Dated at Wellington this 29th day of July 2008.
The Common Seal of the Securities Commission was affixed in the presence of:
C A N Beyer,
Statement of reasons
Note: The following statement of reasons should be read in conjunction with the statement(s) of reasons appended to the:
This notice comes into force on its notification in the Gazette and expires on 30 September 2012. It replaces the Securities Act (Local Authority and Other Venture Capital Schemes) Exemption Notice 2003 (the former notice).
The notice applies to offers of equity and participatory securities made in accordance with venture capital investment schemes administered under an approved code of practice by certain bodies designated by the Securities Commission.
The notice exempts the body administering the scheme and the members of the scheme, subject to conditions, from the prospectus and minimum subscription requirements of the Securities Act 1978 (the Act), regulation 17 of the Securities Regulations 1983 (the Regulations), and, in the case of offers of participatory securities, from the participation deed and statutory supervisor requirements of the Act.
The notice also exempts the body administering the scheme and members of the scheme from the authorised advertisement requirements of the Act, regulation 17 of the Regulations, and the participation deed and statutory supervisor requirements of the Act in respect of the distribution of certain documents that seek preliminary indications of interest by members of the public in subscribing for those securities.
The notice adds a new exemption for the body administering the scheme and the members of the scheme, subject to a condition, from the participation deed, statutory supervisor, prospectus, minimum subscription, and investment statement requirements of the Act and the Regulations in respect of the offer and allotment of securities to eligible persons (basically as defined in section 5(2CC) of the Act).
The Securities Commission considers that it is appropriate to grant the exemptions because—
the costs of full Securities Act 1978 compliant fund-raising is often prohibitive to small to medium start-up or expanding businesses seeking limited funds, or with limited existing resources with which to undertake the fund-raising process. However, in considering what relief from securities law requirements may be appropriate it is recognised that investment in businesses of this nature is high risk. Further, the entrepreneurs running the businesses are often enthusiastic and convincing about the prospects for success but may be less informative about the risks of investment:
the notice addresses the cost difficulties faced by these businesses in raising funds by providing substantial exemptions from the usual Securities Act 1978 requirements, but on conditions that alert investors to the risks of investing in businesses of this nature. The notice does this by allowing the businesses to raise funds with substantial exemptions from the usual securities law requirements but under the supervision of an independent scheme administrator:
key differences between this notice and the former notice—
increase the range of businesses that can raise funds under it and the range of investors from whom funds can be sought (including wealthy and experienced investors as eligible persons) whilst remaining within the scope of the policy envisaged by the exemptions and improving the warnings and protections for investors; and
simplify rules and procedures imposed to make fund-raising more cost and resource efficient; and
clarify requirements for compliance with the notice; and
update the schedule of scheme administrators designated by the Commission:
the criteria the Commission will use to consider future applications for designation as scheme administrators, together with the code of practice, will be published on the Commission’s Internet site.
Note: The preceding statement of reasons should be read in conjunction with the statement(s) of reasons appended to the: