Financial Markets Conduct (Unlisted Market) Regulations 2015

2015/253

Coat of Arms of New Zealand

Financial Markets Conduct (Unlisted Market) Regulations 2015

Jerry Mateparae, Governor-General

Order in Council

At Wellington this 27th day of October 2015

Present:
His Excellency the Governor-General in Council

Pursuant to section 545(1)(m) 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 545(3), 549, and 550 of that Act, makes the following regulations.

Regulations

1 Title

These regulations are the Financial Markets Conduct (Unlisted Market) Regulations 2015.

2 Commencement

These regulations come into force on 1 December 2015.

3 Interpretation

(1)

In these regulations, unless the context otherwise requires,—

approved broker means a broker who is an authorised financial adviser within the meaning of those terms in the Financial Advisers Act 2008

audited financial statements means financial statements of the issuing group that have been prepared in accordance with generally accepted accounting practice and that have been audited by a qualified auditor

EMS means Efficient Market Services Limited

issuer means an issuer that is, or that has applied to be, a party to an agreement with EMS providing for the issuer’s financial products to be approved for trading on Unlisted

material enforcement action means any material enforcement action taken by EMS against any approved broker or issuer participating on Unlisted, and includes, but is not limited to, the issuing of a warning or trading suspension

rules means the market rules for Unlisted

Unlisted means the financial product market operated by EMS under that name

Unlisted Internet site means the Internet site maintained by, or on behalf of, EMS in respect of Unlisted, including for the purposes of operating Unlisted online.

(2)

Any term or expression that is defined in the Act or the Financial Markets Conduct Regulations 2014 and used, but not defined, in these regulations has the same meaning as in the Act or those regulations.

4 Exemption in respect of licensing of markets for trading financial products

(1)

Unlisted is exempt from the operation of subpart 7 of Part 5 of the Act.

(2)

Unlisted is therefore a prescribed exempt market for the purpose of section 312(1)(c) of the Act.

5 Conditions of exemption

The exemption in regulation 4 is subject to the following conditions:

Conditions related to Unlisted

(a)

EMS must not hold out that it has a financial product market licence or that the operation of Unlisted is authorised by a financial product market licence; and

(b)

EMS must ensure that the Unlisted Internet site contains at all reasonable times a reasonably prominent warning statement that, to the satisfaction of the FMA, states that Unlisted is not a licensed market and specifies the investor protection mechanisms in Part 5 of the Act that do not apply to Unlisted; and

(c)

EMS must promptly advise the FMA if EMS has any reasonable grounds to believe that any approved broker or issuer participating on Unlisted has breached Part 2 of the Act; and

(d)

EMS must advise the FMA of any material enforcement action taken against any approved broker or issuer participating on Unlisted immediately upon the action being taken; and

(e)

EMS must inform the Minister and the FMA immediately if EMS becomes aware or has reasonable grounds to believe that—

(i)

EMS is, or is likely to become, subject to an insolvency event; or

(ii)

a director or senior manager of EMS, or any of the key personnel of EMS, is adjudicated bankrupt or is likely to be adjudicated bankrupt (whether in New Zealand or overseas); and

(f)

EMS must inform the Minister before there is a sale of all or a substantial part of the assets of EMS, or a merger, a consolidation, or an acquisition of EMS, or any change of ownership of more than 50% of the voting rights in EMS; and

(g)

EMS must provide an annual report to the Minister each August that—

(i)

summarises aggregate trade volumes and values on Unlisted, on a per issuer basis; and

(ii)

contains a list of approved brokers and issuers participating on Unlisted (including any changes during the period to which the report relates); and

(iii)

states the number of shares of each issuer participating on Unlisted, and the overall value of each issuer, as at the date of the report; and

(iv)

contains a list of any complaints received, and any disciplinary actions taken, in respect of Unlisted or any approved broker or issuer participating on Unlisted; and

(h)

EMS must keep, to the satisfaction of the FMA, a record of each transaction that occurs on Unlisted; and

(i)

EMS must promptly provide, on request by the FMA or the Takeovers Panel, any information within EMS’s possession or control about Unlisted, or about any approved broker or issuer participating on Unlisted, or about any activity carried out on Unlisted, that the FMA or the Takeovers Panel considers necessary or desirable to request for the purposes of performing its functions; and

(j)

EMS must co-operate with the FMA and the Takeovers Panel in the exercise of any of their powers to investigate dealings or conduct in relation to financial products on Unlisted; and

Conditions related to Unlisted rules

(k)

EMS must ensure that a copy of the rules is available for public inspection, free of charge and during normal office hours, at the head office of EMS and is published on the Unlisted Internet site at all reasonable times; and

(l)

the rules must provide that all sales and purchases of financial products on Unlisted are required to be executed by, or actioned through the agency of, an approved broker; and

(m)

the rules must require an approved broker, in respect of each participating investor, to obtain, before acting for the first time after 1 December 2015 on that investor’s instructions to trade on Unlisted, an acknowledgement from the investor that the investor knows that Unlisted is an unlicensed market and that the investor protection mechanisms in Part 5 of the Act do not apply to Unlisted; and

(n)

EMS must inform the FMA before making any change to the rules; and

Conditions relating to Unlisted rules about financial statements of issuers

(o)

the rules must provide that all issuers must, at the time of entering into an agreement with EMS providing for the issuer’s financial products to be approved for trading on Unlisted, make publicly available, on an Internet site maintained by or on behalf of the issuer, at all reasonable times, one of the following:

(i)

audited financial statements for the issuing group’s most recent accounting period; or

(ii)

if there is no relevant period under subparagraph (i) but a member of the issuing group has commenced business and has acquired an asset or has incurred a debt on or before the date of entering into an agreement with EMS providing for the issuer’s financial products to be approved for trading on Unlisted, audited financial statements for the issuing group for the period from the date of commencement of business and ending on a stated date that is not more than 4 months before the date of entering into an agreement with EMS providing for the issuer’s financial products to be approved for trading on Unlisted; and

(p)

the rules must provide that all issuers must, while the financial products of the issuer are approved for trading on Unlisted, make publicly available, on an Internet site maintained by or on behalf of the issuer, at all reasonable times, annual audited financial statements for the issuing group’s most recently completed accounting period.

Michael Webster,
Clerk of the Executive Council.

Explanatory note

This note is not part of the regulations, but is intended to indicate their general effect.

These regulations, which come into force on 1 December 2015, exempt, on conditions, Unlisted, a financial product market operated by Efficient Market Services Limited, from the operation of subpart 7 of Part 5 of the Financial Markets Conduct Act 2013, which relates to the licensing of markets for trading financial products.

One of the principal effects of the exemption is that the provisions of Part 5 of that Act will not apply to Unlisted, for example, the rules relating to insider trading, market manipulation, continuous disclosure, disclosure by substantial product holders, and disclosure by directors and senior managers.

Regulatory impact statement

The Ministry of Business, Innovation, and Employment produced a regulatory impact statement on 12 August 2015 to help inform the decisions taken by the Government relating to the contents of this instrument.

Issued under the authority of the Legislation Act 2012.

Date of notification in Gazette: 29 October 2015.

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