Dated at Auckland this 1st day of August 2016.
Statement of reasons
This notice comes into force on 8 August 2016 and is revoked on the close of 6 August 2021.
The notice relates to certain offers of financial products that are made under, or in connection with, employee share purchase schemes. The notice exempts those offers from disclosure requirements under Part 3 of the Financial Markets Conduct Act 2013 (the Act). Offers of debt securities are also exempted from Part 4 of the Act.
The notice also provides that the offers exempted by this notice are not regulated offers under the Act. This means that other requirements of the Act, or other Acts, that apply in connection with regulated offers (such as the financial reporting requirements) will not apply. Any other financial market conduct obligations the exempted entity may have, including obligations under Part 2 of the Act, are not affected.
The exemptions are similar to an exclusion relating to employee share purchase schemes in clause 8 of Schedule 1 of the Act (the Schedule 1 exclusion). However, the exemptions go further than the Schedule 1 exclusion to—
cover offers of financial products to trusts and relatives of employees and of other eligible persons to which the Schedule 1 exclusion relates (or to companies controlled by any of those persons):
cover offers of debt securities made in connection with the acquisition of equity securities under an employee share purchase scheme:
address certain technical issues with the operation of the 10% limit on the number of equity securities issued or transferred in a 12-month period.
The exemptions are subject to conditions that are consistent, as far as practicable, with the requirements of clause 8 of Schedule 1 of the Act and clauses 10 to 12 of Schedule 8 of the Financial Markets Conduct Regulations 2014 (which relate to the Schedule 1 exclusion). Offers of debt securities are subject to the additional conditions—
that the employee share purchase scheme is also offered in a specified overseas jurisdiction; and
that provide for the money paid to acquire the debt securities to be held in a separate bank account.
The Financial Markets Authority (the FMA), after satisfying itself as to the matters set out in section 557 of the Act, considers it appropriate to grant the exemptions because—
the exemptions recognise situations where eligible persons do not elect to participate directly in employee share purchase schemes, but participate instead through other vehicles such as family trusts. The FMA considers that offers to these vehicles remain in substance employee share offers and would otherwise have fallen within the Schedule 1 exclusion; and
debt securities are commonly offered in connection with the employee share purchase schemes operated by large overseas companies or their local subsidiaries. These debt securities are savings arrangements. The savings arrangement is temporary, does not have an investment purpose, and is oriented towards the eventual issue of an equity security. In these circumstances, Part 3 disclosure would provide limited value to investors. As the offer of the debt security is typically connected to a larger international employee share scheme, the requirement to prepare Part 3 disclosure may result in these offers not being extended to New Zealand; and
for technical reasons, there are circumstances where issuers cannot satisfy (or find it difficult in practice to satisfy) clause 8(1)(c)(ii) of Schedule 1 of the Act (which limits the number of products issued or transferred under the scheme to 10% of the products of the issuer). The effect of the exemptions is to provide a meaningful basis for the 10% limit; and
as such, the FMA is satisfied that the granting of the exemptions is desirable in order to promote the purposes of the Act, specifically to avoid unnecessary compliance costs to promote flexibility in financial markets; and
the exemptions are limited to the particular difficulties experienced by certain offer types that are made under, or in connection with, employee share purchase schemes. Given the limited application of the exemptions and that eligible investors will still have access to all of the information required by the Schedule 1 exclusion, the exemptions are not broader than is reasonably necessary to address the matters to which they relate.
Date of notification in Gazette: 4 August 2016.
This notice is administered by the Financial Markets Authority.