Securities Act (Directors' Certificates—Collective Investment Schemes) Exemption Notice 2011

Reprint
as at 31 December 2013

Coat of Arms of New Zealand

Securities Act (Directors' Certificates—Collective Investment Schemes) Exemption Notice 2011

(SR 2011/430)


Note

Changes authorised by subpart 2 of Part 2 of the Legislation Act 2012 have been made in this reprint.

Note 4 at the end of this reprint provides a list of the amendments incorporated.

This notice is administered by the Financial Markets Authority.


Pursuant to section 70B of the Securities Act 1978, the Financial Markets Authority gives the following notice (to which is appended a statement of reasons of the Financial Markets Authority).

Notice

1 Title
  • This notice is the Securities Act (Directors' Certificates—Collective Investment Schemes) Exemption Notice 2011.

2 Commencement
  • This notice comes into force on 20 December 2011.

3 Revocation
  • This notice is revoked on the close of 30 November 2016.

    Clause 3: replaced, on 31 December 2013, by clause 4 of the Securities Act (Directors' Certificates—Collective Investment Schemes) Exemption Amendment Notice 2013 (SR 2013/497).

4 Interpretation
  • (1) In this notice, unless the context otherwise requires,—

    Act means the Securities Act 1978

    other arrangement means an arrangement or scheme—

    • (a) that—

      • (i) involves the issue of participatory securities; or

      • (ii) is a unit trust; or

      • (iii) is a superannuation scheme; and

    • (b) the securities of which are not quoted on a securities market operated by a registered exchange; and

    • (c) the securities of which are not quoted on a securities market operated by an overseas stock exchange

    prospectus means the registered prospectus relating to the specified securities

    Regulations means the Securities Regulations 2009

    specified scheme means an arrangement or scheme if—

    • (a) the arrangement or scheme—

      • (i) involves the issue of participatory securities; or

      • (ii) is a unit trust; or

      • (iii) is a superannuation scheme; and

    • (b) all directors of the issuer are of the opinion after due enquiry by them that—

      • (i) the non-cash assets of the arrangement or scheme (other than non-cash assets that are interests in other arrangements) are sufficiently liquid to allow a reasonably reliable value for the non-cash assets of the arrangement or scheme to be calculated; and

      • (ii) at least 80% of the non-cash assets of the arrangement or scheme (other than non-cash assets that are interests in other arrangements) is, in the ordinary course of business, readily realisable within 5 working days; and

    • (c) the arrangement or scheme does not hold more than 10% of the equity securities of any 1 issuer; and

    • (d) in the case of an arrangement or scheme that invests in 1 or more other arrangements, either–—

      • (i) all directors of the issuer are of the opinion after due enquiry by them that both of the following apply:

        • (A) the non-cash assets of the arrangement or scheme (including those that are interests in other arrangements) are sufficiently liquid to allow a reasonably reliable value for the non-cash assets of the arrangement or scheme to be calculated; and

        • (B) at least 80% of the non-cash assets of the arrangement or scheme (including those that are interests in other arrangements) is, in the ordinary course of business, readily realisable within 5 working days; or

      • (ii) all of the following apply:

        • (A) none of the other arrangements hold more than 10% of the equity securities of any 1 issuer; and

        • (B) the subscription prices for the securities issued in relation to the other arrangements are calculated by reference to the value of the assets of the other arrangements and are set on at least a weekly basis; and

        • (C) all directors of the issuer are of the opinion after due enquiry by them that the non-cash assets of the other arrangements are sufficiently liquid to allow a reasonably reliable value for the non-cash assets of the arrangement or scheme to be calculated

    specified security means a security issued in relation to a specified scheme.

    (2) Any term or expression that is defined in the Act or the Regulations and used, but not defined, in this notice has the same meaning as in the Act or the Regulations.

5 Application if prospectus relates to 2 or more types of securities
  • (1) This clause applies if a prospectus relates to 2 or more types of securities.

    (2) Nothing in this notice prevents the issuer from doing either or both of the following:

    • (a) complying with section 37A(1A) of the Act in respect of any of those types of securities:

    • (b) relying on the exemption in clauses 8 and 10, in respect of any or all of the specified schemes that the prospectus relates to.

    Clause 5: amended, on 31 December 2013, by clause 5 of the Securities Act (Directors' Certificates—Collective Investment Schemes) Exemption Amendment Notice 2013 (SR 2013/497).

6 Exemption from section 37A(1A)(c)(i) of Act in respect of renewals before 31 December 2011
  • [Expired]

    Clause 6: expired, on 1 October 2012, by clause 3(1).

7 Conditions of exemption in clause 6
  • [Expired]

    Clause 7: expired, on 1 October 2012, by clause 3(1).

8 Exemption from section 37A(1A)(c)(i) of Act in respect of renewals
  • Every issuer of specified securities, and every person acting on its behalf, is exempted, in respect of specified securities, from section 37A(1A)(c)(i) of the Act in respect of any certificate that is registered under section 37A(1A) of the Act.

    Clause 8 heading: amended, on 31 December 2013, by clause 6(1) of the Securities Act (Directors' Certificates—Collective Investment Schemes) Exemption Amendment Notice 2013 (SR 2013/497).

    Clause 8: amended, on 31 December 2013, by clause 6(2) of the Securities Act (Directors' Certificates—Collective Investment Schemes) Exemption Amendment Notice 2013 (SR 2013/497).

9 Conditions of exemption in clause 8
  • (1) The exemption in clause 8 is subject to the conditions that—

    • (a) the issuer must have delivered to the Registrar for registration a certificate—

      • (i) that complies with section 37A(1A) of the Act (apart from the requirement in paragraph (c)(i) of that subsection); and

      • (ii) that additionally includes in respect of the specified scheme the scheme performance information, scheme statistics, and director certifications that are referred to in the Schedule of this notice; and

    • (b) during the period in which the issuer relies on the exemption in clause 8,—

      • (i) the issuer must make the certificate referred to in paragraph (a)(i) and (ii) available at all reasonable times on an Internet site maintained by or on behalf of the issuer; and

      • (ii) the certificate referred to in paragraph (a)(i) and (ii) must be accessible by means of a prominent hyperlink on every page where the current subscription price for the specified securities is displayed on an Internet site maintained by or on behalf of an issuer, a trustee, or a promoter of the specified scheme; and

      • (iii) each prominent hyperlink required under subparagraph (ii) must be accompanied by the following statement:

        The value of the net assets of the scheme has reduced from that shown in the statement of financial position contained or referred to [as applicable] in the prospectus. The hyperlink provides access to an explanation of the value reduction, and includes updated information on scheme performance and statistics.

    (2) Subclause (1)(b) ceases to apply after the issuer ceases to rely on the exemption in clause 8.

10 Exemption from regulation 26 of Regulations
  • Every issuer of specified securities, and every person acting on its behalf, is exempted, in respect of specified securities, from regulation 26 of the Regulations in respect of any information that is required by clause 9(1)(b) to be made available on the issuer's Internet site.


Schedule
Scheme performance information, scheme statistics, and director certifications

cl 9(1)(a)(ii)

1 Scheme performance information
  • (1) The purpose of this clause is to ensure that the investment return of the specified scheme can be compared against comparative benchmarks and the average cash rate.

    (2) Information must be provided, in a table format, that compares the matters referred to in subclause (3) in respect of each of the periods referred to in subclause (4).

    (3) The matters that must be compared are as follows:

    • (a) the investment return of the specified scheme. The investment return must be calculated gross of tax but net of all investment costs and charges. Investment costs and charges include performance fees, but do not include administration fees charged to members:

    • (b) if a benchmark asset allocation for the specified scheme has previously been published, the benchmark investment return for the specified scheme. The benchmark investment return must be calculated gross of tax by multiplying the benchmark asset allocation for each asset class by a gross benchmark index return for that asset class and summing all the components. The index used for each asset class must be stated:

    • (c) the average cash rate as expressed by the NZ 90-day bank bill rate.

    (4) The periods for which the matters in subclause (3) must be compared are as follows:

    • (a) the most recently completed financial quarter; and

    • (b) the portion of the financial year that ends at the end of the most recently completed financial quarter; and

    • (c) the previous 1, 3, and 5 financial years.

    (5) The returns and rates in respect of the previous 1, 3, and 5 financial years must be annualised. The other rates and returns must not.

    (6) If a specified scheme came into existence during a period referred to in subclause (4), information for that period, or any earlier period, need not be provided. Information for any remaining periods referred to in subclause (4) must be provided. Additional information must be provided that states—

    • (a) the date that the specified scheme came into existence; and

    • (b) the following information, which must be included in the table format required by subclauses (2) and (3):

      • (i) the average annual investment return of the specified scheme calculated from the date the specified scheme came into existence until the end of the most recently completed financial quarter; and

      • (ii) the average annual benchmark investment return for the specified scheme calculated from the date the specified scheme came into existence until the end of the most recently completed financial quarter; and

      • (iii) the average annual cash rate as expressed by the NZ 90-day bank bill rate calculated from the date the specified scheme came into existence until the end of the most recently completed financial quarter; and

    • (c) that this information is calculated from the date the specified scheme came into existence until the end of the most recently completed financial quarter.

2 Scheme statistics
  • (1) Scheme statistics as at the end of the most recently completed financial quarter, and as at the end of each of the previous 5 financial years, must be provided in a table as follows:

    • (a) the number of investors:

    • (b) the aggregate number of units held by investors:

    • (c) the aggregate amount of funds under management.

    (2) The number of investors provided under subclause (1)(a) in respect of any scheme available through a wrap or master trust platform must be the aggregate number of investors that have invested through each of the platforms.

    (3) If a specified scheme came into existence after a date for which information referred to in paragraphs (a), (b), and (c) of subclause (1) is required to be provided under those paragraphs, information relating to that date, or any earlier date, need not be provided.

3 Director certifications
  • (1) The directors of the issuer must make the following statements:

    • (a) a statement to the effect that the value of the net assets of the scheme has reduced from that shown in the statement of financial position contained or referred to in the prospectus and that the reduction is mainly due to (as is applicable)—

      • (i) a decline in market prices of those assets; or

      • (ii) a significant amount of investor redemptions; or

      • (iii) both a decline in market prices of those assets and a significant amount of investor redemptions:

    • (b) a statement that describes and explains the decline in market prices of the scheme’s assets or of the amount of investor redemptions, or both, whichever is referred to in the certificate as the cause of the decline in the scheme’s net assets:

    • (c) a statement that, in the opinion of all directors of the issuer after due enquiry by them, the prospectus is not, at the date of the certificate, false or misleading in a material particular by reason of failing to refer, or give proper emphasis, to adverse circumstances:

    • (d) a statement that, in the opinion of all directors of the issuer after due enquiry by them, the information relating to the scheme contained in the certificate is calculated correctly, and is not false or misleading in a material particular by reason of failing to refer, or give proper emphasis, to adverse circumstances:

    • (e) a statement that, in the opinion of all directors of the issuer after due enquiry by them,—

      • (i) the non-cash assets of the arrangement or scheme (other than non-cash assets that are interests in other arrangements, if applicable) are sufficiently liquid to allow a reasonably reliable value for the non-cash assets of the arrangement or scheme to be calculated; and

      • (ii) at least 80% of the non-cash assets of the arrangement or scheme (other than non-cash assets that are interests in other arrangements, if applicable) is, in the ordinary course of business, readily realisable within 5 working days; and

      • (iii) the arrangement or scheme does not hold more than 10% of the equity securities of any 1 issuer.

    (2) If an arrangement or scheme invests in 1 or more other arrangements, the directors of the issuer must additionally make the following statements:

    • (a) a statement that the arrangement or scheme invests in 1 or more other arrangements; and

    • (b) either—

      • (i) a statement that, in the opinion of all directors of the issuer after due enquiry by them, both of the following apply:

        • (A) the non-cash assets of the arrangement or scheme (including those that are interests in other arrangements) are sufficiently liquid to allow a reasonably reliable value for the non-cash assets of the arrangement or scheme to be calculated; and

        • (B) at least 80% of the non-cash assets of the arrangement or scheme (including those that are interests in other arrangements) is, in the ordinary course of business, readily realisable within 5 working days; or

      • (ii) a statement that all of the following apply:

        • (A) none of the other arrangements hold more than 10% of the equity securities of any 1 issuer; and

        • (B) the subscription prices for the securities issued in relation to the other arrangements are calculated by reference to the value of the assets of the other arrangements and are set on at least a weekly basis; and

        • (C) all directors of the issuer are of the opinion after due enquiry by them that the non-cash assets of the other arrangements are sufficiently liquid to allow a reasonably reliable value for the non-cash assets of the arrangement or scheme to be calculated.

Dated at Wellington this 16th day of December 2011.

Sue Brown,
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.


Issued under the authority of the Legislation Act 2012.

Date of notification in Gazette: 19 December 2011.


Reprints notes
1 General
  • This is a reprint of the Securities Act (Directors' Certificates—Collective Investment Schemes) Exemption Notice 2011 that incorporates all the amendments to that notice as at the date of the last amendment to it.

2 Legal status
  • Reprints are presumed to correctly state, as at the date of the reprint, the law enacted by the principal enactment and by any amendments to that enactment. Section 18 of the Legislation Act 2012 provides that this reprint, published in electronic form, will have the status of an official version once issued by the Chief Parliamentary Counsel under section 17(1) of that Act.

3 Editorial and format changes
4 Amendments incorporated in this reprint