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 (Continuous Debt Issues) Exemption Notice 2002 (the 2002 notice).
The notice exempts, subject to conditions, issuers who, in the ordinary course of their business, continuously offer debt securities to the public from—
the requirement in section 37A(1)(a) of the Securities Act 1978 (the Act) that, before the allotment of a security, the subscriber must have received an investment statement; and
the requirement in section 54 of the Act to issue a certificate or other document that properly evidences the nature, ownership, terms, and conditions of a security (confirmation information); and
certain other provisions of the Act relating to the inspection of registers.
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 continuous debt issuer may not allot a 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 that purpose; and
modify the conditions relating to the exemption from section 54 of the Act to allow issuers to send a notice making confirmation information available by electronic means; and
refer to the Securities Regulations 2009 (rather than the Securities Regulations 1983).
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 exemption in the 2002 notice from the requirement to ensure that a subscriber receives an investment statement before subscription recognises that this obligation would impose a disproportionate burden on continuous debt issuers. In this regard, the Financial Markets Authority has taken into account the significant number of investment statements sent and the alternative conditions imposed by the 2002 notice that meet investors’ needs:
the exemption in the 2002 notice from the securities certificate requirements recognise the significant cost of, and unhelpful information provided by, the regular receipt of securities certificates in the case of securities issued on a continuous basis. In these circumstances, periodic consolidated statements are both more cost-effective and more informative:
the exemption in the 2002 notice from the register inspection requirements recognise the privacy concerns associated with allowing third parties to inspect registers containing details of funds that subscribers have on deposit:
each of these exemptions has been in place for a number of years and the policy reasons for each remain valid and relevant. While the changes introduced by the Securities Regulations 2009 have reduced costs of issuers, and improved information for investors, they have not attempted to tailor disclosure and conduct requirements to the extensive range of circumstances to which securities law requirements apply. Accordingly, these exemptions continue to be required and remain appropriate in light of the policy of the 2002 notice and are continued in this notice on substantially the same basis:
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:
the change to enable delivery of securities confirmation information by notice to the investors of where this information can be accessed on the Internet recognises the increased use by issuers and investors of Internet-based communications:
given the limited application of the notice to compliance requirements that impose an unduly onerous burden on continuous debt issuers, and the conditions imposing alternative workable obligations that meet subscribers’ needs, 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.