Securities Act (Banks' Regulatory Capital) Exemption Amendment Notice 2014

2014/400

Coat of Arms of New Zealand

Securities Act (Banks' Regulatory Capital) Exemption Amendment Notice 2014

Pursuant to sections 70B and 70D of the Securities Act 1978, the Financial Markets Authority, being satisfied of the matters set out in section 70B(2) of that Act, gives the following notice.

Notice

1 Title
  • This notice is the Securities Act (Banks’ Regulatory Capital) Exemption Amendment Notice 2014.

2 Commencement
  • This notice comes into force on 19 December 2014.

3 Principal notice
4 Clause 6 amended (Conditions of exemption in clause 5)
  • (1) After clause 6(d)(xviii), insert:

    • (xix) a statement to the effect that the issuer of the relevant convertible security is relying on this notice together with a summary of the conditions set out in paragraphs (e) to (i) and a statement to the effect that those conditions apply for the benefit of subscribers for the relevant convertible security and any subsequent holder of the security; and.

    (2) Replace clause 6(g) with:

    • (g) the continuous disclosure information for the relevant convertible security and the specified equity security must be notified to the operator of the specified securities market on which the relevant security is quoted within the time required by that market's continuous disclosure rules (for the purpose of that information being made available to participants in that market), unless the relevant security has been delisted; and.

    (3) Replace clause 6(h)(i) with:

    • (i) the continuous disclosure information for the delisted security that would have been required to have been disclosed if the security had not been delisted must be notified to the operator of the specified securities market for the listed security within the time required by that market's continuous disclosure rules (for the purpose of that information being made available to participants in that market); and.

    (4) In clause 6, insert as subclauses (2) and (3):

    • (2) The exemption in clause 5 is subject to the further condition that the terms of the relevant convertible security must include a requirement (being a term that continues to apply after this notice is revoked) that the issuer of the relevant convertible security—

      • (a) will comply with the condition in subclause (1)(e); and

      • (b) if it is also the issuer of the specified equity security, will comply with the conditions in subclause (1)(f) to (i); and

      • (c) if it is not the issuer of the specified equity security,—

        • (i) will use reasonable endeavours to ensure that the issuer of the specified equity security complies with the condition in subclause (1)(f); and

        • (ii) will comply with the conditions in subclause (1)(g) to (i) to the extent that the conditions relate to matters within the control of the issuer of the relevant convertible security; and

        • (iii) will use reasonable endeavours to ensure that the issuer of the specified equity security complies with the conditions in subclause (1)(g) to (i) to the extent that the conditions relate to matters within the control of the issuer of the specified equity security.

    • (3) Subclauses (1)(d)(xix) and (2) do not apply if the date as at which the investment statement was prepared is on or before 18 December 2014.

Dated at Wellington this 16th day of December 2014.

Liam Mason,
General Counsel.


Statement of reasons

This notice, which comes into force on 19 December 2014, amends the Securities Act (Banks’ Regulatory Capital) Exemption Notice 2014 (the principal notice). Among other things, the principal notice provides an exemption for registered banks and their parent entities from the requirements in the Securities Act 1978 (the Act) to register a prospectus and provide a separate investment statement for equity securities to be issued on conversion of certain regulatory capital instruments. However, this exemption applies only if certain conditions are met. This notice inserts 2 new conditions into the principal notice and makes technical amendments to 2 existing conditions. The first new condition requires a registered bank seeking to rely on the exemption to include additional statements in the investment statement under which the relevant convertible security will be issued. The second new condition requires the registered bank to issue the relevant convertible security on terms that include a requirement to comply (and to continue to comply after the notice is revoked) with the conditions in clause 6(1)(e) to (i) of the principal notice. However, if the issuer of the equity security on conversion is the registered bank’s parent, the requirement to comply with some conditions becomes a requirement to use reasonable endeavours to ensure that the parent complies with those conditions (to the extent that compliance with those conditions is within the control of the parent). The 2 new conditions apply in respect of investment statements that are prepared as at a date that is on or after the commencement of this notice.

The principal notice applies for the purposes of the transitional provisions under the Financial Markets Conduct Act 2013 and the Financial Markets Conduct Regulations 2014. (See, in particular, Schedule 4 of that Act and clause 29 of Schedule 1 of those regulations.)

The Financial Markets Authority (the FMA), after satisfying itself as to the matters set out in section 70B(2) of the Act, considers it appropriate to amend the principal notice because—

  • requiring the investment statement to clearly set out the basis on which the offer of convertible securities is made and the conditions that apply under the principal notice ensures that investors will receive the most relevant information to help them make informed investment decisions; and

  • requiring that the conditions related to continued provision of information under the principal notice apply for the benefit of subsequent holders and initial investors as terms of the relevant convertible security clarifies that those conditions apply as a matter of contract between the issuer and investors after the Act and the principal notice cease to apply; and

  • investors will receive additional information about the basis on which the offer of the convertible securities and the underlying equity securities is made and in those circumstances the FMA considers that the exemption as varied will not cause significant detriment to subscribers of the convertible securities; and

  • the principal notice applies only to registered banks issuing regulatory capital instruments in accordance with the requirements set by the Reserve Bank of New Zealand and the Australian Prudential Regulation Authority. As a result, the FMA remains of the view that the exemption as varied is not broader than is reasonably necessary to address the matters that gave rise to it.


Issued under the authority of the Legislation Act 2012.

Date of notification in Gazette: 18 December 2014.

This notice is administered by the Financial Markets Authority.