Dated at Auckland this 18th day of November 2016.
Statement of reasons
This notice comes into force on 1 December 2016 and is revoked on the close of 30 November 2021.
On and from 1 December 2016 (or earlier if the issuer so elected), certain ongoing and transitional obligations of the Financial Markets Conducts Act 2013 (the FMC Act) will apply to the shares, ie, subpart 4 of Part 3 of the FMC Act (ongoing disclosure), Part 4 of the FMC Act (governance of financial products), Part 7 of the FMC Act (financial reporting and audit), clause 30 of Schedule 4 of the FMC Act, any regulations made for the purposes of subpart 4 of Part 3, Part 4, or Part 7 of the FMC Act, and any other provision of the FMC Act relating to the enforcement, application, or effect of subpart 4 of Part 3, Part 4, or Part 7 of that Act.
This notice exempts the companies from these ongoing requirements in respect of these shares. Companies relying on this notice may still be required to comply with the more limited financial reporting and auditing requirements of the Companies Act 1993. The effect of this exemption is to better align the requirements relating to these previously offered securities with the requirements that apply to securities offered in reliance on the exclusion for employee share purchase schemes in clause 8 of Schedule 1 of the FMC Act.
The Financial Markets Authority (the FMA), after satisfying itself as to the matters set out in section 557 of the FMC Act, considers it appropriate to grant the exemptions because—
the exemptions provide for securities previously offered through employee share purchase schemes under the Securities Act 1978 to be treated more consistently with securities offered through employee share purchase schemes under the FMC Act. Without these exemptions, unlisted New Zealand companies that have previously offered securities through employee share purchase schemes would incur significantly higher compliance costs than unlisted New Zealand companies offering financial products under the FMC Act:
the exemptions strike a balance between lowering compliance costs for companies that have previously offered securities through employee share purchase schemes and providing sufficient information in financial reporting for employees to make informed decisions about the securities offered through these schemes. Consistent with the policy for the exclusion for employee share purchase schemes in clause 8 of Schedule 1 of the FMC Act, the FMA considers that the reduced compliance requirements provided by the exemptions are appropriate in light of the nature of the relationship between the company and its employees, and the desirability of encouraging participation in employee share purchase schemes by reducing unnecessary compliance costs and providing for more tailored content:
given the comprehensive relief provided to these issuers under this exemption, the requirement to notify employees that the FMC Act will apply after the shares transition to the new regime would be both misleading and confusing, and therefore that notice should be tailored to take into account the effect of this exemption:
for these reasons, the exemptions are desirable in order to promote the purposes of the FMC Act, specifically avoiding unnecessary compliance costs:
the exemptions are limited to securities previously offered through employee share purchase schemes in reliance on the Securities Act notice by unlisted companies incorporated in New Zealand. Further, companies relying on the exemptions will still need to comply with the financial reporting and auditing requirements imposed by the Companies Act 1993. As such, the FMA is satisfied that the exemptions are not broader than is reasonably necessary to address the matters that gave rise to them.
Date of notification in Gazette: 24 November 2016.
This notice is administered by the Financial Markets Authority.