New Zealand Legislation: Regulations

Statement of reasons

This notice, which comes into force on the day after the date of its notification in the Gazette and expires on the close of 31 October 2013, exempts certain subsidiaries of General Electric Capital Corporation (GE Capital) from being issuers under section 4(1)(ba) of the Financial Reporting Act 1993 by virtue of being recipients of money raised by GE Capital New Zealand Funding (GE Funding) from any offer of debt securities to the public.

The effect of the exemption is that each subsidiary of GE Capital to whom it applies will not be required to file individual audited financial statements. The exemption is subject to specified conditions.

The Securities Commission considers that it is appropriate to grant the exemption for the following reasons:

• the conduit issuer provisions of the Financial Reporting Act 1993 were introduced to require public reporting by entities that have the effective use of funds raised from the public, but which have structured themselves in such a way as to avoid being issuers under the law and depriving investors of the information to evaluate the true risk of their investment; and

• the comprehensive nature of the guarantee provided by GE Capital is such that it has taken on the credit risk for the failure of the investment and performance of the subsidiaries who actually utilise money raised from the offer; and

• by requiring the financial statements of GE Capital as guarantor to be registered in New Zealand in addition to the financial statements of GE Funding, investors will have access to the information they need to evaluate the true risk of their investment; and

• the warning statement required will alert investors to the fact that the guarantor's financial statements are prepared under US GAAP rather than NZ GAAP. The Securities Commission is satisfied that US GAAP financial statements will provide investors with sufficient information to make an informed assessment of the guarantor's funding position.