the Fair Trading Act would not apply to financial products and financial services regulated by Part 2 of the bill. This would remove uncertainty over which law applies. Misleading and deceptive conduct in relation to financial services and products would be regulated solely by this legislation. In addition, we recommend amendments to Part 2 of the bill to improve consistency with the Fair Trading Act.

We note that the Consumer Law Reform Bill (which is currently before the Commerce Committee) has implications for Part 2 of the bill. If the Fair Trading Act is amended to include prohibitions on unsubstantiated representations or unfair contract terms, these rules should be replicated in Part 2 for consistency.

Discretionary investment management services

Part 6 of the bill proposes new requirements for providers of discretionary investment management services (DIMS) and other providers of market services. We recommend amendments to clarify the boundary between the DIMS covered by the bill and those that fall under the Financial Advisers Act 2008, and make it less subject to arbitrage. These amendments to clause 573 redefine a personalised DIMS to make it clear that providing the client with multiple options in a model portfolio, or allowing investors to make minor modifications to such a portfolio, would not constitute personalisation.

We also recommend amending the bill (in clause 387A(2)(a)) to exclude from the need for a licence for DIMS that are not retail services under the bill, rather than relying solely on the exclusion under the Financial Advisers Act (see clause 572(1)). Retail services as defined in clause 33A of Schedule 1 would exclude services provided only to wholesale investors. We recommend amendments to ensure that the additional requirements for disclosure, client agreements, and for duties of DIMS licensees and custodians under subparts 4 to 6 of Part 6 apply also in respect of the retail service.

Further, we recommend that a DIMS licensee with a corporate licence under the bill be allowed to provide financial advice under that licence to the extent that the advice is given in the ordinary course of, and incidentally to, providing the DIMS under its licence, for example in relation to selecting investment options, reinvestment, and switching (see clause 390A(1)(b)). We believe these services are integral to providing the DIMS itself.

Treatment of derivatives—disclosure

We recommend amendments to the bill to clarify the provisions relating to derivatives, which differ from other financial products, and the business models through which derivatives are typically offered.

The amendments we propose would make clear that a product disclosure statement could be lodged for a derivative product type, rather than for each individual derivative contract (clause 33A). This would ensure that when issuers of derivatives made offers to many investors, each offer would not require a separate product disclosure statement. We recommend also a requirement that customised terms for specific investors not be disclosed (clause 43(2)). For the purposes of clarity, the bill’s scheme in respect of derivatives is outlined below:

If a derivative were entered into between

  • a licensed derivatives issuer and a retail investor (for example, a bank and a customer), then the issuer must make disclosure because of clause 27, but the retail investor need not because of exclusions in Schedule 1, including clause 35(1)(f).

  • a person who is in the business of entering into derivatives and an investor who is not (for example, an energy company and a retail investor), then the first person needs to be licensed because of clause 387(d) and must make disclosure because of clause 27, but the investor does not because of exclusions in Schedule 1, including clause 35(1)(f).

  • two licensed derivatives issuers (for example, two banks), then disclosure is not required because of exclusions in Schedule 1, including clause 35(1)(f).

  • two wholesale investors (for example, two large energy companies), then disclosure is not required because of the exclusion in clause 3(1) of Schedule 1.

  • two investors who are not in the business of issuing derivatives, then disclosure is not required because of the exclusion in clause 19(1) of Schedule 1.

Treatment of derivatives—new exceptions

Schedule 1 of the bill outlines the provisions relating to disclosure requirements and exclusions. As introduced, the bill provides an exclusion from providing a product disclosure statement to an investor for an offer of financial products where the minimum amount payable by the investor is at least $500,000. This exclusion is carried over from the Securities Act 1978 and is intended to provide a bright-line test for offers to wholesale investors.

This exclusion would not apply to many derivatives, as they seldom require large up-front payments. To provide an equivalent exclusion for derivatives, we recommend that the exclusion in clause 3 of Schedule 1 for offers with a minimum investment of $500,000 be accompanied by an exclusion for derivatives with a minimum notional value of $5 million.

Schedule 1 exclusions

Schedule 1 also provides various disclosure exclusions for offers under Part 3 of the bill. These exclusions would apply for investors who are considered to be capable of evaluating the merits of the offer or accessing the information they need, or where full product disclosure is otherwise not needed, because, for example, of the investor’s size and experience or relationship with the issuer.

We consider that significant changes should be made to two particular exclusions, as follows:—

Clause 36 of Schedule 1 specifies the criteria an investor must meet to be classified as a wholesale investor. We recommend reducing the criteria to three, of which the investor must meet one, simplifying the identification of sophisticated investors.

We recommend reducing the threshold defining a “large” person for the purposes of the wholesale investor exclusion in clause 37 of Schedule 1 to net assets of $5 million or turnover of $5 million in each of the past two years, from total assets of $10 million or turnover of $20 million over the past two years. Few businesses or individuals in New Zealand were likely to meet the higher threshold. We believe that an individual or business meeting the lower threshold is likely to be sufficiently sophisticated to participate in wholesale offers of financial products.

We recommend inserting a new exclusion for offers of financial products of the same class as quoted financial products (clause 18A of Schedule 1). We consider that continuous disclosure obligations to which a listed issuer would be subject would ensure that the market had already priced the risk associated with these products.

Principal purpose of superannuation schemes

The bill as introduced seeks to change the current law so that the sole purpose of a registered superannuation scheme must be to provide retirement benefits (clause 115). If a scheme has purposes that are not merely incidental to providing retirement benefits, we consider it should be registered as a standard managed investment scheme. However, we recommend some amendments to the application of this rule to allow existing superannuation schemes (or sections of them) to retain a “principal retirement purpose” if the scheme (or section) is closed to new members (clause 116(2)); and to allow workplace schemes (as defined in regulations) to provide benefits and allow withdrawals on leaving employment with the relevant workplace or industry (clause 116(3)).

We also recommend changes to clause 114(1) and clause 115(1) to restrict the provision of benefits, as well as redemptions and withdrawals, to the retirement purpose, and also to clarify that the potential for early withdrawal in accordance with the KiwiSaver Act 2006 (for example to facilitate first-home ownership) is not inconsistent with the sole purpose test.

Related parties for restricted schemes

Clause 161 places a 5% limit on investments in related parties of restricted schemes. This means that a restricted superannuation scheme provided to a company’s employees could not invest more than 5% of the scheme’s property back into the company. We support retaining this restriction on related party holdings for restricted schemes, and consider it is set at the appropriate level. It would provide the manager of the scheme with some flexibility to invest in a related party, but avoids excessive related party concentration.

However, we recommend that the 5% limit apply separately to non-associated persons. We consider it is necessary to make it clear that investments in businesses that are each a related party of the scheme but are not associated with each other would count separately for the purposes of testing compliance with the 5% restriction. We also recommend that, for workability reasons, the 5% limit should apply only to new acquisitions (although schemes would be required to sell-down existing holdings to comply with the 5% limit within a transitional 3-year period under clause 36 of Schedule 5).

For the related party transactions provisions generally, we also recommend that employer contributors be treated as related parties under clause 158 only for specified employer-related schemes (that is, those that employers have an involvement in other than merely as contributors) rather than all restricted schemes. These employer-related schemes would be identified at the point of their registration under the bill’s transitional provisions (see clause 21 of Schedule 5).

Territorial scope

We recommend amendments to the territorial scope provisions of the bill to make them equivalent to those in the Securities Act, extending the Financial Markets Authority’s stop order powers in clause 448 to apply to any restricted communications distributed to persons outside of New Zealand (see clause 452A). Further amendments are also proposed to provide for the Financial Markets Authority to seek civil remedies if there is a contravention of Part 2 in relation to such communications.

We consider that the territorial scope of the bill needs to be extended to allow the regulation of the conduct of New Zealand residents and businesses in respect of their offshore activities in limited circumstances. As introduced, the bill does not seek to replicate the existing territorial scope provisions of the Securities Act; we believe it should, to facilitate cross-border cooperation, and to regulate externally directed conduct to preserve the reputation of New Zealand issuers or service providers.

Crowd funding

Crowd funding is the pooling of a large number of small contributions to fund a business or project, generally over the internet. Clause 388 of the bill gives crowd funding intermediaries as an example of a type of licensed intermediary service that may be prescribed under regulations. We recommend that the Government, in due course, consider prescribing crowd funding intermediaries in regulations under the bill as an intermediary service for which providers could apply for a licence. Individuals seeking crowd funding through an intermediary service would be exempt from disclosure requirements under clause 6 of Schedule 1 (subject to limited disclosure and other requirements under clause 26 of Schedule 1).

Liability for audit opinions

We are aware of concern about liability for audit opinions, specifically the routine disclaiming of liability to third parties. We do not recommend amending the bill in this respect, but would like to see wider consultation and policy work in this area.

Licensing

We recommend amendments to the provisions for licensing of market services to recognise existing licenses under other licensing regimes. The amendments under clause 395 would require the Financial Markets Authority, in making its licensing decision, to have regard to whether the applicant was already a licensed provider under the Financial Service Providers (Registration and Dispute Resolution) Act and whether the proposed market service was merely incidental to other licensed services.

We also recommend amendments to facilitate group licensing by allowing related bodies corporate, not only subsidiaries, to be covered by a single licence where appropriate controls or supervision by the licensee can be demonstrated (see clause 398). The head licensee remains responsible for the related bodies corporate covered by the licence.

We considered the desirability of requiring the Financial Markets Authority to treat applicants who were already licensed under other regimes (for example, registered banks) as meeting any equivalent requirements under the bill. We agree that cross-recognition of equivalent requirements is highly desirable, but consider that this is a matter for regulations under Part 6, which would specify the substantive licensing requirements.

Commencement

We recommend that the default commencement date in clause 2(3) be amended from 1 April 2015 to 1 April 2017. We expect that most of the provisions of the bill would come into force well before that date. However, given the complex nature of the reform, we consider that the change to clause 2(3) would allow more flexibility to bring some provisions into force later.

Appendix

Committee process

The Financial Markets Conduct Bill was referred to the committee on 7 March 2012. The closing date for submissions was 26 April 2012. We received and considered 62 submissions from interested groups and individuals. We heard 37 submissions, which included holding hearings in Auckland.

We received advice from the Ministry of Business, Innovation and Employment, with the assistance of the Financial Markets Authority.

Committee membership

Jonathan Young (Chairperson)

Kanwaljit Singh Bakshi

Hon Chester Borrows

Hon Clayton Cosgrove (Deputy Chairperson)

Hon David Cunliffe

Clare Curran

Peseta Sam Lotu-Iiga

Mojo Mathers

Mark Mitchell


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Hon Craig Foss

Financial Markets Conduct Bill

Government Bill

342—2

Contents

1 Title

2 Commencement

Part 1
Preliminary provisions

Purposes

3 Main purposes

4 Additional purposes

Overview

5 Overview

Interpretation

6 Interpretation

7 Meaning of financial product

8 Definitions relating to kinds of financial products

9 Definitions of financial benefit and of managed investment scheme

9A Miscellaneous matters relating to definition of derivative

10 Definitions of issued and issuer

11 Meaning of associated person and related body corporate

12 Miscellaneous interpretation provisions relating to statements and information

13 Status of examples

Act binds the Crown

14 Act binds the Crown

General application provision

15 Application of Act

Part 2
Fair dealing

15A Interpretation in this Part

Misleading or deceptive conduct and false or misleading representations

16 Misleading or deceptive conduct generally

17 Misleading conduct in relation to financial products

18 Misleading conduct in relation to financial services

19 False or misleading representations

20 Certain conduct does not contravene various provisions

21 Limited application of provisions in relation to newspapers, magazines, broadcasting, etc

22 Defence for publisher

23 Defence for reasonable reliance on information supplied by another person

24 Licensed market operator does not contravene by notifying disclosures

25 Other exceptions

26 Territorial scope of sections 16 to 19

Offers in course of unsolicited meetings

26A Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade

26B Right to withdraw

26C Offeror obligations if notice of withdrawal given

26D Director not liable if no misconduct or negligence

Civil liability

26E Civil liability for certain contraventions of this Part

Part 3
Disclosure of offers of financial products

Subpart 1Application

27 Issue offers that need disclosure

28 Sale offers that need disclosure

29 Meaning of regulated offer and of regulated product

30 Regulated offers that need to meet additional governance requirements

31 Options over financial products

32 Treatment of offers of convertible financial products

33 Treatment of offers of renewals and variations

33A Offers of financial products involving customised terms

34 Territorial scope of Part

Subpart 2Procedure for making regulated offers

Product disclosure statement must be prepared and lodged

35 PDS must be prepared and lodged

36 Purpose of PDS

Disclosure to investors

37 PDS must be given if offer requires disclosure

38 Certain situations in which section 37 does not need to be complied with

39 PDS treated as having been given if application form used was included in, or accompanied by, PDS

40 Offence to knowingly or recklessly contravene section 37

41 Right to withdraw

41A Offeror obligations if notice of withdrawal given

41B Director not liable if no misconduct or negligence

Content and presentation of product disclosure statements and register entries

42 Disclosure of material information and content of PDS and register entry

42A Register entry not required in prescribed circumstances

43 Meaning of material information in this Part

44 Consent of experts and persons who make endorsements

45 PDS must be worded and presented in clear, concise, and effective manner

46 PDS must comply with prescribed requirements relating to form and presentation

Other provisions relating to lodging of PDS and other documents

47 Supply of prescribed information and documents

48 Registrar must notify FMA of lodgement of PDS

49 Waiting period after lodgement before processing applications for financial products

50 FMA may extend period

51 Waiting period restriction does not prevent offeror from acting under another PDS

52 FMA may remove restrictions if its consideration complete or consideration or further consideration unnecessary

53 Waiting period does not usually apply to continuous issue PDSs

54 No guarantee or representation as to compliance

55 When supplementary document or replacement PDS may be lodged

56 Supplementary document

57 Replacement PDS

58 Registrar must notify FMA of lodgement of supplementary document or replacement PDS

59 Publication of lodgement

Amending register entry

60 When register entry may be amended

Conditions referred to in PDS

61 Minimum number or amount condition must be fulfilled before issue or transfer

62 Issue or transfer void if quotation condition not fulfilled

Dealing with applications where condition referred to in PDS is not met or disclosure is defective

63 Application of section 64

64 Choices open to offeror

64A Director not liable if no misconduct or negligence

Prohibition of offers where defective disclosure in PDS or register entry

65 False or misleading statements, omissions, and new matters requiring disclosure

66 Persons who must inform offeror about disclosure deficiencies

Expiry

67 Expiry

68 How offeror must deal with applications on expiry

68A Director not liable if no misconduct or negligence

Money for financial products must be held in trust

69 Money for financial products must be held in trust

Offering financial products in entity that does not exist

70 Offering financial products in entity that does not exist

71 Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade

72 Right to withdraw and have money returned

Subpart 3Advertising

73 Advertising for regulated offers

74 Inducements to apply

75 Distribution of PDS or registered documents

76 Advertising before PDS lodged

77 Advertising after PDS lodged

78 General exceptions

78 Documents to which subpart does not apply

79 Defence for publishers

Subpart 4Ongoing disclosure and updating of registers

Duty to update register of offers of financial products and register of managed investment schemes

80 Duty to notify changes to Registrar

Disclosure to particular persons

81 Information to be made available to investors or other prescribed persons

Public disclosure

82 Information to be made publicly available

82A Issuer must provide document, information, and matters to Registrar

Defective ongoing disclosure

83 Defective ongoing disclosure

Confirmation

83A Issuer or offeror must provide confirmation

Subpart 5Civil liability for certain contraventions of this Part

84 Part 3 offer provisions

Part 4
Governance of financial products

86 Overview

Subpart 1Application and overview

85 Part applies to all regulated products

86 Regulated offers of debt securities need governing document and supervisor

87 Regulated offers of managed investment products need to be in registered scheme

88 All regulated products have other accountability requirements under this Part

Subpart 2Governance of debt securities

89 Need for governing document and supervisor for regulated offer of debt security

Governing document requirements

90 Contents of trust deed for debt securities

91 Limits on permitted exemptions and indemnities

92 Trust deed must be legally enforceable

93 Effect of trust deed

94 Changes to trust deed

95 Power to make FMA-approved changes to trust deeds

96 Lodging of changes to trust deed

Role of supervisor

97 Functions of supervisor

98 General duties applying in exercise of supervisor's functions

99 Duty of supervisor to comply with professional standard of care

100 Duty of issuer to provide reports to supervisor

101 Duty of issuer to provide requested information and reports to supervisor

102 Issuer must report contravention or possible contravention of issuer obligations

103 Restriction on section 102

104 Duty of issuer to report serious financial problems

105 Power of supervisor to engage expert

Meetings of product holders

106 Meetings of product holders

107 Power of supervisor to attend meetings and appoint chair

107 Supervisor's attendance at meetings of product holders and power to appoint chair

Change of supervisor

108 Change of supervisor

109 Lodging of notice of change of supervisor

Subpart 3Governance of managed investment products

110 Overview

Need to register

111 Need to register managed investment scheme for regulated offer of managed investment product

Registration

112 Application for registration

113 Initial and ongoing registration requirements for all managed investment schemes

114 Additional initial and ongoing registration requirements for KiwiSaver schemes

115 Additional initial and ongoing registration requirements for superannuation schemes

116 Extent to which superannuation scheme may provide non-retirement benefits

117 Additional ongoing registration requirements for restricted schemes

118 Additional initial and ongoing registration requirements for locked-in superannuation schemes

119 Additional prescribed registration requirements for other particular prescribed types of schemes

120 Manager must ensure that ongoing registration requirements are complied with

121 Changes to registration as particular type of registered scheme

Governing document requirements

122 Contents of governing document for registered scheme

123 Limits on permitted exemptions and indemnities

124 Governing document must be legally enforceable

125 Effect of governing document

126 Changes to governing document

127 Power to make FMA and court-approved changes to governing documents

128 Lodging of changes to governing document

Role of manager

129 Management and administration functions of manager

130 General duties applying in exercise of manager's functions

131 Duty of manager and investment manager to comply with relevant professional standard of care

132 Duties of directors and senior managers of manager

133 Contracting out of management functions

134 Duty of manager to provide reports to supervisor or FMA

135 Duty of manager to provide requested information and reports to supervisor

136 Duty of manager to report contravention or possible contravention of issuer obligations

137 Restriction on section 136

138 Duty of manager to report serious financial problems

Role of supervisor

139 Functions of supervisor

140 General duties applying in exercise of supervisor's functions

141 Duty of supervisor to comply with professional standard of care

142 Power of supervisor to engage expert

Custodianship of scheme property

143 Requirement to have supervisor or other independent person as custodian

144 Custodian holds scheme property on trust

145 Custodian must keep records of scheme property

146 Duty of supervisor to refuse to act on wrongful directions

Meetings of scheme participants

147 Meetings of scheme participants

148 Power of supervisor to attend meetings and appoint chair

148 Supervisor's attendance at meetings of scheme participants and power to appoint chair

149 Manager and associated persons cannot vote if interested in resolution

Management of scheme

150 Requirement for statement of investment policy and objectives

151 Changes to statement of investment policy and objectives

152 Lodging of statement of investment policy and objectives and changes to statement

153 Action that must be taken on limit breaks

154 Action that must be taken on pricing errors and failure to comply with pricing methodologies

155 Actuarial examination of defined benefit scheme or life benefit scheme

156 Power of manager to adjust financial benefits to comply with portfolio investment entity rules

157 Limits on reversion of scheme property in certain schemes to non-scheme participant contributor

Related party transactions

158 Definition of related party benefit

159 General prohibition on transactions giving related party benefits

160 Certain related party benefits permitted

160A Requirements for certificates as to related party benefits

161 Additional restrictions on related party transactions of restricted schemes

161 Additional restrictions on restricted schemes' holdings of in-house assets

Scheme participant transfer rules for KiwiSaver and superannuation schemes

162 Application of scheme participant transfer rules

163 Methods of transfer of scheme participants to another scheme or another section of scheme

164 Transfer of substantial numbers of scheme participants with scheme participant consent

165 Transfer with FMA consent

166 Transfers from KiwiSaver scheme

Provisions as to deferred benefits for superannuation schemes

167 Deferred benefits

Change of manager

168 Application of sections 169 to 176

169 Removal of manager of registered scheme

170 Supervisor or FMA may make temporary appointment

171 Term, powers, and duties of temporary manager

172 FMA's costs must be reimbursed from scheme

173 Supervisor or FMA must take reasonable steps to arrange for new appointment

174 Former manager must hand over records and give reasonable assistance

175 Statutory novation of rights, obligations, and liabilities of former manager

176 Lodging of notice of changes to manager

Change of supervisor

177 Change of supervisor

178 Lodging of notice of change of supervisor

Change of independent trustee

179 Change of independent trustee

Cancellation of registration

180 Cancellation of registration

181 Registrar must remove scheme from register on cancellation of registration

Subpart 4Intervention in debt securities offered under regulated offer or registered schemes

Provisions assisting supervisor or FMA to intervene

182 Duty of auditor to report to supervisor or FMA

183 Duty of auditor, investment manager, administration manager, custodian, or actuary to report serious problems

184 What person must do if duty to report serious problem applies

185 Protections extend to volunteers of supporting information for other protected disclosures

186 FMA may require supervisor to attest as to issuer's compliance with issuer obligations

187 Duty of supervisor to report contravention or possible contravention of issuer obligations to FMA

188 Duty of supervisor to report serious financial problems to FMA

189 FMA's powers of direction

190 FMA's directions to supervisor (or issuer)

Powers to obtain court orders to intervene

191 Power of supervisor or FMA to apply for order to remedy problems

192 Court orders to remedy problems

193 Power of court to appoint new manager, provide for manager powers, and deal with changes of managers

194 Power of court to direct supervisor

194 Power of court to direct supervisor

195 Court power to order winding up of scheme

196 Initial steps in winding up of registered scheme

197 Winding-up report

Miscellaneous

198 Offence of false or misleading statements

199 Protection for persons in respect of disclosure under this subpart or subpart 5

Subpart 5Registers and keeping copies of documents

Registers

200 Issuers must keep registers of regulated products

201 Manner of keeping registers

202 Contents of registers

203 Audit of registers

204 Auditor must advise if auditor considers that subpart is not being complied with

205 Issuer must notify Registrar of registers

206 Public inspection of register

207 Manner of inspection

208 Copies of documents

209 Reasons for request must be given and FMA may authorise non-compliance

210 Restriction on use of information in registers

211 Issuer to send confirmation of financial products

212 Requirement for confirmation document does not apply in certain circumstances

213 Certain provisions prevail over Companies Act 1993

Copies of documents to be retained

213A Copies of documents must be retained for 7 years

Subpart 6Accounting records, copies of documents, and audit of financial statements

Accounting records

214 Issuer must keep proper accounting records

215 Place where accounting records to be kept

216 Accounting records to be in English

217 Period for which accounting records to be kept

218 Inspection of accounting records

Copies of documents to be retained

219 Copies of documents must be retained for 7 years

Audit requirement

220 Financial statements to be audited

221 Meaning of qualified auditor

Miscellaneous

222 Application of other Acts not affected

Subpart 7Civil liability for certain contraventions of this Part

223 Part 4 governance provisions

Part 5
Dealing in financial products on markets

Subpart 1Purposes, overview, and interpretation

224 Additional purposes of Part

225 Overview

Material information and generally available to the market

226 Meaning of material information

227 Meaning of generally available to the market

Certain derivatives treated as being quoted financial products of listed issuer

228 Certain derivatives treated as being quoted financial products of listed issuer

Insider conduct

229 Meaning of information insider, inside information, and adviser

Relevant interests

230 Relevant interests in financial products (basic rule)

231 Extension of basic rule to powers or controls exercisable through trust, agreement, etc

232 Extension of basic rule to interests held by other persons under control or acting jointly

233 Situations not giving rise to relevant interests

Subpart 2Insider trading

Insider conduct prohibited

234 Prohibition of insider conduct

235 Information insider must not trade

236 Information insider must not disclose inside information

237 Information insider must not advise or encourage trading

238 Criminal liability for insider conduct

When prohibition on insider conduct does not apply

239 Exception for trading required by enactment or rule of law

240 Exception for disclosure required by enactment or rule of law or by FMA

241 Exception for disclosure in connection with preparing PDS or disclosure document

242 Exceptions in respect of underwriting agreements

243 Exception in case of knowledge of person's own intentions or activities

244 Exception in case of knowledge in relation to derivatives

245 Exception for agent executing trading instruction only

246 Exceptions from section 235 for takeovers

247 Exceptions from sections 236 and 237 for takeovers

248 Exceptions for schemes of arrangement approved under Companies Act 1993

249 Exception for redemption of managed investment products

250 Exception for Reserve Bank

Defences

251 Absence of knowledge of trading

252 Inside information obtained by independent research and analysis

253 Equal information

254 Options and trading plans

255 Chinese wall defence

Subpart 3Market manipulation

256 Misleading or deceptive conduct generally in dealings in quoted financial products

257 False or misleading statement or information

258 Exception for takeovers

259 Criminal liability for false or misleading statement or information

260 False or misleading appearance of trading

261 Exception for short selling and crossings

262 Persons treated as contravening false or misleading appearance of trading prohibition

263 Defence

264 Criminal liability for false or misleading appearance of trading

Subpart 4Continuous disclosure

265 Listed issuers must disclose in accordance with listing rules if continuous disclosure listing rules apply

266 What are continuous disclosure provisions

267 No contravention of continuous disclosure provisions by person who takes reasonable steps to ensure listed issuer complies

Subpart 5Disclosure of interests of substantial product holders in listed issuers

Substantial holding disclosure obligations

268 Purpose of subpart

269 Meaning of substantial product holder, substantial holding, and percentage

270 Persons must disclose if begin to have substantial holding

271 Substantial product holders must disclose if subsequent movement of 1% or more in holdings

272 Substantial product holders must disclose if subsequent changes in nature of relevant interests

273 Persons must disclose if cease to have substantial holding

274 What disclosure required

275 Form and method of disclosure

276 Listed issuer must give acknowledgement of disclosure

277 How to ascertain total financial products in class for purposes of disclosure

Exemptions

278 Exemption for persons with interest in other substantial product holders who comply

279 Exemption for corporate trustees and nominee companies

280 Conditions of exemption for corporate trustees and nominee companies

281 Exemption for persons under control or acting jointly with corporate trustees and nominee companies

282 Extended time for disclosure for trustees, executors, and administrators

Tracing and disclosure of interests in listed issuers

283 FMA may require persons to disclose to market relevant interests and powers to get relevant interests

284 Listed issuer may require registered holder to disclose relevant interests to it

284 Listed issuer may require registered holder or relevant interest holder to disclose relevant interests to it

285 Listed issuer may require person who has relevant interest to disclose information to it

286 Form and method of notice requiring disclosure

Register and publication of substantial holdings

287 Listed issuers must maintain register of disclosures of substantial holdings

288 Public inspection of register

289 Copies of documents

290 Offences relating to substantial holdings register

291 Listed issuers must make available information on substantial holdings

292 No liability for publication of substantial holdings

293 Notice under this subpart not to affect incorporation of listed issuer or constitute notice of trust

Subpart 6Disclosure of relevant interests in quoted financial products by directors and senior managers of listed issuers

294 Purpose of subpart

295 Directors and senior managers of listed issuers must disclose relevant interests and dealings in relevant interests

296 Disclosure of relevant interests and dealings in relevant interests in relation to specified derivatives

297 What disclosure required

298 Form and method of disclosure

299 Disclosure obligation applies for 6 months after ceasing to hold office

300 Exemption for directors or senior managers who disclose substantial holdings

301 Exemption for overseas listed issuers

302 Listed issuer must keep interests register

303 Public inspection of interests register

304 Copies of documents

305 Offences relating to interests register

Subpart 7Licensing of markets for trading financial products

306 Principles guiding exercise of powers under this subpart

Need for financial product market licence

307 What is a financial product market

308 Need for financial product market licence

309 Prohibitions on holding out

310 Exemptions

311 When financial product market taken to be operated in New Zealand

General obligations of licensed market operator

312 General obligations in respect of licensed markets

Issue of licence

313 Application for licence

314 When licence may be issued

315 When licence may be issued for overseas-regulated market

316 Conditions of licence

317 Procedural requirements

318 Licence may cover more than 1 financial product market

319 Licence may cover subsidiaries

320 FMA must maintain list of licensed markets on Internet site

Changes to licences

321 Variation of conditions

322 Minister may suspend or cancel licence

323 Procedure for varying of conditions or suspension or cancellation of licence

324 Effect of suspension

325 Variation or revocation of suspension

Approval of contractual market rules

326 Licensed markets must be operated under market rules that comply with this subpart

327 Required matters for market rules

328 When market rules have effect

329 Approval process for proposed market rules and rule changes

330 Approval of proposed market rules and changes

331 Notice of decision on rules

332 Power of FMA to request changes to market rules on certain matters

333 Overseas-regulated markets must give notice of market rules and rule changes to FMA

334 Market rules must be available for public inspection

335 Application of Acts relating to regulations to contractual market rules

Monitoring of market operator obligations

336 Licensed market operator must give report on compliance with market operator obligations to FMA

337 FMA to carry out market operator obligations reviews

338 FMA must make written report on market operator obligations review

339 FMA may require licensed market operator to submit action plan on failure to meet market operator obligations

340 Approval, amendment, or rejection of action plan

341 Minister may give market operator obligations direction to licensed market operator

342 Minister may vary, suspend, or cancel licence

Control limits on licensed market operators

343 Power to impose control limits on licensed market operators

344 Control limit not to be exceeded

345 Effect of exceeding control limit

346 Application for approval to exceed control limit

347 Revocation or amendment of approval

Other provisions relating to licensing of financial product markets

348 FMA may give advice to Minister

349 Delegation of Minister's licensing functions and powers to FMA

350 Regulations modifying Part for licensed markets

Subpart 8Operation of licensed markets

351 Licensed market operator must notify FMA of disciplinary actions and suspected contraventions

352 When notification required

353 Details and method of notification

354 Licensed market operator must ensure FMA has access to real-time trading and other information

355 Licensed market operator must give FMA material information given to market participants

356 Waiver of notification and disclosure obligations

357 Licensed market operator must give FMA or Takeovers Panel other information and assistance on request

358 Power to disclose further information

359 Licensed market operator must give notice and have regard to submissions on continuous disclosure determinations

360 Limited notice and submissions for urgent determinations

361 FMA may give directions to licensed market operators

362 Grounds for continuous disclosure direction

363 Grounds for other directions

364 Notice, opportunity for licensed market operator to act, and submissions before FMA gives directions

365 Limited notice and submissions for urgent continuous disclosure directions

366 Notice and opportunity to be heard and represented after FMA gives direction

367 Effect of directions to licensed market operator

368 Provisions as to directions

369 Contracting out of or modification of continuous disclosure process requirements

370 Offence for failing to comply with direction

Subpart 9Transfer of transferable financial products

371 Financial products to which this subpart applies

Transfer of specified financial products using transfers in prescribed form or containing prescribed information

372 Transfer of specified financial products by transfer

373 Transfer of specified financial products by products transfer and brokers transfer

374 Products transfer does not need to be witnessed

375 Transfers to be instruments of transfer for purposes of other enactments and instruments

Transfer of specified financial products by electronic means

376 Approval of electronic transfer system

377 Specified financial products may be transferred under approved system

378 Minor technical modifications to system

Registration may not be refused

379 Registration may not be refused on ground that financial products have been transferred under this subpart

380 Effect of this Act on other enactments

Subpart 10Unsolicited offers to purchase financial products off-market

381 Definitions relating to unsolicited offer regulations and related provisions

382 Regulations concerning unsolicited offers

383 Specific provisions for regulations concerning unsolicited offers

384 Protection from liability in connection with unsolicited offer provisions

Subpart 11Civil liability for certain contraventions of this Part

385 Part 5 market provisions

Part 6
Licensing and other regulation of market services

386 Overview

386A Territorial scope for licensing of certain market services

Subpart 1Key provisions

387 When provider of market services needs to be licensed

387A Exemptions from need for market services licence

388 When providers of other market services may be licensed

389 Meaning of licensed market services

390 Prohibitions on holding out

390A Meaning of discretionary investment management service and related terms

Subpart 2Issue of licences, conditions, and duration

391 Principles guiding the exercise of FMA powers

Issue of licences

392 FMA may issue licence

393 Application for licence

394 When licence must be issued

395 Procedural requirements

396 Notice of decision

397 Licence must be issued for particular market services

398 Licence may cover subsidiaries

398 Licence may cover related bodies corporate as authorised bodies

399 FMA must send licence details to Registrar

Conditions of licence

400 Conditions of licence

401 When FMA may impose permitted conditions

402 Licensee may apply for variation of conditions

403 Procedure for variation of conditions

404 Consequences of contravening conditions

Expiry, suspension, or cancellation of licences

405 Duration of licence

406 When FMA may suspend or cancel licence

407 Effect of expiry, suspension, or cancellation of licence on appointments

Subpart 3Monitoring and enforcement of licences

408 Meaning of material change of circumstances

Reports

409 Licensee must deliver reports to FMA

410 Licensee must report certain matters

411 Restriction on section 410

FMA's powers in case of contravention of market services licensee obligation, material change, etc

412 FMA's powers in case of contravention of market services licensee obligation, material change, etc

413 Procedure for exercising powers

414 Notice requirements

Action plan

415 Action plan

416 Approval, amendment, or rejection of action plan

417 Consequences of failure to submit action plan, rejection of action plan, or failure to comply with action plan

Directions

418 Directions

419 Consequences of failure to comply with directions

Subpart 4Disclosure obligations for certain services provided to retail investors

420 Application of subpart

421 Disclosure must be made before providing service to retail investor

422 Timing and method of disclosure

423 Purpose of disclosure statement

424 Disclosure statement

425 False or misleading statements and omissions

426 Further prescribed information to be made available

Subpart 5Requirement for certain services to be provided under client agreements

427 Application of subpart

427A Need for client agreement

428 Contents, form, and effect of client agreement

Subpart 6Additional regulation of discretionary investment management services

429 Application of subpart

430 Meaning of provider of discretionary investment management service and related terms

Duties of DIMS licensee

431 DIMS licensee's duties

432 Duties of directors and senior managers of DIMS licensee

433 Duty of DIMS licensee to comply with professional standard of care

434 Limits on permitted indemnities

435 Requirement for agreed investment mandate

436 Action that must be taken on limit breaks

Related party transactions

437 Definition of related party benefits

438 General prohibition on transactions giving related party benefits

439 Certain related party benefits permitted

439A Requirements for certificates as to related party benefits

DIMS licensees must hold investor money in trust

440 Money paid by, or on account of, investors must be held in trust

Custodial service performed as part of discretionary investment management service

441 Application of sections 442 and 443

442 Requirements for custodian

443 Certain broker obligations of Financial Advisers Act 2008 apply under this Act

Subpart 7Holding and application of investor funds and property by derivatives issuers

444 Application of regulations made under this subpart

445 Regulations regulating holding and application of investor funds and property by derivatives issuers

Subpart 8Miscellaneous provisions

Civil liability

446 Part 6 licence provisions

Part 6A
Financial reporting

Subpart 1Overview

446A Overview

446B Interpretation

Subpart 2Accounting records

446C Issuer must keep proper accounting records

446D Place where accounting records to be kept

446E Accounting records to be in English

446F Period for which accounting records to be kept

446G Inspection of accounting records

Subpart 3Audit of financial statements

446H Financial statements to be audited

446I Meaning of qualified auditor

446J Appointment of registered audit firm

446K Application of other Acts not affected

Subpart 4Civil liability for certain contraventions of this Part

446L Part 6A financial reporting provisions

Part 7
Enforcement, liability, and appeals

447 Meaning of contravene

Subpart 1FMA's enforcement powers

Stop orders

448 When FMA may make stop orders

449 Terms of stop order

450 Meaning of restricted communication

451 FMA may make interim stop order pending exercise of powers

452 Persons to whom stop orders and interim stop orders may apply

452A Extended application of subpart

Direction orders

453 When FMA may make direction orders

454 Terms of direction orders

Unsolicited offer orders

455 When FMA may make unsolicited offer orders

456 Terms of unsolicited offer orders

Orders that exclusion does not apply

456A FMA may order that exclusion for offers of products of same class as quoted products does not apply

Process for FMA's orders

457 FMA must follow steps before making orders

458 FMA may shorten steps for specified orders

459 FMA must give notice after making orders

General provisions

460 General provisions on FMA's orders

461 Consequences of failing to comply with FMA's orders

Subpart 2High Court's enforcement powers

Injunctions

462 Court may grant injunctions

463 When court may grant injunctions and interim injunctions

464 Undertaking as to damages not required by FMA

Court may make FMA orders under this Part

465 Court may make FMA orders under this Part

Subpart 3Civil liability

Overview of civil liability

466 Overview of civil liability

467 What are civil liability provisions

Declarations of contravention and pecuniary penalty orders

468 When court may make declarations of contravention

469 Purpose and effect of declarations of contravention

470 What declarations of contravention must state

471 When court may make pecuniary penalty orders

472 Directors treated as having contravened in case of defective disclosure and may be ordered to pay pecuniary penalty

473 Maximum amount of pecuniary penalty

474 Guidance for court on how to determine gains made or losses avoided for purposes of maximum amount

475 Considerations for court in determining pecuniary penalty

476 Court must order that recovery from pecuniary penalty be applied to FMA's or Commerce Commission's actual costs

Compensatory orders

477 When court may make compensatory orders

478 Terms of compensatory orders

479 Director has due diligence defence

480 Person treated as suffering loss or damage in case of defective disclosure

Other civil liability orders

481 When court may make other civil liability orders

482 Terms of other civil liability orders

Defences for person in contravention of civil liability provisions

482A General defences for person in contravention

482B Disclosure defences for person in contravention

482C Additional disclosure defence for directors who are treated as contravening

482D Conduct still contravenes even if defence is available

Defences for person involved in contravention of civil liability provisions

482E General defences for person involved in contravention

Miscellaneous provisions relating to defences

482F Defendant must identify other person

Interrelationship of civil liability orders

483 More than 1 civil liability order may be made for same conduct

484 Only 1 pecuniary penalty order may be made for same conduct

485 No pecuniary penalty and fine for same conduct

Limitation defences

485A Limitation defences

Due diligence defence

486 Defence for persons other than primary person in contravention

General

487 Rules of civil procedure and civil standard of proof apply to civil liability

487A Commerce Commission may apply for order in relation to Part 2

Subpart 4Offences relating to defective disclosure and false statements

488 Offence of knowingly or recklessly contravening prohibition on offers where defective disclosure in PDS or register entry

489 Offence of knowingly or recklessly contravening other provisions relating to defective disclosure

489A General offence for false or misleading statements

Subpart 5Infringement offences

490 Infringement offences

491 Infringement notices

492 Procedural requirements for infringement notices

493 Payment of infringement fee

Subpart 6Banning orders

494 When court may make banning orders

495 Terms of banning orders

496 Offence of contravening banning order

497 Only 1 banning order may be made for same conduct

498 General provisions for banning orders

Subpart 7Orders to protect interests of aggrieved persons in case of financial markets investigations or proceedings

499 When court may make order to protect interests of aggrieved persons

500 What orders may be made

501 Interim orders

502 Relationship with other law

Subpart 8Indemnities or insurance for directors, employees, and auditors of issuers, offerors, and licensees

503 Prohibition on indemnities or insurance for directors or employees of issuers, offerors, or licensees that are not New Zealand companies

504 Permitted indemnities for certain liabilities or costs

505 Permitted insurance for certain liability or costs

505A Prohibition on indemnity or insurance for auditors of issuers, offerors, or licensees

506 Interpretation for this subpart

Subpart 9Appeals

507 Appeals against market services licence decisions

508 Appeals against other decisions of FMA on questions of law only

Subpart 10Miscellaneous

509 Time for laying information for summary offences

Accessories and attribution of liability

509 Involvement in contraventions

509A Directors treated as having contravened in case of defective disclosure

509B State of mind of directors, employees, or agents attributed to body corporate or other principal

509C Conduct of directors, employees, or agents attributed to body corporate or other principal

Miscellaneous

509D Time for filing charging document for certain offences

510 Jurisdiction of courts in New Zealand

511 Orders to secure compliance

512 General provisions as to court's orders

513 Persons entitled to appear before court

514 State of mind of directors, employees, or agents attributed to body corporate or other principal

515 Conduct of directors, employees, or agents attributed to body corporate or other principal

516 Saving of liability under Crimes Act 1961 and general law

Part 8
Regulations, transitional provisions, and miscellaneous provisions

Subpart 1Regulations

517 Regulations for purposes of Part 3 (disclosure of offers of financial products)

518 Regulations for purposes of Part 4 (governance of financial products)

519 Regulations for purposes of Part 5 (dealing in financial products on markets)

520 Regulations for purposes of Part 6 (market services)

521 Transitionals, savings, and orderly implementation of Act and related enactments

522 Other regulations

522A Minister must consult FMA about regulations

523 Procedural requirements for regulations relating to exemptions, exclusions, and definitions

524 Miscellaneous provisions relating to exemptions

525 Miscellaneous provisions relating to fees and charges

526 Regulations or exemptions may require compliance with generally accepted accounting practice, financial reporting standards, or FMA frameworks or methodologies

527 Different matters may be prescribed in respect of different circumstances

Subpart 2Exemptions

528 FMA may grant exemptions

529 Restriction on FMA's exemption power

530 Exemption in force for not more than 5 years

531 Breach of exemption conditions

532 Exemptions in respect of specified overseas jurisdictions

532A Effect of exemptions on regulated offers

Subpart 3FMA's designation power

533 FMA may designate financial products and offers

534 Procedural requirements

535 Transitional matters

536 FMA may make interim orders pending exercise of powers

537 Period in which interim order is in force

Subpart 4Frameworks or methodologies

537A Purpose

538 FMA may specify frameworks or methodologies

539 Consultation

Subpart 5General provisions relating to certain FMA instruments

540 Application of subpart

541 Status and publication of instruments

542 Variation and revocation

Subpart 6Recognition and application regimes

543 Purpose of this subpart

544 Definition of country in this subpart

Exemption from Act and regulations for New Zealand offers under recognition regime

545 Exemption from Act and regulations for New Zealand offers under recognition regime

546 Power to exempt from Act and regulations under recognition regime

547 Matters that must be stated in regulations implementing recognition regime

548 Offence for breach of regulations implementing recognition regime

Extension of Act and regulations to overseas offers under application regime

549 Extension of Act and regulations to overseas offers under application regime

550 Power to extend Act and regulations under application regime

551 Matters that must be stated in regulations implementing application regime

Subpart 7Enforcement of overseas pecuniary penalties under application regime

552 Purpose of this subpart

553 Enforcement of overseas pecuniary penalties under application regime

554 Power to enforce overseas penalties under application regime

555 Interpretation

556 Registration of judgment

557 Effect of registration

558 Enforceability of registered judgment

559 Stay may be granted

560 Costs

561 Interest

562 Rules of private international law not to apply

563 Other regulations for registration of judgments under application regime

Subpart 8Transitional and miscellaneous provisions

563A Registers

563B Transitional provisions

Part 9
Repeals and amendments

Subpart 1Repeals and revocations

564 Repeals

565 Revocations

Subpart 2Amendments to Fair Trading Act 1986

566 Principal Act amended

567 New section 5A substituted

567A New section 48B inserted (Commission's powers in relation to Part 2 of Financial Markets Conduct Act 2011)

567B Transitional provision for existing offences and contraventions

Subpart 3Amendments to Financial Advisers Act 2008

568 Principal Act amended

569 Interpretation

570 Who are wholesale clients

571 When person provides discretionary investment management service

572 Other exemptions

573 When financial adviser service is personalised service or class service

574 Who is permitted to provide personalised service to retail clients

575 Who is permitted to provide class service to retail clients

576 Financial adviser must make disclosure before providing personalised service to retail client

577 What financial adviser must disclose

578 QFE must make disclosure before personalised service provided to retail client

579 No compliance with disclosure obligation if disclosure out of date

580 New section 29A inserted

581 What is conduct obligation and when does it apply

581A Financial adviser must exercise care, diligence, and skill

582 New sections 36A to 36D inserted

583 New section 38 substituted

584 Other exemptions

585 What is conduct obligation and when does it apply

586 Restriction on use of term sharebroker

587 New section 77O substituted

588 Offence of recommending offer of securities when subscription illegal

589 Offences of receiving client money if offer for subscription illegal

590 Heading to subpart 4 of Part 4 amended

591 Sections 137C to 137J and heading repealed

592 Pecuniary order for contravening wholesale certification requirement

593 When FMA may make temporary banning orders for financial adviser services or broking services

594 General regulations

Subpart 4Financial Markets Authority Act 2011

595 Principal Act amended

596 Interpretation

597 FMA's functions

597A Power to enter and search place, vehicle, or other thing

598 FMA may exercise person’s right of action

599 FMA may accept undertakings

600 New section 46A inserted

601 New heading and section 48A inserted

602 FMA may require its warning to be disclosed

603 Schedule 1 amended

Subpart 5Amendments to KiwiSaver Act 2006

604 Principal Act amended

605 Purpose

606 Interpretation

607 Meaning of provider

608 Outline

609 Outline of how people become members of overall KiwiSaver scheme

610 Extension of opt-out period

611 Sections 24 to 32 and heading repealed

612 Employer must also supply investment statement for employer’s chosen KiwiSaver scheme (if any)

613 Effect of employer choice of KiwiSaver scheme

614 Commissioner provisionally allocates certain people to default KiwiSaver schemes and sends investment statement

615 New section 52 substituted

616 Notification of transfers and requirement to transfer funds and information

617 Compulsory employer contribution amount: general rule

618 Sections 101H to 101K and heading repealed

619 Part 4 substituted

KiwiSaver scheme rules

Provisions about unreasonable fees that apply to both KiwiSaver schemes and complying superannuation funds

Other implied terms

Other regulation of schemes

Interface with securities law

620 Sections 205 to 206 repealed

621 Sections 209 and 210 and heading repealed

622 Duty of Commissioner under section 50 modified in certain cases in which section 210 applies

623 Section 220 substituted

624 Administration of Act

625 Section 225 repealed

626 Status of Crown contribution and fee subsidy for tax purposes

627 Section 228 substituted

628 Regulations relating to default KiwiSaver providers

629 Sections 231 to 237 repealed

630 Amendments to Schedule 1 (KiwiSaver scheme rules)

631 Further amendments to Schedule 1 (KiwiSaver scheme rules)

632 Schedules 2 and 3 repealed

Subpart 6Amendments to Securities Trustees and Statutory Supervisors Act 2011

633 Principal Act amended

634 Name of principal Act changed

635 New section 3 substituted

636 Interpretation

637 Heading to Part 2

638 Heading to subpart 1 of Part 2

639 New section 6 substituted

640 New section 8 substituted

641 Requirement to be licensed: exception for certain FMA appointees

642 New section 10 substituted

643 FMA may impose conditions on licence

644 Information to be stated in licence

645 FMA must send licence and details to licensee and others

646 Decision on application for, or to vary, licence

647 Application to cancel licence

648 Notice, consultation, and submissions concerning decision under section 16(1)

649 Appeal to High Court against FMA's decision on application

649A Cross-heading amended

650 Effect of expiry of licence

651 Licensee must apply for new licence or notify issuer or operator before licence expires

652 Rejection of application for new licence: FMA may replace existing appointee

653 Expiry of licence: issuer or operator may replace existing appointee or FMA appointee

654 Expiry of licence: existing appointee must provide documents

655 FMA may vary licence because of material change of circumstances, etc

656 FMA's powers if action plan not submitted, etc

657 Removal notice

658 Removal notice: FMA may give direction to existing appointee

659 Removal notice: FMA may replace existing appointee

660 Replacement notice: affected person may replace existing appointee or FMA appointee

661 Notice requiring documents: existing appointee, etc, must provide documents

662 New section 41 substituted

663 Compensation orders

663 Compensation orders

664 Part 3 repealed

665 FMA may vary or cancel direction

666 New section 52 substituted

Transitional provisions

667 FMA may vary licences under Financial Markets Supervisors Act 2011

668 Appeal against licence decision

Subpart 7Amendments to other enactments

669 Amendments to other enactments

Subpart 8Transitional provisions for offers of financial products

670 Act applies to offer unless former enactments continue to apply

671 Former enactments continue to apply if prospectus registered before commencement

672 Issuer may elect to comply with former enactments instead of this Act if prospectus registered within 12 months of commencement

673 Former enactments apply if no prospectus is required unless issuer elects otherwise

674 Transitional provisions that apply after 12-month date in respect of registered prospectuses

675 This Act and 1978 Act are (on transitional basis) alternative means of compliance

676 All offers and allotments under old law must cease

677 All offers and allotments under old law must cease within 2 years of commencement

678 FMA may continue to perform and exercise functions, duties, and powers

679 Subpart does not prevent PDS from being lodged

680 Transitional and application provisions subject to exemption

Subpart 9Transitional provisions relating to securities offered under Securities Act 1978

681 Subpart applies to securities offered under Securities Act 1978

682 Interpretation in this subpart

683 Former enactments continue to apply until effective date

684 KiwiSaver schemes, superannuation schemes, and unit trusts continue under former enactments until effective date

685 Transition period

686 Ongoing requirements of this Act apply on and after effective date

687 Issuer of debt security must lodge trust deed and supply information

688 Managed investment scheme treated as being registered and issuer must supply information

689 Type of registration

690 Registrar to amend register

691 Restriction on making regulated offers and accepting contributions if requirements have not been complied with

692 Issuer may amend or replace governing document with FMA's consent

693 Conversion of governing documents to separate governing documents

694 Amalgamation of schemes

695 Amended enactments continue to apply or have effect in connection with securities

696 Issuer must send notification to security holders

697 PDS treated as having been given

698 FMA may continue to perform and exercise functions, duties, and powers

699 Transitional and application provisions subject to exemption

Subpart 10Other transitional provisions

Unit trusts and superannuation schemes in relation to which offers to the public have not been made

700 Unit trusts in relation to which offers to public have not been made

701 Superannuation schemes in relation to which offers to public have not been made

Amended enactments continue to apply or have effect in connection with schemes

702 Amended enactments continue to apply or have effect in connection with schemes

Extra transitional provisions relating to managed investment schemes

703 Remaining trustees (if any) cease to hold office

704 Restricted schemes have 3 years to comply with related party asset cap rule

705 Savings related to Superannuation Schemes Act 1976

Repealed enactments continue to be financial markets legislation

706 Repealed enactments continue to be financial markets legislation

Licensing of financial product markets

707 Transition process for existing financial product markets

Market services licences

708 Authorised dealers treated as holding market services licence

709 FMA may exercise powers in respect of licences

Approval of electronic transfer systems continues

710 Approval of electronic transfer systems continues

References to banning orders under this Act include references to banning orders under former enactments

711 References to banning orders under this Act include references to banning orders under former enactments

Financial Reporting Act 1993

712 Issuers continue to be issuers under Financial Reporting Act 1993

713 External Reporting Board must review tiers of financial reporting

Schedule 1
Provisions relating to when disclosure is required and exclusions for offers and services

Schedule 2
Registers

Schedule 3
Schedule 3 schemes

Schedule 4
Consequential amendments

Schedule 5
Transitional provisions


The Parliament of New Zealand enacts as follows:

1 Title
  • This Act is the Financial Markets Conduct Act 2011.

2 Commencement
  • (1) Section 350, subpart 10 of Part 5, subpart 7 of Part 6, and subparts 1 to 7 of Part 8 come into force on the day after the date on which this Act receives the Royal assent.

    (2) The rest of this Act comes into force on a date appointed by the Governor-General by Order in Council; and 1 or more orders may be made bringing different provisions into force on different dates.

    (3) To the extent that it is not previously brought into force under subsection (1) or (2), the rest of this Act comes into force on 1 April 2015 2017.

    (4) In this section, provision includes any item, or any part of an item, in Schedule 4.

Part 1
Preliminary provisions

Purposes

3 Main purposes
  • The main purposes of this Act are to—

    • (a) promote the confident and informed participation of businesses, investors, and consumers in the financial markets; and

    • (b) promote and facilitate the development of fair, efficient, and transparent financial markets.

4 Additional purposes
  • This Act has the following additional purposes:

    • (a) to provide for timely, accurate, and understandable information to be provided to persons to assist those persons to make decisions relating to financial products or the provision of financial services:

    • (b) to ensure that appropriate governance arrangements apply to financial products and market services that allow for effective monitoring and reduce governance risks:

    • (c) to avoid unnecessary compliance costs:

    • (d) to promote innovation and flexibility in the financial markets.

Overview

5 Overview
  • (1) In this Act,—

    • (a) this Part deals with preliminary matters, including specifying the purposes of this Act and interpretation:

    • (b) Part 2 prohibits misleading or deceptive conduct, and false or misleading representations, in connection with financial products and financial services:

    • (b) Part 2 provides for fair dealing matters, including—

      • (i) prohibiting misleading or deceptive conduct, and false or misleading representations, in connection with financial products and financial services:

      • (ii) prohibiting offers of financial products in the course of unsolicited meetings:

    • (c) Part 3 provides for—

      • (i) disclosure to investors in relation to certain offers of financial products (Schedule 1 contains provisions relating to when disclosure is required, including exclusions):

      • (ii) advertisements and other publicity for those offers:

      • (iii) ongoing disclosure to investors:

    • (d) Part 4 provides for the governance of regulated products, including—

      • (i) the governance of debt securities (including the need for a trust deed and a supervisor):

      • (ii) the registration governance of managed investment schemes products (including the need for registration of the managed investment scheme, a governing document, and a supervisor):

      • (iia) the duties of persons associated with debt securities or registered schemes to make protected disclosures:

      • (iii) the powers of intervention to enable the supervision of debt securities and managed investment registered schemes by a licensed supervisor or the FMA:

      • (iv) ongoing duties of issuers of all regulated products (for example, to maintain registers of regulated products and keep proper accounting records):

      • (v) duties of persons associated with regulated products to make protected disclosures:

    • (e) Part 5 provides for matters relating to dealing in financial products on markets, including—

      • (i) prohibiting insider trading and market manipulation:

      • (ii) providing for continuous disclosure by listed issuers:

      • (iii) providing for the disclosure of interests of substantial product holders in listed issuers and the disclosure of relevant interests by directors and senior managers of listed issuers:

      • (iv) providing for the licensing of markets for trading financial products:

      • (v) providing for the transfer of financial products:

      • (vi) the making of regulations setting rules for unsolicited offers to purchase financial products:

    • (f) Part 6 regulates certain financial market services, including—

      • (i) the licensing of certain financial market service providers (for example, managers of registered schemes, certain issuers of derivatives, and providers of intermediary services):

      • (ii) providing for disclosure obligations and obligations in respect of the need for client agreements in connection with some of those financial market services:

      • (iii) imposing other conduct obligations on licensees providers of providing discretionary investment management services and on their custodians:

      • (iv) providing for the making of regulations regulating the holding and application of investor funds and property by issuers of derivatives:

    • (fa) Part 6A provides for financial reporting obligations:

    • (g) Part 7 provides for enforcement and liability matters and for appeals, including—

      • (i) providing the FMA and the High Court with certain powers to avoid, remedy, or mitigate any actual or likely adverse effects of contraventions of this Act or the regulations:

      • (ii) the imposition of civil remedies liability (including pecuniary penalty orders and compensation orders):

      • (iii) offences:

      • (iv) providing for appeals against the FMA's decisions:

    • (h) Part 8 provides for regulations and exemptions, including powers to prescribe matters relating to the form and content of product disclosure statements, and powers for the FMA to designate financial products and offers, and to grant exemptions, where this is necessary or desirable in order to promote the main purposes of this Act specified in section 3 or any of the additional purposes of this Act specified in section 4:

    • (h) Part 8 provides for—

      • (i) regulations and exemptions, including powers to prescribe matters relating to the form and content of product disclosure statements, and powers for the FMA to designate financial products and offers, and to grant exemptions, where this is necessary or desirable in order to promote the main purposes of this Act specified in section 3 or any of the additional purposes of this Act specified in section 4:

      • (ii) transitional and miscellaneous matters.

    • (i) Part 9 provides for—

      • (i) the repeal of the Securities Act 1978, the Securities Markets Act 1988, and certain other enactments, and for consequential amendments:

      • (ii) transitional provisions:

      • (iii) various miscellaneous matters.

    (2) This section is only a guide to the general scheme and effect of this Act.

Interpretation

6 Interpretation
  • (1) In this Act, unless the context otherwise requires,—

    acquire

    • (a) includes obtain by buying, subscribing, or taking an assignment or transfer of; and

    • (b) includes, in Part 5, agree to acquire; and

    • (c) in relation to a derivative, includes entering into the legal relationship that constitutes the derivative

    administration manager, in relation to a registered scheme, means a person to whom a manager of the scheme has contracted some or all of the administration of the scheme

    advertisement,—

    • (a) in relation to an offer, or intended offer, of financial products, means any form of communication made to the public or a section of the public for the purpose of promoting the offer or intended offer:

    • (b) in relation to the supply of financial services, means any form of communication made to the public or a section of the public for the purpose of promoting the supply of the services

    agreement includes any contract, arrangement, or understanding

    alternative disclosure obligation means any provision of regulations made under section 350 that is stated by those regulations to be an alternative disclosure obligation

    application, in relation to financial products, includes an offer to acquire the financial products whether in writing or otherwise

    associated person or associated has the meaning set out in section 11(1)

    audio or visual service means an audio or visual service provided to users of the service by means of telecommunications

    authorised body, in relation to a market services licence, means a related body corporate of a licensee that is authorised under section 398 to provide a market service under the licence

    authorised financial adviser has the same meaning as in section 5 of the Financial Advisers Act 2008

    balance date has the same meaning as in section 7 of the Financial Reporting Act 1993

    becomes subject to an insolvency event has the meaning set out in subsection (4)

    building society has the same meaning as in section 2(1) of the Building Societies Act 1965

    business includes any profession, trade, or undertaking, whether or not carried on with the intention of making a pecuniary profit

    broadcaster has the same meaning as in section 2(1) of the Broadcasting Act 1989

    broadcasting has the same meaning as in section 2(1) of the Broadcasting Act 1989

    category 2 product has the same meaning as in section 5 of the Financial Advisers Act 2008

    chartered accountant has the meaning set out in section 19 of the New Zealand Institute of Chartered Accountants Act 1996

    civil remedy liability order has the meaning set out in section 466

    civil remedy liability provision has the meaning set out in section 467

    company means a company, or an overseas company, within the meaning of section 2(1) of the Companies Act 1993

    company

    • (a) means a company, or an overseas company, within the meaning of section 2(1) of the Companies Act 1993; but

    • (b) does not include an overseas limited partnership (within the meaning of section 4 of the Limited Partnerships Act 2008)

    complying superannuation fund means a superannuation scheme that is identified as a complying superannuation fund on the register of managed investment schemes

    conduct in relation to a takeover offer

    • (a) means conduct following the public announcement by a person of an intention to make an offer (being an offer that is regulated by the Takeovers Code), whether or not the offer has already begun and whether or not the offer proceeds; and

    • (b) includes conduct incidental or preliminary to a takeover that is regulated by the Takeovers Code

    constitution means,—

    • (a) in the case of a company within the meaning of the Companies Act 1993, the constitution of the company; and

    • (b) in the case of any other entity, the documents or instruments constituting or defining the constitution of the entity

    continuous disclosure exemption means an exemption or a waiver of a continuous disclosure provision or provisions of the listing rules of the licensed market

    continuous disclosure obligation means an obligation under section 265 and any listing rules with which that section requires compliance

    continuous disclosure provisions has the meaning set out in section 266

    continuous issue PDS means a PDS that—

    • (a) relates to financial products that the issuer, in the ordinary course of its business, continuously offers for issue; and

    • (b) is not the first PDS to be lodged with the Registrar in respect of that class of financial products

    continuous issuer means an issuer that in the ordinary course of its business continuously offers financial products for issue

    contravene has the meaning set out in section 447

    controlling owner, in relation to any person, has the meaning set out in section 4 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (applied to that person as if it were a financial service provider even if it is not)

    convertible note has the same meaning as in section YA 1 of the Income Tax Act 2007

    co-operative company means a company registered as a co-operative company under the Co-operative Companies Act 1996

    court means, in relation to any matter, the court before which the matter is to be determined (see section 510, which confers exclusive jurisdiction on the High Court in proceedings other than proceedings for offences)

    credit union has the same meaning as in section 2 of the Friendly Societies and Credit Unions Act 1982

    custodian means,—

    • (a) in relation to a registered scheme, the supervisor of the scheme (if the supervisor holds some or all of the scheme property) or other person to whom the supervisor or manager of the scheme has contracted the holding of some or all of the scheme property: each person who is designated or appointed to perform, or to whom is contracted, the function of holding some or all of the scheme property under the scheme:

    • (b) in relation to a discretionary investment management service provided by a DIMS licensee, the each person holding investor property on behalf of a retail investor under that service (whether or not appointed by that client investor)

    dealing in financial products, in relation to financial products,

    • (a) means any of the following:

      • (i) acquiring or disposing of financial products; or

      • (ii) offering financial products for issue or sale and issuing and transferring financial products; or

      • (iii) underwriting financial products; or

      • (iiia) promoting by any means the acquisition or disposal of financial products; or

      • (iiib) in relation to a derivative, discharging obligations under the derivative; or

      • (iv) anything that is preparatory to, or related to, any dealings in financial products (for example, giving financial advice), unless an exception applies to those dealings the dealing under this Act; but

    • (b) does not include dealings a dealing excluded by the regulations

    debt security has the meaning set out in section 8(1)

    defined benefit scheme means a scheme that operates on the principle of unallocated funding, and includes a scheme under which contributions are not allocated on a defined basis to individual members

    derivative has the meaning set out in section 8(1C)

    derivatives issuer means a person that is in the business of entering into derivatives

    DIMS licensee means a person that is licensed under Part 6 and whose licence covers acting as a provider of a discretionary investment management service

    DIMS licensee has the meaning set out in section 390A

    direction order means an order under section 453

    director means,—

    • (a) in relation to a company, any person occupying the position of a director of the company by whatever name called:

    • (b) in relation to a partnership (other than a limited partnership), any partner:

    • (c) in relation to a limited partnership, any general partner:

    • (d) in relation to a body corporate or unincorporate, other than a company, partnership, or limited partnership, any person occupying a position in the body that is comparable with that of a director of a company:

    • (e) in relation to any other person, that person

    disclosure document means any of the following:

    • (a) a PDS:

    • (b) a disclosure document under clause 26 of Schedule 1:

    • (c) documents, information, or other matters made available under subpart 4 of Part 3:

    • (d) a disclosure statement under subpart 4 of Part 6

    discretionary investment management service has the meaning set out in section 430 390A

    dispose of

    • (a) includes dispose of by issuing, selling, assigning, or transferring, withdrawing from, or terminating; and

    • (ab) includes withdrawing from, terminating, or closing out the legal relationship that constitutes the financial product; and

    • (b) includes agreeing to dispose of; and

    • (c) in relation to a derivative, includes discharging obligations under the derivative

    distribute includes—

    • (a) make available, publish, and circulate; and

    • (b) communicate by letter, newspaper, an Internet site, broadcasting, an audio or visual service, sound recording, television, film, video, or any form of electronic or other means of communication

    document has the same meaning as in section 4(1) of the Evidence Act 2006

    employee share purchase scheme means a scheme established by an entity under which employees or directors of the entity or of any of its subsidiaries (or other eligible persons referred to in clause 8 of Schedule 1) may acquire specified financial products (as defined in that clause) that are issued by the entity

    engaging in conduct means doing or refusing to do an act, and includes—

    • (a) omitting to do an act; or

    • (b) making it known that an act will or will not be done

    entity means any of the following:

    • (a) a company or other body corporate:

    • (b) a corporation sole:

    • (c) in the case of a trust that has—

      • (i) only 1 trustee, the trustee acting in his, her, or its capacity as trustee:

      • (ii) more than 1 trustee, the trustees acting jointly in their capacity as trustees:

    • (d) an unincorporated body (including a partnership)

    equity security has the meaning set out in section 8(1A)

    exhibiting films to the public means to exhibit to the public films within the meaning of section 2 of the Films, Videos, and Publications Classification Act 1993

    financial markets

    • (a) means the financial markets in New Zealand; and

    • (b) includes—

      • (i) markets in New Zealand for the provision of financial services; and

      • (ii) the capital markets in New Zealand

    financial markets legislation means the Acts listed in Schedule 1 of the Financial Markets Authority Act 2011 and the enactments made under those Acts

    financial markets participant has the same meaning as in section 4 of the Financial Markets Authority Act 2011

    financial product has the meaning set out in section 7 (but in Part 2 has the meaning set out in section 15A)

    financial product market has the meaning set out in section 307

    financial product market licence means a licence issued under subpart 7 of Part 5

    financial service

    • (a) has the same meaning as in section 5 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008; but and

    • (ab) includes a market service; but

    • (b) does not include any class or classes of services declared by the regulations not to be financial services for the purposes of this Act

    FMA means the Financial Markets Authority established by Part 2 of the Financial Markets Authority Act 2011

    generally available to the market has the meaning set out in section 227

    give, in relation to a document, information, or other matter, includes give by electronic or other means that enable the recipient to readily store the matter in a permanent and legible form

    governing document

    • (a) means (in the case of a debt security) a trust deed:

    • (b) means (in the case of a managed investment scheme constituted as a trust) the 1 or more trust deeds that constitutes the scheme or (in the case of any other managed investment scheme) the 1 or more deeds, agreements, or instruments that constitute or govern the scheme (for example, a partnership agreement or a trust deed):

    • (c) includes (in each case)—

      • (i) any amendments to a document referred to in paragraph (a) or (b):

      • (ii) any document that, under the terms of a document referred to in paragraph (a) or (b), forms part of or determines the meaning of any term of that document

    • (c) includes (in each case) any amendments to a document referred to in paragraph (a) or (b)

    in the business of, in relation to any service or other activity, means carrying on a business of that type (whether or not the business is the person's only business or the person's principal business)

    indemnify includes relieve, exempt, or excuse from liability, whether before or after the liability arises

    independent trustee, in relation to a restricted scheme, means the trustee, or director of a sole corporate trustee, who is the licensed independent trustee for the purposes of the restricted scheme

    industrial and provident society means a society registered under the Industrial and Provident Societies Act 1908

    information insider has the meaning set out in section 229

    infringement fee, in relation to an infringement offence, means the amount prescribed by the regulations as the infringement fee for the offence

    infringement offence means an offence under section 47, 49, 71, 80, 81, 96, 109, 128, 152, 155, 176, 178, 196, 197, 200, 202, 203, 205, 206, 208, 211, 216, 218, 219, 280,290, 291, 305, 334, 503, or 696

    infringement offence means an offence identified in this Act as being an infringement offence

    infringement notice means a notice issued under section 491

    Inland Revenue Acts means the Acts listed in the schedule of the Tax Administration Act 1994

    inside information has the meaning set out in section 229

    insolvency event has the meaning set out in subsection (4)

    insolvent means that,—

    • (a) in relation to an issuer of a debt security or a managed investment product,—

      • (i) the issuer is unable to pay the issuer's debts as they become due in the normal course of business; or

      • (ii) the value of the issuer's assets is less than the value of the issuer's liabilities, including contingent liabilities (and for this purpose section 4(4) of the Companies Act 1993 applies in respect of the issuer as if it were a company even if it is not):

    • (b) in relation to a registered scheme that is a defined benefit scheme, the value of the assets in the scheme is less than the value of the vested benefits (not counting contingent or discretionary benefits) that may in due course flow from, or are attributable to, membership of the scheme:

    • (c) in relation to any other registered scheme,—

      • (i) the funds in the scheme are not sufficient to enable debts in respect of the scheme to be paid as they become due in the normal course of business; or

      • (ii) the value of the assets in the scheme is less than the value of the liabilities in respect of the scheme, including contingent liabilities (and for this purpose section 4(4) of the Companies Act 1993 applies in respect of the scheme as if it were a company)

    inspection period means the period commencing on the third working day after the day on which notice of intention to inspect is served on the issuer by the person concerned and ending with the eighth working day after the day of service

    interim stop order has the meaning set out in section 451

    investment authority has the meaning set out in section 430 390A

    investment manager means, in relation to a registered scheme, a person to whom a manager of the scheme has contracted the investment of some or all of the scheme property

    investment mandate has the meaning set out in section 430 390A

    investor includes—

    • (a) a person to whom an offer of financial products is made; and

    • (b) a person who acquires, or may acquire, a financial product; and

    • (c) a person who receives, or may receive, a financial service

    investor property, in relation to a discretionary investment management service that is a retail service, means—

    • (a) a financial product held on behalf of an investor under that service; and

    • (b) money or property held for or received from, or on account of, an investor in relation to acquiring, holding, or disposing of a financial product under that service

    involved in a contravention has the meaning set out in section 509

    issued and issuer have the meanings set out in section 10

    issuer obligation means an obligation imposed on the issuer of a financial product by or under any of the following:

    • (a) a governing document that relates to the financial product:

    • (b) the terms of any regulated offer of the financial product:

    • (c) a court order relating to the financial product:

    • (d) this Act (including, in relation to a managed investment product, all obligations as manager):

    • (e) the KiwiSaver Act 2006:

    • (f) Part 5D of the Reserve Bank of New Zealand Act 1989

    KiwiSaver scheme means a scheme that is registered on the register of managed investment schemes as a KiwiSaver scheme

    lawyer has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006

    licence means a licence under this Act or, in relation to a supervisor, the Financial Markets Supervisors Act 2011, and licensed means having a licence, or being authorised under a licence, under this Act or, in relation to a supervisor, having a licence under the Financial Markets Supervisors Act 2011

    licensed market means a financial product market that is licensed under Part 5 (subject to any regulations made under section 350(1)(d))

    licensed market obligation means an obligation imposed on a licensed market operator in respect of a licensed market by or under any of the following:

    • (a) a condition of the licence:

    • (b) section 312 (general obligations in respect of licensed markets):

    • (c) section 332 (power to request changes to market rules):

    • (d) sections 336, 339, 340, and 341 (monitoring obligations)

    licensed market operator means—

    • (a) a person that is authorised to operate a licensed market under a financial product market licence:

    • (b) any subsidiary of that person that is authorised, and is operating the market, under the licence

    licensed market operator means a person that is authorised to operate a licensed market under a financial product market licence

    licensed market services has the meaning set out in section 389

    licensed market services means those market services—

    • (a) that are required to be licensed under Part 6; or

    • (b) for which a person holds a licence under Part 6 (whether or not required to do so)

    listed issuer means—

    • (a) a person that is a party to a listing agreement with a licensed market operator in relation to a licensed market (and includes a licensed market operator that has financial products quoted on its own licensed market):

    • (b) a person to which paragraph (a) previously applied, in respect of any action or event or circumstance to which this Act applied at that time

    local authority

    • (a) has the meaning set out in section 5(1) of the Local Government Act 2002; and

    • (b) includes New Zealand Local Government Funding Agency Limited while it is a council-controlled organisation within the meaning of section 6(1) of the Local Government Act 2002

    local authority has the meaning set out in section 5(1) of the Local Government Act 2002 (and see also section 8 of the Local Government Borrowing Act 2011)

    locked-in superannuation scheme means a scheme that is registered on the register of managed investment schemes as a superannuation scheme and that is identified as a locked-in scheme on that register

    managed investment product has the meaning set out in section 8(1B)

    managed investment scheme has the meaning set out in section 9

    manager means,—

    • (a) in relation to a registered scheme (other than a restricted scheme), the person designated or appointed as the manager of the scheme:

    • (b) in relation to a restricted scheme, the persons designated or appointed as trustees of the scheme or, if only 1 person is designated or appointed as a trustee of the scheme, that person:

    • (c) in relation to a managed investment scheme if there is no person to whom paragraph (a) or (b) applies, a person occupying the position of, and carrying out any of the functions of, the manager set out in section 129 (whether or not the scheme is registered)

    market operator obligation means an obligation imposed on a licensed market operator in respect of a licensed market by or under any of the following:

    • (a) a condition of the licence:

    • (b) section 312 (general obligations in respect of licensed markets):

    • (c) section 332 (power to request changes to market rules):

    • (d) sections 336, 339, 340, and 341 (monitoring obligations)

    market service means any of the following:

    • (a) acting as a manager of a registered scheme (other than a restricted scheme):

    • (b) acting as an independent trustee of a restricted scheme:

    • (c) acting as a provider of a discretionary investment management service:

    • (d) acting as a derivatives issuer in respect of a regulated offer of derivatives:

    • (da) acting as a custodian in respect of a registered scheme or a discretionary investment management service:

    • (e) acting as a provider of prescribed intermediary services

    market services licence means a licence issued under Part 6

    market services licensee obligation means an obligation imposed on a licensee or an authorised body by or under any of the following:

    • (a) a condition of the licence:

    • (b) this Act:

    • (c) the terms of the offer of a financial product or the provision of a market service:

    • (d) a court order made in connection with the offer of a financial product or the provision of a market service:

    • (e) in the case of a manager or an independent trustee of a registered scheme,—

      • (i) a governing document:

      • (ii) the KiwiSaver Act 2006

    material information,—

    • (a) in Part 3, has the meaning set out in section 43:

    • (b) in Part 5, has the meaning set out in section 226

    Minister means the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of this Act

    money includes money's worth (except in the definition of debt security)

    New Zealand resident for tax purposes means a person that is a New Zealand resident, as determined under sections YD 1 and YD 2 of the Income Tax Act 2007

    non-quoted financial products means financial products that are not quoted

    offer includes—

    • (a) inviting applications for the issue of financial products:

    • (b) inviting applications to purchase financial products

    offeror means,—

    • (a) in relation to an offer of financial products for issue, the issuer; or

    • (b) in any other case, the person who has the capacity, or who agrees, to transfer the financial products if the offer is accepted

    Part 2 misleading or deceptive conduct fair dealing provision means any of sections 16 to 19 the provisions specified in section 26E(1)

    Part 3 offer provision means any of the provisions specified in section 84(3) or (4) and any regulations with which those provisions require compliance

    Part 4 governance provision means any of the provisions specified in section 223(3) or (4) and any regulations with which those provisions require compliance

    Part 5 market provision means—

    • (a) any of the provisions specified in section 385(3) or (4); and

    • (b) any regulations with which the provisions referred to in paragraph (a) require compliance; and

    • (c) any listing rules with which section 265 requires compliance; and

    • (d) any provision of regulations made under section 350 that is stated by those regulations to be a Part 5 market provision

    Part 6 licence provision means—

    • (a) any of the provisions specified in section 446(3) or (4); and

    • (b) any condition imposed on a market services licence by the regulations that is stated by those regulations to be a Part 6 licence provision

    Part 6A financial reporting provision means any of the provisions specified in section 446L(3) or (4)

    participant means, in relation to a licensed market, a person authorised by the licensed market operator to participate in that market

    person includes any entity

    prescribed intermediary services means services of a kind that are prescribed for the purposes of this definition and involve a person acting as an intermediary in relation to a particular kind of financial product or financial service

    prescribed workplace scheme means a registered scheme of a kind that is prescribed for the purposes of this definition

    product disclosure statement or PDS, in relation to a regulated offer, means a product disclosure statement for the offer

    product holder, in relation to a financial product, means,—

    • (a) in the case of a financial product to which section 200 does not apply, the holder of the financial product (subject to paragraph (c)); or

    • (b) in the case of any other financial product, the person who is registered as the holder of the product in a register kept under subpart 5 of Part 4 (subject to paragraph (c)); or

    • (c) in the case of a derivative, any party to the derivative that is not a derivatives issuer

    protected disclosure has the meaning set out in section 199(5)

    provider of a discretionary investment management service has the meaning set out in section 430390A

    QFE or qualifying financial entity has the same meaning as in section 5 of the Financial Advisers Act 2008

    QFE adviser has the same meaning as in section 5 of the Financial Advisers Act 2008

    qualified auditor has the meaning set out in section 221 446I

    quoted, in relation to—

    • (a) financial products of a listed issuer, means financial products of the issuer that are approved for trading on a licensed market (and, to avoid doubt, financial products do not cease to be quoted merely because trading in those products is suspended):

    • (b) derivatives, means derivatives that are approved for trading on a licensed market (and, to avoid doubt, derivatives do not cease to be quoted merely because trading in those products is suspended)

    redeemable has the meaning set out in subsection (5)

    register entry, in relation to a regulated offer, means the entry for the offer in the register of offers of financial products

    register of managed investment schemes means the register of managed investment schemes kept under Schedule 2

    register of offers of financial products means the register of offers of financial products kept under Schedule 2

    registered bank has the same meaning as in section 2(1) of the Reserve Bank of New Zealand Act 1989

    registered scheme means a managed investment scheme that is registered on the register of managed investment schemes

    Registrar means the Registrar of Financial Service Providers appointed under section 35 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008

    regulated offer has the meaning set out in section 29

    regulated product has the meaning set out in section 29

    regulations means regulations made under this Act

    related body corporate has the meaning set out in section 11(2)

    related party, in relation to a registered scheme, has the meaning set out in section 158

    related party benefit,—

    • (a) in relation to a registered scheme, has the meaning set out in section 158:

    • (b) in relation to a DIMS licensee, has the meaning set out in section 437

    relative has the meaning set out in clause 5(2) of Schedule 1

    relevant event means an event that results in a person having to disclose matters under sections 270 to 273

    relevant interest has the meaning set out in sections 230 to 233

    relevant money, in relation to financial products, means the money paid—

    • (a) to acquire the financial products; or

    • (b) on account of those financial products; or

    • (c) as a further contribution or a further deposit as referred to in section 10(2)(c)

    reporting period has the meaning set out in section 336

    Reserve Bank means the Reserve Bank of New Zealand

    restricted communication has the meaning set out in section 450

    restricted scheme means a scheme that is registered on the register of managed investment schemes as a KiwiSaver scheme or a superannuation scheme and that is identified as a restricted scheme on that register

    retail investor has the meaning set out in clause 34 33A of Schedule 1

    retail service has the meaning set out in clause 33A of Schedule 1

    retirement scheme has the meaning set out in section 111(4)

    retirement scheme means any of the following schemes:

    • (a) a registered scheme that is a KiwiSaver scheme or a superannuation scheme:

    • (b) a Schedule 3 scheme:

    • (c) a fund or scheme constituted under the Government Superannuation Fund Act 1956

    same class, in relation to financial products, has the meaning set out in subsection (3)

    Schedule 3 scheme means a scheme that, under Schedule 3, is approved as a Schedule 3 scheme

    scheme participant, in relation to a managed investment scheme, has the meaning set out in paragraph (a) of the definition of managed investment scheme in section 9(1)

    scheme property or property of the scheme, in relation to a registered scheme, means the property to which the registered scheme relates, including—

    • (a) contributions of money to the scheme; and

    • (b) money borrowed or raised for the purposes of the scheme; and

    • (c) financial products or other property acquired, directly or indirectly, with, or with the proceeds of, contributions or money referred to in paragraph (a) or (b), (b), or (d); and

    • (d) income and property derived, directly or indirectly, from contributions, money, or property referred to in paragraphs (a) to (c) or this paragraph

    security

    • (a) means an arrangement or a facility that has, or is intended to have, the effect of a person making an investment or managing a financial risk; and

    • (b) includes—

      • (i) a financial product; and

      • (ii) any interest or right to participate in any capital, assets, earnings, royalties, or other property of any person; and

      • (iii) any interest in, or right to be paid, money that is, or is to be, deposited with, lent to, or otherwise owing by, any person (whether or not the interest or right is secured by a charge over any property); and

      • (iv) any renewal or variation of the terms or conditions of any existing security; but

    • (c) does not include any interest or right that is declared by regulations not to be a security for the purposes of this Act

    senior manager, in relation to a person (A), means a person who is not a director but occupies a position that allows that person to exercise significant influence over the management or administration of A (for example, a chief executive or a chief financial officer)

    service provider means a provider of a financial service

    solicitor has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006

    special resolution, in relation to—

    • (a) holders of a financial product issued by a credit union, means a resolution approved by no less than 75% of the number of members of the credit union who are entitled to vote on a special resolution and voting (in person, by proxy, or by electronic vote):

    • (b) holders of debt securities in any other case, means a resolution approved by product holders holding no less than 75% of the nominal value of the debt securities held by those persons who are entitled to vote on a special resolution and voting (in person, by proxy, or by electronic vote):

    • (c) holders of managed investment products in any other case, means a resolution approved by product holders holding no less than 75% of the value of the managed investment products held by those persons who are entitled to vote on a special resolution and voting (in person, by proxy, or by electronic vote)

    stop order means an order under section 448

    subscribe includes purchase and contribute to, whether by way of cash or otherwise

    subsidiary has the meaning set out in section 5 of the Companies Act 1993

    substantial product holder has the meaning set out in section 269(1)

    substantial holding has the meaning set out in section 269

    superannuation scheme means a scheme that is registered on the register of managed investment schemes as a superannuation scheme

    supervisor means a person designated or appointed as a supervisor in relation to a debt security or managed investment scheme for the purposes of any financial markets legislation

    Takeovers Code means the Takeovers Code in force under the Takeovers Act 1993

    trade, in Part 2, has the meaning set out in section 15A

    trading day means, in relation to a licensed market, a day on which the market is open for the trading of financial products

    transacting shareholder, in relation to a co-operative company,—

    • (a) has the same meaning as in section 4 of the Co-operative Companies Act 1996; and

    • (b) includes a supplying shareholder within the meaning of section 34 of that Act

    underlying, in relation to a derivative, means the underlying asset, rate, index, commodity, or other thing referred to in paragraph (a)(iii) of the definition of derivative in section 8 in respect of that derivative section 8(1C)(a)(iii)

    unsolicited offer has the meaning set out in section 381(1)

    unsolicited offer order means an order under section 455

    unsolicited offer provision means any provision of any regulations made under section 382 that is stated by those regulations to be an unsolicited offer provision

    voting product, in relation to an entity,—

    • (a) means a financial product of the entity that confers a right to vote at meetings of members or shareholders (whether or not there is any restriction or limitation on the number of votes that may be cast by or on behalf of the holder of the product); and

    • (b) includes a financial product that is convertible into a financial product of the kind referred to in paragraph (a); but

    • (c) does not include a financial product that confers only a right to vote that, under the conditions attached to the product, is exercisable only in 1 or more of the following circumstances:

      • (i) during a period in which a dividend (or part of a dividend) in respect of the product is in arrears:

      • (ii) on a proposal to reduce the capital of the entity:

      • (iii) on a proposal that affects rights attached to the product:

      • (iv) on a proposal to put the entity into liquidation:

      • (v) on a proposal for the disposal of the whole or a material part of the property, business, and undertaking of the entity:

      • (vi) during the liquidation of the entity

    wholesale investor

    • (a) has the meaning set out in clause 3(2) of Schedule 1, in relation to an offer of financial products; and

    • (b) has the meaning set out in clause 33B of Schedule 1 in relation to the provision of a market service.

    (2) Terms defined in other provisions of this Act have the meanings given unless the context otherwise requires.

    (3) In this Act, financial products are of the same class if those financial products have attached to them identical rights, privileges, limitations, and conditions (including, in the case of debt securities, the same redemption date).

    (4) In this Act, an insolvency event is any of the following events and a person becomes subject to an insolvency event on the date on which, and (if specified) the time at which, that event occurs:

    • (a) a liquidator is appointed in respect of a liquidation under Part 16 of the Companies Act 1993 or under any other Act; or

    • (b) an administrator is appointed in respect of a voluntary administration under Part 15A of the Companies Act 1993; or

    • (c) a receiver is appointed in relation to the whole, or substantially the whole, of the assets and undertaking of the person; or

    • (d) a liquidator is appointed in respect of a liquidation of an overseas company under section 342 of the Companies Act 1993; or

    • (e) a statutory manager is appointed in respect of a statutory management under Part 3 of the Corporations (Investigation and Management) Act 1989 or any other enactment; or

    • (f) a person is appointed in respect of, or another event occurs that indicates the start of, a process in New Zealand or in any other country in which the company or other body corporate was incorporated, created, or established that is similar to any of those set out in paragraphs (a) to (e).

    (5) In this Act, a share in an entity or a managed investment product in a scheme is redeemable if—

    • (a) the constitution of the entity, the governing documents of the scheme, or the terms of issue of the share or product make provision for the redemption of the share or product by the entity or the manager of the scheme in 1 or more of the following circumstances:

      • (i) at the option of the entity or manager; or:

      • (ii) at the option of the holder of the share or product; or:

      • (iii) on a date specified in those documents or in those terms; and

    • (b) that redemption is for a consideration that is 1 or more of the following:

      • (i) specified; or:

      • (ii) to be calculated by reference to a formula; or:

      • (iii) required to be fixed by a suitably qualified person who is not associated with or interested in the entity or manager of the scheme.

7 Meaning of financial product
  • (1) In this Act, financial product means—

    • (a) a debt security; or

    • (b) an equity security; or

    • (c) a managed investment product; or

    • (d) a derivative.

    (2) If an interest or a right is declared by regulations not to be a security for the purposes of this Act, the interest or right is not a financial product for the purposes of this Act.

8 Definitions relating to kinds of financial products
  • (1) In this Act, subject to subsection (2)(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); 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 paragraph (b) of the definition of that term in this section; or

      • (iii) a unit, proportionate interest, or membership interest in a registered scheme

    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, 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 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

    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

    managed investment product

    • (a) means a right to participate in, or receive, financial benefits from a managed investment scheme, whether the right is actual, prospective, or contingent and whether it is enforceable or not; but

    • (b) does not include—

      • (i) an equity security; or

      • (ii) a debt security.

    (1) In this Act, subject to subsection (2)(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); 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 (1C)(b); or

      • (iii) a unit, proportionate interest, or membership interest in a registered scheme.

    (1A) In this Act, subject to subsection (2)(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.

    (1B) In this Act, subject to subsection (2)(a) and (b), managed investment product

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

    • (b) does not include—

      • (i) an equity security; or

      • (ii) a debt security.

    (1C) In this Act, subject to subsection (2)(a) and (b) and section 9A, 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, 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.

    (2) A financial product of a particular kind defined in subsection (1), (1A), (1B), or (1C)

    • (a) includes—

      • (i) a security declared to be a financial product of that kind under subpart 3 of Part 8; 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 8 to be a financial product of a different kind:

      • (ii) a security that is declared under subpart 3 of Part 8 not to be a financial product.

    (3) Paragraph (d) of the definition of derivative in subsection (1) applies only to the extent that the agreement deals with the purchase and sale referred to in that paragraph.

    (4) An agreement under which one party has an obligation to buy, and the other has an obligation to sell, property is not a derivative merely because the agreement provides for the consideration to be varied by reference to a general inflation index (for example, the Consumers Price Index (All Groups) published by Statistics New Zealand).

    (5) Subsection (4) is subject to subsection (2)(a).

9 Definitions of financial benefit and of managed investment scheme
  • (1) In this Act,—

    financial benefit means capital, earnings, or other financial returns

    managed investment scheme means a scheme to which both each of the following apply applies:

    • (a) the purpose or effect of the scheme is to enable persons taking part in the scheme (scheme participants) to contribute money, or have money contributed on their behalf, to the scheme as consideration to acquire rights to financial benefits produced principally by the efforts of another person under the scheme interests in the scheme; and

    • (ab) those interests are rights to participate in, or receive, financial benefits produced principally by the efforts of another person under the scheme (whether those rights are actual, prospective, or contingent, and whether they are enforceable or not); and

    • (b) the scheme participants do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions).

    (2) However, a managed investment scheme does not include—

    • Scheme only involves management of direct interests in underlying property
    • (a) a scheme under which the scheme participant takes part in the scheme only by holding 1 or more interests in property if—

      • (i) it is an interest in separately identifiable or traceable property; and

      • (ii) the scheme participant either holds both the legal and beneficial interest in the property or the legal interest in the property is held on a bare trust for the scheme participant; and

      • (iii) the value of the interest is not substantially dependent on contributions being made by other scheme participants or the use of other scheme participants' contributions:

    • Discretionary investment management services
    • (b) a discretionary investment management service provided by a DIMS licensee or another person permitted to provide that service under sections 17 to 20 of the Financial Advisers Act 2008:

    • Insurance contracts
    • (c) a scheme that would be a managed investment scheme only because it involves pure risk contracts of insurance:

    • (d) a scheme that would be a managed investment scheme only because it involves life insurance policies (within the meaning of section 2(1) of the Securities Act 1978) that were issued before this section comes into force.

    (3) In subsection (2), pure risk contract of insurance means a contract of insurance that does not, and never will, have a value on its cancellation or surrender that is greater than the sum of premiums paid to the insurer.

    • (a) for the payment of money on the happening of a contingency, other than a contingency dependent on the continuance of human life; and

    • (b) that does not, and never will, have a value on its cancellation or surrender that is greater than the value of an unexpired premium relating to a period after the date of cancellation or surrender.

9A Miscellaneous matters relating to definition of derivative
  • (1) Section 8(1C)(d) applies only to the extent that the agreement deals with the purchase and sale referred to in that paragraph.

    (2) An agreement under which one party has an obligation to buy, and the other has an obligation to sell, property is not a derivative merely because the agreement provides for the consideration to be varied by reference to a general inflation index (for example, the Consumers Price Index (All Groups) published by Statistics New Zealand).

    (3) Subsection (2) is subject to section 8(2)(a).

10 Definitions of issued and issuer
  • (1) In this Act,—

    • (a) a financial product is issued to a person when it is first issued, granted, or otherwise made available to a person (subject to subsection (2)):

    • (b) issuer means, in relation to—

      • (i) a debt security, the person that is liable to repay money or pay interest or other returns under the security (other than as a guarantor):

      • (ii) an equity security, the company, industrial and provident society, building society, or other entity to which the security relates:

      • (iii) a managed investment product, the manager of the managed investment scheme to which the product relates:

      • (iv) a derivative, the derivatives issuer that entered into the derivative.

    (2) Despite subsection (1)(a),—

    • (a) a managed investment product that is an interest in a superannuation scheme, KiwiSaver scheme, or other prescribed scheme is issued to a person when the person becomes a member of the scheme:

    • (b) a derivative is issued to a person when the person enters into the legal relationship that constitutes the derivative:

    • (c) none of the following are taken to give rise to the issue of a financial product to a person (A):

      • (i) A making a further contribution to, or investment in, a superannuation scheme, a KiwiSaver scheme, or other prescribed scheme of which A is already a scheme participant:

      • (ii) an employer of A or any other person making, for the benefit of A, a further contribution to, or investment in, a superannuation scheme, a KiwiSaver scheme, or other prescribed scheme of which A is already a scheme participant:

      • (iii) A making a further deposit into a prescribed deposit product:

      • (iv) A engaging in conduct specified in regulations made for the purposes of this subparagraph in relation to a financial product already held by A.

    (3) Despite subsection (1)(b), if a debt security is offered for the purposes of a managed investment scheme, the manager of the scheme is the issuer for the purposes of this Act.

    (3A) If each person that enters into a derivative is a derivatives issuer, each of those persons is the issuer.

    Example

    A and B enter into a futures contract.

    Both A and B are derivatives issuers. Accordingly, both A and B are issuers of the futures contract.

    Although both parties are issuers, whether any particular party has disclosure or other obligations will depend on the circumstances.

    If both A and B hold a market services licence, both A and B will be wholesale investors under clause 35(1)(f) of Schedule 1. Accordingly, neither party will be required to make disclosure under Part 3 to the other party.

    (3B) In this Act, a reference to an issuer in relation to events, circumstances, or other matters before the financial products are issued is a reference to the person that will be, or is intended to be, the issuer when those products are issued.

    (4) In this Act, a person ceases to be an issuer in relation to financial products when those products are cancelled, redeemed, or forfeited, or all of the obligations owing under those products have been discharged.

    (5) If the terms of a financial product require or allow the person acquiring the product to pay separate amounts of money at different times, each of those payments must, for the purposes of this Act, be treated as payment for the same financial product as each of those other payments.

11 Meaning of associated person and related body corporate
  • (1) In this Act, a person (A) is associated with, or an associated person of, another person (B) if—

    • (a) A is a body corporate and B has the power, directly or indirectly, to exercise, or control the exercise of, the rights to vote attaching to 25% or more of the voting products of the body corporate (or vice versa):

    • (b) A and B are relatives or related bodies corporate:

    • (c) A and B are partners to whom the Partnership Act 1908 applies:

    • (d) A is a director or senior manager of B (or vice versa):

    • (e) A and B are acting jointly or in concert:

    • (f) A acts, or is accustomed to act, in accordance with the wishes of B (or vice versa):

    • (g) A is able, directly or indirectly, to exert a substantial degree of influence over the activities of B (or vice versa):

    • (h) A and B are bodies corporate that consist substantially of the same members or shareholders or that are under the control of the same persons:

    • (i) there is another person with which A and B are both associated under this subsection.

    (2) In this Act, a body corporate (A) is a related body corporate of another body corporate (B) if—

    • (a) B is A's holding company or subsidiary within the meaning of section 5 of the Companies Act 1993; or

    • (b) more than half of A's voting products (other than voting products that carry no right to participate beyond a specified amount in a distribution of either profits or capital) are held by B and bodies corporate that are related to B (whether directly or indirectly, but other than in a fiduciary capacity), or vice versa; or

    • (c) more than half of the voting products (other than voting products that carry no right to participate beyond a specified amount in a distribution of either profits or capital) of each of A and B are held by members of the other (whether directly or indirectly, but other than in a fiduciary capacity); or

    • (d) the businesses of A and B have been so carried on that the separate business of each body corporate, or a substantial part of that business, is not readily identifiable; or

    • (e) there is another body corporate to which A and B are both related under this subsection.

12 Miscellaneous interpretation provisions relating to statements and information
  • (1) In this Act, a reference to a statement or other information that is false, misleading, deceptive, or confusing includes a reference to a statement or information that is false, misleading, deceptive, or confusing (as the case may be) by reason of—

    • (a) the form or context in which the statement or information is made, published, or provided; or

    • (b) the omission of any other information that is material in the form and context in which it is made, published, or provided.

    (2) For the purpose of considering whether a PDS, a register entry, or any other document or communication provided under this Act is false, misleading, deceptive, or confusing, a statement or other information must be treated as being included in the PDS, register entry, or other document or communication if it—

    • (a) is contained in the PDS, register entry, or document or communication (as the case may be); or

    • (b) appears on the face of the PDS, register entry, or document or communication (as the case may be); or

    • (c) is contained in any financial statements, report, or other document that accompanies, or is incorporated by reference or referred to in, or distributed with, the PDS, register entry, or document or communication (as the case may be).

    (3) For the purposes of this section, if a PDS, a register entry, or any other document or communication specifically identifies a particular page or section of an Internet site or another document, only that page or section is incorporated by reference or referred to in the PDS, register entry, or other document or communication (except in the prescribed circumstances).

    (4) If this Act or the regulations require information or any other matter to be contained or included in a PDS, register entry, or document or communication, the information or other matter may be incorporated by reference only if this is authorised by the regulations.

13 Status of examples
  • (1) An example used in this Act is only illustrative of the provisions to which it relates. It does not limit those provisions.

    (2) If an example and a provision to which it relates are inconsistent, the provision prevails.

Act binds the Crown

14 Act binds the Crown
  • This Act binds the Crown.

General application provision

15 Application of Act
  • (1) The provisions of this Act have effect despite anything to the contrary in any other enactment or in any agreement, deed, application, disclosure document, or advertisement.

    (2) A provision of an agreement or a deed is void if it provides that a party to the agreement or deed is—

    • (a) required or bound to waive compliance with any requirement of this Act or the regulations; or

    • (b) taken to have notice of any agreement, document, or matter not specifically referred to in the relevant disclosure document (if any).

    (3) Nothing in this section or in any other provision of this Act or the regulations limits the Illegal Contracts Act 1970.

Part 2
Misleading or deceptive conduct or false or misleading representationsFair dealing

15A Interpretation in this Part
  • In this Part,—

    financial product

    • (a) has the meaning set out in section 7; and

    • (b) includes any class or classes of financial product (within the meaning of section 5 of the Financial Advisers Act 2008) declared by the regulations to be a financial product for the purposes of this Part

    trade means any trade, business, industry, profession, occupation, activity of commerce, or undertaking.

Misleading or deceptive conduct and false or misleading representations

16 Misleading or deceptive conduct generally
  • (1) A person must not, in trade, engage in conduct that is misleading or deceptive or likely to mislead or deceive in relation to—

    • (a) any dealing in financial products; or

    • (b) the supply or possible supply of a financial service or the promotion by any means of the supply or use of financial services.

    (2) A person must not engage in conduct that is misleading or deceptive or likely to mislead or deceive in relation to any dealing in quoted financial products.

    (3) Subsection (2) applies regardless of whether or not the dealing is in trade.

    (2) In this Part, trade means any trade, business, industry, profession, occupation, activity of commerce, or undertaking.

    Compare: 1986 No 121 s 9; 1988 No 234 s 13

17 Misleading conduct in relation to financial products
  • A person must not, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of financial products.

    Compare: 1986 No 121 s 10

18 Misleading conduct in relation to financial services
  • A person must not, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of financial services.

    Compare: 1986 No 121 s 11

19 False or misleading representations
  • A person must not, in trade, in connection with any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services, make a false or misleading representation—

    • (a) that the products or services are of a particular kind, standard, quality, grade, quantity, composition, or value, grade, or composition, or have had a particular history; or

    • (b) that the products or services are offered, issued, transferred, or supplied by a particular person, by a person who has particular characteristics, by a person of a particular trade, qualification, or skill, or by a person who is of a particular kind; or

    • (c) that a particular person has agreed to acquire the products or services; or

    • (d) that the products or services have any sponsorship, approval, endorsement, performance characteristics, accessories, uses, or benefits; or

    • (e) that a person has any sponsorship, approval, endorsement, or affiliation; or

    • (f) with respect to the price of the products or services; or

    • (g) concerning the need for the products or services; or

    • (h) concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right, or remedy, including (to avoid doubt) in relation to any guarantee, right, or remedy available under the Consumer Guarantees Act 1993; or

    • (i) concerning the place of origin of the products or services.

    Compare: 1986 No 121 s 13

20 Certain conduct does not contravene this Part various provisions
  • (1) Conduct that contravenes—

    • (a) section 65, 83, or 425 or clause 27 of Schedule 1 does not contravene this Part:

    • (b) section 27, 28, 34, 35, 47, 48, 77G, 77H, 77L, or 77M of the Financial Advisers Act 2008 does not contravene this Part.

    (1) Conduct that contravenes section 65, 83, 257, 260, or 425 or clause 27 of Schedule 1 does not contravene sections 16 to 19.

    (2) For the purpose of this section, conduct must be treated as contravening a provision referred to in subsection (1) section 65, 83, 257, 260, or 425 or clause 27 of Schedule 1 even if the conduct does not constitute an offence, or does not lead to any liability, because of the availability of a defence.

    Compare: Australian Securities and Investments Commission Act 2001 ss 12DA(1A), 12DB(2) (Aust)

21 Limited application of Part of provisions in relation to newspapers, magazines, broadcasting, etc
  • (1) Nothing in this Part sections 16 to 19 applies to the publication of any information or matter in a newspaper or magazine, or on a news media or financial market commentary Internet site, by the relevant person, not being—

    • (a) the publication of an advertisement; or

    • (b) the publication of any information or matter relating to any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services by—

      • (i) the relevant person or, if the relevant person is a body corporate, by a related body corporate; or

      • (ii) a person who is a party to any agreement with the relevant person relating to the content, nature, or tenor of the information or matter.

    (2) Nothing in this Part sections 16 to 19 applies to the broadcasting or exhibiting of any information or matter by the relevant person, not being—

    • (a) the broadcasting or exhibiting of an advertisement; or

    • (b) the broadcasting or exhibiting of any information or matter relating to any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services by—

      • (i) the relevant person or, if the relevant person is a body corporate, by a related body corporate; or

      • (ii) a person who is a party to any agreement with the relevant person relating to the content, nature, or tenor of the information or matter.

    (3) In this section,—

    exhibiting means—

    • (a) exhibiting by means of an audio or visual service; or

    • (b) exhibiting films to the public

    newspaper has the same meaning as in section 2 of the Films, Videos, and Publications Classification Act 1993

    relevant person means, in relation to—

    • (a) a newspaper or magazine, the proprietor of the newspaper or magazine:

    • (b) a news media or financial market commentary Internet site, the person that controls the content of the Internet site:

    • (c) broadcasting, the broadcaster:

    • (d) an audio or visual service, the person that controls the content of the audio or visual service:

    • (e) exhibiting films to the public, the person that exhibits the films.

    Compare: 1986 No 121 s 15

22 Defence for publisher
  • In any proceeding against a person (A) for contravention of a provision of this Part any of sections 16 to 19 committed by the publication of an advertisement, it is a defence if A proves that

    • (a) A's business is publishing or arranging for the publication of advertisements; and

    • (b) A received the advertisement, or the information contained in the advertisement, as the case may be, in the ordinary course of that business and did not know and had no reason to suspect that the publication of the advertisement or the publication of the advertisement containing that information, as the case may be, would constitute a contravention of the provision.

    Compare: 1986 No 121 s 44(4)

23 Defence for reasonable reliance on information supplied by another person
  • (1) In any proceeding against a person (A) for contravention of a provision of this Part, it is a defence if the contravention was due to reasonable reliance on information supplied by another person.

    (2) In this section, another person does not include a director, employee, or agent of A.

    (3) A is not, without the leave of the court, entitled to rely on the defence provided by this section that the contravention was due to reasonable reliance on information supplied by another person unless A has, not later than 7 working days before the date on which the hearing of the proceeding commences, served on the other party to the proceeding a notice in writing identifying that person.

    Compare: 1986 No 121 s 44(1)(b), (2), (3)

24 Licensed market operator does not contravene by notifying disclosures
  • A licensed market operator does not contravene any provision of this Part of sections 16 to 19 by the notification of any disclosure made to it under subpart 4, 5, or 6 of Part 5 or under an alternative disclosure obligation.

25 Other exceptions
  • (1) This Part does Sections 16 to 19 do not apply to conduct in relation to a takeover offer for financial products under the Takeovers Code or to conduct under that offer to the extent that the conduct is regulated by the Code, the Takeovers Act 1993, or an exemption granted under that Act.

    (2) This Part does Sections 16 to 19 do not apply to conduct in relation to the acquisition or redemption by a company of its shares under the Companies Act 1993 to the extent that the conduct is regulated by that Act.

    Compare: 1988 No 234 ss 14, 15

26 Territorial scope of Part sections 16 to 19
  • (1) This Part applies Sections 16 to 19 apply to—

    • (a) conduct in New Zealand; and

    • (b) conduct outside New Zealand by any person resident, incorporated, registered, or carrying on business in New Zealand to the extent that that conduct relates to dealing in financial products, or the supply of a financial service, that occurs (in part or otherwise) within New Zealand.

    (2) Sections 16 to 19 also apply to a restricted communication that is distributed or to be distributed to a person outside New Zealand by any person resident, incorporated, or having a principal place of business in New Zealand.

    (3) A proceeding under subpart 3 of Part 7 in relation to conduct to which this Part applies by virtue of subsection (2) may be commenced only by the FMA.

    Compare: 1988 No 234 s 18; 1978 No 103 s 7(3)

Offers in course of unsolicited meetings

26A Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade
  • (1) A person must not offer financial products for issue or sale to a person who is acting otherwise than in trade (A) in the course of, or because of, an unsolicited meeting with A.

    (2) Subsection (1) does not prohibit an offer of financial products if—

    • (a) the offer does not require disclosure under Part 3 because of an exclusion under Part 1 of Schedule 1 (other than an exclusion under clause 12 or 16 of that schedule); or

    • (b) the offer is through an authorised financial adviser or a QFE adviser who is acting in the ordinary course of business as a financial adviser; or

    • (c) the offer is an offer of quoted financial products made to A through a person who, under the Financial Advisers Act 2008, is permitted to give personalised financial advice to A in respect of those products (including as a result of an exemption by or under that Act); or

    • (d) the offer is an offer of the financial products of a co-operative where becoming a holder of those products is—

      • (i) a necessary incident of doing business with the co-operative; or

      • (ii) the means by which a person can access the benefits of membership of the co-operative; or

    • (e) the offer is made in the prescribed circumstances.

    (3) This section applies to offers of financial products received by persons in New Zealand, regardless of—

    • (a) where any resulting issue or transfer occurs:

    • (b) where the issuer or offeror is resident, incorporated, or carries on business.

    (4) In this section,—

    meeting includes—

    • (a) a telephone call; or

    • (b) a meeting held by means of audio, audio and visual, or electronic communication where the participants can simultaneously communicate with each other throughout the meeting

    co-operative means—

    • (a) a co-operative company; or

    • (b) an industrial and provident society; or

    • (c) an entity of a prescribed kind.

    Compare: Corporations Act 2001 s 736 (Aust)

26B Right to withdraw
  • (1) If financial products are issued or transferred to a person (A) as a result of an offer that contravenes section 26A, A has the right to—

    • (a) withdraw from holding the financial products and to have the relevant money repaid (in any case other than a derivative); or

    • (b) in the case of a derivative, withdraw from the derivative.

    (2) The right referred to in subsection (1) is exercisable by A giving to the offeror notice of the exercise of the right within 1 month after the date of the issue or transfer.

    (3) Notice under this section may be expressed in any way (including oral or written) that shows the intention of A to withdraw from holding the financial product or the derivative.

    (4) This section and sections 26C and 26D do not limit any other liability that a person may have for a contravention of section 26A.

    Compare: Corporations Act 2001 s 738 (Aust)

26C Offeror obligations if notice of withdrawal given
  • (1) If a notice is given under section 26B in relation to a financial product other than a derivative,—

    • (a) the offeror must ensure that the relevant money is repaid as soon as practicable; and

    • (b) if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the relevant money together with interest at a prescribed rate from the date on which the notice was given.

    (2) If a notice is given under section 26B in relation to a derivative,—

    • (a) no party to the derivative is obliged or entitled to perform it further; and

    • (b) each party to the derivative must, as soon as practicable, repay any money, or return any other property, received by the party under the derivative to the party from whom it was received; and

    • (c) if money owed by the offeror is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the date on which the notice was given.

    (3) For the purposes of subsection (2)(b), an amount of money due from one party must be set off against an amount due from the other party.

26D Director not liable if no misconduct or negligence
  • A director is not liable under section 26C(1)(b) or (2)(c) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Civil liability

26E Civil liability for certain contraventions of this Part
  • (1) Sections 16 to 19, 26A, and 26C are Part 2 fair dealing provisions.

    (2) A contravention of any of sections 16 to 19 may give rise to civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.

    (3) A contravention of section 26A or 26C may give rise to civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case.

Part 3
Disclosure of offers of financial products

Subpart 1Application

27 Issue offers that need disclosure
  • An offer of financial products for issue requires disclosure to an investor under this Part unless an exclusion under Part 1 of Schedule 1 applies.

    Compare: Corporations Act 2001 s 706 (Aust)

28 Sale offers that need disclosure
  • An offer of financial products for sale requires disclosure to an investor under this Part only if disclosure is required under Part 2 of Schedule 1.

    Compare: Corporations Act 2001 s 707(1) (Aust)

29 Meaning of regulated offer and of regulated product
  • (1) In this Act, regulated offer

    • (a) means an offer of financial products to 1 or more investors where the offer to at least 1 of those investors requires disclosure under this Part (regardless of whether or not an exclusion under Schedule 1 applies to an offer to 1 or more other investors); but

    • (b) does not include an offer of financial products to 1 or more investors if—

      • (i) the only investors in New Zealand who are able, under the terms of the offer, to acquire the products are investors to whom disclosure under this Part is not required; and

      • (ii) all of the investors who acquire the products under the offer are investors to whom disclosure under this Part is not required.

    Example

    ABC Limited makes an offer of its ordinary shares to 100 investors.

    Of those investors, 5 are wholesale investors, 15 are relatives of directors of ABC Limited, and 20 are close business associates of ABC Limited. Exclusions under Schedule 1 apply and accordingly the offers to these investors do not require disclosure under this Part.

    However, none of the exclusions in Schedule 1 apply to the remaining 60 investors. The offer to each of these investors requires disclosure. This means that a product disclosure statement must be given to each of the 60 investors under section 37 (subject to section 38).

    The offer of ABC Limited's ordinary shares, as a whole, is a regulated offer because at least some of the offers to investors require disclosure.

    Some obligations under this Act apply to the regulated offer as a whole. These obligations apply to all of the investors even if the offers to some of those investors do not require disclosure. For example, all subscriptions money paid for the shares must be held in trust under section 69 (even if the subscription money is paid by a wholesale investor, a relative, or a close business associate), ongoing disclosure under subpart 4 may be required to be made to a wholesale investor, a relative, or a close business associate, and registers of financial products kept under subpart 5 of Part 4 relate to products held by all product holders.

    (2) In this Act, regulated product means—

    • (a) a financial product offered under a regulated offer; or

    • (b) a managed investment product in a registered scheme (whether or not there has been a regulated offer).

30 Regulated offers that need to meet additional governance requirements
  • (1) A regulated offer of debt securities must meet the governing document and supervisor requirements under subpart 2 of Part 4.

    (2) A regulated offer of managed investment products must meet the registration requirements under subpart 3 of Part 4.

31 Options over financial products
  • (1) For the purposes of this Part and Schedule 1,—

    • (a) an offer of an option over financial products to acquire, by way of issue, a financial product is an offer both of the option and of the underlying financial products; and

    • (b) the grant of an option without an offer of the option is an offer of the option; and

    • (c) an offer to grant an option is an offer to issue the option.

    (2) See clause 11 of Schedule 1 for an exclusion in relation to options.

    Compare: Corporations Act 2001 s 702 (Aust)

32 Treatment of offers of convertible financial products
  • For the purposes of this Part and Schedule 1, an offer of a financial product of an issuer that will be converted, or is or may become convertible, into another financial product of the issuer is an offer both of the financial product that is issued and of the financial product into which it converts.

33 Treatment of offers of renewals and variations
  • (1) For the purposes of this Part and Schedule 1, an offer of a renewal or variation of the terms or conditions of a financial product made by the issuer is an offer of the financial product as renewed or varied.

    (2) A change to the terms or conditions of a financial product is not a variation for the purposes of this section if the change is made in accordance with the existing terms or conditions of the financial product (for example, if the issuer exercises a power under the terms or conditions to change an interest rate).

    (3) See clause 23 of Schedule 1 for an exclusion in relation to renewals and variations (but limited disclosure may be required under clause 26 of that schedule).

33A Offers of financial products involving customised terms
  • (1) Offers of a type of financial product to 2 or more investors are not prevented from being part of the same regulated offer merely because the product involves terms that are customised for each investor.

    (2) The PDS and register entry for a regulated offer are not required to include specific information about any customised terms that apply to a particular investor.

    (3) Subsection (2) does not prevent the regulations from requiring a PDS or register entry to contain information about the kinds of terms that may be customised for each investor.

    Example

    A derivatives issuer makes an offer of a particular type of swap agreement to retail investors (where the offer to at least 1 of those investors requires disclosure under this Part).

    These derivatives involve some standard or generic terms. They also involve customised terms that are negotiated with each retail investor (for example, terms relating to particular dates or amounts).

    The offer of those derivatives to those investors is a regulated offer.

    The PDS or register entry relates to the regulated offer as a whole. The PDS and register entry do not include specific information about the customised terms that apply to a particular investor. This does not prevent the regulations requiring the PDS or register entry to contain a description of the kinds of customised terms that may be negotiated (such as a range of dates or amounts).

34 Territorial scope of Part
  • (1) This Part applies to offers of financial products in New Zealand, regardless of—

    • (a) where any resulting issue or transfer occurs:

    • (b) where the issuer or offeror is resident, incorporated, or carries on business.

    (2) For the purposes of this Part subsection (1), financial products are offered in New Zealand if an offer of the financial products is received by a person in New Zealand, unless the offeror demonstrates that it took all reasonable steps to ensure that persons in New Zealand (other than persons referred to in subsection (3)) may not accept the offer.

    (3) The persons referred to in this subsection are persons to whom disclosure under this Part is not required because of an exclusion under any of clauses 3 to 5 of Schedule 1.

    (4) The territorial scope of this Part may be further extended under subpart 6 of Part 8.

    Compare: 1978 No 103 s 7

Subpart 2Procedure for making regulated offers

Product disclosure statement must be prepared and lodged

35 PDS must be prepared and lodged
  • (1) A person must not make a regulated offer, or distribute an application form for a regulated offer, unless the issuer of the financial products has—

    • (a) prepared a product disclosure statement (PDS) for the offer; and

    • (b) lodged the PDS with the Registrar; and

    • (c) supplied to the Registrar all of the information and documents that the register entry (if any) is required to contain by this Act or the regulations.

    (2) A person who contravenes subsection (1) commits an offence if the person knows that, or is reckless as to whether, the offer is a regulated offer.

    (3) A person who commits an offence under subsection (2) is liable on conviction on indictment,—

    • (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and

    • (b) in any other case, to a fine not exceeding $2.5 million.

    Compare: Corporations Act 2001 ss 709(1), 718, 727(1) (Aust)

36 Purpose of PDS
  • The purpose of a PDS is to provide certain information that is likely to assist a prudent but non-expert person to decide whether or not to acquire the financial products.

Disclosure to investors

37 PDS must be given if offer requires disclosure
  • (1) This section applies if an offer of financial products is made to a person to whom disclosure under this Part is required (A).

    (2) The offeror A person must not accept an application, or issue or transfer the financial products to A, if a PDS for the regulated offer was not given to A before the application was made.

    (3) In this section, application means an application for the financial products that is made by, or on behalf of, A.

    (4) See sections 27 and 28 and Schedule 1, which contain provisions relating to when an offer of financial products to a person requires disclosure under this Part.

38 Certain situations in which section 37 does not need to be complied with
  • (1) An offeror does not have to comply with section 37 in respect of an offer of financial products to a person (A)—

    • (a) if A has already been given a PDS (for the same or a different offer) that contains all of the information that the PDS referred to in section 37 would be required to contain; or

    • (b) if the offeror believes on reasonable grounds that paragraph (a) applies; or

    • (c) in any other prescribed circumstances.

    (2) For the purposes of subsection (1)(a), minor immaterial differences in the information that is contained in the PDS that has been given to A and the PDS referred to in section 37 may be disregarded.

    Compare: Corporations Act 2001 s 1012D(1) (Aust)

39 PDS treated as having been given if application form used was included in, or accompanied by, PDS
  • (1) An offeror must be treated as having complied with section 37 in respect of an offer of financial products to a person (A) if the offeror

    • (a) the offeror issues or transfers the financial products to A in response to an application form; and

    • (ab) the application form identifies the PDS to which it relates; and

    • (b) the offeror has reasonable grounds to believe that—

      • (i) the application form was included in, or accompanied by, the PDS when the form was distributed by or on behalf of the offeror; or

      • (ii) the form was copied, or directly derived, by the person making the application from a form referred to in subparagraph (i).

    (2) The identification of the PDS under subsection (1)(ab) must be reasonably prominent.

40 Offence to knowingly or recklessly contravene section 37
  • (1) A person who contravenes section 37 commits an offence if the person knows that, or is reckless as to whether, the offer of financial products to A requires disclosure under this Part.

    (2) A person who commits an offence under subsection (1) is liable on conviction on indictment,—

    • (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and

    • (b) in any other case, to a fine not exceeding $2.5 million.

41 Right to withdraw and have money returned
  • (1) If an offeror contravenes section 37 in respect of an offer of financial products to a person (A), A has the right to withdraw from holding the financial products and to have the relevant money repaid.

    (1) If a person contravenes section 37 in respect of an offer of financial products to a person (A), A has the right to—

    • (a) withdraw from holding the financial products and to have the relevant money repaid (in any case other than a derivative); or

    • (b) in the case of a derivative, withdraw from the derivative.

    (2) The right referred to in subsection (1) is exercisable by A giving to the offeror written notice of the exercise of the right within the earlier of—

    • (a) 6 months after A knows, or ought reasonably to know, that section 37 has been contravened; or

    • (b) 12 months after the financial products are issued or transferred to A.

    (3) If a notice is given under subsection (2),—

    • (a) the offeror must ensure that the relevant money is repaid as soon as practicable; and

    • (b) if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the relevant money together with interest at a prescribed rate from the date on which the notice was given.

    (3) Notice under this section may be expressed in any way (including oral or written) that shows the intention of A to withdraw from holding the financial product or the derivative.

    (4) This section does and sections 41A and 41B do not limit any other liability that a person may have for a contravention of section 37.

41A Offeror obligations if notice of withdrawal given
  • (1) If a notice is given under section 41 in relation to a financial product other than a derivative,—

    • (a) the offeror must ensure that the relevant money is repaid as soon as practicable; and

    • (b) if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the relevant money together with interest at a prescribed rate from the date on which the notice was given.

    (2) If a notice is given under section 41 in relation to a derivative,—

    • (a) no party to the derivative is obliged or entitled to perform it further; and

    • (b) each party to the derivative must, as soon as practicable, repay any money, or return any other property, received by the party under the derivative to the party from whom it was received; and

    • (c) if money owed by the offeror is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the date on which the notice was given.

    (3) For the purposes of subsection (2)(b), an amount of money due from one party must be set off against an amount due from the other party.

41B Director not liable if no misconduct or negligence
  • A director is not liable under section 41A(1)(b) or (2)(c) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Content and presentation of product disclosure statements and register entries

42 Disclosure of material information and content of PDS and register entry
  • (1) An issuer that prepares, or is required to prepare, a PDS must ensure that, as at the date on which the PDS is lodged with the Registrar,—

    • (a) the PDS—

      • (i) contains all of the information that it is required to contain by the regulations; and

      • (ii) is accompanied by all of the documents that the regulations require it to be accompanied by; and

      • (iii) complies with all other requirements of the regulations relating to the content of the PDS; and

      • (iv) is dated not later than the date on which it is lodged with the Registrar; and

      • (v) if applicable, specifies its expiry date (see section 67) and states that no financial products will be issued or sold on the basis of the PDS in relation to applications received after the expiry date; and

      • (vi) complies with section 44 (consent for expert statements or endorsements); and

    • (b) the register entry (if any)—

      • (i) contains all of the information and documents that it is required to contain by the regulations; and

      • (ii) contains all material information relating to the regulated offer that is not contained in the PDS; and

      • (iii) complies with all other requirements of the regulations relating to the content of the register entry; and

      • (iv) complies with section 44 (consent for expert statements or endorsements).

    (2) Subsection (1)(b)(ii) does not limit subsection (1)(a).

    (3) Subsection (1)(b)(ii) does not apply in the prescribed circumstances (which may include, for example, certain offers to existing product holders or certain situations in which information about an offer is available by means of a continuous disclosure obligation).

42A Register entry not required in prescribed circumstances
  • A register entry for a regulated offer is not required in the prescribed circumstances.

43 Meaning of material information in this Part
  • (1) In this Part, material information, in relation to a regulated offer, means information that—

    • (a) a reasonable person would expect to, or to be likely to, influence persons who commonly invest in financial products in deciding whether to acquire the financial products on offer; and

    • (b) relates to the particular financial products on offer or the particular issuer, rather than to financial products generally or issuers generally.

    (2) However, material information does not include—

    • (a) information about the specific terms of a financial product that have been customised for a particular investor; or

    • (b) information about an identifiable investor.

    Example

    A derivatives issuer makes an offer of a particular type of swap agreement to retail investors.

    These derivatives involve some standard or generic terms. They also involve customised terms that are negotiated with the particular retail investor (for example, terms relating to particular dates or amounts).

    The material information for the regulated offer as a whole does not include specific information about the customised terms that apply to a particular investor. This does not prevent the regulations requiring the PDS or register entry to contain a description of the kinds of customised terms that may be negotiated.

    Compare: Corporations Act 2001 ss 674, 677, 710, 1013E (Aust)

44 Consent of experts and persons who make endorsements
  • (1) An issuer that prepares, or is required to prepare, a PDS must ensure that the PDS and the register entry only include an expert statement or endorsement made by a person (A), or a statement said in the PDS or register entry to be based on an expert statement or endorsement made by a person (A), only if—

    • (a) A has consented in writing to the statement being included in the PDS or register entry in the form and context in which it is included; and

    • (b) the PDS or register entry states that A has given the consent; and

    • (c) A has not withdrawn the consent before the PDS is lodged with the Registrar.

    (1A) Nothing in subsection (1) applies in relation to any statement given by an approved rating agency in connection with a rating given, or to be given, by it.

    (2) In this section and section 66(3),—

    approved rating agency means a rating agency nominated or approved under section 80 or 157J of the Reserve Bank of New Zealand Act 1989 or section 62 of the Insurance (Prudential Supervision) Act 2010

    endorsement means a statement that—

    • (a) may reasonably be regarded as encouraging or persuading persons to acquire the financial products on offer; and

    • (b) relates to the particular financial products on offer or the particular issuer, rather than to financial products generally or issuers generally

    expert

    • (a) means a person who holds himself or herself out to be of a profession or calling that gives authority to a statement made by him or her; but

    • (b) does not include a person acting in his or her capacity as a director or senior manager of an entity

    expert statement means a statement purporting to be made by an expert.

    Compare: Corporations Act 2001 ss 716, 735(1) (Aust)

45 PDS must be worded and presented in clear, concise, and effective manner
  • (1) An issuer that prepares, or is required to prepare, a PDS must ensure that the information in the PDS is worded and presented in a clear, concise, and effective manner.

    (2) This section is not a civil remedy liability provision for the purposes of subpart 3 of Part 7 (but see subpart 1 of Part 7, which allows the FMA to make a stop order if a PDS does not comply with this section).

    Compare: Corporations Act 2001 s 715A (Aust)

46 PDS must comply with prescribed requirements relating to form and presentation
  • An issuer that prepares, or is required to prepare, a PDS must ensure that the PDS complies with all requirements of the regulations relating to the form and presentation of the statement PDS.

Other provisions relating to lodging of PDS and other documents

47 Supply of prescribed information and documents
  • (1) An issuer that lodges a PDS or other document under this Part must supply the prescribed information and documents to the Registrar when the PDS or document is lodged.

    (2) A document referred to in subsection (1) may include, for example, a copy of the consent of a prescribed person to the lodgement.

    (3) An issuer who that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

48 Registrar must notify FMA of lodgement of PDS
  • (1) The Registrar must, immediately after a PDS is lodged, notify the FMA of the lodgement for the purpose of allowing the FMA an opportunity to consider the PDS, any governing document, and whether the offer, or intended offer, of financial products will be made in compliance with this Act.

    (2) The nature and extent of the consideration under subsection (1) (if any) is at the FMA's discretion.

    (3) Nothing in this section or any other provision of this Act limits the FMA's power to consider or reconsider at any time any of the matters referred to in subsection (1).

    Compare: 1978 No 103 s 43C(1), (3), (4)

49 Waiting period after lodgement before processing applications for financial products
  • (1) An offeror must not accept an application for, or issue or transfer, financial products offered under a regulated offer until—

    • (a) the period of 5 working days after lodgement of the PDS has ended; or

    • (b) if the period is extended under section 50, the period as extended has ended.

    (2) A person who An offeror that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    (4) This section does not prevent an offeror from receiving applications for financial products or money during the period that applies under this section.

    Compare: 1978 No 103 s 43D; Corporations Act 2001 s 727(3) (Aust)

50 FMA may extend period
  • (1) The FMA may extend the period under section 49(1)(a) by notice in writing to the offeror.

    (2) The period, as extended, must end no later than 10 working days after lodgement of the PDS with the Registrar.

    (3) The FMA must give a copy of the notice under subsection (1) to the Registrar.

51 Waiting period restriction does not prevent offeror from acting under another PDS
  • If section 49 applies to a PDS that relates to a particular offer of financial products but another lodged PDS that is not or is no longer subject to section 49 also relates to the offer of those products, that section does not prevent a person an offeror, in accordance with this Act, from accepting applications for, or issuing or transferring, financial products in reliance upon the other PDS.

52 FMA may remove restrictions if its consideration complete or consideration or further consideration unnecessary
  • (1) This section applies if the FMA is satisfied that—

    • (a) its consideration as referred to in section 48 is complete; or

    • (b) consideration as referred to in section 48 is, in the circumstances, unnecessary.

    (2) The FMA may give notice to the offeror that—

    • (a) the period that applies under section 49 ends at a particular time specified by the FMA (being an earlier time than that provided for under that section); or

    • (b) section 49 does not apply in respect of the PDS.

    (3) Nothing in this section limits subpart 2 of Part 8 (which allows the FMA to grant exemptions in respect of compliance with section 49).

    Compare: 1978 No 103 s 43E

53 Waiting period does not usually apply to continuous issue PDSs
  • (1) Section 49 applies to a continuous issue PDS only if it is of a class that is prescribed by the FMA in a notice issued under this section.

    (2) The FMA may issue a notice that prescribes the class or classes of continuous issue PDSs to which section 49 applies.

    (3) The FMA must, before issuing a notice in respect of a class of continuous issue PDSs, be satisfied that it is in the public interest for the FMA to have an opportunity to consider those statements PDSs before any person accepts applications for, or issues or transfers, financial products offered under those statements PDSs (for example, where in the circumstances, a particular risk relates to a particular class of offerors or financial products).

    (4) Subpart 5 of Part 8 (general provisions relating to certain FMA instruments) applies to a notice under this section.

    Compare: 1978 No 103 s 43EA

54 No guarantee or representation as to compliance
  • (1) Nothing done or omitted to be done under this Act or the regulations by the Registrar or the FMA guarantees or represents that—

    • (a) a PDS, register entry, or governing document—

      • (i) complies with this Act and the regulations:

      • (ii) does not contain any material misdescription or material error or any material matter that is not clearly legible:

      • (iii) is not misleading or deceptive false or misleading:

    • (b) the FMA has considered a PDS, register entry, or governing document with a view to determining whether it—

      • (i) complies with this Act and the regulations:

      • (ii) contains any material misdescription or material error or any material matter that is not clearly legible:

      • (iii) is misleading or deceptive false or misleading.

    (2) This section does not limit section 22 of the Financial Markets Authority Act 2011 (which provides protection from liability for the FMA and its members and employees).

    Compare: 1978 No 103 s 43M

55 When supplementary document or replacement PDS may be lodged
  • (1) An issuer that lodges a PDS with the Registrar may lodge a supplementary document or replacement PDS with the Registrar to—

    • (a) correct a false or misleading or deceptive statement in the PDS; or

    • (b) correct an omission from the PDS of information it is required to contain by this Act or the regulations; or

    • (c) correct the PDS because is not worded and presented in a clear, concise, and effective manner; or

    • (d) update, or add to, the information contained in the PDS.

    (2) However, a supplementary document must not be lodged with the Registrar in the prescribed circumstances.

    Compare: Corporations Act 2001 s 1014A (Aust)

56 Supplementary document
  • (1) If a supplementary document is lodged with the Registrar, the PDS together with the supplementary document is taken to be the PDS for the purposes of the application of this Act or the regulations to events that occur after the lodgement.

    (2) The issuer must ensure that, at the beginning of a supplementary document, there is—

    • (a) a statement that it is a supplementary document; and

    • (b) an identification of the PDS that it supplements; and

    • (c) an identification of all previous supplementary documents lodged with the Registrar in relation to the regulated offer; and

    • (d) a statement that it is to be read together with the PDS that it supplements and the previous supplementary documents.

    (3) The supplementary document must be dated with the date on which it is lodged with the Registrar.

    Compare: Corporations Act 2001 s 719(2), (4) (Aust)

57 Replacement PDS
  • (1) If a replacement PDS is lodged with the Registrar, the PDS is taken to be the replacement PDS for the purposes of the application of this Act to events that occur after the lodgement.

    (2) The issuer must ensure that, at the beginning of a replacement PDS, there is—

    • (a) a statement that it is a replacement PDS; and

    • (b) an identification of the PDS that it replaces.

    (3) The replacement PDS must be dated with the date on which it is lodged with the Registrar.

    Compare: Corporations Act 2001 s 719(3), (5) (Aust)

58 Registrar must notify FMA of lodgement of supplementary document or replacement PDS
  • (1) The Registrar must, immediately after a supplementary document or replacement PDS is lodged, notify the FMA of the lodgement for the purpose of allowing the FMA an opportunity to consider the supplementary document or replacement PDS.

    (2) The nature and extent of the consideration (if any) that the FMA gives to a supplementary document or replacement PDS are at the FMA's discretion.

    (3) Section 49 does not apply to the lodgement of a supplementary document or replacement PDS.

    Compare: 1978 No 103 s 43C(1), (3)

59 Publication of lodgement
  • (1) If a PDS, supplementary document, or replacement PDS is lodged by an issuer under this Part, the issuer must, as soon as practicable after it receives the certificate of lodgement from the Registrar, ensure that an Internet site maintained by or on behalf of the issuer—

    • (a) contains a reasonably prominent statement—

      • (i) to the effect that the PDS, supplementary document, or replacement PDS has been lodged; and

      • (ii) describing where and how a copy of the PDS, supplementary document, or replacement PDS can be obtained; or

    • (b) contains a reasonably prominent link to such a statement.

    (2) The statement or link referred to in subsection (1) may be removed from the Internet site maintained by or on behalf of the issuer on or after the date that the offeror ceases to offer financial products in reliance upon the PDS.

Amending register entry

60 When register entry may be amended
  • An issuer of financial products offered under a regulated offer may give notice to the Registrar to amend the register entry in order to—

    • (a) correct a false or misleading or deceptive statement in the register entry; or

    • (b) correct an omission from the register entry of information it is required to contain by this Act or the regulations; or

    • (c) update, or add to, the information contained in the register entry.

Conditions referred to in PDS

61 Minimum subscription number or amount condition must be fulfilled before issue or transfer
  • (1) This section applies if a PDS states that the financial products will not be issued or transferred unless—

    • (a) applications for a minimum number of the financial products are received; or

    • (b) a minimum amount is raised.

    (2) The offeror must not issue or transfer any of the financial products under the regulated offer until the condition referred to in subsection (1) is satisfied.

    (3) For the purpose of working out whether a condition referred to in this section or section 63(2)(a) has been satisfied, a person who has agreed to take acquire financial products as an underwriter is taken to have applied for those products.

    Compare: Corporations Act 2001 s 723(2) (Aust)

62 Issue or transfer void if quotation condition not fulfilled
  • (1) This section applies if—

    • (a) a PDS states or implies that the financial products are to be quoted on a financial market (whether in New Zealand or elsewhere); and

    • (b) the financial products are not admitted to quotation within—

      • (i) the period specified in, or determined in accordance with, the PDS; or

      • (ii) if there is no such period, 3 months after the date of the PDS.

    (2) An issue or a transfer of financial products under the regulated offer is void.

    (3) The offeror must deal under section 64 with the application for financial products that relates to the issue or transfer referred to in subsection (2).

    Compare: Corporations Act 2001 s 723(3) (Aust)

Dealing with applications where condition referred to in PDS is not met or disclosure is defective

63 Application of section 64
  • (1) An offeror must, if any of subsections (2) to (5) apply, deal under section 64 with any applications for the financial products offered under the regulated offer that have not resulted in an issue or a transfer of the products.

    (2) This subsection applies if—

    • (a) a PDS states that the financial products will not be issued or transferred unless—

      • (i) applications for a minimum number of the financial products are received; or

      • (ii) a minimum amount is raised; and

    • (b) the condition referred to in paragraph (a) is not satisfied within 4 months after the date of the PDS.

    (3) This subsection applies if—

    • (a) a PDS states or implies that the financial products are to be quoted on a financial market (whether in New Zealand or elsewhere); and

    • (b) the financial products are not admitted to quotation within—

      • (i) the period specified in, or determined in accordance with, the PDS; or

      • (ii) if there is no such period, 3 months after the date of the PDS.

    (4) This subsection applies if—

    • (a) the issuer or offeror (or both) offeror becomes aware—

      • (i) that a statement in the PDS is misleading or deceptive or is likely to mislead or deceive false or misleading or is likely to mislead; or

      • (ii) that there is an omission from the PDS of information required to be contained in the PDS by this Act or the regulations; or

      • (iii) of a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the PDS if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the PDS; and

    • (b) the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.

    (5) This subsection applies if—

    • (a) the issuer or offeror (or both) offeror becomes aware—

      • (i) that a statement in the register entry is misleading or deceptive or is likely to mislead or deceive false or misleading or is likely to mislead; or

      • (ii) that there is an omission from the register entry of information required to be contained in the register entry by this Act or the regulations; or

      • (iii) of a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the register entry if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the register entry; and

    • (b) the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.

    Compare: Corporations Act 2001 s 724(1) (Aust)

64 Choices open to offeror
  • (1) If this section applies, the offeror must do 1 of the following in respect of each applicant:

    • (a) ensure that the money received from the applicant in respect of the application for financial products is repaid; or

    • (b) in the case of section 62 or 63(2), (3), or (4), give the applicant—

      • (i) a supplementary document or replacement PDS that corrects the deficiency or changes the terms of offer; and

      • (ii) 1 month to confirm whether or not the applicant still wants to acquire the financial products; or

    • (c) in the case of section 63(5),—

      • (i) amend the register entry to correct the deficiency; and

      • (ii) give notice in the prescribed manner to the applicant that the register entry has been amended; and

      • (iii) give the applicant 1 month to confirm whether or not the applicant still wants to acquire the financial products.

    (2) If an applicant does not confirm that the applicant still wants to acquire the financial products within 1 month after being given the opportunity to do so under subsection (1)(b)(ii) or (c)(iii), the offeror must ensure that the money received from the applicant in respect of the application for financial products is repaid as soon as practicable.

    (3) If the money referred to in subsection (2) is not repaid within 1 month after the offeror is required to ensure that it is repaid under that subsection, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the expiry of the 1-month period referred to in subsection (2).

    (4) An offeror must, when acting under this section, comply with the prescribed requirements (if any).

    Compare: Corporations Act 2001 s 724(2) (Aust)

64A Director not liable if no misconduct or negligence
  • A director is not liable under section 64(3) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Prohibition of offers where defective disclosure in PDS or register entry

65 Misleading or deceptive False or misleading statements, omissions, and new matters requiring disclosure
  • (1) An offeror must not offer, or continue to offer, financial products under a regulated offer if—

    • (a) there is—

      • (i) a statement in the PDS, any application form that accompanies the PDS, or the register entry that is misleading or deceptive or is likely to mislead or deceive false or misleading or is likely to mislead; or

      • (ii) an omission from the PDS, or the register entry, of information that is required to be contained in the PDS, or the register entry, by this Act or the regulations; or

      • (iii) a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the PDS, or the register entry, if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the PDS or the register entry; and

    • (b) the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.

    (2) For the purposes of this section, a statement about a future matter (including the doing of, or refusing to do, an act) must be taken to be misleading if the person making the statement does not have reasonable grounds for making it.

    (3) Subsection (2) does not limit the meaning of a reference to a misleading statement.

    (4) See section 488 (offence to knowingly or recklessly contravene this section) and section 480 (which provides that a person may be treated as suffering loss or damage in the case of a contravention of this section).

    Compare: Corporations Act 2001 s 728 (Aust)

66 Persons who must inform offeror about disclosure deficiencies
  • (1) A person referred to in subsection (2) must, in relation to a regulated offer, notify the offeror in writing as soon as practicable if the person becomes aware during at any time before the end of the application period that—

    • (a) a material statement in the PDS, or the register entry, is misleading or deceptive or is likely to mislead or deceive false or misleading or is likely to mislead; or

    • (b) there is a material omission from the PDS, or the register entry, of information that is required to be contained in the PDS, or the register entry, by this Act or the regulations; or

    • (c) there is a material circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the PDS, or the register entry, if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the PDS or register entry.

    (2) The persons are—

    • (a) each director of the offeror:

    • (b) each person named in the PDS or register entry with the person's consent as a proposed director of the offeror:

    • (c) the issuer (if the offeror is not the issuer) and each director of the issuer:

    • (d) a person referred to in section 44 who has consented as referred to in that section.

    (3) A person referred to in subsection (2)(d) is required to notify the offeror of matters under this section only if the matters relate to the expert statement or endorsement to which the person's consent relates.

    (4) In subsection (1), application period means the period in which applications for financial products under the PDS may be made.

    Compare: Corporations Act 2001 s 730(1) (Aust)

Expiry

67 Expiry
  • (1) A PDS must, if required by the regulations, specify its expiry date.

    (2) The expiry date must not be later than the end of the prescribed period (if any).

    (3) The expiry date of a replacement PDS must be the same as that of the original PDS it replaces.

    Compare: Corporations Act 2001 s 711(6) (Aust)

68 How offeror must deal with applications on expiry
  • (1) If a PDS expires, the offeror must deal with applications for the financial products offered under the regulated offer in accordance with subsections (2) and (3).

    (2) If an application is received on or before the expiry date, the offeror may issue or transfer financial products to the applicant.

    (3) If an application is received after the expiry date, the offeror must do 1 of the following:

    • (a) ensure that the money received from the applicant in respect of the application is repaid; or

    • (b) give the applicant—

      • (i) a new PDS (unless the applicant is not a person to whom disclosure under this Part is required or, under section 38, the offeror does not have to comply with section 37 in respect of the offer to the applicant); and

      • (ii) 1 month to confirm whether or not the applicant still wants to acquire the financial products.

    (4) If an applicant does not confirm that the applicant still wants to acquire the financial products within 1 month after being given the opportunity to do so under subsection (3), the offeror must ensure that the money received from the applicant in respect of the application for financial products is repaid as soon as practicable.

    (5) If the money referred to in subsection (4) is not repaid within 1 month after the offeror is required to ensure that it is repaid under that subsection, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the expiry of the 1-month period referred to in subsection (4).

    (6) An offeror must, when acting under this section, comply with the prescribed requirements (if any).

    Compare: Corporations Act 2001 s 725 (Aust)

68A Director not liable if no misconduct or negligence
  • A director is not liable under section 68(5) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Money for financial products must be held in trust

69 Money for financial products must be held in trust
  • (1) This section applies to money paid to an issuer or offeror of regulated products if the money is paid by a person (A)—

    • (a) to acquire the financial products; or

    • (b) on account of those financial products; or

    • (c) as a further contribution or a further deposit as referred to in section 10(2)(c).

    (2) The issuer or offeror must hold the money in trust for A until—

    • (a) the financial products are issued or transferred; or

    • (b) the money is otherwise applied for the purpose for which it was paid (for example, to increase the extent of A's interest in a scheme or A's deposit or to pay a fee, collateral, or margin); or

    • (c) the money is repaid to A; or

    • (d) the money is applied in accordance with A's express instructions given after the application for financial products was made and the money was paid.

    (3) The issuer or offeror must—

    • (a) deal with the money, while it is held in trust, in the prescribed manner; and

    • (b) if the money needs to be repaid, ensure the money is repaid as soon as practicable and, in any event, no later than 1 month after the obligation to repay arises.

    Compare: Corporations Act 2001 ss 722, 1017E (Aust)

Other prohibitions and restrictionsOffering financial products in entity that does not exist

70 Offering financial products in entity that does not exist
  • (1) A person must not offer financial products of an entity that has not been formed or does not exist if the offer would be a regulated offer if the entity did exist.

    (2) Subsection (1) applies even if it is proposed to form or incorporate the entity.

    (3) A person who contravenes this section commits an offence if the person knows that the offer would be a regulated offer if the entity did exist.

    (4) A person who commits an offence under this section is liable on conviction on indictment,—

    • (a) in the case of an individual, to imprisonment for a term not exceeding 3 years, a fine not exceeding $200,000, or both; and

    • (b) in any other case, to a fine not exceeding $600,000.

    Compare: Corporations Act 2001 s 726 (Aust)

71 Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade
  • (1) A person must not offer financial products for issue or sale in the course of, or because of, an unsolicited meeting with a person who is acting otherwise than in trade.

    (2) In this section,—

    meeting includes—

    • (a) a telephone call; or

    • (b) a meeting held by means of audio, audio and visual, or electronic communication where the participants can simultaneously communicate with each other throughout the meeting

    trade means any trade, business, industry, profession, occupation, activity of commerce, or undertaking.

    (3) Subsection (1) does not prohibit an offer of financial products if—

    • (a) the offer does not require disclosure under this Part because of an exclusion under Schedule 1 (other than an exclusion under clause 12 or 16 of that schedule); or

    • (b) the offer is an offer of quoted financial products made through a person who, under the Financial Advisers Act 2008, is permitted to give financial advice in respect of those products (including as a result of an exemption by or under that Act); or

    • (c) the offer is through an authorised financial adviser or a QFE adviser to a client, or former client, of the financial adviser or the business on whose behalf the financial adviser acts; or

    • (d) the offer is an offer of the financial products of a co-operative where becoming a holder of those products is—

      • (i) a necessary incident of doing business with the co-operative; or

      • (ii) the means by which a person can access the benefits of membership of the co-operative; or

    • (e) the offer is made in the prescribed circumstances.

    (4) In this section, co-operative means—

    • (a) a co-operative company; or

    • (b) an industrial and provident society; or

    • (c) an entity of a prescribed kind.

    (5) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (6) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: Corporations Act 2001 s 736 (Aust)

72 Right to withdraw and have money returned
  • (1) If financial products are issued or transferred to a person (A) as a result of an offer that contravenes section 71, A has the right to withdraw from holding the products and to have the relevant money repaid.

    (2) The right referred to in subsection (1) is exercisable by A giving to the offeror written notice of the exercise of the right within 1 month after the date of the issue or transfer.

    (3) If a notice is given under subsection (2),—

    • (a) the offeror must ensure that the relevant money is repaid as soon as practicable; and

    • (b) if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the relevant money together with interest at a prescribed rate from the date on which the notice was given.

    (4) This section does not limit any other liability that a person may have for a contravention of section 71.

    Compare: Corporations Act 2001 s 738 (Aust)

Subpart 3Advertising and publicity

73 Advertising or publicity for regulated offers
  • (1) If an offer, or intended offer, of financial products is or will be a regulated offer, a person must not, except in accordance with any of sections 75 to 78,—

    • (a) advertise the offer or intended offer; or

    • (b) publish a statement that—

      • (i) contains or refers to the offer or intended offer; or

      • (ii) is reasonably likely to induce persons to apply for the financial products.

    (1) If an offer, or intended offer, of financial products is or will be a regulated offer, a person must not, except in accordance with any of sections 75 to 77, distribute an advertisement of the offer or intended offer.

    (2) Subsection (1) applies only if the advertisement or publication referred to in subsection (1)(a) or (b) is authorised or instigated by, or on behalf of, the issuer, the offeror, or an associated person of the issuer or offeror.

    (3) Subsection (1)(b) does not apply to statements published after the end of the period during which applications for financial products under the offer may be made.

    Compare: Corporations Act 2001 s 734(2), (2A) (Aust)

74 Inducements to apply
  • In deciding whether a statement is reasonably likely to induce persons to apply for financial products, the following must be taken into account:

    • (a) whether the statement is advertising of an issuer's or offeror's goods or services and is directed at maintaining its existing customers, or attracting new customers, for those goods or services:

    • (b) whether the statement is likely to encourage the making of investment decisions on the basis of the statement rather than on the basis of information contained in a PDS.

    Compare: Corporations Act 2001 s 734(3) (Aust)

75 Distribution of PDS or registered documents
  • A person may distribute either of the following without contravening section 73:

    • (a) a PDS that has been lodged with the Registrar; or:

    • (b) a copy of any part of the register entry or of any document that is contained on the register.

    Compare: Corporations Act 2001 s 734(4) (Aust)

76 Advertising and publicity before PDS lodged
  • (1) Before the PDS is lodged with the Registrar, an advertisement or a publication may be distributed does not contravene section 73 if it includes, in relation to the offer or intended offer referred to in section 73, a statement—

    • (a) that no money is currently being sought; and

    • (b) that applications for the financial products are currently not being accepted; and

    • (b) that financial products cannot currently be applied for or acquired under the offer or intended offer; and

    • (c) that, if the offer is made, the offer will be made in accordance with this Act; and

    • (d) if the offeror wishes, that specifies that the offeror is seeking preliminary indications of interest and, in that case, also specifies—

      • (i) how indications of interest may be made; and

      • (ii) that no indication of interest will involve an obligation or a commitment of any kind to acquire the financial products.

    (2) A statement required under subsection (1)(a) to (c) and (d)(ii) must be reasonably prominent.

    Compare: 1978 No 103 s 5(2CA); Corporations Act 2001 s 734(5) (Aust)

77 Advertising and publicity after PDS lodged
  • (1) After the PDS is lodged with the Registrar, an advertisement or a publication may be distributed does not contravene section 73 if it—

    • (a) includes a statement that identifies,—

      • (i) if the financial products are offered by way of issue, the issuer of the products; and

      • (ii) if the financial products are offered pursuant to sale offers to which section 28 applies, the issuer of the products and the offeror of the products; and

    • (b) includes a statement that indicates that the PDS for the offer is available and where and how it can be obtained; and

    • (c) does not contain any information, sound, image, or other matter that is materially inconsistent with the PDS, or register entry, for the offer to which it relates.

    (2) A statement required under this section must be reasonably prominent.

    Compare: Corporations Act 2001 s 734(6)

78 General exceptions
  • An advertisement or a publication may be distributed if it—

    • (a) relates to an offer of the financial products of a listed issuer and consists of a notice or report by the issuer, or by 1 of its directors or employees, about the issuer's affairs to the relevant licensed market operator; or

    • (b) consists solely of a notice or report of a meeting, or a statement made at a meeting, of the issuer's product holders or any class of those product holders; or

    • (c) consists solely of a document or information that is required by law to be provided or made available (for example, an annual report of a company), whether directly or as a condition of carrying out any activity or as a condition of an exemption from any enactment.

    Compare: Corporations Act 2001 s 734(7) (Aust)

78 Documents to which subpart does not apply
  • Nothing in this subpart applies to the distribution of any of the following:

    • (a) a document that relates to the financial products of a listed issuer and consists solely of—

      • (i) a statement or report relating to the affairs of the issuer made to the relevant licensed market operator, by or on behalf of the issuer, for the purposes of compliance with any market rules; or

      • (ii) a report of a statement or report referred to in subparagraph (i):

    • (b) a document that consists solely of—

      • (i) a statement or report made to or for the purposes of a meeting of the issuer's product holders or any class of those product holders; or

      • (ii) a report of the proceedings of such a meeting:

    • (c) a document or information that consists solely of a document or information that is required by law to be provided or made available (for example, an annual report of a company), whether directly or as a condition of carrying out any activity or as a condition of an exemption from any enactment.

79 Defence for publishers
  • In any proceeding against a person (A) for a contravention of section 73 in relation to an advertisement or a statement, it is a defence if A proves that

    • (a) A's business is publishing or arranging for the publication of advertisements or statements; and

    • (b) A received the advertisement or statement, or the information contained in the advertisement or statement, as the case may be, in the ordinary course of that business and did not know and had no reason to suspect that the publication of the advertisement or statement or the publication of the advertisement or statement containing that information, as the case may be, would constitute a contravention of section 73.

    Compare: 1986 No 121 s 44(4)

Subpart 4Ongoing disclosure and updating of registers

Duty to update register of offers of financial products and register of managed investment schemes

80 Duty to notify relevant matters and provide certain documents and information changes to Registrar
  • (1) An issuer of regulated products must—

    • (a) notify the Registrar of a prescribed change within 5 working days of becoming aware of the change; and

    • (b) provide to the Registrar a copy of any documents, information, and other matters made, or to be made, publicly available under section 82 before the date that is 5 working days after that material is made available under that section.

    (1) An issuer of regulated products must notify the Registrar of a prescribed change within 5 working days of becoming aware of the change.

    (2) In this section, prescribed change, in respect of regulated products,—

    • (a) means a prescribed change that relates to the issuer, any offeror of those products, the regulated products, or any registered scheme to which those products relate; but

    • (b) does not include a change in respect of which the FMA is required to notify the Registrar (for example, an order made under subpart 1 of Part 7).

    (3) A person who An issuer that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1978 No 103 s 43Q

Disclosure to particular persons

81 Information to be made available to investors or other prescribed persons
  • (1) Every issuer of regulated products must, at the request of a prescribed person or at the prescribed times or on the occurrence of the prescribed events, make available to a prescribed person the documents, information, and other matters that are required to be made available under this section by the regulations.

    (2) The documents, information, and other matters must be made available in the prescribed manner.

    (3) A person who An issuer that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    (5) To avoid doubt, documents, information, and other matters may be required to be made available to a person under this section even though Schedule 1 specifies that an offer to the person would not require disclosure under this Part (for example, a wholesale investor who acquires financial products under a regulated offer is not required to be given a PDS for the offer but ongoing disclosure to the investor may be required under the regulations).

Public disclosure

82 Information to be made publicly available
  • Every issuer of regulated products must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, make publicly available the documents, information, and other matters that are required to be made publicly available by the regulations.

    Compare: 1978 No 103 s 54C

82A Issuer must provide document, information, and matters to Registrar
  • (1) An issuer of regulated products must lodge with the Registrar a copy of any documents, information, and other matters made, or to be made, publicly available under section 82 before the date that is 5 working days after that material is made available under that section.

    (2) Subsection (1) does not apply if the regulations made for the purposes of section 82 require the documents, information, or other matters to be made publicly available by lodging that material with the Registrar.

    (3) An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Defective ongoing disclosure

83 Defective ongoing disclosure
  • (1) An issuer must not provide information to the Registrar, or make available documents, information, and other matters, under this subpart to the Registrar, or make available to any person or the public, any documents, information, or other matters under any of sections 80 to 82A (the ongoing disclosure) if—

    • (a) there is—

      • (i) a statement in the ongoing disclosure that is misleading or deceptive or is likely to mislead or deceive false or misleading or is likely to mislead; or

      • (ii) an omission from the ongoing disclosure of information that is required to be contained in the ongoing disclosure by this Act or the regulations; and

    • (b) the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.

    (2) For the purposes of this section, a statement about a future matter (including the doing of, or refusing to do, an act) must be taken to be misleading if the person making the statement does not have reasonable grounds for making it.

    (3) Subsection (2) does not limit the meaning of a reference to a misleading statement.

    (4) This section does not limit sections 80 to 82A.

    (5) See section 489 (offence to knowingly or recklessly contravene this section) and section 480 (which provides that a person may be treated as suffering loss or damage in the case of a contravention of this section).

Confirmation

83A Issuer or offeror must provide confirmation
  • (1) An issuer or offeror of a regulated product must, in the prescribed circumstances, provide to a product holder either the product or confirmation information.

    (2) The financial product or confirmation information must be provided in the prescribed manner.

    (3) In this section, confirmation information means the information relating to the financial product or product holder that is prescribed (which may include, for example, information describing the nature, terms, and conditions of the financial product and the name of the product holder).

    (4) An issuer or offeror that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

    (5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1978 No 103 s 54(1), (4)

Subpart 5Civil liability for certain contraventions of this Part

84 Part 3 offer provisions
  • (1) All of the provisions specified in subsections (3) and (4) are Part 3 offer provisions.

    (2) A contravention of any of the provisions listed in subsection (3) may give rise to a civil remedy civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.

    (3) The provisions are the following:

    • (a) section 35 (PDS must be prepared and lodged):

    • (b) section 37 (PDS must be given to person to whom disclosure is required):

    • (c) section 42 (disclosure of material information and content of PDS and register entry):

    • (d) section 44 (consent of person to whom statement attributed):

    • (e) section 46 (PDS must comply with prescribed requirements relating to form and presentation):

    • (f) section 49 (waiting period restriction):

    • (g) section 61 (minimum subscription number or amount condition must be fulfilled before issue or transfer):

    • (h) section 64 (choices open to offeror if condition in PDS not met or defective disclosure):

    • (i) section 65 (false or misleading or deceptive statements, omissions, and new matters requiring disclosure):

    • (j) section 69(2) (money for financial products must be held in trust):

    • (k) section 73 (advertising or publicity for regulated offers):

    • (l) section 80 (duty to notify relevant matters and provide certain documents and information to Registrar):

    • (m) sections 82 and 83 (ongoing disclosure):

    • (n) clauses 13 and 17 of Schedule 1 (restrictions on advertising for small offers and small schemes):

    • (o) clause 26 of Schedule 1 (offeror must comply with disclosure and other requirements):

    • (p) clause 27 of Schedule 1 (false or misleading or deceptive statements and omissions).

    (4) A contravention of any of the following may give rise to a civil remedy civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case:

    • (aa) section 41A (offeror obligations if notice of withdrawal is given):

    • (ab) section 46 (PDS must comply with prescribed requirements relating to form and presentation):

    • (a) section 59 (publication of lodgement):

    • (b) section 66 (certain persons must inform offeror about disclosure deficiencies):

    • (c) section 68 (dealing with applications on expiry):

    • (d) section 69(3) (money for financial products must be dealt with in prescribed manner and repaid as soon as practicable if required):

    • (e) section 70 (offering financial products in entity that does not exist).

    • (f) section 71 (prohibition of offers in course of unsolicited meetings):

    • (g) section 72 (right to withdraw and have money returned).

Part 4
Governance of financial products

86 Overview
  • (1) This Part provides for the governance of regulated products as follows:

    • (a) subpart 2 sets out the need for a trust deed and a supervisor, and other issuer and supervisor obligations, for regulated offers of debt securities:

    • (b) subpart 3 sets out the need for a managed investment scheme to be registered for regulated offers of managed investment products, and the need for a governing document and a supervisor, and other issuer, supervisor, and custodian obligations, for registered schemes:

    • (c) subpart 4

      • (i) requires persons associated with those debt securities or registered schemes to make protected disclosures; and

      • (ii) provides powers of intervention to enable the supervision of those debt securities or registered schemes by the supervisor or the FMA (in addition to the powers in Part 7):

    • (d) subpart 5 contains ongoing duties of issuers of all regulated products to maintain registers and keep copies of documents.

    (2) Subsection (1) is only a guide to the general scheme and effect of this Part.

Subpart 1Application and overview

85 Part applies to all regulated products
  • This Part applies to—

    • (a) financial products offered under a regulated offer; and

    • (b) managed investment products in a registered scheme (whether or not there has been a regulated offer).

86 Regulated offers of debt securities need governing document and supervisor
  • (1) In this Part,—

    • (a) subpart 2 contains requirements for a governing document, supervisor, and other related issuer and supervisor obligations for a regulated offer of debt securities; and

    • (b) subpart 4 provides for interventions in regulated offers of debt securities (in addition to the powers in Part 7).

    (2) This section is only a guide to the general scheme and effect of subparts 2 and 4.

87 Regulated offers of managed investment products need to be in registered scheme
  • (1) In this Part,—

    • (a) subpart 3 contains the requirement that the managed investment scheme be registered for a regulated offer of managed investment products, and regulates registered schemes; and

    • (b) subpart 4 provides for interventions in registered schemes (in addition to the powers in Part 7).

    (2) This section is only a guide to the general scheme and effect of subparts 3 and 4.

88 All regulated products have other accountability requirements under this Part
  • (1) In this Part, the following subparts relate to all regulated products:

    • (a) subpart 5 contains requirements for the issuer to keep registers of the regulated products; and

    • (b) subpart 6 contains accounting and other record-keeping and auditing requirements for the issuer.

    (2) This section is only a guide to the general scheme and effect of subparts 5 and 6.

Subpart 2Governance of offers of debt securities

89 Need for governing document and supervisor for regulated offer of debt security
  • (1) A person must not make a regulated offer of a debt security unless—

    • (a) there is a trust deed for the debt security that complies with sections 90 to 92 and that is lodged with the Registrar at or before the time that the PDS is lodged with a certificate from the issuer and supervisor to the effect that the trust deed complies with those sections on the basis set out in the certificate; and

    • (b) there is a licensed supervisor—

      • (i) who is designated or appointed as the trustee under the trust deed for the debt security (or under the Financial Markets Supervisors Act 2011); and

      • (ii) whose licence covers supervision of the debt security.

    (2) A reference in this subpart to a trust deed is a reference to the trust deed required by subsection (1).

    (2) A reference in this subpart to—

    • (a) a trust deed is a reference to the trust deed required by subsection (1); and

    • (b) a debt security is a reference to a debt security offered under a regulated offer.

    (3) The issuer of a the debt security offered under a regulated offer must ensure that there continues to be a trust deed and licensed supervisor as required by subsection (1) until the debt security is cancelled, redeemed, or forfeited, or all of the obligations owing under the debt security have been discharged.

    Compare: 1978 No 103 s 33(2)

Governing document requirements

90 Contents of trust deed for debt securities
  • (1) A trust deed for a debt security must provide that the following are held in trust by the supervisor for the benefit of the holders of the debt security:

    • (a) the right to enforce the issuer's duty to repay, or to pay interest, under the terms of the debt security; and

    • (b) any charge or security for repayment; and

    • (c) the right to enforce any other duties that the issuer, any guarantor, and any other person have under—

      • (i) the terms of the debt security; or

      • (ii) the provisions of the trust deed or this Act in relation to the debt security.

    (2) Subsection (1) does not prevent a holder of a debt security from enforcing the issuer's duty to repay, or to pay interest, or any other duties that the issuer, any guarantor, or any other person owes to the holder.

    (3) The trust deed is treated as containing any provision that is implied into it by or under this Act.

    (4) The trust deed must also provide adequately for all of the matters required to be contained in it by section 91 and the regulations.

    (5) The trust deed must provide for the contents required by this section in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8.

    Compare: Corporations Act 2001 s 283AB (Aust)

91 Limits on permitted exemptions and indemnities
  • (1) If a supervisor of a debt security has any rights to be exempted from liability for, or indemnified in relation to, the performance of the supervisor's licensee obligations (as defined in section 4 of the Financial Markets Supervisors Act 2011), those rights—

    • (a) must be set out in the trust deed for the debt security; and

    • (b) are available only in relation to the proper performance of the duties under sections 98(1) and 99.

    (2) No other agreement has any effect to the extent that it purports to confer a right of a kind set out in subsection (1).

    Compare: Corporations Act 2001 s 283DB (Aust); 1978 No 103 s 62

92 Trust deed must be legally enforceable
  • A trust deed for a debt security must be contained in 1 or more documents that are legally enforceable as between the supervisor, the issuer of the debt security, and the product holders.

93 Effect of trust deed
  • A trust deed for a debt security has no effect to the extent that it contravenes, or is inconsistent with, this Act, the regulations, or any term implied into it by this Act or the regulations.

94 Changes to trust deed
  • (1) An amendment to or a replacement of a trust deed for a debt security has no effect unless made either—

    • (a) with the consent of the supervisor of the debt security under this section; or

    • (b) under section 95; or

    • (c) under section 22(7) or 37(6) of the Financial Markets Supervisors Act 2011.

    (2) The supervisor must not consent to an amendment to, or a replacement of, the trust deed under this section unless—

    • (a) either—

      • (i) the amendment or replacement is approved by, or is contingent on approval by, the holders of the debt security; or

      • (ii) the supervisor is satisfied that the amendment or replacement does not have a material adverse effect on the holders of the debt security; and

    • (b) the supervisor certifies to that effect and certifies, or obtains a certificate from a solicitor lawyer, that the trust deed, as amended or replaced, will comply with sections 90 to 92 on the basis set out in the certificate.

    (3) The approval of the holders of the debt security for the purposes of subsection (2)(a) must be the approval of a special resolution of—

    • (a) the holders of the debt security; or

    • (b) the each class of holders of the debt security that is or may be adversely affected by the amendment or replacement.

    (4) Subsection (2) is subject to section 98(1)(e) 98(1A)(b).

    (5) This section does not limit section 157ZD of the Reserve Bank of New Zealand Act 1989.

95 Power to make FMA-approved changes to trust deeds
  • (1) An issuer may amend or replace a trust deed for a debt security with the FMA's consent if the FMA is satisfied that it is necessary to enable the trust deed to comply with this subpart or any enactment or rule of law.

    (2) Subsection (1) applies despite anything to the contrary in the trust deed or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the trust deed.

    (3) An amendment or a replacement made under this section must be treated for all purposes as if it were made in accordance with the trust deed.

96 Lodging of changes to trust deed
  • (1) Within 5 working days of the amendment to or replacement of a trust deed for a debt security, the issuer must ensure that notice of the amendment or replacement, and a copy of the certificate for the amendment or replacement (if any), is lodged with the Registrar.

    (2) A person who An issuer that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Role of supervisor

97 Functions of supervisor
  • (1) The supervisor of a debt security is responsible for the following functions:

    • (a) acting on behalf of the holders of the debt security in relation to—

      • (i) the issuer of the debt security; and

      • (ii) any matter connected with the trust deed for the debt security or the terms of the regulated offer; and

      • (iii) any contravention or alleged contravention of the issuer obligations; and

    • (b) supervising the issuer's performance—

      • (i) of its issuer obligations; and

      • (ii) in order to ascertain whether the assets of the issuer and of each guarantor that are or may be available, whether by way of security or otherwise, are sufficient or likely to be sufficient to discharge the amounts of the debt securities as they become due; and

    • (c) performing or exercising any other functions, duties, and powers conferred or imposed on the supervisor by or under this Act, the Financial Markets Supervisors Act 2011, or the governing document.

    (2) The supervisor must not delegate any of its functions under subsection (1) (except as expressly permitted by this Act).

98 General duties applying in exercise of supervisor's functions
  • (1) The supervisor of a debt security must—

    • (a) act honestly in acting as a supervisor; and

    • (b) in exercising its powers and performing its duties as a supervisor, act in the best interests of the holders of the debt security; and

    • (c) exercise reasonable diligence in carrying out its functions as a supervisor; and.

    • (d) do all the things it has the power to do to cause any contravention referred to in section 97(1)(a)(iii) to be remedied (unless it is satisfied that the contravention will not materially prejudice the security of the debt security or the interests of holders of the debt security); and

    • (e) act in accordance with any direction given by a special resolution of the holders of the debt security that is not inconsistent with any enactment or the trust deed in relation to—

      • (i) seeking a remedy to a contravention referred to in section 97(1)(a)(iii); and

      • (ii) any other matter connected with the supervisor's functions.

    (1A) The supervisor of a debt security must also—

    • (a) do all the things it has the power to do to cause any contravention referred to in section 97(1)(a)(iii) to be remedied (unless it is satisfied that the contravention will not have a material adverse effect on holders of the debt security); and

    • (b) act in accordance with any direction given by a special resolution of the holders of the debt security that is not inconsistent with any enactment, rule of law, or the trust deed in relation to—

      • (i) seeking a remedy to a contravention referred to in section 97(1)(a)(iii); and

      • (ii) any other matter connected with the supervisor's functions.

    (2) The supervisor is not liable for anything done, or omitted to be done, in good faith in giving effect to a direction to it by holders of the debt security.

    (3) The duty in subsection (1)(e) (1A)(b) is subject to any order of the court made under section 194.

    Compare: SR 2009/230 Schedule 15 cl 1

99 Duty of supervisor to comply with professional standard of care
  • The supervisor of a debt security must, in exercising its powers and performing its duties as a supervisor, exercise the care, diligence, and skill that a prudent person engaged in the business of acting as a licensed supervisor would exercise in the same circumstances.

100 Duty of issuer to provide regular reports to supervisor
  • The issuer of a debt security must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, prepare and provide to the supervisor reports that contain the documents, information, or other matters that are required to be provided by the regulations.

    Compare: SR 2009/230 Schedule 15 cl 4

101 Duty of issuer to provide requested information and reports to supervisor
  • (1) If requested by the supervisor of a debt security (or a person authorised by the supervisor to exercise its powers under this section), the issuer must—

    • (a) make available to the supervisor (or other authorised person) all documents and records relating to the issuer; and

    • (b) provide the supervisor (or other authorised person) with any other reports or information required by the supervisor (or other authorised person).

    (2) Reports or information required under subsection (1) may—

    • (a) be about any matter relevant to the performance of the supervisor's functions; and

    • (b) include forward-looking reports.

    (3) The reports or information must be provided within the time and in the manner (which must be reasonable in the circumstances) specified by the supervisor.

    Compare: SR 2009/230 Schedule 15 cls 2(2), 5(3)

102 Issuer must report contravention or possible contravention of issuer obligations
  • If an issuer of a debt security has reasonable grounds to believe that it has contravened, may have contravened, or is likely to contravene any of its issuer obligations in a material respect, the issuer must, as soon as practicable,—

    • (a) report the contravention or possible contravention to the supervisor; and

    • (b) advise the supervisor of the steps (if any) that the issuer has taken or intends to take in light of the contravention or possible contravention and the date by which the steps were taken or are to be taken.

103 Restriction on section 102
  • An issuer is not required to provide, under section 102, information that would, if so provided, be likely to incriminate the issuer under New Zealand law for an offence punishable by a fine or imprisonment.

104 Duty of issuer to report serious financial problems
  • (1) This section applies if an issuer of a debt security becomes aware of information on the basis of which it could reasonably form the opinion that the issuer is, or it is likely that the issuer will become, insolvent.

    (2) The issuer must, as soon as practicable,—

    • (a) disclose to the supervisor all information relevant to that matter that is in the possession or under the control of the issuer and that was obtained in the course of, or in connection with, the performance of its functions as issuer; and

    • (b) advise the supervisor of the steps (if any) that the issuer intends to take in respect of that matter and the date by which the steps are to be taken.

    Compare: 2011 No 10 s 47

105 Power of supervisor to engage expert
  • (1) The supervisor of a debt security is entitled, in the performance of the supervisor's functions, to engage an expert (for example, an auditor, investigating accountant, valuer, or actuary) if the supervisor considers, on reasonable grounds, that it requires the assistance of the expert to—

    • (a) determine the financial position of the issuer; or

    • (b) review the business, operation, or management systems, or the governance, of the issuer.

    (2) If the supervisor engages an expert under this section,—

    • (a) the issuer must provide reasonable assistance to the expert to allow the expert to provide the assistance under subsection (1); and

    • (b) the fees and expenses of the expert, which must be reasonable in the circumstances, must be paid by the issuer.

    Compare: SR 2009/230 Schedule 15 cl 11

Meetings of product holders

106 Meetings of product holders
  • (1) A meeting of a class of holders of a debt securities security must be called by the issuer on the written request of—

    • (a) the supervisor; or

    • (b) holders of the debt securities that value together no less than 5% of the nominal value of the debt securities on issue in that class; or

    • (c) in the case of an issuer that is a credit union, no less than 5% of the number of members of the credit union who hold debt securities on issue in that class; or

    • (d) a person who is authorised by the trust deed or by the regulations to call the meeting.

    (2) The proceedings at the meeting are governed by the regulations (if any) and the trust deed (if there are no regulations or to the extent that the trust deed is not inconsistent with the regulations).

    Compare: 2009/230 Schedule 15 cl 3(1)

107 Power of supervisor to attend meetings and appoint chair
  • (1) The supervisor of a debt security is entitled to receive all notices of, and other communications relating to, any meeting of the holders of the debt securities that any holder is entitled to receive.

    (2) The supervisor of a debt security (or any person appointed by the supervisor to exercise its powers under this section) is entitled to—

    • (a) attend a meeting of the holders of the debt securities; and

    • (b) be heard at a meeting of the holders of the debt securities on any part of the business of the meeting that concerns the supervisor's functions or the holders for whom the supervisor is acting; and

    • (c) appoint the chairperson of the meeting.

    Compare: SR 2009/230 Schedule 15 cl 3(3)

107 Supervisor's attendance at meetings of product holders and power to appoint chair
  • The issuer of a debt security must ensure that the supervisor—

    • (a) is permitted to attend any meeting of holders of the debt security; and

    • (b) receives the notices and communications that any holder of the debt security is entitled to receive in relation to a meeting of those holders; and

    • (c) may be heard at any meeting of holders of the debt security on any part of the business of the meeting that concerns the supervisor's functions or the holders for whom the supervisor is acting; and

    • (d) may appoint the chairperson of any meeting of holders of the debt security.

    Compare: SR 2009/230 Schedule 15 cl 3(3)

Change of supervisor

108 Supervisor ceasing to hold appointmentChange of supervisor
  • (1) The supervisor of a debt security ceases to hold that appointment (subject to subsection (2)) if the supervisor—

    • (a) is removed by the FMA or the issuer under Part 2 of the Financial Markets Supervisors Act 2011; or

    • (b) is removed by a special resolution of the holders of the debt security; or

    • (c) is removed or resigns in accordance with the trust deed.

    (2) No issuer of a debt security may remove a supervisor without the FMA's consent (even if permitted to do so by the trust deed).

    (2) However, a supervisor may not—

    • (a) be removed or resign under subsection (1)(b) or (c) unless—

      • (i) all functions and duties of the position have been performed; or

      • (ii) another licensed supervisor has been appointed, and accepted the appointment, in its place; or

      • (iii) the court consents:

    • (b) (despite anything in the trust deed) be removed by an issuer of the debt security under subsection (1)(c) without the FMA's consent.

    Compare: 1978 No 103 s 48

109 Lodging of notice of change of supervisor
  • (1) Within 5 working days of a change to the supervisor of a debt security under section 108, the issuer must ensure that notice of the change is lodged with the Registrar.

    (2) A person who An issuer that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Subpart 3Registration of managed investment schemesGovernance of managed investment products

110 Overview
  • (1) This subpart—

    • (aa) sets out when managed investment schemes need to be registered; and

    • (a) requires registered schemes, irrespective of legal form, to meet key common governance and reporting requirements; and

    • (b) provides for the manager and independent supervisor of a registered scheme to owe statutory duties of care to investors; and

    • (c) provides for the custodianship of scheme property of a registered scheme to be independent from the manager.

    (2) This section is only a guide to the general scheme and effect of this subpart.

Need to register

111 Need to register managed investment scheme for regulated offer of managed investment product
  • (1) A person must not make a regulated offer of a managed investment product, or accept further contributions if there has been a regulated offer of a managed investment product, unless the managed investment scheme is registered.

    (2) However, a managed investment scheme may be registered even if there is no regulated offer of a managed investment product in the scheme but, in this case, the managed investment products in the scheme are regulated products and the following sections apply:

    • (a) section 69(money for financial products must be held in trust):

    • (b) sections 80, 81, 82, and 83 (ongoing disclosure requirements):

    • (c) subpart 5 (registers that must be kept by issuers of all regulated products):

    • (d) subpart 6 (accounting records and audit of financial statements).

    • (a) the managed investment products in the scheme are regulated products under section 29; and

    • (b) this Act applies accordingly (for example, in addition to this subpart, see section 69 (money for financial products must be held in trust) and subpart 4 of Part 3 (ongoing disclosure)).

    (3) A scheme that is approved as a Schedule 3 scheme under Schedule 3 may not be registered under this subpart.

    (4) For the purposes of any enactment (unless the enactment provides otherwise), a reference to a retirement scheme means any of the following schemes:

    • (a) a registered scheme that is a KiwiSaver scheme or a superannuation scheme:

    • (b) a Schedule 3 scheme:

    • (c) a fund or scheme constituted under the Government Superannuation Fund Act 1956.

    Compare: 1960 No 99 s 8; 1978 No 103 s 33(3)

Registration

112 Application for registration
  • (1) A person may apply to the Registrar for registration of a managed investment scheme.

    (2) The application must—

    • (a) be made in the prescribed manner; and

    • (b) contain the prescribed information; and

    • (c) be accompanied by the written consent to the registration of the licensed manager and licensed supervisor of the scheme (or the proposed licensed manager and licensed supervisor) manager and supervisor of the scheme; and

    • (d) contain a copy of the governing document for the scheme; and

    • (e) contain a certificate from the licensed manager and licensed supervisor (or proposed licensed manager and licensed supervisor) manager and supervisor of the scheme to the effect that the scheme complies with the registration requirements for all schemes under section 113 on the basis set out in the certificate; and

    • (f) if the application is for registration as a particular type of scheme under sections 114 to 119,—

      • (i) state that fact; and

      • (ii) comply with any additional prescribed requirements for applications for that type of registration; and

      • (iii) contain a certificate from the FMA that it is satisfied that the scheme complies with any additional registration requirements for that type of scheme under those sections.

    (3) The Registrar must register a managed investment scheme if satisfied that the application meets the requirements of this section (subject to clause 7 of Schedule 2).

113 Initial and ongoing registration requirements for all managed investment schemes
  • (1) Every registered scheme must meet the following registration requirements:

    • (a) it must not have a name that, in the opinion of the Registrar, is misleading or offensive or the use of which would contravene an enactment; and

    • (b) its governing document must comply with sections 122 to 124; and

    • (c) it must have a licensed manager designated or appointed under the governing document (or this Act) whose licence covers management of the scheme; and

    • (d) it must have a licensed supervisor designated or appointed under the governing document (or the Financial Markets Supervisors Act 2011) whose licence covers supervision of the scheme; and

    • (e) the manager and the supervisor of the scheme must not be the same or associated persons; and

    • (f) the scheme property must be held by the supervisor or another person who meets the custodianship requirements in section 143 (to the extent that it is not held directly by the scheme participants).

    (2) However, subsection (1)(c) to (e) do not apply to a restricted scheme (and any reference in this Act to a supervisor in relation to a registered scheme does not apply in relation to a restricted scheme (unless the context otherwise requires)).

    Compare: 1960 No 99 s 3(1), (4); 2006 No 40 ss 116F, 116G

114 Additional initial and ongoing registration requirements for KiwiSaver schemes
  • (1) Every KiwiSaver scheme must meet the following registration requirements in addition to those in section 113:

    • (a) it must be a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law; and

    • (b) its purpose must be to provide retirement benefits directly to individuals; and

    • (ba) it must, accordingly, restrict redemptions, withdrawals, and the provision of benefits in respect of a member's accumulation (including in the way the trust deed is applied) to those permitted under the KiwiSaver scheme rules under the KiwiSaver Act 2006; and

    • (c) it must admit as members (both in its conditions of entry of scheme participants and in the way those conditions are applied on entry) only persons who meet the New Zealand criteria set out in subsection (2) or (3); and

    • (d) it must restrict redemptions or withdrawals (under the trust deed and in the way the trust deed is applied) to those permitted under the KiwiSaver scheme rules under the KiwiSaver Act 2006; and

    • (e) it must be a scheme under which contributions are allocated to scheme participants on an individual basis; and

    • (f) the benefits provided by the scheme must be fully funded as they accrue; and

    • (g) its manager must have at least 1 director who is a New Zealand resident a New Zealand resident for tax purposes; and

    • (h) the FMA must be satisfied that the fees charged in accordance with any information provided in the application will comply with clause 2 of the KiwiSaver scheme rules under the KiwiSaver Act 2006.

    (2) The New Zealand criteria are that the person, at the time of becoming a participant,—

    • (a) is, or normally is, living in New Zealand, or is an employee of the State services (within the meaning of the State Sector Act 1988) who is—

      • (i) serving outside New Zealand; and

      • (ii) employed on New Zealand terms and conditions; and

      • (iii) serving in a jurisdiction where offers of superannuation scheme membership are lawful; and

    • (b) is a New Zealand citizen or is entitled, in terms of the Immigration Act 2009, to be in New Zealand indefinitely.

    (3) A person also meets the New Zealand criteria if the person—

    • (a) is, immediately before becoming a participant of the KiwiSaver scheme (scheme A), a member of another KiwiSaver scheme (scheme B); and

    • (b) is transferring the member's entitlements from scheme B to scheme A.

    (4) If the KiwiSaver scheme is a restricted scheme,—

    • (a) subsection (1)(g) does not apply; but

    • (b) at least 1 of the trustees or 1 of the directors of the corporate trustee of the scheme must be a New Zealand resident for tax purposes.

    Compare: 2006 No 40 s 116

115 Additional initial and ongoing registration requirements for superannuation schemes
  • (1) Every superannuation scheme must meet the following registration requirements in addition to those in section 113:

    • (a) it must be a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law; and

    • (b) its purpose must be to provide retirement benefits directly or indirectly to individuals; and

    • (ba) it must, accordingly, restrict redemptions, withdrawals, and the provision of benefits (including in the way that the trust deed is applied) to those for retirement purposes; and

    • (c) it must admit as members (both in its conditions of entry of scheme participants and in the way those conditions are applied on entry) only either or both of—

      • (i) persons who meet the New Zealand criteria set out in subsection (2); or:

      • (ii) persons who are the trustees or managers of a retirement scheme; and

    • (d) it must restrict redemptions or withdrawals (under the trust deed and in the way that the trust deed is applied) to redemptions or withdrawals for retirement purposes; and

    • (e) it must not be registered as a KiwiSaver scheme; and

    • (f) it must be either—

      • (i) a defined benefit scheme; or

      • (ii) a scheme under which contributions are allocated to scheme participants on an individual basis and the benefits provided by the scheme must be fully funded as they accrue.

    (2) The New Zealand criteria for the purpose of subsection (1)(c)(i) are that the person, at the time of becoming a participant, must meet at least 1 of the following criteria:

    • New Zealand citizen or permanent resident
    • (a) the person is a New Zealand citizen or is entitled, in terms of the Immigration Act 2009, to be in New Zealand indefinitely; or

    • Transferring member
    • (b) the person—

      • (i) is, immediately before becoming a participant of the superannuation scheme (scheme A), a member of another superannuation scheme (scheme B); and

      • (ii) is transferring the member's entitlements from scheme B to scheme A; or

    • Person living in New Zealand employed by New Zealand resident employer
    • (c) the person is, or normally is, living in New Zealand and is employed on terms and conditions that are governed by New Zealand law by an employer that is a New Zealand resident (as determined in accordance with sections YD 1 and YD 2 of the Income Tax Act 2007) for tax purposes.

    (3) Subsection (1)(c) does not apply to a locked-in superannuation scheme.

    Compare: 1989 No 10 ss 2A, 3(1)

116 Extent to which superannuation scheme may provide non-retirement benefits
  • (1) Nothing in section 115(1)(b) or (d) (ba) prevents any of the following if it is merely ancillary to the purpose of providing retirement benefits to individuals:

    • (a) the provision by a scheme of insurance benefits to members (for example, in the event of the death or disability of a member):

    • (b) redemptions or withdrawals in limited circumstances that are defined in the trust deed of the scheme (for example, financial hardship, ceasing employment, or changing employment):

    • (c) redemptions or withdrawals in accordance with limited early partial withdrawal criteria that are defined in the trust deed of the scheme.

    (2) For the purposes of subsection (1), something is ancillary to the purpose of providing retirement benefits to individuals if it is—

    • (a) ancillary, secondary, subordinate, or incidental to the purpose of providing retirement benefits to individuals; and

    • (b) not an independent purpose of the scheme.

    (2) If the superannuation scheme is registered under clause 20 of Schedule 5, and the scheme or a section of the scheme is closed to new members,—

    • (a) section 115(1)(b) and (ba) do not apply to the closed scheme or closed section; but

    • (b) the principal purpose of the scheme or section must be to provide retirement benefits directly or indirectly to individuals; and

    • (c) the scheme or section must continue to be closed to new members.

    (3) Despite section 115(1)(b) and (ba), a prescribed workplace scheme may—

    • (a) have, as an additional purpose, the provision of benefits on ceasing employment with an employer, or in an industry, specified in the trust deed:

    • (b) permit redemptions, withdrawals, and benefits for that purpose as well as retirement purposes.

    (4) For the purposes of subsection (1), something is ancillary to the purpose of providing retirement benefits to individuals if it is ancillary, secondary, subordinate, or incidental to that purpose.

    Compare: 2005 No 39 s 5(4)

117 Additional ongoing registration requirements for restricted schemes
  • (1) Every restricted scheme registered under section 688(1)(a) clause 20 of Schedule 5 must meet the following registration requirements in addition to those in section 113:

    • (a) it must be a KiwiSaver scheme or a superannuation scheme; and

    • (b) it must either—

      • (i) admit as members (both in its conditions of entry of scheme participants and in the way in which those conditions are applied on entry) only 1 or more of the classes of persons referred to in subsection (2); or

      • (ii) be closed to new members; and

    • (c) the conditions of entry of scheme participants, or the way in which those conditions have been applied on entry, must not have been changed without the FMA's consent since the date of the scheme's registration under section 688(1)(a) clause 20 of Schedule 5 in a way that expands, or is likely to expand, the classes of people who may become scheme participants; and

    • (d) its trustees must either—

      • (i) include at least 1 licensed independent trustee whose licence covers the scheme and who is independent under subsection (3); or

      • (ii) consist only of a sole corporate trustee that has at least 1 director who is a licensed independent trustee whose licence covers the scheme and who is independent under subsection (3); and

    • (e) the trustees of the scheme must be designated or appointed to manage the scheme under the governing document (or this Act).

    (2) The classes of persons for the purpose of subsection (1)(b)(i) are—

    • (a) persons who are employed by a particular employer:

    • (b) persons who are employed by a related body corporate of a particular employer:

    • (c) persons who belong to a particular profession, calling, trade, occupation, or industry:

    • (d) persons who belong to a particular association, society, or other entity with a definable community of interest:

    • (e) persons who are immediate family members of, or wholly or partially financially dependent on, a person in 1 or more of the classes of persons described in paragraphs (a) to (d).

    (3) In this section,—

    immediate family member, in relation to a person, means the person's spouse, civil union partner, de facto partner, parent, child, step-parent, or stepchild

    independent means a person that—

    • (a) is not a related body corporate of any other trustee of the restricted scheme; and

    • (b) is not an employer that provides access to the scheme for its employees, an administration manager, or an investment manager of the restricted scheme (or a related body corporate of any of them); and

    • (c) is not a director of, shareholder in, or an employee of any person referred to in paragraph (a) or (b); and

    • (d) is not a current scheme participant; and

    • (e) is not a representative in any capacity of an organisation (such as a trade union) that represents the interests of 1 or more scheme participants; and

    • (f) is not a representative in any capacity of an organisation that represents the interests of 1 or more employer contributors to the scheme; and

    • (g) is not a corporate trustee if none of its directors are independent under this definition.

    Compare: 2006 No 40 s 116A

118 Additional initial and ongoing registration requirements for locked-in superannuation schemes
  • Every locked-in superannuation scheme must meet the prescribed registration requirements in addition to those in sections 113 and 115.

    Compare: 2006 No 40 s 116

119 Additional prescribed registration requirements for other particular prescribed types of schemes
  • A scheme of a particular type of registered scheme specified in the regulations must meet the prescribed registration requirements for that type of scheme (if any) in addition to those in section 113.

120 Manager must ensure that ongoing registration requirements are complied with
  • The manager of a registered scheme must ensure that, until all of the managed investment products in the scheme are cancelled, redeemed, or forfeited, or all of the obligations owing under those products have been discharged, the scheme—

    • (a) continues to comply with the registration requirements for all schemes that apply to the scheme under section 113; and

    • (b) if it is registered as a particular type of scheme under sections 114 to 119, continues to comply with the additional registration requirements for that type of scheme under those sections.

121 Changes to registration as particular type of registered scheme
  • (1) The FMA may direct the removal of the registration of a registered scheme as a particular type of scheme—

    • (a) if the FMA is satisfied that the scheme does not meet the registration requirements for that type of scheme under sections 114 to 119; or

    • (b) on the written request of the manager of the scheme, if the supervisor certifies, or the trustees of a restricted scheme certify, that—

      • (i) the removal has been approved by a special resolution of the scheme participants (subject to any restrictions in the governing document); or

      • (ii) there is no material adverse effect on scheme participants from the removal.

    (2) The FMA must not direct removal under subsection (1)(a) unless—

    • (a) the FMA gives the manager of the scheme no less than 10 working days' written notice of the following matters before it exercises the power:

      • (i) that the FMA may direct removal; and

      • (ii) the reasons why it may exercise that power; and

    • (b) the FMA gives the manager or the manager's representative an opportunity to make written submissions on the matter within that notice period.

    (3) The FMA may direct that a registered scheme be registered as a particular type of scheme on the written request of the manager of the scheme if the FMA is satisfied that the scheme meets the registration requirements for that type of scheme under sections 114 to 119.

    (4) A direction under subsection (1)(a) in relation to the removal of a registration as a restricted scheme must not take effect before the expiry of 6 months after the direction is made (unless the manager consents to an earlier date).

    (5) The manager of a registered scheme must, as soon as practicable after being notified of a direction under this section, notify the scheme participants of the direction.

    (5) If the FMA makes a direction under this section,—

    • (a) the FMA must notify the manager and the supervisor of the registered scheme of the direction; and

    • (b) as soon as practicable after being notified of the direction, the manager must notify the scheme participants of the direction.

    Compare: 2006 No 40 s 168A

Governing document requirements

122 Contents of governing document for registered scheme
  • (1) The governing document for a registered scheme must provide adequately for all of the following matters under the scheme:

    • (a) whether or not managed investment products are transferable or redeemable and the rules applying to acquiring or disposing of the managed investment products and, if they are redeemable,—

      • (i) the manner in which, and the conditions on which, interests are to be redeemed; and

      • (ii) the method of calculating the minimum price at which interests are to be redeemed; and

    • (b) the rules applying to becoming a scheme participant or withdrawing from participation in the scheme (if there are any rules); and

    • (c) the contributions payable, or the manner of calculating the contributions payable, and the rules applying to changing the contributions payable or the manner of their calculation; and

    • (d) the methodology, or the rules applying to determining the methodology, and other rules applying to valuations of assets of the scheme and pricing of interests in the scheme; and

    • (e) the rules applying to the determination and payment of financial benefits to scheme participants; and

    • (f) the fees and expenses that can be paid out of scheme property to any manager, investment manager, administration manager, supervisor, or custodian (for example, by setting out, or the basis on which those fees and expenses are to be determined), and any rights of any of those persons to be indemnified out of scheme property (and any other matters required by section 123); and

    • (g) the appointment and removal of the supervisor (unless none is required under this Part); and

    • (h) the appointment and removal of the manager; and

    • (i) the winding up of the scheme; and

    • (j) any other matters (other than the matters contained in the statement of investment policy and objectives) that materially affect—

      • (i) the management and operation of the scheme by the manager:

      • (ii) the rights and duties of scheme participants in the scheme:

      • (iii) the powers, rights, and duties of the manager and the supervisor (if any) of the scheme.

    (2) The governing document is treated as containing any provision that is implied into it by or under this Act or the KiwiSaver Act 2006.

    (3) The governing document must provide for the contents of the document that are required by this section in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8.

    Compare: 1989 No 10 s 7; 2006 No 40 s 119

123 Limits on permitted exemptions and indemnities
  • (1) If a manager or supervisor of a registered scheme has any rights to be exempted from liability for, or to be indemnified out of scheme property for, for liabilities or expenses incurred in relation to, the performance of the manager's issuer obligations or the supervisor's licensee obligations (as defined in section 4 of the Financial Markets Supervisors Act 2011), those rights—

    • (a) must be set out in the scheme's governing document; and

    • (b) must be available only in relation to the proper performance of the duties under sections 130(1) and 131 or sections 140(1) and 141.

    (2) If an investment manager of a registered scheme has any rights to be exempted from liability for, or to be indemnified out of scheme property for liabilities or expenses incurred in relation to, the performance of the investment manager's contracted functions, those rights—

    • (a) must be set out either—

      • (i) in the scheme's governing document; or

      • (ii) in the contract between the investment manager and the manager, provided that the scheme's governing document contains a power that permits such an indemnity; and

    • (b) must be available only in relation to the proper performance of the duties duty under sections 130 and section 131.

    (3) No other agreement has any effect to the extent that it purports to confer a right of a kind referred to in subsection (1) or (2).

    Compare: Corporations Act 2001 s 601GA(2) (Aust); 1960 No 99 s 24(2); 1978 No 103 s 62; 2006 No 40 s 116J(1)

124 Governing document must be legally enforceable
  • A governing document for a registered scheme must be contained in 1 or more documents that are legally enforceable as between the supervisor, the manager, and the scheme participants.

    Compare: Corporations Act 2001 s 601GB (Aust)

125 Effect of governing document
  • A governing document for a registered scheme has no effect to the extent that it contravenes, or is inconsistent with, this Act, the regulations, or any term implied into it by this Act or the regulations.

126 Changes to governing document
  • (1) An amendment to or a replacement of a governing document has no effect unless made either

    • (a) under this section with the consent of the supervisor or, if there is no supervisor, the FMA; or

    • (b) under section 127 or 171(3); or

    • (c) under section 22(7) or 37(6) of the Financial Markets Supervisors Act 2011.

    (2) The supervisor or the FMA must not consent to an amendment to, or a replacement of, the governing document under this section unless—

    • (a) either—

      • (i) the amendment or replacement is approved by, or contingent on approval by, the scheme participants; or

      • (ii) the supervisor or the FMA is satisfied that the amendment or replacement does not have a material adverse effect on the scheme participants; and

    • (b) in the case of the supervisor, the supervisor certifies to that effect and certifies, or obtains a certificate from a solicitor lawyer, that the governing document, as amended or replaced, will comply with sections 122 to 124 on the basis set out in the certificate.

    (3) The approval of scheme participants for the purposes of subsection (2)(a) must consist of,—

    • (a) in the case of an amendment to or a replacement of a governing document of a defined benefit scheme or a superannuation scheme that is registered under clause 20 of Schedule 5 that reduces, postpones, or otherwise adversely affects the benefits, whether vested, contingent, or discretionary, that may in due course flow from, or are attributable to, membership of the scheme up to the date the amendment or replacement is made, the written consent of all scheme participants who would be adversely affected by the amendment or replacement; or

    • (b) in any other case, a special resolution of the scheme participants or the each class of scheme participants that is or may be adversely affected by the amendment or replacement.

    (4) Subsection (2) is subject to section 140(1)(e) 140(1A)(b).

    Compare: 1989 No 10 ss 9, 12; 2006 No 40 ss 119A, 129, 129A

127 Power to make FMA and court-approved changes to governing documents
  • (1) A manager of a registered scheme may amend or replace the governing document—

    • (a) with the FMA's consent if the FMA is satisfied that the amendment or replacement is necessary to enable the governing document to comply with sections 122 to 124 or any enactment or rule of law; or

    • (b) with the court's consent, in the case of a defined benefit scheme or a superannuation scheme that is registered under clause 20 of Schedule 5, if—

      • (i) the amendment or replacement would otherwise require the consent of all the scheme participants who would be adversely affected by it; and

      • (ii) the court considers that it is in the interests of the scheme participants.

    (2) Subsection (1) applies despite anything to the contrary in the governing document or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the governing document.

    (3) An amendment or a replacement made under this section must be treated for all purposes as if it were made in accordance with the governing document.

128 Lodging of changes to governing document
  • (1) Within 5 working days of the amendment to or replacement of a governing document, the manager of a registered scheme must ensure that notice of the amendment or replacement, and a copy of the certificate for the amendment or replacement (if any), is lodged with the Registrar.

    (2) A person who manager that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Role of manager

129 Management and administration functions of manager
  • The manager of a registered scheme is responsible for performing the following functions:

    • (a) offering the managed investment products; and

    • (b) issuing the managed investment products; and

    • (c) managing the scheme property and investments; and

    • (d) administering the scheme.

    Compare: 1960 No 99 s 3(2)(a) and (b); 2006 No 40 s 116B(1)

130 General duties applying in exercise of manager's functions
  • (1) A manager of a registered scheme must—

    • (a) act honestly in acting as a manager; and

    • (b) carry out the functions of a manager in accordance with the governing document, the statement of investment policy and objectives, and all other issuer obligations; and

    • (c) in exercising any powers or performing any duties as a manager,—

      • (i) act in the best interests of the scheme participants; and

      • (ii) treat the scheme participants equitably; and

    • (d) not make use of information acquired through being the manager in order to—

      • (i) gain an improper advantage for itself or any other person; or

      • (ii) cause detriment to the scheme participants.

    (1A) The manager must also carry out the functions of a manager in accordance with the governing document, the statement of investment policy and objectives, and all other issuer obligations.

    (2) If the registered scheme is established under a trust deed, the manager has the same duties and liability in the performance of its functions as manager as it would if it performed those functions as a trustee (except to the extent that those duties are altered by or are inconsistent with this Act).

    Compare: Corporations Act 2001 s 601FC (Aust); 1960 No 99 ss 3(2)(c), 12(1)(c), 24(1); SR 2009/230 Schedule 17 cl 3(1)

131 Duty of manager and investment manager to comply with relevant professional standard of care
  • (1) A professional manager of a registered scheme must, in exercising any powers, or performing any duties, exercise the care, diligence, and skill that a prudent person engaged in that profession would exercise in the same circumstances.

    (2) In this section, a professional manager is—

    • (a) a manager of a registered scheme (other than a restricted scheme):

    • (b) an investment manager of a registered scheme:

    • (c) a licensed independent trustee of a restricted scheme:

    • (d) any other trustee of a restricted scheme whose profession is or business is or includes acting as a trustee or investing money on behalf of others.

    (3) A trustee of a restricted scheme who is not a professional manager must, in exercising any powers or performing any duties, exercise the care, diligence, and skill that a prudent person of business would exercise in the same circumstances.

    Compare: 1960 No 99 ss 3(2)(c), 24(1); 2006 No 40 s 117; SR 2009/230 Schedule 17 cl 3(3)

132 Duties of directors and senior managers of manager
  • A director or senior manager of a manager of a registered scheme must—

    • (a) not make use of information acquired through being the director or senior manager of the manager in order to—

      • (i) gain an improper advantage for himself or herself or any other person; or

      • (ii) cause detriment to the scheme participants; and

    • (b) not make improper use of the position as a director or senior manager of the manager to gain, directly or indirectly, an advantage for himself or herself or any other person or to cause detriment to the scheme participants.

    Compare: Corporations Act 2001 s 601FE (Aust); 1960 No 99 s 26

133 Contracting out of management functions
  • (1) A manager may, unless prohibited by the governing document, contract out to 1 or more persons (whether or not the person or persons hold a market services licence under this Act covering management of the scheme) some or all of its functions as a manager.

    (2) However,—

    • (a) the manager must take all reasonable steps to—

      • (i) ensure that those functions are performed in the same manner, and are subject to the same duties and restrictions, as if the manager were performing them directly; and

      • (ii) monitor the performance of those functions; and

    • (b) the contracting out does not affect the liability of the manager for the performance of those functions.

134 Duty of manager to provide regular reports to supervisor or FMA
  • The manager of a registered scheme must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, prepare and provide to the supervisor (or, in the case of a restricted scheme, the FMA) reports that contain the documents, information, or other matters that are required to be provided by the regulations.

135 Duty of manager to provide requested information and reports to supervisor
  • (1) If requested by the supervisor of a registered scheme (or a person authorised by the supervisor to exercise its powers under this section), the issuer manager must—

    • (a) make available to the supervisor (or other authorised person) all documents and records relating to the issuer manager and the scheme (including those held by an investment manager or administration manager); and

    • (b) provide the supervisor (or other authorised person) with any other reports or information required by the supervisor (or other authorised person).

    (2) Reports or information required under subsection (1) may—

    • (a) be about any matter relevant to the performance of the supervisor's functions; and

    • (b) include forward-looking reports.

    (3) The reports or information must be provided within the time and in the manner (which must be reasonable in the circumstances) specified by the supervisor.

    Compare: 1960 No 99 s 12(1)(b); SR 2009/230 Schedule 17 cl 2

136 Duty of manager to report contravention or possible contravention of issuer obligations
  • If a manager of a registered scheme has reasonable grounds to believe that it has contravened, may have contravened, or is likely to contravene any of its issuer obligations in a material respect, the manager must, as soon as practicable,—

    • (a) report the contravention or possible contravention to the supervisor (or, in the case of a restricted scheme, the FMA); and

    • (b) advise the supervisor (or, in the case of a restricted scheme, the FMA) of the steps (if any) that the manager has taken or intends to take in light of the contravention or possible contravention and the date by which the steps were taken or are to be taken.

137 Restriction on section 136
  • A manager is not required to provide, under section 136, information that would, if so provided, be likely to incriminate the manager under New Zealand law for an offence punishable by a fine or imprisonment.

138 Duty of manager to report serious financial problems
  • (1) This section applies if a manager of a registered scheme becomes aware of information on the basis of which it could reasonably form the opinion that—

    • (a) the manager is, or it is likely that the manager will become, insolvent; or

    • (b) the registered scheme is, or it is likely that the registered scheme will become, insolvent.

    (2) The manager must, as soon as practicable,—

    • (a) disclose to the supervisor (or, if there is no supervisor, to the FMA) all information relevant to that matter that is in the possession or under the control of the manager (including information held by an investment manager or administration manager) and that was obtained in the course of, or in connection with, the performance of its functions as manager; and

    • (b) advise the supervisor (or the FMA, as the case may be) of the steps (if any) that the manager intends to take in respect of that matter and the date by which the steps are to be taken.

    Compare: 2011 No 10 s 47

Role of supervisor

139 Functions of supervisor
  • (1) The supervisor of a registered scheme is responsible for the following functions:

    • (a) acting on behalf of the scheme participants in relation to—

      • (i) the manager; and

      • (ii) any matter connected to the governing document or the terms of the any regulated offer; and

      • (iii) any contravention or alleged contravention of the issuer obligations; and

      • (iv) any contravention or alleged contravention of this Act by any other person in connection with the registered scheme, the governing document, or the terms of the regulated offer; and

    • (b) supervising—

      • (i) the performance by the manager of its functions and its issuer obligations; and

      • (ii) the financial position of the manager and the scheme in respect of the managed investment product to ascertain that it is adequate; and

    • (c) holding the scheme property, or ensuring that the scheme property is held, in accordance with sections 143 to 145; and

    • (d) performing or exercising any other functions, powers, and duties conferred or imposed on the supervisor by or under this Act, the Financial Markets Supervisors Act 2011, and the governing document.

    (2) The supervisor must not delegate its functions under subsection (1) (except as expressly permitted by section 143 in relation to its function under subsection (1)(c) and otherwise by this Act).

    Compare: 2006 No 40 s 116D(3), (4)

140 General duties applying in exercise of supervisor's functions
  • (1) The supervisor of a registered scheme must—

    • (a) act honestly in acting as a supervisor; and

    • (b) in exercising its powers and performing its duties as a supervisor, act in the best interests of the scheme participants; and

    • (c) exercise reasonable diligence in carrying out its functions as a supervisor; and.

    • (d) do all the things it has the power to do to cause any contravention referred to in section 139(1)(a) to be remedied (unless it is satisfied that the contravention will not materially prejudice the security of the managed investment product or the interests of scheme participants); and

    • (e) act in accordance with any direction given by a special resolution of the scheme participants that is not inconsistent with any enactment, rule of law, or the governing document in relation to—

      • (i) seeking a remedy to a contravention referred to in section 139(1)(a); and

      • (ii) any other matter connected with its functions.

    (1A) The supervisor of a registered scheme must also—

    • (a) do all the things it has the power to do to cause any contravention referred to in section 139(1)(a) to be remedied (unless it is satisfied that the contravention will not have a material adverse effect on scheme participants); and

    • (b) act in accordance with any direction given by a special resolution of the scheme participants that is not inconsistent with any enactment, rule of law, or the governing document in relation to—

      • (i) seeking a remedy to a contravention referred to in section 139(1)(a); and

      • (ii) any other matter connected with the supervisor's functions.

    (2) The supervisor is not liable for anything done, or omitted to be done, in good faith in giving effect to a direction to it by scheme participants.

    (3) If the registered scheme is established under a trust deed,—

    • (a) the supervisor is the trustee of the trust; and

    • (b) the supervisor has the same duties and liability in the performance of its functions as supervisor as it would if it performed those functions as a trustee (except to the extent that those duties are altered by or are inconsistent with this Act).

    (4) The duty in subsection (1)(e) (1A)(b) is subject to any order of the court made under section 194.

    Compare: 1960 No 99 s 18(2)–(4); SR 2009/230 Schedule 17 cl 1

141 Duty of supervisor to comply with professional standard of care
  • The supervisor of a registered scheme must, in exercising its powers and performing its duties as a supervisor, exercise the care, diligence, and skill that a prudent person engaged in the business of acting as a licensed supervisor would exercise in the same circumstances.

142 Power of supervisor to engage expert
  • (1) The supervisor of a registered scheme is entitled, in the performance of the supervisor's functions, to engage an expert (for example, an auditor, investigating accountant, valuer, or actuary) if the supervisor considers, on reasonable grounds, that it requires the assistance of the expert to—

    • (a) determine the financial position of the manager or the scheme; or

    • (b) review the business, operation, or management systems, or the governance, of the manager or the scheme.

    (2) If the supervisor engages an expert under this section,—

    • (a) the manager must provide reasonable assistance to the expert to allow the expert to provide the assistance under subsection (1); and

    • (b) the manager must pay the fees and expenses of the expert, which must be reasonable in the circumstances; and

    • (c) the manager is entitled to be indemnified for those fees and expenses out of scheme property, subject to any limits referred to in section 123.

    Compare: SR 2009/230 Schedule 15 cl 11

Custodianship of scheme property

143 Requirement to have supervisor or other independent person as custodian
  • (1) The supervisor of a registered scheme (A) must hold the scheme property or, if authorised by the governing document, contract the holding of the scheme property to another person (B) who meets the external custodianship requirements.

    (2) If there is no supervisor for the scheme (for example, in the case of a restricted scheme), the scheme property must be held in 1 or more of the following ways:

    • (a) in the case of a restricted scheme that has a sole corporate trustee with no function other than to be the manager of the scheme, by that corporate trustee; or

    • (a) in the case of a restricted scheme, by a body corporate that is either a corporate trustee of the restricted scheme or has, as its directors, only persons who are trustees of the restricted scheme; or

    • (b) by being invested in other registered schemes; or

    • (c) by a person (B) who meets the external custodianship requirements and to whom the manager of the scheme (A), if authorised by the governing document, has contracted the holding of the scheme property.

    (3) B may, if authorised in writing by A, in turn contract the holding of the scheme property to another person who meets the external custodianship requirements.

    (4) To meet the external custodianship requirements, a person must—

    • (a) be a body corporate that A or (if B contracted the custodian) B believes, on reasonable grounds, to be appropriate to hold, and safeguard, the scheme property; and

    • (b) not be the same person as, or be associated with, the manager (other than in respect by virtue of the custodianship requirements).

    (5) If a person contracts the holding of the scheme property to another person (the nominee) under this section, the person contracting out that function—

    • (a) must take all reasonable steps to—

      • (i) ensure that the function is performed by the nominee in the same manner and subject to the same duties and restrictions as if that person were performing it directly; and

      • (ii) monitor the performance of that function; and

    • (b) is jointly and severally liable with the nominee (and any other person who has contracted out the function) for the performance of that function in accordance with paragraph (a).

    (6) This section does not apply to the extent that scheme property is held directly by the scheme participants.

    Compare: 1960 No 99 ss 3(3), 6–6C; 2006 No 40 ss 116G, 116H, 116I

144 Custodian holds scheme property on trust
  • (1) The custodian for a registered scheme (whether the supervisor or another nominee under section 143) holds the scheme property on trust for the scheme.

    (2) The custodian for a registered scheme must ensure that the scheme property is held separate from property held by any of the following persons on their own account:

    • (a) the custodian:

    • (b) any related party of the scheme (within the meaning of section 158).

    (3) Scheme property—

    • (a) is not available for the payment of the debts of the custodian or any other creditor of the custodian; and

    • (b) is not liable to be attached or taken in execution under the order or process of any court at the instance of the custodian or any other creditor of the custodian.

    (4) Nothing in this section takes away or affects any lawful lien or claim that a custodian who holds scheme property has against the scheme property.

145 Custodian must keep records of scheme property
  • (1) The custodian for a registered scheme must keep, or ensure that there are kept, records that—

    • (a) identify the scheme property; and

    • (b) show the date when the scheme property was received; and

    • (c) if the scheme property has been disposed of, show where the scheme property was disposed of and to whom.

    (2) The custodian for a registered scheme must also keep all other prescribed records.

    (3) The custodian for a registered scheme must keep the records required by this section, or ensure that they are kept, in a manner that enables those records to be conveniently inspected by the manager and the supervisor and conveniently and properly audited.

146 Duty of supervisor to refuse to act on wrongful directions
  • (1) The supervisor of a registered scheme must refuse, and must direct any other custodian to refuse, to act on a direction of the manager that relates to the acquisition or disposal of scheme property if the supervisor considers that the proposed acquisition or disposal would be—

    • (a) in breach of the scheme's governing document, any rule of law, or any enactment; or

    • (b) manifestly not in the interests of the scheme participants.

    (1A) A custodian of a registered scheme must comply with any direction given to it by a supervisor under this section.

    (2) If the supervisor refuses, or directs any other custodian to refuse, to act on a direction of the manager, the supervisor must notify the manager and the FMA in writing of that fact and the supervisor's reasons for the refusal or direction.

    (3) A supervisor of a registered scheme, and any other custodian of the scheme, is not liable to the scheme participants or the manager for refusing, or directing any other custodian to refuse, to act on a direction of the manager in accordance with this section.

    Compare: 1960 No 99 s 12(1)(c)

Meetings of scheme participants

147 Meetings of scheme participants
  • (1) A meeting of a class of scheme participants must be called by the manager of the registered scheme on the written request of—

    • (a) the supervisor; or

    • (b) scheme participants holding managed investment products that value together no less than 5% of the value of the managed investment products on issue in that class; or

    • (c) a person who is authorised by the governing document or by the regulations to call the meeting.

    (2) The proceedings at the meeting are governed by the regulations (if any) and the governing document (if there are no regulations or to the extent that the governing document is not inconsistent with any regulations).

    Compare: 1960 No 99 ss 12(1)(d), 18(1)

148 Power of supervisor to attend meetings and appoint chair
  • (1) The supervisor of a registered scheme is entitled to receive all notices of, and other communications relating to, any meeting of the scheme participants that any scheme participant is entitled to receive.

    (2) The supervisor of a registered scheme (or any person authorised by the supervisor to exercise its powers under this section) is entitled to—

    • (a) attend a meeting of the scheme participants; and

    • (b) be heard at a meeting of the scheme participants on any part of the business of the meeting that concerns the supervisor's duties or the scheme participants for whom the supervisor is acting; and

    • (c) appoint the chairperson of the meeting.

    Compare: 1960 No 99 s 18(1); SR 2009/137 Schedule 16 cl 2(1), 2(2)

148 Supervisor's attendance at meetings of scheme participants and power to appoint chair
  • The manager of a registered scheme must ensure that the supervisor—

    • (a) is permitted to attend any meeting of scheme participants; and

    • (b) receives the notices and communications that any scheme participant is entitled to receive in relation to a meeting of those participants; and

    • (c) may be heard at any meeting of scheme participants on any part of the business of the meeting that concerns the supervisor's functions or the scheme participants for whom the supervisor is acting; and

    • (d) may appoint the chairperson of any meeting of scheme participants.

    Compare: 1960 No 99 s 18(1); SR 2009/230 Schedule 17 cl 2(1), 2(2)

149 Manager and associated persons cannot vote if interested in resolution
  • (1) The manager of a registered scheme and its associated persons are not entitled to vote their interest on a resolution at a meeting of scheme participants if they have an interest in the resolution or matter other than as a scheme participant.

    (2) However,—

    • (a) if the managed investment products in the registered scheme are quoted, subsection (1) does not prevent the manager and its associated persons are entitled to vote from voting their interest on resolutions to remove the manager and appoint a new manager:

    • (b) the manager or its associated persons may vote as proxies if the proxy appointment specifies the way they are to vote on the resolution and they vote that way:

    • (c) subsection (1) does not apply in the prescribed circumstances.

    Compare: Corporations Act 2001 ss 253A(2), 253E (Aust)

Management of scheme

150 Requirement for statement of investment policy and objectives
  • (1) A manager of a registered scheme must ensure that there is a statement of investment policy and objectives that covers the investment policy and objectives of the scheme and provides adequately for the following matters:

    • (a) the nature or type of investments that may be made, and any limits on those; and

    • (b) any limits on the proportion of each type of asset invested in; and

    • (c) the methodology used for developing and amending the investment strategy and for measuring performance against that investment strategy the investment objectives of the scheme.

    (2) However, if there are no limits provided for under subsection (1)(a) or (b), the statement of investment policy and objectives must state that fact.

    (3) The statement must provide for the matters set out in this section in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8 that apply to it.

151 Changes to statement of investment policy and objectives
  • (1) The manager of a registered scheme may amend or replace a statement of investment policy and objectives only after giving prior written notice to the supervisor.

    (2) This section does not apply to a restricted scheme.

152 Lodging of statement of investment policy and objectives and changes to statement
  • (1) The manager of a registered scheme must lodge the statement of investment policy and objectives, and any changes to it, with the Registrar, except in the prescribed circumstances.

    (2) The manager must lodge any change to the statement of investment policy and objectives within 5 working days of the change taking effect.

    (1) The manager of a registered scheme must, except in the prescribed circumstances,—

    • (a) lodge the statement of investment policy and objectives with the Registrar before a regulated offer of managed investment products is made or, if no regulated offer is made, before any managed investment product is issued; and

    • (b) lodge any change to the statement of investment policy and objectives with the Registrar within 5 working days after the change takes effect.

    (3) A person who manager that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

153 Action that must be taken on limit breaks
  • (1) This section applies to a registered scheme if, under the scheme's statement of investment policy and objectives, there is a material breach of any limits on either of the following (a limit break):

    • (a) the nature or type of investments that may be made; or

    • (b) the proportion of each type of assets that may be invested in.

    (2) If this section applies, the manager of the registered scheme must report the limit break to the supervisor or to the FMA (if there is no supervisor) in the prescribed circumstances and in the prescribed manner.

    (3) Whether or not a limit break is material must be determined in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8.

154 Action that must be taken on pricing errors and failure to comply with pricing methodologies
  • (1) This section applies to a registered scheme if—

    • (a) the managed investment products under the scheme are transferable or redeemable; and

    • (b) eitherthe manager (or any person to whom the manager has contracted some or all of its functions as a manager)

      • (i) makes an error occurs in calculating the price at which the managed investment products are transferred or redeemed; or

      • (ii) there is a failure fails to comply with the methodology for pricing the managed investment products as set out in the governing document or any notices issued by the FMA under subpart 4 of Part 8.

    (2) If this section applies, the manager must ensure, if the pricing error or non-compliance is material,—

    • (a) correct the pricing error or non-compliance is corrected; and

    • (b) report the pricing error or non-compliance is reported to the supervisor (or to the FMA if there is no supervisor); and

    • (c) take the prescribed steps are taken to remedy the pricing error or non-compliance.

    (3) Whether or not a pricing error or non-compliance is material must be determined in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8.

155 Actuarial examination of defined benefit scheme or life benefit scheme
  • (1) This section applies to a registered scheme that—

    • (a) is a defined benefit scheme; or

    • (b) provides benefits that provide for the payment of money on the happening of a contingency dependent on the termination or continuance of human life, and the risks associated with those benefits are not fully insured with a company engaged in the business of life insurance life insurer within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2010 (a life benefit scheme).

    (2) The manager of a defined benefit scheme or a life benefit scheme must ensure that a suitably qualified actuary examines the financial position of the scheme as at dates that are no more than 3 years apart.

    (3) The manager must ensure that—

    • (a) the report of the actuary is received no later than 7 months after the date as at which the financial position of the scheme was examined; and

    • (b) the manager gives a copy of the report, as soon as practicable, to the supervisor (or if there is no supervisor, to the FMA); and

    • (c) if there is a supervisor, the manager also gives a copy of the report to the FMA within 20 working days after its receipt by the supervisor (if any).

    (4) A person who manager that contravenes subsection (3)(b) or (c) commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (5) The offence in subsection (4) is an infringement offence (see subpart 5 of Part 7).

    Compare: 1989 No 10 s 15

156 Power of manager to adjust financial benefits to comply with portfolio investment entity rules
  • The manager of a registered scheme to which section HM 48 of the Income Tax Act 2007 applies may adjust the financial benefits of scheme participants in the way required by that section.

    Compare: 1960 No 99 ss 12A, 22

157 Limits on reversion of scheme property in certain schemes to non-scheme participant contributor
  • (1) No part of the scheme property of a KiwiSaver scheme or superannuation scheme may revert to a contributor who is not a scheme participant under the governing document without the prior written consent of the FMA.

    (2) The FMA must not give consent to the reversion of any assets of the scheme to a person under this section unless satisfied that—

    • (a) sufficient assets will remain to support the interests of all of the scheme participants; and

    • (b) the reversion is fair and equitable to the scheme participants, taking into account the manner in which the scheme acquired those assets.

    Compare: 1989 No 10 s 10; 2006 No 40 ss 129B, 130

Related party transactions

158 Definition of related party benefit
  • (1) A related party benefit, in relation to a registered scheme, is a benefit—

    • (a) that is either given out of scheme property or creates an exposure to loss for scheme property; and

    • (b) that is given to, or received by, a related party of the scheme; but

    • (c) does not include fees or expenses that are paid or reimbursed to the manager in accordance with this Act or the governing document of the scheme.

    (2) A related party of the scheme is—

    • (a) any of the following persons (a scheme-connected person):

      • (i) the manager of the scheme; and

      • (ii) any investment manager, administration manager, or other person to whom the manager has contracted out some or all of its functions as a manager; and

      • (iii) for a restricted scheme that is identified on the register of managed investment schemes as an employer-related scheme, any contributor to the scheme who is not a scheme participant (other than the Crown); or

    • (b) an associated person of a scheme-connected person.

    Compare: Corporations Act 2001 ss 601LA–601LE (Aust)

159 General prohibition on transactions giving related party benefits
  • (1) A manager of a registered scheme (and any investment manager, administration manager, or other person to whom the manager has contracted out some or all of its functions as a manager) must not enter into a transaction that provides for a related party benefit to be given.

    (2) However, subsection (1) does not apply to a transaction or series of transactions if the manager notifies the supervisor of the transaction or transactions, including the related party benefits given under the transaction or transactions, and the key terms of the transaction or transactions and either—

    • (a) the manager obtains the supervisor's consent to the transaction or transactions; or

    • (b) section 160 applies to the transaction or transactions or all related party benefits to be given and the manager certifies to that effect.

    (3) The supervisor must not consent to a transaction or transactions under this section unless 1 of the following applies and the supervisor certifies to that effect:

    • (a) either—

      • (i) the supervisor considers that the transaction or transactions are in the best interests of the scheme participants; or

      • (ii) the transaction is approved by, or contingent on approval by, a special resolution of the class of scheme participants affected, or potentially affected, by the transaction; and

    • (b) the supervisor certifies to that effect.

    • (a) the supervisor considers that the transaction or transactions are in the best interests of the scheme participants; or

    • (b) the transaction is approved by, or contingent on approval by, a special resolution of the class of scheme participants affected, or potentially affected, by the transaction.

    (4) However, in the case of a restricted scheme, subsection (1) does not apply to a transaction or series of transactions if 1 of the following applies and the manager certifies that to that effect:

    • (a) the transaction or transactions are in the best interests of the scheme participants; or

    • (b) section 160 applies to the transaction or transactions or all related party benefits to be given; or

    • (c) the transaction is approved by, or contingent on approval by, a special resolution of the class of scheme participants affected, or potentially affected, by the transaction.

    (5) The manager may not certify under subsection (4) unless the licensed independent trustee has consented to the certification.

    (6) However, a failure to comply with this section does not affect the validity of any transaction (subject to any court order under Part 7).

    (7) See also section 125A of the KiwiSaver Act 2006 for an additional prohibition on loans and financial assistance to members of KiwiSaver schemes that have fewer than 20 members.

    Compare: Corporations Act 2001 ss 601LA–601LE (Aust)

160 Certain related party benefits permitted
  • This section applies to—

    • Arm's-length terms
    • (a) a benefit that is given on terms that—

      • (i) would be reasonable in the circumstances if the parties were connected or related only by the transaction in question, each acting independently, and each acting in its own best interests; or

      • (ii) are less favourable to the related party than the terms referred to in subparagraph (i):

    • Investments in other registered schemes
    • (b) an acquisition or a disposal of a managed investment product in another registered scheme or a benefit or transaction in respect of a prescribed overseas scheme:

    • Certain registered bank investments
    • (c) investments in category 2 products issued by a registered bank or products prescribed for the purposes of clause 20(c) of Schedule 1:

    • (c) investments in products referred to in clause 20 of Schedule 1:

    • Other prescribed benefits or transactions
    • (d) a prescribed benefit or transaction.

    Compare: Corporations Act 2001 ss 601LA–601LE (Aust)

160A Requirements for certificates as to related party benefits
  • (1) A certificate under section 159 is effective only if the certificate—

    • (a) states the specific grounds on which it is given under section 159 and (if relevant) section 160, and the basis for relying on those grounds; and

    • (b) complies with the prescribed requirements (if any) as to its form, content, or the manner in which it is given.

    (2) Nothing in that section requires a new certificate if there is an existing certificate that applies (whether specifically or in general terms) to the transaction or transactions.

161 Additional restrictions on related party transactions of restricted schemes
  • (1) The manager of a restricted scheme must ensure that the restricted scheme does not have more than 5% of the scheme property in investments related to or managed by a related party of the scheme (as defined in section 158) or a scheme participant.

    (2) However, the following investments do not count for the purpose of calculating the 5% limit:

    • (a) investments referred to in section 160(b) or (c); and

    • (b) other prescribed benefits or transactions.

    Compare: 2006 No 40 s 117A

161 Additional restrictions on restricted schemes' holdings of in-house assets
  • (1) A manager of a restricted scheme (or any person to whom the manager has contracted some or all of its functions as a manager) must not acquire any new in-house asset if, as a result of the acquisition, the restricted scheme would have an in-house assets ratio of 5% or more in relation to any related party or scheme participant (A).

    (2) The in-house assets ratio of a scheme, in relation to A, must be calculated as the ratio, expressed as a percentage, of paragraph (a) to paragraph (b):

    • (a) the sum of the net asset values of—

      • (i) the in-house assets of A; and

      • (ii) the in-house assets of any other related parties of the scheme, or scheme participants, that are associated with A; and

    • (b) the net asset value of the scheme property.

    (3) In this section,—

    acquire includes to make a loan or investment, or enter into a lease or lease arrangement, if the resulting loan, investment, or asset subject to the lease or lease arrangement, would be an in-house asset

    in-house asset

    • (a) means, in relation to a related party or scheme participant (A), an asset of the scheme that is a loan to, or investment in, A (or an associate of A) or an asset of the scheme that is subject to a lease or lease arrangement with A (or an associate of A); but

    • (b) excludes investments referred to in section 160(b) or (c)

    investment means the application of assets in any way, or a contract entered into, for the purpose of gaining interest, income, profit, or gain

    lease arrangement means, in relation to an asset, an agreement in the nature of a lease under which a person is to use, or control the use of, the asset (whether or not the agreement is enforceable)

    loan includes the provision of credit or any other form of financial accommodation (whether or not enforceable).

    (4) The in-house assets ratio of a scheme must be calculated under this section in accordance with the frameworks or methodologies specified in notices issued by the FMA under subpart 4 of Part 8.

    (5) This section does not apply in the prescribed circumstances.

    Compare: Superannuation Industry (Supervision) Act 1993 s 83 (Aust)

Scheme participant transfer rules for KiwiSaver and superannuation schemes

162 Application of scheme participant transfer rules
  • (1) Sections 163 to 166 apply to both of the following types of transfer (a transfer):

    • (a) the transfer of a scheme participant from one KiwiSaver scheme or superannuation scheme to another KiwiSaver scheme or superannuation scheme:

    • (b) the transfer of a scheme participant from one section of a KiwiSaver scheme or superannuation scheme to another section of the same scheme.

    (2) In sections 163 to 166,—

    • (a) a person proposed to be transferred is a proposed transferee:

    • (b) the scheme, or section of the scheme, from which the person is proposed to be transferred is the old scheme:

    • (c) the scheme, or section of the scheme, into which the person is proposed to be transferred is the new scheme.

    (3) Sections 163 to 166 do not apply to transfers to which subpart 3 of Part 2 of the KiwiSaver Act 2006 applies.

    Compare: 1989 No 10 s 9B; 2006 No 40 ss 119B, 119D(6)

163 Methods of transfer of scheme participants to another scheme or another section of scheme
  • (1) No scheme participant may be transferred from one registered scheme to another registered scheme, or to another section of the same scheme, except in accordance with this section.

    (2) A scheme participant may be transferred, if authorised by a governing document,—

    • (a) with the scheme participant's written consent (which must be obtained in accordance with section 164, if that section applies); or

    • (b) in accordance with the FMA's consent under section 165.

    (3) However, the FMA may permit a transfer to occur under subsection (2)(a) without the scheme participant's consent if the FMA is satisfied that—

    • (a) the manager of the old scheme has taken all reasonable steps to contact all of the relevant scheme participants, but has not been able to do so; and

    • (b) the proposed action is not unreasonable in relation to the best interests of any of those scheme participants who have not been contacted.

    (4) No scheme participant may be transferred from a KiwiSaver scheme into another scheme that is not a KiwiSaver scheme under this section.

    Compare: 1989 No 10 ss 9B, 9BAA(1); 9BA, 2006 No 40 ss 119C, 119G(1), 119I

164 Transfer of substantial numbers of scheme participants with scheme participant consent
  • (1) This section applies to a transfer (whether at the same time or over an extended period) of all, or a substantial number, of the scheme participants from an old scheme to a new scheme.

    (2) The manager of the old scheme and the manager of the new scheme must each consult their own scheme's supervisor (if any) about the proposed transfer and give notice of the proposed transfer in accordance with this section.

    (3) The notice must—

    • (a) be given to the FMA and every scheme participant of the old scheme and the new scheme, other than scheme participants who, in the opinion of the FMA, are not likely to be affected by the proposed transfer; and

    • (b) set out—

      • (i) the proposal and its implications for the proposed transferees; and

      • (ii) the date of the proposed transfer; and

      • (iii) the date on which the proposed transferees' written consent must be received by the manager or the trustees; and

      • (iv) the fact that the notice has also been sent to the FMA; and

    • (c) be given at least 1 month before the date on which, under the notice, the proposed transferees' written consent must be received by the manager or the trustees.

    (4) Giving notice under this section does not derogate from the need to comply with any other requirement of the KiwiSaver Act 2006 (in relation to a KiwiSaver scheme).

    Compare: 1989 No 10 s 9B; 2006 No 40 s 119D

165 Transfer with FMA consent
  • (1) The FMA may consent to a transfer if the FMA is satisfied that—

    • (a) the terms and conditions of the new scheme are no less favourable to the proposed transferees than the terms and conditions of the old scheme; and

    • (b) the transfer is otherwise reasonable in all the circumstances (including having regard to the value of the assets transferred from the old scheme to the new scheme); and

    • (c) the person applying for the transfer is the manager of the old or new scheme, a relevant employer, or another person who the FMA considers has an appropriate interest in the transfer; and

    • (d) the applicant has given notice to every proposed transferee that—

      • (i) the applicant has applied for the FMA's consent to transfer the person without the person's written consent; and

      • (ii) the person may make submissions to the FMA about the transfer.

    (2) The FMA must have regard to any submissions received by proposed transferees before deciding whether or not to give its consent.

    (3) The FMA may give its consent subject to any terms and conditions that the FMA sets out in the written notice of consent.

    (4) The transfer must be carried out in accordance with those terms and conditions.

    Compare: 1989 No 10 s 9BAA; 2006 No 40 ss 119G, 119H

166 Transfers from KiwiSaver scheme
  • (1) This section applies to an old scheme if it was a KiwiSaver scheme.

    (2) The provider of the old scheme must give the following information to the provider of the new scheme in respect of a scheme participant (A) who transfers under sections 163 to 165:

    • (a) A's name, address, and date of birth; and

    • (b) A's tax file number; and

    • (c) the date on which A first became a member of a KiwiSaver scheme and (if known and different) the date on which A first contributed to a KiwiSaver scheme; and

    • (d) if A is an employee,—

      • (i) the name and address of each of A's employers; and

      • (ii) the rate at which A intends each of those employers to make deductions of contributions from his or her salary or wages; and

    • (d) (if known) the aggregate amounts of each of—

      • (i) A's contributions to the old scheme; and

      • (ii) the Crown contribution to the old scheme in respect of A; and

      • (iii) any employer contributions to the old scheme in respect of A; and

    • (e) the name, address, and tax file number of both the provider and the old scheme; and

    • (f) any other information that the Commissioner of Inland Revenue requires the provider of the old scheme to give to the provider of the new scheme.

    (3) In this section, provider has the meaning set out in section 5 of the KiwiSaver Act 2006.

    Compare: 2006 No 40 s 119F

Provisions as to deferred benefits for superannuation schemes

167 Deferred benefits
  • (1) A scheme participant in respect of a superannuation scheme who continues to be employed by an employer after the participant's expected age or date of retirement (as defined in the governing document of the scheme) may elect to defer the receipt of any benefit that the participant is eligible to receive under the scheme until the date on which the participant ceases to be employed by that employer.

    (2) Subsection (1) applies despite anything to the contrary contained in the governing document of the scheme.

    (3) Nothing in subsection (1) or in the Human Rights Act 1993 has the effect of requiring either an employer or a scheme participant to continue to contribute, or to cease to contribute, to the scheme after the participant's expected age or date of retirement, as defined in the governing document of the scheme.

    (4) If a scheme participant has the right, under subsection (1), to elect to defer receipt of any benefit that the participant is eligible to receive under the scheme, the manager must inform the participant in writing of that right.

    Compare: 1989 No 10 s 9C

Change of manager

168 Application of sections 169 to 176
  • Sections 169 to 176 apply to—

    • (a) the manager of a registered scheme (other than a restricted scheme); or

    • (b) each of the trustees of a restricted scheme (including, to avoid doubt, the independent trustee).

169 Removal of manager of registered scheme
  • (1) A manager of a registered scheme ceases to hold that office if removed

    • (a) the manager is removed by written direction of the supervisor after the supervisor certifies that it is in the best interests of scheme participants that the manager be removed; or

    • (b) the manager is removed by a special resolution of the scheme participants; or

    • (ba) in the case of an independent trustee of a restricted scheme,—

      • (i) the trustee's licence expires or is cancelled under Part 6; or

      • (ii) the trustee is removed by the FMA if it is satisfied that the trustee no longer meets the requirements in section 117(1)(d); or

    • (c) the manager is substituted by the court under section 193; or

    • (d) the manager is otherwise removed or resigns in accordance with the governing document.

    (2) Subsection (1)(a) and (b) does do not apply to a restricted scheme.

    (2A) However, a licensed independent trustee may not—

    • (a) be removed or resign under subsection (1)(d) unless—

      • (i) all functions and duties of the position have been performed; or

      • (ii) another licensed independent trustee has been appointed, and accepted the appointment, in its place; or

      • (iii) the court consents:

    • (b) (despite anything in the governing document) be removed under subsection (1)(d) without the FMA's consent.

    (3) If a manager ceases to hold office under subsection (1), the manager and any delegate of the manager must immediately desist from all activities relating to the registered scheme unless the supervisor agrees to the contrary.

    Compare: 1960 No 99 s 19

170 Supervisor or FMA may make temporary appointment
  • (1) This section applies if a registered scheme does not, for any reason, have a manager or (in the case of a restricted scheme) a licensed independent trustee.

    (2) The supervisor or the FMA must appoint a person (the temporary manager) to fill the vacancy in the manager's office until a substitute appointment may be made under the governing document.

    (3) That person must be,—

    • (a) if the appointment is by the supervisor, a person who meets the requirements in section 113(1)(c) and (e):

    • (b) if the appointment is by the FMA, a person whom the FMA considers appropriate (but who need not be a person who meets the requirements in section 113(1)(c) and (e) or (in the case of an independent trustee) section 117(1)(d)).

    (4) However, the FMA may act under this section only if—

    • (a) it is satisfied that the supervisor has had a reasonable opportunity to act under this section but has not done so; or

    • (b) it is satisfied that it is necessary as a matter of urgency for the FMA to do so and it is not reasonably practicable to wait for the supervisor to do so; or

    • (c) the supervisor requests the FMA to act; or

    • (d) there is no supervisor.

    (5) If the FMA appoints a person who does not meet the requirements of section 113(1)(c) and (e) or 117(1)(d), that person does not contravene section 387, and the scheme does not fail to meet those registration requirements, as a result of that appointment.

    Compare: 1960 No 99 s 23

171 Term, powers, and duties of temporary manager
  • (1) A temporary manager may hold the appointment until a substitute manager is appointed—

    • (a) under the governing document; or

    • (b) otherwise under this Act.

    (2) The temporary manager has all of the powers and duties of the manager of the registered scheme and (if applicable) of the independent trustee that are conferred or imposed by the governing document or by law.

    (3) However, the FMA may, in the prescribed manner, amend a governing document, in so far as it applies to an FMA appointee a temporary manager appointed by the FMA, if—

    • (a) the supervisor (if any) consents; and

    • (b) the FMA is satisfied that the change will have no material adverse effect on the interests of scheme participants.

    (4) An amendment made under this section must be treated for all purposes as if it were made in accordance with the governing document.

    (5) Section 128 (lodging of changes to governing document) applies to an amendment to the governing document under this section.

172 FMA's costs must be reimbursed from scheme
  • (1) The FMA's costs and expenses incurred in connection with the FMA appointee holding the appointment the holding of the appointment by a temporary manager appointed by the FMA must be reimbursed from out of scheme property of the registered scheme.

    (2) An amount payable under subsection (1) is recoverable by the FMA in any court of competent jurisdiction as a debt due to the FMA.

173 Supervisor or FMA must take reasonable steps to arrange for new appointment
  • (1) The supervisor of a registered scheme or the FMA (if there is no supervisor) must, in the prescribed manner (if any), take all reasonable steps to secure, in accordance with the governing document, the appointment of a person as a permanent manager in place of the temporary manager (other than a temporary independent trustee).

    (1A) The trustees of a restricted scheme must, in the prescribed manner (if any), take all reasonable steps to secure, in accordance with the governing document, the appointment of a person as a permanent licensed independent trustee in place of the temporary independent trustee.

    (2) The temporary manager may be appointed to continue to hold the office as a permanent manager, but in this case—

    • (a) if the person was an FMA appointee appointed by the FMA, the person ceases to be an FMA appointee appointed by the FMA for the purposes of sections 170 to 172; and

    • (b) must meet the requirements in section 113(1)(c) and (e) or 117(1)(d) (if applicable).

174 Former manager must hand over records and give reasonable assistance
  • (1) If the person who holds an appointment as a manager of a registered scheme changes, the person who previously held the appointment (the former manager) must,—

    • (a) as soon as is reasonably practicable, give the person that currently holds the appointment (the current manager) all of the information or documents held or controlled by the former manager that are reasonably necessary to allow the current manager to hold the office; and

    • (b) give the current manager all reasonable assistance to facilitate the change.

    (2) The former manager may withhold the information or documents, or retain a copy of the information or documents,—

    • (a) with the FMA's written consent; or

    • (b) otherwise in the prescribed circumstances.

    (3) If a temporary manager has been appointed to an office, for the purposes of this section, former manager includes the person who held the office immediately before the temporary manager and current manager includes the person who held the office immediately after the temporary manager.

175 Statutory novation of rights, obligations, and liabilities of former manager
  • (1) If the manager of a registered scheme changes, the rights, obligations, and liabilities of the former manager in relation to the scheme become the rights, obligations, and liabilities of the new manager.

    (2) Despite subsection (1), the following rights, obligations, and liabilities remain rights, obligations, and liabilities of the former manager:

    • (a) any right of the former manager to be paid fees for the performance of its functions, or to be indemnified for liabilities or expenses it incurred, before it ceased to be the manager of the scheme; and

    • (b) any right, obligation, or liability that the former manager had as a scheme participant; and

    • (c) any liability for which the former manager could not have been indemnified out of the scheme property if it had remained the scheme's manager.

    (3) This section is subject to any order of the court under section 193.

176 Lodging of notice of changes to manager
  • (1) Within 5 working days of a change to the manager of a registered scheme, the new manager must ensure that notice of the change is lodged with the Registrar.

    (2) A person who manager that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Change of supervisor

177 Change of supervisor
  • (1) The supervisor of a registered scheme ceases to hold that appointment (subject to subsection (2)) if the supervisor—

    • (a) is removed by the FMA if it is satisfied that the manager and the supervisor no longer meet the requirements in section 113(1)(e) (registration requirements); or

    • (b) is removed by the FMA or the issuer under Part 2 of the Financial Markets Supervisors Act 2011; or

    • (c) is removed by a special resolution of the scheme participants; or

    • (d) is removed or resigns in accordance with the governing document.

    (2) No manager of a registered scheme may remove a supervisor under subsection (1)(d) without the FMA's consent (even if permitted to do so by the governing document).

    (2) However, a supervisor may not—

    • (a) be removed or resign under subsection (1)(c) or (d) unless—

      • (i) all functions and duties of the position have been performed; or

      • (ii) another licensed supervisor has been appointed, and accepted the appointment, in its place; or

      • (iii) the court consents:

    • (b) (despite anything in the governing document) be removed by the manager under subsection (1)(d) without the FMA's consent.

    Compare: 1960 No 99 s 10; 1978 No 103 s 48; 2006 No 40 s 116E(2)

178 Lodging of notice of change of supervisor
  • (1) Within 5 working days of a change of supervisor of a registered scheme, the manager must ensure that notice of the change is lodged with the Registrar.

    (2) A person who manager that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Change of independent trustee

179 Change of independent trustee
  • (1) A trustee who is a licensed independent trustee ceases to hold that appointment (subject to subsection (2)) if—

    • (a) the trustees's licence expires or is cancelled under Part 6; or

    • (b) the trustee is removed by the FMA under the Financial Markets Supervisors Act 2011; or

    • (c) the trustee is removed or resigns in accordance with the trust deed.

    (2) No licensed independent trustee may be removed or resign in accordance with the trust deed without the FMA's consent.

Cancellation of registration

180 Cancellation of registration
  • (1) The FMA may direct that the registration of a registered scheme be cancelled—

    • (a) on giving 20 working days' notice to the manager of the scheme, if satisfied on reasonable grounds that the scheme does not meet the registration requirements under section 113; or

    • (b) on giving 20 working days' notice to the manager of the scheme, if the FMA has reasonable cause to believe that the scheme has no scheme participants; or

    • (c) on the written request of the manager of the scheme (subject to subsection (3)), if the supervisor certifies, or the trustees of a restricted scheme certify, that—

      • (i) the removal cancellation has been approved by a special resolution of the scheme participants (subject to any restriction in the governing document); or

      • (ii) there is no material adverse effect on the scheme participants from the removal cancellation; or

    • (d) if the scheme has been wound up or dissolved or has otherwise ceased to exist.

    (1A) The FMA must not direct cancellation under subsection (1)(a) or (b) unless—

    • (a) the FMA gives the manager of the scheme no less than 20 working days' written notice of the following matters before it exercises the power:

      • (i) that the FMA may direct cancellation; and

      • (ii) the reasons why it may exercise that power; and

    • (b) the FMA gives the manager or the manager's representative an opportunity to make written submissions on the matter within that notice period.

    (2) The manager of a registered scheme must, as soon as practicable after being notified of a direction under this section, notify the scheme participants in writing of the direction.

    (2) If the FMA makes a direction under this section,—

    • (a) the FMA must notify the manager and the supervisor of the registered scheme of the direction; and

    • (b) as soon as practicable after being notified of the direction, the manager must notify the scheme participants of the direction.

    (3) The FMA may, instead of removing cancelling a scheme's registration on the request of the manager under this section, exercise its rights to apply for an order winding up the scheme under section 195 (power to order winding up).

    Compare: 1989 No 10 s 19; 2006 No 40 s 168

181 Registrar must remove scheme from register on cancellation of registration
  • (1) On the cancellation of the registration of a scheme under section 180, the Registrar must remove it from the register of managed investment schemes.

    (2) The cancellation must be treated as taking effect on the date on which the scheme is removed from the register.

    (3) The Registrar must give notice of the cancellation of registration, as soon as practicable after the registration of the scheme is cancelled, to—

    • (a) the manager of the scheme; and

    • (ab) the supervisor of the scheme; and

    • (b) the Commissioner of Inland Revenue (in the case of a KiwiSaver scheme).

    Compare: 2006 No 40 s 170

Subpart 4Intervention in debt securities offered under regulated offer or registered schemes

Provisions assisting supervisor or FMA to intervene

182 Duty of auditor to report to supervisor or FMA
  • (1) This section applies to the auditor of an issuer of a debt securities security under a regulated offer or a registered scheme.

    (2) If the auditor provides the issuer, any of the issuer's members or shareholders, or any of the holders of the debt securities security or managed investment products with any report, financial statement, certificate, or other document required by an Act or a trust deed relating to the financial products or scheme, the auditor must, as soon as practicable, send a copy to the supervisor of the debt securities security or registered scheme or, if there is no supervisor, to the FMA.

    (3) If, in the performance of the auditor's duties, the auditor becomes aware of a matter that, in the auditor's opinion, is relevant to the exercise or performance of the powers or duties of the supervisor of the debt securities security or registered scheme, the auditor must, within 7 working days of becoming aware of the matter, send—

    • (a) a written report on the matter to the issuer; and

    • (b) a copy of the report to the supervisor or, if there is no supervisor, to the FMA.

    (4) The auditor must, from time to time, at the request of the supervisor, provide the supervisor with any information relating to the issuer or registered scheme—

    • (a) that the supervisor requests; and

    • (b) that is within the auditor's knowledge; and

    • (c) that is, in the auditor's opinion, relevant to the exercise or performance of the powers or duties of the supervisor.

    (5) Section 199 (protected disclosure) applies to a disclosure in good faith under this section.

    (6) This section does not limit the duties or liability of an issuer or a supervisor.

    Compare: 1978 No 103 s 50

183 Duty of auditor, investment manager, administration manager, custodian, or actuary to report serious problems
  • (1) This section applies to an auditor of an issuer of a debt security under a regulated offer and to an investment manager, an administration manager, a custodian, an auditor, or an actuary of a registered scheme.

    (2) A person to whom this section applies must take the steps set out in section 184 if the person has reasonable grounds to believe that any of the following has arisen in relation to a relevant financial product (a serious problem):

    • (a) the issuer of the relevant financial product has contravened, may have contravened, or is likely to contravene an issuer obligation in a material respect; or

    • (b) the issuer or scheme is, or it is likely that the issuer or scheme will become, insolvent; or

    • (c) the financial position of the scheme or issuer or the security of benefits or the management of the scheme or issuer is otherwise inadequate; or

    • (d) the manager of the scheme has contravened, may have contravened, or is likely to contravene any of the manager's market services licensee obligations in a material respect; or

    • (e) the supervisor of the scheme has contravened, may have contravened, or is likely to contravene any of the supervisor's licensee obligations (as defined in section 4 of the Financial Markets Supervisors Act 2011) in a material respect; or

    • (f) the custodian of the scheme has contravened, may have contravened, or is likely to contravene any of the custodian's obligations in a material respect.

    Compare: 2006 No 40 s 191

184 What person must do if duty to report serious problem applies
  • (1) If section 183 applies, the person to whom that section applies must, as soon as practicable,—

    • (a) report a serious problem to the supervisor or, if subsection (2) applies, to the FMA; and

    • (b) disclose to the supervisor or the FMA (as applicable under paragraph (a)) all information relevant to the serious problem that is in the possession or control of the relevant person and was obtained in the course of, or in connection with, the performance of functions of that relevant person.

    (2) A serious problem must be reported to the FMA instead of the supervisor if—

    • (a) there is no supervisor; or

    • (b) the serious problem concerns a contravention or likely contravention of an obligation by the supervisor; or

    • (c) the contravention relates to the custodian and the custodian is a related party related body corporate of the supervisor.

    (3) Section 199 (protected disclosure) applies to a disclosure in good faith under this section.

    (4) To avoid doubt, section 183 and this section do not require a relevant person to carry out functions additional to those functions that the person would ordinarily carry out in the course of holding the person's office (other than as expressly required by subsection (1)).

    Compare: 2006 No 40 s 191(2), (4)

185 Protections extend to volunteers of supporting information for other protected disclosures
  • (1) This section applies to an employee of the person in respect of whom any other protected disclosure is made under this Act (A).

    (1) Section 199 (protected disclosure) applies to a disclosure that is supporting information volunteered by a person under this section.

    (2) A disclosure of information under this section qualifies for protection under this subpart if the employeeA person volunteers supporting information under this section if the person—

    • (aa) is an employee of a person in respect of whom a protected disclosure is made by another person under this Act; and

    • (a) provides information, in support of another that other protected disclosure made by another person, to—

      • (i) the supervisor or the FMA (whichever receives the other protected disclosure); or

      • (ii) the person who made the disclosure; and

    • (b) makes the disclosure in good faith; and

    • (c) wishes to provide the supporting information so that a serious problem can be investigated.

    (3) However, an employee does not volunteer supporting information under this section if the employee provides the supporting information only after being—

    • (a) required to do so under any enactment, rule of law, or agreement for the purposes of the investigation; or

    • (b) approached during the course of the investigation by, or on behalf of, the FMA or any other person investigating the matter.

    (4) Section 199 (protected disclosure) applies to a disclosure that qualifies for protection under subsection (2).

186 FMA may require supervisor to attest as to issuer's compliance with issuer obligations
  • (1) The FMA may require a supervisor of a debt security or registered scheme to attest to the FMA, at a time and in a manner specified by the FMA, as to whether the supervisor is satisfied that the issuer has not contravened an issuer obligation in a material respect.

    (2) If the FMA requires a supervisor to attest to the FMA under this section, the supervisor must either—

    • (a) provide that attestation; or

    • (b) if unable to attest to the FMA as required, report the reason, including the details of any contravention or possible contravention and, if applicable, the report under section 187.

    (3) Section 199 (protected disclosure) applies to a report made in good faith under this section.

    Compare: 2011 No 10 s 45

187 Duty of supervisor to report contravention or possible contravention of issuer obligations to FMA
  • (1) If a supervisor of a debt security or registered scheme has reasonable grounds to believe that an the issuer has contravened, may have contravened, or is likely to contravene an issuer obligation in a material respect, the supervisor must, as soon as practicable,—

    • (a) report the contravention or possible contravention to the FMA; and

    • (b) advise the FMA of the steps (if any) that the supervisor intends to take in respect of the contravention or possible contravention and the date by which the steps are to be taken.

    (2) Section 199 (protected disclosure) applies to a report made in good faith under this section.

    Compare: 2011 No 10 s 46

188 Duty of supervisor to report serious financial problems to FMA
  • (1) This section applies if a supervisor of a debt security or registered scheme becomes aware, in the course of or in connection with the performance of its functions as supervisor, of information on the basis of which it could reasonably form the opinion that—

    • (a) the issuer is, or it is likely that the issuer will become, insolvent; or

    • (b) in the case of a registered scheme, the scheme is, or it is likely that the scheme will become, insolvent.

    (2) The supervisor must, as soon as practicable,—

    • (a) disclose to the FMA all information relevant to that matter that is in the possession or under the control of the supervisor and that was obtained in the course of, or in connection with, the performance of its functions as supervisor; and

    • (b) advise the FMA of the steps (if any) that the supervisor intends to take in respect of that matter and the date by which the steps are to be taken.

    (3) Section 199 (protected disclosure) applies to a report made in good faith under this section.

    Compare: 2011 No 10 s 47

189 FMA's powers of direction
  • (1) The FMA may exercise a power under subsection (2) if it is satisfied that—

    • (a) there is a significant risk that the interests of holders of a debt security under a regulated offer or managed investment product scheme participants in a registered scheme will be materially prejudiced; and

    • (b) either—

      • (i) the supervisor of the debt securities security or registered scheme is aware of that risk and has had a reasonable opportunity to take action to eliminate or reduce the risk but has not done so; or

      • (ii) action is urgently required to eliminate or reduce the risk and it is not reasonably practicable to wait for the supervisor to do so; or

      • (iii) there is no supervisor.

    (2) The FMA may, by written notice to the supervisor and otherwise in the prescribed manner, give a direction to the supervisor.

    (3) If there is no supervisor, the FMA may, by written notice to the issuer and otherwise in the prescribed manner, give a direction to the issuer.

    Compare: 2011 No 10 s 49(1), (2)

190 FMA's directions to supervisor (or issuer)
  • (1) If the notice under section 189 gives a direction to the supervisor (or, if there is no supervisor, the issuer), the notice must specify—

    • (a) the step or steps that the supervisor (or issuer) must take in relation to the issuer, the registered scheme (if any), or the financial products; and

    • (b) the date by which each step will be taken.

    (2) The supervisor or the issuer (as the case may be) must comply with the direction (see subpart 3 of Part 7, which provides for civil remedies for a contravention of this provision).

    (3) A supervisor or issuer (as the case may be) who that refuses or fails, without reasonable excuse, to comply with the direction commits an offence and is liable on summary conviction to a fine not exceeding $300,000.

    Compare: 2011 No 10 s 49(3)–(5)

Powers to obtain court orders to intervene

191 Power of supervisor or FMA to apply for order to remedy problems
  • (1) A supervisor of a debt security or a registered scheme, or the FMA, may apply for an order under section 192 if it is satisfied that—

    • (a) the issuer and any guarantor of the financial products are unlikely to be able to pay all money owing in respect of the financial products when it becomes due; or

    • (b) the issuer is insolvent; or

    • (c) in the case of a registered scheme, the scheme is insolvent; or

    • (d) the financial position of the scheme or issuer or the security of benefits or the management of the scheme or issuer is otherwise inadequate; or

    • (e) in the case of a registered scheme, the scheme does not meet the registration requirements, or the requirements for registration as a particular type of scheme, under sections 113 to 119; or

    • (f) there is a significant risk that the interests of product holders will be materially prejudiced for any other reason; or

    • (g) the provisions of a governing document are no longer adequate to give proper protection to product holders.

    (2) However, the FMA may apply for the order only if it is satisfied that—

    • (a) the supervisor has had a reasonable opportunity to apply for the order but has not done so; or

    • (b) it is necessary as a matter of urgency for the FMA to do so and it is not reasonably practicable to wait for the supervisor to do so; or

    • (c) there is no supervisor.

    Compare: 1960 No 99 s 19A; 1978 No 103 s 49; 2006 No 40 s 116K(1), (2); 2011 No 10 s 50(1)–(3)

192 Court orders to remedy problems
  • (1) The court may, on the application by a supervisor or the FMA under section 191 and after giving the issuer and any other person as the court thinks fit the opportunity to be heard, make 1 or more of the orders listed in subsection (2).

    (2) The orders may—

    • (a) amend the provisions of the governing document:

    • (b) impose restrictions on the activities of the issuer (including restrictions on advertising) that the court thinks are necessary to protect the interests of product holders:

    • (c) direct that no offers, issues, sales, or transfers of debt securities or managed investment products specified in the order be made while the order is in force:

    • (d) direct that an issuer must not accept further contributions or deposits in respect of debt securities or managed investment products specified in the order while the order is in force:

    • (e) direct the issuer or the supervisor to convene a meeting of product holders for the purpose of—

      • (i) having placed before the product holders by the issuer or the supervisor the information or proposal that the court, the supervisor, or the FMA thinks necessary or appropriate relating to their interests; and

      • (ii) obtaining the opinions or directions of product holders:

    • (f) give directions in relation to the conduct of any meeting convened in accordance with paragraph (e):

    • (g) stay any civil actions or civil proceedings before the court by or against the supervisor, the issuer, or any guarantor of the financial products:

    • (h) restrain the payment of money by the custodian, the issuer, or any guarantor of the financial products to product holders or a class of product holders or restrain the transfer of scheme property by the custodian:

    • (i) appoint a receiver or manager of the property that constitutes the security (if any) for the financial products (with any powers that the court orders):

    • (j) give any other directions that the court considers necessary to protect the interests of product holders, any guarantor of the financial products, or the public.

    (3) The court may vary or cancel an order made under this section.

    (4) In exercising its powers under this section, the court must have regard to the interests of all creditors of the issuer (in the case of a debt security) and all creditors in respect of the registered scheme (in the case of a managed investment product).

    Compare: 1960 No 99 s 19A; 1978 No 103 s 49; 2006 No 40 s 116K(3)–(6); 2011 No 10 s 50(4)–(7)

193 Power of court to appoint new manager, provide for manager powers, and deal with changes of managers
  • (1) The court may, on the application of the supervisor of a registered scheme, the FMA, or a scheme participant in a registered scheme, or (in the case of an order under paragraph (b)) a manager of a registered scheme, make an order to—

    • (a) appoint a new manager of a registered scheme (with any powers that the court orders) if there is no manager or in substitution for an existing manager:

    • (b) confer an additional power on the manager of a registered scheme (either generally or specifically) to facilitate a transaction or type of transaction that the court considers to be in the interests of the scheme participants, and provide for the exercise of that additional power:

    • (c) direct that section 175 not apply in whole or in part and also, if an agreement has been entered into between a manager of a registered scheme that has been removed and any other person,—

      • (i) vary the agreement or any collateral agreement as specified in the order and, if the court thinks fit, declare the agreement to have had effect as so varied on and after a date before the order was made, as specified in the order; or

      • (ii) cancel the agreement and, if the court thinks fit, declare the cancellation to have had effect on and after a date before the order was made, as specified in the order:

    • (d) amend the governing document to provide for a new or temporary appointment of a manager of a registered scheme (whether the appointment is by a court order or under the governing document or this Act) or otherwise in connection with another order made under this section:

    • (e) cancel in whole or in part any liability of the scheme to make any payment or transfer any property to a manager of a registered scheme that has been removed.

    (2) The court may under this section (without limiting subsection (1)) appoint a new manager in substitution for a manager who—

    • (a) has been held by the court to have contravened any issuer obligation; or

    • (b) is insolvent.

    (3) A manager appointed by the court under this section has all of the powers and duties of the manager of the registered scheme that are conferred or imposed by the governing document or by law.

    Compare: 1960 No 99 s 22

194 Power of court to direct supervisor
  • The court may, on the application of the supervisor, the FMA, or a product holder, make an order directing the supervisor (or, if there is no supervisor, the FMA) not to comply with a special resolution of product holders if the court is satisfied that compliance would be objectionable (for example, because it would be oppressive to the minority).

194 Power of court to direct supervisor
  • (1) The court may, on an application made under subsection (2), make an order directing a supervisor of a debt security under a regulated offer or of a registered scheme not to comply with a special resolution of product holders if the court is satisfied that compliance would be objectionable (for example, because it would be oppressive to the minority).

    (2) The supervisor, the FMA, or a product holder may apply for an order under this section within 20 working days after the special resolution (or, with leave of the court, within any longer period).

195 Court power to order winding up of scheme
  • (1) The court may, on the application of the FMA or a supervisor of the registered scheme, direct that a registered scheme must be wound up if it is satisfied that—

    • (a) the manager or the scheme is insolvent; or

    • (b) the manager has persistently or seriously failed to comply with this Act or any other financial markets legislation; or

    • (c) no permanent manager is appointed under the governing document or this Act; or

    • (d) no supervisor is appointed under the governing document or the Financial Markets Supervisors Act 2011 (if required under this Part); or

    • (e) the scheme does not meet the registration requirements in sections 113 to 119; or

    • (f) it is just and equitable that the scheme be wound up.

    (2) However, the FMA may apply for an order to wind up a scheme only if it is satisfied that—

    • (a) the supervisor has had a reasonable opportunity to do so but has not done so; or

    • (b) it is necessary as a matter of urgency for the FMA to do so rather than wait for the supervisor to do so; or

    • (c) there is no supervisor.

    (3) The court may give any other directions that it thinks fit for the purpose of facilitating the winding up (and, if there is any conflict between those directions and the provisions of the governing document, those directions prevail).

196 Initial steps in winding up of registered scheme
  • (1) If a registered scheme is to be wound up, the supervisor or (in the case of a restricted scheme) the trustees must, within 10 working days after a winding-up resolution or an order by the court that the scheme be wound up is made,—

    • (a) give a copy of any order or resolution to the FMA; and

    • (b) in the case of a KiwiSaver scheme or a complying superannuation fund,—

      • (i) give a copy of any order or resolution to the Commissioner of Inland Revenue; and

      • (ii) give notice to the Commissioner of Inland Revenue of the name, tax file number, and address of each member of the registered scheme.

    (2) See sections 50 to 52 of the KiwiSaver Act 2006 (which set out the effect of notice to the Commissioner of Inland Revenue in relation to members of a KiwiSaver scheme) and subpart 3 of Part 2 of the KiwiSaver Act 2006 (which relates to the transfer of members’ interests to another KiwiSaver scheme).

    (3) A person who supervisor or trustee that contravenes subsection (1) commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 2006 No 40 s 173

197 Winding up Winding-up report
  • (1) The person who was the supervisor of the relevant registered scheme or, in the case of a restricted scheme, the persons who were the trustees immediately before the scheme was wound up—

    • (a) must, within 4 months of after the date on which the winding up takes effect, ensure that final financial statements of the scheme, showing the financial position of the scheme as at the date on which the winding up takes effect, are prepared in accordance with generally accepted accounting practice and audited; and

    • (b) must, within 20 working days after the final financial statements have been audited, ensure that—

      • (i) a copy of those financial statements is sent to the FMA and to every person who was a scheme participant immediately before it was wound up; and

      • (ii) the FMA and the scheme participants are advised in writing as to the manner in which the remaining assets (if any) of the scheme are to be distributed; and

    • (ba) may make a partial distribution of assets of the scheme at any time before a copy of the final financial statements is sent to the FMA under paragraph (b) (unless prohibited by the governing document); and

    • (c) must inform the FMA of the date on which the distribution of the assets is completed.

    (2) The FMA may, by giving notice to the relevant person, extend the time period within which a person must comply with any of the requirements set out in this section.

    (3) A person who supervisor or trustee that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1989 No 10 s 21(1), (1A); 2006 No 40 ss 174, 175

Miscellaneous

198 Offence of false or misleading statements
  • (1) Every person commits an offence who, in relation to a document or information required to be supplied to a supervisor or, in the absence of a supervisor, to the FMA by or under this Act,—

    • (a) makes, or authorises the making of, a statement in it that is false or misleading in a material particular knowing it to be false or misleading; or

    • (b) omits, or authorises the omission from it of, any matter knowing that the omission makes the document false or misleading in a material particular.

    (2) Every person who commits an offence under subsection (1) is liable on conviction on indictment,—

    • (a) in the case of an individual, to imprisonment for a term not exceeding 3 years or a fine not exceeding $200,000, or both; and

    • (b) in any other case, to a fine not exceeding $600,000.

199 Protection for relevant persons in respect of disclosure under this subpart or subpart 5
  • (1) No civil, criminal, or disciplinary proceedings may be brought against a relevant person by reason of the person having made a protected disclosure.

    (2) No person may terminate the appointment of a relevant person by reason of the relevant person having made a protected disclosure.

    (3) No tribunal, body, or authority that has jurisdiction in respect of the professional conduct of a relevant person may make an order against, or do any act in relation to, the relevant person by reason of the relevant person having made a protected disclosure.

    (4) In this section Act, protected disclosure means a disclosure of information to which this section applies under this subpart or subpart 5.

    Compare: 1978 No 103 s 50C; 2006 No 40 s 192; 2011 No 10 s 48

Subpart 5Registers that must be kept by issuers of all regulated products and keeping copies of documents

Registers

200 Issuers must keep registers of regulated products
  • (1) Every issuer of regulated products must ensure that there is kept, in the manner specified in section 201,—

    • (a) a register of those regulated products and of all financial products that are of the same class as those regulated products of which it is the issuer; and

    • (b) a register of other financial products of which it is the issuer that is required to be kept by the regulations.

    (2) However, subsection (1) does not apply—

    • (a) to derivatives (unless those derivatives are of a prescribed type); or

    • (b) to prescribed financial products; or

    • (c) otherwise in the prescribed circumstances.

    (3) If this section does not apply to derivatives of a particular type, the issuer must comply with the requirements prescribed for the purposes of this subsection (if any).

    (4) A person who An issuer that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1978 No 103 s 51(1)

201 Manner of keeping registers
  • (1) A register kept under this subpart must be kept in New Zealand.

    (2) A register kept under this subpart may be—

    • (a) an electronic register; or

    • (b) kept in any other reasonable manner that the issuer thinks fit.

202 Contents of registers
  • (1) Every issuer of regulated products must ensure that every register kept by, or on behalf of, the issuer under this subpart contains, in respect of every financial product entered in the register,—

    • (a) the name and address of the holder; and

    • (b) the date on which the product was issued or transferred to the holder, as the case may be; and

    • (c) the nature of the product; and

    • (d) the amount of the product (if any); and

    • (e) the due date of the product (if any); and

    • (f) all other prescribed particulars (if any).

    (2) No notice of any trust, expressed, implied, or constructive, may be entered on a register kept under this subpart.

    (3) Every register kept under this subpart is prima facie evidence of the matters required by this Act to be entered in it.

    (4) A person who An issuer that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1978 No 103 s 51(2)–(5)

203 Audit of registers
  • (1) Every issuer of regulated products must ensure that every register kept by, or on behalf of, the issuer under this subpart is audited by a qualified auditor annually within 5 months after the balance date of the issuer.

    (2) In this section, balance date has the same meaning as in section 7 of the Financial Reporting Act 1993.

    (3) A person who An issuer that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1978 No 103 s 51(6)

204 Auditor must advise if auditor considers that subpart is not being complied with
  • (1) If the auditor referred to in section 203 considers at any time that this subpart is not being complied with, the auditor must, as soon as practicable,—

    • (a) advise the issuer and the FMA; and

    • (b) advise,—

      • (i) in the case of equity securities, the security holders at their next meeting if the non-compliance is material:

      • (ii) in the case of debt securities or managed investment products, the supervisor.

    (2) Section 199 (protected disclosure) applies to a disclosure made in good faith under this section.

    Compare: 1978 No 103 s 51(8)

205 Issuer must notify Registrar of registers
  • (1) Every issuer of regulated products must send a notice to the Registrar of the place where its registers under this subpart are kept and of any change in that place.

    (2) The notice must be sent within 10 working days of the register being established or of the change in place (as the case may be).

    (3) This section does not apply to an issuer that is a company if the registers of the company are kept at its registered office.

    (4) A person who An issuer that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1978 No 103 s 51(9), (10)

206 Public inspection of register
  • (1) Every issuer of regulated products must ensure that every register kept by, or on behalf of, the issuer under this subpart is available for inspection in the manner referred to in section 207.

    (2) Subsection (1) does not apply—

    • (a) to a register of managed investment products in respect of a superannuation scheme or KiwiSaver scheme:

    • (b) to a register of derivatives:

    • (c) in the prescribed circumstances.

    (3) However,—

    • (a) a register of managed investment products in respect of a superannuation scheme or KiwiSaver scheme must be available for inspection in the manner referred to in section 207 by the supervisor if the supervisor serves on the issuer written notice of intention to inspect:

    • (b) the part of a register of derivatives that concerns derivatives entered into by a particular person must be available for inspection in the manner referred to in section 207 by the person if the person serves written notice on the issuer of intention to inspect.

    (4) A person who An issuer that contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1978 No 103 s 52

207 Manner of inspection
  • For the purposes of section 206, a register kept under this subpart must—

    • (a) be available for inspection, by a person who serves on the issuer written notice of intention to inspect, at the place at which the register is kept between the hours of 9 am and 5 pm on each working day during the inspection period; and

    • (b) otherwise be available for inspection in the prescribed manner (if any).

    Compare: 1993 No 105 s 217

208 Copies of documents
  • (1) A person may require a copy of, or an extract from, a register that is available for inspection by the person under section 206 to be sent to the person—

    • (a) within 5 working days after the person has made a written request for the copy or extract to the issuer; and

    • (b) if the person has paid the prescribed fee (if any).

    (2) The issuer must comply with the request (subject to section 209).

    (3) A person who An issuer that contravenes subsection (2) commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1993 No 105 s 218

209 Reasons for request must be given and FMA may authorise non-compliance
  • (1) A person who makes a request under section 208(1) must include in the request a statement of the person's reasons for the request (including the intended use of purpose for which the person intends to use the copy of, or extract from, the register), and the issuer may, if it thinks fit, provide a copy of that statement to the FMA.

    (2) If the issuer provides a copy of the statement to the FMA before the expiry of the 5-working-day period referred to in section 208(1)(a),—

    • (a) the period within which the request may be complied with is 10 working days after the person made the request (rather than 5 working days); and

    • (b) the issuer does not have to comply with the request at all if the FMA, within that 10-working-day period, gives written notice to the issuer that it is not required to comply.

210 Restriction on use of information in registers
  • (1) A person must not—

    • (a) use information about a person obtained from a register kept under this subpart to contact or send material to that person; or

    • (b) disclose information of that kind knowing that the information is likely to be used to contact or send material to the person.

    Example

    An example of using information to send material to a person is putting a person's name and address on a mailing list for advertising material.

    (2) Subsection (1) does not apply if the use or disclosure of the information is—

    • (a) relevant to the holding of the interests recorded in the register or the exercise of the rights attaching to those interests; or

    • (b) approved by the issuer that keeps the register.

    (3) A person must not—

    • (a) use information obtained from a register kept under this subpart for any prescribed purpose; or

    • (a) use information obtained from a register kept under this subpart—

      • (i) for any prescribed purpose; or

      • (ii) in the case of a request under section 208(1), for any purpose other than the purpose disclosed in the statement under section 209(1); or

    • (b) disclose information of that kind knowing that the information is likely to be used for any such purpose.

    Compare: Corporations Act 2001 s 177 (Aust)

211 Issuer to send confirmation of financial products
  • (1) Every issuer of a regulated product must send to the product holder either the product or a confirmation document within the specified period after—

    • (a) the issue of the product; or

    • (b) the receipt by or on behalf of the issuer of a duly effected transfer of the product.

    (2) In this section,—

    confirmation document means a document that properly describes the nature, terms, and conditions of the financial product and the name of the product holder

    specified period means—

    • (a) the period of 1 month; or

    • (b) if the regulations have prescribed a different period to apply in particular circumstances, that period.

    (3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1978 No 103 s 54(1), (4)

212 Requirement for confirmation document does not apply in certain circumstances
  • (1) Section 211 does not apply—

    • (a) in respect of any of the following:

      • (i) financial products that are approved for transfer under, or in accordance with the rules of, a system that does not require a certificate for the transfer of the products:

      • (ii) debt securities or managed investment products of a kind that are continuously offered by a continuous issuer for issue:

      • (iii) equity securities or debt securities issued by a co-operative company to persons who are, or immediately after issue will be, transacting shareholders of the co-operative company:

      • (iv) equity securities issued by a building society or an industrial and provident society; or

    • (b) otherwise in the prescribed circumstances.

    (2) In this section, system means the following:

    • (a) a system approved under section 376:

    • (b) a designated settlement system (as defined in section 156M(1) of the Reserve Bank of New Zealand Act 1989).

    Compare: 1978 No 103 s 54(3), (4)

213 Certain provisions prevail over Companies Act 1993
  • If a provision of sections 206 to 212 210 is inconsistent with a provision in the Companies Act 1993, the provision of sections 206 to 212 210 prevails.

Copies of documents to be retained

213A Copies of documents must be retained for 7 years
  • (1) If this Act or the regulations provide for a certificate, notice, consent, confirmation, or other document to be given, made, or provided in respect of a regulated product, a regulated offer, or a registered scheme, the issuer of the regulated product, the offeror under the regulated offer, or the manager of the scheme must—

    • (a) keep a copy of the document for a period of at least 7 years after the date on which the document came into the possession of the issuer, offeror, or manager; and

    • (b) comply with the prescribed requirements relating to where the copy is kept, inspection of the copy, and making copies of the document available.

    (2) Subsection (1) applies only if the document is given, made, or provided by or to the issuer, offeror, or manager.

    (3) A person that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Subpart 6Accounting records, copies of documents, and audit of financial statements

Accounting records

214 Issuer must keep proper accounting records
  • (1) Every issuer of regulated products must ensure that there are kept at all times accounting records that—

    • (a) correctly record and explain the transactions,—

      • (i) in the case of an issuer of equity securities, debt securities, or derivatives, of the issuer; and

      • (ii) in the case of an issuer of managed investment products, of the issuer and of the registered scheme; and

    • (b) will at any time enable the financial position of the issuer and of any such scheme to be determined with reasonable accuracy; and

    • (c) will enable the issuer to ensure that the financial statements of the issuer and of any such scheme comply with the Financial Reporting Act 1993 and any prescribed requirements; and

    • (d) will enable the financial statements of the issuer and of any such scheme to be readily and properly audited.

    (2) In this subpart, financial statements means the financial statements and any group financial statements that are required to be prepared for the purposes of the Financial Reporting Act 1993, this Act, or the regulations.

    Compare: 1978 No 103 s 53

215 Place where accounting records to be kept
  • (1) Accounting records required to be kept by this subpart must be kept—

    • (a) at the registered office of the issuer (if any); or

    • (b) at another place that the directors of the issuer think fit.

    (2) The accounting records may be kept at a place outside New Zealand only if there are sent to, and kept at a place in, New Zealand documents in respect of the business dealt with in those accounting records that—

    • (a) disclose with reasonable accuracy the financial position of the business at intervals not exceeding 6 months; and

    • (b) will enable the preparation in accordance with the Financial Reporting Act 1993 of—

      • (i) the financial statements of the issuer and any registered scheme referred to in section 214; and

      • (ii) any other document annexed to any of those statements that gives information that is required by any enactment.

    Compare: 1978 No 103 s 53A

216 Accounting records to be in English
  • (1) Accounting records required to be kept by this subpart and the documents in respect of the business dealt with in those accounting records referred to in section 215 must be kept—

    • (a) in written form and in English; or

    • (b) in a form or manner in which they are easily accessible and convertible into written form in English.

    (2) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1978 No 103 s 53B

217 Period for which accounting records to be kept
  • (1) Accounting records kept under this subpart, or copies of them, must be retained by the issuer for a period of at least 7 years after the later of—

    • (a) the date the records are made; and

    • (b) the date of completion of the transaction to which the records relate.

    (2) Nothing in this section limits any other requirement under an enactment to keep accounting records for a particular time.

    Compare: 1978 No 103 s 53C

218 Inspection of accounting records
  • (1) Every issuer must make the accounting records required to be kept under this subpart and the documents in respect of the business dealt with in those accounting records referred to in section 215 available, in written form in English at all reasonable times for inspection without charge, to—

    • (a) the directors of the issuer; and

    • (b) the supervisor in respect of the financial products (if any); and

    • (c) any other persons authorised or permitted to inspect the accounting records of the issuer or scheme.

    (2) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

    Compare: 1978 No 103 s 53D

Copies of documents to be retained

219 Copies of documents must be retained for 7 years
  • (1) If this Act or the regulations provide for a certificate, notice, consent, confirmation, or other document to be given, made, or provided in respect of a regulated offer or a registered scheme, the offeror or manager of the scheme must—

    • (a) keep a copy of the document for a period of at least 7 years after the date on which the document came into the possession of the offeror or manager; and

    • (b) comply with the prescribed requirements relating to where the copy is kept, inspection of the copy, and making copies of the document available.

    (2) Subsection (1) applies only if the document is given, made, or provided by or to the offeror or manager.

    (3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

    (4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Audit requirement

220 Financial statements to be audited
  • (1) Every issuer of regulated products that are equity securities, debt securities, or derivatives must ensure that its financial statements are audited by a qualified auditor.

    (2) Every issuer of regulated products that are managed investment products must ensure that its financial statements and the financial statements for the scheme to which the products relate are audited by a qualified auditor.

    (3) This section applies only to financial statements prepared for the purposes of the Financial Reporting Act 1993.

    Compare: 1978 No 103 s 53E

221 Meaning of qualified auditor
  • (1) For the purposes of this Act, qualified auditor means—

    • (a) a licensed auditor; or

    • (b) a registered audit firm; or

    • (c) in the case of an issuer that is a public entity under the Public Audit Act 2001, the Auditor-General or any other person who may act as the auditor under that Act.

    (2) In this section, licensed auditor and registered audit firm have the same meanings as in section 6(1) of the Auditor Regulation Act 2011.

    (3) The appointment of a registered audit firm by the firm name to be the qualified auditor for the purposes of this Act is deemed to be the appointment of all the partners in the firm, from time to time, who are licensed auditors.

    (4) None of the following persons is qualified for appointment as the qualified auditor of an issuer of financial products:

    • (a) the issuer, or a director, an officer, or an employee of the issuer:

    • (b) a person who is a partner, or in the employment, of a person specified in paragraph (a):

    • (c) a body corporate.

    (5) A person is not qualified for appointment as the qualified auditor of an issuer of financial products if the person is, by virtue of subsection (4), disqualified for appointment as auditor of a person that is the issuer's subsidiary or holding company or a subsidiary of the issuer's holding company, or would be so disqualified if that person were a company.

    Compare: 1978 No 103 s 2C

Miscellaneous

222 Application of other Acts not affected
  • Nothing in this subpart limits the Companies Act 1993, the Financial Reporting Act 1993, or any other enactment.

    Compare: 1978 No 103 s 53F

Subpart 7Civil liability for certain contraventions of this Part

223 Part 4 governance provisions
  • (1) All of the provisions specified in subsections (3) and (4) are Part 4 governance provisions.

    (2) A contravention of any of the provisions listed in subsection (3) may give rise to a civil remedy civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.

    (3) The provisions are the following:

    • (a) section 89 (need for governing document and supervisor for regulated offer of debt security):

    • (b) section 111 (need to register managed investment scheme for regulated offer of managed investment product):

    • (c) sections 143 to 145 (requirements relating to custodianship of scheme property):

    • (d) section 169(3) (manager and delegate must desist from all activities relating to scheme on removal).

    • (e) section 214 (issuer must keep proper accounting records):

    • (f) section 220 (financial statements to be audited).

    (4) A contravention of any of the following may give rise to a civil remedy civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case:

    • (a) section 94(2) (changes to trust deed):

    • (b) sections 98 and 99 (duties applying to supervisor of debt security):

    • (c) sections 100 to 104 and 105(2) (duties on issuer to provide various reports, information, and assistance):

    • (d) sections 106 and 147, 107, 147, and 148 (meetings of product holders):

    • (e) section 120 (manager must ensure that ongoing registration requirements are complied with):

    • (f) section 121(5)(b) (manager must notify scheme participants of direction):

    • (g) sections 122 to 124 (contents of governing document for registered scheme):

    • (h) section 126(2) (changes to governing document):

    • (i) sections 130 to 133 (duties applying to manager, investment manager, and directors and senior managers of manager):

    • (j) sections 134 to 138 and 142(2) (duties on issuer to provide various reports, information, and assistance):

    • (k) sections 140 and 141 (duties applying to supervisor of registered scheme):

    • (l) section 146 (duty on supervisor to refuse to act on wrongful directions):

    • (m) sections 150 and 151 (requirements relating to statement of investment policy and objectives):

    • (n) sections 153 to 155 (actions that must be taken on limit breaks, pricing errors, and other non-compliances, and requirements for actuarial examinations):

    • (o) section 157 (limits on reversion of scheme property in certain schemes to non-scheme participant contributor):

    • (p) section 159 (general prohibition on related party transactions):

    • (q) section 161 (additional restrictions on transactions of restricted schemes restricted schemes' holdings of in-house assets):

    • (r) sections 163, 164, 165(4), and 166 (scheme participants transfer rules):

    • (s) section 174 (former manager must hand over records and give reasonable assistance):

    • (t) section 180(2) (manager must notify scheme participants of direction):

    • (u) sections 182 to 184, and 186 to 188 (duties to report problems):

    • (v) section 190(2) (FMA’s directions to supervisor):

    • (w) section 210 (restriction on use of information in registers).

    • (x) sections 215 and 217 (place where, and period for which, accounting records to be kept).

Part 5
Dealing in financial products on markets

Subpart 1Purposes, overview, and interpretation

224 Additional purposes of Part
  • (1) This Part has the following purposes for financial product markets (in addition to those set out in sections 3 and 4):

    • (a) to promote fair, orderly, and transparent financial product markets:

    • (b) to encourage a diversity of financial product markets to take account of the differing needs and objectives of issuers and investors.

    (2) This section does not limit section 3 or 4.

225 Overview
  • (1) In this Part,—

    • (a) this subpart contains the additional purposes of this Part and interpretation provisions:

    • (b) subpart 2 prohibits insider trading on licensed markets:

    • (c) subpart 3 prohibits market manipulation on licensed markets (including a general prohibition on false and misleading conduct in relation to any dealing in quoted financial products):

    • (d) subpart 4 requires listed issuers to comply with the continuous disclosure provisions of listing rules of a licensed market:

    • (e) subpart 5 requires substantial product holders in listed issuers to disclose their interests:

    • (f) subpart 6 requires directors and senior managers of listed issuers to disclose their interests and dealings in quoted financial products of or connected to the listed issuer:

    • (g) subpart 7 provides for the licensing of financial product markets, the approval of market rules of licensed markets, the ability to impose a control limit on licensed market operators, and the ability to make regulations modifying this subpart for particular markets:

    • (h) subpart 8 contains requirements applying in the operation of a licensed market:

    • (i) subpart 9 provides for the transfer of transferable financial products:

    • (j) subpart 10 regulates the making of unsolicited offers to purchase financial products off-market.

    (2) Provisions of this Part may be disapplied or modified in relation to a licensed market (and any issuers listed on that licensed market) under regulations made under section 350.

    (3) This section is a guide only to the general scheme and effect of this Part.

Material information and generally available to the market

226 Meaning of material information
  • (1) In this Part, material information, in relation to a listed issuer, is information that—

    • (a) a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of quoted financial products of the listed issuer; and

    • (b) relates to particular financial products, a particular listed issuer, or particular listed issuers, rather than to financial products generally or listed issuers generally.

    (2) In this Part, material information, in relation to quoted derivatives, the underlying of quoted derivatives, or the issuer of a financial product underlying quoted derivatives, is information that—

    • (a) a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of the derivatives; and

    • (b) relates to the particular derivatives, rather than to derivatives generally.

    • (b) relates to particular derivatives, a particular underlying, or a particular issuer of a financial product underlying quoted derivatives, rather than to derivatives generally or underlyings generally or issuers generally.

    Compare: 1988 No 234 ss 3, 3A

227 Meaning of generally available to the market
  • (1) In this Part, information is generally available to the market

    • (a) if—

      • (i) it is information that has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in relevant financial products; and

      • (ii) since it was made known, a reasonable period for it to be disseminated among those persons has expired; or

    • (b) if it is likely that persons who commonly invest in relevant financial products can readily obtain the information (whether by observation, use of expertise, purchase from other persons, or any other means); or

    • (c) if it is information that consists of deductions, conclusions, or inferences made or drawn from either or both of the kinds of information referred to in paragraphs (a) and (b).

    (2) In this section, relevant financial products means financial products of a kind the price of which might reasonably be expected to be affected by the information.

    (3) Information that is notified in accordance with a continuous disclosure obligation is generally available to the market under subsection (1)(a) immediately on it being made available to participants in a licensed market (without limiting how quickly the reasonable period of dissemination in subsection (1)(a)(ii) may be satisfied in other cases).

    Compare: 1988 No 234 s 4

Certain derivatives treated as being quoted financial products of listed issuer

228 Certain derivatives treated as being quoted financial products of listed issuer
  • (1) If the underlying of a derivative is a quoted financial product of a listed issuer, the derivative must, for the purposes of this subpart and subpart 2, be treated as being a quoted financial product of the listed issuer (whether the derivative is quoted or not).

    (2) See also section 296 (which relates to the disclosure of relevant interests and dealings in relevant interests by directors and senior managers).

Insider conduct

229 Meaning of information insider, inside information, and adviser
  • (1) In this Part, a person is an information insider of a listed issuer if that person—

    • (a) has material information relating to the listed issuer that is not generally available to the market; and

    • (b) knows or ought reasonably to know that the information is material information; and

    • (c) knows or ought reasonably to know that the information is not generally available to the market.

    (2) A listed issuer may be an information insider of itself.

    (3) In this Part, a person is an information insider in relation to quoted derivatives if that person—

    • (a) has material information relating to any of the following that is not generally available to the market:

      • (i) the derivatives:

      • (ii) the underlying:

      • (iii) the issuer of a financial product underlying the derivatives; and

    • (b) knows or ought reasonably to know that the information is material information; and

    • (c) knows or ought reasonably to know that the information is not generally available to the market.

    (4) In this Part, inside information means—

    • (a) the information in respect of which a person is an information insider of the listed issuer in question; or

    • (b) in the case of quoted derivatives, the information in respect of which a person is an information insider in relation to the derivatives in question.

    (5) In this Part, adviser means an adviser acting in a professional capacity (for example, a lawyer, an accountant, or a financial adviser).

    Compare: 1988 No 234 ss 8A, 8B, 11E

Relevant interests

230 Relevant interests in financial products (basic rule)
  • (1) In this Part Act, a person has a relevant interest in a financial product if the person—

    • (a) is a registered holder of the product; or

    • (b) is a beneficial owner of the product; or

    • (c) has the power to exercise, or to control the exercise of, a right to vote attached to the product; or

    • (d) has the power to acquire or dispose of, or to control the acquisition or disposal of, the product.

    (2) Subsection (1) applies regardless of whether the power or control is express or implied, direct or indirect, legally enforceable or not, related to a particular financial product or not, exercisable presently or in the future, or exercisable alone or jointly with another person or persons (but a power to cast merely 1 of many votes is not, in itself, a joint power of this kind).

    (3) Subsection (1) applies regardless of whether or not the power or control is or can be made subject to restraint or restriction or is exercisable only on the fulfilment of a condition.

    (4) If 2 or more persons can jointly exercise a power, each of those persons is taken to have the power.

    Compare: 1988 No 234 s 5

231 Extension of basic rule to powers or controls exercisable through trust, agreement, etc
  • (1) A person has a power or control referred to in section 230 if the power or control is, or may at any time be, exercised under, by virtue of, by means of, or as a result of a revocation or breach of, a trust or agreement (or any combination of them).

    (2) Subsection (1) applies regardless of whether or not the trust or agreement is legally enforceable or whether or not the person is a party to it.

    Compare: 1988 No 234 s 5A

232 Extension of basic rule to interests held by other persons under control or acting jointly
  • A person (A) has a relevant interest in a financial product that another person (B) has if—

    • (a) B or B's directors are accustomed or under an obligation (whether legally enforceable or not) to act in accordance with A's directions, instructions, or wishes in relation to a power or control referred to in section 230; or

    • (b) A has the power to exercise, or control the exercise of, the right to vote attached to 20% or more of the voting products of B; or

    • (c) A has the power to acquire or dispose of, or to control the acquisition or disposal of, 20% or more of the voting products of B; or

    • (d) A and B are related bodies corporate; or

    • (e) A and B have an agreement to act in concert in relation to a power or control referred to in section 230.

    Compare: 1988 No 234 s 5B(1)

233 Situations not giving rise to relevant interests
  • (1) A person (A) does not have a relevant interest in a financial product under sections 230 to 232 merely because—

    • (a) the ordinary business of A consists of, or includes, the lending of money or the provision of financial services, or both, and A has the relevant interest only as security given for the purposes of a transaction entered into in the ordinary course of the business of A; or

    • (b) A is authorised to undertake trading activities on a licensed market and A acts for another person to acquire or dispose of those products on behalf of that person in the ordinary course of A's business of carrying out those trading activities; or

    • (c) A has been authorised by resolution of the directors of a body corporate to act as its representative at a particular meeting of members product holders, or class of members product holders, of a listed issuer, and a copy of the resolution is deposited with the listed issuer before the meeting; or

    • (d) A is appointed as a proxy to vote at a particular meeting of members product holders, or of a class of members product holders, of the listed issuer and the instrument of A's appointment is deposited with the listed issuer before the meeting; or

    • (e) A is a bare trustee of a trust to which the products are subject; or

    • (f) A is a director of a body corporate and the body corporate has a relevant interest in the products; or

    • (g) A is a member product holder of a body corporate and the body corporate's constitution gives the member product holder pre-emptive rights on the transfer of the products, if all members product holders of the products have pre-emptive rights on the same terms; or

    • (h) A is an operator of a designated settlement system (as defined in section 156M(1) of the Reserve Bank of New Zealand Act 1989) and is acting in the ordinary course of that business.

    (2) Subsection (1)(a) to (h) do not apply to a person if the person is currently declared by the FMA, by notice under section 533(1)(f), to be a person that is not exempt under any of those paragraphs.

    (3) For the purposes of subsection (1)(e), a trustee may be a bare trustee even if he or she is entitled as a trustee to be remunerated out of the income or property of the trust.

    Compare: 1988 No 234 s 6

Subpart 2Insider trading

Insider conduct prohibited

234 Prohibition of insider conduct
  • (1) A person must not do any of the things set out in any of sections 235(1), 236(1), and 237(1) if the person is an information insider of the listed issuer.

    (2) A person must not do any of the things set out in any of sections 235(2), 236(2), and 237(2) if the person is an information insider in relation to quoted derivatives.

    Compare: 1988 No 234 s 8

235 Information insider must not trade
  • (1) An information insider of a listed issuer must not trade quoted financial products of the listed issuer.

    (2) An information insider in relation to quoted derivatives must not trade the derivatives.

    (3) In this subpart, trade

    • (a) means acquire or dispose of; but

    • (b) does not include acquire, or dispose of, by inheritance or gift.

    Compare: 1988 No 234 s 8C

236 Information insider must not disclose inside information
  • (1) An information insider (A) of a listed issuer must not directly or indirectly disclose inside information to another person (B) if A knows or ought reasonably to know or believes that B will, or is likely to,—

    • (a) trade quoted financial products of the listed issuer; or

    • (b) advise or encourage another person (C) to trade or hold those products.

    (2) An information insider (A) in relation to quoted derivatives must not directly or indirectly disclose inside information to another person (B) if A knows or ought reasonably to know or believes that B will, or is likely to,—

    • (a) trade the derivatives; or

    • (b) advise or encourage another person (C) to trade or hold those derivatives.

    Compare: 1988 No 234 s 8D

237 Information insider must not advise or encourage trading
  • (1) An information insider (A) of a listed issuer must not—

    • (a) advise or encourage another person (B) to trade or hold quoted financial products of the listed issuer:

    • (b) advise or encourage B to advise or encourage another person (C) to trade or hold those financial products.

    (2) An information insider (A) in relation to quoted derivatives must not—

    • (a) advise or encourage another person (B) to trade or hold the derivatives:

    • (b) advise or encourage B to advise or encourage another person (C) to trade or hold those derivatives.

    Compare: 1988 No 234 s 8E

238 Criminal liability for insider conduct
  • (1) A person who contravenes any of sections 235 to 237 commits an offence if the person knows—

    • (a) that the information is material information; and

    • (b) that the information is not generally available to the market; and

    • (c) in the case of a contravention of section 236, of any of the matters set out in section 236(1)(a) or (b) or (2)(a) or (b).

    (2) A person who commits an offence under subsection (1) is liable on conviction on indictment,—

    • (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and

    • (b) in any other case, to a fine not exceeding $2.5 million.

    Compare: 1988 No 234 s 8F

When prohibition on insider conduct does not apply

239 Exception for trading required by enactment or rule of law
  • Section 235 does not apply to trading in financial products that is required by an enactment or any rule of law.

    Compare: 1988 No 234 s 9

240 Exception for disclosure required by enactment or rule of law or by FMA
  • Section 236 does not apply to disclosure that is required by—

    • (a) an enactment or any rule of law; or

    • (b) the FMA when exercising a power under this Act or any other enactment.

    Compare: 1988 No 234 s 9A

241 Exception for disclosure in connection with preparing PDS or disclosure document
  • Section 236 does not apply to disclosure that is necessary, in connection with an offer