Financial Markets Conduct Regulations 2014

5 Interpretation

(1)

In these regulations, unless the context otherwise requires,—

address, of a person (A), means—

(a)

the address (including an electronic address) specified by A for the relevant purpose; or

(b)

the actual or last known address (including an electronic address) for A, if—

(i)

paragraph (a) does not apply; or

(ii)

the sender knows that the address referred to in paragraph (a) is not correct

applicable framework or methodology, in relation to a requirement or any other matter, means a framework or methodology specified in a notice issued by the FMA under subpart 4 of Part 9 of the Act that applies to the requirement or matter (if any)

average net asset value has the meaning given to it by clause 1(2) of Schedule 4

board, in relation to an issuer, means—

(a)

the board or any other governing body of the issuer; or

(b)

the issuer, if the issuer does not have a governing body

borrowing group, in relation to an NBDT, has the same meaning as in section 4 of the Non-bank Deposit Takers Act 2013

closed for applications status, in relation to a PDS, means that the PDS has, or should have, a closed for applications status under regulation 280

closed to all investment status, in relation to a specified fund, multi-fund investment option, or life cycle investment option, means that the fund or option has, or should have, a closed to all investment status under clause 51(1)(ea), (ga)(iv), or (h)(iv) and (2) of Schedule 4

closed to new investors status, in relation to a specified fund, multi-fund investment option, or life cycle investment option, means that the fund or option has, or should have, a closed to new investors status under clause 51(1)(ea), (ga)(iv), or (h)(iv) and (2) of Schedule 4

continuous issue PDS means a PDS that relates to financial products that the issuer, in the ordinary course of its business, continuously offers

convertible means a financial product that will be converted, or is or may become convertible, into another financial product

co-operative shares means—

(a)

nominal value shares in a co-operative company that are offered only to persons who are, or immediately after the issue or sale will be, transacting shareholders of the co-operative company; or

(b)

shares in an industrial and provident society

credit contract has the same meaning as in section 4 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008

credit union products means debt securities issued by a credit union

creditor has the same meaning as in section 4 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008

crime involving dishonesty

(a)

has the same meaning as in section 2(1) of the Crimes Act 1961; and

(b)

includes an offence committed in an overseas jurisdiction that, if committed in New Zealand, would be a crime involving dishonesty within the meaning of that section

crowd funding service has the meaning set out in regulation 185

custodial fee means a fee paid to a custodian for the safe keeping of an asset

date of the PDS means the date on which the board of the issuer consents to the lodgement of the PDS with the Registrar (being no more than 5 working days before that lodgement)

DIMS means a discretionary investment management service within the meaning of section 392 of the Act

disclosure year means,—

(a)

in the case of a managed investment product (other than a product referred to in paragraph (ab)), a period starting on 1 April in a year and ending on 31 March in the following year:

(ab)

in the case of a managed investment product in a KiwiSaver scheme, a superannuation scheme, or a workplace savings scheme under which benefits payable from the scheme are based on the investment return of scheme property at the end of the scheme’s accounting period (but excluding a scheme that is operated on a unitised basis), a 12-month period ending on the scheme’s balance date:

(b)

in the case of a DIMS provided to an investor, a 12-month period starting on 1 April or any other date in each year that is determined by the provider in respect of the investor, and if, as a result of a change of that date, the period ending on that date is longer or shorter than 12 months, that longer or shorter period is a disclosure year (see subclause (5))

dividend means,—

(a)

in relation to equity securities in a company within the meaning of section 2(1) of the Companies Act 1993, a dividend within the meaning of section 53 of that Act; and

(b)

in relation to any other equity securities, a distribution of the income or gains of the issuer to a holder of the equity securities that is comparable to a dividend referred to in paragraph (a)

exemption means an exemption granted under subpart 2 of Part 9 of the Act

existence,—

(a)

in relation to a fund or scheme, has the meaning set out in subclause (4)(b):

(b)

in relation to a multi-fund investment option or life cycle stage, has the meaning set out in clause 8C(a) of Schedule 4

facility, in relation to a crowd funding service or a peer-to-peer lending service, means the facility referred to in regulation 185

financial covenant includes any agreement or undertaking to—

(a)

maintain a minimum capital ratio, liquidity ratio, or other financial ratio; or

(b)

comply with any other restriction or prohibition that relates to the issuer’s, or the issuing group’s, or the borrowing group’s financial position or performance

financial service provider number, in relation to a person, is the number given to the person on the person’s registration under the Financial Service Providers (Registration and Dispute Resolution) Act 2008

foreign passport fund has the same meaning as in regulation 3 of the Financial Markets Conduct (Asia Region Funds Passport) Regulations 2019

FRS-42 means the financial reporting standard known as Financial Reporting Standard No 42 (Prospective Financial Statements) that is in effect under the Financial Reporting Act 2013

fund means a defined pool of assets that are held for the benefit of a group of investors and that are managed together under a single investment mandate

fund charges has the meaning set out in clause 2(1) of Schedule 4

fund update means a fund update prepared under regulations 56 to 61

generally accepted accounting practice or GAAP has the meaning set out in regulation 7(1)

generally available to the market has the meaning set out in section 232 of the Act

group financial statements

(a)

has the same meaning as in section 6(1) of the Act; but

(b)

in the case of an issuing group that consists of only an issuer, means financial statements for that issuer

guarantee, in relation to debt securities, means a guarantee given by a guarantor in respect of those securities

guarantor, in relation to debt securities, means a person that guarantees the repayment of the securities offered (in whole or in part) or the payment of any interest or other money to holders of the securities

holding company has the same meaning as in section 5 of the Companies Act 1993

host economy has the same meaning as in section 55 of the passport rules

investor money, in relation to a crowd funding service or a peer-to-peer lending service, means money to which the following apply:

(a)

the money is received under that service; and

(b)

the money is received from, or on account of, an investor by a person (A) (and not on A’s own account)

investor’s portfolio, in respect of a DIMS provided to an investor, means the financial products that the DIMS provider is managing on behalf of the investor

issuing group has the meaning set out in regulation 6

KIS means a key information summary

licensed derivatives issuer

(a)

means a person who holds, or is treated as holding, a licence that covers the service referred to in section 388(d) of the Act; and

(b)

includes an authorised body in respect of that licence

life cycle investment option has the meaning set out in clause 1(1) of Schedule 4

life cycle stage has the meaning set out in clause 1(1) of Schedule 4

limit break has the meaning set out in section 167 or 438 of the Act (as the case may be)

managed fund

(a)

means a managed investment scheme the managed investment products of which are or were—

(i)

offered on the basis that, in the ordinary course of business, the products will be continuously offered and redeemed on a basis calculated wholly or mainly on the value of the scheme property; or

(ii)

offered on a basis that the scheme will invest, in the ordinary course of business, at least 80% of its assets in 1 or more of the following ways:

(A)

in debt securities issued by a specified bank or NBDT where the money invested is available for withdrawal immediately on request during the specified bank’s or NBDT’s normal business hours or at the end of a fixed-term period that does not exceed 3 months:

(B)

in managed investment products that are redeemable on request, or within a period not exceeding 10 working days, on a basis calculated wholly or mainly on the value of the scheme property of the scheme to which those products relate:

(C)

in assets where the manager can reasonably expect to realise the investment, at the market value of the assets, within 10 working days; and

(b)

includes a KiwiSaver scheme, superannuation scheme, or workplace savings scheme

material information has the same meaning as in section 59 of the Act

memorandum of cooperation has the same meaning as memorandum has in regulation 3 of the Financial Markets Conduct (Asia Region Funds Passport) Regulations 2019 (see Schedule 2 of those regulations, which sets out the text of the memorandum)

moratorium means a variation of the terms or conditions of a debt security that extends the time for payment of the principal or interest, or reduces or cancels the principal or interest, under the debt security

multi-fund investment option has the meaning set out in clause 1(1) of Schedule 4

NBDT category 2 debt securities means category 2 products issued by an NBDT that are debt securities

net asset value means,—

(a)

in relation to a fund, the residual value of the fund’s assets after all liabilities, other than net assets attributable to investors, have been deducted; and

(b)

in relation to information required by these regulations to be included in a fund update, the net asset value at the date to which the fund update relates (unless otherwise provided in these regulations)

new product, in relation to a convertible, means the financial product into which the convertible is or may be converted

New Zealand Business Number means the number allocated to an entity under the New Zealand Business Number Act 2016

NZ IAS 34 means the financial reporting standard known as the New Zealand Equivalent to International Accounting Standard 34 (Interim Financial Reporting) that is in effect under the Financial Reporting Act 2013

offer register means the register of offers of financial products kept under Schedule 2 of the Act

open for applications status, in relation to a PDS, means that the PDS has, or should have, an open for applications status under regulation 280

open status, in relation to a specified fund, multi-fund investment option, or life cycle investment option, means that the fund or option has, or should have, an open status under clause 51(1)(ea), (ga)(iv), or (h)(iv) and (2) of Schedule 4

overseas market means a financial product market that is authorised to operate in an overseas jurisdiction

passport fund means a scheme that is registered on the scheme register as a passport fund

passport rules means the rules in Annex 3 of the memorandum of cooperation (see Schedule 2 of the Financial Markets Conduct (Asia Region Funds Passport) Regulations 2019)

peer-to-peer lending service has the meaning set out in regulation 185

personalised DIMS has the same meaning as in section 5 of the Financial Advisers Act 2008

PIE or portfolio investment entity means a portfolio investment entity within the meaning of section YA 1 of the Income Tax Act 2007

prescribed investor rate has the same meaning as in section YA 1 of the Income Tax Act 2007

proposed director, in relation to an issuer, means a person who has consented to act as a director of the issuer

proposed senior manager, in relation to an issuer, means a person who has been appointed as a senior manager of the issuer

public security means any security issued under section 63 of the Public Finance Act 1989, and includes any loan or credit agreement, guarantee, indemnity, bond, note, debenture, bill of exchange, Treasury bill, Government stock, and any other security representing part of the public debt of New Zealand

publicly available has the meaning set out in subclause (3)

quarter,—

(a)

in the case of regulations 56, 57, and 220 and Schedule 4, means each of the 4 quarters of a year ending on 30 June, 30 September, 31 December, and 31 March:

(b)

in any other case, means each 3-month period of a 12-month period (where each quarter ends on the date that the manager, any other issuer, or the provider determines)

register kept by the Registrar

(a)

means a register kept or maintained by the Registrar (or the Registrar of Companies); but

(b)

does not include the register of financial service providers

related underlying fund means, in relation to a fund (fund A),—

(a)

an underlying fund managed by the manager of fund A or by an associated person of the manager of fund A; and

(b)

if fund A’s assets are managed as a whole by a person other than the manager, an underlying fund managed by that person or that person’s associated persons

Example

A KiwiSaver scheme is managed by ABC Investment Limited and provides an option for members to select XYZ Balanced Fund, a fund the assets of which are managed by XYZ Investment Limited. All underlying funds managed by ABC Investment Limited, XYZ Investment Limited, an associated person of ABC Investment Limited, or an associated person of XYZ Investment Limited are related underlying funds.

relevant party has the meaning set out in subclause (4)(c)

relevant proceeding or action means—

(a)

a civil or criminal proceeding or regulatory action (whether in New Zealand or overseas) in relation to the contravention, or involvement in the contravention, of any—

(i)

financial markets legislation; or

(ii)

overseas law that regulates the supply of any financial service, any dealing in financial products, or the management of an entity; or

(b)

a regulatory or disciplinary action for a breach of a professional or industry code of conduct or the rules of a financial product market (whether in New Zealand or overseas)

retail investor, in relation to an offer of financial products, financial products that have previously been offered, or the supply of a DIMS, means a person who is not a wholesale investor (as defined in subclause (5A)) in relation to the offer, financial products, or service

returns means capital, earnings, or other financial returns

scheme participant’s accumulation has the meaning set out in regulation 82(5)

scheme register means the register of managed investment schemes

SDS or service disclosure statement, in relation to a service, means a disclosure statement under section 423 of the Act for the service

security interest means an interest in property created or provided for by a transaction that, in substance, secures payment or performance of an obligation, without regard to—

(a)

the form of the transaction; and

(b)

the identity of the person who has title to the property that is subject to the security interest

simplified disclosure offer has the meaning set out in regulation 49G(2)

simplified disclosure PDS means a PDS of a class that is declared to be a class of simplified disclosure PDSs under regulation 22(4) or 23(3)

SIPO means a statement of investment policy and objectives

specified bank means—

(a)

a registered bank; or

(b)

a bank that is authorised to accept deposits under the law of Australia, Canada, Hong Kong, Ireland, Singapore, the United Kingdom, or the United States of America; or

(c)

any other overseas bank within the meaning of regulation 9 of the Financial Advisers (Definitions, Voluntary Authorisation, Prescribed Entities, and Exemptions) Regulations 2011

specified fund means a fund that may be, or previously has been, selected as an investment option by holders of a managed investment product

specified life cycle stage means a life cycle stage for a life cycle investment option that may be, or previously has been, selected as an investment option by holders of a managed investment product

specified multi-fund investment option means a multi-fund investment option that may be, or previously has been, selected as an investment option by holders of a managed investment product

subsidiary

(a)

has the meaning set out in section 5 of the Companies Act 1993; and

(b)

includes any entity that is classified as a subsidiary in any applicable financial reporting standard

successful has the meaning set out in subclause (4)(a)

superannuation scheme rules means the provisions implied into the governing document for a superannuation scheme under regulation 81 and Schedule 12

supervisor includes a representative of the supervisor

unconditional guarantor, in relation to an offer of debt securities, means a person that—

(a)

is unconditionally liable (whether or not jointly or severally with the issuer or any other person) to repay the securities; or

(b)

is liable to repay the securities subject only to the condition that the issuer or any other person has failed to do so

underlying fund means, in relation to a managed investment scheme or a fund of that scheme (a specified fund), a fund in which the specified fund, or any part of that specified fund, is invested, whether directly or indirectly, through a number of layers of funds

unique identifying information, in relation to an issuer or any other person or a scheme, means a statement of—

(a)

its name; and

(b)

its legal form (for example, partnership); and

(ba)

in the case of a trust or a partnership (other than a limited partnership), the names of the trustees or partners; and

(c)

its balance date; and

(d)

the jurisdiction in which it is incorporated, formed, established, or resident, and the number (if any) under which it is so incorporated, formed, or established; and

(e)

its address for service in New Zealand

URL means a World Wide Web uniform resource locator.

(2)

Section 13(1) of the Act applies (with all necessary modifications) to a reference in these regulations to a statement or other information that is false, misleading, deceptive, or confusing.

(3)

In these regulations, unless the context otherwise requires, a document or any other information relating to financial products is publicly available if the document or information is available, free of charge,—

(a)

on an Internet site maintained by, or on behalf of, the issuer of the financial products in a way that ensures—

(i)

that the document or information, or a link to the document or information, is prominently displayed on the site either on the home page or on an investor or a scheme section of the site; and

(ii)

that the home page prominently displays a link to the investor or scheme section of the site (if the document or information is displayed on that section of the site); and

(iii)

that members of the public (or members of the section of the public to which the document or information is applicable) can easily access the document or information at all reasonable times; and

(b)

in hard copy, on request to the issuer of the financial products.

(4)

In these regulations, unless the context otherwise requires,—

(a)

a civil or criminal proceeding, regulatory action, or disciplinary action is successful in relation to the person that is the subject of the proceeding or action if 1 or more of the following apply:

(i)

a penalty or an order is imposed or made against the person:

(ii)

any licence, registration, or other authorisation of the person is cancelled, revoked, or suspended:

(iii)

the person is found guilty or liable:

(iv)

the person is censured:

(b)

a fund or scheme is in existence from the date on which the manager started accepting contributions to the fund or scheme (whether before or after the registration of the scheme under subpart 2 of Part 4 of the Act):

(c)

a person (R) is a relevant party in relation to another person (A) if—

(i)

A is a body corporate and R has the power, directly or indirectly, to exercise, or control the exercise of, the rights to vote attaching to 25% or more of the voting products of A; or

(ii)

A and R are acting jointly or in concert; or

(iii)

A acts, or is accustomed to act, in accordance with the wishes of R; or

(iv)

R is able, directly or indirectly, to exert a substantial degree of influence over the activities of A; or

(v)

R is a director or senior manager of A or of a relevant party of A under subparagraphs (i) to (iv).

(5)

For the purposes of paragraph (b) of the definition of disclosure year in subclause (1), if the provider changes the date on which a disclosure year starts, the period between any 2 starting dates of disclosure years must not exceed 15 months.

(5A)

For the purposes of the definition of retail investor in subclause (1) and regulation 65, wholesale investor,—

(a)

in relation to an offer of financial products, has the same meaning as in clause 36(a) of Schedule 1 of the Act and includes an entity that is controlled (within the meaning of clause 48 of Schedule 1 of the Act) by—

(i)

a wholesale investor in relation to the offer; or

(ii)

a close business associate of the offeror (within the meaning of clause 4 of Schedule 1 of the Act); or

(iii)

a relative of the offeror or of a director of the offeror (within the meaning of clause 5 of Schedule 1 of the Act):

(b)

in relation to financial products that have previously been offered, means a person who, if the previous offer had been made to the person, would have been a wholesale investor in relation to the offer under paragraph (a):

(c)

in relation to the supply of a DIMS, has the same meaning as in clause 36(b) of Schedule 1 of the Act and includes an entity that is controlled (within the meaning of clause 48 of Schedule 1 of the Act) by a wholesale investor in relation to the DIMS.

(6)

Terms defined in other provisions of these regulations have the meanings given unless the context otherwise requires.

Regulation 5(1) closed for applications status: inserted, on 1 December 2015, by regulation 4(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) closed to all investment status: replaced, on 9 August 2017, by regulation 4(2) of the Financial Markets Conduct Amendment Regulations 2017 (LI 2017/181).

Regulation 5(1) closed to new investors status: replaced, on 9 August 2017, by regulation 4(2) of the Financial Markets Conduct Amendment Regulations 2017 (LI 2017/181).

Regulation 5(1) convertible: inserted, on 1 December 2015, by regulation 4(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) disclosure year paragraph (a): replaced, on 1 December 2015, by regulation 4(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) disclosure year paragraph (ab): inserted, on 1 December 2015, by regulation 4(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) existence: inserted, on 17 December 2015, by regulation 4(6) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) foreign passport fund: inserted, on 14 June 2019, by regulation 4 of the Financial Markets Conduct (Asia Region Funds Passport) Amendment Regulations 2019 (LI 2019/101).

Regulation 5(1) host economy: inserted, on 14 June 2019, by regulation 4 of the Financial Markets Conduct (Asia Region Funds Passport) Amendment Regulations 2019 (LI 2019/101).

Regulation 5(1) life cycle investment option: inserted, on 9  August 2017, by regulation 4(2) of the Financial Markets Conduct Amendment Regulations 2017 (LI 2017/181).

Regulation 5(1) life cycle stage: inserted, on 9 August 2017, by regulation 4(2) of the Financial Markets Conduct Amendment Regulations 2017 (LI 2017/181).

Regulation 5(1) memorandum of cooperation: inserted, on 14 June 2019, by regulation 4 of the Financial Markets Conduct (Asia Region Funds Passport) Amendment Regulations 2019 (LI 2019/101).

Regulation 5(1) multi-fund investment option: inserted, on 9 August 2017, by regulation 4(2) of the Financial Markets Conduct Amendment Regulations 2017 (LI 2017/181).

Regulation 5(1) new product: inserted, on 1 December 2015, by regulation 4(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) New Zealand Business Number: inserted, on 31 December 2017, by regulation 4 of the Financial Markets Conduct Amendment Regulations (No 2) 2017 (LI 2017/287).

Regulation 5(1) New Zealand Business Number: amended, on 2 September 2019, by regulation 4 of the Financial Markets Conduct (New Zealand Business Numbers) Amendment Regulations 2019 (LI 2019/171).

Regulation 5(1) open status: replaced, on 9 August 2017, by regulation 4(2) of the Financial Markets Conduct Amendment Regulations 2017 (LI 2017/181).

Regulation 5(1) passport fund: inserted, on 14 June 2019, by regulation 4 of the Financial Markets Conduct (Asia Region Funds Passport) Amendment Regulations 2019 (LI 2019/101).

Regulation 5(1) passport rules: inserted, on 14 June 2019, by regulation 4 of the Financial Markets Conduct (Asia Region Funds Passport) Amendment Regulations 2019 (LI 2019/101).

Regulation 5(1) quarter: replaced, on 1 December 2015, by regulation 4(3) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) quarter paragraph (b): amended, on 28 October 2016, by regulation 4 of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

Regulation 5(1) retail investor: inserted, on 1 December 2015, by regulation 4(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) simplified disclosure offer: inserted, on 1 December 2015, by regulation 4(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) simplified disclosure PDS: inserted, on 1 December 2015, by regulation 4(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) specified life cycle stage: inserted, on 17 December 2015, by regulation 4(6) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) specified life cycle stage: amended, on 9 August 2017, by regulation 4(3) of the Financial Markets Conduct Amendment Regulations 2017 (LI 2017/181).

Regulation 5(1) specified multi-fund investment option: inserted, on 17 December 2015, by regulation 4(6) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) specified multi-fund investment option: amended, on 9 August 2017, by regulation 4(3) of the Financial Markets Conduct Amendment Regulations 2017 (LI 2017/181).

Regulation 5(1) unique identifying information paragraph (ba): inserted, on 1 June 2016, by regulation 4(4) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) unique identifying information paragraph (d): replaced, on 1 June 2016, by regulation 4(5) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(5A): inserted, on 1 December 2015, by regulation 4(8) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).