Dated at Wellington this 22nd day of March 2011.
The Common Seal of the Securities Commission was affixed in the presence of:
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, which comes into force on the day after the date of its notification in the Gazette and expires on 30 September 2012, replaces the Securities Act (Financial Institutions) Exemption Notice 2007 (the 2007 notice).
The notice provides financial institutions with exemptions, subject to conditions, from—
section 37A(1)(c) and (1A)(d) of the Securities Act 1978 (the Act); and
various prospectus content requirements in Schedule 2 of the Securities Regulations 2009 (the 2009 regulations) that relate to financial statements.
The exemptions allow financial institutions that have non-guaranteeing subsidiaries that do not exceed 5% of the total assets, equity, and profit or loss after taxation of the group to use the financial statements for the whole of the financial institution group (including non-guaranteeing subsidiaries) in respect of a prospectus for debt securities.
The Securities Commission considers that it is appropriate to grant the exemptions because—
allowing the financial institutions referred to above to use the financial statements for the whole of the financial institution group reduces the regulatory compliance costs of preparing a prospectus. The 5% threshold ensures the financial statements presented provide a reasonable representation of the financial backing to the debt securities on offer:
consequential exemptions are appropriate to provisions of the Act that define the life of the prospectus (by reference to the date of the financial statements contained or referred to in the prospectus) and to provisions of the Act that specify the financial statements that must accompany a directors’ certificate extending the life of a prospectus. The exemptions tie these requirements to the financial statements for the whole of the financial institution group:
these exemptions continue existing exemptions in the 2007 notice from provisions of the Securities Regulations 1983 in respect of equivalent provisions of the 2009 regulations for these financial institutions with non-material non-guaranteeing subsidiaries:
the financial statement disclosure requirements prescribed by the 2009 regulations are now consistent with generally accepted accounting practice. Accordingly, the exemptions that have been continued in this notice are no longer required to align the financial statements requirements with generally accepted accounting practice. In particular, conditions in the 2007 notice prohibiting the use of equity accounting are not continued because, unlike the Securities Regulations 1983, the 2009 regulations do not prohibit the inclusion in prospectuses of financial statements that have used equity accounting as a basis of reflecting the value of non-wholly owned subsidiaries:
the exemptions in the 2007 notice for financial institutions that have material non-guaranteeing subsidiaries (non-guaranteeing subsidiaries that exceed the 5% threshold tests) are not continued in this notice. The purpose of these exemptions was to align the financial statement disclosure requirements with generally accepted accounting practice and so these exemptions are now redundant:
the transitional provisions reduce the short-term compliance costs resulting from the regulatory changes for issuers that have previously relied on the 2007 notice. These issuers may continue to rely on the 2007 notice in respect of securities offered under an existing registered prospectus.
Note: The preceding statement of reasons should be read in conjunction with the statement(s) of reasons appended to the: