Dated at Wellington this 24th day of September 2012.
Head of Primary Regulatory Operations.
Statement of reasons
This notice, which comes into force on 1 October 2012 and expires on 30 September 2017, replaces the Securities Act (Commercial Bill Dealers) Exemption Notice 2002 (the 2002 notice).
The notice exempts, subject to conditions, registered banks from—
the trust deed and prospectus requirements of the Securities Act 1978 (the Act); and
the requirement in section 37A(1)(a) of the Act that, before the allotment of a security offered to the public for subscription, the subscriber has received an investment statement; and
certain other requirements of the Act and the Securities Regulations 2009.
The exemption is granted in respect of any debt security that is—
a promissory note that is endorsed (without negativing or limiting liability) but not made by that registered bank; or
a bill of exchange that is drawn, accepted, or endorsed (without negativing or limiting liability) by that registered bank; or
a negotiable or transferable debt security, not being a promissory note or a bill of exchange, in respect of which that registered bank is directly or indirectly liable otherwise than as the original allotter.
The notice also exempts persons, other than registered banks, who issue or allot securities of the kind referred to above from the trust deed, prospectus, and investment statement requirements of the Act.
The provisions of the 2002 notice have been carried forward with little change of substance. However, changes have been made to—
reduce the period during which a bank may not allot a specified debt security to 2 days (rather than the current 3 working days) if the investment statement is sent to an electronic address specified by the subscriber for this purpose; and
refer to the Securities Regulations 2009 (rather than the Securities Regulations 1983) and to remove a redundant exemption from those regulations.
The Financial Markets Authority, after satisfying itself as to the matters set out in section 70B(2) of the Act, considers it appropriate to grant the exemptions because—
the 2002 notice provides relief for banks from a number of compliance requirements in relation to the securities referred to above. The 2002 notice recognises that a bank is not the primary issuer, that these compliance requirements would impose a disproportionate burden compared with the benefits for investors, and the additional prudential requirements imposed on banks. Additionally, the 2002 notice provides exemptions for persons other than banks in relation to certain obligations in relation to these securities on the basis that the exempt issuer is not the primary issuer:
changes introduced by the Securities Regulations 2009 have reduced costs for issuers, and improved information for investors, but did not attempt to tailor disclosure and conduct requirements to the extensive range of circumstances to which securities law requirements apply. Accordingly, generally the exemptions continue to be required and remain appropriate in light of the policy of each of the exemptions. One exception is the exemption relating to persons authorised to complete the advertising certificate. The Securities Regulations 2009 provide for completion of these certificates by authorised agents of the issuers’ directors and so a particular exemption for banks is no longer required:
the reduced period of delay that this notice permits between sending the investment statement and allotment of securities recognises the increased use by issuers and investors of Internet-based communications that enable information to be delivered at greater speed:
given the limited application of the notice to the class of defined investment products, and the alternative controls and conditions in place, the Financial Markets Authority considers that the exemptions will not cause significant detriment to subscribers and that they are not broader than is reasonably necessary to address the matters that gave rise to the exemptions.
Date of notification in Gazette: 27 September 2012.
This notice is administered by the Financial Markets Authority.