Financial Markets Conduct Regulations 2014

Reprint as at 28 October 2016

Coat of Arms of New Zealand

Financial Markets Conduct Regulations 2014

(LI 2014/326)

Jerry Mateparae, Governor-General

Order in Council

At Wellington this 3rd day of November 2014

Present:
His Excellency the Governor-General in Council

Note

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

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

These regulations are administered by the Ministry of Business, Innovation, and Employment.

Pursuant to subpart 1 of Part 9, sections 344, 382, 448, 576, and 581, and clause 29 of Schedule 1 of the Financial Markets Conduct Act 2013, His Excellency the Governor-General, acting on the advice and with the consent of the Executive Council and on the recommendation of the Minister of Commerce and Consumer Affairs made in accordance with sections 344(3), 382(3), 448(2), 547(2), 549, 550, 576(2), and 581(2) and clause 29(3) of Schedule 1 of that Act, makes the following regulations.

Contents

1Title
2Commencement
3Overview
4Transitional, savings, and related provisions
5Interpretation
6Meaning of issuing group
7Matters relating to GAAP
8Status of examples
9General provision relating to statements in particular form, warning statements, etc
10Name of financial products or services
11Section numbers may be renumbered
12PDS, other disclosure document, or register entry not required to refer to matter that is not applicable
13Derivative definition prescribed times
14Financial service does not include being creditor under credit contract
15PDS does not have to be given if investor already holds products and has received, or has access to, same information
16Offeror treated as having reasonable grounds
17PDS does not have to be given before application if investment in category 2 products is made urgently and PDS is later provided
18PDS does not have to be given for category 2 products issued by NBDT that are debt securities
19NBDT must give credit risk statement to investors if it does not have investment-grade credit rating
20Information at start of PDS
21Information at front may be on separate cover page or before key information summary
22Content of PDS for offer of debt securities
23Content of PDS for offer of equity securities
24Content of PDS for offer of managed investment products
25Content of PDS for offer of derivatives
26Key information summary
27Purpose of key information summary
28Key information summary must be identified
29Key information summary requirements
30PDS must be easily readable
31Blank pages
32PDS may relate to more than 1 class of products, etc
33Incorporation by reference
34Additional information
35Information that must be included in PDS where regulations do not otherwise provide for placement
36Application form
37Content of register entries when PDS is lodged
38Content of register entry for offer of debt securities
39Content of register entry for offer of equity securities
40Content of register entry for offer of managed investment products
41Content of register entry for offer of derivatives
42Register entry must contain material information and may contain other lodged information
42ARequirement to include all material information does not apply to simplified disclosure offers
42BRequirement to include all material information does not apply to information in supplement for multiple-participant scheme
43Register entry must contain information referred to in PDS
44Lodging or giving information for register entry
45Lodgement of PDS
46When supplementary document may not be lodged
47How offeror must act under section 80 of Act
48How offeror must deal with applications on expiry
49Dealing with money while it is held in trust
49AOffers of convertible financial products
49BRequirements that apply to convertibles
49CPDS and register entry requirements
49DConvertible debt securities issued by registered banks
49EModification of statement at start of PDS
49FAdditional information
49GSimplified disclosure offers for listed issuers
49HCleansing notice
49ICleansing notice may not be provided in certain circumstances
50Duty to notify changes to Registrar
51Information to be lodged with Registrar for updating register
52Confirmation notice
52AAnnual confirmation notice
52BSupplementary confirmation notice if PDS or fund opens after being closed
53Issuer must make information available on request
53ACertain members of defined benefit schemes may request information
54Disclosure for unquoted convertible financial products where holder has option to convert
54ACorrecting defective cleansing notice
55Event disclosures to be made publicly available
56Duty to make fund update publicly available
57Information at start of fund update
58Content of fund update for funds
58AContent of fund update for specified multi-fund investment option or specified life cycle stage
59Templates
60How long fund updates must be publicly available
61Revised fund update to be made publicly available in certain circumstances
61AFund update must be given if PDS incorporates it by reference
62Annual report
63Content of annual report
64Annual report for issuer of equity securities must compare prospective financial information with actual results
65When confirmation information is provided
66Who provides confirmation information
67Confirmation information
68How confirmation information is provided
69Confirmation for KiwiSaver schemes, superannuation schemes, and workplace savings schemes
70Confirmation information for KiwiSaver schemes, superannuation schemes, and workplace savings schemes
71How confirmation information for KiwiSaver schemes, superannuation schemes, and workplace savings schemes is provided
71AOngoing confirmation for derivatives
71BOngoing confirmation information for derivatives
71CHow ongoing confirmation information for derivatives is provided
72Provisions relating to exclusions and other Schedule 1 of Act matters
72AWholesale offer exclusion does not apply to certain offers of Crown debt securities
73References to trust deeds and debt securities
74Trust deed for debt security must provide for certain matters
75Terms implied into trust deed for debt security
76Duty of NBDT to provide reports to supervisor
77Proceedings at meetings of holders of debt security
78Resolution in lieu of meeting
79Application for registration
80Lodging or giving information for scheme register
81Superannuation scheme rules
82Additional initial and ongoing registration requirement for workplace savings schemes
83Governing document for registered scheme must provide for certain additional matters
84Terms implied into governing document for registered scheme
85Custodian’s records of scheme property
86Procedures for reconciling records
87Custodian must obtain assurance engagement
88Requirements of assurance engagement
89Proceedings at meetings of scheme participants
90Resolution in lieu of meeting
91Manager and associated persons may vote if interested in resolution to remove and replace manager in certain circumstances
92Annual meeting of closed-ended schemes
93Statement of investment policy and objectives or change does not need to be lodged in certain circumstances
94Manager must provide immediate report to supervisor (or FMA) in event of uncorrected limit break
95Manager must provide quarterly reports to supervisor (or FMA) about limit breaks
96Contents of reports about limit breaks
97Manager must report to supervisor (or FMA) about pricing error or failure to comply with pricing methodologies
98Contents of reports about pricing error or failure to comply with pricing methodologies
99Other action that must be taken on pricing errors and failure to comply with pricing methodologies
100Manager must provide quarterly report to supervisor (or FMA) on related party transaction certificates
101Investments in Australian registered managed investment scheme is permitted related party benefit transaction
102Investment in Government securities is permitted related party benefit transaction
103Transaction to acquire first property is permitted related party benefit transaction
104Listed manager transaction is permitted related party transaction
105Requirements for certificates as to related party benefits
106Restriction on acquisitions of in-house assets does not apply to public securities
106ARestriction on acquisitions of in-house assets does not apply to restricted schemes that invest in certain unregistered schemes
107Circumstances in which duty for issuer to keep register does not apply
108Audit of registers
109Audit of particular register
110Collective audit of registers kept by registrar entity
111Public inspection of register not required in certain circumstances
112Inspection and copies of documents
113Reporting obligations for Schedule 3 schemes
114Terms implied into trust deed of Schedule 3 schemes
115Interpretation
116Exemption
117Prohibited purpose
118Size of IPO
119Period of market stabilisation
120Disclosure by offeror
121Stabilisation agreement
122Appointment of stabilisation manager
123Stabilisation manager must notify licensed market operator and FMA that market stabilisation to begin
124Duties and responsibilities of stabilisation manager
125Stabilisation bids
126Price of stabilisation bids: before any trades
127Price of stabilisation bids: after trades
128Stabilisation manager must keep daily record of trading
129Stabilisation manager’s report to licensed market operator
130Over-allocation
131Interpretation
132Person treated as holding financial products where person has relevant interest in certain derivatives
133How to make event disclosures to licensed market operator
134How to make event disclosures to listed issuer
135How to disclose more than 1 type of event disclosure
136How to disclose more than 1 substantial holding
137How to disclose for more than 1 connected holder with similar or related substantial holding
138What information must be disclosed in event disclosures
139When relevant agreement documents must be attached to event disclosures
140Previously attached relevant agreement documents need not be attached again
141Relevant agreement documents need not be attached for ownership relevant interests
142Relevant agreement documents need not be attached in case of investment management contracts
143How listed issuer must give acknowledgement of event disclosure
144Exemption for substantial holdings in overseas issuer with only secondary listing on domestic licensed markets
145Exemption for substantial holdings held for hedging by derivatives issuer acting in client-serving capacity
146Exemption from disclosing derivative where relevant interest to acquire or dispose of underlying is disclosed
147Setting of licensed market operator’s form and delivery method for event disclosure
148Forms for tracing and disclosure of interests in listed issuers
149Interpretation
150Directors and senior managers must complete disclosure
151What information must be disclosed
152Aggregation of multiple transactions in transaction disclosure notice
153Method by which disclosure notice must be given
154Exemption relating to overseas-regulated markets
155Exemption from disclosing derivative where relevant interest to acquire or dispose of underlying is disclosed
156Setting of licensed market operator’s form for disclosure
157Products transfer
158Brokers transfer
159Interpretation
160Application of subpart
161Miscellaneous provisions relating to application
162Obligations do not apply to offers to certain persons
163Offeror must notify intention to make unsolicited offer
164Contents of written notice to issuer
165Unsolicited offer must be made in disclosure document
166Restricted unsolicited offer communications
167Disclosure document must be prominently identified if accompanied by other documents
168Contents of disclosure document
169Presentation of information and statements
170Offer period
171Withdrawal of offer
172Terms of offer cannot be varied
173Right to cancel
174Right to cancel does not apply if FMA has exempted offeror
175Notice of cancellation
176Offeror’s cancellation duties where offer to acquire financial products
177Offeror’s cancellation duties where offer to acquire disposal power or other interests or rights
178Prohibition on inviting offers to sell
179Unsolicited offer provisions
180Protection from liability in connection with unsolicited offer obligations
181Control limit for NZX Limited
182Exemptions from DIMS licensing requirement
183Exemption for temporary management of portfolio in situations of absence or incapacity or unexpected contingencies
184Prescribed intermediary services
185Meaning of crowd funding service and peer-to-peer lending service
186Additional eligibility criteria for crowd funding service
187Additional eligibility criteria for peer-to-peer lending service
188Eligibility criteria for authorised bodies
189FMA must have regard to compliance history of relevant parties
190FMA must consult Reserve Bank in relation to banks, NBDTs, and insurers
191General reporting condition
192Condition for independent trustees to report serious problems
193Condition for DIMS providers and prescribed intermediary service providers to keep documents and to give documents on request
194Condition for DIMS providers to disclose if service is wholesale
195Condition for intermediaries to notify FMA of suspected contraventions of Part 2 of Act or of investment cap
196Condition for provider of crowd funding service to make warning statement available
197Condition for provider of crowd funding service to obtain investor confirmation
198Conditions are Part 6 services provisions
199General FMA conditions
200Other FMA conditions for DIMS
201Other FMA conditions for derivatives issuer
202Other FMA conditions for crowd funding service or peer-to-peer lending service
203Application
204Information at start of SDS for DIMS
205Content of SDS for DIMS
206Investment proposal must be provided to investors
207Presentation requirements for SDS and investment proposal
208Information that must be available to investors
209Various PDS requirements also apply to SDSs and investment proposals
210Ongoing reporting for DIMS
211Annual information
212How information is made available
213Disclosure obligations apply to prescribed intermediary services
214Application
215SDS for crowd funding service or peer-to-peer lending service
216Presentation requirements
217SDS may refer to facility’s Internet site
218Timing of disclosure for prescribed intermediary services
219Prescribed intermediary service providers must provide transaction information to investors
220How transaction information is made available
221Document that identifies defects and material changes must accompany new SDS
222Provider of DIMS or prescribed intermediary service must make information available on request
223Client agreement requirements apply to prescribed intermediary services
224Time for entering into client agreement for prescribed intermediary services
225Terms implied into client agreements
226Client agreements for DIMS must provide for certain matters
227Client agreements for crowd funding service must provide for certain matters
228Client agreements for peer-to-peer lending service must provide for certain matters
229Client agreements may use different terminology
230DIMS licensee must provide report to FMA in event of limit break
231DIMS licensee must provide quarterly reports to FMA about limit breaks
232Contents of reports about limit breaks
233Investments in Australian registered managed investment scheme is permitted related party benefit transaction
234Investment in Government securities is permitted related party benefit transaction
235Requirements for certificates as to related party benefits
236DIMS licensee must provide quarterly report to FMA that identifies certificates
237Quarterly reports may be in single report
237ARequirements do not apply if money or property held solely for completing transaction or securing obligation
238Interpretation and application
239Derivatives investor money and investor property
240Derivatives issuer must ensure derivatives investor money and property held on trust for investor
241Derivatives issuer must pay money into trust account
242When derivatives investor money ceases to be held on trust
243When derivatives investor property ceases to be held on trust
244Responsibilities of derivatives issuer in event of shortfall
244AEquity-based reconciliation
244BCash-based reconciliation
245Protections
246Insolvency
247Record keeping
248Assurance engagement
249Contents of assurance report
250Application of Part 6 provisions
251Entities that are FMC reporting entities as a result of exclusions
252Prescribed circumstances for definition of recipient of money from conduit issuer
253Financial service does not include providing credit in definition of restricted communication
254Infringement offence fees
255Infringement notice and reminder notice
256Interpretation
257Australia designated as country to which recognition regime applies
258Class of financial products to which subpart applies
259When New Zealand is host country
260When offer is recognised offer
261Effect of recognised offer
262Preconditions
263Precondition for offer to be regulated offer in Australia
264Precondition concerning pre-offer advertising
265Precondition for Australian offeror to be entitled under Australian law to offer financial products
266Preconditions for Australian offeror to give notice to Registrar
267Requirements for notice to Registrar
268Documents that must accompany notice to Registrar
269Terms and conditions to be complied with
270Offer must remain Australian regulated offer, comply with Australian law, and be open to acceptance in Australia
271Warning statements
272Other terms and conditions
273Notice of changes
274Other requirements for notices under regulation 266 or 273
275Additional information that must be contained in specific notices required by regulation 273
276Extension of Act and regulations to financial products offered in Australia by New Zealand offeror
277Notice to Registrar of intention to make offer under Australian recognition scheme
278Form of notice required by regulation 277
279Prescribed rate of interest
280Status of PDS
280ANotices or other documents given, provided, or served by FMA
280BHow FMA notices or other documents are given, provided, or served
281Revocation of Financial Markets Conduct (Phase 1) Regulations 2014
Gazette Information
Reprint notes

Regulations

1 Title

These regulations are the Financial Markets Conduct Regulations 2014.

2 Commencement

These regulations come into force on 1 December 2014.

Part 1 Preliminary provisions

3 Overview

In these regulations,—

(a)

this Part provides for preliminary matters, including prescribing certain matters relating to interpretation for the purposes of Part 1 of the Act:

(b)

Part 2 declares, for the purposes of Part 2 of the Act (fair dealing), that the service of being a creditor under a credit contract is not a financial service:

(c)

Part 3 and Schedules 2 to 9 prescribe matters for the purposes of Part 3 of the Act (disclosure of offers of financial products), including—

(i)

regulating product disclosure statements and register entries; and

(ii)

providing for limited disclosure and other requirements and conditions for offers made in reliance upon the exclusions in Schedule 1 of the Act; and

(iii)

providing for ongoing disclosure; and

(iv)

prescribing matters in connection with money relating to financial products that is held in trust:

(d)

Part 4 and Schedules 10 to 13 prescribe matters for the purposes of Part 4 of the Act (governance of financial products), including matters relating to—

(i)

governing documents; and

(ii)

meetings of product holders; and

(iii)

superannuation scheme rules; and

(iv)

the custodianship of scheme property; and

(v)

limit breaks, pricing errors, and related party transactions; and

(vi)

registers of regulated products:

(e)

Part 5 and Schedules 14 to 20 prescribe matters for the purposes of Part 5 of the Act (dealing in financial products on markets), including matters relating to—

(i)

market manipulation; and

(ii)

substantial holding disclosure; and

(iii)

directors’ and senior managers’ disclosure obligations; and

(iv)

the transfer of financial products; and

(v)

unsolicited offers:

(f)

Part 6 and Schedule 21 prescribe matters for the purposes of Part 6 of the Act (licensing and other regulation of market services), including matters relating to—

(i)

exemptions from the DIMS licensing requirement; and

(ii)

intermediary services, licensing criteria, conditions, and other matters to facilitate the issue of licences for market services under that Part of the Act; and

(iii)

disclosure obligations of certain licensees; and

(iv)

client agreements; and

(v)

additional regulation of DIMS:

(g)

Part 7 prescribes matters for the purposes of Part 7 of the Act (financial reporting), including providing for entities that rely on the small offer exclusion to be FMC reporting entities:

(h)

Part 8 and Schedules 22 to 24 provide for enforcement matters for the purposes of Part 8 of the Act, including prescribing infringement fees, an infringement notice, and a reminder notice:

(i)

Part 9 and Schedule 25 contain miscellaneous provisions, including provisions relating to the mutual recognition of financial product offerings (in respect of Australia).

4 Transitional, savings, and related provisions

The transitional, savings, and related provisions set out in Schedule 1 have effect according to their terms.

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, means the fund has, or should have, a closed to all investment status under clause 51(1)(ea) and (2) of Schedule 4

closed to new investors status, in relation to a specified fund, means the fund has, or should have, a closed to new investors status under clause 51(1)(ea) 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

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

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

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

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

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

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, means the fund has, or should have, an open status under clause 51(1)(ea) and (2) of Schedule 4

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

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 (as defined in clause 1(1) of Schedule 4) 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 (as defined in clause 1(1) of Schedule 4) 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: inserted, on 1 June 2016, by regulation 4(7) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 5(1) closed to new investors status: inserted, on 1 June 2016, by regulation 4(7) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

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) 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) open status: inserted, on 1 June 2016, by regulation 4(7) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

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 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) 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).

6 Meaning of issuing group

(1)

In these regulations, issuing group, in relation to an offer of debt securities or equity securities, means the issuer of the securities and all subsidiaries of the issuer at the date of the PDS (subject to subclauses (2) to (4)).

(2)

In the case of an offer of debt securities, the issuing group is the holding company of the issuer and all subsidiaries of the holding company at the date of the PDS if the holding company is an unconditional guarantor of those securities.

(3)

Subclause (4) applies to an offer of debt securities if—

(a)

the PDS states that an intended use of the money raised under the offer is to provide money to either or both of the following:

(i)

the holding company of the issuer:

(ii)

1 or more subsidiaries of the holding company of the issuer; and

(b)

the issuer reasonably considers that information about the financial position and financial performance of the holding company and its subsidiaries would be more useful to investors (in terms of deciding whether or not to acquire the securities) than information about the financial position and financial performance of the issuer and its subsidiaries.

(4)

If this subclause applies, the issuing group is the holding company and all subsidiaries of the holding company at the date of the PDS.

7 Matters relating to GAAP

(1)

In these regulations, generally accepted accounting practice or GAAP

(a)

has the same meaning as generally accepted accounting practice in section 6(1) of the Act; and

(b)

includes, if the Financial Reporting Act 1993 applies in respect of the entity, generally accepted accounting practice within the meaning of that Act.

(2)

In these regulations, an amount or information is determined in accordance with GAAP or prepared in accordance with GAAP if—

(a)

it is taken or derived from interim financial statements, prospective financial statements, financial statements, or group financial statements that are prepared in accordance with GAAP; or

(b)

the amount or information would have appeared in interim financial statements, prospective financial statements, financial statements, or group financial statements prepared in accordance with GAAP if those statements had included the amount or information.

(3)

For the purposes of subclause (2), GAAP means,—

(a)

in the case of information for accounting periods that have ended before the relevant date,—

(i)

GAAP as in effect on the relevant date; or

(ii)

GAAP as in effect during those accounting periods:

(b)

in any other case, GAAP as in effect on the relevant date.

(4)

For the purposes of subclause (2), a requirement in a schedule of these regulations for an amount or information to be prepared or determined in accordance with GAAP is subject to any provision of these regulations that requires or permits pro forma financial information to be substituted for other financial information.

(5)

In subclause (3), relevant date means—

(a)

the date of lodgement of the relevant disclosure document or information for the register entry; or

(b)

if the information is not lodged, the date of the information.

8 Status of examples

(1)

An example used in these regulations is only illustrative of the provisions to which it relates. It does not limit those provisions.

(2)

If an example and a provision to which it relates are inconsistent, the provision prevails.

9 General provision relating to statements in particular form, warning statements, etc

(1)

This regulation applies if a provision of these regulations requires—

(a)

a statement to be included in a PDS, any other disclosure document, or a register entry in a specified form or using prescribed wording; or

(b)

a warning statement to be provided.

(2)

A statement included, or a warning statement provided, for the purpose referred to in subclause (1) is not invalid just because it contains differences from the requirements prescribed by these regulations if—

(a)

the differences are necessary—

(i)

because particular information required by these regulations is inapplicable to the particular offer or service; or

(ii)

because additional or modified information that relates to the offer, the financial products, or the service needs to be included to ensure that the statement is not false, misleading, deceptive, or confusing; or

(iii)

to ensure that the statement is grammatically correct; and

(b)

the issuer or provider reasonably considers that the differences are not broader than is reasonably necessary to address the matters referred to in paragraph (a)(i) to (iii).

(3)

Nothing in this regulation limits any other provision of these regulations that requires or permits a statement referred to in subclause (1) to be modified.

Regulation 9(3): inserted, on 1 December 2015, by regulation 5 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

10 Name of financial products or services

(1)

This regulation applies if—

(a)

these regulations require a statement to be included in a PDS, an SDS, or any other disclosure document using a specified form or using prescribed wording; and

(b)

the form or wording requires the name of financial products or services to be specified (for example, [name of financial products]).

(2)

The issuer or provider may insert any name of the financial products or services that clearly identifies those products or services, which may be—

(a)

a generic label (for example, unsecured bonds); or

(b)

a name that is particular to the issuer or provider (for example, ABC bonds).

11 Section numbers may be renumbered

If a section of a PDS or other disclosure document is not included because it is not applicable, the section heading numbers of the PDS or document may be renumbered and any references to those numbers may be consequentially amended.

12 PDS, other disclosure document, or register entry not required to refer to matter that is not applicable

(1)

If a matter that is required by these regulations to be contained in a disclosure document or register entry is not applicable to the offer, the financial products, or the service for which the disclosure document or register entry is required, the disclosure document or register entry is not required to refer to that matter and, in particular, is not required to state that the matter is not applicable.

(2)

If the name or contact details of an offeror are required by—

(a)

these regulations to be contained in a disclosure document but that information is not known by the issuer at the date of the disclosure document, the disclosure document is not required to contain that information:

(b)

any of regulations 37 to 41 and 43 to be contained in a register entry but that information is not known by the issuer at the date on which the information is required to be lodged on the register entry, the register entry is not required to contain that information under those regulations.

Regulation 12(2): inserted, on 1 December 2015, by regulation 6 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

13 Derivative definition prescribed times

(1)

For the purposes of section 8(4)(a)(ii) of the Act, the prescribed time is,—

(a)

for a foreign exchange agreement, 3 working days; and

(b)

in any other case, 1 working day.

(2)

In this regulation, working day, in relation to a derivative,—

(a)

has the same meaning as in section 29 of the Interpretation Act 1999; but

(b)

if a payment or delivery under the derivative is made or received in an overseas jurisdiction, does not include a day that, under the law of that jurisdiction, is a public holiday or a bank holiday in that jurisdiction.

Part 2 Fair dealing

14 Financial service does not include being creditor under credit contract

For the purposes of paragraph (c) of the definition of financial service in section 6(1) of the Act, the service of being a creditor under a credit contract is declared not to be a financial service for the purposes of any provision of Part 2 of the Act.

Part 3 Disclosure of offers of financial products

Subpart 1—Procedure for making regulated offers

When PDS does not have to be given

15 PDS does not have to be given if investor already holds products and has received, or has access to, same information

(1)

For the purposes of section 51(1)(c) of the Act, an offeror does not have to comply with section 50 of the Act in respect of an offer of financial products to a person (A) if—

(a)

A already holds a financial product of the same class as those that are offered; and

(b)

the offeror has reasonable grounds for believing that A has already been given (or has access and knows that they have access to) all of the information that the PDS referred to in section 50 of the Act would be required to contain through 1 or more of the following:

(i)

a PDS (for the same or a different offer):

(ii)

information provided to A under subpart 4 of Part 3 of the Act:

(iii)

in the case of products issued by a listed issuer, information notified to a licensed market operator for the purpose of that information being made available to participants in the licensed market (for example, under a continuous disclosure obligation).

(2)

For the purposes of subclause (1)(b), immaterial differences in the information that is contained in the PDS referred to in section 50 of the Act and the documents or information referred to in subclause (1)(b)(i) to (iii) may be disregarded.

16 Offeror treated as having reasonable grounds

(1)

An offeror must be treated as having reasonable grounds for believing that A has already been given (or has access and knows that they have access to) 1 or more documents or the information referred to in regulation 15(1)(b)(i) to (iii) if—

(a)

the offeror has previously provided to A a written notice that—

(i)

identifies the documents or information; and

(ii)

includes a statement to the effect that the identified documents or information may help the investor to make decisions about whether or not to acquire the relevant financial products; and

(b)

the notice was provided by giving it to A or delivering or sending it to A’s address; and

(c)

the notice—

(i)

includes or attaches the documents or information; or

(ii)

includes a statement as to how the investor may obtain a copy of, or access to, the documents or information by electronic means (for example, from a specified Internet site address); and

(d)

in the case of paragraph (c)(ii), the documents or information is available by that means.

(2)

This regulation does not limit the circumstances in which the offeror may have reasonable grounds for the belief referred to in subclause (1).

17 PDS does not have to be given before application if investment in category 2 products is made urgently and PDS is later provided

For the purposes of section 51(1)(c) of the Act, an offeror does not have to comply with section 50 of the Act in respect of an offer of financial products to a person (A) if—

(a)

the products are category 2 products (other than bonus bonds within the meaning of section 5 of the Financial Advisers Act 2008); and

(b)

A expressly requests that the products are issued or transferred urgently or by a specified time, and it is not reasonably practicable to comply with section 50 of the Act and still comply with the request; and

(c)

the offeror provides to A, not later than 10 working days after the date on which the products are issued or transferred to A,—

(i)

a PDS for the offer; and

(ii)

a written notice of the right under paragraph (e) and how the right may be exercised; and

(d)

the PDS and written notice are provided to A by giving them to A or delivering or sending them to A’s address; and

(e)

the terms of the offer include a right for A to withdraw from holding the financial products and to have the relevant money repaid, and that right is exercisable up until the expiry of at least 20 working days after the PDS is provided under paragraph (c).

18 PDS does not have to be given for category 2 products issued by NBDT that are debt securities

For the purposes of section 51(1)(c) of the Act, an offeror does not have to comply with section 50 of the Act in respect of an offer of NBDT category 2 debt securities to a person (A) if—

(a)

the PDS for the offer is publicly available; and

(b)

the offeror complies with regulation 19 in respect of A (if applicable).

19 NBDT must give credit risk statement to investors if it does not have investment-grade credit rating

(1)

This regulation applies for the purposes of regulation 18(b) if, at the time of the offer to A, the NBDT does not have an investment-grade credit rating.

(2)

The offeror must make available to A a credit risk statement before the offeror accepts an application for the NBDT category 2 debt securities that is made by A or the offeror issues or transfers the NBDT category 2 debt securities to A (whichever is earlier).

(3)

The credit risk statement must be made available by—

(a)

including the statement in an application form for the NBDT category 2 debt securities that includes a confirmation from A that A has received the statement (being a confirmation that must be completed before the offeror accepts the application); or

(b)

giving it to A.

(4)

The credit risk statement must—

(a)

be headed “What is [name of NBDT]’s credit risk?”; and

(b)

include a statement in the following form:

Deposits have risks. A key risk is that [name of NBDT] does not meet its commitment to repay you or to pay you any interest that is due (credit risk).”

(c)

include whichever of the statements specified in clause 5(2) and (5) of Schedule 7 that better applies (and clause 5(3) of that schedule applies with any necessary modifications for the purposes of clause 5(2), including the requirement to include a diagram in the credit risk statement); and

(d)

include a statement—

(i)

to the effect that further information about the credit risk of the NBDT is provided in the PDS and the offer register; and

(ii)

that describes how an investor may obtain this information.

(5)

If the credit risk statement is included in an application form or other document, the statement must be reasonably prominent in that document.

(6)

An NBDT has an investment-grade credit rating if the NBDT has a current rating of its creditworthiness or, if required by regulations made under the Non-bank Deposit Takers Act 2013, the creditworthiness of its borrowing group that is—

(a)

BBB– or better by Standard & Poor’s or by Fitch Ratings; or

(b)

Baa3 or better by Moody’s Investors Service.

Information at start of product disclosure statement

20 Information at start of PDS

(1)

Every PDS must, at the start of the PDS,—

(a)

include, in a prominent position, the words “Product Disclosure Statement”; and

(b)

identify the offer of financial products to which the PDS relates; and

Example

Initial public offering of ordinary shares in ABC Limited

(c)

identify the issuer; and

(d)

state the date of the PDS; and

(e)

contain a statement in the following form:

This document gives you important information about this investment to help you decide whether you want to invest. There is other useful information about this offer on [specify Internet site address of offer register]. [Name of issuer] has prepared this document in accordance with the Financial Markets Conduct Act 2013. You can also seek advice from a financial adviser to help you to make an investment decision.”

(2)

The PDS may also, at the start of the PDS, do any or all of the following:

(a)

identify the lead manager or managers (for example, a bank that is organising the offer):

(b)

identify the offeror (if the offeror is not the issuer):

(c)

identify 1 or more underwriters:

(d)

identify the investment manager or managers:

(e)

identify the issuing group if regulation 6(1) or (2) applies:

(f)

include 1 or more brands or logos customarily used by the issuer or any person referred to in paragraphs (a) to (e).

(3)

In the case of derivatives, the statement under subclause (1)(e) must be in the following form:

This document provides important information about [name of financial product or products or offer] to help you decide whether you want to enter into [it or any of these derivatives]. There is other useful information about this offer at [specify Internet site address of the offer register].

*Many derivatives are complex and high-risk financial products that are not suitable for most retail investors. If you do not fully understand a derivative described in this document and the risks associated with it, you should not enter into it. You can also seek advice from a financial adviser to help you make your decision. You should ask if that adviser has experience with these types of derivatives.

[Name of issuer] has prepared this document in accordance with the Financial Markets Conduct Act 2013.”

*Omit this sentence if the PDS covers only currency forwards.
21 Information at front may be on separate cover page or before key information summary

(1)

The information required or permitted by regulation 20 must be—

(a)

on a separate cover page; or

(b)

on the same page as, and before, the start of the KIS.

(2)

If the cover page contains no information other than the information required or permitted by regulation 20 or an exemption, the cover page must be disregarded when determining whether the PDS complies with the length restrictions that apply under regulations 22 to 29.

Content of product disclosure statements

22 Content of PDS for offer of debt securities

(1)

Every PDS for an offer of debt securities must contain all of the information specified in Part 1 of Schedule 2 that is applicable.

(2)

However,—

(a)

in the case of an offer of NBDT category 2 debt securities, the PDS must—

(i)

contain all of the information specified in Schedule 7 that is applicable (in which case subclause (1) does not apply); or

(ii)

comply with subclause (1):

(b)

in the case of a simplified disclosure offer of debt securities, the PDS must—

(i)

contain all of the information specified in Part 1 of Schedule 2 that is applicable (as modified in accordance with Part 1A of Schedule 2); or

(ii)

comply with subclause (1).

(3)

The PDS under subclause (1) or (2) must comply with at least 1 of the following length limits:

(a)

30 A4 pages when printed:

(b)

15 000 words.

(4)

PDSs that comply with subclause (2)(b)(i) are declared to be a class of simplified disclosure PDSs for the purposes of section 470 of the Act.

Regulation 22(2): replaced, on 1 December 2015, by regulation 7(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 22(4): inserted, on 1 December 2015, by regulation 7(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

23 Content of PDS for offer of equity securities

(1)

Every PDS for an offer of equity securities must contain all of the information specified in Part 1 of Schedule 3 that is applicable.

(1A)

However, in the case of a simplified disclosure offer of equity securities, the PDS must—

(a)

contain all of the information specified in Part 1 of Schedule 3 that is applicable (as modified in accordance with Part 1A of Schedule 3); or

(b)

comply with subclause (1).

(2)

The PDS under subclause (1) or (1A) must comply with at least 1 of the following length limits:

(a)

60 A4 pages when printed:

(b)

30 000 words.

(3)

PDSs that comply with subclause (1A)(a) are declared to be a class of simplified disclosure PDSs for the purposes of section 470 of the Act.

Regulation 23(1A): inserted, on 1 December 2015, by regulation 8(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 23(2): amended, on 1 December 2015, by regulation 8(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 23(3): inserted, on 1 December 2015, by regulation 8(3) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

24 Content of PDS for offer of managed investment products

(1)

Every PDS for an offer of managed investment products in a managed fund must contain all of the information specified in Part 1 of Schedule 4 that is applicable.

(2)

The PDS under subclause (1) must comply with at least 1 of the following length limits:

(a)

12 A4 pages when printed:

(b)

6 000 words.

(3)

Every PDS for an offer of managed investment products in any other managed investment scheme must contain all of the information specified in Part 1 of Schedule 5 that is applicable.

(4)

The PDS under subclause (3) must comply with at least 1 of the following length limits:

(a)

60 A4 pages when printed:

(b)

30 000 words.

25 Content of PDS for offer of derivatives

(1)

Every PDS for an offer of derivatives must contain all of the information specified in Part 1 of Schedule 6 that is applicable.

(2)

The PDS must comply with at least 1 of the following length limits:

(a)

30 A4 pages when printed:

(b)

15 000 words.

Key information summary

26 Key information summary

(1)

Every PDS must contain a key information summary (KIS).

(2)

However, subclause (1) does not apply to an offer of NBDT category 2 debt securities if the PDS contains all of the information specified in Schedule 7 that is applicable.

27 Purpose of key information summary

(1)

The purpose of a KIS is to provide the issuer’s assessment of the most significant aspects of the offer of the financial products that are relevant to a prudent but non-expert person’s decision as to whether or not to acquire the financial products.

(2)

The issuer must have regard to that purpose when preparing the KIS.

28 Key information summary must be identified

Every KIS must, at the start of the KIS, include, in a prominent position, the words “Key Information Summary”.

29 Key information summary requirements

(1)

Every KIS must comply with the following requirements:

(a)

the KIS must comply with the length limits under subclause (2); and

(b)

the KIS must contain all of the information for a KIS that is set out in the schedule of these regulations that applies to the PDS; and

(c)

no information, other than the required or permitted information, may be included in the KIS.

(2)

The KIS must comply with,—

(a)

in the case of an offer of debt securities, at least 1 of the following length limits:

(i)

3 A4 pages when printed:

(ii)

1 500 words:

(b)

in the case of an offer of equity securities, at least 1 of the following length limits:

(i)

4 A4 pages when printed:

(ii)

2 000 words:

(c)

in the case of an offer of managed investment products in a managed fund, at least 1 of the following length limits:

(i)

2 A4 pages when printed:

(ii)

1 000 words:

(d)

in the case of an offer of managed investment products in a scheme other than a managed fund, at least 1 of the following length limits:

(i)

4 A4 pages when printed:

(ii)

2 000 words:

(e)

in the case of an offer of derivatives, at least 1 of the following length limits:

(i)

2 A4 pages when printed:

(ii)

1 000 words.

(3)

A KIS does not fail to comply with subclause (1)(c) merely because the KIS contains additional information that is necessary—

(a)

to clarify the required or permitted information; or

(b)

to put the required or permitted information in context to ensure that the information that is disclosed is not false or misleading.

(4)

A KIS does not fail to comply with subclause (1)(c) merely because it includes—

(a)

1 or more brands or logos customarily used by the issuer or any person referred to in regulation 20(2)(a) to (e) (provided that the brand or logo is not distracting); or

(b)

a warning required to be contained in the PDS under an order made under section 49 of the Financial Markets Authority Act 2011.

(5)

A warning referred to in subclause (4)(b) must be disregarded when determining whether the KIS or PDS complies with the length restrictions that apply under subclause (2) or regulations 22 to 25.

(6)

In this regulation, required or permitted information means the information that is required or permitted to be contained in the KIS by these regulations or an exemption.

Presentation requirements

30 PDS must be easily readable

(1)

The format, font, and font size of the PDS must be easily readable.

(2)

See also section 61 of the Act (PDS must be worded and presented in a clear, concise, and effective manner).

Miscellaneous matters relating to PDSs

31 Blank pages

Blank pages must be disregarded when determining whether the KIS or PDS complies with the length restrictions that apply under regulations 22 to 29.

32 PDS may relate to more than 1 class of products, etc

(1)

A PDS may—

(a)

relate to more than 1 class of financial products if those financial products are of the same kind (for example, the PDS may relate to 2 or more classes of debt securities):

(b)

in the case of a managed fund, relate to more than 1 registered scheme:

(c)

in the case of derivatives, relate to more than 1 type of derivatives (for example, the PDS may relate to currency forwards and currency options).

(2)

However, subclause (1) applies only if the issuer reasonably considers that disclosing information about those classes, registered schemes, or types in 1 document is useful to investors.

(3)

In the case of an offer referred to in section 44 of the Act (convertible financial products), the PDS may, in accordance with regulations 49A to 49F, relate to the convertibles and the new products.

Regulation 32(3): inserted, on 1 December 2015, by regulation 9 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

33 Incorporation by reference

(1)

If these regulations require information to be contained or included in a PDS or register entry,—

(a)

the information may be incorporated by reference only if incorporation by reference is authorised by these regulations (see section 13 of the Act); and

(b)

the requirements in subclause (2) apply.

(2)

The requirements are that the PDS or register entry must—

(a)

include a brief description of the information; and

(b)

include a link to or URL for the page or section of the Internet site where the information is located (if the reference is to information on an Internet site); and

(c)

identify the document that contains the information and state how the information may be obtained (if paragraph (b) does not apply).

(3)

If a document that is lodged with the Registrar contains information that is incorporated by reference in the PDS,—

(a)

the information must be placed in the document under the relevant PDS heading; and

(b)

if there is more than 1 item of such information, each item must be presented in the same order as it would otherwise appear in the PDS; and

(c)

the document must identify the PDS and state that the information forms part of that PDS.

34 Additional information

(1)

A PDS must not contain any information in addition to the required or permitted information unless—

(a)

the PDS meets the length restrictions that apply under regulations 22 to 29; and

(b)

either—

(i)

the additional information is included after the relevant section of the PDS; or

(ii)

the additional information does not detract from the prominence of the information that is required to be included in the PDS by the Act, these regulations, or an exemption.

(2)

See also section 61 of the Act (which requires the information in the PDS to be worded and presented in a clear, concise, and effective manner).

(3)

This regulation does not limit any other permission to include additional information in the PDS.

(4)

In this regulation,—

relevant section means, in relation to a PDS for an offer of—

(a)

debt securities, section 9 of the PDS (unless paragraph (f) or (g) applies):

(b)

equity securities, section 9 of the PDS:

(c)

managed investment products in a managed fund, section 6 of the PDS:

(d)

managed investment products in a scheme other than a managed fund, section 9 of the PDS:

(e)

derivatives, section 6 of the PDS:

(f)

NBDT category 2 debt securities (in the case of a PDS under regulation 22(2)(a)), section 6 of the PDS:

(g)

convertibles to which regulation 49D applies, section 7 of the PDS

required or permitted information means the information that is required or permitted to be contained in the PDS by—

(a)

the Act, these regulations, or an exemption; or

(b)

any other Act.

Regulation 34(3): amended, on 1 December 2015, by regulation 10(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 34(4) relevant section paragraph (a): amended, on 1 December 2015, by regulation 10(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 34(4) relevant section paragraph (g): inserted, on 1 December 2015, by regulation 10(3) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

35 Information that must be included in PDS where regulations do not otherwise provide for placement

(1)

This regulation applies if—

(a)

the Act requires particular information to be included in a PDS, but these regulations do not otherwise provide for where that information must be included; or

Example

A PDS contains a statement made by John Smith as an expert. Section 60(1)(a) of the Act requires Mr Smith to consent to the statement being contained in the PDS. Section 60(1)(b) of the Act requires the PDS to state that Mr Smith has given his consent, but these regulations do not otherwise indicate where the statement should be included.

(b)

any other enactment requires a PDS to include particular information and neither that enactment nor these regulations otherwise provide for where that information must be included (for example, section 129 of the KiwiSaver Act 2006).

(2)

The information must be included in the PDS in the place that the issuer considers is most appropriate in terms of the PDS being presented in a clear, concise, and effective manner.

36 Application form

(1)

A PDS may include an application form if that form is included in an unnumbered section at the end of the PDS.

(2)

The application form must be disregarded when determining whether the PDS complies with the length restrictions that apply under regulations 22 to 25.

(3)

Subclause (2) does not apply if the application form contains information that is not directly related to an application for the financial products (for example, information that promotes the offer).

(4)

In this regulation, application form means an application form for the financial products that are offered under the PDS (or, in the case of derivatives, an application form to enter into a client agreement with a derivatives issuer).

Content of register entries when PDS is lodged

37 Content of register entries when PDS is lodged

(1)

Regulations 38 to 41 and 43 specify the information that the register entry (if any) is required to contain for the purposes of—

(a)

section 48(1)(c) of the Act (which requires the issuer to supply the information before making the regulated offer and before distributing application forms); and

(b)

section 57(1)(b)(i) and (iii) of the Act (content of register entry as at the date on which the PDS is lodged).

(2)

See regulations 50 and 51 (which provide for the updating of register entries).

38 Content of register entry for offer of debt securities

Every register entry for an offer of debt securities must contain all of the information specified in Part 2 of Schedule 2 that is applicable.

39 Content of register entry for offer of equity securities

Every register entry for an offer of equity securities must contain all of the information specified in Part 2 of Schedule 3 that is applicable.

40 Content of register entry for offer of managed investment products

(1)

Every register entry for an offer of managed investment products in a managed fund must contain all of the information specified in Part 2 of Schedule 4 that is applicable.

(2)

Every register entry for an offer of managed investment products in any other managed investment scheme must contain all of the information specified in Part 2 of Schedule 5 that is applicable.

41 Content of register entry for offer of derivatives

Every register entry for an offer of derivatives must contain all of the information specified in Part 2 of Schedule 6 that is applicable.

42 Register entry must contain material information and may contain other lodged information

Regulations 37 to 41 do not limit—

(a)

section 57(1)(b)(ii) and (iv) of the Act (which require the register entry to contain all material information relating to the regulated offer that is not contained in the PDS and to contain information concerning consents for expert statements or endorsements):

(b)

other provisions of these regulations or any other enactment that require information to be lodged with the Registrar.

42A Requirement to include all material information does not apply to simplified disclosure offers

Section 57(1)(b)(ii) of the Act does not apply to a simplified disclosure offer.

Regulation 42A: inserted, on 1 December 2015, by regulation 11 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

42B Requirement to include all material information does not apply to information in supplement for multiple-participant scheme

(1)

This regulation applies to an offer of interests in a multiple-participant scheme.

(2)

Section 57(1)(b)(ii) of the Act does not apply to information contained in relevant supplements that are given to investors under clause 8B of Schedule 4.

(3)

In this clause, multiple-participant scheme and relevant supplement have the same meanings as in clause 8B of Schedule 4.

Regulation 42B: inserted, on 28 October 2016, by regulation 5 of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

43 Register entry must contain information referred to in PDS

If any of Schedules 2 to 7 require a PDS to refer to information contained on the offer register, the register entry must contain that information.

44 Lodging or giving information for register entry

Information for a register entry that is lodged with or given to the Registrar must be lodged or given in the manner specified by the Registrar in accordance with clause 13(1) of Schedule 2 of the Act.

Example

The identification of the industry in which the issuer operates is selected from a drop-down list of options specified by the Registrar on the offer register Internet site maintained by the Registrar.

Other provisions relating to lodging of PDS and other documents

45 Lodgement of PDS

(1)

For the purposes of section 63 of the Act, an issuer that lodges a PDS must, when the PDS is lodged, supply to the Registrar evidence of the board’s consent—

(a)

to the lodgement of the PDS; and

(b)

to the supply to the Registrar of information under section 48(1)(c) of the Act (which relates to information for the register entry).

(2)

Evidence of the board’s consent may include a statement of the board’s consent to the lodgement and supply that is signed on behalf of the board—

(a)

by 2 directors of the issuer; or

(b)

if the issuer has only 1 director, by that director.

(3)

Subclause (2) does not limit the form that the evidence may take.

46 When supplementary document may not be lodged

For the purposes of section 71(2) of the Act, a supplementary document must not be lodged with the Registrar if—

(a)

the document purports to supplement a PDS for an offer of managed investment products in a managed fund; or

(b)

the document purports to supplement any part of the key information summary (unless the document covers the whole key information summary).

Dealing with applications where condition referred to in PDS not met or disclosure defective

47 How offeror must act under section 80 of Act

An offeror must, when acting under section 80 of the Act, comply with the following requirements:

(a)

the offeror must act as soon as practicable under section 80(1)(a), (b), or (c) of the Act:

(b)

in the case of section 80(1)(b) or (c) of the Act,—

(i)

the offeror must, by way of a written notice (the notice), give the applicant 1 month to confirm under that paragraph; and

(ii)

the notice must state how the applicant may confirm under that paragraph; and

(iii)

the notice must state the reason why section 80 of the Act applies; and

(iv)

if a replacement PDS is given, the notice must state how the replacement PDS is materially different from the PDS that it replaces; and

(v)

if the register entry has been amended, the notice must state how the register entry has been amended; and

(vi)

the notice must state that, if the applicant does not confirm to the issuer that the applicant still wants to acquire the financial products by a date specified in the notice (that is 1 month after the notice is given), no issue or transfer of financial products will be made and the applicant’s money will be repaid.

Expiry

48 How offeror must deal with applications on expiry

(1)

This regulation applies if a PDS specifies an expiry date for the PDS.

(2)

An offeror must, when acting under section 85 of the Act, comply with the following requirements:

(a)

the offeror must act as soon as practicable under section 85(3)(a) or (b) of the Act; and

(b)

in the case of section 85(3)(b) of the Act,—

(i)

the offeror must, by way of a written notice (the notice), give the applicant 1 month to confirm under that paragraph; and

(ii)

the notice must state how the applicant may confirm under that paragraph; and

(iii)

the notice must state the reason why section 85 of the Act applies; and

(iv)

the notice must state that if the applicant does not confirm to the offeror that the applicant still wants to acquire the financial products by a date specified in the notice (that is 1 month after the notice is given), no issue or transfer of financial products will be made and the applicant’s money will be repaid.

Money for financial products must be held in trust

49 Dealing with money while it is held in trust

(1)

For the purposes of section 87 of the Act, an issuer or offeror—

(a)

must ensure that the money is paid promptly into a specified bank to a trust account; and

(b)

must ensure that the money is held separate from money held by or for the issuer or offeror on its own account; and

(c)

must keep, or ensure that there are kept, trust account records that disclose clearly the position of the money in the trust account; and

(d)

must ensure that the trust account records are kept in a manner that enables those records to be conveniently and properly audited, reviewed, or inspected; and

(e)

must ensure that the bank and any other interested parties are put on notice that the money in the trust account is trust money.

(2)

In this regulation,—

money means the money held in trust under section 87 of the Act

trust account means any account at a bank—

(a)

in the name of the issuer, offeror, supervisor, or custodian; and

(b)

that is designated as a trust account.

Provisions relating to convertibles

Heading: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

49A Offers of convertible financial products

Regulations 49B to 49F apply to offers referred to in section 44 of the Act (convertible financial products) if—

(a)

the convertible is—

(i)

a debt security; or

(ii)

an equity security; or

(iii)

a managed investment product in a managed investment scheme other than a managed fund; and

(b)

the issuer of the convertible is—

(i)

the issuer of the new product; or

(ii)

a related body corporate of the issuer of the new product.

Regulation 49A: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 49A: amended, on 28 October 2016, by regulation 6 of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

49B Requirements that apply to convertibles

The requirements in regulations 49C to 49E apply instead of the requirements that would otherwise apply to the offers of the convertible and the new product.

Example

XYZ Limited makes an offer of debt securities that will convert into ordinary shares. XYZ Limited is not a registered bank (see regulation 49D).

The convertibles are debt securities, while the new products are equity securities.

The PDS will comply with the requirements for a PDS for debt securities (in Schedule 2) rather than those that apply to equity securities (in Schedule 3). The PDS must include the additional information about the new products that is required by Schedule 2.

The register entry will comply with the requirements for debt securities (in Part 2 of Schedule 2) rather than those that apply to equity securities (in Part 2 of Schedule 3).

Regulation 49B: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 49B: amended, on 28 October 2016, by regulation 7(1) of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

Regulation 49B example: replaced, on 28 October 2016, by regulation 7(2) of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

49C PDS and register entry requirements

(1)

The PDS must comply with—

(a)

regulation 22 if the convertibles are debt securities:

(b)

regulation 23 if the convertibles are equity securities:

(c)

regulation 24(3) and (4) if the convertibles are managed investment products.

(2)

The KIS must comply with—

(a)

regulation 29(2)(a) if the convertibles are debt securities:

(b)

regulation 29(2)(b) if the convertibles are equity securities:

(c)

regulation 29(2)(d) if the convertibles are managed investment products.

(3)

Despite subclauses (1)(a) and (2)(a), if the convertibles are debt securities and the new products are equity securities or managed investment products,—

(a)

regulations 22(3) and 29(2)(a) do not apply; and

(b)

the PDS must instead comply with—

(i)

regulation 23(2) if the new products are equity securities:

(ii)

regulation 24(4) if the new products are managed investment products; and

(c)

the KIS must instead comply with—

(i)

regulation 29(2)(b) if the new products are equity securities:

(ii)

regulation 29(2)(d) if the new products are managed investment products.

(4)

The register entry must comply with—

(a)

regulation 38 if the convertibles are debt securities:

(b)

regulation 39 if the convertibles are equity securities:

(c)

regulation 40(2) if the convertibles are managed investment products.

(5)

For the purposes of this regulation, unless the context otherwise requires, each reference to the debt securities in Schedule 2, the equity securities in Schedule 3, or the managed investment products in Schedule 5 (as the case may be) is a reference to the convertibles (rather than to the new products).

(6)

This regulation does not apply if regulation 49D applies.

Regulation 49C: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

49D Convertible debt securities issued by registered banks

(1)

This regulation applies if—

(a)

the convertible is a debt security issued by a registered bank; and

(b)

the new product is an equity security.

(2)

The disclosure document must—

(a)

contain all of the information specified in Schedule 9 that is applicable; and

(b)

comply with regulation 23(2).

(3)

The KIS must comply with regulation 29(2)(b).

(4)

The register entry must comply with regulation 38.

(5)

Subclause (4) is subject to clause 26 of Schedule 8 (which applies to the register entry with all necessary modifications).

(6)

[Revoked]

(7)

For the purposes of this regulation, unless the context otherwise requires, each reference to the debt securities in Schedule 2 or 9 is a reference to the convertibles (rather than to the new products).

(8)

Nothing in regulation 49B or this regulation limits the application of regulation 72 in relation to the offer of the convertible.

Example

ABC Limited (a registered bank) makes an offer of debt securities that will convert into ordinary shares.

The convertibles are debt securities, while the new products are equity securities.

An offer of the debt securities issued by a registered bank does not require disclosure under Part 3 of the Act (see clause 21 of Schedule 1 of the Act). Instead, a limited disclosure document (LDD) that complies with Schedule 9 is required. However, the offer of the equity securities requires disclosure under Part 3 of the Act.

The disclosure document (which is a PDS for the offer of the equity securities and an LDD for the offer of the debt securities) must comply with the requirements in Schedule 9. Most of the disclosure required by Schedule 9 relates to the debt securities, but that schedule does require some additional information to be included relating to the equity securities.

The register entry for the offer of equity securities must comply with the requirements for debt securities (in Part 2 of Schedule 2) rather than those that apply to equity securities (in Part 2 of Schedule 3).

Regulation 49D: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 49D(2): replaced, on 28 October 2016, by regulation 8(1) of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

Regulation 49D(5): replaced, on 28 October 2016, by regulation 8(2) of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

Regulation 49D(6): revoked, on 28 October 2016, by regulation 8(2) of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

Regulation 49D(8): inserted, on 28 October 2016, by regulation 8(3) of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

Regulation 49D example: inserted, on 28 October 2016, by regulation 8(3) of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

49E Modification of statement at start of PDS

If the convertibles will be converted into new products in connection with an event or a circumstance relating to the insolvency or a financial difficulty of the issuer, the statement under regulation 20(1)(e) must be in the following form:

This document gives you important information about this investment to help you decide whether you want to invest. There is other useful information about this offer on [specify Internet site address of offer register].

This investment is riskier than a bank deposit.* These [name of convertibles] are complex financial products that are not suitable for many investors. If you do not fully understand how they work or the risks associated with them, you should not invest in them. You can seek advice from a financial adviser to help you make an investment decision.

[Name of issuer] has prepared this document in accordance with the Financial Markets Conduct Act 2013.”

*Include this sentence if the issuer is a registered bank.

Regulation 49E: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

49F Additional information

(1)

The PDS may include additional information if that information is of a kind that would be required or permitted to be disclosed in a PDS if the offer related only to the new products (for example, information about the issuing group of the new products).

(2)

The additional information under this regulation may be included in any section of the PDS where the issuer reasonably considers the information is useful to investors.

(3)

However, the additional information may be included in the KIS only if it is of a kind that would be required or permitted to be disclosed in a KIS if the offer related only to the new products.

Regulation 49F: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Simplified disclosure offers for listed issuers

Heading: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

49G Simplified disclosure offers for listed issuers

(1)

The purpose of this regulation is to define the offers for which—

(a)

a simplified disclosure PDS may be used (see regulations 22(4) and 23(3)); and

(b)

all material information in the register entry is not required (see regulation 42A).

(2)

An offer of financial products is a simplified disclosure offer if—

(a)

the offer is an offer—

(i)

of debt securities or equity securities that rank equally with, or in priority to, existing quoted products of the issuer; or

(ii)

of options referred to in section 43 of the Act where the underlying financial products are equity securities that rank equally with, or in priority to, existing quoted products of the issuer; or

(iii)

referred to in section 44 of the Act where—

(A)

the convertibles are debt securities or equity securities that rank equally with, or in priority to, existing quoted products of the issuer; and

(B)

the new products are debt securities, equity securities, or managed investment products that rank equally with, or in priority to, existing quoted products of the issuer; and

(b)

the existing quoted products have been quoted on a licensed market (the licensed market) at all times during the 3-month period before the time of the offer; and

(c)

trading in the existing quoted products on the licensed market was not suspended for more than a total of 5 trading days during the 3-month period referred to in paragraph (b); and

(d)

the market rules of the licensed market contain continuous disclosure provisions; and

(e)

the issuer has, at a relevant time, provided a notice that complies with regulation 49H to the licensed market operator that operates the licensed market for the purpose of that notice being notified to the market.

(3)

In this regulation,—

existing quoted products means the financial products that are quoted at the time of the offer

relevant time, in relation to an offer of financial products, means—

(a)

a time within the 24-hour period before the offer is made; or

(b)

an earlier time required by the licensed market operator; or

(c)

if a similar notice is also being given for the purposes of an offer of the financial products in Australia, an earlier time required by ASX Limited (a company incorporated in Australia) for giving the similar notice.

(4)

In this regulation, a financial product ranks equally with, or in priority to, another financial product if—

(a)

it has that ranking on a liquidation of the issuer; and

(b)

in the case of equity securities in relation to other equity securities, it has that ranking on a liquidation of the issuer and on the payment of dividends.

Regulation 49G: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

49H Cleansing notice

(1)

This regulation applies to a notice under regulation 49G(2)(e).

(2)

The notice must—

(a)

state that an offer for issue or sale is being made using short-form disclosure; and

(b)

state that the notice is provided under regulation 49G(2)(e); and

(c)

state that, as at the date of the notice, the issuer is in compliance with the continuous disclosure obligations that apply to it in relation to the existing quoted products; and

(d)

state that, as at the date of the notice, the issuer is in compliance with its financial reporting obligations; and

(e)

set out the information (if any) that is excluded information as at the date of the notice; and

(f)

in the case of an offer involving equity securities, describe—

(i)

the potential effect that the offer will have on the control of the issuer; and

(ii)

the consequences of that effect.

(3)

If the offer is an offer referred to in section 44 of the Act and the convertibles are equity securities, subclause (2)(f) applies to the convertibles and, if the new products are equity securities, subclause (2)(f) also applies to those securities.

(4)

The notice must contain information under subclause (2)(e) and (f) only to the extent to which it is material information.

(5)

If the licensed market on which the existing quoted products are quoted is the NXT market,—

(a)

subclause (2)(c) and (e) does not apply; but

(b)

the notice must—

(i)

state that, as at the date of the notice, the issuer is in compliance with the continuous disclosure obligations and all other alternative disclosure obligations under the listing rules of the NXT market that apply to it in relation to the existing quoted products; and

(ii)

set out the material information that is not generally available to the market and that has not been disclosed to the market under a continuous disclosure obligation or an alternative disclosure obligation.

(6)

See regulation 54A (which provides for the correction of a defect in a notice under this regulation).

(7)

In this regulation,—

control has the same meaning as in clause 48 of Schedule 1 of the Act

excluded information means information to which a continuous disclosure obligation would apply but which has not been disclosed under such an obligation as a result of an exclusion in, or a waiver given under, the listing rules for the licensed market upon which the existing quoted products are quoted

existing quoted products means the quoted financial products referred to in regulation 49G(2)

financial reporting obligations, in relation to an issuer, means requirements imposed under—

(a)

the Act or another enactment to prepare financial statements or group financial statements in relation to the issuer, its group, or (if it is a manager) a scheme of which it is a manager for the most recently completed accounting period, to have those statements audited, and to lodge or register those statements; and

(b)

any listing rules of the licensed market that provide for financial statements to be released to the market for a more recent interim accounting period than the period referred to in paragraph (a)

NXT market means the licensed market operated by NZX Limited under that name.

Regulation 49H: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

49I Cleansing notice may not be provided in certain circumstances

(1)

A notice under regulation 49H may not be provided under regulation 49G(2)(e) (and, accordingly, the requirements of regulation 49G(2) are not satisfied) if—

(a)

the offer is made within 3 months after a change to the essential nature of the issuer’s business; or

(b)

the offer is made within 3 months after a transaction for which the issuer has provided disclosure to the licensed market as if it were listing on that market; or

(c)

the offer is made in connection with enabling—

(i)

a change to the essential nature of the issuer’s business; or

(ii)

a transaction for which the issuer will be required to provide disclosure to the licensed market as if it were listing on that market; or

(d)

the FMA has, in the 12-month period before the offer is made, made an order under section 474 of the Act in respect of the issuer.

(2)

Regulation 49G is subject to this regulation.

Regulation 49I: inserted, on 1 December 2015, by regulation 12 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Subpart 2—Ongoing disclosure and updating of registers

Updating register entry

50 Duty to notify changes to Registrar

(1)

For the purposes of section 95 of the Act, the following are prescribed changes:

(a)

if, at the time of the change, the PDS for the regulated offer has an open for applications status,—

(i)

a change relating to the information disclosed under a relevant clause that makes that information in the register entry incorrect:

(ii)

a change of circumstances that has arisen that would have required different information to have been disclosed under a relevant clause had it arisen before the date of the PDS:

(b)

a change to an address for communications that is specified in the register entry for the issuer or any other person.

(2)

In this regulation, relevant clause means,—

(a)

in relation to debt securities, clause 63 of Schedule 2:

(b)

in relation to equity securities, clause 52 of Schedule 3:

(c)

in relation to managed investment products in a managed fund, clause 51 of Schedule 4:

(d)

in relation to other managed investment products, clause 47 of Schedule 5:

(e)

in relation to derivatives, clause 28 of Schedule 6.

Regulation 50(1)(a)(ii) example: revoked, on 1 December 2015, by regulation 13 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

51 Information to be lodged with Registrar for updating register

For the purposes of section 96 of the Act, an issuer of—

(a)

debt securities must lodge with the Registrar the information specified in clause 67 of Schedule 2 within the time specified in that clause:

(b)

equity securities must lodge with the Registrar the information specified in clause 55 of Schedule 3 within the time specified in that clause:

(c)

managed investment products in a managed fund must lodge with the Registrar the information specified in clause 54 of Schedule 4 within the time specified in that clause.

52 Confirmation notice

(1)

For the purposes of section 97 of the Act, an issuer of regulated products must, at the times referred to in regulations 52A and 52B, lodge with the Registrar—

(a)

a confirmation notice; and

(b)

evidence of the board’s consent to the lodgement of the confirmation notice (being consent that is given no more than 5 working days before that lodgement).

(2)

The confirmation notice must confirm that, as at the date of the board’s consent to the lodgement of the notice, an offeror is not prohibited under section 82(1) of the Act from offering, or continuing to offer, financial products under the regulated offer.

(3)

Evidence of the board’s consent under this regulation may include a statement of the board’s consent to the lodgement that is signed on behalf of the board—

(a)

by 2 directors of the issuer; or

(b)

if the issuer has only 1 director, by that director.

(4)

Subclause (3) does not limit the form that the evidence may take.

Regulation 52: replaced, on 1 June 2016, by regulation 14 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

52A Annual confirmation notice

(1)

A confirmation notice and evidence under regulation 52 must be lodged with the Registrar in each year not later than 1 month after the confirmation date.

(2)

However, this regulation applies only if, at the confirmation date, at least 1 PDS on the register entry has an open for applications status.

(3)

In this regulation and regulation 52B, confirmation date, in relation to an issuer and a register entry, means—

(a)

the anniversary in each year of the date of lodgement of the PDS on the register entry (or, if more than 1 PDS has been lodged, the anniversary in each year of the date of lodgement of the first PDS); or

(b)

any other date that the issuer adopts as the confirmation date (see subclause (4)).

(4)

A date that is adopted under subclause (3)(b) is effective only if—

(a)

the date is notified to the Registrar; and

(b)

in the case of a date that is adopted as the first confirmation date for the register entry, the period between the date of lodgement of the PDS referred to in subclause (3)(a) and the date that is adopted does not exceed 13 months; and

(c)

the period between any 2 confirmation dates does not exceed 13 months.

Regulation 52A: inserted, on 1 June 2016, by regulation 14 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

52B Supplementary confirmation notice if PDS or fund opens after being closed

(1)

This regulation applies if—

(a)

a PDS has a closed for applications status or a specified fund in a managed fund that is covered by a PDS has a closed to all investment status; and

(b)

at the time of the most recent confirmation date, the PDS had a closed for applications status or the specified fund had a closed to all investment status.

(2)

A confirmation notice and evidence under regulation 52 must be lodged with the Registrar before—

(a)

the status of the PDS changes to an open for applications status; or

(b)

the status of the specified fund changes to an open status or a closed to new investors status.

Regulation 52B: inserted, on 1 June 2016, by regulation 14 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Request disclosure

53 Issuer must make information available on request

(1)

This regulation applies if a disclosure document, a register entry, or an entry in the scheme register contains a statement to the effect that a document or other information is available from an issuer on a request that is made by a particular person or a person of a particular class (A).

(2)

For the purposes of section 96 of the Act, the issuer must, after receiving a request from A, provide the document or other information to A as soon as practicable but, in any event, within 5 working days after the issuer receives the request.

(3)

The document or other information must be provided by giving it to A or delivering or sending it to A’s address.

(4)

The document or other information must be provided free of charge (unless a charge is otherwise expressly permitted by these regulations).

53A Certain members of defined benefit schemes may request information

(1)

This regulation applies if a member of a defined benefit scheme to whom contributions are not allocated on a defined basis (A) requests from the issuer 1 or more of the following:

(a)

an estimate of A’s benefits:

(b)

a copy of a report of an actuary required under section 169 of the Act:

(c)

a statement of the specific interest, mortality, and other assumptions and bases of calculation applied in determining the value of the assets and liabilities of the scheme for the purposes of the actuarial report:

(d)

if A is considering a proposed change to A’s benefits,—

(i)

a statement of the specific interest, mortality, and other assumptions and bases of calculation applied in determining the benefits under consideration; and

(ii)

if different assumptions and bases of calculation have been applied in the last 12 months in determining similar benefits to those under consideration, a statement of the reason why different bases and assumptions applied.

(2)

For the purposes of section 96 of the Act, the issuer must, after receiving a request from A, provide the document or other information to A as soon as practicable but, in any event, within 5 working days after the issuer receives the request.

(3)

The document or other information must be provided by giving it to A or delivering or sending it to A’s address.

(4)

The document or other information must be provided free of charge.

(5)

In this regulation, proposed change includes (without limitation)—

(a)

an election to convert any benefit into a lump sum:

(b)

an election to defer receipt of a benefit:

(c)

a change to a benefit regardless of whether or not the benefit is specified in the governing document of the scheme of which A is a member:

(d)

an election to convert all or part of a benefit into a benefit to be provided to some other person:

(e)

an election to transfer a benefit to another scheme or from one section of a scheme to another section of the same scheme.

Regulation 53A: inserted, on 17 December 2015, by regulation 15 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Convertible financial products

54 Disclosure for unquoted convertible financial products where holder has option to convert

(1)

This regulation applies in respect of a specified convertible if—

(a)

the new product is not quoted at any time at which a product holder may exercise the option to convert; and

(b)

the issuer becomes aware—

(i)

that a statement in the PDS, any application form that accompanies the PDS, or the register entry is false or misleading or is likely to mislead; or

(ii)

that there is an omission from the PDS, or the register entry, of information that is required to be contained in the PDS, or the register entry, by the Act or these regulations; or

(iii)

of a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by the Act or these regulations to be disclosed or otherwise contained in the PDS, or the register entry, if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the PDS or the register entry; and

(c)

the matter referred to in paragraph (b) is materially adverse from the point of view of an investor.

(2)

For the purposes of section 96 of the Act, the issuer must, as soon as practicable after becoming aware of the matter in subclause (1)(b), send a copy of a correcting document (or a notice of how to obtain a copy of a correcting document) to all product holders of the specified convertible.

(3)

For the purposes of section 97 of the Act, the issuer must, as soon as practicable after becoming aware of the matter in subclause (1)(b), make publicly available a correcting document.

(4)

See regulation 5(3) (which defines publicly available).

(5)

In this regulation,—

correcting document, in relation to a deficiency referred to in subclause (1)(b), means a document that—

(a)

corrects the deficiency; and

(b)

states the reason why this regulation applies

option to convert means the option of the product holder referred to in the definition of specified convertible

PDS means the PDS for the offer of the specified convertible

register entry means the register entry for the offer of the specified convertible

specified convertible means a convertible that will be converted, or is or may become convertible, into another financial product at the option of the product holder (whether or not the financial product will be converted, or is or may become convertible, in any other circumstances).

Regulation 54(1): amended, on 1 December 2015, by regulation 16(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 54(2): amended, on 1 December 2015, by regulation 16(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 54(5): replaced, on 1 December 2015, by regulation 16(3) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Correcting defective cleansing notice

Heading: inserted, on 1 December 2015, by regulation 17 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

54A Correcting defective cleansing notice

(1)

This regulation applies if—

(a)

a notice to which regulation 49H applies is defective; and

(b)

the issuer becomes aware of the defect in the notice before the close of the offer to which the notice relates.

(2)

For the purposes of section 97 of the Act, the issuer must, within a reasonable time after becoming aware of the defect, provide a notice to the licensed market operator that sets out the information necessary to correct the defect (for the purpose of the licensed market operator notifying that information to the market).

(3)

For the purposes of section 98(2)(b) of the Act, section 98(1) of the Act does not apply to information provided under this regulation.

(4)

In this regulation, a notice is defective if—

(a)

there is—

(i)

a statement in the notice that is false or misleading or that is likely to mislead; or

(ii)

an omission from the notice of information that is required to be contained in the notice by regulation 49H; or

(iii)

a circumstance that has arisen since the notice was provided to the licensed market operator that would have been required by regulation 49H to be contained in the notice if it had arisen before the notice was provided, and the circumstance is not so contained in the notice; and

(b)

the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.

Regulation 54A: inserted, on 1 December 2015, by regulation 17 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Event disclosures

55 Event disclosures to be made publicly available

(1)

For the purposes of section 97 of the Act, an issuer of—

(a)

debt securities must make the information specified in clause 68 of Schedule 2 publicly available within the time specified in that clause:

(b)

equity securities must make the information specified in clause 56 of Schedule 3 publicly available within the time specified in that clause:

(c)

managed investment products in a scheme (other than a managed fund) must make the information specified in clause 52 of Schedule 5 publicly available within the time specified in clause 51 of that schedule.

(2)

See regulation 5(3) (which defines publicly available).

Fund updates for managed funds

56 Duty to make fund update publicly available

(1)

Every manager of a registered scheme that is a managed fund must make publicly available, within 20 working days after the last day of each quarter of each disclosure year,—

(a)

a fund update for each specified fund in the registered scheme; and

(b)

a fund update for each specified multi-fund investment option in the registered scheme; and

(c)

a fund update for each specified life cycle stage in a life cycle investment option in the registered scheme.

(2)

However, if the managed fund is a restricted scheme or a closed scheme or the managed fund has a closed section,—

(a)

subclause (1) does not apply to the restricted scheme, closed scheme, or closed section; and

(b)

the manager must make a fund update for each specified fund, specified multi-fund investment option, and specified life cycle stage in that scheme or section publicly available within 3 months after—

(i)

the last day of each disclosure year; or

(ii)

the balance date of the scheme in each year.

(2A)

If a managed fund is a defined benefit scheme, subclause (1) or (2) applies if, and only if, contributions are allocated on a defined basis to any member.

(2B)

If a specified fund, specified multi-fund investment option, or specified life cycle stage relates to both a closed section and an open section of a superannuation scheme or workplace savings scheme, the manager must,—

(a)

for the purposes of the open section, make the fund update for the fund, option, or stage publicly available in accordance with subclause (1); and

(b)

for the purposes of the closed section, make the fund update for the fund, option, or stage publicly available in accordance with subclause (2)(b).

(3)

This regulation and regulations 57 to 61 apply for the purposes of section 97 of the Act.

(4)

See regulation 5(3) (which defines publicly available).

(5)

In this regulation,—

closed scheme means a superannuation scheme, or workplace savings scheme, that—

(a)

was closed to new members on its registration as a registered scheme; and

(b)

remains closed to new members

closed section means a section of a superannuation scheme, or workplace savings scheme, that—

(a)

was closed to new members on the scheme’s registration as a registered scheme; and

(b)

remains closed to new members

open section means a section of a superannuation scheme, or workplace savings scheme, that is not a closed section

working day means a day that is not—

(a)

Saturday, Sunday, Good Friday, Easter Monday, Anzac Day, Labour Day, the Sovereign’s birthday, or Waitangi Day; or

(b)

a day in the period commencing on 25 December in one year and ending on 15 January in the next year; or

(c)

if Waitangi Day or Anzac Day falls on a Saturday or a Sunday, the following Monday.

Regulation 56(1): replaced, on 17 December 2015, by regulation 18(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 56(2): replaced, on 28 October 2016, by regulation 9(1) of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

Regulation 56(2A): inserted, on 17 December 2015, by regulation 18(3) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 56(2B): inserted, on 28 October 2016, by regulation 9(2) of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

Regulation 56(5): replaced, on 28 October 2016, by regulation 9(3) of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

57 Information at start of fund update

Every fund update must, at the start of the fund update,—

(a)

include, in a prominent position, the words “Fund Update” (or, in the case of a specified multi-fund investment option or life cycle stage, the words “Investment update”); and

(b)

identify the fund, investment option, or stage to which the fund update relates; and

(c)

identify the registered scheme to which that fund, investment option, or stage relates; and

(d)

identify, in the case of—

(i)

regulation 56(1), the last day of the quarter as at which the fund update is prepared (being the most recently completed quarter):

(ii)

regulation 56(2), the last day of the disclosure year or the balance date of the scheme as at which the fund update is prepared (being the last day of the most recently completed disclosure year or the most recent balance date); and

(e)

state the date on which the fund update is first made publicly available.

Regulation 57(a): amended, on 17 December 2015, by regulation 19(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 57(b): amended, on 17 December 2015, by regulation 19(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 57(c): amended, on 17 December 2015, by regulation 19(3) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

58 Content of fund update for funds

Every fund update for a fund must contain all of the information specified in Part 4 of Schedule 4 that is applicable.

Regulation 58: replaced, on 17 December 2015, by regulation 20 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

58A Content of fund update for specified multi-fund investment option or specified life cycle stage

(1)

Every fund update for a specified multi-fund investment option or specified life cycle stage must contain all of the information specified in Part 4 of Schedule 4 that is applicable (applied with all necessary modifications as if the investment option or stage were a fund).

(2)

However, if the manager reasonably considers that it is likely to be useful to investors, the information in clauses 67 to 72 of Schedule 4 may (instead of being provided as would otherwise be required by subclause (1)) be—

(a)

set out on a per-fund basis (that is, on a basis relating to the funds to which the specified multi-fund investment option or specified life cycle stage relates); or

(b)

incorporated by reference to a relevant fund update for each fund to which the specified multi-fund investment option or specified life cycle stage relates.

(3)

In this regulation, relevant fund update means a fund update that is publicly available and is prepared as at the same date as the fund update for the specified multi-fund investment option or specified life cycle stage.

Regulation 58A: inserted, on 17 December 2015, by regulation 20 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

59 Templates

(1)

A fund update must disclose the required or permitted information in the same format as in the templates for that fund update that are set out in an applicable framework or methodology (if any).

(2)

A fund update must—

(a)

round figures to 2 decimal places, or more if additional decimal places are necessary to ensure that the fund update is not misleading or are necessary to provide the required or permitted information; and

(b)

present the required or permitted information in the same order as in the relevant template; and

(c)

contain no information other than the required or permitted information.

(3)

A fund update does not fail to comply with subclause (2)(c) merely because the fund update contains additional information that is necessary—

(a)

to clarify the required or permitted information; or

(b)

to put the required or permitted information in context to ensure that the information that is disclosed is not false or misleading.

(4)

A fund update does not fail to comply with subclause (1) merely because the fund update deviates from a template in the following ways:

(a)

uses a different font and size, as long as it is easily readable:

(b)

uses different borders, shading, colours, and other minor formatting variations:

(c)

includes 1 or more of the following:

(i)

the registered scheme’s or issuer’s brand or logo, provided that it is not distracting:

(ii)

contact information for the registered scheme, provided that it is not distracting:

(iii)

a reference or a link, or both, to the PDS or other relevant documents:

(d)

presents information side by side, uses columns, or uses more of the page than the template:

(e)

contains minor variations from the format in the template if this is necessary to ensure that the fund update is not false or misleading.

(5)

In this regulation, required or permitted information means the information that is required or permitted to be contained in the fund update by these regulations or an exemption.

60 How long fund updates must be publicly available

The manager of a registered scheme must—

(a)

ensure that each fund update is publicly available for a period of not less than 2 years; and

(b)

after the fund update ceases to be publicly available under paragraph (a), ensure that the Internet site maintained by, or on behalf of, the manager prominently displays a link to the place on the offer register where previous fund updates can be obtained.

61 Revised fund update to be made publicly available in certain circumstances

(1)

This regulation applies if—

(a)

there is—

(i)

a statement in a fund update that is false or misleading or is likely to mislead; or

(ii)

an omission from a fund update of information that is required to be contained in the fund update by these regulations; and

(b)

the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.

(2)

For the purposes of this regulation, a statement about a future matter (including the doing of, or the refusal to do, an act) must be taken to be misleading if the person making the statement does not have reasonable grounds for making it.

(3)

The manager of the registered scheme must, as soon as practicable after the manager becomes aware of the deficiency,—

(a)

remove the fund update from the Internet site maintained by, or on behalf of, the manager; and

(b)

prepare a replacement fund update that corrects the deficiency; and

(c)

make the replacement fund update publicly available; and

(d)

ensure that, at the beginning of a replacement fund update, there is—

(i)

a statement that it is a replacement fund update; and

(ii)

an identification of the 1 or more fund updates that it replaces; and

(iii)

a summary of the changes that have been made.

61A Fund update must be given if PDS incorporates it by reference

(1)

This regulation applies if a PDS for an offer of managed investment products in a managed fund incorporates by reference a relevant fund update for a fund or other investment option (the fund or option) as referred to in clause 8A of Schedule 4.

(2)

For the purposes of section 96 of the Act, the manager of the managed fund must, before accepting contributions to, or investments in, the fund or option in respect of a retail investor, give the relevant fund update to the retail investor.

(3)

In this regulation, a relevant fund update means a fund update for the fund or option that—

(a)

is one of the 4 fund updates most recently made publicly available or (if regulation 56(2) applies) the fund update most recently made publicly available; and

(b)

includes the information required in the PDS by clauses 28, 33, and 37 of Schedule 4 for the fund or option (to the extent that the information is not contained in the PDS).

Regulation 61A: inserted, on 17 December 2015, by regulation 21 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Annual report for registered scheme

62 Annual report

(1)

For the purposes of section 96 of the Act, every manager of a registered scheme must,—

(a)

within 4 months after each balance date of the scheme, prepare an annual report on the affairs of the scheme during the accounting period ending on that date; and

(b)

within 28 days after the annual report is prepared, send to every scheme participant—

(i)

a copy of the annual report; or

(ii)

a notice containing the statements specified in subclause (2).

(2)

The notice referred to in subclause (1)(b)(ii) must contain—

(a)

a statement to the effect that the scheme participant has a right to receive from the manager, free of charge, a copy of the annual report if the scheme participant, within 15 working days of receiving the notice, makes a request to the manager to receive a copy of the annual report; and

(b)

a statement to the effect that the scheme participant may obtain a copy of the annual report by electronic means; and

(c)

a statement as to how the scheme participant may obtain a copy of the annual report by electronic means (for example, from the address of the offer register).

(3)

For the purposes of section 97 of the Act, a manager of a registered scheme must lodge with the Registrar each annual report prepared in respect of the scheme under this regulation (and that report must be so lodged within 28 days after it is prepared).

63 Content of annual report

Every annual report under regulation 62 must contain,—

(a)

in the case of a managed fund, all of the information specified in Part 5 of Schedule 4 that is applicable:

(b)

in the case of any other scheme, all of the information specified in Part 4 of Schedule 5 that is applicable.

Annual report for issuer of equity securities

64 Annual report for issuer of equity securities must compare prospective financial information with actual results

(1)

This regulation applies to an issuer of equity securities that includes in a PDS for an offer of the securities prospective financial information in a table under clause 35 of Schedule 3.

(2)

For the purposes of section 96 of the Act, the issuer must include, in its annual report that is made available to its shareholders for a relevant period (if any), a table that restates the prospective financial information referred to in subclause (1) for the relevant period together with a comparison with the corresponding actual financial information for that period.

(3)

The information must be stated in the same form as is required for the table under clause 35 of Schedule 3 and must comply with the requirements that apply to the information that is included under that clause.

(4)

In this regulation, relevant period means a period in respect of which prospective financial information is included in the PDS referred to in subclause (1).

Confirmation

65 When confirmation information is provided

(1)

For the purposes of section 100(1) of the Act, the prescribed circumstances are—

(a)

when a regulated product is issued to a person (other than a wholesale investor); or

(b)

when a regulated product is transferred to a person (other than a wholesale investor); or

(c)

when a regulated product held by a person (other than a wholesale investor) is redeemed.

(2)

See the definition of wholesale investor in regulation 5(5A).

(3)

Regulations 66 to 68 apply for the purposes of confirmation in the circumstances specified in subclause (1).

(4)

This regulation and regulations 66 to 68

(a)

do not apply to KiwiSaver schemes, superannuation schemes, or workplace savings schemes:

(b)

apply to a regulated product that is a derivative only when the derivative is issued.

Regulation 65(2): replaced, on 1 December 2015, by regulation 22 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

66 Who provides confirmation information

(1)

The issuer of the regulated product must provide the confirmation information to the product holder.

(2)

However, if a transfer referred to in regulation 65(1)(b) is under an offer referred to in section 40 of the Act (sale offers that need disclosure), the offeror of the regulated product (rather than the issuer) must provide the confirmation information to the product holder.

67 Confirmation information

(1)

The confirmation information that must be provided is, in relation to a transaction referred to in regulation 65(1)(a) to (c), the information that the issuer (or offeror) reasonably believes the product holder needs in order to have a reasonable understanding of the nature of the transaction (having regard to the information the product holder has received before the transaction).

(2)

The confirmation information must—

(a)

include a brief description of the transaction and the parties to the transaction (and of the issuer if the issuer is not a party); and

(b)

identify the financial products involved; and

(c)

state the price per financial product if known at the relevant time (and if the transaction relates to more than 1 financial product); and

(d)

state the number or amount of financial products; and

(e)

state any fees or costs deducted if known at the relevant time; and

(f)

state the total amount paid or payable for the transaction if known at the relevant time; and

(g)

state the date of the transaction.

(3)

In this regulation and regulation 68,—

relevant time means the time when the confirmation information is first made available

transaction means a transaction involving the issue, transfer, or redemption of regulated products.

68 How confirmation information is provided

(1)

The confirmation information must be provided to the product holder—

(a)

by making it available through an electronic facility on a substantially continuous basis (but only if the product holder has agreed to this method); or

(b)

by giving it to the product holder or delivering or sending it to the product holder’s address not later than 10 working days after the last day of each reporting period in each year (but only if the products were issued under a continuous issue PDS and the product holder has agreed to this method); or

(c)

by giving it to the product holder or delivering or sending it to the product holder’s address not later than 5 working days after a financial product is issued or transferred or redeemed.

(2)

In the case of a transfer from one investor (A) to another investor (B), product holder means—

(a)

both A and B; or

(b)

in the case of regulation 66(2), B.

(3)

For the purposes of subclause (1)(a), the information must cover the transactions entered into in the period starting when regulation 65 first applies to the issuer or offeror of the regulated product in respect of the product holder and ending at a stated time that is not earlier than 48 hours before the information is made available.

(4)

For the purposes of subclause (1)(b), the following apply:

(a)

the information must cover the transactions entered into in the last reporting period:

(b)

the information must state the reporting period that it covers:

(c)

no information is required to be made available under that paragraph for a reporting period if no transactions are entered into in that period:

(d)

the requirement in that paragraph for the product holder to agree to the method does not apply if, before 1 December 2014 or during the transition period, the issuer provided similar information to the product holder on a periodic basis in accordance with the former enactments (for example, under the Securities Act (Unit Trust Certificates) Exemption Notice 2012).

(4A)

In subclause (4)(d), former enactments and transition period have the same meanings as in clause 16(1) of Schedule 4 of the Act.

(5)

In this regulation, reporting period means each 6-month period of a year (where each period ends on the date that the issuer determines).

Regulation 68(1)(a): amended, on 1 December 2015, by regulation 23(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 68(4)(d): replaced, on 1 December 2015, by regulation 23(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 68(4A): inserted, on 1 December 2015, by regulation 23(3) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

69 Confirmation for KiwiSaver schemes, superannuation schemes, and workplace savings schemes

(1)

This regulation applies to KiwiSaver schemes, superannuation schemes, and workplace savings schemes.

(2)

For the purposes of section 100(1) of the Act, a prescribed circumstance is the expiry of an accounting period of the KiwiSaver scheme, superannuation scheme, or workplace savings scheme.

(3)

Regulations 70 and 71 apply for the purposes of confirmation in the circumstance specified in subclause (2).

70 Confirmation information for KiwiSaver schemes, superannuation schemes, and workplace savings schemes

The confirmation information that must be provided is, in relation to the accounting period that has expired and a particular scheme participant (A),—

(a)

A’s balance in the scheme at the start and at the end of the period; and

(b)

the amount of each type of contribution received by the manager in respect of A during the period.

71 How confirmation information for KiwiSaver schemes, superannuation schemes, and workplace savings schemes is provided

The confirmation information must, not later than 3 months after the expiry of the scheme’s accounting period, be provided to the scheme participant (A)—

(a)

by making it available through an electronic facility (but only if A has agreed to this method); or

(b)

by giving it to A or delivering or sending it to A’s address.

Regulation 71(a): amended, on 1 December 2015, by regulation 24 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Ongoing confirmation for derivatives investor money or property

Heading: inserted, on 17 December 2015, by regulation 25 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

71A Ongoing confirmation for derivatives

(1)

This regulation and regulations 71B and 71C

(a)

apply to regulated products that are derivatives; and

(b)

do not limit the application of regulations 65 to 68 to derivatives.

(2)

For the purposes of section 100(1) of the Act, a prescribed circumstance is the expiry of a reporting period.

(3)

Regulations 71B and 71C apply for the purposes of confirmation in the circumstance specified in subclause (2).

(4)

If there is no information that is required to be provided under regulation 71B in relation to a reporting period, confirmation information does not need to be provided under this regulation for that period.

(5)

In this regulation and regulations 71B and 71C,—

derivatives investor money has the same meaning as in regulation 238

derivatives investor property has the same meaning as in regulation 238

reporting period means—

(a)

each 6-month period of a year (where each period ends on the date that the derivatives issuer determines); or

(b)

each shorter period agreed with the investor.

Example

The derivatives issuer and an investor agree on a daily reporting period (with the confirmation information being made available through an electronic facility).

Regulation 71A: inserted, on 17 December 2015, by regulation 25 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

71B Ongoing confirmation information for derivatives

(1)

The confirmation information that must be provided is, in relation to an investor, the following (as at the end of the reporting period to which the information relates):

(a)

a list of the investor’s derivatives issued by the derivatives issuer:

(b)

in the case of a derivative that can be terminated or closed out by the investor at any time, the value of the derivative:

(c)

the total amount of derivatives investor money held by the derivatives issuer on behalf of the investor:

(d)

the total amount that is allocated to margins (if any).

(2)

In this regulation, investor means—

(a)

a retail investor on behalf of whom derivatives investor money is held at the end of the reporting period; or

(b)

a retail investor who, at the end of the reporting period, holds a derivative with the derivatives issuer that can, under the terms of the derivative, be terminated or closed out by the investor at any time.

(3)

For the purposes of subclause (1)(b), the value is the amount the investor will receive if the investor chooses to terminate or close out the derivative.

Regulation 71B: inserted, on 17 December 2015, by regulation 25 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

71C How ongoing confirmation information for derivatives is provided

The confirmation information must, not later than 10 working days after the expiry of the reporting period, be provided to the investor (A)—

(a)

by making it available through an electronic facility (but only if A has agreed to this method); or

(b)

by giving it to A or delivering or sending it to A’s address.

Regulation 71C: inserted, on 17 December 2015, by regulation 25 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Subpart 3—Provisions relating to exclusions and other Schedule 1 of Act matters

72 Provisions relating to exclusions and other Schedule 1 of Act matters

(1)

The provisions in Schedule 8 of these regulations have effect for the purposes of prescribing—

(a)

limited disclosure and other requirements and conditions for the purposes of clause 26 of Schedule 1 of the Act; and

(b)

other matters for the purposes of Schedule 1 of the Act.

(2)

The provisions in Schedule 9 have effect for the purpose of prescribing matters for the purposes of clauses 25 and 31 of Schedule 8.

72A Wholesale offer exclusion does not apply to certain offers of Crown debt securities

For the purposes of clause 29 of Schedule 1 of the Act, the exclusion in clause 3 of Schedule 1 of the Act (offer to wholesale investor) does not apply to an offer of debt securities that are continuously offered by the Crown by way of issue if—

(a)

the offer is made by the Crown to 1 or more wholesale investors; and

(b)

the offer is made in reliance on clause 22(1)(a) of Schedule 1 of the Act (and in compliance with clauses 30 and 31 of Schedule 8); and

(c)

the limited disclosure document that is provided under clause 30 of Schedule 8 includes a statement to the effect that this regulation applies in relation to the offer.

Regulation 72A: inserted, on 28 October 2016, by regulation 10 of the Financial Markets Conduct Amendment Regulations (No 2) 2016 (LI 2016/249).

Part 4 Governance of financial products

Subpart 1—Governance of debt securities

73 References to trust deeds and debt securities

A reference in this Part to—

(a)

a trust deed is a reference to the trust deed required by section 103(1) of the Act; and

(b)

a debt security is a reference to a debt security offered under a regulated offer.

Requirements for governing document for debt security

74 Trust deed for debt security must provide for certain matters

A trust deed for a debt security must provide adequately for all of the following matters:

(a)

the financial covenants (if any) that the issuer has given in favour of the holders of the debt security or the supervisor:

(b)

the prohibitions or restrictions (if any) on the issuer entering into transactions with—

(i)

any of its related parties within the meaning of section 6 of the Non-bank Deposit Takers Act 2013 (in the case of an issuer that is an NBDT); or

(ii)

any of its associated persons (in any other case):

(c)

reporting by the issuer to the supervisor (other than reporting required by the Act or these regulations), where the details relating to the frequency or content of the reports (or both) are set out in the trust deed or in a separate written agreement between the issuer and the supervisor:

(d)

the appointment and removal of the supervisor:

(e)

any additions or changes to the meeting procedures set by Schedule 11:

(f)

any other matters that materially affect—

(i)

the rights and duties of holders of the debt security:

(ii)

the powers, rights, and duties of the issuer and the supervisor.

75 Terms implied into trust deed for debt security

(1)

Clauses 1 to 3 of Schedule 10 are implied into a trust deed for a debt security.

(2)

Clauses 4 and 5 of Schedule 10 are implied into a trust deed for a debt security if the issuer is an NBDT (in addition to the provisions implied by subclause (1)).

(3)

However, subclause (2) does not apply to a building society, a credit union, or a co-operative company.

Reports by NBDT

76 Duty of NBDT to provide reports to supervisor

(1)

This regulation applies to an issuer of a debt security if the issuer is an NBDT.

(2)

However, this regulation does not apply to a building society, a credit union, or a co-operative company.

(3)

For the purposes of section 114 of the Act, the issuer must provide to the supervisor,—

(a)

within 30 days after the end of each month, a report for that month that is a copy of the monthly management report prepared for the directors of the issuer; and

(b)

a monthly report, in a form required by the supervisor and within 30 days after the end of each month, on—

(i)

the capital of the issuer; and

(ii)

the liquidity of the issuer; and

(iii)

the asset quality of the issuer (including arrears reports, and restructured, impaired, past due, and bad debts); and

(iv)

reinvestment rates; and

(v)

any breaches by members of the borrowing group of financial covenants in financing arrangements with third parties; and

(c)

at least once in every 3 months, a report confirming whether,—

(i)

at any time since the last confirmation under this paragraph, the issuer was prohibited under section 82(1) of the Act from offering, or continuing to offer, debt securities; and

(ii)

at all times during the period since the last confirmation under this paragraph, the issuer has complied with all provisions of the trust deed; and

(d)

a report to advise the supervisor, in advance or as soon as it is known, of—

(i)

every transaction that would require the consent of the Reserve Bank under section 43 of the Non-bank Deposit Takers Act 2013 (Bank’s consent for change of ownership); and

(ii)

every change of directors of the issuer; and

(iii)

every change in the senior managers of the issuer; and

(e)

a report to notify the supervisor, in advance, of any major transaction (as defined in the Companies Act 1993), or any related series of transactions that have the effect of a major transaction, entered into or to be entered into by the issuer.

(4)

The report that is given under subclause (3)(a) does not need to contain particular information in the monthly management report prepared for the directors of the issuer if the supervisor has waived the requirement for the report to contain information of that kind.

(5)

Subclause (3)(c)(i) applies to a period only if the PDS has an open for applications status.

(6)

Each report must be signed by at least 2 directors on behalf of the board of the issuer or, if the issuer has only 1 director, by that director.

Meetings of product holders

77 Proceedings at meetings of holders of debt security

(1)

Schedule 11 governs meetings of a class of holders of a debt security and proceedings at those meetings except to the extent that the trust deed expressly provides otherwise.

(2)

However, a trust deed may not disapply or modify clauses 2 and 5 of Schedule 11 in relation to a meeting of a class of holders of a debt security to approve a special resolution of those holders (except to the extent that those clauses are expressly subject to, or allow matters to be set by, the trust deed).

(3)

In subclause (2) and Schedule 11, special resolution means—

(a)

a resolution relating to a matter that is required by the Act or these regulations to be done by way of a special resolution; and

(b)

a resolution relating to a matter that is required by the trust deed to be done by way of a special resolution (by whatever name called).

78 Resolution in lieu of meeting

(1)

A written resolution is as valid as if it had been passed at a meeting of a class of holders of a debt security if, in the case of—

(a)

credit union products, it is signed by no less than 75% of the number of members of the credit union who are entitled to vote:

(b)

any other debt securities, it is signed by product holders who hold debt securities with a combined nominal value of no less than 75% of the nominal value of the debt securities held by those persons who are entitled to vote.

(2)

In this regulation, entitled to vote means entitled to vote on the resolution at a meeting of the class of holders of a debt security.

(3)

A written resolution that is signed by the persons specified in subclause (1) is as effective for the purposes of the Act and the trust deed as it would be if passed by resolution at a meeting of the class of the product holders.

(4)

A written resolution under this regulation may consist of 1 or more documents in similar form (including letters, electronic mail, or other similar means of communication) each signed by or on behalf of 1 or more of the persons specified in subclause (1).

(5)

The issuer must ensure—

(a)

that a proposed resolution under this regulation is dated with the date on which the proposed resolution is first sent to a person entitled to vote for the purpose of signing (the circulation date); and

(b)

that the proposed resolution is sent to every person entitled to vote; and

(c)

as far as is reasonably practicable, that the proposed resolution is sent under paragraph (b) on the circulation date; and

(d)

that a proposed resolution sent under paragraph (b) is accompanied by a statement of the effect of subclause (6).

(6)

A proposed resolution lapses if it is not passed under this regulation within 3 months (or any shorter period provided in the trust deed) after the circulation date.

(7)

The accidental omission to send a proposed resolution or statement under subclause (5) to a person entitled to vote does not invalidate a resolution passed under this regulation.

(8)

The issuer must, within 5 working days after a resolution is passed under this regulation, send a copy of the resolution to every person entitled to vote who did not sign the resolution and on whose behalf the resolution was not signed.

(9)

This regulation does not apply (or does not apply to resolutions of a particular kind) if the trust deed expressly states that this regulation does not apply (or does not apply to resolutions of that kind).

Subpart 2—Governance of managed investment products

Registration

79 Application for registration

(1)

An application for registration of a managed investment scheme must be made on an Internet site maintained by or on behalf of the Registrar for the purpose of the register of managed investment schemes.

(2)

The application must include the following information in respect of the scheme (in addition to the information required by section 126 of the Act):

(a)

the name of the scheme:

(b)

an identification of the type or types of scheme:

(c)

if the scheme is a default KiwiSaver scheme, confirmation of that fact:

(d)

the name of each of the following (as selected from another register kept by the Registrar) or, if the person does not have an entry on such a register, the unique identifying information of the person:

(i)

the manager:

(ii)

the supervisor:

(iii)

each custodian that is not the supervisor (other than a sub-custodian):

(e)

the financial service provider number (if any) for each person referred to in paragraph (d):

(f)

the address for communications from the Registrar to the manager:

(g)

the address for communications from the Registrar to the supervisor:

(h)

if the manager is relying, or intends to rely, on an exemption granted under subpart 2 of Part 9 of the Act in relation to the registration of the scheme, confirmation of that fact and the name of the exemption notice:

(i)

the balance date of the scheme:

(j)

the financial statements for the scheme (if any) for the most recently completed accounting period before the date of the application that are prepared in accordance with GAAP, and a copy of a qualified auditor’s report on those statements:

(k)

the annual report for the scheme for that accounting period (if any):

(l)

if the assets of any fund in the scheme are available to be applied to meet the liabilities of any other fund in the scheme, confirmation of that fact.

80 Lodging or giving information for scheme register

Information for the scheme register that is lodged with or given to the Registrar must be lodged or given in the manner specified by the Registrar in accordance with clause 13(1) of Schedule 2 of the Act.

Example

The identification of the type of scheme may be selected from a drop-down list of options specified by the Registrar on the scheme register Internet site maintained by the Registrar.

81 Superannuation scheme rules

(1)

The provisions set out in Schedule 12 are to be known as the superannuation scheme rules.

(2)

The superannuation scheme rules—

(a)

apply for the purposes of section 129(1)(c) of the Act (rules relating to permitted redemptions, withdrawals, and the provision of benefits); and

(b)

must be treated as implied into a governing document for a superannuation scheme (or, if a scheme is registered as a superannuation scheme in respect of only a section of the scheme, into a governing document in respect of that section only).

(3)

This regulation does not apply to a scheme, or a section of a scheme, that is closed to new members at the time of its registration (a legacy scheme).

82 Additional initial and ongoing registration requirement for workplace savings schemes

(1)

Every workplace savings scheme must meet the registration requirement specified in subclause (2) (in addition to the requirements in sections 127 and 130(1)(a) to (e) and (g) of the Act).

(2)

The requirement is that the governing document has the effect that each scheme participant who satisfies the requirements for withdrawal of the scheme participant’s accumulation set out in the governing document, and who elects to withdraw from membership of the scheme, may transfer the accumulation to any of the following types of schemes (to the extent that transfers are available to that other scheme):

(a)

another workplace savings scheme:

(b)

a superannuation scheme:

(c)

a KiwiSaver scheme:

(d)

an equivalent overseas retirement scheme.

(3)

In subclause (2)(d), equivalent overseas retirement scheme means any trust or other arrangement established in a country other than New Zealand that—

(a)

has the purpose of providing retirement benefits directly or indirectly to individuals; or

(b)

has the purposes of providing—

(i)

retirement benefits directly or indirectly to individuals; and

(ii)

benefits to eligible individuals on ceasing employment or engagement with a contributor or a related body corporate of a contributor (whether immediately on ceasing that employment or engagement, or subsequently).

(4)

For the purposes of that definition, a scheme may be considered to be for the purpose of providing retirement benefits even if it permits redemptions, withdrawals, and the provision of benefits in limited circumstances (provided that those permitted redemptions, withdrawals, and benefits are incidental or secondary to the purpose of providing retirement benefits).

(5)

In this regulation,—

net value means the value once any appropriate debits and credits have been made to account for things like fees, permitted withdrawals, and positive and negative returns

scheme participant’s accumulation, in relation to a scheme participant,—

(a)

means, in the case of a defined benefit scheme, the amount of the benefit that the scheme participant is entitled to receive on ceasing to be a member of the scheme:

(b)

means, in any other case, the net value of the total of—

(i)

the scheme participant’s contributions; and

(ii)

any other vested contributions in respect of the scheme participant.

Requirements for governing document for registered scheme

83 Governing document for registered scheme must provide for certain additional matters

(1)

The governing document for a registered scheme must provide adequately for all of the following matters under the scheme (in addition to the matters in section 135(1)(a) to (i) and (k) of the Act):

(a)

reporting by the manager to the supervisor (other than reports required by the Act and these regulations), where the details relating to the frequency or content of the reports (or both) are set out in the governing document or in a separate written agreement between the manager and the supervisor; and

(b)

any additions or changes to the meeting procedures set by Schedule 11.

(2)

Subclause (1)(a) does not apply to a restricted scheme.

84 Terms implied into governing document for registered scheme

(1)

Clauses 1 to 3 of Schedule 13 are implied into a governing document for a registered scheme (other than a restricted scheme).

(2)

Clause 4 of Schedule 13 is implied into a governing document for a restricted scheme.

Custodianship of scheme property

85 Custodian’s records of scheme property

Regulations 86 to 88 prescribe requirements for the purposes of section 158 of the Act.

86 Procedures for reconciling records

(1)

For the purpose of ensuring that the custodian’s records accurately state its holdings of scheme property, the scheme property relating to each fund, and all transactions relating to that property, the custodian must—

(a)

take adequate steps, or ensure adequate steps are taken, to reconcile records of scheme property kept by or on behalf of the custodian with records kept by sub-custodians and third parties; and

(b)

ensure adequate procedures are in place for promptly identifying discrepancies in those records and determining the cause of those discrepancies; and

(c)

promptly and fully rectify any discrepancies referred to in paragraph (b) or ensure that those discrepancies are promptly and fully rectified.

(2)

The frequency of the reconciliation must be appropriate to—

(a)

the type of scheme property to which the records relate; and

(b)

the frequency with which scheme property is traded; and

(c)

the timing of any custody reports provided.

(3)

However, all records of money must be reconciled daily.

87 Custodian must obtain assurance engagement

(1)

A custodian must obtain, within 4 months after the relevant date, an assurance engagement with a qualified auditor done in accordance with applicable auditing and assurance standards.

(2)

The custodian must, within 20 working days after obtaining an assurance report, provide a copy of the assurance report to each of the relevant persons.

(3)

This regulation does not apply to a sub-custodian (A) if the custodian that appointed A has complied with this regulation in respect of the scheme property held by A.

(4)

In this regulation and regulation 88,—

relevant date, in relation to a custodian, means—

(a)

the custodian’s balance date; or

(b)

a date in each calendar year that is—

(i)

determined by the custodian; and

(ii)

notified in writing, within 10 working days after the determination is made, to each of the relevant persons

relevant persons means,—

(a)

in the case of a restricted scheme, the FMA and (unless the manager is the custodian) the manager of the scheme:

(b)

in the case of any other scheme, the manager of the scheme and (unless the supervisor is the custodian) the supervisor of the scheme.

(5)

The following apply for the purposes of the date under paragraph (b) of the definition of relevant date in subclause (4):

(a)

in the case of a date that is adopted as the first relevant date, the date must be within the first 12 months of this regulation applying to the custodian in respect of the scheme; and

(b)

the custodian may change the date if—

(i)

the period between any 2 dates does not exceed 15 months; and

(ii)

the change is notified in writing, within 10 working days after the custodian decides to make the change, to each of the relevant persons; and

(c)

if the custodian adopts a date in accordance with paragraph (a) or changes the date in accordance with paragraph (b), it need not have a date in a particular calendar year.

Regulation 87(1): replaced, on 1 December 2015, by regulation 26(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 87(2): replaced, on 1 December 2015, by regulation 26(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 87(4): inserted, on 1 December 2015, by regulation 26(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 87(5): inserted, on 1 December 2015, by regulation 26(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

88 Requirements of assurance engagement

(1)

An assurance engagement referred to in regulation 87(1) must determine whether, in the auditor’s opinion, there is reasonable assurance that—

(a)

the custodian’s processes, procedures, and controls were suitably designed to meet the objectives in subclause (3) throughout the most recently completed relevant period; and

(b)

the custodian’s processes, procedures, and controls operated effectively throughout that relevant period.

(2)

Subclause (1)(a) applies in respect of—

(a)

scheme property held by the custodian; and

(b)

scheme property held by a sub-custodian appointed by the custodian.

(3)

The objectives are as follows:

(a)

transactions are authorised, processed, and recorded in an appropriate, accurate, and timely manner:

(b)

scheme property is held in accordance with the Act, these regulations, and the governing document:

(c)

records and changes to records relating to the service are accurate and kept—

(i)

in an appropriate and timely manner; and

(ii)

in accordance with the Act, these regulations, and the governing document:

(d)

there are adequate safeguards against the loss, misappropriation, and unauthorised use of scheme property:

(e)

sub-custodians are appropriately approved and managed, and are adequately monitored:

(f)

reports in respect of holdings of scheme property are—

(i)

complete and accurate; and

(ii)

provided within the time frames specified in the Act, these regulations, and the governing document:

(g)

information technology systems and processes are appropriate to allow the custodian to accurately and reliably meet the objectives in paragraphs (a) to (f).

(4)

In this regulation, relevant period, in relation to a custodian, means a 12-month period ending on the relevant date of the custodian, and if, as a result of the date on which it became a custodian or a change of the relevant date of the custodian, the period ending on that date is longer or shorter than 12 months, that longer or shorter period is a relevant period.

Regulation 88(1)(a): amended, on 1 December 2015, by regulation 27(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 88(1)(b): amended, on 1 December 2015, by regulation 27(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 88(4): inserted, on 1 December 2015, by regulation 27(3) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Meetings of scheme participants

89 Proceedings at meetings of scheme participants

(1)

Schedule 11 governs meetings of a class of scheme participants and proceedings at those meetings except to the extent that the governing document expressly provides otherwise.

(2)

However, a governing document may not disapply or modify any of clauses 2, 3, or 5 of Schedule 11 in relation to a meeting of a class of scheme participants to approve a special resolution of those scheme participants (except to the extent that those clauses are expressly subject to, or allow matters to be set by, the governing document).

(3)

In subclause (2) and Schedule 11, special resolution means—

(a)

a resolution relating to a matter that is required by the Act or these regulations to be done by way of a special resolution; and

(b)

a resolution relating to a matter that is required by the governing document to be done by way of a special resolution (by whatever name called).

90 Resolution in lieu of meeting

(1)

A written resolution is as valid as if it had been passed at a meeting of a class of scheme participants if, in the case of—

(a)

managed investment products in a superannuation scheme, a KiwiSaver scheme, or a workplace savings scheme, it is signed by no less than 75% of the number of scheme participants who are entitled to vote:

(b)

any other managed investment products, it is signed by the scheme participants who hold managed investment products with a combined value of no less than 75% of the value of the managed investment products held by those persons who are entitled to vote.

(2)

In this regulation, entitled to vote means entitled to vote on the resolution at a meeting of the class of scheme participants.

(3)

A written resolution that is signed by the persons specified in subclause (1) is as effective for the purposes of the Act and the governing document as it would be if passed by resolution at a meeting of the class of scheme participants.

(4)

A written resolution under this regulation may consist of 1 or more documents in similar form (including letters, electronic mail, or other similar means of communication) each signed by or on behalf of 1 or more of the persons specified in subclause (1).

(5)

The manager must ensure—

(a)

that a proposed resolution under this regulation is dated with the date on which the proposed resolution is first sent to a person entitled to vote for the purpose of signing (the circulation date); and

(b)

that the proposed resolution is sent to every person entitled to vote; and

(c)

as far as is reasonably practicable, that the proposed resolution is sent under paragraph (b) on the circulation date; and

(d)

that a proposed resolution sent under paragraph (b) is accompanied by a statement of the effect of subclause (6).

(6)

A proposed resolution lapses if it is not passed under this regulation within 3 months (or any shorter period provided in the governing document) after the circulation date.

(7)

The accidental omission to send a proposed resolution or statement under subclause (5) to a person entitled to vote does not invalidate a resolution passed under this regulation.

(8)

The manager must, within 5 working days after a resolution is passed under this regulation, send a copy of the resolution to every person entitled to vote who did not sign the resolution and on whose behalf the resolution was not signed.

(9)

This regulation does not apply (or does not apply to resolutions of a particular kind) if the governing document expressly states that this regulation does not apply (or does not apply to resolutions of that kind).

91 Manager and associated persons may vote if interested in resolution to remove and replace manager in certain circumstances

Section 163(1) of the Act does not apply in relation to a resolution to remove the manager and appoint a new manager of a registered scheme if—

(a)

there has been no regulated offer of managed investment products in the scheme; and

(b)

none of the scheme participants are retail investors; and

(c)

the governing document expressly permits the relevant person to vote their interest on the resolution; and

(d)

the manager certifies, before voting, that the manager considers that the manager (and, if applicable, its associated persons) is voting in the best interests of the scheme participants.

92 Annual meeting of closed-ended schemes

(1)

The manager of a registered scheme that is closed-ended must call an annual meeting of scheme participants to be held—

(a)

not later than 6 months after the balance date of the scheme; and

(b)

not later than 15 months after the previous annual meeting.

(2)

The manager must hold the meeting on the date on which it is called to be held.

(3)

A registered scheme (other than a scheme to which clause 22(1)(a) of Schedule 4 of the Act applies) that is closed-ended does not have to hold its first annual meeting in the calendar year of its registration under subpart 2 of Part 4 of the Act, but must hold that meeting within 18 months of that registration.

(4)

However,—

(a)

the manager is not required to call a meeting to be held in a calendar year if, before the date that a meeting in the calendar year would otherwise be required to be held, the scheme participants, by a written unanimous resolution, agree that an annual meeting need not be called; and

(b)

if a resolution under paragraph (a) is passed, an annual meeting must be treated as having been held on the date of the resolution for the purposes of subclause (1)(b).

(5)

A written resolution under subclause (4)(a) may consist of 1 or more documents in similar form (including letters, electronic mail, or other similar means of communication) each signed by or on behalf of the scheme participants.

(6)

A scheme is closed-ended unless—

(a)

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

(b)

the scheme is a KiwiSaver scheme, a superannuation scheme, or a workplace savings scheme.

When statement of investment policy and objectives or change does not need to be lodged

93 Statement of investment policy and objectives or change does not need to be lodged in certain circumstances

(1)

This regulation prescribes circumstances in which a SIPO, and changes to a SIPO, do not need to be lodged for the purpose of section 166(1) of the Act.

(2)

A SIPO need not be lodged under section 166(1)(a) of the Act if all of the following circumstances apply:

(a)

there has been no regulated offer of managed investment products in the registered scheme (and no interests in the scheme have been offered to the public in New Zealand under the Securities Act 1978); and

(b)

the manager lodges with the Registrar a notice that states that—

(i)

the scheme register does not contain the SIPO because no regulated offer of managed investment products in the registered scheme has been made; and

(ii)

a copy of the SIPO is available, on request and free of charge, to scheme participants and the FMA; and

(c)

the notice under paragraph (b) is lodged—

(i)

before any managed investment product is issued; or

(ii)

at the time the scheme is registered (if the scheme is registered after any managed investment product is issued).

(3)

A change to the SIPO need not be lodged under section 166(1)(b) of the Act if all of the following circumstances apply:

(a)

there has been no regulated offer of managed investment products in the registered scheme (and no interests in the scheme have been offered to the public in New Zealand under the Securities Act 1978); and

(b)

the manager lodges with the Registrar a notice that states that—

(i)

the scheme register does not contain a change to the SIPO because no regulated offer of managed investment products in the registered scheme has been made; and

(ii)

a copy of any change to the SIPO is available, on request and free of charge, to scheme participants and the FMA; and

(c)

the notice under paragraph (b) is lodged within 5 working days after the change takes effect.

Limit breaks

94 Manager must provide immediate report to supervisor (or FMA) in event of uncorrected limit break

(1)

The manager of a registered scheme must provide to the supervisor (or, in the case of a restricted scheme, the FMA) a report in accordance with this regulation and regulation 96 if—

(a)

section 167 of the Act applies; and

(b)

the limit break is not corrected within 5 working days after the date that the manager becomes aware of the limit break.

(2)

The report must be provided as soon as practicable after the expiry of the 5-working-day period referred to in subclause (1)(b).

(3)

The report must contain the information specified in regulation 96.

95 Manager must provide quarterly reports to supervisor (or FMA) about limit breaks

(1)

For the purposes of section 147 of the Act, the manager of a registered scheme must provide to the supervisor (or, in the case of a restricted scheme, the FMA) a report in accordance with this regulation and regulation 96 within 10 working days after the expiry of each quarter of each year.

(2)

The report must—

(a)

state whether there have been any limit breaks in the previous quarter to which section 167 of the Act applies; and

(b)

if so, contain the information specified in regulation 96.

(3)

The report may be combined with any other report that is provided by the manager to the supervisor (or, in the case of a restricted scheme, the FMA).

96 Contents of reports about limit breaks

(1)

This regulation applies to—

(a)

a report under regulation 94:

(b)

a report under regulation 95 if regulation 95(2)(b) applies.

(2)

The report must disclose—

(a)

the date that the manager became aware of the limit break; and

(b)

the name of the registered scheme affected and the name of any fund within that scheme to which the limit break relates; and

(c)

the nature and cause of the limit break (the type of limit break); and

(d)

the net asset value of the scheme property in the registered scheme as a whole and in respect of any fund within that scheme to which the limit break relates (as at the date the limit break first occurred); and

(e)

the reasons why the limit break is material (as determined in accordance with an applicable framework or methodology (if any)); and

(f)

the date on which the limit break first occurred and the period for which the limit break continued before it was corrected (or whether the limit break remains uncorrected at the time of the report); and

(g)

the steps taken, or to be taken, by the manager to correct the limit break; and

(h)

what steps (if any) have been taken, or will be taken, to minimise risk of a recurrence of this type of limit break or to ensure early notification and correction of limit breaks of this type; and

(i)

the time frame within which the manager intends to take any steps not already taken under paragraph (g) or (h).

(3)

If any information referred to in subclause (2)(d) to (i) is not reasonably ascertainable as at the date of the report,—

(a)

the report is not required to include that information; but

(b)

the manager must make a further report containing that information to the supervisor (or, if there is no supervisor, to the FMA) as soon as is reasonably practicable after the information becomes reasonably ascertainable.

(4)

A quarterly report under regulation 95 is not required to include any information referred to in subclause (2)(d) to (i) if—

(a)

the information has previously been provided to the supervisor (or, in the case of a restricted scheme, the FMA) in a report provided under regulation 94 or in any other report that the manager is required to provide to the supervisor (or, in the case of a restricted scheme, the FMA); and

(b)

the quarterly report states the date of the report in which the information was previously provided; and

(c)

as at the date of the quarterly report, the information remains correct.

Pricing error or failure to comply with pricing methodologies

97 Manager must report to supervisor (or FMA) about pricing error or failure to comply with pricing methodologies

(1)

If section 168 of the Act applies, the manager must ensure that the pricing error or non-compliance is reported to the supervisor (or, if there is no supervisor, to the FMA) as soon as is reasonably practicable after the manager becomes aware of the pricing error or non-compliance.

(2)

In this regulation and regulations 98 and 99,—

non-compliance means a failure to comply with the methodology for pricing the managed investment products as set out in the governing document or a notice issued by the FMA under subpart 4 of Part 9 of the Act

pricing error means an error in the calculation of the price at which managed investment products are transferred or redeemed.

98 Contents of reports about pricing error or failure to comply with pricing methodologies

(1)

The report under regulation 97 must disclose—

(a)

the name of the registered scheme affected and the name of any fund within that scheme to which the pricing error or non-compliance relates; and

(b)

the nature and cause of the pricing error or non-compliance; and

(c)

the amount of the pricing error or the cost of the non-compliance as a percentage of the price of the relevant managed investment product or of the net asset value of the fund; and

(d)

the number and classes of current and former scheme participants affected by the pricing error or non-compliance; and

(e)

the date on which the pricing error or non-compliance was corrected and the period of time before which the manager became aware of the pricing error or non-compliance; and

(f)

if applicable, the steps taken, or to be taken, to correct, reimburse for, and compensate for the pricing error or non-compliance (including how reimbursement will be made and compensation will be paid) and the time frame within which the manager intends to take any steps not already taken; and

(g)

what steps (if any) have been taken, or will be taken, to minimise risk of a recurrence of the pricing error or non-compliance and the time frame within which the manager intends to take any steps not already taken.

(2)

If any information referred to in subclause (1)(c) to (g) is not reasonably ascertainable as at the date of the report under regulation 97,—

(a)

the report is not required to include that information; but

(b)

the manager must make a further report containing that information to the supervisor (or, if there is no supervisor, to the FMA) as soon as is reasonably practicable after the information becomes reasonably ascertainable.

99 Other action that must be taken on pricing errors and failure to comply with pricing methodologies

(1)

This regulation applies if section 168 of the Act applies.

(2)

The manager must, as soon as is reasonably practicable, take all reasonable steps (in consultation with the supervisor or, if there is no supervisor, the FMA) to—

(a)

ensure that every disadvantaged current scheme participant is reimbursed, and every disadvantaged former scheme participant is compensated, so as to restore that person as near as possible to the position the person would be in (in relation to the scheme) had the pricing error or non-compliance not occurred; and

(b)

notify each of those current or former scheme participants of—

(i)

the pricing error or non-compliance; and

(ii)

any action that has been or will be taken to compensate or reimburse them; and

(c)

ensure that the manager and its associated persons do not retain any benefit from the pricing error or non-compliance.

(3)

Subclause (2) does not require a payment for the purposes of reimbursement or compensation to a current or former scheme participant if the amount of reimbursement or compensation is less than the minimum level specified in, or determined in accordance with, the governing document.

(4)

For the purposes of subclause (2),—

(a)

a disadvantaged current or former scheme participant includes a current or former scheme participant who is disadvantaged by the pricing error or non-compliance on the issue or transfer of a managed investment product:

(b)

the reimbursement may be made—

(i)

by issuing more managed investment products to a current scheme participant or otherwise adjusting a current scheme participant’s holdings of managed investment products, by adjusting the price of managed investment products, or by otherwise adjusting a current scheme participant’s accumulation; or

(ii)

by direct credit to a bank account or by cheque (if reimbursement under subparagraph (i) is impracticable):

(c)

compensation may be made to a former scheme participant—

(i)

by direct credit to a bank account or by cheque; or

(ii)

if the pricing error or non-compliance relates to a KiwiSaver scheme, by making a contribution to the scheme participant’s current KiwiSaver scheme:

(d)

a notice to a current or former scheme participant (A) under subclause (2)(b) must be provided by giving it to A or delivering or sending it to A’s address.

Related party transactions

100 Manager must provide quarterly report to supervisor (or FMA) on related party transaction certificates

(1)

For the purposes of section 147 of the Act, the manager of a registered scheme must provide to the supervisor (or, in the case of a restricted scheme, the FMA) a report in accordance with this regulation within 10 working days after the expiry of each quarter of each year.

(2)

The report must state whether any certificates have been given under section 173(2)(b) or (4) of the Act in the previous quarter and, if so, include a copy of those certificates.

(3)

The report may be combined with any other report that is provided by the manager to the supervisor (or, in the case of a restricted scheme, the FMA).

101 Investments in Australian registered managed investment scheme is permitted related party benefit transaction

For the purposes of section 174(b) of the Act, an interest in a registered scheme (within the meaning of section 9 of the Corporations Act 2001 (Aust)) is a prescribed interest in a prescribed overseas scheme.

102 Investment in Government securities is permitted related party benefit transaction

A transaction is prescribed for the purposes of section 174(d) of the Act if the transaction is the acquisition or disposal of any public security in the ordinary course of business.

103 Transaction to acquire first property is permitted related party benefit transaction

(1)

A transaction is prescribed for the purposes of section 174(d) of the Act if—

(a)

the transaction is the acquisition of a first property; and

(b)

an estimate of the value of the first property is specified in the first PDS; and

(c)

that estimate is based on,—

(i)

in the case where the first property is quoted financial products, the market price of those products as at the close of a trading day not earlier than 5 trading days before the lodgement of the first PDS:

(ii)

in the case where the first property is real property, a valuation from an independent registered valuer (within the meaning of the Valuers Act 1948) that complies with the requirements in subclause (2):

(iii)

in any other case, a valuation from a suitably qualified independent valuer.

(2)

For the purposes of subclause (1)(c)(ii), the valuation must—

(a)

be signed by the registered valuer; and

(b)

be dated not more than 4 months before the date of the first PDS; and

(c)

be contained on the offer register or the scheme register.

(3)

Subclause (1)(b) and (c) does not apply if the first property has an estimated value of $100 or less (and for that purpose, if the first property is quoted financial products, those products must be valued in aggregate rather than per product).

(4)

The valuer referred to in subclause (1)(c) is not independent if the valuer is a related party of the scheme.

(5)

In this regulation,—

first PDS, in relation to a registered scheme,—

(a)

means the first PDS for a regulated offer of managed investment products in the scheme; but

(b)

does not include a PDS if interests in the scheme have previously been offered to the public in New Zealand under the Securities Act 1978

first property, in relation to a registered scheme, means property identified in the first PDS as being property the purchase price of which is to be met (in whole or in part) out of the proceeds of the offer to which the first PDS relates.

104 Listed manager transaction is permitted related party transaction

(1)

A transaction, in relation to a registered scheme, is prescribed for the purposes of section 174(d) of the Act if—

(a)

the managed investment products in the scheme are quoted; and

(b)

the transaction is entered into by the manager; and

(c)

the listing rules of the licensed market on which those products are quoted contain related party provisions.

(2)

In this regulation, related party provisions means provisions that—

(a)

apply to the manager as a listed issuer; and

(b)

prohibit or restrict the ability of listed issuers to enter into transactions with 1 or more types of associated persons.

105 Requirements for certificates as to related party benefits

For the purpose of section 175(1)(b) of the Act, a certificate under section 173 of the Act—

(a)

must,—

(i)

if the monetary value of the related party benefit or benefits to which the certificate relates can be quantified, state the nature and monetary value of that benefit or those benefits; or

(ii)

if the monetary value of the related party benefit or benefits to which the certificate relates cannot be quantified, state the nature and extent of that benefit or those benefits; and

(b)

must provide, or have attached to it, reasonable evidence supporting—

(i)

the statement under paragraph (a); and

(ii)

the stated basis for relying on a ground in section 173 of the Act and (if relevant) section 174 of the Act.

106 Restriction on acquisitions of in-house assets does not apply to public securities

Section 176 of the Act does not apply to an acquisition of a new in-house asset if—

(a)

the asset is a public security; and

(b)

the public security is acquired in the ordinary course of business of the restricted scheme.

Regulation 106 heading: replaced, on 30 June 2016, by regulation 4 of the Financial Markets Conduct Amendment Regulations 2016 (LI 2016/118).

106A Restriction on acquisitions of in-house assets does not apply to restricted schemes that invest in certain unregistered schemes

(1)

Section 176 of the Act does not apply to an investment in an unregistered scheme that is made by a restricted scheme if—

(a)

the requirements of section 173(4) of the Act are met in relation to the transaction or series of transactions by which the investment is made; and

(b)

the unregistered scheme is a trust that is used for the purpose of facilitating investment and reporting for registered schemes; and

(c)

the manager of the unregistered scheme is an investment business (as defined in clause 37 of Schedule 1 of the Act); and

(d)

the manager of the unregistered scheme has in place ongoing arrangements that can reasonably be expected to ensure that, in exercising any powers or performing any duties as a manager, it exercises the care, diligence, and skill that a prudent person engaged in the business of managing a registered scheme would exercise in the same circumstances; and

(e)

the manager of the unregistered scheme has in place ongoing arrangements that can reasonably be expected to ensure that section 174 of the Act applies to the relevant transactions or all related party benefits to be given under those transactions.

(2)

For the purposes of subclause (1)(e),—

related party benefit, in relation to the unregistered scheme,—

(a)

is a benefit—

(i)

that either is given out of scheme property of the unregistered scheme or creates an exposure to loss for scheme property of the unregistered scheme; and

(ii)

that is given to, or received by, a related party of the unregistered scheme; but

(b)

does not include fees or expenses that are paid or reimbursed to the manager in accordance with the governing document of the unregistered scheme

relevant transactions means transactions entered into for or on behalf of the unregistered scheme that provide for 1 or more related party benefits to be given (as defined in this subclause).

(3)

Any term or expression that is defined in section 172 or 176(3) of the Act and used, but not defined, in this regulation has the same meaning as in those provisions.

Regulation 106A: inserted, on 30 June 2016, by regulation 5 of the Financial Markets Conduct Amendment Regulations 2016 (LI 2016/118).

Subpart 3—Registers and keeping copies of documents

Registers of regulated products

107 Circumstances in which duty for issuer to keep register does not apply

Section 215 of the Act does not apply to—

(a)

bearer securities; or

(b)

category 2 products that are debt securities.

108 Audit of registers

Every issuer of regulated products must ensure that registers kept by, or on behalf of, the issuer under subpart 4 of Part 4 of the Act are audited in accordance with regulation 109 or 110 (which are alternative means of compliance with this regulation).

109 Audit of particular register

(1)

An audit of a register of regulated products must,—

(a)

in the case of managed investment products, be carried out every year within 4 months after the balance date of the registered scheme:

(b)

in any other case, be carried out every year within 4 months after the issuer’s balance date.

(2)

The audit must be carried out in accordance with applicable auditing and assurance standards.

(3)

The audit must determine whether, in the auditor’s opinion, there is reasonable assurance that the register, in all material respects, correctly contains the information referred to in section 217 of the Act.

Regulation 109(1): replaced, on 1 December 2015, by regulation 28 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

110 Collective audit of registers kept by registrar entity

(1)

This regulation applies to the registers of regulated products kept on behalf of 1 or more issuers by a registrar entity.

(2)

The registers kept by the registrar entity on behalf of 1 or more issuers must be collectively audited at least once a year.

(3)

The audit must be carried out in accordance with applicable auditing and assurance standards.

(4)

The audit must determine whether, in the auditor’s opinion, there is reasonable assurance that the registers kept by the registrar entity, in all material respects, correctly contain the information referred to in section 217 of the Act.

(5)

An issuer referred to in subclause (1) may elect that 1 or more of its registers be audited under regulation 109 rather than this regulation.

(6)

In this regulation, registrar entity means an entity that carries on a business of maintaining registers of regulated products on behalf of issuers (whether or not the business is the entity’s only business or the entity’s principal business).

111 Public inspection of register not required in certain circumstances

Section 221(1) of the Act does not apply in respect of a register of regulated products if—

(a)

the regulated products are debt securities issued by a continuous issuer of those debt securities; and

(b)

it is a term of the offer of those debt securities that—

(i)

the part of the register that concerns the debt securities of a particular product holder (A) is available for inspection by A in the manner referred to in section 222 of the Act if A serves written notice on the issuer of intention to inspect; and

(ii)

A may require a copy of, or an extract from, that part of the register to be sent to A within 5 working days after A has made a written request for the copy or extract to the issuer (free of charge).

112 Inspection and copies of documents

(1)

For the purposes of section 227(1)(b) of the Act, the issuer of a regulated product, the offeror under a regulated offer, or the manager of a registered scheme must—

(a)

keep a document that is relevant to a person (A) available for inspection in the manner prescribed in subclause (2) by A, or by a person authorised in writing by A for the purpose, who serves written notice of intention to inspect on the issuer, offeror, or manager; and

(b)

provide, on request and on payment of the relevant fee, to a person (A) a copy of, or an extract from, a document that is relevant to A (and must provide the copy or extract within 20 working days after receiving the request).

(2)

The documents must be available for inspection at the place at which the issuer’s, offeror’s, or manager’s records are kept between the hours of 9 am and 5 pm on each working day during the inspection period.

(3)

In this regulation, a document is relevant to a person if the person has or had a right to access or obtain a copy of the document under the Act, these regulations, a governing document, or the terms of the offer of a financial product.

(4)

In this regulation,—

inspection period means the period commencing on the third working day after the day on which notice of intention to inspect is served on the issuer, offeror, or manager by the person concerned and ending with the eighth working day after the day of service

relevant fee means a reasonable printing and administration fee set by the issuer, offeror, or manager.

Subpart 4—Schedule 3 schemes

113 Reporting obligations for Schedule 3 schemes

(1)

The trustees of a Schedule 3 scheme must,—

(a)

within 5 months after the balance date of the scheme, prepare an annual report on the affairs of the scheme during the accounting period ending on that date; and

(b)

within 28 days after the completion of that report, send a copy of the completed report to the FMA.

(2)

The annual report must, in respect of the accounting period to which it relates, include the following matters:

(a)

the financial statements of the scheme:

(b)

a copy of the auditor’s report (if any) on those financial statements:

(c)

a statement by the trustees as to whether all the contributions required to be made to the scheme in accordance with the terms of the trust deed have been made:

(d)

a statement by the trustees as to whether all the benefits required to be paid from the scheme in accordance with the terms of the trust deed have been paid:

(e)

a statement by the trustees as to whether the scheme has been operated in accordance with the terms of the trust deed and the Act:

(f)

a notification by the trustees if the assets of the scheme at any time during the accounting period were invested directly or indirectly (in a way in which it was reasonable for the trustees to be aware) in the scheme participant or in any associated person of the scheme participant and if so, details of all such investments held during the accounting period.

(3)

In this regulation and in the provisions implied into a trust deed under regulation 114, the balance date of a scheme is the close of 31 March or any other date that the trustees adopt as the scheme’s balance date (and, for that purpose, section 42 of the Financial Reporting Act 2013 (other than subsection (3)(b) of that section) applies with any necessary modifications).

114 Terms implied into trust deed of Schedule 3 schemes

The following provisions are implied into the trust deed of a Schedule 3 scheme:

1 Trustees must keep proper accounting records

(1)

The trustees must ensure that there are kept at all times accounting records that—

(a)

correctly record the transactions of the scheme; and

(b)

will enable the trustees to ensure that the financial statements of the scheme comply with generally accepted accounting practice; and

(c)

will enable the financial statements of the scheme to be readily and properly audited (if an audit is required by any enactment).

(2)

The trustees must establish and maintain a satisfactory system of control of those accounting records.

(3)

In this clause and clause 2, financial statements and generally accepted accounting practice have the same meanings as in the Financial Reporting Act 2013.

2 Financial statements must be prepared

The trustees must ensure that, within 5 months after the balance date of the scheme, financial statements that comply with generally accepted accounting practice are—

(a)

completed in relation to the scheme and that balance date; and

(b)

dated and signed on behalf of the trustees by 2 trustees or, if the scheme has only 1 trustee, by that trustee.

3 Prohibition on transactions giving related party benefits

(1)

The trustees must not, unless permitted under subclause (3), enter into a transaction that provides for a related party benefit to be given.

(2)

A related party benefit is a benefit that is given out of, or creates an exposure to loss for, scheme property and that is given to, or received by, the scheme participant or any associated person of the scheme participant (for example, benefits from the personal use of scheme property by the scheme participant or indirect financial advantages derived by the scheme participant).

(3)

Subclause (1) does not apply to—

(a)

withdrawals permitted by the trust deed; or

(b)

a transaction entered into on terms that—

(i)

would be reasonable in the circumstances if the parties were connected or related only by the transaction in question, each acting independently, and each acting in its own best interests; or

(ii)

are less favourable to the scheme participant or associated person than the terms referred to in subparagraph (i).

(4)

This clause does not affect the validity of any transaction entered into before the scheme is approved as a Schedule 3 scheme.

(5)

In this clause, associated person has the same meaning as in section 12 of the Financial Markets Conduct Act 2013.

Part 5 Dealing in financial products on markets

Subpart 1—Market manipulation

115 Interpretation

In this subpart, unless the context otherwise requires,—

independent bid means a bid by a buyer who is not—

(a)

the stabilisation manager; or

(b)

any person acting on behalf of, or in association with, the stabilisation manager

IPO means an offer of debt securities, equity securities, or managed investment products if, immediately before the offer, financial products of the same class are not quoted

licensed market means the licensed market on which the financial products are quoted

market stabilisation means the process of stabilising the market for financial products offered under an IPO

offer document

(a)

means the PDS for the IPO; and

(b)

if an exemption has been granted under the Act from the requirement for a PDS, means the principal offer document for the IPO that complies with the exemption; and

(c)

includes a document that contains the IPO offer of financial products and by which an offer of those financial products is permitted by law to be made

offer price means the price of the financial products set under the IPO

offeror means the offeror of the financial products

over-allocation means the issue or transfer of additional financial products by the offeror at the option of the stabilisation manager

stabilisation agreement means the agreement referred to in regulation 121

stabilisation bid means a bid by the stabilisation manager for the purpose of the market stabilisation

stabilisation manager means the person appointed in accordance with regulation 122

stabilisation trade means a trade resulting from a stabilisation bid

trade means a completed buy and sell transaction.

Compare: SR 2007/373 r 3

116 Exemption

(1)

Market stabilisation that complies with each of the requirements set out in regulations 117 to 130 does not contravene section 262 or 265 of the Act.

(2)

For this exemption to apply, the market stabilisation must comply with each of the requirements set out in regulations 117 to 130 for the whole of the period of the market stabilisation.

Compare: SR 2007/373 r 4

117 Prohibited purpose

The market stabilisation must not—

(a)

have the purpose of raising the price of the financial products, except for the objective of stabilising the market in the products; or

(b)

be undertaken with the intention of creating a false or misleading appearance—

(i)

with respect to the extent of active trading in quoted financial products; or

(ii)

with respect to the supply of, demand for, price for trading in, or value of those financial products.

Compare: SR 2007/373 r 5

118 Size of IPO

(1)

At the close of the IPO, the total value of the IPO must not be less than $30 million.

(2)

In subclause (1), total value

(a)

means the total value of the IPO when all payments, including any payments on instalment, are received by the offeror; but

(b)

does not include payment under any over-allocation.

Compare: SR 2007/373 r 6

119 Period of market stabilisation

The market stabilisation is limited to the period of 30 days beginning with the first day on which the financial products are available for trading on the licensed market.

Compare: SR 2007/373 r 7

120 Disclosure by offeror

The offeror must comply with the following before market stabilisation begins:

(a)

the offeror must disclose in each offer document—

(i)

the name of the stabilisation manager; and

(ii)

the nature and anticipated effect of the market stabilisation; and

(iii)

whether over-allocation has been agreed and, if so, the limit of the over-allocation; and

(b)

the offeror must include in each offer document a statement—

(i)

to the effect that the investor—

(A)

has a right to receive from the offeror, free of charge and on request, a copy of the stabilisation agreement; and

(B)

may obtain a copy of the stabilisation agreement by electronic means; and

(ii)

as to how the investor may obtain that copy by electronic means; and

(c)

if there is a register entry for the IPO, the offeror must lodge with the Registrar a copy of the stabilisation agreement.

Compare: SR 2007/373 r 8

121 Stabilisation agreement

(1)

Before the IPO opens, the offeror must enter into a stabilisation agreement with the licensed market operator and with the stabilisation manager.

(2)

The terms of the agreement must include the following:

(a)

the terms and conditions stipulated by the licensed market operator for the technical conduct of the market stabilisation; and

(b)

an undertaking by the offeror to comply with those terms and conditions.

(3)

The offeror must not breach the undertaking referred to in subclause (2)(b).

Compare: SR 2007/373 r 9

122 Appointment of stabilisation manager

(1)

The offeror must appoint a stabilisation manager, and must notify the stabilisation manager’s name and contact details to the licensed market operator.

(2)

A person (A) may be appointed the stabilisation manager only if, before the appointment is made,—

(a)

A has in place a Chinese wall to the satisfaction of the FMA; and

(b)

the FMA has notified the offeror and the licensed market operator that it is so satisfied.

(3)

In subclause (2), Chinese wall means an internal information barrier and other necessary procedures to—

(a)

confine confidential information relating to the market stabilisation and the financial products to those of A’s officers, employees, or agents (including any broker) who are engaged in the market stabilisation; and

(b)

prevent that information passing to any other of A’s officers, employees, or agents (including any broker).

Compare: SR 2007/373 r 10

123 Stabilisation manager must notify licensed market operator and FMA that market stabilisation to begin

(1)

The stabilisation manager must notify the licensed market operator and the FMA that the market stabilisation is to begin.

(2)

The notice must be given in writing and must be given,—

(a)

if the market stabilisation begins at the start of a trading day, before the market closes on the previous trading day; or

(b)

not less than 3 trading hours before the market stabilisation begins.

(3)

The licensed market operator must ensure that the notice is notified in accordance with its arrangements for notifying disclosures made to it (see section 314(b)(i) of the Act).

Compare: SR 2007/373 r 11

124 Duties and responsibilities of stabilisation manager

The stabilisation manager must—

(a)

ensure that the market stabilisation complies with this subpart and the terms and conditions of the stabilisation agreement; and

(b)

do everything that is required of the stabilisation manager by this subpart.

Compare: SR 2007/373 r 12

125 Stabilisation bids

(1)

A stabilisation bid must be made in the ordinary course of trading on a licensed market.

(2)

The stabilisation manager must notify each stabilisation bid to the licensed market operator for release to the market at the same time as the bid is made.

(3)

A stabilisation bid must be prioritised behind the current highest independent bid.

Compare: SR 2007/373 r 13

126 Price of stabilisation bids: before any trades

If there have been no trades in the financial products, and there are no current independent bids, a stabilisation bid must not be higher than the offer price.

Compare: SR 2007/373 r 14

127 Price of stabilisation bids: after trades

(1)

If there has been a trade in the financial products, and there are 1 or more current independent bids, a stabilisation bid must be the lower of the highest current independent bid and the offer price.

(2)

If there has been a trade in the financial products but there are no independent bids, the stabilisation bid must not be higher than the lower of the last trade and the offer price.

Compare: SR 2007/373 r 15

128 Stabilisation manager must keep daily record of trading

The stabilisation manager must keep a record for each day of trading during market stabilisation that records the following information:

(a)

in respect of each stabilisation trade for that day, the quantity, price, and time of the transaction:

(b)

for the period of market stabilisation to date, the cumulative total of financial products acquired under the market stabilisation.

Compare: SR 2007/373 r 16

129 Stabilisation manager’s report to licensed market operator

After the close of each trading day during the market stabilisation, and before the start of trading on the next trading day,—

(a)

the stabilisation manager must report in writing to the licensed market operator the information that is specified in regulation 128 for the day ended; and

(b)

the licensed market operator must ensure that the information referred to in paragraph (a) is notified in accordance with its arrangements for notifying disclosures made to it (see section 314(b)(i) of the Act).

Compare: SR 2007/373 r 17

130 Over-allocation

(1)

The payments made under an over-allocation must not exceed 15% of the total value of the IPO.

(2)

For the purposes of subclause (1), the amount of the over-allocation must not be subsequently increased, even if it is less than 15% of the total value of the IPO.

(3)

In this regulation, total value has the same meaning as in regulation 118(2).

Compare: SR 2007/373 r 18

Subpart 2—Disclosure of interests of substantial product holders in listed issuers

131 Interpretation

In this subpart, unless the context otherwise requires,—

attach, in relation to an event disclosure, includes send to a person (on or about the same time as the event disclosure is sent to the person) by a delivery method permitted for that person under these regulations

delivery does not include delivery by post

event disclosure means a disclosure under section 276, 277, 278, or 279 of the Act

relevant agreement has the meaning set out in regulation 139(1)

relevant agreement document has the meaning set out in regulation 139(3).

Compare: SR 2007/372 r 3

132 Person treated as holding financial products where person has relevant interest in certain derivatives

(1)

A person (A) that has a relevant interest in a derivative for which the underlying is a quoted voting product of a listed issuer must be treated, at a particular date, as having a relevant interest in the following number of those quoted voting products for the purposes of section 275 of the Act:

(a)

if the derivative gives A, in economic substance, the financial benefits of holding an ascertainable number of the quoted voting products for a period determined under the derivative and the derivative is a cash-settled derivative, that number of quoted voting products:

(b)

if the derivative is a cash-settled option to buy or sell an ascertainable number of quoted voting products at an agreed price on, or on or before, an agreed date and the derivative gives A a long position on those products, the number that is equal to the ascertainable number of products multiplied by the delta of the derivative at the end of the most recent trading day:

(c)

in any other case for which there is an applicable framework or methodology, the number calculated in accordance with that framework or methodology.

(2)

In subclause (1),—

ascertainable number, in relation to the particular date referred to in subclause (1), means a number that is specified in, determined in accordance with, or can be ascertained on that date under the terms of the derivative

financial benefit means capital, earnings, or other financial returns.

(3)

For the purposes of subclause (1)(b),—

(a)

A will have a long position if, under the terms of the derivative, A may benefit if the price of the underlying quoted voting products increases (rather than decreases); and

(b)

the delta of the derivative must be calculated in accordance with accepted market practice for applying a delta calculation to determine how many quoted voting products a counterparty should hold at the end of the most recent trading day to hedge the counterparty’s obligations under the derivative (whether or not the counterparty chooses to hedge this way in practice).

Form and delivery method for event disclosures

133 How to make event disclosures to licensed market operator

(1)

An event disclosure to a licensed market operator must be made using the operator’s form (for that type of event disclosure) and delivery method set under regulation 147 unless—

(a)

doing so would delay making the disclosure; or

(b)

the operator has not set a form or delivery method under regulation 147.

(2)

If subclause (1)(a) or (b) applies, an event disclosure to a licensed market operator must be made in the default form (for that type of event disclosure) set out in Schedule 14 and sent to the licensed market operator’s address,—

(a)

if reasonably possible, by email in the electronic format required by the operator for dissemination; or

(b)

otherwise by email in another electronic format, another electronic method consented to by the operator, or (if none of these is reasonably possible) delivery.

Compare: SR 2007/372 r 4

134 How to make event disclosures to listed issuer

(1)

An event disclosure to a listed issuer must be made using—

(a)

the relevant licensed market operator’s form (for that type of event disclosure) set under regulation 147; or

(b)

the default form (for that type of event disclosure) set out in Schedule 14.

(2)

The event disclosure must be sent to the listed issuer at the listed issuer’s address by email or another electronic method consented to by the listed issuer, or delivery.

Compare: SR 2007/372 r 5

When event disclosures may be combined

135 How to disclose more than 1 type of event disclosure

(1)

A person may disclose, in 1 event disclosure, both a movement of 1% or more in a substantial holding and a change in the nature of any relevant interest in the same substantial holding.

(2)

In all other cases, a person may disclose only 1 type of event disclosure in an event disclosure.

(3)

A person who ceases to have a substantial holding need make only that type of event disclosure, and not also the following types of event disclosures for the same transactions or events:

(a)

a movement of 1% or more in the substantial holding; or

(b)

a change in the nature of any relevant interest in the substantial holding.

Compare: SR 2007/372 r 7

136 How to disclose more than 1 substantial holding

A person who has a substantial holding in more than 1 class of quoted voting products must make a separate event disclosure for each substantial holding.

Compare: SR 2007/372 r 8

137 How to disclose for more than 1 connected holder with similar or related substantial holding

More than 1 person may disclose together, in 1 event disclosure, if—

(a)

they have a similar or related substantial holding in the same listed issuer; and

(b)

they are disclosing the same type of event disclosure; and

(c)

they are associated persons or connected in the ways set out in section 237(a) to (e) of the Act (and this association or connection is set out in the event disclosure); and

(d)

it is clear which information relates to which person or persons in the event disclosure, and the disclosure is not confusing in any other way as a consequence.

Compare: SR 2007/372 r 9

What disclosure required for event disclosures

138 What information must be disclosed in event disclosures

An event disclosure must contain the information required by—

(a)

the form in which it is made, in accordance with these regulations; and

(b)

the instructions to that form.

Compare: SR 2007/372 r 10

139 When relevant agreement documents must be attached to event disclosures

(1)

A relevant agreement is an agreement or a deed under which, or by virtue of which,—

(a)

a relevant interest arises; or

(b)

a qualification arises on a person’s relevant interest power to exercise, or control the exercise of, a right to vote, acquire, or dispose of a financial product.

(2)

If there is a relevant agreement for a relevant interest or qualification required to be disclosed in an event disclosure, the event disclosure must have attached to it a copy of—

(a)

the relevant agreement (if in writing); or

(b)

if the relevant agreement is not in writing, a document setting out the material terms of the relevant agreement.

(3)

That written relevant agreement or document is the relevant agreement document.

(4)

This regulation is subject to regulations 140 to 142.

Compare: SR 2007/372 r 11

140 Previously attached relevant agreement documents need not be attached again

A relevant agreement document need not be attached to an event disclosure if—

(a)

it has been attached to a previous event disclosure; and

(b)

the present event disclosure states this fact and gives the date of that previous event disclosure.

Compare: SR 2007/372 r 12

141 Relevant agreement documents need not be attached for ownership relevant interests

(1)

A relevant agreement document need not be attached to an event disclosure for a relevant interest if the substantial product holder has the relevant interest only because the holder—

(a)

is a registered holder of the financial products; or

(b)

is the beneficial owner of the financial products; or

(c)

is both the registered holder and beneficial owner of the financial products.

(2)

However, subclause (1) does not exempt the substantial product holder from the requirement to attach a relevant agreement document for any qualification on the substantial product holder’s relevant interest power to exercise, or control the exercise of, a right to vote, dispose of, or acquire a financial product.

Compare: SR 2007/372 r 13

142 Relevant agreement documents need not be attached in case of investment management contracts

(1)

A person (A) need not attach a relevant agreement document to an event disclosure for a relevant interest or qualification on a relevant interest if—

(a)

A’s ordinary business consists of, or includes, the investment of some or all of the funds of another person; and

(b)

the relevant agreement document (the investment management contract) gives A powers to buy and sell financial products for the benefit of the client and to manage investments held for the client (which may include the powers to hold those financial products and exercise the voting rights attached to the financial products, and may be qualified or unqualified powers); and

(c)

the relevant interest, or qualification on a relevant interest, arising under the investment management contract arises only because A has those powers; and

(d)

the client has the beneficial ownership of the quoted voting products bought or sold by A for the client, or has a beneficial interest in the fund that includes those quoted voting products; and

(e)

the event disclosure—

(i)

states that the relevant interest or interests, or qualifications on relevant interests, arising under the investment management contract arise only from the powers of investment contained in the investment management contract; and

(ii)

describes the nature of the investment management contract.

(2)

The exemption in this regulation also applies to a related body corporate of A that exercises some or all of the powers of, or performs some or all of the obligations of, A under the relevant agreement document (and, for that purpose, a reference to A in subclause (1) includes that related body corporate).

Compare: SR 2007/372 r 14

Acknowledgements of event disclosure

143 How listed issuer must give acknowledgement of event disclosure

If a person requests an acknowledgement of an event disclosure under section 282 of the Act, the listed issuer must send that acknowledgement to the person by delivery, post, or (if the disclosure was given by email or another electronic means) email or that other electronic means.

Compare: SR 2007/372 r 15

Exemptions from event disclosure obligations

144 Exemption for substantial holdings in overseas issuer with only secondary listing on domestic licensed markets

(1)

A person need not comply with any of sections 276 to 279 of the Act in relation to a substantial holding in a listed issuer if—

(a)

the class of quoted voting products in which the person has the substantial holding is also approved for trading on a financial product market in an overseas jurisdiction set out in Schedule 15; and

(b)

no financial product market that is licensed under section 316 of the Act has primary jurisdiction for the listing requirements for the listed issuer and the quotation of its financial products; and

(c)

the listed issuer is not incorporated in New Zealand or established under New Zealand law; and

(d)

the person is subject to overseas substantial holding disclosure requirements in connection with the substantial holding.

(2)

In this regulation, overseas substantial holding disclosure requirements, in relation to a financial product market in an overseas jurisdiction, means requirements (whether under the market’s rules or under the law of the overseas jurisdiction) for persons who have significant holdings of financial products approved for trading on the market to disclose those holdings to the market.

Compare: SR 2007/372 r 16

145 Exemption for substantial holdings held for hedging by derivatives issuer acting in client-serving capacity

(1)

This regulation applies to a person that is a derivatives issuer (A).

(2)

A need not comply with any of sections 276 to 279 of the Act in relation to a substantial holding to the extent that—

(a)

the substantial holding arises as a result of the application of section 275 of the Act to derivatives entered into in the ordinary course of A’s derivatives-issuing business for the purpose of hedging A’s obligations under other derivatives entered into with 1 or more investors in a client-serving capacity; and

(b)

A and the investor or investors are not associated persons; and

(c)

A has opted into this exemption by written notice to the FMA (and not withdrawn the notice by further written notice to the FMA); and

(d)

the FMA has given a written notice to A confirming that the FMA is satisfied that A’s reliance on this regulation would not have the effect of circumventing, evading, or defeating any of the purposes specified in section 273 of the Act (and the FMA has not withdrawn the confirmation by further written notice to A).

(3)

A derivatives issuer acts in a client-serving capacity when it deals in derivatives by fulfilling orders received from an investor or responding to an investor’s request to trade (rather than dealing on its own behalf).

146 Exemption from disclosing derivative where relevant interest to acquire or dispose of underlying is disclosed

(1)

This regulation applies if—

(a)

a person (D) has a relevant interest in a derivative; and

(b)

the underlying of the derivative is the quoted voting products of a listed issuer; and

(c)

a relevant interest to acquire or dispose of those underlying quoted voting products arises under, or by virtue of, the derivative; and

(d)

D makes a disclosure under section 276, 277, or 279 of the Act in respect of the relevant interest referred to in paragraph (c).

(2)

D need not comply with the provision referred to in subclause (1)(d) under which the disclosure is made to the extent that the provision would require (by virtue of section 275 of the Act) additional disclosure of the relevant interest in the derivative itself.

Setting of licensed market operator’s form and delivery method for event disclosure

147 Setting of licensed market operator’s form and delivery method for event disclosure

(1)

A licensed market operator may set or change 1 or more forms and delivery methods for event disclosures.

(2)

The licensed market operator must, before setting or changing a form or delivery method for event disclosures, be satisfied that—

(a)

the form requires the disclosure of the same information and documents as the default form (for the same type of event disclosure) in Schedule 14 (although different words and format may be used); and

(b)

the form has sufficient instructions for its use; and

(c)

the form can also be used for disclosure to the listed issuer (either by the person making the disclosure or by the operator on that person’s behalf); and

(d)

the form generates a disclosure in a form that may be notified by the licensed market operator, and may continue to be made available, as referred to in section 314(b)(i) of the Act; and

(e)

the form requires a person making the disclosure to confirm that it is correct to the best of the person’s knowledge and belief and that the person is duly authorised to make the disclosure by all persons for whom it is made; and

(f)

using the form or delivery method will not generally delay the making of event disclosures in comparison with the default form (for the same type of event disclosure) in Schedule 14 or the delivery methods permitted under the regulations; and

(g)

using the form or delivery method will not impose unreasonable compliance costs on persons making event disclosures.

(3)

For the purposes of subclause (2)(a), immaterial differences in the information that is required in the default form and the information required by the operator’s form must be disregarded.

(4)

The licensed market operator must ensure that its approved form or forms and delivery method are accessible at all reasonable times on an Internet site maintained by, or on behalf of, the licensed market operator.

Compare: SR 2007/372 r 17

Forms for tracing and disclosure of interests in listed issuers

148 Forms for tracing and disclosure of interests in listed issuers

(1)

A listed issuer must use form 1 in Schedule 16 to require a person to disclose relevant interests to it under section 290 of the Act.

(2)

A listed issuer must use form 2 in Schedule 16 to require a person to disclose information to it under section 291 of the Act.

Compare: SR 2007/372 r 18

Subpart 3—Disclosure of relevant interests in quoted financial products or specified derivatives by directors and senior managers of listed issuers

149 Interpretation

In this subpart and in Schedule 17, unless the context otherwise requires,—

disclosure notice means a notice in a form referred to in regulation 150

disclosure on appointment or listing means the disclosure required under section 297(1) or 298(1) of the Act

financial product

(a)

means a quoted financial product of a listed issuer or a related body corporate; and

(b)

includes a specified derivative as defined in section 298(3) of the Act

transaction means the agreement pursuant to which, or the circumstances in which, the acquisition or disposal of the financial product to which the relevant interest relates or related took place, and includes (without limitation)—

(a)

an on-market trade:

(b)

an off-market trade:

(c)

an exercise of options:

(d)

an issue of financial products under a dividend reinvestment plan:

(e)

participation in a buy-back scheme

transaction disclosure means the disclosure required under section 297(2) or 298(2) of the Act.

Compare: SR 2003/382 r 3

Form and delivery method for disclosure

150 Directors and senior managers must complete disclosure

(1)

A director or senior manager of a listed issuer who must make a disclosure on appointment or listing must do so using—

(a)

the relevant licensed market operator’s form (for disclosure on appointment or listing) set under regulation 156; or

(b)

the default form (for disclosure on appointment or listing) set out in Schedule 17.

(2)

A director or senior manager of a listed issuer who must make a transaction disclosure must do so using—

(a)

the relevant licensed market operator’s form (for transaction disclosure) set under regulation 156; or

(b)

the default form (for transaction disclosure) set out in Schedule 17.

Compare: SR 2003/382 r 5

151 What information must be disclosed

A disclosure on appointment or listing or a transaction disclosure must contain the information required by—

(a)

the form in which it is made, in accordance with these regulations; and

(b)

the instructions to that form.

Compare: SR 2007/372 r 10

152 Aggregation of multiple transactions in transaction disclosure notice

(1)

Multiple acquisitions and multiple disposals of relevant interests in financial products may be disclosed in 1 disclosure notice for transaction disclosure, provided that all the acquisitions and disposals disclosed in the notice took place within the 20-working-day or 5-trading-day period (as the case may be) referred to in section 297(2) or 298(2) of the Act.

(2)

A director or senior manager who discloses multiple acquisitions or multiple disposals of relevant interests in financial products in accordance with subclause (1) must state, in the transaction disclosure notice, the number of transactions that the disclosure notice relates to.

Compare: SR 2003/382 r 12

153 Method by which disclosure notice must be given

(1)

Every disclosure notice must be—

(a)

delivered to the address of the person to whom the notice is given; or

(b)

given by other electronic means to which the licensed market operator has given its consent (in the case of a notice given to a licensed market operator); or

(c)

given by other electronic means to which the listed issuer has given its consent (in the case of a notice given to a listed issuer).

(2)

In subclause (1)(a), delivered does not include delivered by post.

Compare: SR 2003/382 r 16

Exemptions from disclosure obligations

154 Exemption relating to overseas-regulated markets

(1)

A director or senior manager of an overseas listed issuer who has, or who acquires or disposes of, a relevant interest in a quoted financial product of the overseas listed issuer does not have to disclose that fact under section 297 of the Act.

(2)

A director or senior manager of an overseas listed issuer who has, or who acquires or disposes of, a relevant interest in a specified derivative does not have to disclose that fact under section 298 of the Act if the underlying is a financial product of the overseas listed issuer.

(3)

A director or senior manager of an overseas listed issuer who has, or who acquires or disposes of, a relevant interest in a quoted financial product of a related body corporate of that overseas listed issuer does not have to disclose that fact under section 297 of the Act unless—

(a)

the director or senior manager is also a director or senior manager of the related body corporate; and

(b)

the related body corporate is a listed issuer, but not an overseas listed issuer.

(4)

A director or senior manager of an overseas listed issuer who has, or who acquires or disposes of, a relevant interest in a specified derivative does not have to disclose that fact under section 298 of the Act if the underlying is a financial product of a related body corporate of the overseas listed issuer unless—

(a)

the director or senior manager is also a director or senior manager of the related body corporate; and

(b)

the related body corporate is a listed issuer, but not an overseas listed issuer.

(5)

In this regulation, overseas listed issuer means a listed issuer—

(a)

whose financial products are approved for trading on a market that—

(i)

is licensed under section 317 of the Act (the overseas-regulated market); and

(ii)

has primary jurisdiction for the listing requirements for the listed issuer and the quotation of its financial products; and

(b)

in relation to which no licensed market (other than the overseas-regulated market) has primary jurisdiction for the listing requirements for the listed issuer and the quotation of its financial products.

Compare: SR 2004/105 cl 12

155 Exemption from disclosing derivative where relevant interest to acquire or dispose of underlying is disclosed

(1)

This regulation applies if—

(a)

a person (A) has a relevant interest in a derivative; and

(b)

the underlying of the derivative is the quoted voting products of a listed issuer; and

(c)

A makes a disclosure under section 297(2) of the Act in respect of an acquisition or a disposal of a relevant interest in those underlying quoted voting products (or relies on section 302 of the Act in respect of the acquisition or disposal of that relevant interest).

(2)

A need not comply with section 298 of the Act to the extent that it requires disclosure of the relevant interest in the derivative.

Setting of licensed market operator’s form for disclosure

156 Setting of licensed market operator’s form for disclosure

(1)

A licensed market operator may set or change 1 or more forms for disclosure on appointment or listing or transaction disclosure.

(2)

The licensed market operator must, before setting or changing a form, be satisfied that—

(a)

the form requires the disclosure of the same information and documents as the default form (for the same type of disclosure) in Schedule 17 (although different words and format may be used); and

(b)

the form has sufficient instructions for its use; and

(c)

the form can also be used for disclosure to the listed issuer (either by the person making the disclosure or by the operator on that person’s behalf); and

(d)

the form generates a disclosure in a form that may be notified by the licensed market operator, and may continue to be made available, as referred to in section 314(b)(i) of the Act; and

(e)

the form requires a person making the disclosure to confirm that it is correct to the best of the person’s knowledge and belief and that the person is duly authorised to make the disclosure by all persons for whom it is made; and

(f)

using the form will not generally delay the making of disclosures in comparison with the default forms in Schedule 17; and

(g)

using the form will not impose unreasonable compliance costs on persons making disclosures.

(3)

For the purposes of subclause (2)(a), immaterial differences in the information that is required in the default form and the information required by the operator’s form must be disregarded.

(4)

The licensed market operator must ensure that its approved form or forms are accessible at all reasonable times on an Internet site maintained by, or on behalf of, the licensed market operator.

Compare: SR 2007/372 r 17

Subpart 4—Transfer of transferable financial products

157 Products transfer

A products transfer for the purposes of sections 372 and 373(1)(a) of the Act must be in form 1 in Schedule 18.

158 Brokers transfer

A brokers transfer for the purposes of section 373(1)(b) of the Act must be in form 2 in Schedule 18.

Subpart 5—Unsolicited offers to purchase financial products off-market

159 Interpretation

(1)

In this subpart, unless the context otherwise requires,—

agreement means the agreement that results from the acceptance of an unsolicited offer

disclosure document means the document referred to in regulation 165

financial products register means—

(a)

a register kept under subpart 4 of Part 4 of the Act; or

(b)

a register of financial products kept under any other enactment or overseas law

issuer, in relation to an unsolicited offer, means the listed issuer or issuer of the financial products to which the offer relates

offeree means a person to whom an unsolicited offer is made

offeror means a person who makes an unsolicited offer

same, or substantially similar, terms includes terms that have, in substance, the same, or substantially similar, effect.

(2)

See section 381 of the Act (which defines unsolicited offer).

Compare: SR 2012/331 r 3

160 Application of subpart

(1)

This subpart applies to an unsolicited offer made by a person (A) to another person (B) if—

(a)

the financial products are—

(i)

quoted financial products or approved for trading on a financial product market; or

(ii)

financial products of a class that has previously been offered under a regulated offer or in reliance on clause 6 of Schedule 1 of the Act; or

(iii)

financial products of a class that has previously been offered to the public in New Zealand under the Securities Act 1978 (whether before its repeal or under Part 1 of Schedule 4 of the Act); and

(b)

A or an associated person of A or both have made, are making, or intend to make (in aggregate) unsolicited offers on the same, or substantially similar, terms to 20 or more other persons in the period that begins 6 months before the date of the offer to B and ends 6 months after that date; and

(c)

the offer is received by B in New Zealand (regardless of where any resulting transfer occurs or where A is resident, incorporated, or carries on business).

Example

A makes an unsolicited offer to purchase the shares of B. Those shares are quoted financial products.

A makes substantially similar offers to 10 other persons in the 6-month period before the offer.

At the date of the offer to B, A intends to make substantially similar offers to a further 10 persons in the 6-month period after the offer.

It does not matter for the purposes of counting the number of persons to whom an offer is made under subclause (1)(b) that some of those offers are made to persons referred to in regulation 162.

These regulations apply to the offer to B because A has made, is making, or intends to make unsolicited offers on substantially similar terms to 20 other persons in the period referred to in subclause (1)(b).

(2)

However, this subpart does not apply to an unsolicited offer—

(a)

that is an offer to acquire a derivative, to acquire a power to dispose of a derivative, or to acquire another interest in or right attaching to a derivative; or

(b)

that is made in connection with an amalgamation under Part 13 of the Companies Act 1993; or

(c)

that is made in connection with an arrangement or amalgamation under Part 15 of the Companies Act 1993; or

(d)

that is made in connection with a compromise or an arrangement under Part 5.1 of the Corporations Act 2001 (Aust); or

(e)

that is made in connection with a takeover offer for quoted managed investment products that is made in accordance with the market rules of the licensed market on which the products are quoted; or

(f)

to acquire financial products issued by a body corporate that is incorporated outside New Zealand if—

(i)

the offer is made by, and the financial products are to be acquired by, that body corporate; or

(ii)

the offer is made as part of, or in connection with, a takeover offer that is regulated by overseas law or rules.

(3)

For the purposes of subclause (2)(f),—

overseas law or rules, in relation to the body corporate referred to in that paragraph, means—

(a)

the law of the country, State, or jurisdiction in which the body corporate is incorporated; or

(b)

the rules of an overseas market on which the financial products issued by the body corporate are approved for trading

overseas market means a financial product market that is authorised to operate in an overseas jurisdiction in which its principal place of business is located.

Compare: SR 2012/331 r 5(1), (3), (4)

161 Miscellaneous provisions relating to application

For the purposes of regulation 160(1)(b),—

(a)

the intention to make further offers must be considered as at the date of the offer to B:

(b)

if A or an associated person of A makes unsolicited offers on the same, or substantially similar, terms to other persons during the 6-month period after the date of the offer to B, it must be presumed that A or the associated person intended, as at the date of the offer to B, to make those offers unless the contrary is proved by A:

(c)

in determining the number of offers to other persons,—

(i)

offers to persons referred to in regulation 162 must be counted even though regulations 163 to 177 do not apply to those offers:

(ii)

an offer to 2 or more persons who are joint holders of the products must be treated as an offer to a single person:

(iii)

offers to persons made before or after commencement of these regulations must be counted:

(iv)

only offers to persons received in New Zealand must be counted:

(v)

invitations to persons to make offers to sell financial products, to confer powers to dispose of financial products, or to sell interests in or rights attaching to financial products must be counted as offers to acquire financial products, to acquire powers to dispose of financial products, or to acquire other interests in or rights attaching to financial products (as the case may be).

Compare: SR 2012/331 r 5(2)

162 Obligations do not apply to offers to certain persons

(1)

Regulations 163 to 177 do not apply to an offer made to any of the following:

(a)

a wholesale investor:

(b)

an associated person of the offeror:

(c)

a close business associate of the offeror or of a director of the offeror:

(d)

a relative of the offeror or of a director of the offeror (see clause 5(2) of Schedule 1 of the Act).

(2)

In this regulation,—

close business associate has the same meaning as in clause 4(2) and (3) of Schedule 1 of the Act (applied with all necessary modifications as if the references to the offeror or an offer of financial products were, respectively, references to the offeror as defined in regulation 159 or the unsolicited offer)

wholesale investor, in relation to financial products, means—

(a)

a person who acquired the financial products under an offer as a wholesale investor (as defined in clause 3(2) and (3) of Schedule 1 of the Act); or

(b)

a person who is a wholesale investor within the meaning of clause 3(2) of Schedule 1 of the Act (see subclause (3)).

(3)

The relevant time, for the purposes of applying Schedule 1 of the Act under paragraph (b) of the definition of wholesale investor in subclause (2), must be treated as the time immediately before the unsolicited offer is made to the person.

Compare: SR 2012/331 r 6

Offeror obligations

163 Offeror must notify intention to make unsolicited offer

(1)

A person (A) must not make an unsolicited offer unless A has given written notice to the issuer, at least 5 working days before the offer is made, of A’s intention to do so.

(2)

However, the written notice must not be given more than 10 working days before the offer is made.

(3)

If the unsolicited offer will relate to quoted financial products, A must, at least 5 working days before the offer is made, give a copy of the written notice referred to in subclause (1) (including the information referred to in regulation 164) to the relevant licensed market operator.

Compare: SR 2012/331 r 7(1), (2)

164 Contents of written notice to issuer

(1)

The written notice referred to in regulation 163 must be accompanied by—

(a)

a copy of the standard disclosure document that will be given to the offerees (excluding information relating only to a particular offeree); and

(b)

a list of the names and addresses of every offeree to whom the disclosure document will be given; and

(c)

a list of the names and addresses of every other person to whom the offeror or an associated person of the offeror or both have made, are making, or intend to make an unsolicited offer on the same, or substantially similar, terms in the period referred to in regulation 160(1)(b).

(2)

If the person referred to in regulation 163(1) intends to make the offer to all of the persons who, as at a particular date, are registered on a financial products register as holding financial products of a particular class, the written notice referred to in that regulation—

(a)

must state that intention (including the particular date and the class of financial products concerned); but

(b)

is not required to be accompanied by the lists referred to in subclause (1)(b) and (c).

(3)

The information referred to in subclause (1)(b) and (c) must be in a format that is readily accessible by the issuer so as to enable the issuer to readily communicate with the offerees or other persons referred to in those paragraphs.

Compare: SR 2012/331 r 7(3) to (6)

165 Unsolicited offer must be made in disclosure document

An offeror must ensure that an unsolicited offer is made only in a disclosure document that—

(a)

complies with regulations 168 and 169; and

(b)

is given to the offeree.

Compare: SR 2012/331 r 8(1)

166 Restricted unsolicited offer communications

(1)

An offeror must ensure that a restricted unsolicited offer communication is not distributed to a person who is or will be an offeree before the disclosure document is given to the offeree under regulation 165.

(2)

An offeror must, if distributing a restricted unsolicited offer communication to an offeree after giving a disclosure document to the offeree but before the offer is accepted, ensure that the communication is accompanied by another copy of the disclosure document that complies with regulations 168 and 169.

(3)

In this regulation, restricted unsolicited offer communication means a document or other communication that—

(a)

refers to an unsolicited offer or an intended unsolicited offer (for example, an acceptance form); and

(b)

is authorised or instigated by, or on behalf of, the person who is or will be the offeror or prepared with the co-operation of, or by arrangement with, that person.

Compare: SR 2012/331 r 8(2), (4)

167 Disclosure document must be prominently identified if accompanied by other documents

If the disclosure document is accompanied by 1 or more other documents when it is given to the offeree, the offeror must ensure—

(a)

that the disclosure document is prominently identified; and

(b)

in the case where it is given—

(i)

otherwise than by electronic means, that the disclosure document is placed in front of any of the other documents:

(ii)

by electronic means, that the disclosure document is in a position within the group of documents where it is reasonably likely to come to the attention of the offeree.

Compare: SR 2012/331 r 8(3)

168 Contents of disclosure document

(1)

The disclosure document must contain, at the front of the document, the information and statements specified in Schedule 19, in the form set out in that schedule, including,—

(a)

in the case of an unsolicited offer to acquire quoted financial products,—

(i)

the consideration that the offeror is offering under the offer to the offeree for each financial product (the offer price); and

(ii)

the current average market price of each financial product (the market price), being the average market price calculated over a 20-working-day period ending at a point in time specified in the document (being a time that is not earlier than 10 working days before the date of the offer); and

(iii)

the total consideration that the offeror is offering under the offer to the offeree (the total offer price); and

(iv)

the total current average market price of all of the financial products that are the subject of the offer to the offeree (the total market price), being the total average market price calculated over a 20-working-day period ending at a point in time specified in the document (being a time that is not earlier than 10 working days before the date of the offer); and

(v)

the unique identification code of the issuer as issued by the relevant licensed market operator; and

(vi)

a statement to the effect that the offeree may check the current market price of the financial products on the relevant licensed market operator’s Internet site and in newspapers; and

(vii)

the name of that licensed market operator and its Internet site address; and

(b)

in the case of an unsolicited offer to acquire non-quoted financial products,—

(i)

the consideration that the offeror is offering under the offer to the offeree for each financial product (the offer price); and

(ii)

a fair estimate of the value of each financial product as at a point in time specified in the document (being a time that is not earlier than 10 working days before the date of the offer) (the fair estimate of value); and

(iii)

the total consideration that the offeror is offering under the offer to the offeree (the total offer price); and

(iv)

a fair estimate of the total value of the financial products that are the subject of the offer to the offeree as at a point in time specified in the document (being a time that is not earlier than 10 working days before the date of the offer) (the total fair estimate of value); and

(v)

the basis for making the estimates (including the main assumptions on which the estimates are based); and

(vi)

a statement as to whether the estimates have been reviewed by an independent third party acting in his or her professional capacity or consist only of the expression of the offeror’s opinion; and

(c)

in the case of an unsolicited offer to acquire a power to dispose of financial products or to acquire other interests in or rights attaching to financial products,—

(i)

the total consideration that the offeror is offering under the offer to the offeree (the total offer price); and

(ii)

a fair estimate of the total value of the power, interests, or rights that are the subject of the offer to the offeree as at a point in time specified in the document (being a time that is not earlier than 10 working days before the date of the offer) (the total fair estimate of value); and

(iii)

the basis for making the estimate (including the main assumptions on which the estimate is based); and

(iv)

a statement as to whether the estimate has been reviewed by an independent third party acting in his or her professional capacity or consists only of the expression of the offeror’s opinion; and

(d)

in each case, the terms of payment of the consideration that the offeror is offering under the offer, including—

(i)

how and when payments will be made; and

(ii)

the date by which the consideration will be paid in full; and

(iii)

if payment of the consideration is to be made by way of a single payment more than 90 days after the date of the offer, a statement in the form set out in Part 1 of Schedule 20; and

(iv)

if payment of the consideration is to be made in instalments, the information and statement referred to in subclause (3).

(2)

Subclause (1)(c) does not apply if subclause (1)(a) or (b) applies.

(3)

The information and statement for the purposes of subclause (1)(d)(iv) are as follows:

(a)

the amount of each instalment:

(b)

when each instalment will be paid:

(c)

how many instalments will be paid:

(d)

how each instalment will be paid:

(e)

a statement in the form set out in Part 1 of Schedule 20 if the last instalment is to be made more than 90 days after the date of the offer.

(4)

Consideration, prices, values, or other monetary amounts that must be disclosed in a disclosure document must be expressed in New Zealand currency.

Compare: SR 2012/331 r 9

169 Presentation of information and statements

The information and statements required to be contained in a disclosure document must be worded and presented in a clear, concise, and effective manner.

Compare: SR 2012/331 r 10

170 Offer period

(1)

An offeror must ensure that the unsolicited offer—

(a)

specifies the period for which it will remain open; and

(b)

remains open for that period.

(2)

The offer period must—

(a)

commence with the date of the offer; and

(b)

be not shorter than 30 days and not longer than 12 months.

(3)

A specified person must not, in relation to an unsolicited offer made to a person (B), make a representation to B (whether in the disclosure document or otherwise) to the effect that B has less than 30 days after the date of the offer within which to make a decision on the offer.

(4)

In this regulation, specified person, in relation to an unsolicited offer, means—

(a)

the offeror; or

(b)

an associated person of the offeror; or

(c)

a person acting on behalf of the offeror or an associated person of the offeror.

(5)

This regulation is subject to regulation 171.

Compare: SR 2012/331 r 12

171 Withdrawal of offer

(1)

An unsolicited offer may be withdrawn only with the consent of the FMA.

(2)

A purported withdrawal of an unsolicited offer in contravention of subclause (1) is ineffective.

(3)

The FMA may give its consent subject to the conditions that it thinks fit (for example, conditions relating to notice being given to the offeree and the issuer).

(4)

The offerer must comply with the conditions of the FMA’s consent.

Compare: SR 2012/331 r 13

172 Terms of offer cannot be varied

(1)

The terms of an unsolicited offer, as set out in the disclosure document, cannot be varied.

(2)

A purported variation of the terms of the offer is ineffective.

(3)

This regulation does not—

(a)

prevent the offeror from withdrawing the offer in accordance with regulation 171 and making another offer on different terms; or

(b)

prevent the offeree from making a counter-offer on different terms.

Compare: SR 2012/331 r 14

Cancellation

173 Right to cancel

(1)

An offeree has a right to cancel an agreement by—

(a)

doing both of the following:

(i)

giving notice of the cancellation to the offeror not later than 10 working days after the date of the acceptance of the unsolicited offer; and

(ii)

repaying to the offeror any consideration paid by the offeror to the offeree under the agreement not later than 20 working days after the date of the acceptance of the unsolicited offer; or

(b)

repaying to the offeror any consideration paid by the offeror to the offeree under the agreement not later than 10 working days after the date of the acceptance of the unsolicited offer.

(2)

If the agreement is cancelled under subclause (1), no party is obliged or entitled to perform it further.

(3)

These regulations do not limit any other right to cancel the agreement exercisable apart from this regulation.

Compare: SR 2012/331 r 15(1), (4)

174 Right to cancel does not apply if FMA has exempted offeror

Despite regulation 173(1), the right to cancel under that subclause does not apply if—

(a)

the FMA has, before the right is exercised, granted an exemption under subpart 2 of Part 9 of the Act from the whole of regulation 176 or 177 (as the case may be); and

(b)

the exemption applies to the unsolicited offer; and

(c)

the offeror has complied with all of the terms and conditions of that exemption that are required to be complied with.

175 Notice of cancellation

(1)

Notice of the cancellation under regulation 173(1)(a)

(a)

must be in writing and in a form that indicates (irrespective of the exact words used) the intention of the offeree to cancel or withdraw from the agreement; and

(b)

may be given by the offeree or any person authorised by the offeree to act on the offeree’s behalf.

(2)

A written refusal to complete the relevant transfer of the financial products given by or on behalf of the offeree must be treated as satisfying subclause (1)(a).

(3)

If an offeree gives notice of the cancellation under regulation 173(1) but does not comply with regulation 173(1)(a)(ii) within 5 working days after the notice is given to the offeror, the offeror must, as soon as practicable, give written notice to the offeree of the obligation to repay under regulation 173(1)(a)(ii).

Compare: SR 2012/331 r 15(2), (3), (5)

176 Offeror’s cancellation duties where offer to acquire financial products

(1)

This regulation applies in relation to an unsolicited offer to acquire financial products if the offeree has exercised the right under regulation 173(1).

(2)

If the financial products that are the subject of the unsolicited offer—

(a)

have not been transferred to the offeror, the offeror—

(i)

must not take any steps to arrange for the transfer of the financial products; and

(ii)

must take all reasonably practicable steps to prevent the registration of a transfer of the financial products:

(b)

have already been, or are subsequently, transferred to the offeror, the offeror must comply with subclause (3).

(3)

The offeror must—

(a)

either—

(i)

transfer the financial products back to the offeree; or

(ii)

if the financial products have been on-sold, transfer to the offeree an equal number of financial products of the same class; and

(b)

pay to the offeree all dividends and any other distribution received by the offeror in respect of the financial products; and

(c)

transfer to the offeree any other interest, rights, or benefits received by the offeror in respect of the financial products.

(4)

The offeror must act under this regulation as soon as practicable, but in any event not later than the end of the specified period after the offeree returns to the offeror any consideration paid by the offeror to the offeree under the agreement.

(5)

In this regulation, specified period means,—

(a)

if the financial products have been on-sold, 20 working days; or

(b)

in any other case, 10 working days.

Compare: SR 2012/331 r 16

177 Offeror’s cancellation duties where offer to acquire disposal power or other interests or rights

(1)

This regulation applies in relation to an unsolicited offer to acquire a power to dispose of financial products or to acquire other interests in or rights attaching to financial products if the offeree has exercised the right under regulation 173(1).

(2)

This regulation does not apply in relation to an unsolicited offer to acquire financial products (see regulation 176).

(3)

The offeror must not take any steps to arrange for the acquisition of the power, interests, or rights.

(4)

If the power, interests, or rights have already been, or are subsequently, acquired by the offeror, the offeror,—

(a)

in the case of a power to dispose of financial products, must not take any steps to exercise the power and must—

(i)

take all practicable steps to arrange for the termination of the power; or

(ii)

if the power has been exercised, transfer to the offeree an equal number of financial products of the same class as those that have been disposed of; and

(b)

in the case of interests in or rights attaching to financial products, must—

(i)

transfer the interests or rights back to the offeree; or

(ii)

if the interests or rights have been on-sold, transfer to the offeree equivalent interests or rights; and

(c)

in either case, must pay to the offeree all dividends and any other distribution received by the offeror in respect of the power, interests, or rights; and

(d)

in either case, must transfer to the offeree any other interest, rights, or benefits received by the offeror in respect of the power, interests, or rights that have been acquired.

(5)

The offeror must act under this regulation as soon as practicable, but in any event not later than the end of the specified period after the offeree returns to the offeror any consideration paid by the offeror to the offeree under the agreement.

(6)

In this regulation, specified period means,—

(a)

if the power, interests, or rights have been exercised or on-sold, 20 working days; or

(b)

in any other case, 10 working days.

Compare: SR 2012/331 r 17

Miscellaneous provisions

178 Prohibition on inviting offers to sell

(1)

A person (A) must not invite another person (B) to—

(a)

make an offer to sell a financial product in circumstances in which, if the invitation were an offer to acquire the financial product, it would be an unsolicited offer to which this subpart applies; or

(b)

make an offer to confer a power to dispose of a financial product in circumstances in which, if the invitation were an offer to acquire a power to dispose of a financial product, it would be an unsolicited offer to which this subpart applies; or

(c)

make an offer to sell an interest in or a right attaching to a financial product in circumstances in which, if the invitation were an offer to acquire an interest in or a right attaching to a financial product, it would be an unsolicited offer to which this subpart applies.

(2)

Subclause (1) does not apply to invitations made to any of the persons referred to in regulation 162(1) (applied with all necessary modifications as if A were the offeror).

Compare: SR 2012/331 r 19

179 Unsolicited offer provisions

Regulations 163 to 172, 175(3), 176, 177, and 178 are unsolicited offer provisions for the purposes of the Act (which means that a contravention may give rise to an unsolicited offer order, a direction order, a pecuniary penalty, or another civil liability order).

Compare: SR 2012/331 r 20

180 Protection from liability in connection with unsolicited offer obligations

(1)

The following persons, in relation to an unsolicited offer, are protected persons for the purposes of section 384 of the Act:

(a)

the issuer:

(b)

a person who maintains a financial products register on behalf of the issuer:

(c)

a person who acts on behalf of a person referred to in paragraph (a) or (b) in connection with a transfer of financial products.

(2)

For the purposes of section 384(2) of the Act, any thing done or omitted by a person referred to in subclause (1) for the purpose of implementing or giving effect to a cancellation of an agreement under regulations 173 to 177 is a protected act or omission.

Subpart 6—Control limit

181 Control limit for NZX Limited

For the purposes of section 344 of the Act, the control limit for NZX Limited is 10% of the voting rights in that company.

Part 6 Licensing and other regulation of market services

Exemptions from DIMS licensing requirement

182 Exemptions from DIMS licensing requirement

(1)

For the purposes of section 389(2)(c) of the Act, the following are exempt services:

(a)

a service provided by a trustee corporation in the ordinary course of providing—

(i)

legal or financial services relating to the preparation or drafting of a will; or

(ii)

estate management and administration services (and associated legal, financial, and other services carried out under the relevant enactment governing the trustee corporation):

(b)

a service provided by a statutory officer, a Crown organisation (other than Public Trust), or the Reserve Bank in—

(i)

discharging any duties or exercising any powers of the statutory officer, the Crown organisation, or the Reserve Bank under any enactment; or

(ii)

doing anything that is incidental to the discharge of the functions of the statutory officer, the Crown organisation, or the Reserve Bank under any enactment:

(c)

a service relating to only category 2 products that is provided—

(i)

by a non-profit organisation in the course of providing a money management service for budgeting assistance purposes; and

(ii)

without charge or for a charge set at a level to recover no more than the costs of providing the service:

(d)

a service provided by a lawyer or an incorporated law firm acting, in the ordinary course of business, as an attorney under an enduring power of attorney in respect of a donor’s property in circumstances where the donor becomes mentally incapable:

(e)

a service provided by a person appointed by the court in respect of a person’s assets.

(2)

In this regulation and regulation 183,—

(a)

Crown organisation, financial adviser service, non-profit organisation, statutory officer, and trustee corporation have the same meanings as in section 5 of the Financial Advisers Act 2008:

(b)

incorporated law firm has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006.

183 Exemption for temporary management of portfolio in situations of absence or incapacity or unexpected contingencies

(1)

For the purposes of section 389(2)(c) of the Act, a service provided by an authorised financial adviser (A) to another person (B) is an exempt service if all of the circumstances specified in subclause (2) apply.

(2)

The circumstances are as follows:

(a)

the service referred to in subclause (1) is incidental or secondary to other financial adviser services provided by A to B in connection with financial products; and

(b)

the investment authority is not granted for the purpose of providing a mechanism to allow A to regularly manage some or all of B’s holdings of financial products; and

(c)

the investment authority is restricted to temporary management of the investor’s portfolio under the investment authority in situations of absence or incapacity or unexpected contingencies where—

(i)

B has confirmed in writing that A may manage some or all of B’s holdings of financial products for a temporary period that is specified in the confirmation (being a period that is not longer than is reasonably necessary to cover the period of the absence, incapacity, or contingency); or

(ii)

A reasonably considers it urgent to act under the authority in the best interests of B, and A is not reasonably able to obtain instructions from B within a time frame that would enable A to act urgently; and

(d)

the management of some or all of B’s holdings of financial products under subclause (1) is for a period or periods that, in aggregate, do not exceed 6 months in any 12-month period; and

(e)

A agrees in a written client agreement with B that A will, in acting under the investment authority, comply with the duties that would apply under sections 39 and 40 of the Financial Advisers Act 2008 as if A were providing a personalised DIMS under that Act; and

(f)

the client agreement referred to in paragraph (e) must adequately provide for reporting on the transactions undertaken under the service, including—

(i)

providing for appropriate timing and content of reports; and

(ii)

requiring reporting on why A considered it necessary to act urgently in the case of paragraph (c)(ii); and

(g)

the client agreement referred to in paragraph (e) must adequately provide for a right for B to immediately revoke the investment authority by written or oral notice to A; and

(h)

neither A nor any person associated with A otherwise provides a DIMS to B (except a personalised DIMS that A is permitted to provide under sections 17 to 20 of the Financial Advisers Act 2008); and

(i)

neither A nor any associated person of A (other than a custodian permitted by A’s conditions of authorisation as an authorised financial adviser) holds the financial products acquired or disposed of under the service; and

(j)

the investment authority—

(i)

must be in writing; and

(ii)

must clearly disclose the scope of the investment authority, including any limits on the nature or type of investments and on the proportion of each type of asset invested in, or if there are no such limits, must clearly disclose that fact; and

(iii)

must not permit the authority to be changed without B’s prior written consent.

Prescribed intermediary services

184 Prescribed intermediary services

The following services are prescribed intermediary services:

(a)

a crowd funding service:

(b)

a peer-to-peer lending service.

185 Meaning of crowd funding service and peer-to-peer lending service

(1)

In these regulations,—

(a)

a person (A) provides a crowd funding service if—

(i)

A provides a facility by means of which offers of shares in a company are made; and

(ii)

the principal purpose of the facility is to facilitate the matching of companies who wish to raise funds with many investors who are seeking to invest relatively small amounts:

(b)

a person (A) provides a peer-to-peer lending service if—

(i)

A provides a facility by means of which offers of debt securities are made; and

(ii)

the principal purpose of the facility is to facilitate the matching of lenders with borrowers who are seeking loans for personal, charitable, or small business purposes.

(2)

A crowd funding service or a peer-to-peer lending service also includes—

(a)

any broking services that are provided in the course of providing the service referred to in subclause (1)(a) or (b) (as the case may be):

(b)

any service of operating an ancillary market for trading financial products that have been offered on the facility referred to in subclause (1)(a) or (b) (as the case may be) (see section 309(2)(c) of the Act).

(3)

If a facility referred to in—

(a)

subclause (1)(a)(i) allows offers of financial products other than shares in a company, the crowd funding service does not include providing the facility to the extent that it relates to offers of those other financial products:

(b)

subclause (1)(b)(i) allows offers of financial products other than debt securities, the peer-to-peer lending service does not include providing the facility to the extent that it relates to offers of those other financial products.

(4)

For the purposes of this regulation,—

debt security does not include—

(a)

an option to acquire, by way of issue, a debt security; or

(b)

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

share does not include a financial product that will be converted, or is or may become convertible, into another financial product.

Additional eligibility criteria

186 Additional eligibility criteria for crowd funding service

(1)

The eligibility criteria for licences for a crowd funding service under section 396(a) of the Act are as follows:

(a)

the provider has fair, orderly, and transparent systems and procedures for providing the service:

(b)

the service is designed primarily for offers by persons other than the provider and its associated persons:

(c)

the provider has an adequate policy for identifying and managing the risk of fraud by issuers using the service (the anti-fraud policy) that, at a minimum,—

(i)

checks, against information that is readily accessible and information that is otherwise available to the public, the identity of the issuer and information provided by the issuer relating to the identity and character of its directors and senior managers; and

(ii)

excludes an issuer from using the service if the provider—

(A)

is not satisfied as to the identity of the issuer or of the issuer’s directors and senior managers; or

(B)

has reason to believe that any of the issuer’s directors or senior managers are not of good character; or

(C)

has reason to believe that the issuer is not likely to comply with the obligations imposed on it under the service:

(d)

the provider has adequate disclosure arrangements to give investors, or to enable investors to readily obtain, timely and understandable information to assist investors to decide whether to acquire the shares (for example, through initial disclosure, or question and answer forums, or other information that is made available) (see subclause (2)):

(e)

the provider has an adequate policy (a fair dealing policy) for excluding an issuer from using the service if the provider has information (for example, from checks or assessments it carries out (if any)) that gives it reason to believe that the issuer, in relation to any dealing in shares using the service, has—

(i)

engaged in conduct that is misleading or deceptive or likely to mislead or deceive; or

(ii)

made a false or misleading representation in contravention of section 22 of the Act; or

(iii)

made an unsubstantiated representation in contravention of section 23 of the Act:

(f)

the provider has adequate systems and procedures for implementing the anti-fraud policy and the fair dealing policy:

(g)

the provider has adequate systems and procedures for ensuring that each issuer does not raise more than $2 million in any 12-month period under the service:

(h)

the provider has adequate systems and procedures for handling conflicts between the commercial interests of the provider (or of its associated persons) and the need for the provider to have fair, orderly, and transparent systems and procedures for providing the service:

(i)

if a broking service is to be provided by the provider in the course of providing the service, the provider is, or will be, registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 for the broking service on and from commencing to provide the broking service.

(2)

In considering whether disclosure arrangements are adequate, the FMA must have regard to—

(a)

the limits (if any) on the amount that retail investors may invest under the service; and

(b)

the amount that issuers may raise under the service.

187 Additional eligibility criteria for peer-to-peer lending service

The eligibility criteria for licences for a peer-to-peer lending service under section 396(a) of the Act are as follows:

(a)

the provider has fair, orderly, and transparent systems and procedures for providing the service:

(b)

the service is designed primarily for offers by persons other than the provider and its associated persons:

(c)

the provider has adequate systems and procedures for—

(i)

checking the identity of each issuer of debt securities, and of each director and senior manager of the issuer, before the issuer is authorised to offer debt securities using the service; and

(ii)

assessing, before debt securities are offered using the service, the risk of investors not being repaid in full or not receiving the interest or other returns that will be offered (for example, assessing the creditworthiness of the issuer, any guarantees, and any charge or other security to secure the performance of obligations under the securities); and

(iii)

disclosing information about that checking and assessment to investors:

(d)

the provider has an adequate policy (a fair dealing policy) for excluding an issuer from using the service if the provider has information (for example, from checks or assessments it carries out (if any)) that gives it reason to believe that the issuer, in relation to any dealing in debt securities using the service, has—

(i)

engaged in conduct that is misleading or deceptive or likely to mislead or deceive; or

(ii)

made a false or misleading representation in contravention of section 22 of the Act; or

(iii)

made an unsubstantiated representation in contravention of section 23 of the Act:

(e)

the provider has adequate systems and procedures for implementing the fair dealing policy:

(f)

to the extent that the provider, under the service, carries out the activities referred to in regulation 228(d) and (e), the provider has adequate arrangements for ensuring the orderly administration of the debt securities in the event that it ceases to operate the service:

(g)

the provider has adequate systems and procedures for ensuring that each issuer does not raise more than $2 million in any 12-month period under the service:

(h)

the provider has adequate systems and procedures for handling conflicts between the commercial interests of the provider (or of its associated persons) and the need for the provider to have fair, orderly, and transparent systems and procedures for providing the service:

(i)

if a broking service is to be provided by the applicant in the course of providing the service, the applicant is, or will be, registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 for the broking service on and from commencing to provide the broking service.

188 Eligibility criteria for authorised bodies

(1)

The eligibility criterion for a related body corporate under section 400(1)(e) of the Act is that the key personnel of the related body corporate are fit and proper persons to hold their respective positions.

(2)

In this regulation and regulation 191, key personnel, in relation to a body corporate (A), means—

(a)

the executive directors of A; and

(b)

those senior managers of A who will perform duties in connection with providing a market service covered by the licence.

Procedural matters

189 FMA must have regard to compliance history of relevant parties

(1)

The FMA must, before making a decision in relation to the matters in section 396(c) and (d) of the Act, have regard to any conviction, order made, or successful disciplinary action taken under a relevant proceeding or action against any relevant party.

(2)

Subclause (1) applies only to the extent that the FMA is aware of the relevant proceeding or action.

(3)

In this regulation, a person (R) is a relevant party in relation to an applicant (A) if—

(a)

1 or more of the following apply:

(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:

(ii)

A and R are acting jointly or in concert:

(iii)

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

(iv)

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

(v)

R is a director or senior manager of A or of a person who is associated with or connected to A under subparagraphs (i) to (iv); and

(b)

the FMA considers that the nature of the association or connection referred to in paragraph (a)(i) to (v) is relevant to the carrying out of the service to which an application for a licence relates.

(4)

In this regulation, relevant proceeding or action means civil or criminal proceedings, regulatory action, or disciplinary action (whether in New Zealand or overseas) that the FMA considers is relevant to the carrying out of the service to which an application for a licence relates.

190 FMA must consult Reserve Bank in relation to banks, NBDTs, and insurers

The FMA must, before making a decision under section 396 of the Act, consult the Reserve Bank if the applicant, or a proposed authorised body, is a registered bank, an NBDT, or a licensed insurer.

Conditions of licences

191 General reporting condition

(1)

A market services licence is subject to a condition that, if any of the following occurs, the licensee or an authorised body must, as soon as practicable, send a report containing details of the matter to the FMA:

(a)

the licensee or an authorised body becomes aware or has reasonable grounds to believe that—

(i)

the licensee or an authorised body is, or it is likely that the licensee or authorised body will become, subject to an insolvency event; or

(ii)

a director or senior manager of the licensee, or any of the key personnel of an authorised body, is adjudicated bankrupt or it is likely that that person will be adjudicated bankrupt (whether in New Zealand or overseas); or

(b)

the licensee or an authorised body becomes aware that a relevant proceeding or action has been commenced or taken against any of the following:

(i)

the licensee:

(ii)

an authorised body:

(iii)

a director or senior manager of the licensee:

(iv)

any of the key personnel of an authorised body; or

(c)

a director or senior manager of the licensee, or any of the key personnel of an authorised body,—

(i)

resigns, is removed, or otherwise ceases to hold the office or position; or

(ii)

is appointed, employed, or engaged; or

(d)

an auditor of the licensee or an authorised body—

(i)

resigns or otherwise ceases to hold the office; or

(ii)

is appointed (other than by way of reappointment); or

(e)

the licensee or an authorised body proposes to change its name or its legal structure (for example, by virtue of an amalgamation); or

(f)

the licensee or an authorised body proposes to enter into a major transaction (within the meaning of section 129 of the Companies Act 1993 applied to a licensee or an authorised body whether or not it is a company); or

(g)

the licensee or an authorised body becomes aware that a transaction or an arrangement has been entered into, or it is likely that a transaction or arrangement will be entered into, that will result or has resulted in a person obtaining or losing control of the licensee or the authorised body.

(2)

In subclause (1)(b), relevant proceeding or action

(a)

has the same meaning as in regulation 5(1); and

(b)

includes a criminal proceeding for a crime involving dishonesty; but

(c)

does not include any proceeding commenced, or action taken, by the FMA.

(3)

In subclause (1)(g), control has the same meaning as in clause 48 of Schedule 1 of the Act.

192 Condition for independent trustees to report serious problems

(1)

A market services licence for an independent trustee of a restricted scheme is subject to a condition that, if the licensee has reasonable grounds to believe that a serious problem has arisen in relation to a managed investment product in the scheme, the licensee must, as soon as practicable,—

(a)

report the serious problem to the FMA; and

(b)

disclose to the FMA all information relevant to the serious problem that is in the possession or control of the independent trustee and was obtained in the course of, or in connection with, the performance of the functions of that trustee.

(2)

In subclause (1), serious problem has the same meaning as in section 199(2) of the Act.

193 Condition for DIMS providers and prescribed intermediary service providers to keep documents and to give documents on request

(1)

A market services licence for a provider of a DIMS, a crowd funding service, or a peer-to-peer lending service is subject to a condition that the provider must, in respect of any document required by or for the purposes of the Act or these regulations in connection with the service,—

(a)

keep a copy of the document for a period of at least 7 years after the date on which the document comes into the possession of the provider; and

(b)

provide, on request and on payment of the relevant fee, to an investor a copy of, or an extract from, a document that is relevant to the investor (and the copy or extract must be provided in accordance with subclause (3) within 10 working days after receiving the request).

(2)

The condition in subclause (1) applies to a document only if the document is given, made, or provided by or to the provider.

(3)

The document must be provided by giving it to the investor or delivering or sending it to the investor’s address.

(4)

In this regulation,—

(a)

a document is relevant to an investor if the investor has or had a right to access or obtain a copy of the document under the Act, regulations made under the Act, a governing document, or the terms of the offer of a financial product or a DIMS:

(b)

relevant fee means a reasonable printing and administration fee set by the provider.

194 Condition for DIMS providers to disclose if service is wholesale

(1)

A market services licence for a provider of a DIMS that is not a retail service is subject to a condition that the provider must not acquire or dispose of a financial product under the service for an investor, or accept an investment authority from an investor, unless a warning statement has been provided to the investor before—

(a)

the provider acquires or disposes of a financial product under the service for the investor; or

(b)

the investor grants an investment authority to the provider.

(2)

A warning statement must be provided by giving it to the investor or delivering or sending it to the investor’s address.

(3)

The warning statement must—

(a)

contain a statement to the effect that—

(i)

the service is not a retail service:

(ii)

the service is not covered by the licence (and, accordingly, the protections and requirements of the Financial Markets Conduct Act 2013 may not apply); and

(b)

if it is included in another document, be in a prominent position in that document.

195 Condition for intermediaries to notify FMA of suspected contraventions of Part 2 of Act or of investment cap

(1)

A market services licence for a provider of a crowd funding service or a peer-to-peer lending service is subject to a condition that the provider must notify the FMA, in accordance with subclauses (2) and (3), if the provider knows or suspects that an issuer that uses the service has committed, is committing, or is likely to commit—

(a)

a significant contravention of Part 2 of the Act (which relates to fair dealing) in connection with the use of the service; or

(b)

a contravention of the $2 million aggregate limit referred to in clause 7 of Schedule 8.

(2)

The provider must give the notice immediately after knowing or suspecting the person has committed, is committing, or is likely to commit the contravention.

(3)

The notice must include—

(a)

the issuer’s name and contact details; and

(b)

the obligation to which the known or suspected contravention relates; and

(c)

the facts supporting the provider’s view relating to the known or suspected contravention; and

(d)

any supporting evidence for that view.

196 Condition for provider of crowd funding service to make warning statement available

(1)

A market services licence for a provider of a crowd funding service is subject to a condition that the provider must,—

(a)

if the facility is available through an Internet site, ensure that a warning statement is prominently displayed—

(i)

on the home page of the site; and

(ii)

to an investor, on a page on the site, immediately before the investor uses the site to apply for, or otherwise acquire, financial products; and

(b)

in all cases, ensure that a warning statement is prominently displayed in all application forms for acquiring financial products using the service.

(2)

The warning statement must be in the following form:

Warning statement about crowd funding

Equity crowd funding is risky.

*Issuers using this facility include new or rapidly growing ventures. *Investment in these types of businesses is very speculative and carries high risks.

You may lose your entire investment, and must be in a position to bear this risk without undue hardship.

New Zealand law normally requires people who offer financial products to give information to investors before they invest. This requires those offering financial products to have disclosed information that is important for investors to make an informed decision.

The usual rules do not apply to offers by issuers using this facility. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.

Ask questions, read all information given carefully, and seek independent financial advice before committing yourself.”

*Omit this sentence if the facility is confined to issuers for whom the sentence would be inapplicable.
197 Condition for provider of crowd funding service to obtain investor confirmation

(1)

A market services licence for a provider of a crowd funding service is subject to a condition that the provider must obtain from each investor, in accordance with subclauses (2) and (3), a confirmation to the following effect:

I confirm that I have seen the warning statement about crowd funding and—

  • I understand that equity crowd funding is risky and I may lose my entire investment; and

  • I confirm that I could bear that loss without suffering undue hardship; and

  • I understand that the usual legal protections do not apply to this investment; and

  • I understand that I may not be given the same information as is usually required by New Zealand law for investments.”

(2)

The confirmation must be obtained in writing in a separate document or, if it is obtained by electronic means, through a process by which it is obtained separately from the agreement to use the service.

(3)

The confirmation must be obtained by the provider before the investor is authorised to use the service.

198 Conditions are Part 6 services provisions

The conditions imposed under regulations 191 to 197 are Part 6 services provisions that give rise to civil liability under section 449(4) of the Act.

Additional conditions that FMA may impose on licences

199 General FMA conditions

(1)

The FMA may impose on a market services licence 1 or more of the following conditions:

(a)

conditions concerning the insurance of a licensee, an authorised body, or any director, employee, or agent of a licensee or an authorised body against claims made against any of them in respect of anything done or omitted by them in connection with a market service and for any costs associated with those claims, including—

(i)

requiring a licensee or an authorised body to hold professional indemnity insurance:

(ii)

requiring that insurance be held only with insurers approved by the FMA:

(iii)

specifying the minimum terms and conditions that an insurance policy must satisfy for the purposes of subparagraph (i):

(b)

conditions requiring the licensee or an authorised body to periodically report information to the FMA concerning the nature, scale, and operation of the service (including statistical information about numbers of transactions entered into and amounts involved):

(c)

conditions under section 400(1) of the Act to authorise 1 or more named related bodies corporate of the licensee to provide a market service covered by the licence:

(d)

conditions for the purposes of section 400(2) of the Act.

(2)

See also section 403(3) of the Act (which allows the FMA to impose conditions that, for example, impose limits or restrictions on the services that are covered by the licence).

200 Other FMA conditions for DIMS

The FMA may impose on a market services licence for a provider of a DIMS 1 or more of the following conditions:

(a)

conditions regulating the provision of financial advice referred to in section 392(1)(b) of the Act:

(b)

conditions that—

(i)

permit the custodian of investor money and investor property to be an associated person of the DIMS licensee (other than by virtue of the custodianship); and

(ii)

impose limitations on that permission (for example, limiting the permission to a specified period); and

(iii)

specify requirements that must be observed relating to that permission for the purposes of section 445(2)(b) of the Act, including requirements that relate to the systems or procedures that must be maintained to identify, disclose, or manage any risks associated with the custodian being an associated person of the DIMS licensee.

201 Other FMA conditions for derivatives issuer

(1)

The FMA may impose on a market services licence for a derivatives issuer conditions that do 1 or more of the following:

(a)

require the licensee or an authorised body to maintain a minimum level of capital that the FMA considers is adequate:

(b)

regulate the form of that capital (for example, the financial instruments that may be taken into account in calculating capital):

(c)

require the licensee or an authorised body to maintain a capital ratio (including providing for the capital ratio to be set at a specified minimum level):

(d)

require the licensee or an authorised body to maintain minimum amounts of liquid assets relative to liabilities that the FMA considers is adequate:

(e)

specify the assets that qualify as liquid assets, and requirements concerning matching maturity of assets and liabilities, for the purposes of paragraph (d):

(f)

impose other requirements to better ensure that a licensee or an authorised body maintains prudent cash flows and a level of liquid assets sufficient to enable it to withstand a plausible range of liquidity shocks (for example, events that result in it experiencing a significantly reduced inflow of liquid assets):

(g)

require the licensee or an authorised body to have systems or procedures for assessing the suitability of a derivative for a retail investor or class of retail investors and for preventing the issue of a derivative to a retail investor where the derivative is assessed as not suitable under those systems or procedures:

(h)

require the licensee or an authorised body to maintain and enforce limits on the extent to which a retail investor is permitted to be leveraged under a derivative issued by the licensee or authorised body.

(2)

The FMA may not impose a condition under subclause (1)(a) to (f) (capital and liquidity) for a derivatives issuer that is a registered bank, an NBDT, or a licensed insurer.

202 Other FMA conditions for crowd funding service or peer-to-peer lending service

The FMA may impose on a market services licence for a provider of a crowd funding service or a peer-to-peer lending service any or all of the following conditions:

(a)

conditions that restrict or prohibit the provider or its associated persons from issuing under or using the service:

(b)

conditions that specify requirements that must be observed relating to that issuing or use, including requirements that relate to the systems or procedures that must be maintained to identify, disclose, and manage any risks associated with the provider or its associated persons issuing under or using the service.

Disclosure obligations for discretionary investment management service

203 Application

(1)

Regulations 204 to 209 apply to a service disclosure statement (SDS) for a DIMS.

(2)

In those regulations, provider means the person who is in the business of providing the service to which the SDS relates.

204 Information at start of SDS for DIMS

(1)

The SDS must, at the start of the SDS,—

(a)

include, in a prominent position, the words “Service Disclosure Statement”; and

(b)

identify the service to which the SDS relates; and

Example

ABC Limited’s Investment Management Services

(c)

identify the provider; and

(d)

state the date of the SDS; and

(e)

contain a statement in the following form:

“This document gives you important information about this service to help you decide whether you want to invest using this service. [Name of provider] has prepared this document in accordance with the Financial Markets Conduct Act 2013.”; and

(f)

contain, at the end of the statement under paragraph (e), whichever of the following sentences best applies:

(i)

“You can also seek advice from a financial adviser to help you decide if this service is appropriate for you.”:

(ii)

“[Name of provider]’s advisers can also give you financial advice to help you decide if this service is appropriate for you.”

(2)

The sentence in subclause (1)(f)(ii) may, in addition to or instead of referring to the provider’s advisers, refer to the advisers of a named associated person.

(3)

The SDS may also, at the start of the SDS, do either or both of the following:

(a)

identify 1 or more persons involved in providing the service:

(b)

include 1 or more brands or logos customarily used by the provider or any person referred to in paragraph (a).

205 Content of SDS for DIMS

The SDS must contain all of the information specified in Part 1 of Schedule 21 that is applicable.

206 Investment proposal must be provided to investors

(1)

For the purposes of section 428 of the Act, a licensee or an authorised body that provides a DIMS that is a retail service must make available an investment proposal to each retail investor at the same time as or before the investment authority is granted by the investor.

(2)

The investment proposal is a written document that contains all of the information specified in Part 2 of Schedule 21 that is applicable.

(3)

The investment proposal must be made available to the investor by—

(a)

giving the investment proposal to the investor or delivering or sending the investment proposal to the investor’s address; or

(b)

combining the investment proposal with the investment authority; or

(c)

combining the investment proposal with the SDS; or

(d)

combining the investment proposal with both the investment authority and the SDS.

(4)

If the investment proposal is not combined with the SDS, the investment proposal must be incorporated by reference in the SDS by including a reference to the investment proposal in section 3 of the SDS.

(5)

In the case of subclause (3)(c), the investment proposal must be included after section 10 of the SDS.

(6)

In the case of subclause (3)(d), the investment proposal and the investment authority must be included after section 10 of the SDS.

207 Presentation requirements for SDS and investment proposal

(1)

Every SDS and investment proposal must be worded and presented in a clear, concise, and effective manner.

(2)

The format, font, and font size of the SDS and the investment proposal must be easily readable.

208 Information that must be available to investors

(1)

For the purposes of section 428 of the Act, if Schedule 21 requires an SDS or an investment proposal to refer to information that is available to the investor, the provider must ensure that the information is—

(a)

available to the investor—

(i)

through an electronic facility on a substantially continuous basis; and

(ii)

on request to the provider; or

(b)

provided to the investor at or about the same time, and by the same means, as the SDS or investment proposal is made available to the investor.

(2)

For the purposes of subclause (1)(a)(ii),—

(a)

the provider must, after receiving a request from an investor, provide the information to the investor as soon as practicable but, in any event, within 5 working days after it receives the request; and

(b)

the information must be provided by giving it to the investor or delivering or sending it to the investor’s address; and

(c)

the information must be provided free of charge.

209 Various PDS requirements also apply to SDSs and investment proposals

(1)

The following regulations apply to an SDS or an investment proposal with all necessary modifications as if it were a PDS:

(a)

regulation 33 (incorporation by reference):

(b)

regulation 34 (additional information).

(2)

For the purpose of subclause (1),—

(a)

a reference to a length restriction in regulation 34 must be disregarded:

(b)

a reference to the relevant section in regulation 34 is a reference to section 6 of the SDS or section 4 of the investment proposal (as the case may be).

210 Ongoing reporting for DIMS

(1)

For the purposes of section 428 of the Act, a licensee or an authorised body that provides a DIMS that is a retail service must, in accordance with regulation 212, make available the information specified in subclauses (2) to (4) to each retail investor who uses the service.

(2)

The information is a record of all transactions made by the provider on behalf of the investor under the service during the reporting period, including for each transaction (to the extent applicable)—

(a)

the name of the issuer and the number and class of financial products to which the transaction relates; and

(b)

the price per financial product; and

(c)

the total amount of the transaction; and

(d)

the date of the transaction.

(3)

The information is also the following as at the reporting time:

(a)

the name of each class of financial products in the investor’s portfolio, the name of the issuer of those products, and the number of those products in the investor’s portfolio; and

(b)

the cash held for the investor under the service.

(4)

The information is also the following in respect of the investor’s portfolio:

(a)

all dividends paid, all interest paid, and other distributions or income received during the reporting period:

(b)

all percentage-based charges paid during the reporting period:

(c)

all other charges paid during the reporting period:

(d)

all individual action fees paid during the reporting period:

(e)

other information that the licensee or authorised body reasonably believes the investor needs in order to have a reasonable understanding of any corporate action that affects the investor’s portfolio (for example, bonus issues).

(5)

If the information required under subclause (2), (3), or (4) is made available to an investor by a person (A) on behalf of the licensee or authorised body (for example, by a custodian), the information must be accompanied by a statement to that effect (and the statement must include A’s name and role).

(6)

For the purposes of section 428 of the Act, a licensee or an authorised body that provides a DIMS that is a retail service must, within 5 working days after receiving a request, make available the following requested information to the retail investor who makes the request:

(a)

the current value or the most recent valuation of any of the financial products in the investor’s portfolio and a statement of—

(i)

the basis on which that value is assessed or the valuation is carried out (for example, the value of quoted products is the market price); and

(ii)

the date on which the value is assessed or of the valuation; and

(b)

the total value of the financial products in the investor’s portfolio (based on the values disclosed under paragraph (a)).

(7)

The information under subclause (6) must be made available, free of charge, by giving it to the investor or delivering or sending it to the investor’s address.

(8)

In this regulation and regulations 211 and 212,—

individual action fees has the same meaning as in clause 37 of Schedule 21

other charges has the same meaning as in clause 37 of Schedule 21

percentage-based charges has the same meaning as in clause 37 of Schedule 21

quarter means each 3-month period of a disclosure year (where each quarter ends on the date that the provider determines)

reporting period means,—

(a)

in the case of regulation 212(1)(a), the period starting when this regulation first applies to the licensee or authorised body in respect of the investor and ending at a stated time (the stated time) that is not earlier than 48 hours before the information is made available:

(b)

in the case of regulation 212(1)(b),—

(i)

each of the 4 quarters of a disclosure year; or

(ii)

any period shorter than a quarter of a year that is agreed with the investor

reporting time means,—

(a)

in the case of regulation 212(1)(a), the stated time:

(b)

in the case of regulation 212(1)(b), the end of the reporting period.

(9)

In this regulation and regulations 211 and 212, financial products are of the same class if those financial products have attached to them identical rights, privileges, limitations, and conditions (including, in the case of debt securities, the same redemption date and interest rate).

211 Annual information

(1)

For the purposes of section 428 of the Act, a licensee or an authorised body that provides a DIMS that is a retail service must, in accordance with regulation 212, make available to each retail investor who uses the service the following information in respect of the most recently completed disclosure year:

(a)

a description of—

(i)

the investment strategy to which the information provided under this regulation relates (including the investment objectives and a diagram or other description summarising the target investment mix under the strategy); and

(ii)

the material changes to the investment strategy that have been made during the disclosure year (if any):

(b)

the return on the investor’s portfolio before tax but net of fees—

(i)

over the disclosure year; and

(ii)

over the 5-year period ending on the close of the disclosure year:

(c)

a bar graph showing the return on the investor’s portfolio before tax but net of fees, indicated by a bar on the graph and as a figure near the corresponding bar, that has been generated for the investor for—

(i)

each complete disclosure year since the date on which the investor first started using the service; or

(ii)

each of the last 10 complete disclosure years, if the investor has been using the service for 10 or more complete disclosure years:

(d)

the name of each class of financial products in the investor’s portfolio, the name of the issuer of those products, and the number of those products in the portfolio (as at the end of the disclosure year):

(e)

the current value of each of those financial products (as at the end of the disclosure year) or the most recent valuation of each of those financial products that was available at the end of the disclosure year, and a statement of—

(i)

the basis on which that value is assessed or the valuation is carried out (for example, the value of quoted products is the market price); and

(ii)

the date on which the value is assessed or of the valuation:

(f)

the total value of the investor’s portfolio at the beginning and the end of the disclosure year (based on the values disclosed under paragraph (e) and in the previous annual disclosure made under this regulation):

(g)

the cash held for the investor under the service at the end of the disclosure year:

(h)

the total of all dividends paid, all interest paid, and other distributions or income received, in respect of the investor’s portfolio during the disclosure year:

(i)

the total percentage-based charges paid during the disclosure year in respect of the investor’s portfolio, expressed as a percentage of the investor’s portfolio:

(j)

the total amount of other charges paid during the disclosure year in respect of the investor’s portfolio:

(k)

the individual action fees of each type paid during the disclosure year in respect of the investor’s portfolio:

(l)

a pie graph showing the composition of the financial products in the investor’s portfolio at the end of the disclosure year, according to the asset categories specified in clause 1(2) of Schedule 21:

(m)

a reminder that the investor may request past quarterly reports or obtain further information from the electronic facility referred to in regulation 212, as applicable.

(2)

The following apply in relation to that information:

(a)

the information under subclause (1)(b) or (c) may also include return information for the same periods net of trading expenses but before all other fees and tax:

(b)

subclause (1)(b) and (c) applies only in respect of disclosure years that start on or after 1 December 2014:

(c)

information about a disclosure year under subclause (1)(b) is not required if the investor did not have an investor’s portfolio over the whole of that period:

(d)

the information under subclause (1)(c) may be provided in a table (instead of a bar graph):

(e)

information under subclause (1)(f) about the beginning of a disclosure year is not required if the investor does not have an investor’s portfolio at the beginning of that disclosure year:

(f)

return has the same meaning as in clause 34 of Schedule 21:

(g)

the information may be combined in a document that includes information under regulation 210.

212 How information is made available

(1)

The information under regulation 210(1) to (5) must be made available to the investor (A)—

(a)

through an electronic facility on a substantially continuous basis (but only if A has agreed to this method); or

(b)

by giving it to A or delivering or sending it to A’s address not later than 20 working days after the last day of each reporting period in each year.

(2)

In the case of subclause (1)(b), the information must cover the most recently completed reporting period.

(3)

The information under regulation 211 must, not later than 20 working days after the end of each disclosure year, be made available to the investor (A)—

(a)

through an electronic facility (but only if A has agreed to this method); or

(b)

by giving it to A or delivering or sending it to A’s address.

Disclosure obligations for prescribed intermediary services

213 Disclosure obligations apply to prescribed intermediary services

For the purposes of section 422(b) of the Act, subpart 4 of Part 6 of the Act applies to each of the following:

(a)

the provision of a crowd funding service:

(b)

the provision of a peer-to-peer lending service.

214 Application

(1)

Regulations 215 to 218 apply to an SDS for a crowd funding service or a peer-to-peer lending service.

(2)

In those regulations, provider means the person who is in the business of providing the service to which the SDS relates.

215 SDS for crowd funding service or peer-to-peer lending service

(1)

An SDS must contain a brief description of—

(a)

the nature of the service provided; and

(b)

how investors apply for, and obtain, access to the facility and the eligibility criteria that apply; and

(c)

how issuers apply for, and obtain, access to the facility and the eligibility criteria that apply; and

(d)

how investments are made and financial products are issued under the service; and

(e)

how investor money is received and dealt with; and

(f)

the nature and extent of the checks and assessments made by the provider of the following:

(i)

each issuer that offers financial products under the service:

(ii)

the directors and senior managers of those issuers:

(iii)

the risks involved in those financial products (or, if checks and assessments of those risks are not made as part of the service, a statement to that effect); and

(g)

the nature and extent of the disclosure arrangements that apply in relation to the financial products offered under the service; and

(h)

the charges that may be payable to the provider by an investor under the service (or, if those charges are not fixed, the types and bases on which charges will be imposed) and when the investor must pay the charges; and

(i)

the rights of the provider or any other person to alter any of the charges applicable to the service; and

(j)

the charges that may be payable to the provider by an issuer under the service (or, if those charges are not fixed, the types and bases on which charges will be imposed); and

(k)

if the provider is, or issuers that are associated with the provider are, restricted or prohibited from issuing under or using the service, the nature of the restrictions or prohibitions (see also subclause (2)); and

(l)

the nature and extent of any interest held by or in the provider that may materially adversely impact on the provider’s ability to have fair, orderly, and transparent systems and procedures for providing the service, and of the steps taken to manage any risks of that adverse impact; and

(m)

contact details of the provider; and

(n)

how investors may complain about the service to the provider and to any dispute resolution scheme that is available; and

(o)

the type of information relating to the service that is required to be, or otherwise will be, available on request from the provider and how the request should be made (including whether any charge may be made for the information and the amount of the charge).

(2)

If subclause (1)(k) does not apply in relation to the provider or issuers that are associated with the provider (or both), an SDS must also contain a statement to the effect that the provider or those issuers (or both) are not restricted or prohibited from issuing under or using the service.

(3)

An SDS for a crowd funding service must also contain the warning statement required by regulation 196.

(4)

An SDS for a peer-to-peer lending service must also contain—

(a)

a brief description of the nature and extent of the provider’s monitoring of compliance by the issuer with its obligations to make repayments and payments under the debt securities (or, if such monitoring is not part of the service, a statement to that effect); and

(b)

a brief description of processes in the event of a default by an issuer of those obligations or (if such processes are not part of the service) of the investor’s remedies in the event of a default.

216 Presentation requirements

(1)

An SDS must be worded and presented in a clear, concise, and effective manner.

(2)

The format, font, and font size of the SDS must be easily readable.

217 SDS may refer to facility’s Internet site

(1)

If the facility is available through an Internet site, the SDS may incorporate any information required by regulation 215(1), (2), and (4) by reference to the page or section of the Internet site on which the information is located.

(2)

The reference in the SDS must include—

(a)

a link to or URL for the page or section of the Internet site where that information is located; and

(b)

a brief description of the information on the relevant page or section.

218 Timing of disclosure for prescribed intermediary services

The prescribed time under section 424(1)(b) of the Act (for providing an SDS to a retail investor relating to a prescribed intermediary service) is before the investor enters into a client agreement for the crowd funding service or peer-to-peer lending service.

219 Prescribed intermediary service providers must provide transaction information to investors

(1)

For the purposes of section 428 of the Act, a licensee or an authorised body that provides a prescribed intermediary service must, in accordance with regulation 220, make available the information specified in subclause (2) to each investor who makes transactions under the service.

(2)

The information is a record of all transactions made by the investor under the service, including for each transaction (to the extent applicable)—

(a)

the names of the parties (unless the parties are anonymous under the service); and

(b)

a product description; and

(c)

the price per product; and

(d)

the quantity of products; and

(e)

the total amount of the transaction; and

(f)

the date of the transaction; and

(g)

in the case of a loan, any security given.

220 How transaction information is made available

(1)

This regulation applies for the purposes of regulation 219.

(2)

The information must be made available to the investor (A)—

(a)

through an electronic facility on a substantially continuous basis (but only if A has agreed to this method); or

(b)

by giving it to A or delivering or sending it to A’s address not later than 10 working days after the last day of each reporting period in each year (but only if A has agreed to this method); or

(c)

by giving it to A or delivering or sending it to A’s address not later than 5 working days after a financial product is issued or transferred under each transaction.

(3)

The information must cover,—

(a)

in the case of subclause (2)(a), the transactions entered into in the period starting when regulation 219 first applies to the provider in respect of A and ending at a stated time that is not earlier than 48 hours before the information is made available:

(b)

in the case of subclause (2)(b), the transactions entered into in the last reporting period.

(4)

The information under subclause (2)(a) or (b) must state the period that it covers.

(5)

No information is required to be made available under subclause (2)(b) for a reporting period if no transactions are entered into in that period.

(6)

In this regulation, reporting period means—

(a)

each of the 4 quarters of a year ending on 30 June, 30 September, 31 December, and 31 March; or

(b)

any period shorter than a quarter of a year that is agreed with A.

New SDS provided after defective SDS

221 Document that identifies defects and material changes must accompany new SDS

(1)

This regulation applies if a licensee or an authorised body—

(a)

has provided to an investor (A) an SDS that is defective in terms of section 427(1)(a) and (b) of the Act; and

(b)

provides to A a new SDS for the purposes of section 427(5) of the Act.

(2)

For the purposes of section 428 of the Act, the new SDS must be accompanied by a document that—

(a)

identifies the SDS that is defective and briefly explains why it is defective in terms of section 427(1)(a) and (b) of the Act; and

(b)

describes the material changes that have been made in the new SDS to ensure that it is not defective in terms of section 427(1)(a) and (b) of the Act.

Request disclosure

222 Provider of DIMS or prescribed intermediary service must make information available on request

(1)

This regulation applies if an SDS for a DIMS, a crowd funding service, or a peer-to-peer lending service contains a statement to the effect that a document or other information is available from the provider of the service on a request that is made by a particular person or a person of a particular class (A).

(2)

For the purposes of section 428 of the Act, the provider must, after receiving a request from A, provide the document or other information to A as soon as practicable but, in any event, within 5 working days after the provider receives the request.

(3)

The document or other information must be provided by—

(a)

giving it to A; or

(b)

delivering or sending it to A’s address; or

(c)

making it available to A in any other way agreed with A.

(4)

The document or other information must be provided free of charge (unless a charge is otherwise expressly permitted by these regulations).

Client agreement requirements apply to prescribed intermediary services

223 Client agreement requirements apply to prescribed intermediary services

For the purposes of section 429(c) of the Act, subpart 5 of Part 6 of the Act applies to each of the following:

(a)

the provision of a crowd funding service:

(b)

the provision of a peer-to-peer lending service.

Client agreements

224 Time for entering into client agreement for prescribed intermediary services

For the purposes of section 430(2)(c) of the Act, a client agreement required by subpart 5 of Part 6 of the Act for a crowd funding service or a peer-to-peer lending service must be entered into before the investor applies for or acquires any financial products under the service.

225 Terms implied into client agreements

(1)

The following provisions are treated as being implied into a client agreement required by subpart 5 of Part 6 of the Act:

1

The licensee and every authorised body must, in exercising any powers or performing any duties in relation to the service provided under the licence, exercise the care, diligence, and skill that a prudent licensee for that service would exercise in the same circumstances.

2

If the licensee or an authorised body contracts out any of its functions in providing the service, the licensee or authorised body must take all reasonable steps to—

(a)

ensure that those functions are performed in the same manner, and are subject to the same duties and restrictions, as if the licensee or authorised body were performing them directly; and

(b)

monitor the performance of those functions.

(2)

If clause 6(2) of Schedule 1 applies in relation to a DIMS provided to a person (B), the following provisions must be treated as being implied into the client agreement in respect of the DIMS provided to B (unless or until the client agreement expressly provides otherwise):

3

The investment authority may be changed only by written agreement between the investor and the licensee or authorised body.

4

The investor may terminate the client agreement, without penalty, by giving 2 days’ written notice to the licensee or an authorised body.

226 Client agreements for DIMS must provide for certain matters

(1)

A client agreement required by subpart 5 of Part 6 of the Act for a DIMS must provide adequately for the following matters:

(a)

if financial products are to be held under the service on behalf of investors,—

(i)

how custodianship will be provided under the service and the process for appointing and removing a custodian:

(ii)

whether and, if so, how the investor may give instructions to exercise rights over the investor’s financial products (for example, a right to vote at meetings of product holders):

(iii)

the consequences of the termination of the client agreement, including whether any financial products held by a custodian on behalf of the investor under the service will be transferred to the investor, will continue to be held by the custodian, or will be sold:

(iv)

how holdings of wholesale products (if any) will be dealt with on termination of the client agreement:

(b)

how the investment authority may be changed:

(c)

a right for the investor to terminate the client agreement without penalty:

(d)

how the right under paragraph (c) may be exercised within a reasonable notice period.

(2)

In subclause (1)(a)(iv), wholesale products means financial products that the investor is eligible to acquire only by virtue of the investor acquiring the products through a DIMS.

227 Client agreements for crowd funding service must provide for certain matters

A client agreement required by subpart 5 of Part 6 of the Act for a crowd funding service must provide adequately for the use and operation of the facility, including in relation to the following matters:

(a)

how investors and issuers apply for, and obtain, access to the facility and the eligibility criteria that apply in each case:

(b)

how investments are made and financial products are issued under the service:

(c)

how investor money is received and dealt with (to the extent that this is part of the service):

(d)

the nature, extent, and frequency of monitoring of issuers undertaken by the provider (to the extent that this is part of the service):

(e)

the charges that may be payable to the provider by an investor under the service (or, if those charges are not fixed, the types and bases on which charges will be imposed) and when the investor must pay the charges.

228 Client agreements for peer-to-peer lending service must provide for certain matters

A client agreement required by subpart 5 of Part 6 of the Act for a peer-to-peer lending service must provide adequately for the use and operation of the facility, including in relation to the following matters:

(a)

how investors and issuers apply for, and obtain, access to the facility and the eligibility criteria that apply in each case:

(b)

how investments are made and financial products are issued under the service:

(c)

how investor money is received and dealt with:

(d)

how the provider will monitor compliance by the issuer with its obligations to make repayments and payments under the debt securities (to the extent that this is part of the service):

(e)

processes in the event of a default by an issuer of its obligations under the terms of a debt security (to the extent that this is part of the service):

(f)

the charges that may be payable to the provider by an investor under the service (or, if those charges are not fixed, the types and bases on which charges will be imposed) and when the investor must pay the charges.

229 Client agreements may use different terminology

Regulations 226 to 228 do not require client agreements to use the same terminology as is used in those regulations (for example, in relation to a peer-to-peer lending service, an agreement may refer to a borrower, a lender, or a loan rather than to an issuer, an investor, or a debt security).

Additional regulation of DIMS

230 DIMS licensee must provide report to FMA in event of limit break

(1)

A DIMS licensee must provide to the FMA a report in accordance with this regulation and regulation 232 if—

(a)

section 438 of the Act applies; and

(b)

the limit break is not corrected within 5 working days after the date that the DIMS licensee becomes aware of the limit break.

(2)

The report must be provided as soon as practicable after the expiry of the 5-working-day period referred to in subclause (1)(b).

(3)

The report must contain the information specified in regulation 232.

231 DIMS licensee must provide quarterly reports to FMA about limit breaks

(1)

For the purposes of section 411 of the Act, a DIMS licensee must provide to the FMA a report in accordance with this regulation and regulation 232 within 10 working days after the expiry of each quarter of each year.

(2)

The report must—

(a)

state whether there have been any limit breaks in the previous quarter to which section 438 of the Act applies; and

(b)

if so, contain the information specified in regulation 232.

232 Contents of reports about limit breaks

(1)

This regulation applies to—

(a)

a report under regulation 230:

(b)

a report under regulation 231 if regulation 231(2)(b) applies.

(2)

The report must disclose—

(a)

the date that the DIMS licensee became aware of the limit break; and

(b)

a description of the service affected; and

(c)

the nature and cause of the limit break (the type of limit break); and

(d)

the net asset value of the assets held under the service to which the limit break relates (as at the date the limit break first occurred); and

(e)

the reasons why the limit break is material (as determined in accordance with an applicable framework or methodology (if any)); and

(f)

the date on which the limit break first occurred and the period for which the limit break continued before it was corrected (or whether the limit break remains uncorrected at the time of the report); and

(g)

the steps taken, or to be taken, by the DIMS licensee to correct the limit break; and

(h)

what steps (if any) have been taken, or will be taken, to minimise risk of a recurrence of this type of limit break or to ensure early notification and correction of limit breaks of this type; and

(i)

the time frame within which the DIMS licensee intends to take any steps not already taken under paragraph (g) or (h).

(3)

If any information referred to in subclause (2)(d) to (i) is not reasonably ascertainable as at the date of the report,—

(a)

the report is not required to include that information; but

(b)

the DIMS licensee must make a further report containing that information to the FMA as soon as is reasonably practicable after the information becomes reasonably ascertainable.

(4)

A quarterly report under regulation 231 is not required to include any information referred to in subclause (2)(d) to (i) if—

(a)

the information has previously been provided to the FMA in a report provided under regulation 230 or in any other report that the DIMS licensee is required to provide to the FMA; and

(b)

as at the date of the quarterly report under regulation 231, the information remains correct.

233 Investments in Australian registered managed investment scheme is permitted related party benefit transaction

For the purposes of section 441(b) of the Act, an interest in a registered scheme (within the meaning of section 9 of the Corporations Act 2001 (Aust)) is a prescribed interest in a prescribed overseas scheme.

234 Investment in Government securities is permitted related party benefit transaction

A transaction is prescribed for the purposes of section 441(d) of the Act if the transaction is the acquisition or disposal of any public security in the ordinary course of business.

235 Requirements for certificates as to related party benefits

For the purpose of section 442(1)(b) of the Act, a certificate under section 440 of the Act—

(a)

must,—

(i)

if the monetary value of the related party benefit or benefits to which the certificate relates can be quantified, state the nature and monetary value of that benefit or those benefits; or

(ii)

if the monetary value of the related party benefit or benefits to which the certificate relates cannot be quantified, state the nature and extent of that benefit or those benefits; and

(b)

must provide, or have attached to it, reasonable evidence supporting—

(i)

the statement under paragraph (a); and

(ii)

the stated basis for relying on a ground in section 440 of the Act and (if relevant) section 441 of the Act.

236 DIMS licensee must provide quarterly report to FMA that identifies certificates

(1)

For the purposes of section 411 of the Act, a DIMS licensee must provide to the FMA a report in accordance with this regulation within 10 working days after the expiry of each quarter of each year.

(2)

The report must state whether any certificates have been given under section 440 of the Act in the previous quarter and, if so, include a copy of those certificates.

237 Quarterly reports may be in single report

The reports that a DIMS licensee must provide to the FMA after the expiry of each quarter may be combined in a single report.

Circumstance in which custodian requirements do not apply

Heading: inserted, on 1 December 2015, by regulation 29 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

237A Requirements do not apply if money or property held solely for completing transaction or securing obligation

Section 445 of the Act does not apply to investor money or investor property if it is held solely for completing a transaction, securing an obligation, or both.

Regulation 237A: inserted, on 1 December 2015, by regulation 29 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Holding and application of investor funds and property by derivatives issuers

238 Interpretation and application

(1)

In regulations 239 to 250, unless the context otherwise requires,—

authorised hedging activity means the hedging of a derivatives issuer’s exposure to investors under derivatives (other than exchange-traded derivatives) by—

(a)

acquiring assets underlying derivatives:

(b)

entering into, securing, or settling offsetting derivatives with a hedging counterparty

derivatives investor money has the meaning given in regulation 239(1) to (3)

derivatives investor property has the meaning given in regulation 239(4) and (5)

exchange-traded derivative means a derivative that is quoted, or approved for trading, on a financial product market (whether a licensed market or not)

hedging counterparty means—

(a)

a specified bank:

(b)

a licensed derivatives issuer:

(c)

an operator of a designated settlement system within the meaning of Part 5C of the Reserve Bank of New Zealand Act 1989:

(d)

a company that is registered as a BIPRU 730k firm (a BIPRU investment firm that is not a collective portfolio management investment firm, a BIPRU 50K firm, or a BIPRU 125K firm) with the UK Financial Conduct Authority:

(e)

a Futures Commission Merchant that is registered with the U.S. Commodity Futures Trading Commission under the Commodity Exchange Act (USA):

(f)

any person who the derivatives issuer considers, on reasonable grounds, is unlikely to default on obligations under derivatives

insolvency event has the meaning given in section 6(4) of the Act

obligations relating to exchange-traded derivatives means obligations incurred by a derivatives issuer in connection with margining or settling dealings in exchange-traded derivatives on behalf of an investor

trust account means an account at a specified bank that is in the name of the derivatives issuer and that is designated as a trust account.

(2)

Regulations 239 to 250 do not apply to a person to the extent that the person is acting as the operator of—

(a)

a designated settlement system (within the meaning of Part 5C of the Reserve Bank of New Zealand Act 1989); or

(b)

a clearing house of a licensed market.

239 Derivatives investor money and investor property

(1)

Money is derivatives investor money if—

(a)

the money is received in connection with 1 or more derivatives, where each of those derivatives is—

(i)

an exchange-traded derivative; or

(ii)

a derivative offered under a regulated offer made by a derivatives issuer; and

(b)

the money is received by the derivatives issuer—

(i)

from an investor and not on the derivatives issuer’s own account; or

(ii)

from a retail investor for the purpose of the investor meeting any current or future margin or collateral requirement under a derivative referred to in paragraph (a).

(2)

In addition, derivatives investor money also includes each of the following:

(a)

money received in connection with 1 or more derivatives that are offered under an offer that is not a regulated offer if—

(i)

the money is received by the derivatives issuer from an investor and not on the derivatives issuer’s own account; and

(ii)

the money is paid into a trust account maintained for the purposes of regulation 241:

(b)

if money or property is used for an authorised hedging activity as permitted by regulation 242(1)(d) or 243(1)(d), the proceeds received by the derivatives issuer from the disposal of—

(i)

assets acquired in the course of the authorised hedging activity; or

(ii)

offsetting derivatives that were entered into or secured in the course of the authorised hedging activity.

(3)

Despite subclauses (1) and (2), derivatives investor money does not include money received by a registered bank on its own account.

(4)

Property (other than money) is derivatives investor property if—

(a)

the property is received in connection with 1 or more derivatives, where each of those derivatives is—

(i)

an exchange-traded derivative; or

(ii)

a derivative offered under a regulated offer made by a derivatives issuer; and

(b)

the property is received by the derivatives issuer—

(i)

from an investor and not on the derivatives issuer’s own account; or

(ii)

from a retail investor for the purpose of the investor meeting any current or future margin or collateral requirement under a derivative referred to in paragraph (a).

(5)

In addition, derivatives investor property also includes each of the following:

(a)

any asset referred to in paragraph (a) of the definition of authorised hedging activity in regulation 238 if the asset is acquired as referred to in that definition using derivatives investor money:

(b)

property (other than money) received in connection with 1 or more derivatives that are offered under an offer that is not a regulated offer if—

(i)

the property is received by the derivatives issuer from an investor and not on the derivatives issuer’s own account; and

(ii)

the derivatives issuer elects, by written notice given to the investor on or before the property is received, that the property is to be derivatives investor property under this paragraph:

(c)

if money or property is used for an authorised hedging activity as permitted by regulation 242(1)(d) or 243(1)(d), any property (other than money) transferred to the derivatives issuer as consideration for the disposal of—

(i)

assets acquired in the course of the authorised hedging activity; or

(ii)

offsetting derivatives that were entered into or secured in the course of the authorised hedging activity.

240 Derivatives issuer must ensure derivatives investor money and property held on trust for investor

(1)

A derivatives issuer must hold derivatives investor money on trust for the investor or ensure the money is held on trust for the investor.

(2)

A derivatives issuer must hold derivatives investor property on trust for the investor or ensure the property is held on trust for the investor.

(3)

If any other person (C) is holding derivatives investor money or derivatives investor property as a custodian, the derivatives issuer must take all reasonable steps to—

(a)

ensure that C holds the money or property in the same manner and subject to the same duties and restrictions as if the derivatives issuer were holding the money or property directly; and

(b)

monitor C’s performance of its functions and duties in respect of the money or property.

241 Derivatives issuer must pay money into trust account

For the purpose of regulation 240(1), a derivatives issuer must ensure that the money is—

(a)

paid promptly into a specified bank to a trust account; and

(b)

held separate from money held by or for any of the following persons on their own account:

(i)

the derivatives issuer:

(ii)

the offeror:

(iii)

any person who holds the money.

Compare: SR 1990/227 rr 3, 4

242 When derivatives investor money ceases to be held on trust

(1)

Derivatives investor money ceases to be held on trust and may be withdrawn from the trust account only if the money—

(a)

is repaid to the investor:

(b)

is used in the settlement of the derivative with the investor:

(ba)

is used to acquire a derivative with the issuer in accordance with the investor’s express instructions:

(c)

is used to meet obligations relating to exchange-traded derivatives and the client agreement authorises the money to be used in this way:

(d)

is used for authorised hedging activities, but—

(i)

only if the client agreement authorises the money to be used in this way; and

(ii)

only so much of the money may be transferred to a hedging counterparty as is reasonably required for entering into derivatives with the hedging counterparty or for settling or securing those derivatives with the hedging counterparty:

(e)

is used to pay brokerage or other fees and charges authorised by the client agreement:

(f)

is paid to a third person in accordance with the investor’s express instructions given after the money is received by the derivatives issuer:

(g)

is withdrawn in accordance with regulation 244(4).

(1A)

Money referred to in subclause (1) ceases to be derivatives investor money when it ceases to be held on trust under that subclause.

(1B)

Subclause (1)(ba) does not include using money to meet any current or future margin or collateral requirement.

(2)

In this regulation, third person means a person other than the derivatives issuer or any of its associated persons.

Regulation 242(1)(ba): inserted, on 1 December 2015, by regulation 30(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 242(1A): inserted, on 1 December 2015, by regulation 30(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 242(1B): inserted, on 1 December 2015, by regulation 30(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

243 When derivatives investor property ceases to be held on trust

(1)

Derivatives investor property ceases to be held on trust if the property—

(a)

is returned to the investor:

(b)

is used in the settlement of the derivative with the investor:

(c)

is used to meet obligations relating to exchange-traded derivatives and the client agreement authorises the property to be used in this way:

(d)

is used for authorised hedging activities, but—

(i)

only if the client agreement authorises the property to be used in this way; and

(ii)

only so much of the property may be transferred to a hedging counterparty as is reasonably required for entering into derivatives with the hedging counterparty or for settling or securing those derivatives with the hedging counterparty:

(e)

is used to pay brokerage or other fees and charges authorised by the client agreement:

(f)

is disposed of to a third person in accordance with the investor’s express instructions given after the property is received by the derivatives issuer.

(1A)

Property referred to in subclause (1) ceases to be derivatives investor property when it ceases to be held on trust under that subclause.

(2)

In this regulation, third person means a person other than the derivatives issuer or any of its associated persons.

Regulation 243(1A): inserted, on 1 December 2015, by regulation 31 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

244 Responsibilities of derivatives issuer in event of shortfall

(1)

The derivatives issuer must,—

(a)

if it carries out authorised hedging activities, carry out an equity-based reconciliation in accordance with regulation 244A; or

(b)

in any other case, carry out an equity-based reconciliation in accordance with regulation 244A or a cash-based reconciliation in accordance with regulation 244B.

(2)

If, on any day, the required amount exceeds the specified aggregate,—

(a)

the derivatives issuer must immediately deposit in the trust account an amount of money equal to the amount of the shortfall; and

(b)

the amount deposited is for the purposes of these regulations deemed to be derivatives investor money.

(3)

The derivatives issuer may deposit in the trust account amounts of money that it considers reasonable to cover the risk of a shortfall arising at any time.

(3A)

If the derivatives issuer has deposited money in the trust account under subclause (3), that money—

(a)

does not become derivatives investor money for the purposes of calculating the required amount; but

(b)

is deemed to be derivatives investor money for all other purposes (subject to regulation 242(1A)).

(4)

If the derivatives issuer has deposited money in the trust account under subclause (2) or (3) and the specified aggregate subsequently exceeds the required amount, the derivatives issuer may withdraw from the account an amount up to the amount of the excess.

(5)

The derivatives issuer must take reasonable steps to ensure that the specified aggregate does not exceed the required amount by more than what is reasonable to cover the risk of a shortfall.

(6)

In this regulation,—

required amount,—

(a)

in relation to a reconciliation under regulation 244A, means the required amount calculated under regulation 244A(2):

(b)

in relation to a reconciliation under regulation 244B, has the same meaning as in regulation 244B

shortfall is the amount by which the required amount exceeds the specified aggregate

specified aggregate,—

(a)

in relation to a reconciliation under regulation 244A, means the specified aggregate under regulation 244A(3):

(b)

in relation to a reconciliation under regulation 244B, has the same meaning as in regulation 244B.

Regulation 244(1): replaced, on 1 December 2015, by regulation 32(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 244(2): amended, on 1 December 2015, by regulation 32(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 244(3): amended, on 1 December 2015, by regulation 32(3) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 244(3A): inserted, on 1 December 2015, by regulation 32(4) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 244(4): amended, on 1 December 2015, by regulation 32(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 244(5): amended, on 1 December 2015, by regulation 32(2) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Regulation 244(6): replaced, on 1 December 2015, by regulation 32(5) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

244A Equity-based reconciliation

(1)

A derivatives issuer that carries out an equity-based reconciliation must, at least daily, reconcile the derivatives issuer’s records of the required amount with the specified aggregate.

(2)

In this regulation, to calculate the required amount the derivatives issuer must take the following steps:

(a)

first, for each investor, the issuer must calculate the sum of the following from its records:

(i)

the amount of derivatives investor money in respect of the investor:

(ii)

the net realisable value to the investor of derivatives issued by the derivatives issuer to the investor:

(b)

second, the issuer must disregard the total amounts under paragraph (a) that are negative:

(c)

third, the issuer must calculate the sum of all of the total amounts under paragraph (a) that are positive (the result being the required amount).

(3)

In this regulation, the specified aggregate is the sum of the following:

(a)

the amount of money in the trust account:

(b)

the net realisable value to the derivatives issuer of the derivatives held by the derivatives issuer with any hedging counterparty:

(c)

the net realisable value of the following types of derivatives investor property:

(i)

the assets referred to in regulation 239(5)(a):

(ii)

the property referred to in regulation 239(5)(c):

(d)

the money held by a hedging counterparty on behalf of the derivatives issuer as a result of the use of derivatives investor money or property in authorised hedging activities under regulation 242(1)(d) or 243(1)(d).

(4)

In this regulation, the net realisable value on a particular day is,—

(a)

in the case of a derivative, the fair value of the derivative on that day determined in accordance with GAAP; and

(b)

in any other case, the net amount that the issuer could reasonably expect to realise on that day for the relevant property.

Regulation 244A: inserted, on 1 December 2015, by regulation 33 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

244B Cash-based reconciliation

(1)

A derivatives issuer that carries out a cash-based reconciliation must, at least daily, reconcile the derivatives issuer’s records of the required amount with the specified aggregate.

(2)

In this regulation,—

required amount is the total amount of derivatives investor money in respect of all investors

specified aggregate is the amount of money in the trust account.

Regulation 244B: inserted, on 1 December 2015, by regulation 33 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

245 Protections

(1)

Derivatives investor money and derivatives investor property are not available to satisfy any liability of a derivatives issuer.

(2)

This regulation does not apply to—

(a)

the right of an investor to recover derivatives investor money or derivatives investor property to which the investor is entitled:

(b)

any claim or lien that the derivatives issuer has against or on the derivatives investor money or derivatives investor property:

(c)

any payment or transfer authorised by these regulations.

246 Insolvency

(1)

If a derivatives issuer is subject to an insolvency event, the following is subject to a single trust in favour of all of the investors on whose behalf the money or property is being held:

(a)

derivatives investor money:

(b)

derivatives investor property:

(c)

any money or property held by a hedging counterparty on behalf of the derivatives issuer as a result of the use of derivatives investor money or property in authorised hedging activities under regulation 242(1)(d) or 243(1)(d) (less any obligations owed by the derivatives issuer to the hedging counterparty that have arisen from this use):

(d)

any obligations owed by a hedging counterparty to the derivatives issuer that have arisen from the use of derivatives investor money under regulation 242(1)(d) or the use of derivatives investor property under regulation 243(1)(d).

(2)

The trustee of a trust created under subclause (1) is a person appointed by the FMA.

Regulation 246(1)(c): amended, on 1 December 2015, by regulation 34 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

247 Record keeping

(1)

A derivatives issuer must, in accordance with this regulation, keep and maintain up-to-date records of derivatives investor money and derivatives investor property held for each investor.

(2)

The records must—

(a)

clearly identify the derivatives investor money:

(b)

clearly disclose details of all amounts deposited in, and all amounts withdrawn from, the trust account:

(c)

clearly identify the derivatives investor property held by the derivatives issuer, and state in respect of each property—

(i)

when that property was received and from whom it was received; and

(ii)

if the property has been disposed of, when the property was disposed of and to whom.

(3)

The following records must be kept separately from the records required under subclause (2):

(a)

details of all amounts paid, or property applied, as is permitted under regulation 242(1)(c) or (d) or 243(1)(c) or (d):

(b)

details of all amounts deposited in, or withdrawn from, the trust account under regulation 244 (which relates to the issuer’s responsibilities in event of a shortfall):

(c)

details of all other money and obligations that have arisen from these permitted activities.

(4)

The derivatives issuer must keep the records in a manner that—

(a)

enables the derivatives issuer to distinguish, without delay, derivatives investor money and derivatives investor property held for 1 investor—

(i)

from derivatives investor money and derivatives investor property held for another investor; and

(ii)

from the derivatives issuer’s own money and property; and

(b)

enables the records to be conveniently and properly audited or reviewed.

248 Assurance engagement

(1)

A derivatives issuer who holds derivatives investor money or derivatives investor property must, within 4 months after the issuer’s balance date, obtain an assurance engagement with a qualified auditor done in accordance with applicable auditing and assurance standards.

(2)

The derivatives issuer must,—

(a)

within 20 working days after obtaining an assurance report, provide a copy of the report to the FMA unless the FMA waives this requirement; and

(b)

at the request of an investor, send the investor a copy of the most recent assurance report within 10 working days after receiving the request.

249 Contents of assurance report

(1)

An assurance report referred to in regulation 248 must state whether, in the auditor’s opinion, there is reasonable assurance that the derivatives issuer’s processes, procedures, and controls—

(a)

were suitably designed to meet the control objectives in subclause (2) throughout the most recently completed accounting period; and

(b)

operated effectively throughout that accounting period.

(2)

The control objectives are that—

(a)

new investor accounts are set up completely and accurately in accordance with client agreements and any applicable regulations:

(b)

complete agreements that properly authorise the holding of derivatives investor money and derivatives investor property (authorising agreements) are established before the derivatives issuer starts receiving derivatives investor money and derivatives investor property:

(c)

transactions in respect of derivatives investor money or derivatives investor property are authorised, processed, and recorded in an appropriate, accurate, and timely manner:

(d)

investor accounts are administered in accordance with the Act, these regulations, and authorising agreements:

(e)

records and changes to records relating to the derivatives investor money and derivatives investor property are accurate and are kept—

(i)

in an appropriate and timely manner; and

(ii)

in accordance with the Act, these regulations, and authorising agreements:

(f)

there are adequate safeguards against the loss, misappropriation, and unauthorised use of derivatives investor money and derivatives investor property:

(g)

hedging counterparties are appropriately approved and managed and adequately monitored:

(h)

entities that the derivatives issuer appoints to hold, pay, or transfer derivatives investor money or derivatives investor property are appropriately approved and managed and adequately monitored:

(i)

reports to the investor in respect of holdings of derivatives investor money and derivatives investor property—

(i)

are complete and accurate; and

(ii)

are provided within the time frames in the Act, these regulations, and client agreements:

(j)

information technology systems and processes are appropriate to allow the provider to accurately and reliably meet the objectives in paragraphs (a) to (i).

250 Application of Part 6 provisions

Regulations 240, 241, 244, 247, 248, and 249 are Part 6 services provisions for the purposes of the Act.

Part 7 Financial reporting

251 Entities that are FMC reporting entities as a result of exclusions

(1)

For the purposes of clause 27A of Schedule 1 of the Act, an entity that has made an offer in reliance upon clause 12 of Schedule 1 of the Act is an FMC reporting entity if it has 50 or more relevant shareholders and 50 or more parcels of relevant shares.

(2)

In subclause (1),—

relevant shareholder means a shareholder who holds a voting product of the entity that was acquired under an offer made in reliance upon clause 12 of Schedule 1 of the Act

relevant shares means voting products of the entity acquired under an offer made in reliance upon clause 12 of Schedule 1 of the Act.

252 Prescribed circumstances for definition of recipient of money from conduit issuer

For the purposes of section 453(b)(ii) of the Act (recipients of money from conduit issuers), the prescribed circumstances are where the offer is made in reliance upon clause 12 of Schedule 1 of the Act by an entity that—

(a)

is an FMC reporting entity as a result of regulation 251; or

(b)

will be an FMC reporting entity as a result of regulation 251 immediately after the issue or transfer of voting products under the offer.

Part 8 Enforcement, liability, and appeals

253 Financial service does not include providing credit in definition of restricted communication

For the purposes of paragraph (c) of the definition of financial service in section 6(1) of the Act, the service of being a creditor under a credit contract is declared not to be a financial service for the purposes of section 464 of the Act (which relates to the meaning of restricted communication).

254 Infringement offence fees

The infringement fee for an infringement offence is the fee specified in relation to the offence in the third column of Schedule 22.

255 Infringement notice and reminder notice

(1)

An infringement notice issued under section 514(1) of the Act must be in the form set out in Schedule 23.

(2)

A reminder notice issued under section 515(4) of the Act must be in the form set out in Schedule 24.

Part 9 Mutual recognition, interest rates, and other miscellaneous provisions

Subpart 1—Preliminary provisions relating to mutual recognition of financial product offerings: Australia

256 Interpretation

In this subpart and subparts 2 and 3, unless the context otherwise requires,—

agreement means the agreement dated 22 February 2006 between the Government of Australia and the Government of New Zealand in relation to mutual recognition of securities offerings

Australian disclosure document means any of the following:

(a)

a Product Disclosure Statement as defined in section 761A of the Corporations Act 2001 (Aust):

(b)

a disclosure document as defined in section 9 of the Corporations Act 2001 (Aust):

(c)

a document that contains disclosure relating to an offer of financial products that is required to be prepared under Australian securities legislation and by which means it is lawful under the law in Australia to accept applications for the financial products that are offered

Australian exemption or declaration means an exemption granted, or a declaration made, by the Australian regulator under the Corporations Act 2001 (Aust)

Australian offeror means an offeror that—

(a)

is incorporated under the laws of Australia; or

(b)

in the case of a natural person, is resident in Australia; or

(c)

in the case of a legal person that is not a natural person, is established under the laws of Australia; or

(d)

is registered as a foreign company under the laws of Australia

Australian recognition scheme means the recognition scheme provided for in Chapter 8 of the Corporations Act 2001 (Aust) and regulations made under that Act for implementing the agreement

Australian registered scheme means a registered scheme as defined in section 9 of the Corporations Act 2001 (Aust)

Australian regulated offer means an offer of financial products by an Australian offeror in respect of which an Australian disclosure document is required under Australian securities legislation

Australian regulator means—

(a)

the Australian Securities and Investments Commission established under the Australian Securities and Investments Commission Act 1989 and continued under the Australian Securities and Investments Commission Act 2001; or

(b)

any other similar regulator established by law to replace that Commission

Australian securities legislation

(a)

means the Corporations Act 2001 (Aust) and any regulations made under that Act, or any legislation enacted in substitution for that Act or those regulations; and

(b)

includes an exemption granted, or a declaration made, by the Australian regulator under the Corporations Act 2001 (Aust)

financial products means,—

(a)

in relation to subpart 2 (recognition regime), any or all of the following financial products:

(i)

debt securities:

(ii)

equity securities:

(iii)

managed investment products that are interests in an Australian registered scheme:

(b)

in relation to subpart 3 (application regime), any or all of the following financial products:

(i)

debt securities:

(ii)

equity securities:

(iii)

managed investment products that are interests in a New Zealand registered scheme

New Zealand offeror means an offeror that—

(a)

is incorporated under the laws of New Zealand; or

(b)

in the case of a natural person, is resident in New Zealand; or

(c)

in the case of a legal person that is not a natural person, is established under the laws of New Zealand; or

(d)

is registered as an overseas company under the laws of New Zealand

New Zealand registered scheme

(a)

means a registered scheme (as defined in section 6(1) of the Act); but

(b)

does not include a retirement scheme

offeror, in relation to an offer of an interest in an Australian registered scheme for issue, means the responsible entity for the scheme as defined in section 9 of the Corporations Act 2001 (Aust)

recognised offer means an offer referred to in regulation 260.

Compare: SR 2008/153 r 4(1)

Subpart 2—Recognition regime when New Zealand is host country

Application

257 Australia designated as country to which recognition regime applies

Australia is designated as the country to which the recognition regime established by this subpart applies.

Compare: SR 2008/153 r 3

258 Class of financial products to which subpart applies

(1)

This subpart applies to financial products offered in New Zealand by an Australian offeror.

(2)

However, this subpart does not apply to an offer of financial products in New Zealand by an Australian offeror if—

(a)

the FMA has made an order under section 471 of the Act that prohibits the Australian offeror from making an offer under the recognition regime; and

(b)

the order has not been revoked or otherwise expired.

Compare: SR 2008/153 rr 7, 8(2)

259 When New Zealand is host country

New Zealand is the host country when an offer of financial products to which this subpart applies is made in New Zealand by an Australian offeror.

Compare: SR 2008/153 r 5

Recognised offer

260 When offer is recognised offer

(1)

An offer of financial products to which this subpart applies becomes a recognised offer, in relation to New Zealand, on the day on which the offer is first made in New Zealand, if the preconditions in regulations 262 to 268 are met in relation to the offer on that day.

(2)

The offer continues to be a recognised offer after that day even if a precondition in regulations 262 to 268 ceases to be met after that day.

(3)

See section 578 of the Act (which allows the FMA to declare that a failure to comply with a precondition is non-material).

Compare: Corporations Act 2001 s 1200B (Aust)

261 Effect of recognised offer

Financial products offered under a recognised offer are exempt from—

(a)

section 23 of the Act (to the extent that it would otherwise apply to an Australian disclosure document); and

(b)

Parts 3 and 4 of the Act.

Compare: SR 2008/153 r 6(1), (2)

Preconditions

262 Preconditions

Regulations 263 to 268 set out preconditions for the purposes of section 577(1)(d) of the Act.

263 Precondition for offer to be regulated offer in Australia

The offer must be an Australian regulated offer.

Compare: SR 2008/153 r 9

264 Precondition concerning pre-offer advertising

(1)

A person must not, except in accordance with subclause (2), distribute an advertisement of the offer or intended offer on or before the day on which the offer is first made in New Zealand.

(2)

A person may distribute an advertisement of the offer or intended offer if the person complies with either of the following (subject to any Australian exemption or declaration):

(a)

section 734 or 1018A of the Corporations Act 2001 (Aust) and any regulations made under that Act that relate to those provisions; or

(b)

any legislation enacted or made in substitution for those sections or regulations (whether with or without modification).

(3)

Subclause (1) applies in relation to an offer by an Australian offeror only if the advertisement is authorised or instigated by, or on behalf of, the Australian offeror or an associated person of the Australian offeror.

Regulation 264(2): replaced, on 1 December 2015, by regulation 35 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

265 Precondition for Australian offeror to be entitled under Australian law to offer financial products

(1)

The Australian offeror must be entitled under Australian securities legislation to offer the financial products.

(2)

In particular, if—

(a)

an Australian disclosure document (or any other document relating to the offer) is required to be lodged with the Australian regulator, the document must be lodged:

(b)

a notice relating to a document referred to in paragraph (a) is required to be lodged with the Australian regulator (for example, under section 1015D of the Corporations Act 2001 (Aust)), the notice must be lodged.

(3)

Subclause (2) does not limit subclause (1).

Compare: SR 2008/153 r 10

266 Preconditions for Australian offeror to give notice to Registrar

(1)

The Australian offeror must, before making the offer, lodge a notice with the Registrar that complies with regulation 267.

(2)

The notice, when received by the Registrar, also serves as the opt-in notice referred to in section 575(2) of the Act.

(3)

If there is more than 1 Australian offeror of the financial products, each Australian offeror who intends to make an offer in accordance with this subpart must lodge a notice under this regulation.

Compare: SR 2008/153 r 11(1), (2), (5)

267 Requirements for notice to Registrar

(1)

The notice referred to in regulation 266 must—

(a)

state that the Australian offeror intends to make an offer under the recognition regime in accordance with this subpart; and

(b)

specify the financial products to be offered; and

(c)

specify the proposed offer period for each of the following:

(i)

the offer of the financial products in New Zealand:

(ii)

the offer of the financial products in Australia; and

(d)

state the full name and address in New Zealand of 1 or more persons resident or incorporated in New Zealand who are authorised to accept service in New Zealand at that address of documents on behalf of the Australian offeror; and

(e)

state that the Australian offeror submits to the jurisdiction of the courts of New Zealand; and

(f)

state the Australian offeror’s New Zealand overseas offeror registration number allocated by the Registrar (if any); and

(g)

be accompanied by the documents specified in regulation 268; and

(h)

comply with the requirements of regulation 274.

(2)

In subclause (1)(c), the proposed offer period for the offer of the financial products in Australia must include the proposed offer period for the offer of the financial products in New Zealand.

Compare: SR 2008/153 r 11(3), (4)

268 Documents that must accompany notice to Registrar

The following documents must accompany the notice lodged with the Registrar under regulation 267:

(a)

the Australian disclosure documents and any document that supplements those documents (whether or not those documents are lodged with the Australian regulator); and

(b)

a copy of every Australian exemption or declaration that is relevant to the offer (other than an exemption or a declaration referred to in paragraph (c)); and

(c)

particulars of every Australian exemption or declaration that is—

(i)

relevant to the offer; and

(ii)

of general application and applies to a class of persons or a class of transactions; and

(d)

to the extent that it is not included as part of the documents referred to in paragraph (a),—

(i)

the constitution (if any) of the issuer of the financial products, unless subparagraph (ii) applies:

(ii)

if the financial products to be offered are interests in an Australian registered scheme, the constitution of the scheme (see section 601GA of the Corporations Act 2001 (Aust)):

(iii)

a copy of each warning statement referred to in regulation 271.

Compare: SR 2008/153 r 12

Terms and conditions

269 Terms and conditions to be complied with

Regulations 270 to 275 set out terms and conditions for the purposes of section 577(1)(e) of the Act (see section 579 of the Act for an offence relating to a contravention).

270 Offer must remain Australian regulated offer, comply with Australian law, and be open to acceptance in Australia

The offer must comply with the following terms and conditions:

(a)

the offer must remain an Australian regulated offer at all times during which it is open for acceptance by persons in New Zealand; and

(b)

the offer must comply with the Australian securities legislation; and

(c)

the offer must be open to acceptance by persons in Australia at all times during which it is open for acceptance by persons in New Zealand.

Compare: SR 2008/153 r 13(1)(a) to (c)

271 Warning statements

If an Australian disclosure document or any other document referred to in regulation 268(a) is provided to a person in New Zealand, the document must be accompanied by—

(a)

the warning statement set out in Part 1 of Schedule 25; and

(b)

the additional warning statement set out in Part 2 of Schedule 25 if the offer involves payments that are not in New Zealand dollars; and

(c)

the additional warning statement set out in Part 3 of Schedule 25 if the offer involves financial products able to be traded on a financial product market; and

(d)

the additional warning statement set out in Part 4 of Schedule 25 if the offer is of interests in an Australian registered scheme and any dispute resolution process described in the document is not available in New Zealand.

Compare: SR 2008/153 r 13(1)(d) to (g)

272 Other terms and conditions

The Australian offeror must comply with the following requirements during the period of the offer:

(a)

the Australian offeror must provide an offeree, on request, with a copy of the constitution referred to in regulation 268(d)(i) or (ii) if the constitution has been lodged with the Registrar; and

(b)

the Australian offeror must ensure that no director, senior manager, or controlling owner of the Australian offeror would be disqualified under section 14(2) of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (if the Australian offeror were a provider to which that Act applied); and

(c)

the Australian offeror must ensure that at least 1 person resident or incorporated in New Zealand is authorised to accept service in New Zealand of documents on behalf of the Australian offeror.

Compare: SR 2008/153 r 13(2)

273 Notice of changes

(1)

If an event listed in column 2 of the following table occurs in relation to the offer or the Australian offeror, the Australian offeror must lodge with the Registrar the notice specified in column 3 within the time for lodging the notice specified in column 4:

Column 1
Item
Column 2
Event
Column 3
Notice
Column 4
Time for filing
1Change made to an Australian disclosure document or any other document required by Australian securities legislation in relation to the offer (unless the offeror is not required to notify the Australian regulator of the change)Notice of change to documentNo later than 5 working days after the day on which the offeror notified (or should have notified) the Australian regulator of the change
2Change in offeror’s address for serviceNotice of change of address for serviceAt least 5 working days before the change takes effect
3Supplementary or replacement Australian disclosure document is lodged or notified under Australian securities legislationNotice of supplementary or replacement Australian disclosure documentAs soon as practicable after the supplementary or replacement document is lodged with the Australian regulator (or the Australian regulator is notified of the document) and no later than 5 working days after the day on which the document is (or should have been) lodged or notified
4Change made to a constitution referred to in regulation 268(d)(i) or (ii)Notice of change to the constitutionNo later than 5 working days after the day on which the offeror notified (or should have notified) the Australian regulator of the change
5Australian regulator grants, amends, or revokes an Australian exemption or declaration referred to in regulation 268(b)Notice of grant of, amendment to, or revocation of the exemption or declarationNo later than 5 working days after the grant of, amendment to, or revocation of the exemption or declaration
6Australian regulator grants, amends, or revokes an Australian exemption or declaration referred to in regulation 268(c)Notice of grant of, amendment to, or revocation of the exemption or declarationNo later than 10 working days after the grant of, amendment to, or revocation of the exemption or declaration
7Australian regulator begins an enforcement action, or exercises a power it has under law, in relation to the offer or the offerorNotice of enforcement action or exercise of power by Australian regulatorAs soon as practicable after the action is taken or the power is exercised and no later than 5 working days after the day on which the action is taken or the power is exercised

(2)

A change referred to in item 1 in the table in subclause (1) does not include a change made by way of a supplementary or replacement document referred to in item 3 of that table.

Compare: SR 2008/153 r 13(3)

274 Other requirements for notices under regulation 266 or 273

(1)

Every notice required by regulation 266 or 273 must—

(a)

be signed and dated by the Australian offeror or a person with authority to act on the offeror’s behalf; and

(b)

contain the information set out in subclause (2).

(2)

Every notice required by regulation 266 or 273 must contain the following information:

(a)

the name of the Australian offeror:

(b)

if applicable, the Australian registered scheme number:

(c)

the name of the person signing the notice on the Australian offeror’s behalf:

(d)

the name of the person completing the notice and an address for communications from the Registrar to that person.

Compare: SR 2008/153 r 16

275 Additional information that must be contained in specific notices required by regulation 273

(1)

A notice required by item 1 in the table in regulation 273 (notice of change to Australian disclosure document) must—

(a)

state the date on which the Australian offeror notified (or should have notified) the Australian regulator of the change; and

(b)

be accompanied by a copy of the changes.

(2)

A notice required by item 2 in the table in regulation 273 (notice of change of address for service) must state—

(a)

the Australian offeror’s new address for service; and

(b)

the date on which the change in the Australian offeror’s address for service takes effect.

(3)

A notice required by item 3 in the table in regulation 273 (notice of supplementary or replacement Australian disclosure document) must—

(a)

state the date on which the Australian offeror lodged (or should have lodged) the supplementary or replacement document with the Australian regulator or notified (or should have notified) the Australian regulator of that document; and

(b)

be accompanied by a copy of the supplementary or replacement document.

(4)

A notice required by item 4 in the table in regulation 273 (notice of change to constitution) must—

(a)

state the date on which the Australian offeror notified (or should have notified) the Australian regulator of the change; and

(b)

be accompanied by a copy of the constitution as changed with the changes marked.

(5)

A notice required by item 5 in the table in regulation 273 (notice of grant of, amendment to, or revocation of specific Australian exemption or declaration) must—

(a)

specify the exemption or declaration; and

(b)

in the case of the grant of, or amendment to, the exemption or declaration, be accompanied by a copy of the exemption or declaration or amended exemption or declaration (with the amendments marked); and

(c)

state the date on which the exemption or declaration was granted, amended, or revoked.

(6)

A notice required by item 6 in the table in regulation 273 (notice of grant of, amendment to, or revocation of Australian class exemption or declaration) must—

(a)

specify the exemption or declaration; and

(b)

state whether it has been granted, amended, or revoked; and

(c)

state the date on which it was granted, amended, or revoked.

(7)

A notice required by item 7 in the table in regulation 273 (notice of enforcement action or exercise of power by Australian regulator) must—

(a)

state the date on which the enforcement action began or the power was exercised; and

(b)

give details of the nature of the enforcement action or the exercise of the power.

Compare: SR 2008/153 r 17

Subpart 3—Application of New Zealand financial markets conduct law to New Zealand financial products offered in Australia

276 Extension of Act and regulations to financial products offered in Australia by New Zealand offeror

(1)

This regulation applies if—

(a)

a New Zealand offeror proposes to make, or is making, an offer of financial products in Australia under the Australian recognition scheme; and

(b)

under the Australian recognition scheme, the offer is to be regulated by the law of New Zealand.

(2)

The Act (other than section 34) and these regulations apply in Australia in relation to the offer as if it were an offer being made in New Zealand.

(3)

However, the Act and these regulations do not apply to financial products offered in Australia by a New Zealand offeror to the extent that the offer is exempted under subpart 2 of Part 9 of the Act.

Compare: SR 2008/153 r 14(1), (2)

277 Notice to Registrar of intention to make offer under Australian recognition scheme

(1)

A New Zealand offeror who intends to make an offer of financial products in Australia under the Australian recognition scheme must lodge a notice with the Registrar of the intention to make the offer.

(2)

The offeror must lodge the notice not later than the time when it notifies the Australian regulator of the intention to make the offer.

Compare: SR 2008/153 r 15

278 Form of notice required by regulation 277

(1)

A notice required by regulation 277 must—

(a)

state that the New Zealand offeror intends to make an offer of financial products in Australia under the Australian recognition scheme; and

(b)

be signed and dated by the New Zealand offeror or a person with authority to act on the New Zealand offeror’s behalf; and

(c)

contain the information set out in subclause (2).

(2)

Every notice required by regulation 277 must contain the following information:

(a)

the name of the New Zealand offeror:

(b)

the New Zealand offeror’s registration number:

(c)

particulars of the financial products to be offered:

(d)

the proposed offer period for the offer of the financial products in Australia:

(e)

the name of the person signing the notice on the New Zealand offeror’s behalf.

Compare: SR 2008/153 r 18

Subpart 4Miscellaneous matters

Subpart 4 heading: amended, on 1 December 2015, by regulation 36 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

279 Prescribed rate of interest

The prescribed rate of interest under sections 36(1)(b) and (2)(c), 55(1)(b) and (2)(c), 80(3), and 85(5) of the Act is 10% per annum.

280 Status of PDS

(1)

The status of a PDS that has been lodged must be described on the offer register as—

(a)

registered; or

(b)

open for applications; or

(c)

closed for applications; or

(d)

withdrawn; or

(e)

finalised.

(2)

For the purposes of subclause (1), the status of a PDS that has been lodged must be determined as follows:

(a)

a PDS is registered if it does not have a status under paragraphs (b) to (e):

(b)

a PDS is open for applications if the offeror is accepting applications for financial products offered under the PDS:

(c)

a PDS is closed for applications if—

(i)

the PDS has had an open for applications status but the offeror is no longer accepting applications for financial products offered under the PDS; and

(ii)

the PDS does not have a withdrawn status or a finalised status:

(d)

a PDS is withdrawn if—

(i)

no financial products have been issued under the PDS; and

(ii)

the PDS does not have an open for applications status and the offeror has determined that the offeror has no intention that the PDS will have such a status at any future time; and

(iii)

the PDS does not have a finalised status:

(e)

a PDS is finalised if—

(i)

the PDS has had an open for applications status and a closed for applications status; and

(ii)

the offeror is not accepting applications for financial products offered under the PDS; and

(iii)

all financial products that were issued under the PDS have been cancelled, redeemed, or forfeited, or all of the obligations owing under those products have been discharged.

(3)

See clause 3(1)(h) of Schedule 2 of the Act.

280A Notices or other documents given, provided, or served by FMA

(1)

Any notice or other document that the FMA may or must give to, provide to, or serve on any person under the Act is sufficiently given, provided, or served if it is—

(a)

in writing; and

(b)

signed by 1 or more of the members of the FMA or by any person purporting to act with the authority of the FMA; and

(c)

sent, provided, or served in accordance with regulation 280B.

(2)

This regulation and regulation 280B do not apply—

(a)

to a requirement to give, provide, or serve any notice or other document in any proceeding in a court; or

(b)

if the Act or these regulations provide for the notice or other document to be given, provided, or served in a particular manner.

Regulation 280A: inserted, on 1 December 2015, by regulation 37 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

280B How FMA notices or other documents are given, provided, or served

(1)

Any notice or other document required or authorised under the Act to be given to, provided to, or served on any person by the FMA may—

(a)

be given, provided, or served on an individual—

(i)

by delivering it personally or by an agent (such as a courier) to the person; or

(ii)

by sending it by post addressed to the person at the person’s usual or last known place of residence or business; or

(iii)

by sending it by fax or email to the person’s fax number or email address provided by the person for the purpose; or

(iv)

in any other manner that a District Court Judge directs:

(b)

be given to, provided to, or served on a company, within the meaning of the Companies Act 1993, in a manner provided for in section 388 of that Act:

(c)

be given to, provided to, or served on an overseas company in a manner provided for in section 390 of the Companies Act 1993:

(d)

be given to, provided to, or served on any other body corporate in a manner in which it could be served if the body corporate were a company within the meaning of the Companies Act 1993.

(2)

In the absence of proof to the contrary, a notice, document, or notification sent to a person in accordance with—

(a)

subclause (1)(a)(ii) must be treated as having been given to, provided to, or served on the person when it would have been delivered in the ordinary course of post; and, in proving the delivery, it is sufficient to prove that the letter was properly addressed and posted:

(b)

subclause (1)(a)(iii) must be treated as having been given to, provided to, or served on the person on the second working day after the day on which it is sent.

(3)

Section 392 of the Companies Act 1993 applies for the purposes of subclause (1)(b) to (d).

(4)

If a person is absent from New Zealand, a notice given to, provided to, or served on the person’s agent in New Zealand in accordance with subclause (1) must be treated as having been given to, provided to, or served on the person.

(5)

If a person has died, the notice may be given, provided, or served, in accordance with subclause (1), on his or her personal representative.

Regulation 280B: inserted, on 1 December 2015, by regulation 37 of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

281 Revocation of Financial Markets Conduct (Phase 1) Regulations 2014

Schedule 1 Transitional, savings, and related provisions

r 4

Contents

1Overview
2Interpretation
3Various aspects of former law continue to apply
4Broker must pay client money into separate trust account and hold client property on trust
5Existing DIMS providers not subject to licensing until either 31 May 2015 or 1 December 2015
6How service disclosure statement for existing DIMS is made available to existing clients
7Definitions extended to cover former law concepts
8Existing licences continue and cover supervision
9Extension of licences to cover substantially similar matters under new law
10KiwiSaver definitions and references
11Former provisions of KiwiSaver Act 2006 and of regulations continue to apply in certain circumstances
12Securities Act 1978 and related enactments continue to apply to previously allotted securities until effective date
13Superannuation Act 1989 continues to apply to superannuation schemes until effective date
14Unit Trusts Act 1960 continues to apply to unit trusts until effective date
15Information to be supplied to Registrar and FMA before effective date for managed investment scheme
16Transitional disclosure exclusion
17Offers of derivatives
18Handling of derivatives investor money and property
19Governance requirements for PIE call fund units, PIE term fund units, and bank notice products that are specified units
20Insider trading
21Transfer of securities by securities transfer under Securities Transfer Act 1991
22Financial markets participants
23Wholesale clients under Financial Service Providers (Registration and Dispute Resolution) Act 2008
24Employee share purchase schemes and small offer exclusion calculations take into account offers under former law
25FMA order power includes equivalent reference under former law
26Exemptions under 1978 Act continue in force
27Exemptions under Securities Markets Act 1988 continue in force
28Miscellaneous transitional provisions relating to continuing application of 1978 Act
29Banks’ regulatory capital
30Transitional provisions relating to consequential amendments in Financial Markets (Repeals and Amendments) Act 2013
30ACertain superannuation schemes may elect to be treated as registered
31Certain requirements need not be complied with before 1 December 2016
1 Overview

This schedule provides for transitional, savings, and related provisions relating to—

(a)

the enactment of the Act; and

(b)

amendments made to these regulations.

Schedule 1 clause 1: replaced, on 1 December 2015, by regulation 38(1) of the Financial Markets Conduct Amendment Regulations 2015 (LI 2015/276).

Part 1 Transitional provisions relating to enactment of Act

2 Interpretation

(1)

In this Part, unless the context otherwise requires,—

1978 Act means the Securities Act 1978

commencement means the commencement of these regulations on 1 December 2014

FMSA means the Financial Markets Supervisors Act 2011 (or, before commencement, the Securities Trustees and Statutory Supervisors Act 2011)

KSA means the KiwiSaver Act 2006

pre-transition KiwiSaver schemes means KiwiSaver schemes that continue to be registered in the KiwiSaver schemes register under clause 18(1)(a) of Schedule 4 of the Act

pre-transition superannuation schemes means superannuation schemes that continue to be registered under the Superannuation Schemes Act 1989 under clause 18(1)(b) of Schedule 4 of the Act

specified enactments means—

(a)

the Act; and

transitional period means the period starting on the commencement of these regulations and ending on the close of 30 November 2016.

(2)

Any term or expression that is defined in clause 4 or 16 of Schedule 4 of the Act and used, but not defined, in this Part has the same meaning as in those clauses.

Financial advisers

3 Various aspects of former law continue to apply

(1)

During the transitional period,—

(a)

the definition of category 1 product in section 5 of the FAA must be treated as including a reference to a security as defined in that section immediately before commencement (other than a security that is a category 2 product):

(b)

the definition of issuer in section 5 of the FAA must be treated as including a reference to an issuer as defined in that section immediately before commencement:

(c)

the definition of product provider in section 5 of the FAA must be treated as including a reference to a product provider as defined in that section immediately before commencement:

(d)

the definition of promoter in section 5 of the FAA must be treated as including a reference to a promoter as defined in that section immediately before commencement.

(2)

During the transitional period, section 5C(1) of the FAA must be treated as continuing to include a paragraph in the same terms as section 5C(1)(g) of the FAA as in force immediately before commencement (and, for that purpose, section 5C(3) of the FAA as in force immediately before commencement continues to apply).

(3)

Until the close of 31 May 2015, section 5C(1) of the FAA must be treated as continuing to include a paragraph in the same terms as section 5C(1)(c) of the FAA as in force immediately before commencement.

(4)

A certification given under section 5D(1) of the FAA that is in effect immediately before commencement remains in effect after commencement (subject to any revocation under section 5F of the FAA).

(5)

Subclause (4) ceases to apply on the close of the 5-year date (as defined in section 547(6) of the Act).

(6)

During the transitional period, section 14(1)(o) of the FAA must be treated as continuing to include a subparagraph in the same terms as section 14(1)(o)(i) of the FAA (as in force immediately before commencement).

(7)

On and after commencement until the close of 31 May 2015, section 14(1) of the FAA must be treated as including a paragraph that refers to a licensed derivatives issuer providing a relevant service in the course of carrying on a business of dealing in derivatives under the licence.

(8)

During the transitional period, in section 18(1)(a) of the FAA, the reference to an FMCA financial product must be treated as including a reference to a security as defined in section 5 of the FAA immediately before commencement.

(9)

During the transitional period and without limiting sections 38 and 77O of the FAA as in force after commencement, sections 38 and 77O of the FAA, as in force immediately before commencement, continue to apply (and, for that purpose, sections 121 and 134B of the FAA also continue to apply).

(10)

During the transitional period, section 137M(a) of the FAA must be treated as including a reference to persistently contravening the 1978 Act.

4 Broker must pay client money into separate trust account and hold client property on trust

(1)

On and after commencement until the close of 30 November 2015, section 77P(1A) of the FAA, as in force after commencement, does not apply to an existing broker.

(2)

An existing broker is a person who, immediately before commencement, is registered for a broking service under the Financial Service Providers (Registration and Dispute Resolution) Act 2008.

5 Existing DIMS providers not subject to licensing until either 31 May 2015 or 1 December 2015

(1)

This clause applies to a person (A) who, immediately before commencement, is permitted to provide a DIMS under sections 17 to 20 of the FAA.

(2)

Section 388(c) of the Act does not apply to A on and after commencement until the close of 31 May 2015 in respect of the DIMS that A was permitted to provide as referred to in subclause (1).

(3)

Section 388(c) of the Act does not apply to A on and after 1 June 2015 until the close of 30 November 2015 in respect of the DIMS that A was permitted to provide as referred to in subclause (1) if,—

(a)

before 1 June 2015, an application is made under section 395 of the Act for a licence that would, if issued, cover the DIMS provided by A; and

(b)

investor money and investor property held on behalf of an investor under the service provided by A is held by a body corporate—

(i)

that A believes, on reasonable grounds, to be appropriate to hold, and safeguard, the money or property; and

(ii)

that is an associated person of A (other than by virtue of the custodianship) only if the application referred to in paragraph (a) also applies for a condition under regulation 200(b)(i) for the custodian to be permitted to be an associated person of A.

(4)

Subclause (3) ceases to apply to A if—

(a)

the FMA declines to issue a licence on the application referred to in subclause (3)(a); or

(b)

in a case where there is an application for a condition referred to in subclause (3)(b)(ii), the FMA gives written notice to A that the FMA will not impose that condition.

(5)

If section 388(c) of the Act does not apply to A under subclause (2) or (3), the FAA and regulations made under that Act, as in force immediately before commencement, continue to apply to a DIMS provided by A during the period in which section 388(c) of the Act does not apply.

(6)

Subclause (5) ceases to apply on a licence being issued that covers the DIMS provided by A.

6 How service disclosure statement for existing DIMS is made available to existing clients

(1)

This clause applies if—

(a)

a person (A)—

(i)

is, immediately before commencement, permitted to provide a DIMS under sections 17 to 20 of the FAA; and

(ii)

provides a DIMS under a licence (whether as the licensee or as an authorised body); and

(b)

A is providing a DIMS to an investor (B) under an investment authority that was granted before the licence is issued.

(2)

The requirement in sections 423 and 424 of the Act to provide an SDS relating to the DIMS to B does not apply.

(3)

However, subclause (2) ceases to apply on the specified date unless A, before the specified date, has sent a written notice that contains, or is accompanied by, the following information to B at B’s last known address:

(a)

a statement to the effect that the requirements of the Act apply to the DIMS on and after a date that is referred to in the statement (being the date on which the licence is issued):

(b)

the names and addresses of A and the custodian (if any):

(c)

either—

(i)

a copy of the SDS relating to the DIMS (being an SDS that complies with regulation 205 but subject to subclause (4)(b)); or

(ii)

a statement to the effect that B may obtain a copy of that SDS on request to the provider and also by electronic means, and a statement as to how B may obtain a copy of that SDS by electronic means (for example, from a specified Internet site address).

(4)

If subclause (2) applies,—

(a)

regulation 206 (investment proposal must be provided to investors) does not apply in relation to the DIMS provided by A to B; and

(b)

the SDS that is made available to B under subclause (3)(c)—

(i)

is not required to refer to the investment proposal; but

(ii)

must state that information about the investment strategy applying to the investor, and about the returns, fees, and expenses of that strategy, will be made available to the investor by way of regular reports made available to the investor; and

(c)

regulation 226(1)(a) does not apply to the client agreement in respect of the DIMS provided to B.

(5)

However, subclause (4)(c) ceases to apply on the specified date unless the SDS that is made available to B under subclause (3)(c) provides adequately for the matters in regulation 226(1)(a)(i) to (iv).

(6)

Section 437(2) to (4) of the Act does not apply to an investment authority referred to in subclause (1)(b).

(7)

However,—

(a)

subclause (6) ceases to apply on the specified date unless A, before the specified date, has sent a written notice that discloses the scope of the investment authority to B at B’s last known address, including the matters referred to in section 437(2)(a) to (c) of the Act; and

(b)

if there are no limits on the investment authority on a matter referred to in section 437(2)(a) or (b) of the Act or if the matter is capable of change without the prior written consent of B, the written notice under paragraph (a) must clearly disclose that fact.

(8)

This clause does not apply to an investment authority granted after the licence referred to in subclause (1) is issued.

(9)

This clause ceases to apply on the close of the 5-year date (as defined in section 547(6) of the Act).

(10)

In this clause, specified date means the later of—

(a)

1 December 2015; and

(b)

the date that is 3 months after the licence is issued to A.

Financial markets supervisors

7 Definitions extended to cover former law concepts

During the transitional period,—

(a)

the definition of debt security in section 4(1) of the FMSA must be treated as including a reference to a debt security as defined in the 1978 Act immediately before commencement:

(b)

the definition of governing document in section 4(1) of the FMSA must be treated as including a reference to a governing document as defined in that section immediately before commencement:

(c)

the definition of issuer in section 4(1) of the FMSA must be treated as including a reference to an issuer as defined in that section immediately before commencement:

(d)

the definition of issuer obligation in section 4(1) of the FMSA must be treated as including a reference to an issuer obligation as defined in that section immediately before commencement:

(e)

the definition of licensee obligation in section 4(1) of the FMSA must be treated as including a reference to a licensee obligation as defined in that section immediately before commencement:

(f)

the definition of registered scheme in section 4(1) of the FMSA must be treated as including a reference to the following:

(i)

a scheme in respect of a participatory security as defined in the 1978 Act immediately before commencement:

(ii)

a unit trust as defined in the 1978 Act immediately before commencement:

(iii)

a KiwiSaver scheme as defined in the section 4(1) of the FMSA immediately before commencement:

(g)

the definition of supervised interest in section 4(1) of the FMSA must be treated as including a reference to a supervised interest as defined in that section immediately before commencement:

(h)

the definition of supervised issuer in section 4(1) of the FMSA must be treated as including a reference to a supervised issuer as defined in that section immediately before commencement:

(i)

the definition of supervisor or statutory supervisor in section 4(1) of the FMSA must be treated as including a reference to a trustee or statutory supervisor as defined in that section immediately before commencement.

8 Existing licences continue and cover supervision

(1)

Every licence granted, before commencement, under section 10 of the FMSA that is in effect immediately before commencement continues in effect on and after commencement.

(2)

If the licence—

(a)

covers a security that is a managed investment product, the licence must also be treated as covering supervision of the scheme to which the product relates:

(b)

covers a security (other than a managed investment product), the licence must also be treated as covering supervision of the security:

(c)

covers a retirement village, the licence must also be treated as covering supervision of the retirement village.

(3)

Nothing in this clause affects the duration of the licence under section 12 of the FMSA or prevents the FMA from exercising any power in relation to the licence.

(4)

This clause ceases to apply on the close of the 5-year date (as defined in section 547(6) of the Act).

9 Extension of licences to cover substantially similar matters under new law

(1)

This clause applies to every licence granted, before commencement, under section 10 of the FMSA that is in effect immediately before commencement.

(2)

However, this clause does not apply to a licence if—

(a)

its coverage, in respect of securities, is limited to securities issued by reference to 1 or more particular issuers or classes of issuer; or

(b)

it applies only in respect of retirement villages.

(3)

The licence must be treated as having been varied with the effect that—

(a)

a trustee in respect of debt securities (before commencement) is also licensed to be a supervisor in respect of all debt securities (after commencement):

(b)

a statutory supervisor in respect of participatory securities (before commencement) is also licensed to be a supervisor in respect of all non-fund schemes (after commencement):

(c)

a trustee in respect of units in unit trusts (before commencement) is also licensed to be a supervisor in respect of all specified managed funds (after commencement):

(d)

a KiwiSaver trustee (before commencement) is also licensed to be a supervisor in respect of all KiwiSaver schemes (after commencement).

(4)

The licence continues to be subject to the conditions, limitations, or restrictions that, immediately before commencement, were imposed by or under the FMSA on the licence (except to the extent that those conditions, limitations, or restrictions are inconsistent with subclause (3)).

(5)

Nothing in this clause limits the continuing coverage of the licence after commencement.

(6)

However, this clause is subject to sections 148 and 149 of the Financial Markets (Repeals and Amendments) Act 2013 (which allow the FMA to vary licences).

(7)

This clause ceases to apply on the close of the 5-year date (as defined in section 547(6) of the Act).

(8)

In this clause,—

non-fund schemes means registered schemes other than managed funds

specified managed funds means managed funds other than KiwiSaver schemes, superannuation schemes, or workplace savings schemes.

KiwiSaver

10 KiwiSaver definitions and references

(1)

During the transitional period,—

(a)

the definition of administration manager in section 4(1) of the KSA (as in force after commencement) must, in respect of pre-transition KiwiSaver schemes, be treated as including a reference to an administration manager as defined in that section immediately before commencement:

(b)

the definition of complying superannuation fund in section 4(1) of the KSA (as in force after commencement) must be treated as including a reference to a complying superannuation fund as defined in section YA 1 of the Income Tax Act 2007 immediately before commencement:

(c)

the reference to a superannuation scheme in the definition of defined benefit scheme member in section 4(1) of the KSA (as in force after commencement) must be treated as including a reference to a registered superannuation scheme as defined in that section immediately before commencement:

(d)

the definitions of defined contribution scheme, independent trustee, investment manager, investment statement, KiwiSaver schemes register, nominated person, nominee, promoter, registered superannuation scheme, related company, trustee corporation, trustees, and umbrella trust in section 4(1) of the KSA as in force immediately before commencement continue to apply in respect of pre-transition KiwiSaver schemes:

(e)

paragraph (d) of the definition of fee in section 4(1) of the KSA (as in force after commencement) must be treated as including a reference to a fee referred to in section 200 of the KSA (as in force immediately before commencement) or charged under regulations made under section 228(c) of the KSA (as in force immediately before commencement):

(f)

the definition of KiwiSaver scheme in section 4(1) of the KSA (as in force after commencement) must be treated as including a reference to a pre-transition KiwiSaver scheme:

(g)

the definition of manager in section 4(1) of the KSA (as in force after commencement) must, in relation to a pre-transition KiwiSaver scheme—

(i)

that is a restricted scheme (as defined in that section immediately before commencement), be treated as including a reference to the trustees as defined in that section immediately before commencement:

(ii)

that is not such a restricted scheme, be treated as including a reference to the person designated or appointed under the trust deed as manager of the scheme:

(h)

the definition of member’s accumulation in section 4(1) of the KSA (as in force after commencement) must be treated as including a reference to a member’s accumulation as defined in that section immediately before commencement:

(i)

the definition of member’s interest in section 4(1) of the KSA (as in force after commencement) must be treated as including a reference to a member’s interest as defined in that section immediately before commencement:

(j)

the definition of restricted scheme in section 4(1) of the KSA (as in force after commencement) must be treated as including a reference to a restricted scheme as defined in that section immediately before commencement:

(k)

the definition of supervisor in section 4(1) of the KSA (as in force after commencement) must, in relation to a pre-transition KiwiSaver scheme (other than a restricted scheme referred to in paragraph (g)(i)), be treated as including a reference to the person who is designated or appointed as trustee of the scheme under the trust deed or the successor of that person:

(l)

the definition of trust deed in section 4(1) of the KSA (as in force after commencement) must be treated as including a reference to a trust deed as defined in that section immediately before commencement.

(2)

Until the close of 30 November 2016, in relation to a pre-transition KiwiSaver scheme,—

(a)

the following references in the KiwiSaver Regulations 2006 must be treated as references to the trustees of the scheme:

(i)

the reference to the manager in regulation 8(1):

(ii)

the references to the supervisor in regulation 9(2)(c)(ii) and (iii):

(b)

the references in Schedule 1 of the KiwiSaver Regulations 2006 to supervisor fees must be treated as references to trustee fees.

Schedule 1 clause 10 heading: replaced, on 31 July 2015, by regulation 4(1) of the Financial Markets Conduct (KiwiSaver) Amendment Regulations 2015 (LI 2015/182).

Schedule 1 clause 10(2): inserted, on 31 July 2015, by regulation 4(2) of the Financial Markets Conduct (KiwiSaver) Amendment Regulations 2015 (LI 2015/182).

11 Former provisions of KiwiSaver Act 2006 and of regulations continue to apply in certain circumstances

(1)

During the transitional period,—

(a)

in sections 18, 43, 50, 133, and 161 of the KSA (as in force after commencement), each reference to a product disclosure statement must be treated as including a reference to an investment statement:

(b)

in subpart 4 of Part 4 of the KSA (as in force after commencement), the references to a superannuation scheme must be treated as including references to a pre-transition superannuation scheme:

(c)

if an employer’s choice of KiwiSaver scheme referred to in section 48(1) of the KSA (as in force after commencement) is a pre-transition KiwiSaver scheme, section 48(2) to (6) of the KSA as in force immediately before commencement continues to apply (instead of section 48(2) to (5) of the KSA as in force after commencement):

(d)

section 49(1) of the KSA (as in force after commencement) does not limit section 119G of the KSA as in force immediately before commencement (to the extent that section 119G continues to apply):

(e)

sections 50(4)(b) to (c), 52, and 57(1)(b) to (c) of the KSA as in force immediately before commencement continue to apply to pre-transition KiwiSaver schemes (instead of sections 50(4)(b) to (c), 52, and 57(1)(b) to (c) of the KSA as in force after commencement):

(f)

if the old scheme referred to in section 56(5) of the KSA (as in force after commencement) is a pre-transition KiwiSaver scheme, section 56(6) of the KSA as in force immediately before commencement continues to apply (instead of section 56(6) of the KSA as in force after commencement):

(g)