Dated at Wellington this 16th day of December 2011.
Head of Primary Regulatory Operations.
Statement of reasons
This notice, which comes into force on 20 December 2011, exempts, subject to conditions, the issuers of certain collective investment schemes from section 37A(1A)(c)(i) of the Securities Act 1978. The notice relates to the certificate that may be registered that allows the date of allotment of securities to be more than 9 months after the date of the statement of financial position referred to in the prospectus. Section 37A(1A)(c)(i) requires the directors of the issuer to state in the certificate that the financial position shown in the statement of financial position has not materially and adversely changed during the period from the date of the statement of financial position to the date of the certificate.
The first part of the exemption, in clauses 6 and 7 of this notice, is substantially similar to the recently expired Securities Act (Directors’ Certificates—Collective Investment Schemes) Exemption Notice 2009, and requires issuers to provide interim financial statements. However, this exemption, in clauses 6 and 7, can be used only in respect of renewal certificates registered with the Registrar of Financial Service Providers before 31 December 2011.
The second part of the exemption, in clauses 8 to 10 and the Schedule of this notice, is new and requires issuers to provide scheme performance information, scheme statistics, and director certifications. These new exemptions can be used in respect of renewal certificates registered with the Registrar of Financial Service Providers on or before 31 March 2013.
The exemptions expire 9 months after the date up until which renewal certificates can be registered under the exemptions in the notice. This means the exemptions and conditions apply throughout the period when information may need to be published on an Internet site to comply with requirements of the notice.
The Financial Markets Authority considers that it is appropriate to grant the exemptions in this notice because—
the exemptions provide relief to issuers of liquid collective investment schemes from the requirement to register a new prospectus in circumstances where the existing prospectus is not false or misleading but there has been a material and adverse change in the financial circumstances of the scheme either because of general market volatility or because investment redemptions have exceeded new investments in the scheme:
the conditions of the new longer-term exemption require the issuer to register, and publish, scheme performance information, scheme statistics, and director certifications, which provide information to retail investors, and their advisers, to enable them to easily understand scheme performance and make informed decisions about their investment options. The directors are liable if this information is false or misleading in a material particular, including by omission of information:
the conditions of the alternative temporary exemption requiring the issuer to register, and publish, interim financial statements are substantially equivalent to exemptions granted in the recently expired Securities Act (Directors’ Certificates—Collective Investment Schemes) Exemption Notice 2009. The condition requiring the issuer to register and publish the interim financial statements and the required director certifications is designed to provide information that can be analysed by investors, and their advisers, to enable them to understand scheme performance and make informed decisions about their investment options. The directors are liable if this information is false or misleading in a material particular, including by omission of information:
both the longer-term exemption and the alternative temporary exemption require information to be provided to investors so that they, and their advisers, can make informed investment decisions. The longer-term exemption is the Financial Markets Authority's preferred solution. It requires key information relevant to investors to be provided in a more easily understandable form. This information is also cheaper to produce than interim financial statements:
where the conditions of these exemptions are met, a requirement to immediately register a new prospectus would impose costs on the issuer that would not be matched by the benefits to investors of a new prospectus.
In light of the limited application of the exemptions to liquid collective investment schemes, and the conditions of the exemptions, which require registration and publication of updated financial information about the scheme, the Financial Markets Authority considers that the exemptions are not broader than reasonably necessary to address the matters that gave rise to the exemptions, and that they will not cause significant detriment to subscribers.