The main purposes of the Financial Markets Conduct Bill are to promote and facilitate the development of fair, efficient, transparent financial markets and to promote the confident and informed participation of businesses, investors, and consumers in the financial markets. The bill seeks to achieve these ends by reforming the regulation of financial market conduct. It seeks to govern the way financial products are offered, promoted, issued, and sold, and the ongoing responsibilities of those who offer, issue, manage, supervise, deal in, and trade them. It also seeks to regulate the provision of certain financial services.

This commentary covers the key amendments that we recommend to the bill. It does not cover the large number of minor or technical amendments proposed to improve workability, drafting, clarity, and legal efficacy. These amendments include

•an exception to the prohibition of offers in the course of unsolicited meetings, to allow authorised financial advisers to continue their established business practice in this respect (clause 26A(2)(b))
•allowing requests for relevant information to be made all the way up the chain of ownership to trace interests in listed issuers, and allowing requests to be made for purposes other than substantial security holdings (clause 284)
•removing the requirement in clauses 287 to 290 for public issuers to maintain a register of substantial product holder disclosures for public inspection
•a new general offence for false or misleading statements, based on section 377(1) of the Companies Act 1993 (clause 498A)
•specific requirements for market operators of domestic financial product markets, licensed providers of market services under Part 6 of the bill, and supervisors under the Financial Markets Supervisors Act 2011 to be registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (see proposed changes to clauses 314(c), 322(ba), 394(f), and 646(2) and Part 1 of Schedule 4)
•amendments to section 14 of the Financial Service Providers (Registration and Dispute Resolution) Act to extend the current bans on persons being directors, senior managers, or controlling owners to include overseas bans (see Part 1 of Schedule 4 of the bill)
•new transitional provisions for participatory securities that would not be financial products under the bill and for interests in contributory mortgages (clauses 31 and 46 of Schedule 5)
•shifting various provisions, including shifting provisions on accounting records to a new Part 6A, and shifting transitional provisions to a new Schedule 5.

Liability regime (criminal and civil)

The liability regime proposed in the bill sets out the circumstances where liability would arise for contraventions of its provisions, including those in which investors could seek compensation and in which company directors and others could be criminally prosecuted. While the regime in the bill is fundamentally sound, we recommend a number of amendments to make clear the precise circumstances where liability would arise under this regime.

Criminal liability

We recommend amendments to Part 7 of the bill to establish a separate criminal liability for a director where there is a disclosure defect (for example, a false statement in a product disclosure statement) that is materially adverse from an investor’s point of view. The offence would be committed if the offer took place with the director’s authority, permission, or consent, and the director knew of, or was reckless as to whether there was a defect (see clause 488(1A)). This would function in a very similar way to section 242 of the Crimes Act 1961.

A key change proposed by the bill is to make the offerors of products and the directors of companies criminally liable for inaccurate statements about products in disclosure documents, but only if the Crown could prove a “guilty mind”. This would move the focus of criminal liability towards the offeror; it includes fault elements for significant offences, generally knowledge or recklessness, in line with the Crimes Act offence for a false statement made by a promoter. We understand that recklessness is also a fault element in the equivalent Australian legislation.

In the case of criminal accessory liability, we consider that the ordinary rules under Part 4 of the Crimes Act should apply. Under these rules a person who promotes an offer would be liable for a false statement made by an offeror if, for example, the promoter committed or omitted an act for the purpose of aiding any person to commit the offence.

We believe that the liability regime should not discourage capable prudent people from becoming directors with overly punitive sanctions, and companies should be able to attract directors with diverse skills and backgrounds. Although directors should supervise capital raising and exercise due diligence regarding offer documents, they should be able to focus mainly on business strategy and supervising management, rather than on compliance and liability. Directors should be liable for civil pecuniary penalties and to compensate investors that lose money if they fail to perform their duties, but should not be liable to imprisonment where there is no fault element.

Civil liability—liability of accessories

We recommend that a new term (“involvement in a contravention”) be used to refer to the behaviour of accessories in the civil context (clause 509). This would clarify how the application of the bill applies to people who were, for example, knowingly concerned in, or party to, the contravention. We are satisfied that “involvement in a contravention” is an appropriate test with a sufficiently high threshold.

We are aware of concern that professional advisers might risk being involved in a contravention in the course of their normal activities. We do not expect this to happen. This test is consistent with equivalent provisions in the Australian Corporations Act 2001 and in other New Zealand laws, including the Commerce Act 1986 and Fair Trading Act 1986, and reflects the rules for parties under the criminal law. For a person to be involved in a contravention, it would need to be proved that he or she was an intentional participant in the primary contravention with knowledge of all the essential facts.

In addition, some of the defences in the bill are more suitable for the primary person in a contravention than for accessories. This uncertainty could lead to expensive and inefficient efforts to limit liability risk. We therefore recommend amendments to broaden the range of defences available to accessories, including defences for reasonable reliance and taking reasonable and proper steps to ensure compliance (clause 482E).

In addition, we recommend changes to the Financial Markets Authority’s order powers to provide for orders to be made preventively when provisions are likely to be contravened (clauses 448, 453, and 455). This would allow the Financial Markets Authority to take a proactive approach in situations in which provisions of the bill might be contravened.

Defences to civil liability

The defences part of the civil liability regime specifies the minimum standard of behaviour or actions that must have been demonstrated to avoid liability. We recommend amendments to include defences that apply to disclosure contraventions and more general defences for other kinds of contraventions (clauses 482A to 482C).

We consider it is necessary for the primary contravener to have a defence if it reasonably relied on a person other than their director, employee, or agent; if (in relation to disclosure) it made all the enquiries that were reasonable in the circumstances and believed on reasonable grounds that the disclosure was not defective; and, in the case of a new circumstance that should have been disclosed, if it was not aware of the matter. Our recommended amendment would give a director of the contravener access to these defences, and to a defence if he or she took all reasonable and proper steps to ensure that the company complied.

We consider that these amendments to the provisions for defences to civil liability would provide certainty for those who might be liable under the bill, and make it clear how the defences would work under the legislation. However, we do not consider that making out a defence should be easy. A defendant who wants to rely on a defence under the bill would have to prove it—they could not simply claim that the defence applies.

Presumption that contravention caused loss

As introduced, the bill presumes that when financial products decline in value as a result of a material defect in disclosure (such as a materially misleading statement), the investor would be treated as suffering a loss unless the decline in value was proved to have had another cause. We consider that clause 480 is an appropriate response to the difficulty for investors of proving that defective disclosure caused them loss. However, the provision should relate only to causation, and we recommend amendments to make it clear that the amount of the investor’s loss that should be compensated for is not determined by the clause; it would be up to a court to decide how much compensation would be awarded.

Indemnities and insurance

We recommend amendments to the indemnity and insurance provisions set out in clauses 503 to 506 of the bill, so that indemnity and insurance restrictions regarding New Zealand companies and their directors and employees would be governed by the Companies Act, rather than these provisions in clauses 503 to 506. This would remove duplication and potential conflict in legislation. We believe these amendments would provide a simple regime that would aid compliance.

The provisions would continue to apply to the auditors of New Zealand companies, and to overseas companies and other non-company entities.

We also recommend that the indemnity and insurance provisions be extended to cover licensees (including supervisors) to ensure that the regime is comprehensive, and certain other changes for consistency with the Companies Act.

Directors’ assets

We are aware of concern that directors might be unable to pay penalties or compensate investors, since most directors’ assets can be transferred to trusts. The use of trusts in commercial and asset-protection contexts has implications beyond the scope of this bill.

Relationship with Fair Trading Act 1986

Part 2 of the bill replicates key parts of the Fair Trading Act and applies them to financial services and products. We recommend amending Part 9 (clause 567) so that equivalent provisions in the Fair Trading Act would not apply to financial products and financial services regulated by Part 2 of the bill. This would remove uncertainty over which law applies. Misleading and deceptive conduct in relation to financial services and products would be regulated solely by this legislation. In addition, we recommend amendments to Part 2 of the bill to improve consistency with the Fair Trading Act.

We note that the Consumer Law Reform Bill (which is currently before the Commerce Committee) has implications for Part 2 of the bill. If the Fair Trading Act is amended to include prohibitions on unsubstantiated representations or unfair contract terms, these rules should be replicated in Part 2 for consistency.

Discretionary investment management services

Part 6 of the bill proposes new requirements for providers of discretionary investment management services (DIMS) and other providers of market services. We recommend amendments to clarify the boundary between the DIMS covered by the bill and those that fall under the Financial Advisers Act 2008, and make it less subject to arbitrage. These amendments to clause 573 redefine a personalised DIMS to make it clear that providing the client with multiple options in a model portfolio, or allowing investors to make minor modifications to such a portfolio, would not constitute personalisation.

We also recommend amending the bill (in clause 387A(2)(a)) to exclude from the need for a licence for DIMS that are not retail services under the bill, rather than relying solely on the exclusion under the Financial Advisers Act (see clause 572(1)). Retail services as defined in clause 33A of Schedule 1 would exclude services provided only to wholesale investors. We recommend amendments to ensure that the additional requirements for disclosure, client agreements, and for duties of DIMS licensees and custodians under subparts 4 to 6 of Part 6 apply also in respect of the retail service.

Further, we recommend that a DIMS licensee with a corporate licence under the bill be allowed to provide financial advice under that licence to the extent that the advice is given in the ordinary course of, and incidentally to, providing the DIMS under its licence, for example in relation to selecting investment options, reinvestment, and switching (see clause 390A(1)(b)). We believe these services are integral to providing the DIMS itself.

Treatment of derivatives—disclosure

We recommend amendments to the bill to clarify the provisions relating to derivatives, which differ from other financial products, and the business models through which derivatives are typically offered.

The amendments we propose would make clear that a product disclosure statement could be lodged for a derivative product type, rather than for each individual derivative contract (clause 33A). This would ensure that when issuers of derivatives made offers to many investors, each offer would not require a separate product disclosure statement. We recommend also a requirement that customised terms for specific investors not be disclosed (clause 43(2)). For the purposes of clarity, the bill’s scheme in respect of derivatives is outlined below:

If a derivative were entered into between

•a licensed derivatives issuer and a retail investor (for example, a bank and a customer), then the issuer must make disclosure because of clause 27, but the retail investor need not because of exclusions in Schedule 1, including clause 35(1)(f).
•a person who is in the business of entering into derivatives and an investor who is not (for example, an energy company and a retail investor), then the first person needs to be licensed because of clause 387(d) and must make disclosure because of clause 27, but the investor does not because of exclusions in Schedule 1, including clause 35(1)(f).
•two licensed derivatives issuers (for example, two banks), then disclosure is not required because of exclusions in Schedule 1, including clause 35(1)(f).
•two wholesale investors (for example, two large energy companies), then disclosure is not required because of the exclusion in clause 3(1) of Schedule 1.
•two investors who are not in the business of issuing derivatives, then disclosure is not required because of the exclusion in clause 19(1) of Schedule 1.

Treatment of derivatives—new exceptions

Schedule 1 of the bill outlines the provisions relating to disclosure requirements and exclusions. As introduced, the bill provides an exclusion from providing a product disclosure statement to an investor for an offer of financial products where the minimum amount payable by the investor is at least $500,000. This exclusion is carried over from the Securities Act 1978 and is intended to provide a bright-line test for offers to wholesale investors.

This exclusion would not apply to many derivatives, as they seldom require large up-front payments. To provide an equivalent exclusion for derivatives, we recommend that the exclusion in clause 3 of Schedule 1 for offers with a minimum investment of $500,000 be accompanied by an exclusion for derivatives with a minimum notional value of $5 million.

Schedule 1 exclusions

Schedule 1 also provides various disclosure exclusions for offers under Part 3 of the bill. These exclusions would apply for investors who are considered to be capable of evaluating the merits of the offer or accessing the information they need, or where full product disclosure is otherwise not needed, because, for example, of the investor’s size and experience or relationship with the issuer.

We consider that significant changes should be made to two particular exclusions, as follows:—

Clause 36 of Schedule 1 specifies the criteria an investor must meet to be classified as a wholesale investor. We recommend reducing the criteria to three, of which the investor must meet one, simplifying the identification of sophisticated investors.

We recommend reducing the threshold defining a “large” person for the purposes of the wholesale investor exclusion in clause 37 of Schedule 1 to net assets of $5 million or turnover of $5 million in each of the past two years, from total assets of $10 million or turnover of $20 million over the past two years. Few businesses or individuals in New Zealand were likely to meet the higher threshold. We believe that an individual or business meeting the lower threshold is likely to be sufficiently sophisticated to participate in wholesale offers of financial products.

We recommend inserting a new exclusion for offers of financial products of the same class as quoted financial products (clause 18A of Schedule 1). We consider that continuous disclosure obligations to which a listed issuer would be subject would ensure that the market had already priced the risk associated with these products.

Principal purpose of superannuation schemes

The bill as introduced seeks to change the current law so that the sole purpose of a registered superannuation scheme must be to provide retirement benefits (clause 115). If a scheme has purposes that are not merely incidental to providing retirement benefits, we consider it should be registered as a standard managed investment scheme. However, we recommend some amendments to the application of this rule to allow existing superannuation schemes (or sections of them) to retain a “principal retirement purpose” if the scheme (or section) is closed to new members (clause 116(2)); and to allow workplace schemes (as defined in regulations) to provide benefits and allow withdrawals on leaving employment with the relevant workplace or industry (clause 116(3)).

We also recommend changes to clause 114(1) and clause 115(1) to restrict the provision of benefits, as well as redemptions and withdrawals, to the retirement purpose, and also to clarify that the potential for early withdrawal in accordance with the KiwiSaver Act 2006 (for example to facilitate first-home ownership) is not inconsistent with the sole purpose test.

Related parties for restricted schemes

Clause 161 places a 5% limit on investments in related parties of restricted schemes. This means that a restricted superannuation scheme provided to a company’s employees could not invest more than 5% of the scheme’s property back into the company. We support retaining this restriction on related party holdings for restricted schemes, and consider it is set at the appropriate level. It would provide the manager of the scheme with some flexibility to invest in a related party, but avoids excessive related party concentration.

However, we recommend that the 5% limit apply separately to non-associated persons. We consider it is necessary to make it clear that investments in businesses that are each a related party of the scheme but are not associated with each other would count separately for the purposes of testing compliance with the 5% restriction. We also recommend that, for workability reasons, the 5% limit should apply only to new acquisitions (although schemes would be required to sell-down existing holdings to comply with the 5% limit within a transitional 3-year period under clause 36 of Schedule 5).

For the related party transactions provisions generally, we also recommend that employer contributors be treated as related parties under clause 158 only for specified employer-related schemes (that is, those that employers have an involvement in other than merely as contributors) rather than all restricted schemes. These employer-related schemes would be identified at the point of their registration under the bill’s transitional provisions (see clause 21 of Schedule 5).

Territorial scope

We recommend amendments to the territorial scope provisions of the bill to make them equivalent to those in the Securities Act, extending the Financial Markets Authority’s stop order powers in clause 448 to apply to any restricted communications distributed to persons outside of New Zealand (see clause 452A). Further amendments are also proposed to provide for the Financial Markets Authority to seek civil remedies if there is a contravention of Part 2 in relation to such communications.

We consider that the territorial scope of the bill needs to be extended to allow the regulation of the conduct of New Zealand residents and businesses in respect of their offshore activities in limited circumstances. As introduced, the bill does not seek to replicate the existing territorial scope provisions of the Securities Act; we believe it should, to facilitate cross-border cooperation, and to regulate externally directed conduct to preserve the reputation of New Zealand issuers or service providers.

Crowd funding

Crowd funding is the pooling of a large number of small contributions to fund a business or project, generally over the internet. Clause 388 of the bill gives crowd funding intermediaries as an example of a type of licensed intermediary service that may be prescribed under regulations. We recommend that the Government, in due course, consider prescribing crowd funding intermediaries in regulations under the bill as an intermediary service for which providers could apply for a licence. Individuals seeking crowd funding through an intermediary service would be exempt from disclosure requirements under clause 6 of Schedule 1 (subject to limited disclosure and other requirements under clause 26 of Schedule 1).

Liability for audit opinions

We are aware of concern about liability for audit opinions, specifically the routine disclaiming of liability to third parties. We do not recommend amending the bill in this respect, but would like to see wider consultation and policy work in this area.

Licensing

We recommend amendments to the provisions for licensing of market services to recognise existing licenses under other licensing regimes. The amendments under clause 395 would require the Financial Markets Authority, in making its licensing decision, to have regard to whether the applicant was already a licensed provider under the Financial Service Providers (Registration and Dispute Resolution) Act and whether the proposed market service was merely incidental to other licensed services.

We also recommend amendments to facilitate group licensing by allowing related bodies corporate, not only subsidiaries, to be covered by a single licence where appropriate controls or supervision by the licensee can be demonstrated (see clause 398). The head licensee remains responsible for the related bodies corporate covered by the licence.

We considered the desirability of requiring the Financial Markets Authority to treat applicants who were already licensed under other regimes (for example, registered banks) as meeting any equivalent requirements under the bill. We agree that cross-recognition of equivalent requirements is highly desirable, but consider that this is a matter for regulations under Part 6, which would specify the substantive licensing requirements.

Commencement

We recommend that the default commencement date in clause 2(3) be amended from 1 April 2015 to 1 April 2017. We expect that most of the provisions of the bill would come into force well before that date. However, given the complex nature of the reform, we consider that the change to clause 2(3) would allow more flexibility to bring some provisions into force later.

Appendix

Committee process

The Financial Markets Conduct Bill was referred to the committee on 7 March 2012. The closing date for submissions was 26 April 2012. We received and considered 62 submissions from interested groups and individuals. We heard 37 submissions, which included holding hearings in Auckland.

We received advice from the Ministry of Business, Innovation and Employment, with the assistance of the Financial Markets Authority.

Committee membership

Jonathan Young (Chairperson)

Kanwaljit Singh Bakshi

Hon Chester Borrows

Hon Clayton Cosgrove (Deputy Chairperson)

Hon David Cunliffe

Clare Curran

Peseta Sam Lotu-Iiga

Mojo Mathers

Mark Mitchell

Key to symbols used

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This is an HTML version of the Bill. To see whether amendments are unanimous or majority, and whether they are select committee or committee of the whole House amendments, refer to the PDF version. Placing the cursor over the amendment will also give you this information.

Hon Craig Foss

Financial Markets Conduct Bill

Government Bill

342—2

1 Title

2 Commencement

Part 1
Preliminary provisions

Purposes

3 Main purposes

4 Additional purposes

7 Meaning of financial product

8 Definitions relating to kinds of financial products

9 Definitions of financial benefit and of managed investment scheme

9A Miscellaneous matters relating to definition of derivative

10 Definitions of issued and issuer

11 Meaning of associated person and related body corporate

12 Miscellaneous interpretation provisions relating to statements and information

13 Status of examples

Act binds the Crown

14 Act binds the Crown

General application provision

15 Application of Act

Part 2
Fair dealing

15A Interpretation in this Part

Misleading or deceptive conduct and false or misleading representations

16 Misleading or deceptive conduct generally

17 Misleading conduct in relation to financial products

18 Misleading conduct in relation to financial services

19 False or misleading representations

20 Certain conduct does not contravene various provisions

21 Limited application of provisions in relation to newspapers, magazines, broadcasting, etc

22 Defence for publisher

~~23 Defence for reasonable reliance on information supplied by another person~~

24 Licensed market operator does not contravene by notifying disclosures

25 Other exceptions

26 Territorial scope of sections 16 to 19

Offers in course of unsolicited meetings

26A Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade

26B Right to withdraw

26C Offeror obligations if notice of withdrawal given

26D Director not liable if no misconduct or negligence

Civil liability

26E Civil liability for certain contraventions of this Part

Part 3
Disclosure of offers of financial products

Subpart 1 —Application

27 Issue offers that need disclosure

28 Sale offers that need disclosure

29 Meaning of regulated offer and of regulated product

30 Regulated offers that need to meet additional governance requirements

31 Options over financial products

32 Treatment of offers of convertible financial products

33 Treatment of offers of renewals and variations

33A Offers of financial products involving customised terms

34 Territorial scope of Part

Subpart 2 —Procedure for making regulated offers

Product disclosure statement must be prepared and lodged

35 PDS must be prepared and lodged

36 Purpose of PDS

Disclosure to investors

37 PDS must be given if offer requires disclosure

38 Certain situations in which section 37 does not need to be complied with

39 PDS treated as having been given if application form used was included in, or accompanied by, PDS

40 Offence to knowingly or recklessly contravene section 37

41 Right to withdraw

41A Offeror obligations if notice of withdrawal given

41B Director not liable if no misconduct or negligence

Content and presentation of product disclosure statements and register entries

42 Disclosure of material information and content of PDS and register entry

42A Register entry not required in prescribed circumstances

43 Meaning of material information in this Part

44 Consent of experts and persons who make endorsements

45 PDS must be worded and presented in clear, concise, and effective manner

46 PDS must comply with prescribed requirements relating to form and presentation

Other provisions relating to lodging of PDS and other documents

47 Supply of prescribed information and documents

48 Registrar must notify FMA of lodgement of PDS

49 Waiting period after lodgement before processing applications for financial products

50 FMA may extend period

51 Waiting period restriction does not prevent offeror from acting under another PDS

52 FMA may remove restrictions if its consideration complete or consideration or further consideration unnecessary

53 Waiting period does not usually apply to continuous issue PDSs

54 No guarantee or representation as to compliance

55 When supplementary document or replacement PDS may be lodged

56 Supplementary document

57 Replacement PDS

58 Registrar must notify FMA of lodgement of supplementary document or replacement PDS

59 Publication of lodgement

Amending register entry

60 When register entry may be amended

Conditions referred to in PDS

61 Minimum number or amount condition must be fulfilled before issue or transfer

62 Issue or transfer void if quotation condition not fulfilled

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

63 Application of section 64

64 Choices open to offeror

64A Director not liable if no misconduct or negligence

Prohibition of offers where defective disclosure in PDS or register entry

65 False or misleading statements, omissions, and new matters requiring disclosure

66 Persons who must inform offeror about disclosure deficiencies

Expiry

67 Expiry

68 How offeror must deal with applications on expiry

68A Director not liable if no misconduct or negligence

Money for financial products must be held in trust

69 Money for financial products must be held in trust

Offering financial products in entity that does not exist

70 Offering financial products in entity that does not exist

~~71 Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade~~

~~72 Right to withdraw and have money returned~~

Subpart 3 —Advertising

73 Advertising for regulated offers

~~74 Inducements to apply~~

75 Distribution of PDS or registered documents

76 Advertising before PDS lodged

77 Advertising after PDS lodged

~~78 General exceptions~~

78 Documents to which subpart does not apply

79 Defence for publishers

Subpart 4 —Ongoing disclosure and updating of registers

Duty to update register of offers of financial products and register of managed investment schemes

80 Duty to notify changes to Registrar

Disclosure to particular persons

81 Information to be made available to investors or other prescribed persons

Public disclosure

82 Information to be made publicly available

82A Issuer must provide document, information, and matters to Registrar

Defective ongoing disclosure

83 Defective ongoing disclosure

Confirmation

83A Issuer or offeror must provide confirmation

Subpart 5 —Civil liability for certain contraventions of this Part

84 Part 3 offer provisions

Part 4
Governance of financial products

86 Overview

~~Subpart 1 —Application and overview~~

~~85 Part applies to all regulated products~~

~~86 Regulated offers of debt securities need governing document and supervisor~~

~~87 Regulated offers of managed investment products need to be in registered scheme~~

~~88 All regulated products have other accountability requirements under this Part~~

Subpart 2 —Governance of debt securities

89 Need for governing document and supervisor for regulated offer of debt security

Governing document requirements

90 Contents of trust deed for debt securities

91 Limits on permitted exemptions and indemnities

92 Trust deed must be legally enforceable

93 Effect of trust deed

94 Changes to trust deed

95 Power to make FMA-approved changes to trust deeds

96 Lodging of changes to trust deed

Role of supervisor

97 Functions of supervisor

98 General duties applying in exercise of supervisor's functions

99 Duty of supervisor to comply with professional standard of care

100 Duty of issuer to provide reports to supervisor

101 Duty of issuer to provide requested information and reports to supervisor

102 Issuer must report contravention or possible contravention of issuer obligations

103 Restriction on section 102

104 Duty of issuer to report serious financial problems

105 Power of supervisor to engage expert

Meetings of product holders

106 Meetings of product holders

~~107 Power of supervisor to attend meetings and appoint chair~~

107 Supervisor's attendance at meetings of product holders and power to appoint chair

Change of supervisor

108 Change of supervisor

109 Lodging of notice of change of supervisor

Subpart 3 —Governance of managed investment products

110 Overview

Need to register

111 Need to register managed investment scheme for regulated offer of managed investment product

Registration

112 Application for registration

113 Initial and ongoing registration requirements for all managed investment schemes

114 Additional initial and ongoing registration requirements for KiwiSaver schemes

115 Additional initial and ongoing registration requirements for superannuation schemes

116 Extent to which superannuation scheme may provide non-retirement benefits

117 Additional ongoing registration requirements for restricted schemes

118 Additional initial and ongoing registration requirements for locked-in superannuation schemes

119 Additional prescribed registration requirements for other particular prescribed types of schemes

120 Manager must ensure that ongoing registration requirements are complied with

121 Changes to registration as particular type of registered scheme

Governing document requirements

122 Contents of governing document for registered scheme

123 Limits on permitted exemptions and indemnities

124 Governing document must be legally enforceable

125 Effect of governing document

126 Changes to governing document

127 Power to make FMA and court-approved changes to governing documents

128 Lodging of changes to governing document

Role of manager

129 Management and administration functions of manager

130 General duties applying in exercise of manager's functions

131 Duty of manager and investment manager to comply with relevant professional standard of care

132 Duties of directors and senior managers of manager

133 Contracting out of management functions

134 Duty of manager to provide reports to supervisor or FMA

135 Duty of manager to provide requested information and reports to supervisor

136 Duty of manager to report contravention or possible contravention of issuer obligations

137 Restriction on section 136

138 Duty of manager to report serious financial problems

Role of supervisor

139 Functions of supervisor

140 General duties applying in exercise of supervisor's functions

141 Duty of supervisor to comply with professional standard of care

142 Power of supervisor to engage expert

Custodianship of scheme property

143 Requirement to have supervisor or other independent person as custodian

144 Custodian holds scheme property on trust

145 Custodian must keep records of scheme property

146 Duty of supervisor to refuse to act on wrongful directions

Meetings of scheme participants

147 Meetings of scheme participants

~~148 Power of supervisor to attend meetings and appoint chair~~

148 Supervisor's attendance at meetings of scheme participants and power to appoint chair

149 Manager and associated persons cannot vote if interested in resolution

Management of scheme

150 Requirement for statement of investment policy and objectives

151 Changes to statement of investment policy and objectives

152 Lodging of statement of investment policy and objectives and changes to statement

153 Action that must be taken on limit breaks

154 Action that must be taken on pricing errors and failure to comply with pricing methodologies

155 Actuarial examination of defined benefit scheme or life benefit scheme

156 Power of manager to adjust financial benefits to comply with portfolio investment entity rules

157 Limits on reversion of scheme property in certain schemes to non-scheme participant contributor

Related party transactions

158 Definition of related party benefit

159 General prohibition on transactions giving related party benefits

160A Requirements for certificates as to related party benefits

~~161 Additional restrictions on related party transactions of restricted schemes~~

161 Additional restrictions on restricted schemes' holdings of in-house assets

Scheme participant transfer rules for KiwiSaver and superannuation schemes

162 Application of scheme participant transfer rules

163 Methods of transfer of scheme participants to another scheme or another section of scheme

164 Transfer of substantial numbers of scheme participants with scheme participant consent

165 Transfer with FMA consent

166 Transfers from KiwiSaver scheme

Provisions as to deferred benefits for superannuation schemes

167 Deferred benefits

Change of manager

168 Application of sections 169 to 176

169 Removal of manager of registered scheme

170 Supervisor or FMA may make temporary appointment

171 Term, powers, and duties of temporary manager

172 FMA's costs must be reimbursed from scheme

173 Supervisor or FMA must take reasonable steps to arrange for new appointment

174 Former manager must hand over records and give reasonable assistance

175 Statutory novation of rights, obligations, and liabilities of former manager

176 Lodging of notice of changes to manager

Change of supervisor

177 Change of supervisor

178 Lodging of notice of change of supervisor

~~Change of independent trustee~~

~~179 Change of independent trustee~~

Cancellation of registration

180 Cancellation of registration

181 Registrar must remove scheme from register on cancellation of registration

Subpart 4 —Intervention in debt securities offered under regulated offer or registered schemes

Provisions assisting supervisor or FMA to intervene

182 Duty of auditor to report to supervisor or FMA

183 Duty of auditor, investment manager, administration manager, custodian, or actuary to report serious problems

184 What person must do if duty to report serious problem applies

185 Protections extend to volunteers of supporting information for other protected disclosures

186 FMA may require supervisor to attest as to issuer's compliance with issuer obligations

187 Duty of supervisor to report contravention or possible contravention of issuer obligations to FMA

188 Duty of supervisor to report serious financial problems to FMA

189 FMA's powers of direction

190 FMA's directions to supervisor (or issuer)

Powers to obtain court orders to intervene

191 Power of supervisor or FMA to apply for order to remedy problems

192 Court orders to remedy problems

193 Power of court to appoint new manager, provide for manager powers, and deal with changes of managers

~~194 Power of court to direct supervisor~~

194 Power of court to direct supervisor

195 Court power to order winding up of scheme

196 Initial steps in winding up of registered scheme

197 Winding-up report

Miscellaneous

~~198 Offence of false or misleading statements~~

199 Protection for persons in respect of disclosure under this subpart or subpart 5

Subpart 5 —Registers and keeping copies of documents

Registers

200 Issuers must keep registers of regulated products

201 Manner of keeping registers

202 Contents of registers

203 Audit of registers

204 Auditor must advise if auditor considers that subpart is not being complied with

205 Issuer must notify Registrar of registers

206 Public inspection of register

207 Manner of inspection

208 Copies of documents

209 Reasons for request must be given and FMA may authorise non-compliance

210 Restriction on use of information in registers

~~211 Issuer to send confirmation of financial products~~

~~212 Requirement for confirmation document does not apply in certain circumstances~~

213 Certain provisions prevail over Companies Act 1993

Copies of documents to be retained

213A Copies of documents must be retained for 7 years

~~Subpart 6 —Accounting records, copies of documents, and audit of financial statements~~

~~Accounting records~~

~~214 Issuer must keep proper accounting records~~

~~215 Place where accounting records to be kept~~

~~216 Accounting records to be in English~~

~~217 Period for which accounting records to be kept~~

~~218 Inspection of accounting records~~

~~Copies of documents to be retained~~

~~219 Copies of documents must be retained for 7 years~~

~~Audit requirement~~

~~220 Financial statements to be audited~~

~~221 Meaning of qualified auditor~~

~~Miscellaneous~~

~~222 Application of other Acts not affected~~

Subpart 7 —Civil liability for certain contraventions of this Part

223 Part 4 governance provisions

Part 5
Dealing in financial products on markets

Subpart 1 —Purposes, overview, and interpretation

224 Additional purposes of Part

225 Overview

Material information and generally available to the market

226 Meaning of material information

227 Meaning of generally available to the market

Certain derivatives treated as being quoted financial products of listed issuer

228 Certain derivatives treated as being quoted financial products of listed issuer

Insider conduct

229 Meaning of information insider, inside information, and adviser

Relevant interests

230 Relevant interests in financial products (basic rule)

231 Extension of basic rule to powers or controls exercisable through trust, agreement, etc

232 Extension of basic rule to interests held by other persons under control or acting jointly

233 Situations not giving rise to relevant interests

Subpart 2 —Insider trading

Insider conduct prohibited

234 Prohibition of insider conduct

235 Information insider must not trade

236 Information insider must not disclose inside information

237 Information insider must not advise or encourage trading

238 Criminal liability for insider conduct

When prohibition on insider conduct does not apply

239 Exception for trading required by enactment or rule of law

240 Exception for disclosure required by enactment or rule of law or by FMA

241 Exception for disclosure in connection with preparing PDS or disclosure document

242 Exceptions in respect of underwriting agreements

243 Exception in case of knowledge of person's own intentions or activities

244 Exception in case of knowledge in relation to derivatives

245 Exception for agent executing trading instruction only

246 Exceptions from section 235 for takeovers

247 Exceptions from sections 236 and 237 for takeovers

248 Exceptions for schemes of arrangement approved under Companies Act 1993

249 Exception for redemption of managed investment products

250 Exception for Reserve Bank

Defences

251 Absence of knowledge of trading

252 Inside information obtained by independent research and analysis

253 Equal information

254 Options and trading plans

255 Chinese wall defence

Subpart 3 —Market manipulation

~~256 Misleading or deceptive conduct generally in dealings in quoted financial products~~

257 False or misleading statement or information

258 Exception for takeovers

259 Criminal liability for false or misleading statement or information

260 False or misleading appearance of trading

261 Exception for short selling and crossings

262 Persons treated as contravening false or misleading appearance of trading prohibition

263 Defence

264 Criminal liability for false or misleading appearance of trading

Subpart 4 —Continuous disclosure

265 Listed issuers must disclose in accordance with listing rules if continuous disclosure listing rules apply

266 What are continuous disclosure provisions

267 No contravention of continuous disclosure provisions by person who takes reasonable steps to ensure listed issuer complies

Subpart 5 —Disclosure of interests of substantial product holders in listed issuers

Substantial holding disclosure obligations

268 Purpose of subpart

269 Meaning of substantial product holder, substantial holding, and percentage

270 Persons must disclose if begin to have substantial holding

271 Substantial product holders must disclose if subsequent movement of 1% or more in holdings

272 Substantial product holders must disclose if subsequent changes in nature of relevant interests

273 Persons must disclose if cease to have substantial holding

274 What disclosure required

275 Form and method of disclosure

276 Listed issuer must give acknowledgement of disclosure

277 How to ascertain total financial products in class for purposes of disclosure

Exemptions

278 Exemption for persons with interest in other substantial product holders who comply

279 Exemption for corporate trustees and nominee companies

280 Conditions of exemption for corporate trustees and nominee companies

281 Exemption for persons under control or acting jointly with corporate trustees and nominee companies

282 Extended time for disclosure for trustees, executors, and administrators

Tracing and disclosure of interests in listed issuers

283 FMA may require persons to disclose to market relevant interests and powers to get relevant interests

~~284 Listed issuer may require registered holder to disclose relevant interests to it~~

284 Listed issuer may require registered holder or relevant interest holder to disclose relevant interests to it

285 Listed issuer may require person who has relevant interest to disclose information to it

286 Form and method of notice requiring disclosure

~~Register and publication of substantial holdings~~

~~287 Listed issuers must maintain register of disclosures of substantial holdings~~

~~288 Public inspection of register~~

~~289 Copies of documents~~

~~290 Offences relating to substantial holdings register~~

291 Listed issuers must make available information on substantial holdings

292 No liability for publication of substantial holdings

293 Notice under this subpart not to affect incorporation of listed issuer or constitute notice of trust

Subpart 6 —Disclosure of relevant interests in quoted financial products by directors and senior managers of listed issuers

294 Purpose of subpart

295 Directors and senior managers of listed issuers must disclose relevant interests and dealings in relevant interests

296 Disclosure of relevant interests and dealings in relevant interests in relation to specified derivatives

297 What disclosure required

298 Form and method of disclosure

299 Disclosure obligation applies for 6 months after ceasing to hold office

300 Exemption for directors or senior managers who disclose substantial holdings

301 Exemption for overseas listed issuers

302 Listed issuer must keep interests register

303 Public inspection of interests register

304 Copies of documents

305 Offences relating to interests register

Subpart 7 —Licensing of markets for trading financial products

306 Principles guiding exercise of powers under this subpart

Need for financial product market licence

307 What is a financial product market

308 Need for financial product market licence

309 Prohibitions on holding out

310 Exemptions

311 When financial product market taken to be operated in New Zealand

General obligations of licensed market operator

312 General obligations in respect of licensed markets

Issue of licence

313 Application for licence

314 When licence may be issued

315 When licence may be issued for overseas-regulated market

316 Conditions of licence

317 Procedural requirements

318 Licence may cover more than 1 financial product market

~~319 Licence may cover subsidiaries~~

320 FMA must maintain list of licensed markets on Internet site

Changes to licences

321 Variation of conditions

322 Minister may suspend or cancel licence

323 Procedure for varying of conditions or suspension or cancellation of licence

324 Effect of suspension

325 Variation or revocation of suspension

Approval of contractual market rules

326 Licensed markets must be operated under market rules that comply with this subpart

327 Required matters for market rules

328 When market rules have effect

329 Approval process for proposed market rules and rule changes

330 Approval of proposed market rules and changes

331 Notice of decision on rules

332 Power of FMA to request changes to market rules on certain matters

333 Overseas-regulated markets must give notice of market rules and rule changes to FMA

334 Market rules must be available for public inspection

335 Application of Acts relating to regulations to contractual market rules

Monitoring of market operator obligations

336 Licensed market operator must give report on compliance with market operator obligations to FMA

337 FMA to carry out market operator obligations reviews

338 FMA must make written report on market operator obligations review

339 FMA may require licensed market operator to submit action plan on failure to meet market operator obligations

340 Approval, amendment, or rejection of action plan

341 Minister may give market operator obligations direction to licensed market operator

342 Minister may vary, suspend, or cancel licence

Control limits on licensed market operators

343 Power to impose control limits on licensed market operators

344 Control limit not to be exceeded

345 Effect of exceeding control limit

346 Application for approval to exceed control limit

347 Revocation or amendment of approval

Other provisions relating to licensing of financial product markets

348 FMA may give advice to Minister

349 Delegation of Minister's licensing functions and powers to FMA

350 Regulations modifying Part for licensed markets

Subpart 8 —Operation of licensed markets

351 Licensed market operator must notify FMA of disciplinary actions and suspected contraventions

352 When notification required

353 Details and method of notification

354 Licensed market operator must ensure FMA has access to real-time trading and other information

~~355 Licensed market operator must give FMA material information given to market participants~~

356 Waiver of notification and disclosure obligations

357 Licensed market operator must give FMA or Takeovers Panel other information and assistance on request

358 Power to disclose further information

359 Licensed market operator must give notice and have regard to submissions on continuous disclosure determinations

360 Limited notice and submissions for urgent determinations

361 FMA may give directions to licensed market operators

362 Grounds for continuous disclosure direction

363 Grounds for other directions

364 Notice, opportunity for licensed market operator to act, and submissions before FMA gives directions

365 Limited notice and submissions for urgent continuous disclosure directions

366 Notice and opportunity to be heard and represented after FMA gives direction

367 Effect of directions to licensed market operator

368 Provisions as to directions

369 Contracting out of or modification of continuous disclosure process requirements

370 Offence for failing to comply with direction

Subpart 9 —Transfer of transferable financial products

371 Financial products to which this subpart applies

Transfer of specified financial products using transfers in prescribed form or containing prescribed information

372 Transfer of specified financial products by transfer

373 Transfer of specified financial products by products transfer and brokers transfer

374 Products transfer does not need to be witnessed

375 Transfers to be instruments of transfer for purposes of other enactments and instruments

Transfer of specified financial products by electronic means

376 Approval of electronic transfer system

377 Specified financial products may be transferred under approved system

378 Minor technical modifications to system

Registration may not be refused

379 Registration may not be refused on ground that financial products have been transferred under this subpart

380 Effect of this Act on other enactments

Subpart 10 —Unsolicited offers to purchase financial products off-market

381 Definitions relating to unsolicited offer regulations and related provisions

382 Regulations concerning unsolicited offers

383 Specific provisions for regulations concerning unsolicited offers

384 Protection from liability in connection with unsolicited offer provisions

Subpart 11 —Civil liability for certain contraventions of this Part

385 Part 5 market provisions

Part 6
Licensing and other regulation of market services

386 Overview

386A Territorial scope for licensing of certain market services

Subpart 1 —Key provisions

387 When provider of market services needs to be licensed

387A Exemptions from need for market services licence

388 When providers of other market services may be licensed

~~389 Meaning of licensed market services~~

390 Prohibitions on holding out

390A Meaning of discretionary investment management service and related terms

Subpart 2 —Issue of licences, conditions, and duration

391 Principles guiding the exercise of FMA powers

Issue of licences

392 FMA may issue licence

393 Application for licence

394 When licence must be issued

395 Procedural requirements

396 Notice of decision

397 Licence must be issued for particular market services

~~398 Licence may cover subsidiaries~~

398 Licence may cover related bodies corporate as authorised bodies

399 FMA must send licence details to Registrar

Conditions of licence

400 Conditions of licence

401 When FMA may impose permitted conditions

402 Licensee may apply for variation of conditions

403 Procedure for variation of conditions

404 Consequences of contravening conditions

Expiry, suspension, or cancellation of licences

405 Duration of licence

406 When FMA may suspend or cancel licence

407 Effect of expiry, suspension, or cancellation of licence on appointments

Subpart 3 —Monitoring and enforcement of licences

408 Meaning of material change of circumstances

Reports

409 Licensee must deliver reports to FMA

410 Licensee must report certain matters

411 Restriction on section 410

FMA's powers in case of contravention of market services licensee obligation, material change, etc

412 FMA's powers in case of contravention of market services licensee obligation, material change, etc

413 Procedure for exercising powers

414 Notice requirements

Action plan

415 Action plan

416 Approval, amendment, or rejection of action plan

417 Consequences of failure to submit action plan, rejection of action plan, or failure to comply with action plan

Directions

418 Directions

419 Consequences of failure to comply with directions

Subpart 4 —Disclosure obligations for certain services provided to retail investors

420 Application of subpart

421 Disclosure must be made before providing service to retail investor

422 Timing and method of disclosure

423 Purpose of disclosure statement

424 Disclosure statement

425 False or misleading statements and omissions

426 Further prescribed information to be made available

Subpart 5 —Requirement for certain services to be provided under client agreements

427 Application of subpart

427A Need for client agreement

428 Contents, form, and effect of client agreement

Subpart 6 —Additional regulation of discretionary investment management services

429 Application of subpart

~~430 Meaning of provider of discretionary investment management service and related terms~~

Duties of DIMS licensee

431 DIMS licensee's duties

432 Duties of directors and senior managers of DIMS licensee

433 Duty of DIMS licensee to comply with professional standard of care

434 Limits on permitted indemnities

435 Requirement for agreed investment mandate

436 Action that must be taken on limit breaks

Related party transactions

437 Definition of related party benefits

438 General prohibition on transactions giving related party benefits

439A Requirements for certificates as to related party benefits

DIMS licensees must hold investor money in trust

440 Money paid by, or on account of, investors must be held in trust

Custodial service performed as part of discretionary investment management service

441 Application of sections 442 and 443

442 Requirements for custodian

443 Certain broker obligations of Financial Advisers Act 2008 apply under this Act

Subpart 7 —Holding and application of investor funds and property by derivatives issuers

444 Application of regulations made under this subpart

445 Regulations regulating holding and application of investor funds and property by derivatives issuers

Subpart 8 —Miscellaneous provisions

Civil liability

446 Part 6 licence provisions

Part 6A
Financial reporting

Subpart 1 —Overview

446A Overview

446B Interpretation

Subpart 2 —Accounting records

446C Issuer must keep proper accounting records

446D Place where accounting records to be kept

446E Accounting records to be in English

446F Period for which accounting records to be kept

446G Inspection of accounting records

Subpart 3 —Audit of financial statements

446H Financial statements to be audited

446I Meaning of qualified auditor

446J Appointment of registered audit firm

446K Application of other Acts not affected

Subpart 4 —Civil liability for certain contraventions of this Part

446L Part 6A financial reporting provisions

Part 7
Enforcement, liability, and appeals

~~447 Meaning of contravene~~

Subpart 1 —FMA's enforcement powers

Stop orders

448 When FMA may make stop orders

449 Terms of stop order

450 Meaning of restricted communication

451 FMA may make interim stop order pending exercise of powers

452 Persons to whom stop orders and interim stop orders may apply

452A Extended application of subpart

Direction orders

453 When FMA may make direction orders

454 Terms of direction orders

Unsolicited offer orders

455 When FMA may make unsolicited offer orders

456 Terms of unsolicited offer orders

Orders that exclusion does not apply

456A FMA may order that exclusion for offers of products of same class as quoted products does not apply

Process for FMA's orders

457 FMA must follow steps before making orders

458 FMA may shorten steps for specified orders

459 FMA must give notice after making orders

General provisions

460 General provisions on FMA's orders

461 Consequences of failing to comply with FMA's orders

Subpart 2 —High Court's enforcement powers

Injunctions

462 Court may grant injunctions

463 When court may grant injunctions and interim injunctions

464 Undertaking as to damages not required by FMA

Court may make FMA orders under this Part

465 Court may make FMA orders under this Part

Subpart 3 —Civil liability

Overview of civil liability

466 Overview of civil liability

467 What are civil liability provisions

Declarations of contravention and pecuniary penalty orders

468 When court may make declarations of contravention

469 Purpose and effect of declarations of contravention

470 What declarations of contravention must state

471 When court may make pecuniary penalty orders

~~472 Directors treated as having contravened in case of defective disclosure and may be ordered to pay pecuniary penalty~~

473 Maximum amount of pecuniary penalty

474 Guidance for court on how to determine gains made or losses avoided for purposes of maximum amount

475 Considerations for court in determining pecuniary penalty

476 Court must order that recovery from pecuniary penalty be applied to FMA's or Commerce Commission's actual costs

Compensatory orders

477 When court may make compensatory orders

478 Terms of compensatory orders

~~479 Director has due diligence defence~~

480 Person treated as suffering loss or damage in case of defective disclosure

Other civil liability orders

481 When court may make other civil liability orders

482 Terms of other civil liability orders

Defences for person in contravention of civil liability provisions

482A General defences for person in contravention

482B Disclosure defences for person in contravention

482C Additional disclosure defence for directors who are treated as contravening

482D Conduct still contravenes even if defence is available

Defences for person involved in contravention of civil liability provisions

482E General defences for person involved in contravention

Miscellaneous provisions relating to defences

482F Defendant must identify other person

Interrelationship of civil liability orders

483 More than 1 civil liability order may be made for same conduct

484 Only 1 pecuniary penalty order may be made for same conduct

485 No pecuniary penalty and fine for same conduct

Limitation defences

485A Limitation defences

~~Due diligence defence~~

~~486 Defence for persons other than primary person in contravention~~

General

487 Rules of civil procedure and civil standard of proof apply to civil liability

487A Commerce Commission may apply for order in relation to Part 2

Subpart 4 —Offences relating to defective disclosure and false statements

488 Offence of knowingly or recklessly contravening prohibition on offers where defective disclosure in PDS or register entry

489 Offence of knowingly or recklessly contravening other provisions relating to defective disclosure

489A General offence for false or misleading statements

Subpart 5 —Infringement offences

490 Infringement offences

491 Infringement notices

492 Procedural requirements for infringement notices

493 Payment of infringement fee

Subpart 6 —Banning orders

494 When court may make banning orders

495 Terms of banning orders

496 Offence of contravening banning order

497 Only 1 banning order may be made for same conduct

498 General provisions for banning orders

Subpart 7 —Orders to protect interests of aggrieved persons in case of financial markets investigations or proceedings

499 When court may make order to protect interests of aggrieved persons

500 What orders may be made

501 Interim orders

502 Relationship with other law

Subpart 8 —Indemnities or insurance for directors, employees, and auditors of issuers, offerors, and licensees

503 Prohibition on indemnities or insurance for directors or employees of issuers, offerors, or licensees that are not New Zealand companies

504 Permitted indemnities for certain liabilities or costs

505 Permitted insurance for certain liability or costs

505A Prohibition on indemnity or insurance for auditors of issuers, offerors, or licensees

506 Interpretation for this subpart

Subpart 9 —Appeals

507 Appeals against market services licence decisions

508 Appeals against other decisions of FMA on questions of law only

Subpart 10 —Miscellaneous

~~509 Time for laying information for summary offences~~

Accessories and attribution of liability

509 Involvement in contraventions

509A Directors treated as having contravened in case of defective disclosure

509B State of mind of directors, employees, or agents attributed to body corporate or other principal

509C Conduct of directors, employees, or agents attributed to body corporate or other principal

Miscellaneous

509D Time for filing charging document for certain offences

510 Jurisdiction of courts in New Zealand

511 Orders to secure compliance

512 General provisions as to court's orders

513 Persons entitled to appear before court

~~514 State of mind of directors, employees, or agents attributed to body corporate or other principal~~

~~515 Conduct of directors, employees, or agents attributed to body corporate or other principal~~

516 Saving of liability under Crimes Act 1961 and general law

Part 8
Regulations, transitional provisions, and miscellaneous provisions

Subpart 1 —Regulations

517 Regulations for purposes of Part 3 (disclosure of offers of financial products)

518 Regulations for purposes of Part 4 (governance of financial products)

519 Regulations for purposes of Part 5 (dealing in financial products on markets)

520 Regulations for purposes of Part 6 (market services)

521 Transitionals, savings, and orderly implementation of Act and related enactments

522 Other regulations

522A Minister must consult FMA about regulations

523 Procedural requirements for regulations relating to exemptions, exclusions, and definitions

524 Miscellaneous provisions relating to exemptions

525 Miscellaneous provisions relating to fees and charges

526 Regulations or exemptions may require compliance with generally accepted accounting practice, financial reporting standards, or FMA frameworks or methodologies

527 Different matters may be prescribed in respect of different circumstances

Subpart 2 —Exemptions

528 FMA may grant exemptions

529 Restriction on FMA's exemption power

530 Exemption in force for not more than 5 years

531 Breach of exemption conditions

532 Exemptions in respect of specified overseas jurisdictions

532A Effect of exemptions on regulated offers

Subpart 3 —FMA's designation power

533 FMA may designate financial products and offers

534 Procedural requirements

535 Transitional matters

536 FMA may make interim orders pending exercise of powers

537 Period in which interim order is in force

Subpart 4 —Frameworks or methodologies

537A Purpose

538 FMA may specify frameworks or methodologies

539 Consultation

Subpart 5 —General provisions relating to certain FMA instruments

540 Application of subpart

541 Status and publication of instruments

542 Variation and revocation

Subpart 6 —Recognition and application regimes

543 Purpose of this subpart

544 Definition of country in this subpart

Exemption from Act and regulations for New Zealand offers under recognition regime

545 Exemption from Act and regulations for New Zealand offers under recognition regime

546 Power to exempt from Act and regulations under recognition regime

547 Matters that must be stated in regulations implementing recognition regime

548 Offence for breach of regulations implementing recognition regime

Extension of Act and regulations to overseas offers under application regime

549 Extension of Act and regulations to overseas offers under application regime

550 Power to extend Act and regulations under application regime

551 Matters that must be stated in regulations implementing application regime

Subpart 7 —Enforcement of overseas pecuniary penalties under application regime

552 Purpose of this subpart

553 Enforcement of overseas pecuniary penalties under application regime

554 Power to enforce overseas penalties under application regime

555 Interpretation

556 Registration of judgment

557 Effect of registration

558 Enforceability of registered judgment

559 Stay may be granted

560 Costs

561 Interest

562 Rules of private international law not to apply

563 Other regulations for registration of judgments under application regime

Subpart 8 —Transitional and miscellaneous provisions

563A Registers

563B Transitional provisions

Part 9
Repeals and amendments

Subpart 1 —Repeals and revocations

564 Repeals

565 Revocations

Subpart 2 —Amendments to Fair Trading Act 1986

566 Principal Act amended

567 New section 5A substituted

~~5A Contraventions of financial markets misleading or deceptive conduct or false representation provisions do not contravene sections 9 to 13~~

5A Fair trading provisions that do not apply to financial products or financial services

567A New section 48B inserted (Commission's powers in relation to Part 2 of Financial Markets Conduct Act 2011)

48B Commission's powers in relation to Part 2 of Financial Markets Conduct Act 2011

567B Transitional provision for existing offences and contraventions

Subpart 3 —Amendments to Financial Advisers Act 2008

568 Principal Act amended

569 Interpretation

570 Who are wholesale clients

571 When person provides discretionary investment management service

572 Other exemptions

573 When financial adviser service is personalised service or class service

574 Who is permitted to provide personalised service to retail clients

575 Who is permitted to provide class service to retail clients

576 Financial adviser must make disclosure before providing personalised service to retail client

577 What financial adviser must disclose

578 QFE must make disclosure before personalised service provided to retail client

579 No compliance with disclosure obligation if disclosure out of date

580 New section 29A inserted

29A Further prescribed information to be made available to clients of discretionary investment management service

581 What is conduct obligation and when does it apply

581A Financial adviser must exercise care, diligence, and skill

582 New sections 36A to 36D inserted

36A Requirement to have agreed investment mandate with retail client

36B Duties on financial adviser providing discretionary investment management service

36C Duty to comply with professional standard of care in providing discretionary investment management service

36D Custodial duties under discretionary investment management service

583 New section 38 substituted

38 Authorised financial adviser must not recommend acquisition of FMCA financial products if offer contravenes financial markets legislation

584 Other exemptions

585 What is conduct obligation and when does it apply

586 Restriction on use of term sharebroker

587 New section 77O substituted

77O Broker must not receive client money if offer contravenes financial markets legislation

588 Offence of recommending offer of securities when subscription illegal

589 Offences of receiving client money if offer for subscription illegal

590 Heading to subpart 4 of Part 4 amended

591 Sections 137C to 137J and heading repealed

592 Pecuniary order for contravening wholesale certification requirement

593 When FMA may make temporary banning orders for financial adviser services or broking services

594 General regulations

Subpart 4 —Financial Markets Authority Act 2011

595 Principal Act amended

596 Interpretation

597 FMA's functions

597A Power to enter and search place, vehicle, or other thing

598 FMA may exercise person’s right of action

599 FMA may accept undertakings

600 New section 46A inserted

46A Undertaking may include requirements as to compensation or penalties

601 New heading and section 48A inserted

Power to appear and be heard and adduce evidence

48A FMA may appear and be heard and adduce evidence

602 FMA may require its warning to be disclosed

603 Schedule 1 amended

Part 1

Subpart 5 —Amendments to KiwiSaver Act 2006

604 Principal Act amended

605 Purpose

606 Interpretation

607 Meaning of provider

608 Outline

609 Outline of how people become members of overall KiwiSaver scheme

610 Extension of opt-out period

611 Sections 24 to 32 and heading repealed

612 Employer must also supply investment statement for employer’s chosen KiwiSaver scheme (if any)

613 Effect of employer choice of KiwiSaver scheme

614 Commissioner provisionally allocates certain people to default KiwiSaver schemes and sends investment statement

615 New section 52 substituted

52 Effect of completion of allocation

616 Notification of transfers and requirement to transfer funds and information

617 Compulsory employer contribution amount: general rule

618 Sections 101H to 101K and heading repealed

619 Part 4 substituted

Part 4
Additional Governance Provisions

115 Overview of Part

Subpart 1 —Implied terms and other regulation of schemes

KiwiSaver scheme rules

116 KiwiSaver scheme rules are implied in trust deeds establishing KiwiSaver scheme

Provisions about unreasonable fees that apply to both KiwiSaver schemes and complying superannuation funds

117 Duty to give notice to FMA about fee increases

118 Exercise of functions by FMA about unreasonable fees

119 Powers of High Court in relation to unreasonable fees

Other implied terms

120 Terms relating to backdated validation implied into trust deeds of KiwiSaver schemes

121 Terms relating to members’ tax credits implied into trust deeds of KiwiSaver schemes and complying superannuation funds

122 Terms relating to compulsory employer contributions implied into trust deeds of KiwiSaver schemes and complying superannuation funds

123 Terms relating to lump sum payments by complying superannuation funds

Other regulation of schemes

124 Requirement for annual return

125 Unclaimed money held in KiwiSaver scheme

125A Restrictions on transactions for scheme with fewer than 20 members

126 Member’s interest in KiwiSaver scheme not assignable

127 Application of Financial Transactions Reporting Act 1996 to default allocation of members to KiwiSaver schemes

128 Product disclosure statements must contain responsible investment statement

Interface with securities law

129 Application of Financial Markets Conduct Act 2011

130 Certain sections of Financial Markets Conduct Act 2011 modified in relation to KiwiSaver scheme

Subpart 2 —Default KiwiSaver schemes

131 Appointment of default providers

132 Provisions of instrument of appointment to prevail over provisions of trust deed

133 Effect of appointment under section 131

134 Appointment must be notified

135 Power of High Court to act in respect of terms and conditions of appointment as default KiwiSaver scheme and regulations relating to default KiwiSaver schemes

136 Revocations, etc, of instruments of appointment

137 Duration of obligations as default provider after terminating event

Subpart 3 —Complying superannuation funds

138 Outline of subpart

139 Failure to pay: provider notice

140 Failure to pay: FMA's duties

141 Failure to pay: Commissioner

142 Recovered amounts

143 Reduction of scheme insurance upon transfer out of complying superannuation fund

144 Revocation of approval of complying superannuation funds

Subpart 4 —Exempt employers

145 Effect of being exempt employer and outline of subpart

146 Eligibility to continue to be exempt employer

147 How 4% minimum amount may be calculated for exempt employer defined contribution schemes

148 Exempt employers who provide access to more than 1 scheme

149 Exempt employers who have schemes established under master trusts

150 Employers may apply to succeed to former employer's exempt employer status

151 How applications to succeed to former employer's exempt employer status must be dealt with

152 Revocation of exempt employer approval

153 FMA must give notice to Commissioner of exempt employers

154 Register of exempt employers

Subpart 5 —Miscellaneous

155 Right of appeal against certain decisions of FMA

156 Sharing of information and documents with Commissioner for purpose of administering KiwiSaver schemes

157 Conditions that may be imposed on providing information, documents, or evidence to Commissioner

158 Annual report by FMA

159 Offence to supply false or misleading information, etc

160 No Crown guarantee of KiwiSaver schemes or products

161 Factual description of, or transmission of information about, KiwiSaver scheme not financial adviser service

620 Sections 205 to 206 repealed

621 Sections 209 and 210 and heading repealed

622 Duty of Commissioner under section 50 modified in certain cases in which section 210 applies

623 Section 220 substituted

220 Special rules about giving of product disclosure statements

624 Administration of Act

625 Section 225 repealed

626 Status of Crown contribution and fee subsidy for tax purposes

627 Section 228 substituted

228 Regulations

628 Regulations relating to default KiwiSaver providers

629 Sections 231 to 237 repealed

630 Amendments to Schedule 1 (KiwiSaver scheme rules)

1 Application

631 Further amendments to Schedule 1 (KiwiSaver scheme rules)

632 Schedules 2 and 3 repealed

Subpart 6 —Amendments to Securities Trustees and Statutory Supervisors Act 2011

633 Principal Act amended

634 Name of principal Act changed

635 New section 3 substituted

3 Purpose

636 Interpretation

637 Heading to Part 2

638 Heading to subpart 1 of Part 2

639 New section 6 substituted

6 Supervisor must be licensed

640 New section 8 substituted

8 Prohibition on holding out

641 Requirement to be licensed: exception for certain FMA appointees

642 New section 10 substituted

10 FMA may license supervisors

643 FMA may impose conditions on licence

644 Information to be stated in licence

645 FMA must send licence and details to licensee and others

646 Decision on application for, or to vary, licence

647 Application to cancel licence

648 Notice, consultation, and submissions concerning decision under section 16(1)

649 Appeal to High Court against FMA's decision on application

649A Cross-heading amended

650 Effect of expiry of licence

651 Licensee must apply for new licence or notify issuer or operator before licence expires

652 Rejection of application for new licence: FMA may replace existing appointee

653 Expiry of licence: issuer or operator may replace existing appointee or FMA appointee

654 Expiry of licence: existing appointee must provide documents

655 FMA may vary licence because of material change of circumstances, etc

656 FMA's powers if action plan not submitted, etc

657 Removal notice

658 Removal notice: FMA may give direction to existing appointee

659 Removal notice: FMA may replace existing appointee

660 Replacement notice: affected person may replace existing appointee or FMA appointee

661 Notice requiring documents: existing appointee, etc, must provide documents

662 New section 41 substituted

41 Pecuniary penalty orders

~~663 Compensation orders~~

663 Compensation orders

664 Part 3 repealed

665 FMA may vary or cancel direction

666 New section 52 substituted

52 Protection for supervisor who complies with FMA's direction

Transitional provisions

667 FMA may vary licences under Financial Markets Supervisors Act 2011

668 Appeal against licence decision

Subpart 7 —Amendments to other enactments

669 Amendments to other enactments

~~Subpart 8 —Transitional provisions for offers of financial products~~

~~670 Act applies to offer unless former enactments continue to apply~~

~~671 Former enactments continue to apply if prospectus registered before commencement~~

~~672 Issuer may elect to comply with former enactments instead of this Act if prospectus registered within 12 months of commencement~~

~~673 Former enactments apply if no prospectus is required unless issuer elects otherwise~~

~~674 Transitional provisions that apply after 12-month date in respect of registered prospectuses~~

~~675 This Act and 1978 Act are (on transitional basis) alternative means of compliance~~

~~676 All offers and allotments under old law must cease~~

~~677 All offers and allotments under old law must cease within 2 years of commencement~~

~~678 FMA may continue to perform and exercise functions, duties, and powers~~

~~679 Subpart does not prevent PDS from being lodged~~

~~680 Transitional and application provisions subject to exemption~~

~~Subpart 9 —Transitional provisions relating to securities offered under Securities Act 1978~~

~~681 Subpart applies to securities offered under Securities Act 1978~~

~~682 Interpretation in this subpart~~

~~683 Former enactments continue to apply until effective date~~

~~684 KiwiSaver schemes, superannuation schemes, and unit trusts continue under former enactments until effective date~~

~~685 Transition period~~

~~686 Ongoing requirements of this Act apply on and after effective date~~

~~687 Issuer of debt security must lodge trust deed and supply information~~

~~688 Managed investment scheme treated as being registered and issuer must supply information~~

~~689 Type of registration~~

~~690 Registrar to amend register~~

~~691 Restriction on making regulated offers and accepting contributions if requirements have not been complied with~~

~~692 Issuer may amend or replace governing document with FMA's consent~~

~~693 Conversion of governing documents to separate governing documents~~

~~694 Amalgamation of schemes~~

~~695 Amended enactments continue to apply or have effect in connection with securities~~

~~696 Issuer must send notification to security holders~~

~~697 PDS treated as having been given~~

~~698 FMA may continue to perform and exercise functions, duties, and powers~~

~~699 Transitional and application provisions subject to exemption~~

~~Subpart 10 —Other transitional provisions~~

~~Unit trusts and superannuation schemes in relation to which offers to the public have not been made~~

~~700 Unit trusts in relation to which offers to public have not been made~~

~~701 Superannuation schemes in relation to which offers to public have not been made~~

~~Amended enactments continue to apply or have effect in connection with schemes~~

~~702 Amended enactments continue to apply or have effect in connection with schemes~~

~~Extra transitional provisions relating to managed investment schemes~~

~~703 Remaining trustees (if any) cease to hold office~~

~~704 Restricted schemes have 3 years to comply with related party asset cap rule~~

~~705 Savings related to Superannuation Schemes Act 1976~~

~~Repealed enactments continue to be financial markets legislation~~

~~706 Repealed enactments continue to be financial markets legislation~~

~~Licensing of financial product markets~~

~~707 Transition process for existing financial product markets~~

~~Market services licences~~

~~708 Authorised dealers treated as holding market services licence~~

~~709 FMA may exercise powers in respect of licences~~

~~Approval of electronic transfer systems continues~~

~~710 Approval of electronic transfer systems continues~~

~~References to banning orders under this Act include references to banning orders under former enactments~~

~~711 References to banning orders under this Act include references to banning orders under former enactments~~

~~Financial Reporting Act 1993~~

~~712 Issuers continue to be issuers under Financial Reporting Act 1993~~

~~713 External Reporting Board must review tiers of financial reporting~~

Schedule 1
Provisions relating to when disclosure is required and exclusions for offers and services

Schedule 2
Registers

Schedule 3
Schedule 3 schemes

Schedule 4
Consequential amendments

Schedule 5
Transitional provisions

The Parliament of New Zealand enacts as follows:

1 Title

This Act is the Financial Markets Conduct Act 2011.

2 Commencement

(1) Section 350, subpart 10 of Part 5, subpart 7 of Part 6, and subparts 1 to 7 of Part 8 come into force on the day after the date on which this Act receives the Royal assent.

(2) The rest of this Act comes into force on a date appointed by the Governor-General by Order in Council; and 1 or more orders may be made bringing different provisions into force on different dates.

(3) To the extent that it is not previously brought into force under subsection (1) or (2), the rest of this Act comes into force on 1 April ~~2015~~ 2017.

(4) In this section, provision includes any item, or any part of an item, in Schedule 4.

Part 1
Preliminary provisions

Purposes

3 Main purposes

The main purposes of this Act are to—
- (a) promote the confident and informed participation of businesses, investors, and consumers in the financial markets; and
- (b) promote and facilitate the development of fair, efficient, and transparent financial markets.

4 Additional purposes

This Act has the following additional purposes:
- (a) to provide for timely, accurate, and understandable information to be provided to persons to assist those persons to make decisions relating to financial products or the provision of financial services:
- (b) to ensure that appropriate governance arrangements apply to financial products and market services that allow for effective monitoring and reduce governance risks:
- (c) to avoid unnecessary compliance costs:
- (d) to promote innovation and flexibility in the financial markets.

Overview

5 Overview

(1) In this Act,—
- (a) this Part deals with preliminary matters, including specifying the purposes of this Act and interpretation:
- ~~(b) Part 2 prohibits misleading or deceptive conduct, and false or misleading representations, in connection with financial products and financial services:~~
- (b) Part 2 provides for fair dealing matters, including—
  - (i) prohibiting misleading or deceptive conduct, and false or misleading representations, in connection with financial products and financial services:
  - (ii) prohibiting offers of financial products in the course of unsolicited meetings:
- (c) Part 3 provides for—
  - (i) disclosure to investors in relation to certain offers of financial products (Schedule 1 contains provisions relating to when disclosure is required, including exclusions):
  - (ii) advertisements ~~and other publicity~~ for those offers:
  - (iii) ongoing disclosure to investors:
- (d) Part 4 provides for— the governance of regulated products, including—
  - (i) the governance of debt securities (including the need for a trust deed and a supervisor):
  - (ii) the ~~registration~~ governance of managed investment ~~schemes~~ products (including the need for registration of the managed investment scheme, a governing document, and a supervisor):
  - (iia) the duties of persons associated with debt securities or registered schemes to make protected disclosures:
  - (iii) the powers of intervention to enable the supervision of debt securities and ~~managed investment~~ registered schemes by a ~~licensed~~ supervisor or the FMA:
  - (iv) ongoing duties of issuers of all regulated products (for example, to maintain registers of regulated products ~~and keep proper accounting records~~):
  - ~~(v) duties of persons associated with regulated products to make protected disclosures:~~
- (e) Part 5 provides for matters relating to dealing in financial products on markets, including—
  - (i) prohibiting insider trading and market manipulation:
  - (ii) providing for continuous disclosure by listed issuers:
  - (iii) providing for the disclosure of interests of substantial product holders in listed issuers and the disclosure of relevant interests by directors and senior managers of listed issuers:
  - (iv) providing for the licensing of markets for trading financial products:
  - (v) providing for the transfer of financial products:
  - (vi) the making of regulations setting rules for unsolicited offers to purchase financial products:
- (f) Part 6 regulates certain financial market services, including—
  - (i) the licensing of certain financial market service providers (for example, managers of registered schemes, certain issuers of derivatives, and providers of intermediary services):
  - (ii) providing for disclosure obligations and ~~obligations in respect of~~ the need for client agreements in connection with some of those financial market services:
  - (iii) imposing other conduct obligations on ~~licensees~~ providers of ~~providing~~ discretionary investment management services and on their custodians:
  - (iv) providing for the making of regulations regulating the holding and application of investor funds and property by issuers of derivatives:
- (fa) Part 6A provides for financial reporting obligations:
- (g) Part 7 provides for enforcement and liability matters and for appeals, including—
  - (i) providing the FMA and the High Court with certain powers to avoid, remedy, or mitigate any actual or likely adverse effects of contraventions of this Act or the regulations:
  - (ii) the imposition of civil ~~remedies~~ liability (including pecuniary penalty orders and compensation orders):
  - (iii) offences:
  - (iv) providing for appeals against the FMA's decisions:
- (h) Part 8 provides for regulations and exemptions, including powers to prescribe matters relating to the form and content of product disclosure statements, and powers for the FMA to designate financial products and offers, and to grant exemptions, where this is necessary or desirable in order to promote the main purposes of this Act specified in section 3 or any of the additional purposes of this Act specified in section 4:
- (h) Part 8 provides for—
  - (i) regulations and exemptions, including powers to prescribe matters relating to the form and content of product disclosure statements, and powers for the FMA to designate financial products and offers, and to grant exemptions, where this is necessary or desirable in order to promote the main purposes of this Act specified in section 3 or any of the additional purposes of this Act specified in section 4:
  - (ii) transitional and miscellaneous matters.
- ~~(i) Part 9 provides for—~~
  - ~~(i) the repeal of the Securities Act 1978, the Securities Markets Act 1988, and certain other enactments, and for consequential amendments:~~
  - ~~(ii) transitional provisions:~~
  - ~~(iii) various miscellaneous matters.~~
(2) This section is only a guide to the general scheme and effect of this Act.

Interpretation

6 Interpretation

(1) In this Act, unless the context otherwise requires,—
acquire—
- (a) includes obtain by buying, subscribing, or taking an assignment or transfer of; and
- (b) includes, in Part 5, agree to acquire; and
- (c) in relation to a derivative, includes entering into the legal relationship that constitutes the derivative
administration manager, in relation to a registered scheme, means a person to whom a manager of the scheme has contracted some or all of the administration of the scheme
advertisement,—
- (a) in relation to an offer, or intended offer, of financial products, means any form of communication made to the public or a section of the public for the purpose of promoting the offer or intended offer:
- (b) in relation to the supply of financial services, means any form of communication made to the public or a section of the public for the purpose of promoting the supply of the services
agreement includes any contract, arrangement, or understanding

alternative disclosure obligation means any provision of regulations made under section 350 that is stated by those regulations to be an alternative disclosure obligation

application, in relation to financial products, includes an offer to acquire the financial products whether in writing or otherwise

associated person or associated has the meaning set out in section 11(1)

audio or visual service means an audio or visual service provided to users of the service by means of telecommunications

authorised body, in relation to a market services licence, means a related body corporate of a licensee that is authorised under section 398 to provide a market service under the licence

authorised financial adviser has the same meaning as in section 5 of the Financial Advisers Act 2008

balance date has the same meaning as in section 7 of the Financial Reporting Act 1993

~~becomes subject to an insolvency event has the meaning set out in subsection (4)~~

building society has the same meaning as in section 2(1) of the Building Societies Act 1965

business includes any profession, trade, or undertaking, whether or not carried on with the intention of making a pecuniary profit

broadcaster has the same meaning as in section 2(1) of the Broadcasting Act 1989

broadcasting has the same meaning as in section 2(1) of the Broadcasting Act 1989

category 2 product has the same meaning as in section 5 of the Financial Advisers Act 2008

chartered accountant has the meaning set out in section 19 of the New Zealand Institute of Chartered Accountants Act 1996

civil ~~remedy~~ liability order has the meaning set out in section 466

civil ~~remedy~~ liability provision has the meaning set out in section 467

~~company means a company, or an overseas company, within the meaning of section 2(1) of the Companies Act 1993~~
company—
- (a) means a company, or an overseas company, within the meaning of section 2(1) of the Companies Act 1993; but
- (b) does not include an overseas limited partnership (within the meaning of section 4 of the Limited Partnerships Act 2008)
complying superannuation fund means a superannuation scheme that is identified as a complying superannuation fund on the register of managed investment schemes
conduct in relation to a takeover offer—
- (a) means conduct following the public announcement by a person of an intention to make an offer (being an offer that is regulated by the Takeovers Code), whether or not the offer has already begun and whether or not the offer proceeds; and
- (b) includes conduct incidental or preliminary to a takeover that is regulated by the Takeovers Code
constitution means,—
- (a) in the case of a company within the meaning of the Companies Act 1993, the constitution of the company; and
- (b) in the case of any other entity, the documents or instruments constituting or defining the constitution of the entity
continuous disclosure exemption means an exemption or a waiver of a continuous disclosure provision or provisions of the listing rules of the licensed market

continuous disclosure obligation means an obligation under section 265 and any listing rules with which that section requires compliance

continuous disclosure provisions has the meaning set out in section 266
continuous issue PDS means a PDS that—
- (a) relates to financial products that the issuer, in the ordinary course of its business, continuously offers ~~for issue~~; and
- (b) is not the first PDS to be lodged with the Registrar in respect of that class of financial products
continuous issuer means an issuer that in the ordinary course of its business continuously offers financial products ~~for issue~~

~~contravene has the meaning set out in section 447~~

controlling owner, in relation to any person, has the meaning set out in section 4 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (applied to that person as if it were a financial service provider even if it is not)

convertible note has the same meaning as in section YA 1 of the Income Tax Act 2007

co-operative company means a company registered as a co-operative company under the Co-operative Companies Act 1996

court means, in relation to any matter, the court before which the matter is to be determined (see section 510, which confers exclusive jurisdiction on the High Court in proceedings other than proceedings for offences)

credit union has the same meaning as in section 2 of the Friendly Societies and Credit Unions Act 1982
custodian means,—
- (a) in relation to a registered scheme, the supervisor of the scheme (if the supervisor holds some or all of the scheme property) or other person to whom the supervisor or manager of the scheme has contracted the holding of some or all of the scheme property: each person who is designated or appointed to perform, or to whom is contracted, the function of holding some or all of the scheme property under the scheme:
- (b) in relation to a discretionary investment management service provided by a DIMS licensee, ~~the~~ each person holding investor property ~~on behalf of a retail investor~~ under that service (whether or not appointed by that ~~client~~ investor)
dealing ~~in financial products~~, in relation to financial products,—
- (a) means any of the following:
  - (i) acquiring or disposing of financial products; or
  - (ii) offering financial products for issue or sale and issuing and transferring financial products; or
  - (iii) underwriting financial products; or
  - (iiia) promoting by any means the acquisition or disposal of financial products; or
  - (iiib) in relation to a derivative, discharging obligations under the derivative; or
  - (iv) anything that is preparatory to, or related to, any dealings in financial products (for example, giving financial advice), unless an exception applies to ~~those dealings~~ the dealing under this Act; but
- (b) does not include ~~dealings~~ a dealing excluded by the regulations
debt security has the meaning set out in section 8(1)

defined benefit scheme means a scheme that operates on the principle of unallocated funding, and includes a scheme under which contributions are not allocated on a defined basis to individual members

derivative has the meaning set out in section 8(1C)

derivatives issuer means a person that is in the business of entering into derivatives

~~DIMS licensee means a person that is licensed under Part 6 and whose licence covers acting as a provider of a discretionary investment management service~~

DIMS licensee has the meaning set out in section 390A

direction order means an order under section 453
director means,—
- (a) in relation to a company, any person occupying the position of a director of the company by whatever name called:
- (b) in relation to a partnership (other than a limited partnership), any partner:
- (c) in relation to a limited partnership, any general partner:
- (d) in relation to a body corporate or unincorporate, other than a company, partnership, or limited partnership, any person occupying a position in the body that is comparable with that of a director of a company:
- (e) in relation to any other person, that person
disclosure document means any of the following:
- (a) a PDS:
- (b) a disclosure document under clause 26 of Schedule 1:
- (c) documents, information, or other matters made available under subpart 4 of Part 3:
- (d) a disclosure statement under subpart 4 of Part 6
discretionary investment management service has the meaning set out in section ~~430~~ 390A
dispose of—
- (a) includes dispose of by issuing, selling, assigning, or transferring~~, withdrawing from, or terminating~~; and
- (ab) includes withdrawing from, terminating, or closing out the legal relationship that constitutes the financial product; and
- (b) includes agreeing to dispose of~~; and~~
- ~~(c) in relation to a derivative, includes discharging obligations under the derivative~~
distribute includes—
- (a) make available, publish, and circulate; and
- (b) communicate by letter, newspaper, an Internet site, broadcasting, an audio or visual service, sound recording, television, film, video, or any form of electronic or other means of communication
document has the same meaning as in section 4(1) of the Evidence Act 2006

employee share purchase scheme means a scheme established by an entity under which employees or directors of the entity or of any of its subsidiaries (or other eligible persons referred to in clause 8 of Schedule 1) may acquire specified financial products (as defined in that clause) that are issued by the entity
engaging in conduct means doing or refusing to do an act, and includes—
- (a) omitting to do an act; or
- (b) making it known that an act will or will not be done
entity means any of the following:
- (a) a company or other body corporate:
- (b) a corporation sole:
- (c) in the case of a trust that has—
  - (i) only 1 trustee, the trustee acting in his, her, or its capacity as trustee:
  - (ii) more than 1 trustee, the trustees acting jointly in their capacity as trustees:
- (d) an unincorporated body (including a partnership)
equity security has the meaning set out in section 8(1A)

exhibiting films to the public means to exhibit to the public films within the meaning of section 2 of the Films, Videos, and Publications Classification Act 1993
financial markets—
- (a) means the financial markets in New Zealand; and
- (b) includes—
  - (i) markets in New Zealand for the provision of financial services; and
  - (ii) the capital markets in New Zealand
financial markets legislation means the Acts listed in Schedule 1 of the Financial Markets Authority Act 2011 and the enactments made under those Acts

financial markets participant has the same meaning as in section 4 of the Financial Markets Authority Act 2011

financial product has the meaning set out in section 7 (but in Part 2 has the meaning set out in section 15A)

financial product market has the meaning set out in section 307

financial product market licence means a licence issued under subpart 7 of Part 5
financial service—
- (a) has the same meaning as in section 5 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008; ~~but~~ and
- (ab) includes a market service; but
- (b) does not include any class or classes of services declared by the regulations not to be financial services for the purposes of this Act
FMA means the Financial Markets Authority established by Part 2 of the Financial Markets Authority Act 2011

generally available to the market has the meaning set out in section 227

give, in relation to a document, information, or other matter, includes give by electronic or other means that enable the recipient to readily store the matter in a permanent and legible form
governing document—
- (a) means (in the case of a debt security) a trust deed:
- (b) means (in the case of a managed investment scheme constituted as a trust) the 1 or more trust deeds that constitutes the scheme or (in the case of any other managed investment scheme) the 1 or more deeds, agreements, or instruments that constitute or govern the scheme (for example, a partnership agreement ~~or a trust deed~~):
- ~~(c) includes (in each case)—~~
  - ~~(i) any amendments to a document referred to in paragraph (a) or (b):~~
  - ~~(ii) any document that, under the terms of a document referred to in paragraph (a) or (b), forms part of or determines the meaning of any term of that document~~
- (c) includes (in each case) any amendments to a document referred to in paragraph (a) or (b)
in the business of, in relation to any service or other activity, means carrying on a business of that type (whether or not the business is the person's only business or the person's principal business)

indemnify includes relieve, exempt, or excuse from liability, whether before or after the liability arises

independent trustee, in relation to a restricted scheme, means the trustee, or director of a sole corporate trustee, who is the licensed independent trustee for the purposes of the restricted scheme

industrial and provident society means a society registered under the Industrial and Provident Societies Act 1908

information insider has the meaning set out in section 229

infringement fee, in relation to an infringement offence, means the amount prescribed by the regulations as the infringement fee for the offence

infringement offence means an offence under section 47, 49, 71, 80, 81, 96, 109, 128, 152, 155, 176, 178, 196, 197, 200, 202, 203, 205, 206, 208, 211, 216, 218, 219, 280,290, 291, 305, 334, 503, or 696

infringement offence means an offence identified in this Act as being an infringement offence

infringement notice means a notice issued under section 491

Inland Revenue Acts means the Acts listed in the schedule of the Tax Administration Act 1994

inside information has the meaning set out in section 229

insolvency event has the meaning set out in subsection (4)
insolvent means that,—
- (a) in relation to an issuer of a debt security or a managed investment product,—
  - (i) the issuer is unable to pay the issuer's debts as they become due in the normal course of business; or
  - (ii) the value of the issuer's assets is less than the value of the issuer's liabilities, including contingent liabilities (and for this purpose section 4(4) of the Companies Act 1993 applies in respect of the issuer as if it were a company even if it is not):
- (b) in relation to a registered scheme that is a defined benefit scheme, the value of the assets in the scheme is less than the value of the vested benefits ~~(not counting contingent or discretionary benefits)~~ that may in due course flow from, or are attributable to, membership of the scheme:
- (c) in relation to any other registered scheme,—
  - (i) the funds in the scheme are not sufficient to enable debts in respect of the scheme to be paid as they become due in the normal course of business; or
  - (ii) the value of the assets in the scheme is less than the value of the liabilities in respect of the scheme, including contingent liabilities (and for this purpose section 4(4) of the Companies Act 1993 applies in respect of the scheme as if it were a company)
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 by the person concerned and ending with the eighth working day after the day of service

interim stop order has the meaning set out in section 451

investment authority has the meaning set out in section ~~430~~ 390A

investment manager means, in relation to a registered scheme, a person to whom a manager of the scheme has contracted the investment of some or all of the scheme property

investment mandate has the meaning set out in section ~~430~~ 390A
investor includes—
- (a) a person to whom an offer of financial products is made; and
- (b) a person who acquires, or may acquire, a financial product; and
- (c) a person who receives, or may receive, a financial service
investor property, in relation to a discretionary investment management service that is a retail service, means—
- (a) a financial product held on behalf of an investor under that service; and
- (b) money or property held for or received from, or on account of, an investor in relation to acquiring, holding, or disposing of a financial product under that service
involved in a contravention has the meaning set out in section 509

issued and issuer have the meanings set out in section 10
issuer obligation means an obligation imposed on the issuer of a financial product by or under any of the following:
- (a) a governing document that relates to the financial product:
- (b) the terms of any regulated offer of the financial product:
- (c) a court order relating to the financial product:
- (d) this Act (including, in relation to a managed investment product, all obligations as manager):
- (e) the KiwiSaver Act 2006:
- (f) Part 5D of the Reserve Bank of New Zealand Act 1989
KiwiSaver scheme means a scheme that is registered on the register of managed investment schemes as a KiwiSaver scheme

lawyer has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006

licence means a licence under this Act or, in relation to a supervisor, the Financial Markets Supervisors Act 2011, and licensed means having a licence, or being authorised under a licence, under this Act or, in relation to a supervisor, having a licence under the Financial Markets Supervisors Act 2011

licensed market means a financial product market that is licensed under Part 5 (subject to any regulations made under section 350(1)(d))
~~licensed market obligation means an obligation imposed on a licensed market operator in respect of a licensed market by or under any of the following:~~
- ~~(a) a condition of the licence:~~
- ~~(b) section 312 (general obligations in respect of licensed markets):~~
- ~~(c) section 332 (power to request changes to market rules):~~
- ~~(d) sections 336, 339, 340, and 341 (monitoring obligations)~~
~~licensed market operator means—~~
- ~~(a) a person that is authorised to operate a licensed market under a financial product market licence:~~
- ~~(b) any subsidiary of that person that is authorised, and is operating the market, under the licence~~
licensed market operator means a person that is authorised to operate a licensed market under a financial product market licence

~~licensed market services has the meaning set out in section 389~~
licensed market services means those market services—
- (a) that are required to be licensed under Part 6; or
- (b) for which a person holds a licence under Part 6 (whether or not required to do so)
listed issuer means—
- (a) a person that is a party to a listing agreement with a licensed market operator in relation to a licensed market (and includes a licensed market operator that has financial products quoted on its own licensed market):
- (b) a person to which paragraph (a) previously applied, in respect of any action or event or circumstance to which this Act applied at that time
~~local authority—~~
- ~~(a) has the meaning set out in section 5(1) of the Local Government Act 2002; and~~
- ~~(b) includes New Zealand Local Government Funding Agency Limited while it is a council-controlled organisation within the meaning of section 6(1) of the Local Government Act 2002~~
local authority has the meaning set out in section 5(1) of the Local Government Act 2002 (and see also section 8 of the Local Government Borrowing Act 2011)

locked-in superannuation scheme means a scheme that is registered on the register of managed investment schemes as a superannuation scheme and that is identified as a locked-in scheme on that register

managed investment product has the meaning set out in section 8(1B)

managed investment scheme has the meaning set out in section 9
manager means,—
- (a) in relation to a registered scheme (other than a restricted scheme), the person designated or appointed as the manager of the scheme:
- (b) in relation to a restricted scheme, the persons designated or appointed as trustees of the scheme or, if only 1 person is designated or appointed as a trustee of the scheme, that person:
- (c) in relation to a managed investment scheme if there is no person to whom paragraph (a) or (b) applies, a person occupying the position of, and carrying out any of the functions of, the manager set out in section 129 (whether or not the scheme is registered)
market operator obligation means an obligation imposed on a licensed market operator in respect of a licensed market by or under any of the following:
- (a) a condition of the licence:
- (b) section 312 (general obligations in respect of licensed markets):
- (c) section 332 (power to request changes to market rules):
- (d) sections 336, 339, 340, and 341 (monitoring obligations)
market service means any of the following:
- (a) acting as a manager of a registered scheme ~~(other than a restricted scheme)~~:
- (b) acting as an independent trustee of a restricted scheme:
- (c) acting as a provider of a discretionary investment management service:
- (d) acting as a derivatives issuer ~~in respect of a regulated offer of derivatives~~:
- (da) acting as a custodian in respect of a registered scheme or a discretionary investment management service:
- (e) acting as a provider of prescribed intermediary services
market services licence means a licence issued under Part 6
market services licensee obligation means an obligation imposed on a licensee or an authorised body by or under any of the following:
- (a) a condition of the licence:
- (b) this Act:
- (c) the terms of the offer of a financial product or the provision of a market service:
- (d) a court order made in connection with the offer of a financial product or the provision of a market service:
- (e) in the case of a manager or an independent trustee of a registered scheme,—
  - (i) a governing document:
  - (ii) the KiwiSaver Act 2006
material information,—
- (a) in Part 3, has the meaning set out in section 43:
- (b) in Part 5, has the meaning set out in section 226
Minister means the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of this Act

money includes money's worth (except in the definition of debt security)

New Zealand resident for tax purposes means a person that is a New Zealand resident, as determined under sections YD 1 and YD 2 of the Income Tax Act 2007

non-quoted financial products means financial products that are not quoted
offer includes—
- (a) inviting applications for the issue of financial products:
- (b) inviting applications to purchase financial products
offeror means,—
- (a) in relation to an offer of financial products for issue, the issuer; or
- (b) in any other case, the person who has the capacity, or who agrees, to transfer the financial products if the offer is accepted
Part 2 ~~misleading or deceptive conduct~~ fair dealing provision means any of ~~sections 16 to 19~~ the provisions specified in section 26E(1)

Part 3 offer provision means any of the provisions specified in section 84(3) or (4) and any regulations with which those provisions require compliance

Part 4 governance provision means any of the provisions specified in section 223(3) or (4) and any regulations with which those provisions require compliance
Part 5 market provision means—
- (a) any of the provisions specified in section 385(3) or (4); and
- (b) any regulations with which the provisions referred to in paragraph (a) require compliance; and
- (c) any listing rules with which section 265 requires compliance; and
- (d) any provision of regulations made under section 350 that is stated by those regulations to be a Part 5 market provision
Part 6 licence provision means—
- (a) any of the provisions specified in section 446(3) or (4); and
- (b) any condition imposed on a market services licence by the regulations that is stated by those regulations to be a Part 6 licence provision
Part 6A financial reporting provision means any of the provisions specified in section 446L(3) or (4)

participant means, in relation to a licensed market, a person authorised by the licensed market operator to participate in that market

person includes any entity

prescribed intermediary services means services of a kind that are prescribed for the purposes of this definition and involve a person acting as an intermediary in relation to a particular kind of financial product or financial service

prescribed workplace scheme means a registered scheme of a kind that is prescribed for the purposes of this definition

product disclosure statement or PDS, in relation to a regulated offer, means a product disclosure statement for the offer
product holder, in relation to a financial product, means,—
- (a) in the case of a financial product to which section 200 does not apply, the holder of the financial product (subject to paragraph (c)); or
- (b) in the case of any other financial product, the person who is registered as the holder of the product in a register kept under subpart 5 of Part 4 (subject to paragraph (c)); or
- (c) in the case of a derivative, any party to the derivative that is not a derivatives issuer
protected disclosure has the meaning set out in section 199(5)

provider of a discretionary investment management service has the meaning set out in section ~~430~~390A

QFE or qualifying financial entity has the same meaning as in section 5 of the Financial Advisers Act 2008

QFE adviser has the same meaning as in section 5 of the Financial Advisers Act 2008

qualified auditor has the meaning set out in section ~~221~~ 446I
quoted, in relation to—
- (a) financial products of a listed issuer, means financial products of the issuer that are approved for trading on a licensed market (and, to avoid doubt, financial products do not cease to be quoted merely because trading in those products is suspended):
- (b) derivatives, means derivatives that are approved for trading on a licensed market (and, to avoid doubt, derivatives do not cease to be quoted merely because trading in those products is suspended)
redeemable has the meaning set out in subsection (5)

register entry, in relation to a regulated offer, means the entry for the offer in the register of offers of financial products

register of managed investment schemes means the register of managed investment schemes kept under Schedule 2

register of offers of financial products means the register of offers of financial products kept under Schedule 2

registered bank has the same meaning as in section 2(1) of the Reserve Bank of New Zealand Act 1989

registered scheme means a managed investment scheme that is registered on the register of managed investment schemes

Registrar means the Registrar of Financial Service Providers appointed under section 35 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008

regulated offer has the meaning set out in section 29

regulated product has the meaning set out in section 29

regulations means regulations made under this Act

related body corporate has the meaning set out in section 11(2)

related party, in relation to a registered scheme, has the meaning set out in section 158
related party benefit,—
- (a) in relation to a registered scheme, has the meaning set out in section 158:
- (b) in relation to a DIMS licensee, has the meaning set out in section 437
relative has the meaning set out in clause 5(2) of Schedule 1

relevant event means an event that results in a person having to disclose matters under sections 270 to 273

relevant interest has the meaning set out in sections 230 to 233
relevant money, in relation to financial products, means the money paid—
- (a) to acquire the financial products; or
- (b) on account of those financial products; or
- (c) as a further contribution or a further deposit as referred to in section 10(2)(c)
reporting period has the meaning set out in section 336

Reserve Bank means the Reserve Bank of New Zealand

restricted communication has the meaning set out in section 450

restricted scheme means a scheme that is registered on the register of managed investment schemes as a KiwiSaver scheme or a superannuation scheme and that is identified as a restricted scheme on that register

retail investor has the meaning set out in clause 34 33A of Schedule 1

retail service has the meaning set out in clause 33A of Schedule 1

~~retirement scheme has the meaning set out in section 111(4)~~
retirement scheme means any of the following schemes:
- (a) a registered scheme that is a KiwiSaver scheme or a superannuation scheme:
- (b) a Schedule 3 scheme:
- (c) a fund or scheme constituted under the Government Superannuation Fund Act 1956
same class, in relation to financial products, has the meaning set out in subsection (3)

Schedule 3 scheme means a scheme that, under Schedule 3, is approved as a Schedule 3 scheme

scheme participant, in relation to a managed investment scheme, has the meaning set out in paragraph (a) of the definition of managed investment scheme in section 9(1)
scheme property or property of the scheme, in relation to a registered scheme, means the property to which the registered scheme relates, including—
- (a) contributions of money to the scheme; and
- (b) money borrowed or raised for the purposes of the scheme; and
- (c) financial products or other property acquired, directly or indirectly, with, or with the proceeds of, contributions or money referred to in paragraph (a) ~~or (b)~~, (b), or (d); and
- (d) income and property derived, directly or indirectly, from contributions, money, or property referred to in paragraphs (a) to (c) or this paragraph
security—
- (a) means an arrangement or a facility that has, or is intended to have, the effect of a person making an investment or managing a financial risk; and
- (b) includes—
  - (i) a financial product; and
  - (ii) any interest or right to participate in any capital, assets, earnings, royalties, or other property of any person; and
  - (iii) any interest in, or right to be paid, money that is, or is to be, deposited with, lent to, or otherwise owing by, any person (whether or not the interest or right is secured by a charge over any property); and
  - (iv) any renewal or variation of the terms or conditions of any existing security; but
- (c) does not include any interest or right that is declared by regulations not to be a security for the purposes of this Act
senior manager, in relation to a person (A), means a person who is not a director but occupies a position that allows that person to exercise significant influence over the management or administration of A (for example, a chief executive or a chief financial officer)

service provider means a provider of a financial service

~~solicitor has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006~~
special resolution, in relation to—
- (a) holders of a financial product issued by a credit union, means a resolution approved by no less than 75% of the number of members of the credit union who are entitled to vote on a special resolution and voting (in person, by proxy, or by electronic vote):
- (b) holders of debt securities in any other case, means a resolution approved by product holders holding no less than 75% of the nominal value of the debt securities held by those persons who are entitled to vote on a special resolution and voting (in person, by proxy, or by electronic vote):
- (c) holders of managed investment products in any other case, means a resolution approved by product holders holding no less than 75% of the value of the managed investment products held by those persons who are entitled to vote on a special resolution and voting (in person, by proxy, or by electronic vote)
stop order means an order under section 448

~~subscribe includes purchase and contribute to, whether by way of cash or otherwise~~

subsidiary has the meaning set out in section 5 of the Companies Act 1993

substantial product holder has the meaning set out in section 269(1)

substantial holding has the meaning set out in section 269

superannuation scheme means a scheme that is registered on the register of managed investment schemes as a superannuation scheme

supervisor means a person designated or appointed as a supervisor in relation to a debt security or managed investment scheme for the purposes of any financial markets legislation

Takeovers Code means the Takeovers Code in force under the Takeovers Act 1993

trade, in Part 2, has the meaning set out in section 15A

trading day means, in relation to a licensed market, a day on which the market is open for the trading of financial products
transacting shareholder, in relation to a co-operative company,—
- (a) has the same meaning as in section 4 of the Co-operative Companies Act 1996; and
- (b) includes a supplying shareholder within the meaning of section 34 of that Act
underlying, in relation to a derivative, means the underlying asset, rate, index, commodity, or other thing referred to in ~~paragraph (a)(iii) of the definition of derivative in section 8 in respect of that derivative~~ section 8(1C)(a)(iii)

unsolicited offer has the meaning set out in section 381(1)

unsolicited offer order means an order under section 455

unsolicited offer provision means any provision of any regulations made under section 382 that is stated by those regulations to be an unsolicited offer provision
voting product, in relation to an entity,—
- (a) means a financial product of the entity that confers a right to vote at meetings of members or shareholders (whether or not there is any restriction or limitation on the number of votes that may be cast by or on behalf of the holder of the product); and
- (b) includes a financial product that is convertible into a financial product of the kind referred to in paragraph (a); but
- (c) does not include a financial product that confers only a right to vote that, under the conditions attached to the product, is exercisable only in 1 or more of the following circumstances:
  - (i) during a period in which a dividend (or part of a dividend) in respect of the product is in arrears:
  - (ii) on a proposal to reduce the capital of the entity:
  - (iii) on a proposal that affects rights attached to the product:
  - (iv) on a proposal to put the entity into liquidation:
  - (v) on a proposal for the disposal of the whole or a material part of the property, business, and undertaking of the entity:
  - (vi) during the liquidation of the entity
wholesale investor—
- (a) has the meaning set out in clause 3(2) of Schedule 1, in relation to an offer of financial products; and
- (b) has the meaning set out in clause 33B of Schedule 1 in relation to the provision of a market service.
(2) Terms defined in other provisions of this Act have the meanings given unless the context otherwise requires.

(3) In this Act, 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).
(4) In this Act, an insolvency event is any of the following events and a person becomes subject to an insolvency event on the date on which, and (if specified) the time at which, that event occurs:
- (a) a liquidator is appointed in respect of a liquidation under Part 16 of the Companies Act 1993 or under any other Act; or
- (b) an administrator is appointed in respect of a voluntary administration under Part 15A of the Companies Act 1993; or
- (c) a receiver is appointed in relation to the whole, or substantially the whole, of the assets and undertaking of the person; or
- (d) a liquidator is appointed in respect of a liquidation of an overseas company under section 342 of the Companies Act 1993; or
- (e) a statutory manager is appointed in respect of a statutory management under Part 3 of the Corporations (Investigation and Management) Act 1989 or any other enactment; or
- (f) a person is appointed in respect of, or another event occurs that indicates the start of, a process in New Zealand or in any other country in which the company or other body corporate was incorporated, created, or established that is similar to any of those set out in paragraphs (a) to (e).
(5) In this Act, a share in an entity or a managed investment product in a scheme is redeemable if—
- (a) the constitution of the entity, the governing documents of the scheme, or the terms of issue of the share or product make provision for the redemption of the share or product by the entity or the manager of the scheme— in 1 or more of the following circumstances:
  - (i) at the option of the entity or manager~~; or~~:
  - (ii) at the option of the holder of the share or product~~; or~~:
  - (iii) on a date specified in those documents or in those terms; and
- (b) that redemption is for a consideration that is— 1 or more of the following:
  - (i) specified~~; or~~:
  - (ii) to be calculated by reference to a formula~~; or~~:
  - (iii) required to be fixed by a suitably qualified person who is not associated with or interested in the entity or manager of the scheme.

7 Meaning of financial product

(1) In this Act, financial product means—
- (a) a debt security; or
- (b) an equity security; or
- (c) a managed investment product; or
- (d) a derivative.
(2) If an interest or a right is declared by regulations not to be a security for the purposes of this Act, the interest or right is not a financial product for the purposes of this Act.

8 Definitions relating to kinds of financial products

~~(1) In this Act, subject to subsection (2)(a) and (b),—~~
~~debt security—~~
- ~~(a) means a right to be repaid money or paid interest on money that is, or is to be, deposited with, lent to, or otherwise owing by, any person; and~~
- ~~(b) includes—~~
  - ~~(i) a security commonly referred to in the financial markets as a debenture, bond, or note; and~~
  - ~~(ii) a convertible note; and~~
  - ~~(iii) a redeemable share in an entity that would otherwise be an equity security (except a share redeemable only at the option of the entity); but~~
- ~~(c) does not include—~~
  - (i) a share in a co-operative company that is issued or transferred to a transacting shareholder and that is, or may become, subject to the right of a transacting shareholder to surrender the share under section 20 of the Co-operative Companies Act 1996; or
  - ~~(ii) a derivative of the kind referred to in paragraph (b) of the definition of that term in this section; or~~
  - ~~(iii) a unit, proportionate interest, or membership interest in a registered scheme~~
~~derivative—~~
- ~~(a) means an agreement in relation to which the following conditions are satisfied:~~
  - ~~(i) under the agreement, a party to the agreement must, or may be required to, provide at some future time consideration of a particular kind or kinds to another person; and~~
  - ~~(ii) that future time is not less than the time, prescribed for the purposes of this subparagraph, after the time at which the agreement is entered into; and~~
  - (iii) the amount of the consideration, or the value of the agreement, is ultimately determined, derived from, or varies by reference to (wholly or in part) the value or amount of something else (of any nature whatsoever and whether or not deliverable), including, for example, 1 or more of the following:
    
    ~~(A) an asset:~~
    
    ~~(B) a rate (including an interest rate or exchange rate):~~
    
    ~~(C) an index:~~
    
    ~~(D) a commodity; and~~
- ~~(b) includes a transaction that is recurrently entered into in the financial markets and is commonly referred to in those markets as—~~
  - ~~(i) a futures contract or forward; or~~
  - ~~(ii) an option (other than an option to acquire by way of issue an equity security, a debt security, or a managed investment product); or~~
  - ~~(iii) a swap agreement; or~~
  - ~~(iv) a contract for difference, margin contract, or rolling spot contract; or~~
  - ~~(v) a cap, collar, floor, or spread; but~~
- ~~(c) does not include—~~
  - ~~(i) an agreement for the future provision of services; or~~
  - ~~(ii) a debt security, an equity security, or a managed investment product; and~~
- ~~(d) does not include an agreement in relation to which all of the following subparagraphs are satisfied:~~
  - (i) a party has, or may have, an obligation to buy, and another party has, or may have, an obligation to sell, property (other than financial products or New Zealand or foreign currency) at a price and on a date in the future; and
  - ~~(ii) the agreement does not permit the seller's obligations to be wholly settled by cash, or by set-off between the parties, rather than by delivery of the property; and~~
  - (iii) neither usual market practice nor the rules of a market permit the seller's obligations to be closed out by the matching up of the agreement with another agreement of the same kind under which the seller has offsetting obligations to buy
~~equity security—~~
- ~~(a) means—~~
  - ~~(i) a share in a company; and~~
  - ~~(ii) a share in an industrial and provident society; and~~
  - ~~(iii) a share in a building society; but~~
- ~~(b) does not include a debt security~~
~~managed investment product—~~
- ~~(a) means a right to participate in, or receive, financial benefits from a managed investment scheme, whether the right is actual, prospective, or contingent and whether it is enforceable or not; but~~
- ~~(b) does not include—~~
  - ~~(i) an equity security; or~~
  - ~~(ii) a debt security.~~
(1) In this Act, subject to subsection (2)(a) and (b), debt security—
- (a) means a right to be repaid money or paid interest on money that is, or is to be, deposited with, lent to, or otherwise owing by, any person; and
- (b) includes—
  - (i) a security commonly referred to in the financial markets as a debenture, bond, or note; and
  - (ii) a convertible note; and
  - (iii) a redeemable share in an entity that would otherwise be an equity security (except a share redeemable only at the option of the entity); but
- (c) does not include—
  - (i) a share in a co-operative company that is issued or transferred to a transacting shareholder and that is, or may become, subject to the right of a transacting shareholder to surrender the share under section 20 of the Co-operative Companies Act 1996; or
  - (ii) a derivative of the kind referred to in subsection (1C)(b); or
  - (iii) a unit, proportionate interest, or membership interest in a registered scheme.
(1A) In this Act, subject to subsection (2)(a) and (b), equity security—
- (a) means—
  - (i) a share in a company; and
  - (ii) a share in an industrial and provident society; and
  - (iii) a share in a building society; but
- (b) does not include a debt security.
(1B) In this Act, subject to subsection (2)(a) and (b), managed investment product—
- (a) means the interest in a managed investment scheme referred to in paragraph (ab) of the definition of that term in section 9(1); but
- (b) does not include—
  - (i) an equity security; or
  - (ii) a debt security.
(1C) In this Act, subject to subsection (2)(a) and (b) and section 9A, derivative—
- (a) means an agreement in relation to which the following conditions are satisfied:
  - (i) under the agreement, a party to the agreement must, or may be required to, provide at some future time consideration of a particular kind or kinds to another person; and
  - (ii) that future time is not less than the time, prescribed for the purposes of this subparagraph, after the time at which the agreement is entered into; and
  - (iii) the amount of the consideration, or the value of the agreement, is ultimately determined, derived from, or varies by reference to (wholly or in part) the value or amount of something else (of any nature whatsoever and whether or not deliverable), including, for example, 1 or more of the following:
    - (A) an asset:
    - (B) a rate (including an interest rate or exchange rate):
    - (C) an index:
    - (D) a commodity; and
- (b) includes a transaction that is recurrently entered into in the financial markets in New Zealand or overseas and is commonly referred to in those markets as—
  - (i) a futures contract or forward; or
  - (ii) an option (other than an option to acquire by way of issue an equity security, a debt security, or a managed investment product); or
  - (iii) a swap agreement; or
  - (iv) a contract for difference, margin contract, or rolling spot contract; or
  - (v) a cap, collar, floor, or spread; but
- (c) does not include—
  - (i) an agreement for the future provision of services; or
  - (ii) a debt security, an equity security, or a managed investment product; and
- (d) does not include an agreement in relation to which all of the following subparagraphs are satisfied:
  - (i) a party has, or may have, an obligation to buy, and another party has, or may have, an obligation to sell, property (other than financial products or New Zealand or foreign currency) at a price and on a date in the future; and
  - (ii) the agreement does not permit the seller's obligations to be wholly settled by cash, or by set-off between the parties, rather than by delivery of the property; and
  - (iii) neither usual market practice nor the rules of a market permit the seller's obligations to be closed out by the matching up of the agreement with another agreement of the same kind under which the seller has offsetting obligations to buy.
(2) A financial product of a particular kind defined in subsection (1), (1A), (1B), or (1C)—
- (a) includes—
  - (i) a security declared to be a financial product of that kind under subpart 3 of Part 8; or
  - (ii) a right attaching to, or a legal or an equitable interest in, a financial product of that kind; or
  - (iii) an option to acquire, by way of issue, a financial product of that kind; but
- (b) does not include—
  - (i) a security that is declared under subpart 3 of Part 8 to be a financial product of a different kind:
  - (ii) a security that is declared under subpart 3 of Part 8 not to be a financial product.
~~(3) Paragraph (d) of the definition of derivative in subsection (1) applies only to the extent that the agreement deals with the purchase and sale referred to in that paragraph.~~

(4) An agreement under which one party has an obligation to buy, and the other has an obligation to sell, property is not a derivative merely because the agreement provides for the consideration to be varied by reference to a general inflation index (for example, the Consumers Price Index (All Groups) published by Statistics New Zealand).

~~(5) Subsection (4) is subject to subsection (2)(a).~~

9 Definitions of financial benefit and of managed investment scheme

(1) In this Act,—

financial benefit means capital, earnings, or other financial returns
managed investment scheme means a scheme to which ~~both~~ each of the following ~~apply~~ applies:
- (a) the purpose or effect of the scheme is to enable persons taking part in the scheme (scheme participants) to contribute money, or have money contributed on their behalf, to the scheme as consideration to acquire ~~rights to financial benefits produced principally by the efforts of another person under the scheme~~ interests in the scheme; and
- (ab) those interests are rights to participate in, or receive, financial benefits produced principally by the efforts of another person under the scheme (whether those rights are actual, prospective, or contingent, and whether they are enforceable or not); and
- (b) the scheme participants do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions).
(2) However, a managed investment scheme does not include—
- Scheme only involves management of direct interests in underlying property
- (a) a scheme under which the scheme participant takes part in the scheme only by holding 1 or more interests in property if—
  - (i) it is an interest in separately identifiable or traceable property; and
  - (ii) the scheme participant either holds both the legal and beneficial interest in the property or the legal interest in the property is held on a bare trust for the scheme participant; and
  - (iii) the value of the interest is not substantially dependent on contributions being made by other scheme participants or the use of other scheme participants' contributions:
- Discretionary investment management services
- (b) a discretionary investment management service provided by a DIMS licensee or another person permitted to provide that service under sections 17 to 20 of the Financial Advisers Act 2008:
- Insurance contracts
- (c) a scheme that would be a managed investment scheme only because it involves pure risk contracts of insurance:
- (d) a scheme that would be a managed investment scheme only because it involves life insurance policies (within the meaning of section 2(1) of the Securities Act 1978) that were issued before this section comes into force.
(3) In subsection (2), pure risk contract of insurance means a contract of insurance that does not, and never will, have a value on its cancellation or surrender that is greater than the sum of premiums paid to the insurer.
- ~~(a) for the payment of money on the happening of a contingency, other than a contingency dependent on the continuance of human life; and~~
- (b) that does not, and never will, have a value on its cancellation or surrender that is greater than the value of an unexpired premium relating to a period after the date of cancellation or surrender.

9A Miscellaneous matters relating to definition of derivative

(1) Section 8(1C)(d) applies only to the extent that the agreement deals with the purchase and sale referred to in that paragraph.

(2) An agreement under which one party has an obligation to buy, and the other has an obligation to sell, property is not a derivative merely because the agreement provides for the consideration to be varied by reference to a general inflation index (for example, the Consumers Price Index (All Groups) published by Statistics New Zealand).

(3) Subsection (2) is subject to section 8(2)(a).

10 Definitions of issued and issuer

(1) In this Act,—
- (a) a financial product is issued to a person when it is first issued, granted, or otherwise made available to a person (subject to subsection (2)):
- (b) issuer means, in relation to—
  - (i) a debt security, the person that is liable to repay money or pay interest or other returns under the security (other than as a guarantor):
  - (ii) an equity security, the company, industrial and provident society, building society, or other entity to which the security relates:
  - (iii) a managed investment product, the manager of the managed investment scheme to which the product relates:
  - (iv) a derivative, the derivatives issuer that entered into the derivative.
(2) Despite subsection (1)(a),—
- (a) a managed investment product that is an interest in a superannuation scheme, KiwiSaver scheme, or other prescribed scheme is issued to a person when the person becomes a member of the scheme:
- (b) a derivative is issued to a person when the person enters into the legal relationship that constitutes the derivative:
- (c) none of the following are taken to give rise to the issue of a financial product to a person (A):
  - (i) A making a further contribution to, or investment in, a superannuation scheme, a KiwiSaver scheme, or other prescribed scheme of which A is already a scheme participant:
  - (ii) an employer of A or any other person making, for the benefit of A, a further contribution to, or investment in, a superannuation scheme, a KiwiSaver scheme, or other prescribed scheme of which A is already a scheme participant:
  - (iii) A making a further deposit into a prescribed deposit product:
  - (iv) A engaging in conduct specified in regulations made for the purposes of this subparagraph in relation to a financial product already held by A.
(3) Despite subsection (1)(b), if a debt security is offered for the purposes of a managed investment scheme, the manager of the scheme is the issuer for the purposes of this Act.

(3A) If each person that enters into a derivative is a derivatives issuer, each of those persons is the issuer.

Example

A and B enter into a futures contract.

Both A and B are derivatives issuers. Accordingly, both A and B are issuers of the futures contract.

Although both parties are issuers, whether any particular party has disclosure or other obligations will depend on the circumstances.

If both A and B hold a market services licence, both A and B will be wholesale investors under clause 35(1)(f) of Schedule 1. Accordingly, neither party will be required to make disclosure under Part 3 to the other party.

(3B) In this Act, a reference to an issuer in relation to events, circumstances, or other matters before the financial products are issued is a reference to the person that will be, or is intended to be, the issuer when those products are issued.

(4) In this Act, a person ceases to be an issuer in relation to financial products when those products are cancelled, redeemed, or forfeited, or all of the obligations owing under those products have been discharged.

(5) If the terms of a financial product require or allow the person acquiring the product to pay separate amounts of money at different times, each of those payments must, for the purposes of this Act, be treated as payment for the same financial product as each of those other payments.

11 Meaning of associated person and related body corporate

(1) In this Act, a person (A) is associated with, or an associated person of, another person (B) if—
- (a) A is a body corporate and B 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 the body corporate (or vice versa):
- (b) A and B are relatives or related bodies corporate:
- (c) A and B are partners to whom the Partnership Act 1908 applies:
- (d) A is a director or senior manager of B (or vice versa):
- (e) A and B are acting jointly or in concert:
- (f) A acts, or is accustomed to act, in accordance with the wishes of B (or vice versa):
- (g) A is able, directly or indirectly, to exert a substantial degree of influence over the activities of B (or vice versa):
- (h) A and B are bodies corporate that consist substantially of the same members or shareholders or that are under the control of the same persons:
- (i) there is another person with which A and B are both associated under this subsection.
(2) In this Act, a body corporate (A) is a related body corporate of another body corporate (B) if—
- (a) B is A's holding company or subsidiary within the meaning of section 5 of the Companies Act 1993; or
- (b) more than half of A's voting products (other than voting products that carry no right to participate beyond a specified amount in a distribution of either profits or capital) are held by B and bodies corporate that are related to B (whether directly or indirectly, but other than in a fiduciary capacity), or vice versa; or
- (c) more than half of the voting products (other than voting products that carry no right to participate beyond a specified amount in a distribution of either profits or capital) of each of A and B are held by members of the other (whether directly or indirectly, but other than in a fiduciary capacity); or
- (d) the businesses of A and B have been so carried on that the separate business of each body corporate, or a substantial part of that business, is not readily identifiable; or
- (e) there is another body corporate to which A and B are both related under this subsection.

12 Miscellaneous interpretation provisions relating to statements and information

(1) In this Act, a reference to a statement or other information that is false, misleading, deceptive, or confusing includes a reference to a statement or information that is false, misleading, deceptive, or confusing (as the case may be) by reason of—
- (a) the form or context in which the statement or information is made, published, or provided; or
- (b) the omission of any other information that is material in the form and context in which it is made, published, or provided.
(2) For the purpose of considering whether a PDS, a register entry, or any other document or communication provided under this Act is false, misleading, deceptive, or confusing, a statement or other information must be treated as being included in the PDS, register entry, or other document or communication if it—
- (a) is contained in the PDS, register entry, or document or communication (as the case may be); or
- (b) appears on the face of the PDS, register entry, or document or communication (as the case may be); or
- (c) is contained in any financial statements, report, or other document that accompanies, or is incorporated by reference or referred to in, or distributed with, the PDS, register entry, or document or communication (as the case may be).
(3) For the purposes of this section, if a PDS, a register entry, or any other document or communication specifically identifies a particular page or section of an Internet site or another document, only that page or section is incorporated by reference or referred to in the PDS, register entry, or other document or communication (except in the prescribed circumstances).

(4) If this Act or the regulations require information or any other matter to be contained or included in a PDS, register entry, or document or communication, the information or other matter may be incorporated by reference only if this is authorised by the regulations.

13 Status of examples

(1) An example used in this Act 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.

Act binds the Crown

14 Act binds the Crown

This Act binds the Crown.

General application provision

15 Application of Act

(1) The provisions of this Act have effect despite anything to the contrary in any other enactment or in any agreement, deed, application, disclosure document, or advertisement.
(2) A provision of an agreement or a deed is void if it provides that a party to the agreement or deed is—
- (a) required or bound to waive compliance with any requirement of this Act or the regulations; or
- (b) taken to have notice of any agreement, document, or matter not specifically referred to in the relevant disclosure document (if any).
(3) Nothing in this section or in any other provision of this Act or the regulations limits the Illegal Contracts Act 1970.

Part 2
Misleading or deceptive conduct or false or misleading representationsFair dealing

15A Interpretation in this Part

In this Part,—
financial product—
- (a) has the meaning set out in section 7; and
- (b) includes any class or classes of financial product (within the meaning of section 5 of the Financial Advisers Act 2008) declared by the regulations to be a financial product for the purposes of this Part
trade means any trade, business, industry, profession, occupation, activity of commerce, or undertaking.

Misleading or deceptive conduct and false or misleading representations

16 Misleading or deceptive conduct generally

(1) A person must not, in trade, engage in conduct that is misleading or deceptive or likely to mislead or deceive in relation to—
- (a) any dealing in financial products; or
- (b) the supply or possible supply of a financial service or the promotion by any means of the supply or use of financial services.
(2) A person must not engage in conduct that is misleading or deceptive or likely to mislead or deceive in relation to any dealing in quoted financial products.

(3) Subsection (2) applies regardless of whether or not the dealing is in trade.

~~(2) In this Part, trade means any trade, business, industry, profession, occupation, activity of commerce, or undertaking.~~

Compare: 1986 No 121 s 9; 1988 No 234 s 13

17 Misleading conduct in relation to financial products

A person must not, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of financial products.

Compare: 1986 No 121 s 10

18 Misleading conduct in relation to financial services

A person must not, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of financial services.

Compare: 1986 No 121 s 11

19 False or misleading representations

A person must not, in trade, in connection with any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services, make a false or misleading representation—
- (a) that the products or services are of a particular kind, standard, quality, grade, quantity, composition, or value, ~~grade, or composition,~~ or have had a particular history; or
- (b) that the products or services are offered, issued, transferred, or supplied by a particular person, by a person who has particular characteristics, by a person of a particular trade, qualification, or skill, or by a person who is of a particular kind; or
- (c) that a particular person has agreed to acquire the products or services; or
- (d) that the products or services have any sponsorship, approval, endorsement, performance characteristics, accessories, uses, or benefits; or
- (e) that a person has any sponsorship, approval, endorsement, or affiliation; or
- (f) with respect to the price of the products or services; or
- (g) concerning the need for the products or services; or
- (h) concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right, or remedy, including (to avoid doubt) in relation to any guarantee, right, or remedy available under the Consumer Guarantees Act 1993; or
- (i) concerning the place of origin of the products or services.
Compare: 1986 No 121 s 13

20 Certain conduct does not contravene this Part various provisions

~~(1) Conduct that contravenes—~~
- ~~(a) section 65, 83, or 425 or clause 27 of Schedule 1 does not contravene this Part:~~
- ~~(b) section 27, 28, 34, 35, 47, 48, 77G, 77H, 77L, or 77M of the Financial Advisers Act 2008 does not contravene this Part.~~
(1) Conduct that contravenes section 65, 83, 257, 260, or 425 or clause 27 of Schedule 1 does not contravene sections 16 to 19.

(2) For the purpose of this section, conduct must be treated as contravening ~~a provision referred to in subsection (1)~~ section 65, 83, 257, 260, or 425 or clause 27 of Schedule 1 even if the conduct does not constitute an offence, or does not lead to any liability, because of the availability of a defence.

Compare: Australian Securities and Investments Commission Act 2001 ss 12DA(1A), 12DB(2) (Aust)

21 Limited application of Part of provisions in relation to newspapers, magazines, broadcasting, etc

(1) Nothing in ~~this Part~~ sections 16 to 19 applies to the publication of any information or matter in a newspaper or magazine, or on a news media or financial market commentary Internet site, by the relevant person, not being—
- (a) the publication of an advertisement; or
- (b) the publication of any information or matter relating to any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services by—
  - (i) the relevant person or, if the relevant person is a body corporate, by a related body corporate; or
  - (ii) a person who is a party to any agreement with the relevant person relating to the content, nature, or tenor of the information or matter.
(2) Nothing in ~~this Part~~ sections 16 to 19 applies to the broadcasting or exhibiting of any information or matter by the relevant person, not being—
- (a) the broadcasting or exhibiting of an advertisement; or
- (b) the broadcasting or exhibiting of any information or matter relating to any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services by—
  - (i) the relevant person or, if the relevant person is a body corporate, by a related body corporate; or
  - (ii) a person who is a party to any agreement with the relevant person relating to the content, nature, or tenor of the information or matter.
(3) In this section,—
exhibiting means—
- (a) exhibiting by means of an audio or visual service; or
- (b) exhibiting films to the public
newspaper has the same meaning as in section 2 of the Films, Videos, and Publications Classification Act 1993
relevant person means, in relation to—
- (a) a newspaper or magazine, the proprietor of the newspaper or magazine:
- (b) a news media or financial market commentary Internet site, the person that controls the content of the Internet site:
- (c) broadcasting, the broadcaster:
- (d) an audio or visual service, the person that controls the content of the audio or visual service:
- (e) exhibiting films to the public, the person that exhibits the films.
Compare: 1986 No 121 s 15

22 Defence for publisher

In any proceeding against a person (A) for contravention of ~~a provision of this Part~~ any of sections 16 to 19 committed by the publication of an advertisement, it is a defence if A proves that—
- (a) A's business is publishing or arranging for the publication of advertisements; and
- (b) A received the advertisement, or the information contained in the advertisement, as the case may be, in the ordinary course of that business and did not know and had no reason to suspect that the publication of the advertisement or the publication of the advertisement containing that information, as the case may be, would constitute a contravention of the provision.
Compare: 1986 No 121 s 44(4)

23 Defence for reasonable reliance on information supplied by another person

(1) In any proceeding against a person (A) for contravention of a provision of this Part, it is a defence if the contravention was due to reasonable reliance on information supplied by another person.

~~(2) In this section, another person does not include a director, employee, or agent of A.~~

(3) A is not, without the leave of the court, entitled to rely on the defence provided by this section that the contravention was due to reasonable reliance on information supplied by another person unless A has, not later than 7 working days before the date on which the hearing of the proceeding commences, served on the other party to the proceeding a notice in writing identifying that person.

~~Compare: 1986 No 121 s 44(1)(b), (2), (3)~~

24 Licensed market operator does not contravene by notifying disclosures

A licensed market operator does not contravene any ~~provision of this Part~~ of sections 16 to 19 by the notification of any disclosure made to it under subpart 4, 5, or 6 of Part 5 or under an alternative disclosure obligation.

25 Other exceptions

(1) ~~This Part does~~ Sections 16 to 19 do not apply to conduct in relation to a takeover offer for financial products under the Takeovers Code or to conduct under that offer to the extent that the conduct is regulated by the Code, the Takeovers Act 1993, or an exemption granted under that Act.

(2) ~~This Part does~~ Sections 16 to 19 do not apply to conduct in relation to the acquisition or redemption by a company of its shares under the Companies Act 1993 to the extent that the conduct is regulated by that Act.

Compare: 1988 No 234 ss 14, 15

26 Territorial scope of Part sections 16 to 19

(1) ~~This Part applies~~ Sections 16 to 19 apply to—
- (a) conduct in New Zealand; and
- (b) conduct outside New Zealand by any person resident, incorporated, ~~registered,~~ or carrying on business in New Zealand to the extent that that conduct relates to dealing in financial products, or the supply of a financial service, that occurs (in part or otherwise) within New Zealand.
(2) Sections 16 to 19 also apply to a restricted communication that is distributed or to be distributed to a person outside New Zealand by any person resident, incorporated, or having a principal place of business in New Zealand.

(3) A proceeding under subpart 3 of Part 7 in relation to conduct to which this Part applies by virtue of subsection (2) may be commenced only by the FMA.

Compare: 1988 No 234 s 18; 1978 No 103 s 7(3)

Offers in course of unsolicited meetings

26A Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade

(1) A person must not offer financial products for issue or sale to a person who is acting otherwise than in trade (A) in the course of, or because of, an unsolicited meeting with A.
(2) Subsection (1) does not prohibit an offer of financial products if—
- (a) the offer does not require disclosure under Part 3 because of an exclusion under Part 1 of Schedule 1 (other than an exclusion under clause 12 or 16 of that schedule); or
- (b) the offer is through an authorised financial adviser or a QFE adviser who is acting in the ordinary course of business as a financial adviser; or
- (c) the offer is an offer of quoted financial products made to A through a person who, under the Financial Advisers Act 2008, is permitted to give personalised financial advice to A in respect of those products (including as a result of an exemption by or under that Act); or
- (d) the offer is an offer of the financial products of a co-operative where becoming a holder of those products is—
  - (i) a necessary incident of doing business with the co-operative; or
  - (ii) the means by which a person can access the benefits of membership of the co-operative; or
- (e) the offer is made in the prescribed circumstances.
(3) This section applies to offers of financial products received by persons in New Zealand, regardless of—
- (a) where any resulting issue or transfer occurs:
- (b) where the issuer or offeror is resident, incorporated, or carries on business.
(4) In this section,—
meeting includes—
- (a) a telephone call; or
- (b) a meeting held by means of audio, audio and visual, or electronic communication where the participants can simultaneously communicate with each other throughout the meeting
co-operative means—
- (a) a co-operative company; or
- (b) an industrial and provident society; or
- (c) an entity of a prescribed kind.
Compare: Corporations Act 2001 s 736 (Aust)

26B Right to withdraw

(1) If financial products are issued or transferred to a person (A) as a result of an offer that contravenes section 26A, A has the right to—
- (a) withdraw from holding the financial products and to have the relevant money repaid (in any case other than a derivative); or
- (b) in the case of a derivative, withdraw from the derivative.
(2) The right referred to in subsection (1) is exercisable by A giving to the offeror notice of the exercise of the right within 1 month after the date of the issue or transfer.

(3) Notice under this section may be expressed in any way (including oral or written) that shows the intention of A to withdraw from holding the financial product or the derivative.

(4) This section and sections 26C and 26D do not limit any other liability that a person may have for a contravention of section 26A.

Compare: Corporations Act 2001 s 738 (Aust)

26C Offeror obligations if notice of withdrawal given

(1) If a notice is given under section 26B in relation to a financial product other than a derivative,—
- (a) the offeror must ensure that the relevant money is repaid as soon as practicable; and
- (b) if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the relevant money together with interest at a prescribed rate from the date on which the notice was given.
(2) If a notice is given under section 26B in relation to a derivative,—
- (a) no party to the derivative is obliged or entitled to perform it further; and
- (b) each party to the derivative must, as soon as practicable, repay any money, or return any other property, received by the party under the derivative to the party from whom it was received; and
- (c) if money owed by the offeror is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the date on which the notice was given.
(3) For the purposes of subsection (2)(b), an amount of money due from one party must be set off against an amount due from the other party.

26D Director not liable if no misconduct or negligence

A director is not liable under section 26C(1)(b) or (2)(c) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Civil liability

26E Civil liability for certain contraventions of this Part

(1) Sections 16 to 19, 26A, and 26C are Part 2 fair dealing provisions.

(2) A contravention of any of sections 16 to 19 may give rise to civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.

(3) A contravention of section 26A or 26C may give rise to civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case.

Part 3
Disclosure of offers of financial products

Subpart 1—Application

27 Issue offers that need disclosure

An offer of financial products for issue requires disclosure to an investor under this Part unless an exclusion under Part 1 of Schedule 1 applies.

Compare: Corporations Act 2001 s 706 (Aust)

28 Sale offers that need disclosure

An offer of financial products for sale requires disclosure to an investor under this Part only if disclosure is required under Part 2 of Schedule 1.

Compare: Corporations Act 2001 s 707(1) (Aust)

29 Meaning of regulated offer and of regulated product

(1) In this Act, regulated offer—
- (a) means an offer of financial products to 1 or more investors where the offer to at least 1 of those investors requires disclosure under this Part (regardless of whether or not an exclusion under Schedule 1 applies to an offer to 1 or more other investors); but
- (b) does not include an offer of financial products to 1 or more investors if—
  - (i) the only investors ~~in New Zealand~~ who are able, under the terms of the offer, to acquire the products are investors to whom disclosure under this Part is not required; and
  - (ii) all of the investors who acquire the products under the offer are investors to whom disclosure under this Part is not required.
Example

ABC Limited makes an offer of its ordinary shares to 100 investors.

Of those investors, 5 are wholesale investors, 15 are relatives of directors of ABC Limited, and 20 are close business associates of ABC Limited. Exclusions under Schedule 1 apply and accordingly the offers to these investors do not require disclosure under this Part.

However, none of the exclusions in Schedule 1 apply to the remaining 60 investors. The offer to each of these investors requires disclosure. This means that a product disclosure statement must be given to each of the 60 investors under section 37 (subject to section 38).

The offer of ABC Limited's ordinary shares, as a whole, is a regulated offer because at least some of the offers to investors require disclosure.

Some obligations under this Act apply to the regulated offer as a whole. These obligations apply to all of the investors even if the offers to some of those investors do not require disclosure. For example, all ~~subscriptions~~ money paid for the shares must be held in trust under section 69 (even if the ~~subscription~~ money is paid by a wholesale investor, a relative, or a close business associate), ongoing disclosure under subpart 4 may be required to be made to a wholesale investor, a relative, or a close business associate, and registers of financial products kept under subpart 5 of Part 4 relate to products held by all product holders.
(2) In this Act, regulated product means—
- (a) a financial product offered under a regulated offer; or
- (b) a managed investment product in a registered scheme (whether or not there has been a regulated offer).

30 Regulated offers that need to meet additional governance requirements

(1) A regulated offer of debt securities must meet the ~~governing document and supervisor~~ requirements under subpart 2 of Part 4.

(2) A regulated offer of managed investment products must meet the ~~registration~~ requirements under subpart 3 of Part 4.

31 Options over financial products

(1) For the purposes of this Part and Schedule 1,—
- (a) an offer of an option ~~over financial products~~ to acquire, by way of issue, a financial product is an offer both of the option and of the underlying financial products; and
- (b) the grant of an option without an offer of the option is an offer of the option; and
- (c) an offer to grant an option is an offer to issue the option.
(2) See clause 11 of Schedule 1 for an exclusion in relation to options.

Compare: Corporations Act 2001 s 702 (Aust)

32 Treatment of offers of convertible financial products

For the purposes of this Part and Schedule 1, an offer of a financial product ~~of an issuer~~ that will be converted, or is or may become convertible, into another financial product ~~of the issuer~~ is an offer both of the financial product that is issued and of the financial product into which it converts.

33 Treatment of offers of renewals and variations

(1) For the purposes of this Part and Schedule 1, an offer of a renewal or variation of the terms or conditions of a financial product made by the issuer is an offer of the financial product as renewed or varied.

(2) A change to the terms or conditions of a financial product is not a variation for the purposes of this section if the change is made in accordance with the existing terms or conditions of the financial product (for example, if the issuer exercises a power under the terms or conditions to change an interest rate).

(3) See clause 23 of Schedule 1 for an exclusion in relation to renewals and variations (but limited disclosure may be required under clause 26 of that schedule).

33A Offers of financial products involving customised terms

(1) Offers of a type of financial product to 2 or more investors are not prevented from being part of the same regulated offer merely because the product involves terms that are customised for each investor.

(2) The PDS and register entry for a regulated offer are not required to include specific information about any customised terms that apply to a particular investor.

(3) Subsection (2) does not prevent the regulations from requiring a PDS or register entry to contain information about the kinds of terms that may be customised for each investor.

Example

A derivatives issuer makes an offer of a particular type of swap agreement to retail investors (where the offer to at least 1 of those investors requires disclosure under this Part).

These derivatives involve some standard or generic terms. They also involve customised terms that are negotiated with each retail investor (for example, terms relating to particular dates or amounts).

The offer of those derivatives to those investors is a regulated offer.

The PDS or register entry relates to the regulated offer as a whole. The PDS and register entry do not include specific information about the customised terms that apply to a particular investor. This does not prevent the regulations requiring the PDS or register entry to contain a description of the kinds of customised terms that may be negotiated (such as a range of dates or amounts).

34 Territorial scope of Part

(1) This Part applies to offers of financial products in New Zealand, regardless of—
- (a) where any resulting issue or transfer occurs:
- (b) where the issuer or offeror is resident, incorporated, or carries on business.
(2) For the purposes of ~~this Part~~ subsection (1), financial products are offered in New Zealand if an offer of the financial products is received by a person in New Zealand, unless the offeror demonstrates that it took all reasonable steps to ensure that persons in New Zealand (other than persons referred to in subsection (3)) may not accept the offer.

(3) The persons referred to in this subsection are persons to whom disclosure under this Part is not required because of an exclusion under any of clauses 3 to 5 of Schedule 1.

~~(4) The territorial scope of this Part may be further extended under subpart 6 of Part 8.~~

Compare: 1978 No 103 s 7

Subpart 2—Procedure for making regulated offers

Product disclosure statement must be prepared and lodged

35 PDS must be prepared and lodged

(1) A person must not make a regulated offer, or distribute an application form for a regulated offer, unless the issuer of the financial products has—
- (a) prepared a product disclosure statement (PDS) for the offer; and
- (b) lodged the PDS with the Registrar; and
- (c) supplied to the Registrar all of the information and documents that the register entry (if any) is required to contain by this Act or the regulations.
(2) A person who contravenes subsection (1) commits an offence if the person knows that, or is reckless as to whether, the offer is a regulated offer.
(3) A person who commits an offence under subsection (2) is liable on conviction ~~on indictment~~,—
- (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and
- (b) in any other case, to a fine not exceeding $2.5 million.
Compare: Corporations Act 2001 ss 709(1), 718, 727(1) (Aust)

36 Purpose of PDS

The purpose of a PDS is to provide certain information that is likely to assist a prudent but non-expert person to decide whether or not to acquire the financial products.

Disclosure to investors

37 PDS must be given if offer requires disclosure

(1) This section applies if an offer of financial products is made to a person to whom disclosure under this Part is required (A).

(2) ~~The offeror~~ A person must not accept an application, or issue or transfer the financial products to A, if a PDS for the regulated offer was not given to A before the application was made.

(3) In this section, application means an application for the financial products that is made by, or on behalf of, A.

(4) See sections 27 and 28 and Schedule 1, which contain provisions relating to when an offer of financial products to a person requires disclosure under this Part.

38 Certain situations in which section 37 does not need to be complied with

(1) An offeror does not have to comply with section 37 in respect of an offer of financial products to a person (A)—
- (a) if A has already been given a PDS (for the same or a different offer) that contains all of the information that the PDS referred to in section 37 would be required to contain; or
- (b) if the offeror believes on reasonable grounds that paragraph (a) applies; or
- (c) in any other prescribed circumstances.
(2) For the purposes of subsection (1)(a), ~~minor~~ immaterial differences in the information that is contained in the PDS that has been given to A and the PDS referred to in section 37 may be disregarded.

Compare: Corporations Act 2001 s 1012D(1) (Aust)

39 PDS treated as having been given if application form used was included in, or accompanied by, PDS

(1) An offeror must be treated as having complied with section 37 in respect of an offer of financial products to a person (A) if ~~the offeror~~—
- (a) the offeror issues or transfers the financial products to A in response to an application form; and
- (ab) the application form identifies the PDS to which it relates; and
- (b) the offeror has reasonable grounds to believe that—
  - (i) the application form was included in, or accompanied by, the PDS when the form was distributed by or on behalf of the offeror; or
  - (ii) the form was copied, or directly derived, by the person making the application from a form referred to in subparagraph (i).
(2) The identification of the PDS under subsection (1)(ab) must be reasonably prominent.

40 Offence to knowingly or recklessly contravene section 37

(1) A person who contravenes section 37 commits an offence if the person knows that, or is reckless as to whether, the offer of financial products to A requires disclosure under this Part.
(2) A person who commits an offence under subsection (1) is liable on conviction ~~on indictment~~,—
- (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and
- (b) in any other case, to a fine not exceeding $2.5 million.

41 Right to withdraw and have money returned

(1) If an offeror contravenes section 37 in respect of an offer of financial products to a person (A), A has the right to withdraw from holding the financial products and to have the relevant money repaid.
(1) If a person contravenes section 37 in respect of an offer of financial products to a person (A), A has the right to—
- (a) withdraw from holding the financial products and to have the relevant money repaid (in any case other than a derivative); or
- (b) in the case of a derivative, withdraw from the derivative.
(2) The right referred to in subsection (1) is exercisable by A giving to the offeror ~~written~~ notice of the exercise of the right within the earlier of—
- (a) 6 months after A knows, or ought reasonably to know, that section 37 has been contravened; or
- (b) 12 months after the financial products are issued or transferred to A.
~~(3) If a notice is given under subsection (2),—~~
- ~~(a) the offeror must ensure that the relevant money is repaid as soon as practicable; and~~
- (b) if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the relevant money together with interest at a prescribed rate from the date on which the notice was given.
(3) Notice under this section may be expressed in any way (including oral or written) that shows the intention of A to withdraw from holding the financial product or the derivative.

(4) This section ~~does~~ and sections 41A and 41B do not limit any other liability that a person may have for a contravention of section 37.

41A Offeror obligations if notice of withdrawal given

(1) If a notice is given under section 41 in relation to a financial product other than a derivative,—
- (a) the offeror must ensure that the relevant money is repaid as soon as practicable; and
- (b) if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the relevant money together with interest at a prescribed rate from the date on which the notice was given.
(2) If a notice is given under section 41 in relation to a derivative,—
- (a) no party to the derivative is obliged or entitled to perform it further; and
- (b) each party to the derivative must, as soon as practicable, repay any money, or return any other property, received by the party under the derivative to the party from whom it was received; and
- (c) if money owed by the offeror is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the date on which the notice was given.
(3) For the purposes of subsection (2)(b), an amount of money due from one party must be set off against an amount due from the other party.

41B Director not liable if no misconduct or negligence

A director is not liable under section 41A(1)(b) or (2)(c) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Content and presentation of product disclosure statements and register entries

42 Disclosure of material information and content of PDS and register entry

(1) An issuer that prepares, or is required to prepare, a PDS must ensure that, as at the date on which the PDS is lodged with the Registrar,—
- (a) the PDS—
  - (i) contains all of the information that it is required to contain by the regulations; and
  - (ii) is accompanied by all of the documents that the regulations require it to be accompanied by; and
  - (iii) complies with all other requirements of the regulations relating to the content of the PDS; and
  - (iv) is dated not later than the date on which it is lodged with the Registrar; and
  - (v) if applicable, specifies its expiry date (see section 67) and states that no financial products will be issued or sold on the basis of the PDS in relation to applications received after the expiry date; and
  - (vi) complies with section 44 (consent for expert statements or endorsements); and
- (b) the register entry (if any)—
  - (i) contains all of the information and documents that it is required to contain by the regulations; and
  - (ii) contains all material information relating to the regulated offer that is not contained in the PDS; and
  - (iii) complies with all other requirements of the regulations relating to the content of the register entry; and
  - (iv) complies with section 44 (consent for expert statements or endorsements).
(2) Subsection (1)(b)(ii) does not limit subsection (1)(a).

(3) Subsection (1)(b)(ii) does not apply in the prescribed circumstances (which may include, for example, certain offers to existing product holders or certain situations in which information about an offer is available by means of a continuous disclosure obligation).

42A Register entry not required in prescribed circumstances

A register entry for a regulated offer is not required in the prescribed circumstances.

43 Meaning of material information in this Part

(1) In this Part, material information, in relation to a regulated offer, means information that—
- (a) a reasonable person would expect to, or to be likely to, influence persons who commonly invest in financial products in deciding whether to acquire the financial products on offer; and
- (b) relates to the particular financial products on offer or the particular issuer, rather than to financial products generally or issuers generally.
(2) However, material information does not include—
- (a) information about the specific terms of a financial product that have been customised for a particular investor; or
- (b) information about an identifiable investor.
Example

A derivatives issuer makes an offer of a particular type of swap agreement to retail investors.

These derivatives involve some standard or generic terms. They also involve customised terms that are negotiated with the particular retail investor (for example, terms relating to particular dates or amounts).

The material information for the regulated offer as a whole does not include specific information about the customised terms that apply to a particular investor. This does not prevent the regulations requiring the PDS or register entry to contain a description of the kinds of customised terms that may be negotiated.
Compare: Corporations Act 2001 ss 674, 677, 710, 1013E (Aust)

44 Consent of experts and persons who make endorsements

(1) An issuer that prepares, or is required to prepare, a PDS must ensure that the PDS and the register entry only include an expert statement or endorsement made by a person (A), or a statement said in the PDS or register entry to be based on an expert statement or endorsement made by a person (A), ~~only~~ if—
- (a) A has consented in writing to the statement being included in the PDS or register entry in the form and context in which it is included; and
- (b) the PDS or register entry states that A has given the consent; and
- (c) A has not withdrawn the consent before the PDS is lodged with the Registrar.
(1A) Nothing in subsection (1) applies in relation to any statement given by an approved rating agency in connection with a rating given, or to be given, by it.
(2) In this section and section 66(3),—

approved rating agency means a rating agency nominated or approved under section 80 or 157J of the Reserve Bank of New Zealand Act 1989 or section 62 of the Insurance (Prudential Supervision) Act 2010
endorsement means a statement that—
- (a) may reasonably be regarded as encouraging or persuading persons to acquire the financial products on offer; and
- (b) relates to the particular financial products on offer or the particular issuer, rather than to financial products generally or issuers generally
expert—
- (a) means a person who holds himself or herself out to be of a profession or calling that gives authority to a statement made by him or her; but
- (b) does not include a person acting in his or her capacity as a director or senior manager of an entity
expert statement means a statement purporting to be made by an expert.
Compare: Corporations Act 2001 ss 716, 735(1) (Aust)

45 PDS must be worded and presented in clear, concise, and effective manner

(1) An issuer that prepares, or is required to prepare, a PDS must ensure that the information in the PDS is worded and presented in a clear, concise, and effective manner.

(2) This section is not a civil ~~remedy~~ liability provision for the purposes of subpart 3 of Part 7 (but see subpart 1 of Part 7, which allows the FMA to make a stop order if a PDS does not comply with this section).

Compare: Corporations Act 2001 s 715A (Aust)

46 PDS must comply with prescribed requirements relating to form and presentation

An issuer that prepares, or is required to prepare, a PDS must ensure that the PDS complies with all requirements of the regulations relating to the form and presentation of the ~~statement~~ PDS.

Other provisions relating to lodging of PDS and other documents

47 Supply of prescribed information and documents

(1) An issuer that lodges a PDS or other document under this Part must supply the prescribed information and documents to the Registrar when the PDS or document is lodged.

(2) A document referred to in subsection (1) may include, for example, a copy of the consent of a prescribed person to the lodgement.

(3) An issuer ~~who~~ that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

48 Registrar must notify FMA of lodgement of PDS

(1) The Registrar must, immediately after a PDS is lodged, notify the FMA of the lodgement for the purpose of allowing the FMA an opportunity to consider the PDS, any governing document, and whether the offer, or intended offer, of financial products will be made in compliance with this Act.

(2) The nature and extent of the consideration under subsection (1) (if any) is at the FMA's discretion.

(3) Nothing in this section or any other provision of this Act limits the FMA's power to consider or reconsider at any time any of the matters referred to in subsection (1).

Compare: 1978 No 103 s 43C(1), (3), (4)

49 Waiting period after lodgement before processing applications for financial products

(1) An offeror must not accept an application for, or issue or transfer, financial products offered under a regulated offer until—
- (a) the period of 5 working days after lodgement of the PDS has ended; or
- (b) if the period is extended under section 50, the period as extended has ended.
(2) ~~A person who~~ An offeror that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

(4) This section does not prevent an offeror from receiving applications for financial products or money during the period that applies under this section.

Compare: 1978 No 103 s 43D; Corporations Act 2001 s 727(3) (Aust)

50 FMA may extend period

(1) The FMA may extend the period under section 49(1)(a) by notice in writing to the offeror.

(2) The period, as extended, must end no later than 10 working days after lodgement of the PDS with the Registrar.

(3) The FMA must give a copy of the notice under subsection (1) to the Registrar.

51 Waiting period restriction does not prevent offeror from acting under another PDS

If section 49 applies to a PDS that relates to a particular offer of financial products but another lodged PDS that is not or is no longer subject to section 49 also relates to the offer of those products, that section does not prevent ~~a person~~ an offeror, in accordance with this Act, from accepting applications for, or issuing or transferring, financial products in reliance upon the other PDS.

52 FMA may remove restrictions if its consideration complete or consideration or further consideration unnecessary

(1) This section applies if the FMA is satisfied that—
- (a) its consideration as referred to in section 48 is complete; or
- (b) consideration as referred to in section 48 is, in the circumstances, unnecessary.
(2) The FMA may give notice to the offeror that—
- (a) the period that applies under section 49 ends at a particular time specified by the FMA (being an earlier time than that provided for under that section); or
- (b) section 49 does not apply in respect of the PDS.
(3) Nothing in this section limits subpart 2 of Part 8 (which allows the FMA to grant exemptions in respect of compliance with section 49).

Compare: 1978 No 103 s 43E

53 Waiting period does not usually apply to continuous issue PDSs

(1) Section 49 applies to a continuous issue PDS only if it is of a class that is prescribed by the FMA in a notice issued under this section.

(2) The FMA may issue a notice that prescribes the class or classes of continuous issue PDSs to which section 49 applies.

(3) The FMA must, before issuing a notice in respect of a class of continuous issue PDSs, be satisfied that it is in the public interest for the FMA to have an opportunity to consider those ~~statements~~ PDSs before any person accepts applications for, or issues or transfers, financial products offered under those ~~statements~~ PDSs (for example, where in the circumstances, a particular risk relates to a particular class of offerors or financial products).

(4) Subpart 5 of Part 8 (general provisions relating to certain FMA instruments) applies to a notice under this section.

Compare: 1978 No 103 s 43EA

54 No guarantee or representation as to compliance

(1) Nothing done or omitted to be done under this Act or the regulations by the Registrar or the FMA guarantees or represents that—
- (a) a PDS, register entry, or governing document—
  - (i) complies with this Act and the regulations:
  - (ii) does not contain any material misdescription or material error or any material matter that is not clearly legible:
  - (iii) is not ~~misleading or deceptive~~ false or misleading:
- (b) the FMA has considered a PDS, register entry, or governing document with a view to determining whether it—
  - (i) complies with this Act and the regulations:
  - (ii) contains any material misdescription or material error or any material matter that is not clearly legible:
  - (iii) is ~~misleading or deceptive~~ false or misleading.
(2) This section does not limit section 22 of the Financial Markets Authority Act 2011 (which provides protection from liability for the FMA and its members and employees).

Compare: 1978 No 103 s 43M

55 When supplementary document or replacement PDS may be lodged

(1) An issuer that lodges a PDS with the Registrar may lodge a supplementary document or replacement PDS with the Registrar to—
- (a) correct a false or misleading ~~or deceptive~~ statement in the PDS; or
- (b) correct an omission from the PDS of information it is required to contain by this Act or the regulations; or
- (c) correct the PDS because is not worded and presented in a clear, concise, and effective manner; or
- (d) update, or add to, the information contained in the PDS.
(2) However, a supplementary document must not be lodged with the Registrar in the prescribed circumstances.

Compare: Corporations Act 2001 s 1014A (Aust)

56 Supplementary document

(1) If a supplementary document is lodged with the Registrar, the PDS together with the supplementary document is taken to be the PDS for the purposes of the application of this Act or the regulations to events that occur after the lodgement.
(2) The issuer must ensure that, at the beginning of a supplementary document, there is—
- (a) a statement that it is a supplementary document; and
- (b) an identification of the PDS that it supplements; and
- (c) an identification of all previous supplementary documents lodged with the Registrar in relation to the regulated offer; and
- (d) a statement that it is to be read together with the PDS that it supplements and the previous supplementary documents.
(3) The supplementary document must be dated with the date on which it is lodged with the Registrar.

Compare: Corporations Act 2001 s 719(2), (4) (Aust)

57 Replacement PDS

(1) If a replacement PDS is lodged with the Registrar, the PDS is taken to be the replacement PDS for the purposes of the application of this Act to events that occur after the lodgement.
(2) The issuer must ensure that, at the beginning of a replacement PDS, there is—
- (a) a statement that it is a replacement PDS; and
- (b) an identification of the PDS that it replaces.
(3) The replacement PDS must be dated with the date on which it is lodged with the Registrar.

Compare: Corporations Act 2001 s 719(3), (5) (Aust)

58 Registrar must notify FMA of lodgement of supplementary document or replacement PDS

(1) The Registrar must, immediately after a supplementary document or replacement PDS is lodged, notify the FMA of the lodgement for the purpose of allowing the FMA an opportunity to consider the supplementary document or replacement PDS.

(2) The nature and extent of the consideration (if any) that the FMA gives to a supplementary document or replacement PDS are at the FMA's discretion.

(3) Section 49 does not apply to the lodgement of a supplementary document or replacement PDS.

Compare: 1978 No 103 s 43C(1), (3)

59 Publication of lodgement

(1) If a PDS, supplementary document, or replacement PDS is lodged by an issuer under this Part, the issuer must, as soon as practicable after it receives the certificate of lodgement from the Registrar, ensure that an Internet site maintained by or on behalf of the issuer—
- (a) contains a reasonably prominent statement—
  - (i) to the effect that the PDS, supplementary document, or replacement PDS has been lodged; and
  - (ii) describing where and how a copy of the PDS, supplementary document, or replacement PDS can be obtained; or
- (b) contains a reasonably prominent link to such a statement.
(2) The statement or link referred to in subsection (1) may be removed from the Internet site maintained by or on behalf of the issuer on or after the date that the offeror ceases to offer financial products in reliance upon the PDS.

Amending register entry

60 When register entry may be amended

An issuer of financial products offered under a regulated offer may give notice to the Registrar to amend the register entry in order to—
- (a) correct a false or misleading ~~or deceptive~~ statement in the register entry; or
- (b) correct an omission from the register entry of information it is required to contain by this Act or the regulations; or
- (c) update, or add to, the information contained in the register entry.

Conditions referred to in PDS

61 Minimum subscription number or amount condition must be fulfilled before issue or transfer

(1) This section applies if a PDS states that the financial products will not be issued or transferred unless—
- (a) applications for a minimum number of the financial products are received; or
- (b) a minimum amount is raised.
(2) The offeror must not issue or transfer any of the financial products under the regulated offer until the condition referred to in subsection (1) is satisfied.

(3) For the purpose of working out whether a condition referred to in this section or section 63(2)(a) has been satisfied, a person who has agreed to ~~take~~ acquire financial products as an underwriter is taken to have applied for those products.

Compare: Corporations Act 2001 s 723(2) (Aust)

62 Issue or transfer void if quotation condition not fulfilled

(1) This section applies if—
- (a) a PDS states or implies that the financial products are to be quoted on a financial market (whether in New Zealand or elsewhere); and
- (b) the financial products are not admitted to quotation within—
  - (i) the period specified in, or determined in accordance with, the PDS; or
  - (ii) if there is no such period, 3 months after the date of the PDS.
(2) An issue or a transfer of financial products under the regulated offer is void.

(3) The offeror must deal under section 64 with the application for financial products that relates to the issue or transfer referred to in subsection (2).

Compare: Corporations Act 2001 s 723(3) (Aust)

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

63 Application of section 64

(1) An offeror must, if any of subsections (2) to (5) apply, deal under section 64 with any applications for the financial products offered under the regulated offer that have not resulted in an issue or a transfer of the products.
(2) This subsection applies if—
- (a) a PDS states that the financial products will not be issued or transferred unless—
  - (i) applications for a minimum number of the financial products are received; or
  - (ii) a minimum amount is raised; and
- (b) the condition referred to in paragraph (a) is not satisfied within 4 months after the date of the PDS.
(3) This subsection applies if—
- (a) a PDS states or implies that the financial products are to be quoted on a financial market (whether in New Zealand or elsewhere); and
- (b) the financial products are not admitted to quotation within—
  - (i) the period specified in, or determined in accordance with, the PDS; or
  - (ii) if there is no such period, 3 months after the date of the PDS.
(4) This subsection applies if—
- (a) the ~~issuer or offeror (or both)~~ offeror becomes aware—
  - (i) that a statement in the PDS is ~~misleading or deceptive or is likely to mislead or deceive~~ false or misleading or is likely to mislead; or
  - (ii) that there is an omission from the PDS of information required to be contained in the PDS by this Act or the regulations; or
  - (iii) of a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the PDS if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the PDS; and
- (b) the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.
(5) This subsection applies if—
- (a) the ~~issuer or offeror (or both)~~ offeror becomes aware—
  - (i) that a statement in the register entry is ~~misleading or deceptive or is likely to mislead or deceive~~ false or misleading or is likely to mislead; or
  - (ii) that there is an omission from the register entry of information required to be contained in the register entry by this Act or the regulations; or
  - (iii) of a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the register entry if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the register entry; and
- (b) the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.
Compare: Corporations Act 2001 s 724(1) (Aust)

64 Choices open to offeror

(1) If this section applies, the offeror must do 1 of the following in respect of each applicant:
- (a) ensure that the money received from the applicant in respect of the application for financial products is repaid; or
- (b) in the case of section 62 or 63(2), (3), or (4), give the applicant—
  - (i) a supplementary document or replacement PDS that corrects the deficiency or changes the terms of offer; and
  - (ii) 1 month to confirm whether or not the applicant still wants to acquire the financial products; or
- (c) in the case of section 63(5),—
  - (i) amend the register entry to correct the deficiency; and
  - (ii) give notice in the prescribed manner to the applicant that the register entry has been amended; and
  - (iii) give the applicant 1 month to confirm whether or not the applicant still wants to acquire the financial products.
(2) If an applicant does not confirm that the applicant still wants to acquire the financial products within 1 month after being given the opportunity to do so under subsection (1)(b)(ii) or (c)(iii), the offeror must ensure that the money received from the applicant in respect of the application for financial products is repaid as soon as practicable.

(3) If the money referred to in subsection (2) is not repaid within 1 month after the offeror is required to ensure that it is repaid under that subsection, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the expiry of the 1-month period referred to in subsection (2).

(4) An offeror must, when acting under this section, comply with the prescribed requirements (if any).

Compare: Corporations Act 2001 s 724(2) (Aust)

64A Director not liable if no misconduct or negligence

A director is not liable under section 64(3) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Prohibition of offers where defective disclosure in PDS or register entry

65 Misleading or deceptive False or misleading statements, omissions, and new matters requiring disclosure

(1) An offeror must not offer, or continue to offer, financial products under a regulated offer if—
- (a) there is—
  - (i) a statement in the PDS, any application form that accompanies the PDS, or the register entry that is ~~misleading or deceptive or is likely to mislead or deceive~~ false or misleading or is likely to mislead; or
  - (ii) 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 this Act or the regulations; or
  - (iii) a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the 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
- (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 section, a statement about a future matter (including the doing of, or refusing 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) Subsection (2) does not limit the meaning of a reference to a misleading statement.

(4) See section 488 (offence to knowingly or recklessly contravene this section) and section 480 (which provides that a person may be treated as suffering loss or damage in the case of a contravention of this section).

Compare: Corporations Act 2001 s 728 (Aust)

66 Persons who must inform offeror about disclosure deficiencies

(1) A person referred to in subsection (2) must, in relation to a regulated offer, notify the offeror in writing as soon as practicable if the person becomes aware ~~during~~ at any time before the end of the application period that—
- (a) a material statement in the PDS, or the register entry, is ~~misleading or deceptive or is likely to mislead or deceive~~ false or misleading or is likely to mislead; or
- (b) there is a material omission from the PDS, or the register entry, of information that is required to be contained in the PDS, or the register entry, by this Act or the regulations; or
- (c) there is a material circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the 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 register entry.
(2) The persons are—
- (a) each director of the offeror:
- (b) each person named in the PDS or register entry with the person's consent as a proposed director of the offeror:
- (c) the issuer (if the offeror is not the issuer) and each director of the issuer:
- (d) a person referred to in section 44 who has consented as referred to in that section.
(3) A person referred to in subsection (2)(d) is required to notify the offeror of matters under this section only if the matters relate to the expert statement or endorsement to which the person's consent relates.

(4) In subsection (1), application period means the period in which applications for financial products under the PDS may be made.

Compare: Corporations Act 2001 s 730(1) (Aust)

Expiry

67 Expiry

(1) A PDS must, if required by the regulations, specify its expiry date.

(2) The expiry date must not be later than the end of the prescribed period (if any).

(3) The expiry date of a replacement PDS must be the same as that of the original PDS it replaces.

Compare: Corporations Act 2001 s 711(6) (Aust)

68 How offeror must deal with applications on expiry

(1) If a PDS expires, the offeror must deal with applications for the financial products offered under the regulated offer in accordance with subsections (2) and (3).

(2) If an application is received on or before the expiry date, the offeror may issue or transfer financial products to the applicant.
(3) If an application is received after the expiry date, the offeror must do 1 of the following:
- (a) ensure that the money received from the applicant in respect of the application is repaid; or
- (b) give the applicant—
  - (i) a new PDS (unless the applicant is not a person to whom disclosure under this Part is required or, under section 38, the offeror does not have to comply with section 37 in respect of the offer to the applicant); and
  - (ii) 1 month to confirm whether or not the applicant still wants to acquire the financial products.
(4) If an applicant does not confirm that the applicant still wants to acquire the financial products within 1 month after being given the opportunity to do so under subsection (3), the offeror must ensure that the money received from the applicant in respect of the application for financial products is repaid as soon as practicable.

(5) If the money referred to in subsection (4) is not repaid within 1 month after the offeror is required to ensure that it is repaid under that subsection, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the expiry of the 1-month period referred to in subsection (4).

(6) An offeror must, when acting under this section, comply with the prescribed requirements (if any).

Compare: Corporations Act 2001 s 725 (Aust)

68A Director not liable if no misconduct or negligence

A director is not liable under section 68(5) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Money for financial products must be held in trust

69 Money for financial products must be held in trust

(1) This section applies to money paid to an issuer or offeror of regulated products if the money is paid by a person (A)—
- (a) to acquire the financial products; or
- (b) on account of those financial products; or
- (c) as a further contribution or a further deposit as referred to in section 10(2)(c).
(2) The issuer or offeror must hold the money in trust for A until—
- (a) the financial products are issued or transferred; or
- (b) the money is otherwise applied for the purpose for which it was paid (for example, to increase the extent of A's interest in a scheme or A's deposit or to pay a fee, collateral, or margin); or
- (c) the money is repaid to A; or
- (d) the money is applied in accordance with A's express instructions given after the application for financial products was made and the money was paid.
(3) The issuer or offeror must—
- (a) deal with the money, while it is held in trust, in the prescribed manner; and
- (b) if the money needs to be repaid, ensure the money is repaid as soon as practicable and, in any event, no later than 1 month after the obligation to repay arises.
Compare: Corporations Act 2001 ss 722, 1017E (Aust)

Other prohibitions and restrictionsOffering financial products in entity that does not exist

70 Offering financial products in entity that does not exist

(1) A person must not offer financial products of an entity that has not been formed or does not exist if the offer would be a regulated offer if the entity did exist.

(2) Subsection (1) applies even if it is proposed to form or incorporate the entity.

(3) A person who contravenes this section commits an offence if the person knows that the offer would be a regulated offer if the entity did exist.
(4) A person who commits an offence under this section is liable on conviction ~~on indictment~~,—
- (a) in the case of an individual, to imprisonment for a term not exceeding 3 years, a fine not exceeding $200,000, or both; and
- (b) in any other case, to a fine not exceeding $600,000.
Compare: Corporations Act 2001 s 726 (Aust)

71 Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade

~~(1) A person must not offer financial products for issue or sale in the course of, or because of, an unsolicited meeting with a person who is acting otherwise than in trade.~~
~~(2) In this section,—~~
~~meeting includes—~~
- ~~(a) a telephone call; or~~
- ~~(b) a meeting held by means of audio, audio and visual, or electronic communication where the participants can simultaneously communicate with each other throughout the meeting~~
~~trade means any trade, business, industry, profession, occupation, activity of commerce, or undertaking.~~
~~(3) Subsection (1) does not prohibit an offer of financial products if—~~
- ~~(a) the offer does not require disclosure under this Part because of an exclusion under Schedule 1 (other than an exclusion under clause 12 or 16 of that schedule); or~~
- (b) the offer is an offer of quoted financial products made through a person who, under the Financial Advisers Act 2008, is permitted to give financial advice in respect of those products (including as a result of an exemption by or under that Act); or
- ~~(c) the offer is through an authorised financial adviser or a QFE adviser to a client, or former client, of the financial adviser or the business on whose behalf the financial adviser acts; or~~
- ~~(d) the offer is an offer of the financial products of a co-operative where becoming a holder of those products is—~~
  - ~~(i) a necessary incident of doing business with the co-operative; or~~
  - ~~(ii) the means by which a person can access the benefits of membership of the co-operative; or~~
- ~~(e) the offer is made in the prescribed circumstances.~~
~~(4) In this section, co-operative means—~~
- ~~(a) a co-operative company; or~~
- ~~(b) an industrial and provident society; or~~
- ~~(c) an entity of a prescribed kind.~~
~~(5) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.~~

~~(6) The offence in this section is an infringement offence (see subpart 5 of Part 7).~~

~~Compare: Corporations Act 2001 s 736 (Aust)~~

72 Right to withdraw and have money returned

(1) If financial products are issued or transferred to a person (A) as a result of an offer that contravenes section 71, A has the right to withdraw from holding the products and to have the relevant money repaid.

~~(2) The right referred to in subsection (1) is exercisable by A giving to the offeror written notice of the exercise of the right within 1 month after the date of the issue or transfer.~~
~~(3) If a notice is given under subsection (2),—~~
- ~~(a) the offeror must ensure that the relevant money is repaid as soon as practicable; and~~
- (b) if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the relevant money together with interest at a prescribed rate from the date on which the notice was given.
~~(4) This section does not limit any other liability that a person may have for a contravention of section 71.~~

~~Compare: Corporations Act 2001 s 738 (Aust)~~

Subpart 3—Advertising and publicity

73 Advertising or publicity for regulated offers

~~(1) If an offer, or intended offer, of financial products is or will be a regulated offer, a person must not, except in accordance with any of sections 75 to 78,—~~
- ~~(a) advertise the offer or intended offer; or~~
- ~~(b) publish a statement that—~~
  - ~~(i) contains or refers to the offer or intended offer; or~~
  - ~~(ii) is reasonably likely to induce persons to apply for the financial products.~~
(1) If an offer, or intended offer, of financial products is or will be a regulated offer, a person must not, except in accordance with any of sections 75 to 77, distribute an advertisement of the offer or intended offer.

(2) Subsection (1) applies only if the advertisement ~~or publication referred to in subsection (1)(a) or (b)~~ is authorised or instigated by, or on behalf of, the issuer, the offeror, or an associated person of the issuer or offeror.

~~(3) Subsection (1)(b) does not apply to statements published after the end of the period during which applications for financial products under the offer may be made.~~

Compare: Corporations Act 2001 s 734(2), (2A) (Aust)

74 Inducements to apply

~~In deciding whether a statement is reasonably likely to induce persons to apply for financial products, the following must be taken into account:~~
- ~~(a) whether the statement is advertising of an issuer's or offeror's goods or services and is directed at maintaining its existing customers, or attracting new customers, for those goods or services:~~
- ~~(b) whether the statement is likely to encourage the making of investment decisions on the basis of the statement rather than on the basis of information contained in a PDS.~~
~~Compare: Corporations Act 2001 s 734(3) (Aust)~~

75 Distribution of PDS or registered documents

A person may distribute— either of the following without contravening section 73:
- (a) a PDS that has been lodged with the Registrar~~; or~~:
- (b) a copy of any part of the register entry or of any document that is contained on the register.
Compare: Corporations Act 2001 s 734(4) (Aust)

76 Advertising and publicity before PDS lodged

(1) Before the PDS is lodged with the Registrar, an advertisement ~~or a publication may be distributed~~ does not contravene section 73 if it includes, in relation to the offer or intended offer ~~referred to in section 73~~, a statement—
- (a) that no money is currently being sought; and
- ~~(b) that applications for the financial products are currently not being accepted; and~~
- (b) that financial products cannot currently be applied for or acquired under the offer or intended offer; and
- (c) that, if the offer is made, the offer will be made in accordance with this Act; and
- (d) if the offeror wishes, that specifies that the offeror is seeking preliminary indications of interest and, in that case, also specifies—
  - (i) how indications of interest may be made; and
  - (ii) that no indication of interest will involve an obligation or a commitment ~~of any kind~~ to acquire the financial products.
(2) A statement required under subsection (1)(a) to (c) and (d)(ii) must be reasonably prominent.

Compare: 1978 No 103 s 5(2CA); Corporations Act 2001 s 734(5) (Aust)

77 Advertising and publicity after PDS lodged

(1) After the PDS is lodged with the Registrar, an advertisement ~~or a publication may be distributed~~ does not contravene section 73 if it—
- (a) includes a statement that identifies,—
  - (i) if the financial products are offered by way of issue, the issuer of the products; and
  - (ii) if the financial products are offered pursuant to sale offers to which section 28 applies, the issuer of the products and the offeror of the products; and
- (b) includes a statement that indicates that the PDS for the offer is available and where and how it can be obtained; and
- (c) does not contain any information, sound, image, or other matter that is materially inconsistent with the PDS, or register entry, for the offer to which it relates.
(2) A statement required under this section must be reasonably prominent.

Compare: Corporations Act 2001 s 734(6)

78 General exceptions

~~An advertisement or a publication may be distributed if it—~~
- (a) relates to an offer of the financial products of a listed issuer and consists of a notice or report by the issuer, or by 1 of its directors or employees, about the issuer's affairs to the relevant licensed market operator; or
- ~~(b) consists solely of a notice or report of a meeting, or a statement made at a meeting, of the issuer's product holders or any class of those product holders; or~~
- (c) consists solely of a document or information that is required by law to be provided or made available (for example, an annual report of a company), whether directly or as a condition of carrying out any activity or as a condition of an exemption from any enactment.
~~Compare: Corporations Act 2001 s 734(7) (Aust)~~

78 Documents to which subpart does not apply

Nothing in this subpart applies to the distribution of any of the following:
- (a) a document that relates to the financial products of a listed issuer and consists solely of—
  - (i) a statement or report relating to the affairs of the issuer made to the relevant licensed market operator, by or on behalf of the issuer, for the purposes of compliance with any market rules; or
  - (ii) a report of a statement or report referred to in subparagraph (i):
- (b) a document that consists solely of—
  - (i) a statement or report made to or for the purposes of a meeting of the issuer's product holders or any class of those product holders; or
  - (ii) a report of the proceedings of such a meeting:
- (c) a document or information that consists solely of a document or information that is required by law to be provided or made available (for example, an annual report of a company), whether directly or as a condition of carrying out any activity or as a condition of an exemption from any enactment.

79 Defence for publishers

In any proceeding against a person (A) for a contravention of section 73 in relation to an advertisement ~~or a statement~~, it is a defence if A proves that—
- (a) A's business is publishing or arranging for the publication of advertisements ~~or statements~~; and
- (b) A received the advertisement ~~or statement~~, or the information contained in the advertisement ~~or statement~~, as the case may be, in the ordinary course of that business and did not know and had no reason to suspect that the publication of the advertisement ~~or statement~~ or the publication of the advertisement ~~or statement~~ containing that information, as the case may be, would constitute a contravention of section 73.
Compare: 1986 No 121 s 44(4)

Subpart 4—Ongoing disclosure and updating of registers

Duty to update register of offers of financial products and register of managed investment schemes

80 Duty to notify relevant matters and provide certain documents and information changes to Registrar

~~(1) An issuer of regulated products must—~~
- ~~(a) notify the Registrar of a prescribed change within 5 working days of becoming aware of the change; and~~
- (b) provide to the Registrar a copy of any documents, information, and other matters made, or to be made, publicly available under section 82 before the date that is 5 working days after that material is made available under that section.
(1) An issuer of regulated products must notify the Registrar of a prescribed change within 5 working days of becoming aware of the change.
(2) In this section, prescribed change, in respect of regulated products,—
- (a) means a prescribed change that relates to the issuer, any offeror of those products, the regulated products, or any registered scheme to which those products relate; but
- (b) does not include a change in respect of which the FMA is required to notify the Registrar (for example, an order made under subpart 1 of Part 7).
(3) ~~A person who~~ An issuer that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1978 No 103 s 43Q

Disclosure to particular persons

81 Information to be made available to investors or other prescribed persons

(1) Every issuer of regulated products must, at the request of a prescribed person or at the prescribed times or on the occurrence of the prescribed events, make available to a prescribed person the documents, information, and other matters that are required to be made available under this section by the regulations.

(2) The documents, information, and other matters must be made available in the prescribed manner.

(3) ~~A person who~~ An issuer that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

(5) To avoid doubt, documents, information, and other matters may be required to be made available to a person under this section even though Schedule 1 specifies that an offer to the person would not require disclosure under this Part (for example, a wholesale investor who acquires financial products under a regulated offer is not required to be given a PDS for the offer but ongoing disclosure to the investor may be required under the regulations).

Public disclosure

82 Information to be made publicly available

Every issuer of regulated products must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, make publicly available the documents, information, and other matters that are required to be made publicly available by the regulations.

Compare: 1978 No 103 s 54C

82A Issuer must provide document, information, and matters to Registrar

(1) An issuer of regulated products must lodge with the Registrar a copy of any documents, information, and other matters made, or to be made, publicly available under section 82 before the date that is 5 working days after that material is made available under that section.

(2) Subsection (1) does not apply if the regulations made for the purposes of section 82 require the documents, information, or other matters to be made publicly available by lodging that material with the Registrar.

(3) An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Defective ongoing disclosure

83 Defective ongoing disclosure

(1) An issuer must not provide ~~information to the Registrar, or make available documents, information, and other matters, under this subpart~~ to the Registrar, or make available to any person or the public, any documents, information, or other matters under any of sections 80 to 82A (the ongoing disclosure) if—
- (a) there is—
  - (i) a statement in the ongoing disclosure that is ~~misleading or deceptive or is likely to mislead or deceive~~ false or misleading or is likely to mislead; or
  - (ii) an omission from the ongoing disclosure of information that is required to be contained in the ongoing disclosure by this Act or the 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 section, a statement about a future matter (including the doing of, or refusing 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) Subsection (2) does not limit the meaning of a reference to a misleading statement.

(4) This section does not limit sections 80 to 82A.

(5) See section 489 (offence to knowingly or recklessly contravene this section) and section 480 (which provides that a person may be treated as suffering loss or damage in the case of a contravention of this section).

Confirmation

83A Issuer or offeror must provide confirmation

(1) An issuer or offeror of a regulated product must, in the prescribed circumstances, provide to a product holder either the product or confirmation information.

(2) The financial product or confirmation information must be provided in the prescribed manner.

(3) In this section, confirmation information means the information relating to the financial product or product holder that is prescribed (which may include, for example, information describing the nature, terms, and conditions of the financial product and the name of the product holder).

(4) An issuer or offeror that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1978 No 103 s 54(1), (4)

Subpart 5—Civil liability for certain contraventions of this Part

84 Part 3 offer provisions

(1) All of the provisions specified in subsections (3) and (4) are Part 3 offer provisions.

(2) A contravention of any of the provisions listed in subsection (3) may give rise to ~~a civil remedy~~ civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.
(3) The provisions are the following:
- (a) section 35 (PDS must be prepared and lodged):
- (b) section 37 (PDS must be given to person to whom disclosure is required):
- (c) section 42 (disclosure of material information and content of PDS and register entry):
- (d) section 44 (consent of person to whom statement attributed):
- ~~(e) section 46 (PDS must comply with prescribed requirements relating to form and presentation):~~
- ~~(f) section 49 (waiting period restriction):~~
- (g) section 61 (minimum ~~subscription~~ number or amount condition must be fulfilled before issue or transfer):
- (h) section 64 (choices open to offeror if condition in PDS not met or defective disclosure):
- (i) section 65 (false or misleading ~~or deceptive~~ statements, omissions, and new matters requiring disclosure):
- (j) section 69(2) (money for financial products must be held in trust):
- (k) section 73 (advertising ~~or publicity~~ for regulated offers):
- ~~(l) section 80 (duty to notify relevant matters and provide certain documents and information to Registrar):~~
- (m) sections 82 and 83 (ongoing disclosure):
- (n) clauses 13 and 17 of Schedule 1 (restrictions on advertising for small offers and small schemes):
- (o) clause 26 of Schedule 1 (offeror must comply with disclosure and other requirements):
- (p) clause 27 of Schedule 1 (false or misleading ~~or deceptive~~ statements and omissions).
(4) A contravention of any of the following may give rise to ~~a civil remedy~~ civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case:
- (aa) section 41A (offeror obligations if notice of withdrawal is given):
- (ab) section 46 (PDS must comply with prescribed requirements relating to form and presentation):
- (a) section 59 (publication of lodgement):
- (b) section 66 (certain persons must inform offeror about disclosure deficiencies):
- (c) section 68 (dealing with applications on expiry):
- (d) section 69(3) (money for financial products must be dealt with in prescribed manner and repaid as soon as practicable if required):
- (e) section 70 (offering financial products in entity that does not exist).
- ~~(f) section 71 (prohibition of offers in course of unsolicited meetings):~~
- ~~(g) section 72 (right to withdraw and have money returned).~~

Part 4
Governance of financial products

86 Overview

(1) This Part provides for the governance of regulated products as follows:
- (a) subpart 2 sets out the need for a trust deed and a supervisor, and other issuer and supervisor obligations, for regulated offers of debt securities:
- (b) subpart 3 sets out the need for a managed investment scheme to be registered for regulated offers of managed investment products, and the need for a governing document and a supervisor, and other issuer, supervisor, and custodian obligations, for registered schemes:
- (c) subpart 4—
  - (i) requires persons associated with those debt securities or registered schemes to make protected disclosures; and
  - (ii) provides powers of intervention to enable the supervision of those debt securities or registered schemes by the supervisor or the FMA (in addition to the powers in Part 7):
- (d) subpart 5 contains ongoing duties of issuers of all regulated products to maintain registers and keep copies of documents.
(2) Subsection (1) is only a guide to the general scheme and effect of this Part.

Subpart 1—Application and overview

85 Part applies to all regulated products

~~This Part applies to—~~
- ~~(a) financial products offered under a regulated offer; and~~
- ~~(b) managed investment products in a registered scheme (whether or not there has been a regulated offer).~~

86 Regulated offers of debt securities need governing document and supervisor

~~(1) In this Part,—~~
- ~~(a) subpart 2 contains requirements for a governing document, supervisor, and other related issuer and supervisor obligations for a regulated offer of debt securities; and~~
- ~~(b) subpart 4 provides for interventions in regulated offers of debt securities (in addition to the powers in Part 7).~~
~~(2) This section is only a guide to the general scheme and effect of subparts 2 and 4.~~

87 Regulated offers of managed investment products need to be in registered scheme

~~(1) In this Part,—~~
- ~~(a) subpart 3 contains the requirement that the managed investment scheme be registered for a regulated offer of managed investment products, and regulates registered schemes; and~~
- ~~(b) subpart 4 provides for interventions in registered schemes (in addition to the powers in Part 7).~~
~~(2) This section is only a guide to the general scheme and effect of subparts 3 and 4.~~

88 All regulated products have other accountability requirements under this Part

~~(1) In this Part, the following subparts relate to all regulated products:~~
- ~~(a) subpart 5 contains requirements for the issuer to keep registers of the regulated products; and~~
- ~~(b) subpart 6 contains accounting and other record-keeping and auditing requirements for the issuer.~~
~~(2) This section is only a guide to the general scheme and effect of subparts 5 and 6.~~

Subpart 2—Governance of offers of debt securities

89 Need for governing document and supervisor for regulated offer of debt security

(1) A person must not make a regulated offer of a debt security unless—
- (a) there is a trust deed for the debt security that complies with sections 90 to 92 and that is lodged with the Registrar ~~at or before the time that the PDS is lodged~~ with a certificate from the issuer and supervisor to the effect that the trust deed complies with those sections on the basis set out in the certificate; and
- (b) there is a licensed supervisor—
  - (i) who is designated or appointed as the trustee under the trust deed for the debt security (or under the Financial Markets Supervisors Act 2011); and
  - (ii) whose licence covers supervision of the debt security.
~~(2) A reference in this subpart to a trust deed is a reference to the trust deed required by subsection (1).~~
(2) A reference in this subpart to—
- (a) a trust deed is a reference to the trust deed required by subsection (1); and
- (b) a debt security is a reference to a debt security offered under a regulated offer.
(3) The issuer of a the debt security ~~offered under a regulated offer~~ must ensure that there continues to be a trust deed and licensed supervisor as required by subsection (1) until the debt security is cancelled, redeemed, or forfeited, or all of the obligations owing under the debt security have been discharged.

Compare: 1978 No 103 s 33(2)

Governing document requirements

90 Contents of trust deed for debt securities

(1) A trust deed for a debt security must provide that the following are held in trust by the supervisor for the benefit of the holders of the debt security:
- (a) the right to enforce the issuer's duty to repay, or to pay interest, under the terms of the debt security; and
- (b) any charge or security for repayment; and
- (c) the right to enforce any other duties that the issuer, any guarantor, and any other person have under—
  - (i) the terms of the debt security; or
  - (ii) the provisions of the trust deed or this Act in relation to the debt security.
(2) Subsection (1) does not prevent a holder of a debt security from enforcing the issuer's duty to repay, or to pay interest, or any other duties that the issuer, any guarantor, or any other person owes to the holder.

(3) The trust deed is treated as containing any provision that is implied into it by or under this Act.

(4) The trust deed must also provide adequately for all of the matters required to be contained in it by section 91 and the regulations.

(5) The trust deed must provide for the contents required by this section in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8.

Compare: Corporations Act 2001 s 283AB (Aust)

91 Limits on permitted exemptions and indemnities

(1) If a supervisor of a debt security has any rights to be ~~exempted from liability for, or~~ indemnified in relation to, the performance of the supervisor's licensee obligations (as defined in section 4 of the Financial Markets Supervisors Act 2011), those rights—
- (a) must be set out in the trust deed for the debt security; and
- (b) are available only in relation to the proper performance of the duties under sections 98(1) and 99.
(2) No other agreement has any effect to the extent that it purports to confer a right of a kind set out in subsection (1).

Compare: Corporations Act 2001 s 283DB (Aust); 1978 No 103 s 62

92 Trust deed must be legally enforceable

A trust deed for a debt security must be contained in 1 or more documents that are legally enforceable as between the supervisor, the issuer of the debt security, and the product holders.

93 Effect of trust deed

A trust deed for a debt security has no effect to the extent that it contravenes, or is inconsistent with, this Act, the regulations, or any term implied into it by this Act or the regulations.

94 Changes to trust deed

(1) An amendment to or a replacement of a trust deed for a debt security has no effect unless made either—
- (a) with the consent of the supervisor of the debt security under this section; or
- (b) under section 95; or
- (c) under section 22(7) or 37(6) of the Financial Markets Supervisors Act 2011.
(2) The supervisor must not consent to an amendment to, or a replacement of, the trust deed under this section unless—
- (a) either—
  - (i) the amendment or replacement is approved by, or is contingent on approval by, the holders of the debt security; or
  - (ii) the supervisor is satisfied that the amendment or replacement does not have a material adverse effect on the holders of the debt security; and
- (b) the supervisor certifies to that effect and certifies, or obtains a certificate from a ~~solicitor~~ lawyer, that the trust deed, as amended or replaced, will comply with sections 90 to 92 on the basis set out in the certificate.
(3) The approval of the holders of the debt security for the purposes of subsection (2)(a) must be the approval of a special resolution of—
- (a) the holders of the debt security; or
- (b) ~~the~~ each class of holders of the debt security that is or may be adversely affected by the amendment or replacement.
(4) Subsection (2) is subject to section ~~98(1)(e)~~ 98(1A)(b).

(5) This section does not limit section 157ZD of the Reserve Bank of New Zealand Act 1989.

95 Power to make FMA-approved changes to trust deeds

(1) An issuer may amend or replace a trust deed for a debt security with the FMA's consent if the FMA is satisfied that it is necessary to enable the trust deed to comply with this subpart or any enactment or rule of law.

(2) Subsection (1) applies despite anything to the contrary in the trust deed or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the trust deed.

(3) An amendment or a replacement made under this section must be treated for all purposes as if it were made in accordance with the trust deed.

96 Lodging of changes to trust deed

(1) Within 5 working days of the amendment to or replacement of a trust deed for a debt security, the issuer must ensure that notice of the amendment or replacement, and a copy of the certificate for the amendment or replacement (if any), is lodged with the Registrar.

(2) ~~A person who~~ An issuer that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Role of supervisor

97 Functions of supervisor

(1) The supervisor of a debt security is responsible for the following functions:
- (a) acting on behalf of the holders of the debt security in relation to—
  - (i) the issuer of the debt security; and
  - (ii) any matter connected with the trust deed for the debt security or the terms of the regulated offer; and
  - (iii) any contravention or alleged contravention of the issuer obligations; and
- (b) supervising the issuer's performance—
  - (i) of its issuer obligations; and
  - (ii) in order to ascertain whether the assets of the issuer and of each guarantor that are or may be available, whether by way of security or otherwise, are sufficient or likely to be sufficient to discharge the amounts of the debt securities as they become due; and
- (c) performing or exercising any other functions, duties, and powers conferred or imposed on the supervisor by or under this Act, the Financial Markets Supervisors Act 2011, or the governing document.
(2) The supervisor must not delegate any of its functions under subsection (1) (except as expressly permitted by this Act).

98 General duties applying in exercise of supervisor's functions

(1) The supervisor of a debt security must—
- (a) act honestly in acting as a supervisor; and
- (b) in exercising its powers and performing its duties as a supervisor, act in the best interests of the holders of the debt security; and
- (c) exercise reasonable diligence in carrying out its functions as a supervisor~~; and~~.
- (d) do all the things it has the power to do to cause any contravention referred to in section 97(1)(a)(iii) to be remedied (unless it is satisfied that the contravention will not materially prejudice the security of the debt security or the interests of holders of the debt security); and
- ~~(e) act in accordance with any direction given by a special resolution of the holders of the debt security that is not inconsistent with any enactment or the trust deed in relation to—~~
  - ~~(i) seeking a remedy to a contravention referred to in section 97(1)(a)(iii); and~~
  - ~~(ii) any other matter connected with the supervisor's functions.~~
(1A) The supervisor of a debt security must also—
- (a) do all the things it has the power to do to cause any contravention referred to in section 97(1)(a)(iii) to be remedied (unless it is satisfied that the contravention will not have a material adverse effect on holders of the debt security); and
- (b) act in accordance with any direction given by a special resolution of the holders of the debt security that is not inconsistent with any enactment, rule of law, or the trust deed in relation to—
  - (i) seeking a remedy to a contravention referred to in section 97(1)(a)(iii); and
  - (ii) any other matter connected with the supervisor's functions.
(2) The supervisor is not liable for anything done, or omitted to be done, in good faith in giving effect to a direction to it by holders of the debt security.

(3) The duty in subsection ~~(1)(e)~~ (1A)(b) is subject to any order of the court made under section 194.

Compare: SR 2009/230 Schedule 15 cl 1

99 Duty of supervisor to comply with professional standard of care

The supervisor of a debt security must, in exercising its powers and performing its duties as a supervisor, exercise the care, diligence, and skill that a prudent person engaged in the business of acting as a licensed supervisor would exercise in the same circumstances.

100 Duty of issuer to provide regular reports to supervisor

The issuer of a debt security must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, prepare and provide to the supervisor reports that contain the documents, information, or other matters that are required to be provided by the regulations.

Compare: SR 2009/230 Schedule 15 cl 4

101 Duty of issuer to provide requested information and reports to supervisor

(1) If requested by the supervisor of a debt security (or a person authorised by the supervisor to exercise its powers under this section), the issuer must—
- (a) make available to the supervisor (or other authorised person) all documents and records relating to the issuer; and
- (b) provide the supervisor (or other authorised person) with any other reports or information required by the supervisor (or other authorised person).
(2) Reports or information required under subsection (1) may—
- (a) be about any matter relevant to the performance of the supervisor's functions; and
- (b) include forward-looking reports.
(3) The reports or information must be provided within the time and in the manner (which must be reasonable in the circumstances) specified by the supervisor.

Compare: SR 2009/230 Schedule 15 cls 2(2), 5(3)

102 Issuer must report contravention or possible contravention of issuer obligations

If an issuer of a debt security has reasonable grounds to believe that it has contravened, may have contravened, or is likely to contravene any of its issuer obligations in a material respect, the issuer must, as soon as practicable,—
- (a) report the contravention or possible contravention to the supervisor; and
- (b) advise the supervisor of the steps (if any) that the issuer has taken or intends to take in light of the contravention or possible contravention and the date by which the steps were taken or are to be taken.

103 Restriction on section 102

An issuer is not required to provide, under section 102, information that would, if so provided, be likely to incriminate the issuer under New Zealand law for an offence punishable by a fine or imprisonment.

104 Duty of issuer to report serious financial problems

(1) This section applies if an issuer of a debt security becomes aware of information on the basis of which it could reasonably form the opinion that the issuer is, or it is likely that the issuer will become, insolvent.
(2) The issuer must, as soon as practicable,—
- (a) disclose to the supervisor all information relevant to that matter that is in the possession or under the control of the issuer and that was obtained in the course of, or in connection with, the performance of its functions as issuer; and
- (b) advise the supervisor of the steps (if any) that the issuer intends to take in respect of that matter and the date by which the steps are to be taken.
Compare: 2011 No 10 s 47

105 Power of supervisor to engage expert

(1) The supervisor of a debt security is entitled, in the performance of the supervisor's functions, to engage an expert (for example, an auditor, investigating accountant, valuer, or actuary) if the supervisor considers, on reasonable grounds, that it requires the assistance of the expert to—
- (a) determine the financial position of the issuer; or
- (b) review the business, operation, or management systems, or the governance, of the issuer.
(2) If the supervisor engages an expert under this section,—
- (a) the issuer must provide reasonable assistance to the expert to allow the expert to provide the assistance under subsection (1); and
- (b) the fees and expenses of the expert, which must be reasonable in the circumstances, must be paid by the issuer.
Compare: SR 2009/230 Schedule 15 cl 11

Meetings of product holders

106 Meetings of product holders

(1) A meeting of a class of holders of a debt ~~securities~~ security must be called by the issuer on the written request of—
- (a) the supervisor; or
- (b) holders of the debt securities that value together no less than 5% of the nominal value of the debt securities on issue in that class; or
- (c) in the case of an issuer that is a credit union, no less than 5% of the number of members of the credit union who hold debt securities on issue in that class; or
- (d) a person who is authorised by the trust deed or by the regulations to call the meeting.
(2) The proceedings at the meeting are governed by the regulations (if any) and the trust deed (if there are no regulations or to the extent that the trust deed is not inconsistent with the regulations).

Compare: 2009/230 Schedule 15 cl 3(1)

107 Power of supervisor to attend meetings and appoint chair

(1) The supervisor of a debt security is entitled to receive all notices of, and other communications relating to, any meeting of the holders of the debt securities that any holder is entitled to receive.
~~(2) The supervisor of a debt security (or any person appointed by the supervisor to exercise its powers under this section) is entitled to—~~
- ~~(a) attend a meeting of the holders of the debt securities; and~~
- (b) be heard at a meeting of the holders of the debt securities on any part of the business of the meeting that concerns the supervisor's functions or the holders for whom the supervisor is acting; and
- ~~(c) appoint the chairperson of the meeting.~~
~~Compare: SR 2009/230 Schedule 15 cl 3(3)~~

107 Supervisor's attendance at meetings of product holders and power to appoint chair

The issuer of a debt security must ensure that the supervisor—
- (a) is permitted to attend any meeting of holders of the debt security; and
- (b) receives the notices and communications that any holder of the debt security is entitled to receive in relation to a meeting of those holders; and
- (c) may be heard at any meeting of holders of the debt security on any part of the business of the meeting that concerns the supervisor's functions or the holders for whom the supervisor is acting; and
- (d) may appoint the chairperson of any meeting of holders of the debt security.
Compare: SR 2009/230 Schedule 15 cl 3(3)

Change of supervisor

108 Supervisor ceasing to hold appointmentChange of supervisor

(1) The supervisor of a debt security ceases to hold that appointment (subject to subsection (2)) if the supervisor—
- (a) is removed by the FMA or the issuer under Part 2 of the Financial Markets Supervisors Act 2011; or
- (b) is removed by a special resolution of the holders of the debt security; or
- (c) is removed or resigns in accordance with the trust deed.
~~(2) No issuer of a debt security may remove a supervisor without the FMA's consent (even if permitted to do so by the trust deed).~~
(2) However, a supervisor may not—
- (a) be removed or resign under subsection (1)(b) or (c) unless—
  - (i) all functions and duties of the position have been performed; or
  - (ii) another licensed supervisor has been appointed, and accepted the appointment, in its place; or
  - (iii) the court consents:
- (b) (despite anything in the trust deed) be removed by an issuer of the debt security under subsection (1)(c) without the FMA's consent.
Compare: 1978 No 103 s 48

109 Lodging of notice of change of supervisor

(1) Within 5 working days of a change to the supervisor of a debt security under section 108, the issuer must ensure that notice of the change is lodged with the Registrar.

(2) ~~A person who~~ An issuer that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Subpart 3—Registration of managed investment schemesGovernance of managed investment products

110 Overview

(1) This subpart—
- (aa) sets out when managed investment schemes need to be registered; and
- (a) requires registered schemes, irrespective of legal form, to meet key common governance and reporting requirements; and
- (b) provides for the manager and independent supervisor of a registered scheme to owe statutory duties of care to investors; and
- (c) provides for the custodianship of scheme property of a registered scheme to be independent from the manager.
(2) This section is only a guide to the general scheme and effect of this subpart.

Need to register

111 Need to register managed investment scheme for regulated offer of managed investment product

(1) A person must not make a regulated offer of a managed investment product, or accept further contributions if there has been a regulated offer of a managed investment product, unless the managed investment scheme is registered.
(2) However, a managed investment scheme may be registered even if there is no regulated offer of a managed investment product in the scheme but, in this case, ~~the managed investment products in the scheme are regulated products and the following sections apply:~~—
- ~~(a) section 69(money for financial products must be held in trust):~~
- ~~(b) sections 80, 81, 82, and 83 (ongoing disclosure requirements):~~
- ~~(c) subpart 5 (registers that must be kept by issuers of all regulated products):~~
- ~~(d) subpart 6 (accounting records and audit of financial statements).~~
- (a) the managed investment products in the scheme are regulated products under section 29; and
- (b) this Act applies accordingly (for example, in addition to this subpart, see section 69 (money for financial products must be held in trust) and subpart 4 of Part 3 (ongoing disclosure)).
(3) A scheme that is approved as a Schedule 3 scheme under Schedule 3 may not be registered under this subpart.
~~(4) For the purposes of any enactment (unless the enactment provides otherwise), a reference to a retirement scheme means any of the following schemes:~~
- ~~(a) a registered scheme that is a KiwiSaver scheme or a superannuation scheme:~~
- ~~(b) a Schedule 3 scheme:~~
- ~~(c) a fund or scheme constituted under the Government Superannuation Fund Act 1956.~~
Compare: 1960 No 99 s 8; 1978 No 103 s 33(3)

Registration

112 Application for registration

(1) A person may apply to the Registrar for registration of a managed investment scheme.
(2) The application must—
- (a) be made in the prescribed manner; and
- ~~(b) contain the prescribed information; and~~
- (c) be accompanied by the written consent to the registration of the ~~licensed manager and licensed supervisor of the scheme (or the proposed licensed manager and licensed supervisor)~~ manager and supervisor of the scheme; and
- (d) contain a copy of the governing document for the scheme; and
- (e) contain a certificate from the ~~licensed manager and licensed supervisor (or proposed licensed manager and licensed supervisor)~~ manager and supervisor of the scheme to the effect that the scheme complies with the registration requirements for all schemes under section 113 on the basis set out in the certificate; and
- (f) if the application is for registration as a particular type of scheme under sections 114 to 119,—
  - (i) state that fact; and
  - (ii) comply with any additional prescribed requirements for applications for that type of registration; and
  - (iii) contain a certificate from the FMA that it is satisfied that the scheme complies with any additional registration requirements for that type of scheme under those sections.
(3) The Registrar must register a managed investment scheme if satisfied that the application meets the requirements of this section (subject to clause 7 of Schedule 2).

113 Initial and ongoing registration requirements for all managed investment schemes

(1) Every registered scheme must meet the following registration requirements:
- (a) it must not have a name that, in the opinion of the Registrar, is misleading or offensive or the use of which would contravene an enactment; and
- (b) its governing document must comply with sections 122 to 124; and
- (c) it must have a licensed manager designated or appointed under the governing document (or this Act) whose licence covers management of the scheme; and
- (d) it must have a licensed supervisor designated or appointed under the governing document (or the Financial Markets Supervisors Act 2011) whose licence covers supervision of the scheme; and
- (e) the manager and the supervisor of the scheme must not be the same or associated persons; and
- (f) the scheme property must be held by the supervisor or another person who meets the custodianship requirements in section 143 (to the extent that it is not held directly by the scheme participants).
(2) However, subsection (1)(c) to (e) do not apply to a restricted scheme (and any reference in this Act to a supervisor in relation to a registered scheme does not apply in relation to a restricted scheme (unless the context otherwise requires)).

Compare: 1960 No 99 s 3(1), (4); 2006 No 40 ss 116F, 116G

114 Additional initial and ongoing registration requirements for KiwiSaver schemes

(1) Every KiwiSaver scheme must meet the following registration requirements in addition to those in section 113:
- (a) it must be a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law; and
- (b) its purpose must be to provide retirement benefits directly to individuals; and
- (ba) it must, accordingly, restrict redemptions, withdrawals, and the provision of benefits in respect of a member's accumulation (including in the way the trust deed is applied) to those permitted under the KiwiSaver scheme rules under the KiwiSaver Act 2006; and
- (c) it must admit as members (both in its conditions of entry of scheme participants and in the way those conditions are applied on entry) only persons who meet the New Zealand criteria set out in subsection (2) or (3); and
- ~~(d) it must restrict redemptions or withdrawals (under the trust deed and in the way the trust deed is applied) to those permitted under the KiwiSaver scheme rules under the KiwiSaver Act 2006; and~~
- (e) it must be a scheme under which contributions are allocated to scheme participants on an individual basis; and
- (f) the benefits provided by the scheme must be fully funded as they accrue; and
- (g) its manager must have at least 1 director who is ~~a New Zealand resident~~ a New Zealand resident for tax purposes; and
- (h) the FMA must be satisfied that the fees charged in accordance with any information provided in the application will comply with clause 2 of the KiwiSaver scheme rules under the KiwiSaver Act 2006.
(2) The New Zealand criteria are that the person, at the time of becoming a participant,—
- (a) is, or normally is, living in New Zealand, or is an employee of the State services (within the meaning of the State Sector Act 1988) who is—
  - (i) serving outside New Zealand; and
  - (ii) employed on New Zealand terms and conditions; and
  - (iii) serving in a jurisdiction where offers of superannuation scheme membership are lawful; and
- (b) is a New Zealand citizen or is entitled, in terms of the Immigration Act 2009, to be in New Zealand indefinitely.
(3) A person also meets the New Zealand criteria if the person—
- (a) is, immediately before becoming a participant of the KiwiSaver scheme (scheme A), a member of another KiwiSaver scheme (scheme B); and
- (b) is transferring the member's entitlements from scheme B to scheme A.
(4) If the KiwiSaver scheme is a restricted scheme,—
- (a) subsection (1)(g) does not apply; but
- (b) at least 1 of the trustees or 1 of the directors of the corporate trustee of the scheme must be a New Zealand resident for tax purposes.
Compare: 2006 No 40 s 116

115 Additional initial and ongoing registration requirements for superannuation schemes

(1) Every superannuation scheme must meet the following registration requirements in addition to those in section 113:
- (a) it must be a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law; and
- (b) its purpose must be to provide retirement benefits directly or indirectly to individuals; and
- (ba) it must, accordingly, restrict redemptions, withdrawals, and the provision of benefits (including in the way that the trust deed is applied) to those for retirement purposes; and
- (c) it must admit as members (both in its conditions of entry of scheme participants and in the way those conditions are applied on entry) only either or both of—
  - (i) persons who meet the New Zealand criteria set out in subsection (2)~~; or~~:
  - (ii) persons who are the trustees or managers of a retirement scheme; and
- ~~(d) it must restrict redemptions or withdrawals (under the trust deed and in the way that the trust deed is applied) to redemptions or withdrawals for retirement purposes; and~~
- (e) it must not be registered as a KiwiSaver scheme; and
- (f) it must be either—
  - (i) a defined benefit scheme; or
  - (ii) a scheme under which contributions are allocated to scheme participants on an individual basis and the benefits provided by the scheme must be fully funded as they accrue.
(2) The New Zealand criteria for the purpose of subsection (1)(c)(i) are that the person, at the time of becoming a participant, must meet at least 1 of the following criteria:
- New Zealand citizen or permanent resident
- (a) the person is a New Zealand citizen or is entitled, in terms of the Immigration Act 2009, to be in New Zealand indefinitely; or
- Transferring member
- (b) the person—
  - (i) is, immediately before becoming a participant of the superannuation scheme (scheme A), a member of another superannuation scheme (scheme B); and
  - (ii) is transferring the member's entitlements from scheme B to scheme A; or
- Person living in New Zealand employed by New Zealand resident employer
- (c) the person is, or normally is, living in New Zealand and is employed on terms and conditions that are governed by New Zealand law by an employer that is a New Zealand resident ~~(as determined in accordance with sections YD 1 and YD 2 of the Income Tax Act 2007)~~ for tax purposes.
(3) Subsection (1)(c) does not apply to a locked-in superannuation scheme.

Compare: 1989 No 10 ss 2A, 3(1)

116 Extent to which superannuation scheme may provide non-retirement benefits

(1) Nothing in section 115(1)(b) or ~~(d)~~ (ba) prevents any of the following if it is merely ancillary to the purpose of providing retirement benefits to individuals:
- (a) the provision by a scheme of insurance benefits to members (for example, in the event of the death or disability of a member):
- (b) redemptions or withdrawals in limited circumstances that are defined in the trust deed of the scheme (for example, financial hardship, ceasing employment, or changing employment):
- (c) redemptions or withdrawals in accordance with limited early partial withdrawal criteria that are defined in the trust deed of the scheme.
~~(2) For the purposes of subsection (1), something is ancillary to the purpose of providing retirement benefits to individuals if it is—~~
- ~~(a) ancillary, secondary, subordinate, or incidental to the purpose of providing retirement benefits to individuals; and~~
- ~~(b) not an independent purpose of the scheme.~~
(2) If the superannuation scheme is registered under clause 20 of Schedule 5, and the scheme or a section of the scheme is closed to new members,—
- (a) section 115(1)(b) and (ba) do not apply to the closed scheme or closed section; but
- (b) the principal purpose of the scheme or section must be to provide retirement benefits directly or indirectly to individuals; and
- (c) the scheme or section must continue to be closed to new members.
(3) Despite section 115(1)(b) and (ba), a prescribed workplace scheme may—
- (a) have, as an additional purpose, the provision of benefits on ceasing employment with an employer, or in an industry, specified in the trust deed:
- (b) permit redemptions, withdrawals, and benefits for that purpose as well as retirement purposes.
(4) For the purposes of subsection (1), something is ancillary to the purpose of providing retirement benefits to individuals if it is ancillary, secondary, subordinate, or incidental to that purpose.

Compare: 2005 No 39 s 5(4)

117 Additional ongoing registration requirements for restricted schemes

(1) Every restricted scheme registered under ~~section 688(1)(a)~~ clause 20 of Schedule 5 must meet the following registration requirements in addition to those in section 113:
- (a) it must be a KiwiSaver scheme or a superannuation scheme; and
- (b) it must either—
  - (i) admit as members (both in its conditions of entry of scheme participants and in the way in which those conditions are applied on entry) only 1 or more of the classes of persons referred to in subsection (2); or
  - (ii) be closed to new members; and
- (c) the conditions of entry of scheme participants, or the way in which those conditions have been applied on entry, must not have been changed without the FMA's consent since the date of the scheme's registration under ~~section 688(1)(a)~~ clause 20 of Schedule 5 in a way that expands, or is likely to expand, the classes of people who may become scheme participants; and
- (d) its trustees must either—
  - (i) include at least 1 licensed independent trustee whose licence covers the scheme and who is independent under subsection (3); or
  - (ii) consist only of a sole corporate trustee that has at least 1 director who is a licensed independent trustee whose licence covers the scheme and who is independent under subsection (3); and
- (e) the trustees of the scheme must be designated or appointed to manage the scheme under the governing document (or this Act).
(2) The classes of persons for the purpose of subsection (1)(b)(i) are—
- (a) persons who are employed by a particular employer:
- (b) persons who are employed by a related body corporate of a particular employer:
- (c) persons who belong to a particular profession, calling, trade, occupation, or industry:
- (d) persons who belong to a particular association, society, or other entity with a definable community of interest:
- (e) persons who are immediate family members of, or wholly or partially financially dependent on, a person in 1 or more of the classes of persons described in paragraphs (a) to (d).
(3) In this section,—

immediate family member, in relation to a person, means the person's spouse, civil union partner, de facto partner, parent, child, step-parent, or stepchild
independent means a person that—
- (a) is not a related body corporate of any other trustee of the restricted scheme; and
- (b) is not an employer that provides access to the scheme for its employees, an administration manager, or an investment manager of the restricted scheme (or a related body corporate of any of them); and
- (c) is not a director of, shareholder in, or an employee of any person referred to in paragraph (a) or (b); and
- (d) is not a current scheme participant; and
- (e) is not a representative in any capacity of an organisation (such as a trade union) that represents the interests of 1 or more scheme participants; and
- (f) is not a representative in any capacity of an organisation that represents the interests of 1 or more employer contributors to the scheme; and
- (g) is not a corporate trustee if none of its directors are independent under this definition.
Compare: 2006 No 40 s 116A

118 Additional initial and ongoing registration requirements for locked-in superannuation schemes

Every locked-in superannuation scheme must meet the prescribed registration requirements in addition to those in sections 113 and 115.

Compare: 2006 No 40 s 116

119 Additional prescribed registration requirements for other particular prescribed types of schemes

A scheme of a particular type of registered scheme specified in the regulations must meet the prescribed registration requirements for that type of scheme (if any) in addition to those in section 113.

120 Manager must ensure that ongoing registration requirements are complied with

The manager of a registered scheme must ensure that, until all of the managed investment products in the scheme are cancelled, redeemed, or forfeited, or all of the obligations owing under those products have been discharged, the scheme—
- (a) continues to comply with the registration requirements ~~for all schemes~~ that apply to the scheme under section 113; and
- (b) if it is registered as a particular type of scheme under sections 114 to 119, continues to comply with the additional registration requirements for that type of scheme under those sections.

121 Changes to registration as particular type of registered scheme

(1) The FMA may direct the removal of the registration of a registered scheme as a particular type of scheme—
- (a) if the FMA is satisfied that the scheme does not meet the registration requirements for that type of scheme under sections 114 to 119; or
- (b) on the written request of the manager of the scheme, if the supervisor certifies, or the trustees of a restricted scheme certify, that—
  - (i) the removal has been approved by a special resolution of the scheme participants (subject to any restrictions in the governing document); or
  - (ii) there is no material adverse effect on scheme participants from the removal.
(2) The FMA must not direct removal under subsection (1)(a) unless—
- (a) the FMA gives the manager of the scheme no less than 10 working days' written notice of the following matters before it exercises the power:
  - (i) that the FMA may direct removal; and
  - (ii) the reasons why it may exercise that power; and
- (b) the FMA gives the manager or the manager's representative an opportunity to make written submissions on the matter within that notice period.
(3) The FMA may direct that a registered scheme be registered as a particular type of scheme on the written request of the manager of the scheme if the FMA is satisfied that the scheme meets the registration requirements for that type of scheme under sections 114 to 119.

(4) A direction under subsection (1)(a) in relation to the removal of a registration as a restricted scheme must not take effect before the expiry of 6 months after the direction is made (unless the manager consents to an earlier date).

~~(5) The manager of a registered scheme must, as soon as practicable after being notified of a direction under this section, notify the scheme participants of the direction.~~
(5) If the FMA makes a direction under this section,—
- (a) the FMA must notify the manager and the supervisor of the registered scheme of the direction; and
- (b) as soon as practicable after being notified of the direction, the manager must notify the scheme participants of the direction.
Compare: 2006 No 40 s 168A

Governing document requirements

122 Contents of governing document for registered scheme

(1) The governing document for a registered scheme must provide adequately for all of the following matters under the scheme:
- (a) whether or not managed investment products are transferable or redeemable and the rules applying to acquiring or disposing of the managed investment products and, if they are redeemable,—
  - (i) the manner in which, and the conditions on which, interests are to be redeemed; and
  - (ii) the method of calculating the ~~minimum~~ price at which interests are to be redeemed; and
- (b) the rules applying to becoming a scheme participant or withdrawing from participation in the scheme (if there are any rules); and
- (c) the contributions payable, or the manner of calculating the contributions payable, and the rules applying to changing the contributions payable or the manner of their calculation; and
- (d) the methodology, or the rules applying to determining the methodology, and other rules applying to valuations of assets of the scheme and pricing of interests in the scheme; and
- (e) the rules applying to the determination and payment of ~~financial~~ benefits to scheme participants; and
- (f) the fees and expenses that can be paid out of scheme property to any manager, investment manager, administration manager, supervisor, or custodian ~~(for example, by setting out~~, or the basis on which those fees and expenses are to be determined), and any rights of any of those persons to be indemnified out of scheme property (and any other matters required by section 123); and
- (g) the appointment and removal of the supervisor (unless none is required under this Part); and
- (h) the appointment and removal of the manager; and
- (i) the winding up of the scheme; and
- (j) any other matters (other than the matters contained in the statement of investment policy and objectives) that materially affect—
  - (i) the management and operation of the scheme by the manager:
  - (ii) the rights and duties of scheme participants in the scheme:
  - (iii) the powers, rights, and duties of the manager and the supervisor ~~(if any)~~ of the scheme.
(2) The governing document is treated as containing any provision that is implied into it by or under this Act or the KiwiSaver Act 2006.

(3) The governing document must provide for the contents of the document that are required by this section in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8.

Compare: 1989 No 10 s 7; 2006 No 40 s 119

123 Limits on permitted exemptions and indemnities

(1) If a manager or supervisor of a registered scheme has any rights ~~to be exempted from liability for, or~~ to be indemnified ~~out of scheme property for,~~ for liabilities or expenses incurred in relation to, the performance of the manager's issuer obligations or the supervisor's licensee obligations (as defined in section 4 of the Financial Markets Supervisors Act 2011), those rights—
- (a) must be set out in the scheme's governing document; and
- (b) must be available only in relation to the proper performance of the duties under sections 130(1) and 131 or sections 140(1) and 141.
(2) If an investment manager of a registered scheme has any rights ~~to be exempted from liability for, or~~ to be indemnified ~~out of scheme property~~ for liabilities or expenses incurred in relation to, the performance of the investment manager's contracted functions, those rights—
- (a) must be set out either—
  - (i) in the scheme's governing document; or
  - (ii) in the contract between the investment manager and the manager, provided that the scheme's governing document contains a power that permits such an indemnity; and
- (b) must be available only in relation to the proper performance of the ~~duties~~ duty under ~~sections 130 and~~ section 131.
(3) No other agreement has any effect to the extent that it purports to confer a right of a kind referred to in subsection (1) or (2).

Compare: Corporations Act 2001 s 601GA(2) (Aust); 1960 No 99 s 24(2); 1978 No 103 s 62; 2006 No 40 s 116J(1)

124 Governing document must be legally enforceable

A governing document for a registered scheme must be contained in 1 or more documents that are legally enforceable as between the supervisor, the manager, and the scheme participants.

Compare: Corporations Act 2001 s 601GB (Aust)

125 Effect of governing document

A governing document for a registered scheme has no effect to the extent that it contravenes, or is inconsistent with, this Act, the regulations, or any term implied into it by this Act or the regulations.

126 Changes to governing document

(1) An amendment to or a replacement of a governing document has no effect unless made ~~either~~—
- (a) under this section with the consent of the supervisor or, if there is no supervisor, the FMA; or
- (b) under section 127 or 171(3); or
- (c) under section 22(7) or 37(6) of the Financial Markets Supervisors Act 2011.
(2) The supervisor or the FMA must not consent to an amendment to, or a replacement of, the governing document under this section unless—
- (a) either—
  - (i) the amendment or replacement is approved by, or contingent on approval by, the scheme participants; or
  - (ii) the supervisor or the FMA is satisfied that the amendment or replacement does not have a material adverse effect on the scheme participants; and
- (b) in the case of the supervisor, the supervisor certifies to that effect and certifies, or obtains a certificate from a ~~solicitor~~ lawyer, that the governing document, as amended or replaced, will comply with sections 122 to 124 on the basis set out in the certificate.
(3) The approval of scheme participants for the purposes of subsection (2)(a) must consist of,—
- (a) in the case of an amendment to or a replacement of a governing document of a defined benefit scheme or a superannuation scheme that is registered under clause 20 of Schedule 5 that reduces, postpones, or otherwise adversely affects the benefits, whether vested, contingent, or discretionary, that may in due course flow from, or are attributable to, membership of the scheme up to the date the amendment or replacement is made, the written consent of all scheme participants who would be adversely affected by the amendment or replacement; or
- (b) in any other case, a special resolution of the scheme participants or ~~the~~ each class of scheme participants that is or may be adversely affected by the amendment or replacement.
(4) Subsection (2) is subject to section ~~140(1)(e)~~ 140(1A)(b).

Compare: 1989 No 10 ss 9, 12; 2006 No 40 ss 119A, 129, 129A

127 Power to make FMA and court-approved changes to governing documents

(1) A manager of a registered scheme may amend or replace the governing document—
- (a) with the FMA's consent if the FMA is satisfied that the amendment or replacement is necessary to enable the governing document to comply with sections 122 to 124 or any enactment or rule of law; or
- (b) with the court's consent, in the case of a defined benefit scheme or a superannuation scheme that is registered under clause 20 of Schedule 5, if—
  - (i) the amendment or replacement would otherwise require the consent of all the scheme participants who would be adversely affected by it; and
  - (ii) the court considers that it is in the interests of the scheme participants.
(2) Subsection (1) applies despite anything to the contrary in the governing document or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the governing document.

(3) An amendment or a replacement made under this section must be treated for all purposes as if it were made in accordance with the governing document.

128 Lodging of changes to governing document

(1) Within 5 working days of the amendment to or replacement of a governing document, the manager of a registered scheme must ensure that notice of the amendment or replacement, and a copy of the certificate for the amendment or replacement (if any), is lodged with the Registrar.

(2) A ~~person who~~ manager that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Role of manager

129 Management and administration functions of manager

The manager of a registered scheme is responsible for performing the following functions:
- (a) offering the managed investment products; and
- (b) issuing the managed investment products; and
- (c) managing the scheme property and investments; and
- (d) administering the scheme.
Compare: 1960 No 99 s 3(2)(a) and (b); 2006 No 40 s 116B(1)

130 General duties applying in exercise of manager's functions

(1) A manager of a registered scheme must—
- (a) act honestly in acting as a manager; and
- ~~(b) carry out the functions of a manager in accordance with the governing document, the statement of investment policy and objectives, and all other issuer obligations; and~~
- (c) in exercising any powers or performing any duties as a manager,—
  - (i) act in the best interests of the scheme participants; and
  - (ii) treat the scheme participants equitably; and
- (d) not make use of information acquired through being the manager in order to—
  - (i) gain an improper advantage for itself or any other person; or
  - (ii) cause detriment to the scheme participants.
(1A) The manager must also carry out the functions of a manager in accordance with the governing document, the statement of investment policy and objectives, and all other issuer obligations.

(2) If the registered scheme is established under a trust deed, the manager has the same duties and liability in the performance of its functions as manager as it would if it performed those functions as a trustee (except to the extent that those duties are altered by or are inconsistent with this Act).

Compare: Corporations Act 2001 s 601FC (Aust); 1960 No 99 ss 3(2)(c), 12(1)(c), 24(1); SR 2009/230 Schedule 17 cl 3(1)

131 Duty of manager and investment manager to comply with relevant professional standard of care

(1) A professional manager of a registered scheme must, in exercising any powers, or performing any duties, exercise the care, diligence, and skill that a prudent person engaged in that profession would exercise in the same circumstances.
(2) In this section, a professional manager is—
- (a) a manager of a registered scheme (other than a restricted scheme):
- (b) an investment manager of a registered scheme:
- (c) a licensed independent trustee of a restricted scheme:
- (d) any other trustee of a restricted scheme whose profession is or business is or includes acting as a trustee or investing money on behalf of others.
(3) A trustee of a restricted scheme who is not a professional manager must, in exercising any powers or performing any duties, exercise the care, diligence, and skill that a prudent person of business would exercise in the same circumstances.

Compare: 1960 No 99 ss 3(2)(c), 24(1); 2006 No 40 s 117; SR 2009/230 Schedule 17 cl 3(3)

132 Duties of directors and senior managers of manager

A director or senior manager of a manager of a registered scheme must—
- (a) not make use of information acquired through being the director or senior manager of the manager in order to—
  - (i) gain an improper advantage for himself or herself or any other person; or
  - (ii) cause detriment to the scheme participants; and
- (b) not make improper use of the position as a director or senior manager of the manager to gain, directly or indirectly, an advantage for himself or herself or any other person or to cause detriment to the scheme participants.
Compare: Corporations Act 2001 s 601FE (Aust); 1960 No 99 s 26

133 Contracting out of management functions

(1) A manager may, unless prohibited by the governing document, contract out to 1 or more persons (whether or not the person or persons hold a market services licence under this Act covering management of the scheme) some or all of its functions as a manager.
(2) However,—
- (a) the manager must take all reasonable steps to—
  - (i) ensure that those functions are performed in the same manner, and are subject to the same duties and restrictions, as if the manager were performing them directly; and
  - (ii) monitor the performance of those functions; and
- (b) the contracting out does not affect the liability of the manager for the performance of those functions.

134 Duty of manager to provide regular reports to supervisor or FMA

The manager of a registered scheme must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, prepare and provide to the supervisor (or, in the case of a restricted scheme, the FMA) reports that contain the documents, information, or other matters that are required to be provided by the regulations.

135 Duty of manager to provide requested information and reports to supervisor

(1) If requested by the supervisor of a registered scheme (or a person authorised by the supervisor to exercise its powers under this section), the ~~issuer~~ manager must—
- (a) make available to the supervisor (or other authorised person) all documents and records relating to the ~~issuer~~ manager and the scheme (including those held by an investment manager or administration manager); and
- (b) provide the supervisor (or other authorised person) with any other reports or information required by the supervisor (or other authorised person).
(2) Reports or information required under subsection (1) may—
- (a) be about any matter relevant to the performance of the supervisor's functions; and
- (b) include forward-looking reports.
(3) The reports or information must be provided within the time and in the manner (which must be reasonable in the circumstances) specified by the supervisor.

Compare: 1960 No 99 s 12(1)(b); SR 2009/230 Schedule 17 cl 2

136 Duty of manager to report contravention or possible contravention of issuer obligations

If a manager of a registered scheme has reasonable grounds to believe that it has contravened, may have contravened, or is likely to contravene any of its issuer obligations in a material respect, the manager must, as soon as practicable,—
- (a) report the contravention or possible contravention to the supervisor (or, in the case of a restricted scheme, the FMA); and
- (b) advise the supervisor (or, in the case of a restricted scheme, the FMA) of the steps (if any) that the manager has taken or intends to take in light of the contravention or possible contravention and the date by which the steps were taken or are to be taken.

137 Restriction on section 136

A manager is not required to provide, under section 136, information that would, if so provided, be likely to incriminate the manager under New Zealand law for an offence punishable by a fine or imprisonment.

138 Duty of manager to report serious financial problems

(1) This section applies if a manager of a registered scheme becomes aware of information on the basis of which it could reasonably form the opinion that—
- (a) the manager is, or it is likely that the manager will become, insolvent; or
- (b) the registered scheme is, or it is likely that the registered scheme will become, insolvent.
(2) The manager must, as soon as practicable,—
- (a) disclose to the supervisor (or, if there is no supervisor, to the FMA) all information relevant to that matter that is in the possession or under the control of the manager (including information held by an investment manager or administration manager) and that was obtained in the course of, or in connection with, the performance of its functions as manager; and
- (b) advise the supervisor (or the FMA, as the case may be) of the steps (if any) that the manager intends to take in respect of that matter and the date by which the steps are to be taken.
Compare: 2011 No 10 s 47

Role of supervisor

139 Functions of supervisor

(1) The supervisor of a registered scheme is responsible for the following functions:
- (a) acting on behalf of the scheme participants in relation to—
  - (i) the manager; and
  - (ii) any matter connected to the governing document or the terms of ~~the~~ any regulated offer; and
  - (iii) any contravention or alleged contravention of the issuer obligations; and
  - (iv) any contravention or alleged contravention of this Act by any other person in connection with the registered scheme~~, the governing document, or the terms of the regulated offer~~; and
- (b) supervising—
  - (i) the performance by the manager of its functions and its issuer obligations; and
  - (ii) the financial position of the manager and the scheme in respect of the managed investment product to ascertain that it is adequate; and
- (c) holding the scheme property, or ensuring that the scheme property is held, in accordance with sections 143 to 145; and
- (d) performing or exercising any other functions, powers, and duties conferred or imposed on the supervisor by or under this Act, the Financial Markets Supervisors Act 2011, and the governing document.
(2) The supervisor must not delegate its functions under subsection (1) (except as expressly permitted by section 143 in relation to its function under subsection (1)(c) and otherwise by this Act).

Compare: 2006 No 40 s 116D(3), (4)

140 General duties applying in exercise of supervisor's functions

(1) The supervisor of a registered scheme must—
- (a) act honestly in acting as a supervisor; and
- (b) in exercising its powers and performing its duties as a supervisor, act in the best interests of the scheme participants; and
- (c) exercise reasonable diligence in carrying out its functions as a supervisor~~; and~~.
- (d) do all the things it has the power to do to cause any contravention referred to in section 139(1)(a) to be remedied (unless it is satisfied that the contravention will not materially prejudice the security of the managed investment product or the interests of scheme participants); and
- ~~(e) act in accordance with any direction given by a special resolution of the scheme participants that is not inconsistent with any enactment, rule of law, or the governing document in relation to—~~
  - ~~(i) seeking a remedy to a contravention referred to in section 139(1)(a); and~~
  - ~~(ii) any other matter connected with its functions.~~
(1A) The supervisor of a registered scheme must also—
- (a) do all the things it has the power to do to cause any contravention referred to in section 139(1)(a) to be remedied (unless it is satisfied that the contravention will not have a material adverse effect on scheme participants); and
- (b) act in accordance with any direction given by a special resolution of the scheme participants that is not inconsistent with any enactment, rule of law, or the governing document in relation to—
  - (i) seeking a remedy to a contravention referred to in section 139(1)(a); and
  - (ii) any other matter connected with the supervisor's functions.
(2) The supervisor is not liable for anything done, or omitted to be done, in good faith in giving effect to a direction to it by scheme participants.
(3) If the registered scheme is established under a trust deed,—
- (a) the supervisor is the trustee of the trust; and
- (b) the supervisor has the same duties and liability in the performance of its functions as supervisor as it would if it performed those functions as a trustee (except to the extent that those duties are altered by or are inconsistent with this Act).
(4) The duty in subsection ~~(1)(e)~~ (1A)(b) is subject to any order of the court made under section 194.

Compare: 1960 No 99 s 18(2)–(4); SR 2009/230 Schedule 17 cl 1

141 Duty of supervisor to comply with professional standard of care

The supervisor of a registered scheme must, in exercising its powers and performing its duties as a supervisor, exercise the care, diligence, and skill that a prudent person engaged in the business of acting as a licensed supervisor would exercise in the same circumstances.

142 Power of supervisor to engage expert

(1) The supervisor of a registered scheme is entitled, in the performance of the supervisor's functions, to engage an expert (for example, an auditor, investigating accountant, valuer, or actuary) if the supervisor considers, on reasonable grounds, that it requires the assistance of the expert to—
- (a) determine the financial position of the manager or the scheme; or
- (b) review the business, operation, or management systems, or the governance, of the manager or the scheme.
(2) If the supervisor engages an expert under this section,—
- (a) the manager must provide reasonable assistance to the expert to allow the expert to provide the assistance under subsection (1); and
- (b) the manager must pay the fees and expenses of the expert, which must be reasonable in the circumstances; and
- (c) the manager is entitled to be indemnified for those fees and expenses out of scheme property, subject to any limits referred to in section 123.
Compare: SR 2009/230 Schedule 15 cl 11

Custodianship of scheme property

143 Requirement to have supervisor or other independent person as custodian

(1) The supervisor of a registered scheme (A) must hold the scheme property or, if authorised by the governing document, contract the holding of the scheme property to another person (B) who meets the external custodianship requirements.
(2) If there is no supervisor for the scheme (for example, in the case of a restricted scheme), the scheme property must be held in 1 or more of the following ways:
- ~~(a) in the case of a restricted scheme that has a sole corporate trustee with no function other than to be the manager of the scheme, by that corporate trustee; or~~
- (a) in the case of a restricted scheme, by a body corporate that is either a corporate trustee of the restricted scheme or has, as its directors, only persons who are trustees of the restricted scheme; or
- ~~(b) by being invested in other registered schemes; or~~
- (c) by a person (B) who meets the external custodianship requirements and to whom the manager of the scheme (A), if authorised by the governing document, has contracted the holding of the scheme property.
(3) B may, if authorised in writing by A, in turn contract the holding of the scheme property to another person who meets the external custodianship requirements.
(4) To meet the external custodianship requirements, a person must—
- (a) be a body corporate that A or (if B contracted the custodian) B believes, on reasonable grounds, to be appropriate to hold, and safeguard, the scheme property; and
- (b) not be the same person as, or be associated with, the manager (other than ~~in respect~~ by virtue of the custodianship ~~requirements~~).
(5) If a person contracts the holding of the scheme property to another person (the nominee) under this section, the person contracting out that function—
- (a) must take all reasonable steps to—
  - (i) ensure that the function is performed by the nominee in the same manner and subject to the same duties and restrictions as if that person were performing it directly; and
  - (ii) monitor the performance of that function; and
- (b) is jointly and severally liable with the nominee (and any other person who has contracted out the function) for the performance of that function in accordance with paragraph (a).
(6) This section does not apply to the extent that scheme property is held directly by the scheme participants.

Compare: 1960 No 99 ss 3(3), 6–6C; 2006 No 40 ss 116G, 116H, 116I

144 Custodian holds scheme property on trust

(1) The custodian for a registered scheme ~~(whether the supervisor or another nominee under section 143)~~ holds the scheme property on trust for the scheme.
(2) The custodian for a registered scheme must ensure that the scheme property is held separate from property held by any of the following persons on their own account:
- (a) the custodian:
- (b) any related party of the scheme ~~(within the meaning of section 158)~~.
(3) Scheme property—
- (a) is not available for the payment of the debts of the custodian or any other creditor of the custodian; and
- (b) is not liable to be attached or taken in execution under the order or process of any court at the instance of the custodian or any other creditor of the custodian.
(4) Nothing in this section takes away or affects any lawful lien or claim that a custodian who holds scheme property has against the scheme property.

145 Custodian must keep records of scheme property

(1) The custodian for a registered scheme must keep, or ensure that there are kept, records that—
- (a) identify the scheme property; and
- (b) show the date when the scheme property was received; and
- (c) if the scheme property has been disposed of, show where the scheme property was disposed of and to whom.
(2) The custodian for a registered scheme must also keep all other prescribed records.

(3) The custodian for a registered scheme must keep the records required by this section, or ensure that they are kept, in a manner that enables those records to be conveniently inspected by the manager and the supervisor and conveniently and properly audited.

146 Duty of supervisor to refuse to act on wrongful directions

(1) The supervisor of a registered scheme must refuse, and must direct any other custodian to refuse, to act on a direction of the manager that relates to the acquisition or disposal of scheme property if the supervisor considers that the proposed acquisition or disposal would be—
- (a) in breach of the scheme's governing document, any rule of law, or any enactment; or
- (b) manifestly not in the interests of the scheme participants.
(1A) A custodian of a registered scheme must comply with any direction given to it by a supervisor under this section.

(2) If the supervisor refuses, or directs any other custodian to refuse, to act on a direction of the manager, the supervisor must notify the manager and the FMA in writing of that fact and the supervisor's reasons for the refusal or direction.

(3) A supervisor of a registered scheme, and any other custodian of the scheme, is not liable to the scheme participants or the manager for refusing, or directing any other custodian to refuse, to act on a direction of the manager in accordance with this section.

Compare: 1960 No 99 s 12(1)(c)

Meetings of scheme participants

147 Meetings of scheme participants

(1) A meeting of a class of scheme participants must be called by the manager of the registered scheme on the written request of—
- (a) the supervisor; or
- (b) scheme participants holding managed investment products that value together no less than 5% of the value of the managed investment products on issue in that class; or
- (c) a person who is authorised by the governing document or by the regulations to call the meeting.
(2) The proceedings at the meeting are governed by the regulations (if any) and the governing document (if there are no regulations or to the extent that the governing document is not inconsistent with any regulations).

Compare: 1960 No 99 ss 12(1)(d), 18(1)

148 Power of supervisor to attend meetings and appoint chair

(1) The supervisor of a registered scheme is entitled to receive all notices of, and other communications relating to, any meeting of the scheme participants that any scheme participant is entitled to receive.
~~(2) The supervisor of a registered scheme (or any person authorised by the supervisor to exercise its powers under this section) is entitled to—~~
- ~~(a) attend a meeting of the scheme participants; and~~
- ~~(b) be heard at a meeting of the scheme participants on any part of the business of the meeting that concerns the supervisor's duties or the scheme participants for whom the supervisor is acting; and~~
- ~~(c) appoint the chairperson of the meeting.~~
~~Compare: 1960 No 99 s 18(1); SR 2009/137 Schedule 16 cl 2(1), 2(2)~~

148 Supervisor's attendance at meetings of scheme participants and power to appoint chair

The manager of a registered scheme must ensure that the supervisor—
- (a) is permitted to attend any meeting of scheme participants; and
- (b) receives the notices and communications that any scheme participant is entitled to receive in relation to a meeting of those participants; and
- (c) may be heard at any meeting of scheme participants on any part of the business of the meeting that concerns the supervisor's functions or the scheme participants for whom the supervisor is acting; and
- (d) may appoint the chairperson of any meeting of scheme participants.
Compare: 1960 No 99 s 18(1); SR 2009/230 Schedule 17 cl 2(1), 2(2)

149 Manager and associated persons cannot vote if interested in resolution

(1) The manager of a registered scheme and its associated persons are not entitled to vote their interest on a resolution at a meeting of scheme participants if they have an interest in the resolution or matter other than as a scheme participant.
(2) However,—
- (a) if the managed investment products in the registered scheme are quoted, subsection (1) does not prevent the manager and its associated persons ~~are entitled to vote~~ from voting their interest on resolutions to remove the manager and appoint a new manager:
- (b) the manager or its associated persons may vote as proxies if the proxy appointment specifies the way they are to vote on the resolution and they vote that way:
- (c) subsection (1) does not apply in the prescribed circumstances.
Compare: Corporations Act 2001 ss 253A(2), 253E (Aust)

Management of scheme

150 Requirement for statement of investment policy and objectives

(1) A manager of a registered scheme must ensure that there is a statement of investment policy and objectives that covers the investment policy and objectives of the scheme and provides adequately for the following matters:
- (a) the nature or type of investments that may be made, and any limits on those; and
- (b) any limits on the proportion of each type of asset invested in; and
- (c) the methodology used for developing and amending the investment strategy and for measuring performance against ~~that investment strategy~~ the investment objectives of the scheme.
(2) However, if there are no limits provided for under subsection (1)(a) or (b), the statement of investment policy and objectives must state that fact.

(3) The statement must provide for the matters set out in this section in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8 that apply to it.

151 Changes to statement of investment policy and objectives

(1) The manager of a registered scheme may amend or replace a statement of investment policy and objectives only after giving prior written notice to the supervisor.

(2) This section does not apply to a restricted scheme.

152 Lodging of statement of investment policy and objectives and changes to statement

~~(1) The manager of a registered scheme must lodge the statement of investment policy and objectives, and any changes to it, with the Registrar, except in the prescribed circumstances.~~

~~(2) The manager must lodge any change to the statement of investment policy and objectives within 5 working days of the change taking effect.~~
(1) The manager of a registered scheme must, except in the prescribed circumstances,—
- (a) lodge the statement of investment policy and objectives with the Registrar before a regulated offer of managed investment products is made or, if no regulated offer is made, before any managed investment product is issued; and
- (b) lodge any change to the statement of investment policy and objectives with the Registrar within 5 working days after the change takes effect.
(3) A ~~person who~~ manager that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

153 Action that must be taken on limit breaks

(1) This section applies to a registered scheme if, under the scheme's statement of investment policy and objectives, there is a material breach of any limits on either of the following (a limit break):
- (a) the nature or type of investments that may be made; or
- (b) the proportion of each type of assets that may be invested in.
(2) If this section applies, the manager of the registered scheme must report the limit break to the supervisor or to the FMA (if there is no supervisor) in the prescribed circumstances and in the prescribed manner.

(3) Whether or not a limit break is material must be determined in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8.

154 Action that must be taken on pricing errors and failure to comply with pricing methodologies

(1) This section applies to a registered scheme if—
- (a) the managed investment products under the scheme are transferable or redeemable; and
- (b) ~~either~~the manager (or any person to whom the manager has contracted some or all of its functions as a manager)—
  - (i) makes an error ~~occurs~~ in calculating the price at which the managed investment products are transferred or redeemed; or
  - (ii) ~~there is a failure~~ fails to comply with the methodology for pricing the managed investment products as set out in the governing document or ~~any~~ notices issued by the FMA under subpart 4 of Part 8.
(2) If this section applies, the manager must ensure, if the pricing error or non-compliance is material,—
- (a) ~~correct~~ the pricing error or non-compliance is corrected; and
- (b) ~~report~~ the pricing error or non-compliance is reported to the supervisor (or to the FMA if there is no supervisor); and
- (c) ~~take~~ the prescribed steps are taken to remedy the pricing error or non-compliance.
(3) Whether or not a pricing error or non-compliance is material must be determined in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8.

155 Actuarial examination of defined benefit scheme or life benefit scheme

(1) This section applies to a registered scheme that—
- (a) is a defined benefit scheme; or
- (b) provides benefits that provide for the payment of money on the happening of a contingency dependent on the termination or continuance of human life, and the risks associated with those benefits are not fully insured with a ~~company engaged in the business of life insurance~~ life insurer within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2010 (a life benefit scheme).
(2) The manager of a defined benefit scheme or a life benefit scheme must ensure that a suitably qualified actuary examines the financial position of the scheme as at dates that are no more than 3 years apart.
(3) The manager must ensure that—
- (a) the report of the actuary is received no later than 7 months after the date as at which the financial position of the scheme was examined; and
- (b) the manager gives a copy of the report, as soon as practicable, to the supervisor (or if there is no supervisor, to the FMA); and
- (c) if there is a supervisor, the manager also gives a copy of the report to the FMA within 20 working days after its receipt by the supervisor ~~(if any)~~.
(4) A ~~person who~~ manager that contravenes subsection (3)(b) or (c) commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(5) The offence in subsection (4) is an infringement offence (see subpart 5 of Part 7).

Compare: 1989 No 10 s 15

156 Power of manager to adjust financial benefits to comply with portfolio investment entity rules

The manager of a registered scheme to which section HM 48 of the Income Tax Act 2007 applies may adjust the financial benefits of scheme participants in the way required by that section.

Compare: 1960 No 99 ss 12A, 22

157 Limits on reversion of scheme property in certain schemes to non-scheme participant contributor

(1) No part of the scheme property of a KiwiSaver scheme or superannuation scheme may revert to a contributor who is not a scheme participant under the governing document without the prior written consent of the FMA.
(2) The FMA must not give consent to the reversion of any assets of the scheme to a person under this section unless satisfied that—
- (a) sufficient assets will remain to support the interests of all of the scheme participants; and
- (b) the reversion is fair and equitable to the scheme participants, taking into account the manner in which the scheme acquired those assets.
Compare: 1989 No 10 s 10; 2006 No 40 ss 129B, 130

Related party transactions

158 Definition of related party benefit

(1) A related party benefit, in relation to a registered scheme, is a benefit—
- (a) that is either given out of scheme property or creates an exposure to loss for scheme property; and
- (b) that is given to, or received by, a related party of the scheme; but
- (c) does not include fees or expenses that are paid or reimbursed to the manager in accordance with this Act or the governing document of the scheme.
(2) A related party of the scheme is—
- (a) any of the following persons (a scheme-connected person):
  - (i) the manager of the scheme; and
  - (ii) any investment manager, administration manager, or other person to whom the manager has contracted out some or all of its functions as a manager; and
  - (iii) for a restricted scheme that is identified on the register of managed investment schemes as an employer-related scheme, any contributor to the scheme who is not a scheme participant (other than the Crown); or
- (b) an associated person of a scheme-connected person.
Compare: Corporations Act 2001 ss 601LA–601LE (Aust)

159 General prohibition on transactions giving related party benefits

(1) A manager of a registered scheme (and any investment manager, administration manager, or other person to whom the manager has contracted out some or all of its functions as a manager) must not enter into a transaction that provides for a related party benefit to be given.
(2) However, subsection (1) does not apply to a transaction or series of transactions if the manager notifies the supervisor of the transaction or transactions, including the related party benefits given under the transaction or transactions, and the key terms of the transaction or transactions and either—
- (a) the manager obtains the supervisor's consent to the transaction or transactions; or
- (b) section 160 applies to the transaction or transactions or all related party benefits to be given and the manager certifies to that effect.
(3) The supervisor must not consent to a transaction or transactions under this section unless— 1 of the following applies and the supervisor certifies to that effect:
- ~~(a) either—~~
  - ~~(i) the supervisor considers that the transaction or transactions are in the best interests of the scheme participants; or~~
  - ~~(ii) the transaction is approved by, or contingent on approval by, a special resolution of the class of scheme participants affected, or potentially affected, by the transaction; and~~
- ~~(b) the supervisor certifies to that effect.~~
- (a) the supervisor considers that the transaction or transactions are in the best interests of the scheme participants; or
- (b) the transaction is approved by, or contingent on approval by, a special resolution of the class of scheme participants affected, or potentially affected, by the transaction.
(4) However, in the case of a restricted scheme, subsection (1) does not apply to a transaction or series of transactions if 1 of the following applies and the manager certifies ~~that~~ to that effect:
- (a) the transaction or transactions are in the best interests of the scheme participants; or
- (b) section 160 applies to the transaction or transactions or all related party benefits to be given; or
- (c) the transaction is approved by, or contingent on approval by, a special resolution of the class of scheme participants affected, or potentially affected, by the transaction.
(5) The manager may not certify under subsection (4) unless the licensed independent trustee has consented to the certification.

(6) However, a failure to comply with this section does not affect the validity of any transaction (subject to any court order under Part 7).

(7) See also section 125A of the KiwiSaver Act 2006 for an additional prohibition on loans and financial assistance to members of KiwiSaver schemes that have fewer than 20 members.

Compare: Corporations Act 2001 ss 601LA–601LE (Aust)

160 Certain related party benefits permitted

This section applies to—
- Arm's-length terms
- (a) a benefit that is given 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 related party than the terms referred to in subparagraph (i):
- Investments in other registered schemes
- (b) an acquisition or a disposal of a managed investment product in another registered scheme or a benefit or transaction in respect of a prescribed overseas scheme:
- Certain registered bank investments
- ~~(c) investments in category 2 products issued by a registered bank or products prescribed for the purposes of clause 20(c) of Schedule 1:~~
- (c) investments in products referred to in clause 20 of Schedule 1:
- Other prescribed benefits or transactions
- (d) a prescribed benefit or transaction.
Compare: Corporations Act 2001 ss 601LA–601LE (Aust)

160A Requirements for certificates as to related party benefits

(1) A certificate under section 159 is effective only if the certificate—
- (a) states the specific grounds on which it is given under section 159 and (if relevant) section 160, and the basis for relying on those grounds; and
- (b) complies with the prescribed requirements (if any) as to its form, content, or the manner in which it is given.
(2) Nothing in that section requires a new certificate if there is an existing certificate that applies (whether specifically or in general terms) to the transaction or transactions.

161 Additional restrictions on related party transactions of restricted schemes

(1) The manager of a restricted scheme must ensure that the restricted scheme does not have more than 5% of the scheme property in investments related to or managed by a related party of the scheme (as defined in section 158) or a scheme participant.
~~(2) However, the following investments do not count for the purpose of calculating the 5% limit:~~
- ~~(a) investments referred to in section 160(b) or (c); and~~
- ~~(b) ~~other prescribed benefits or transactions.~~~~
~~Compare: 2006 No 40 s 117A~~

161 Additional restrictions on restricted schemes' holdings of in-house assets

(1) A manager of a restricted scheme (or any person to whom the manager has contracted some or all of its functions as a manager) must not acquire any new in-house asset if, as a result of the acquisition, the restricted scheme would have an in-house assets ratio of 5% or more in relation to any related party or scheme participant (A).
(2) The in-house assets ratio of a scheme, in relation to A, must be calculated as the ratio, expressed as a percentage, of paragraph (a) to paragraph (b):
- (a) the sum of the net asset values of—
  - (i) the in-house assets of A; and
  - (ii) the in-house assets of any other related parties of the scheme, or scheme participants, that are associated with A; and
- (b) the net asset value of the scheme property.
(3) In this section,—

acquire includes to make a loan or investment, or enter into a lease or lease arrangement, if the resulting loan, investment, or asset subject to the lease or lease arrangement, would be an in-house asset
in-house asset—
- (a) means, in relation to a related party or scheme participant (A), an asset of the scheme that is a loan to, or investment in, A (or an associate of A) or an asset of the scheme that is subject to a lease or lease arrangement with A (or an associate of A); but
- (b) excludes investments referred to in section 160(b) or (c)
investment means the application of assets in any way, or a contract entered into, for the purpose of gaining interest, income, profit, or gain

lease arrangement means, in relation to an asset, an agreement in the nature of a lease under which a person is to use, or control the use of, the asset (whether or not the agreement is enforceable)

loan includes the provision of credit or any other form of financial accommodation (whether or not enforceable).
(4) The in-house assets ratio of a scheme must be calculated under this section in accordance with the frameworks or methodologies specified in notices issued by the FMA under subpart 4 of Part 8.

(5) This section does not apply in the prescribed circumstances.

Compare: Superannuation Industry (Supervision) Act 1993 s 83 (Aust)

Scheme participant transfer rules for KiwiSaver and superannuation schemes

162 Application of scheme participant transfer rules

(1) Sections 163 to 166 apply to both of the following types of transfer (a transfer):
- (a) the transfer of a scheme participant from one KiwiSaver scheme or superannuation scheme to another KiwiSaver scheme or superannuation scheme:
- (b) the transfer of a scheme participant from one section of a KiwiSaver scheme or superannuation scheme to another section of the same scheme.
(2) In sections 163 to 166,—
- (a) a person proposed to be transferred is a proposed transferee:
- (b) the scheme, or section of the scheme, from which the person is proposed to be transferred is the old scheme:
- (c) the scheme, or section of the scheme, into which the person is proposed to be transferred is the new scheme.
(3) Sections 163 to 166 do not apply to transfers to which subpart 3 of Part 2 of the KiwiSaver Act 2006 applies.

Compare: 1989 No 10 s 9B; 2006 No 40 ss 119B, 119D(6)

163 Methods of transfer of scheme participants to another scheme or another section of scheme

(1) No scheme participant may be transferred from one registered scheme to another registered scheme, or to another section of the same scheme, except in accordance with this section.
(2) A scheme participant may be transferred, if authorised by a governing document,—
- (a) with the scheme participant's written consent (which must be obtained in accordance with section 164, if that section applies); or
- (b) in accordance with the FMA's consent under section 165.
(3) However, the FMA may permit a transfer to occur under subsection (2)(a) without the scheme participant's consent if the FMA is satisfied that—
- (a) the manager of the old scheme has taken all reasonable steps to contact all of the relevant scheme participants, but has not been able to do so; and
- (b) the proposed action is not unreasonable in relation to the best interests of any of those scheme participants who have not been contacted.
(4) No scheme participant may be transferred from a KiwiSaver scheme into another scheme that is not a KiwiSaver scheme under this section.

Compare: 1989 No 10 ss 9B, 9BAA(1); 9BA, 2006 No 40 ss 119C, 119G(1), 119I

164 Transfer of substantial numbers of scheme participants with scheme participant consent

(1) This section applies to a transfer (whether at the same time or over an extended period) of all, or a substantial number, of the scheme participants from an old scheme to a new scheme.

(2) The manager of the old scheme and the manager of the new scheme must each consult their own scheme's supervisor ~~(if any)~~ about the proposed transfer and give notice of the proposed transfer in accordance with this section.
(3) The notice must—
- (a) be given to the FMA and every scheme participant of the old scheme and the new scheme, other than scheme participants who, in the opinion of the FMA, are not likely to be affected by the proposed transfer; and
- (b) set out—
  - (i) the proposal and its implications for the proposed transferees; and
  - (ii) the date of the proposed transfer; and
  - (iii) the date on which the proposed transferees' written consent must be received by the manager or the trustees; and
  - (iv) the fact that the notice has also been sent to the FMA; and
- (c) be given at least 1 month before the date on which, under the notice, the proposed transferees' written consent must be received by the manager or the trustees.
(4) Giving notice under this section does not derogate from the need to comply with any other requirement of the KiwiSaver Act 2006 (in relation to a KiwiSaver scheme).

Compare: 1989 No 10 s 9B; 2006 No 40 s 119D

165 Transfer with FMA consent

(1) The FMA may consent to a transfer if the FMA is satisfied that—
- (a) the terms and conditions of the new scheme are no less favourable to the proposed transferees than the terms and conditions of the old scheme; and
- (b) the transfer is otherwise reasonable in all the circumstances (including having regard to the value of the assets transferred from the old scheme to the new scheme); and
- (c) the person applying for the transfer is the manager of the old or new scheme, a relevant employer, or another person who the FMA considers has an appropriate interest in the transfer; and
- (d) the applicant has given notice to every proposed transferee that—
  - (i) the applicant has applied for the FMA's consent to transfer the person without the person's written consent; and
  - (ii) the person may make submissions to the FMA about the transfer.
(2) The FMA must have regard to any submissions received by proposed transferees before deciding whether or not to give its consent.

(3) The FMA may give its consent subject to any terms and conditions that the FMA sets out in the written notice of consent.

(4) The transfer must be carried out in accordance with those terms and conditions.

Compare: 1989 No 10 s 9BAA; 2006 No 40 ss 119G, 119H

166 Transfers from KiwiSaver scheme

(1) This section applies to an old scheme if it was a KiwiSaver scheme.
(2) The provider of the old scheme must give the following information to the provider of the new scheme in respect of a scheme participant (A) who transfers under sections 163 to 165:
- (a) A's name, address, and date of birth; and
- (b) A's tax file number; and
- (c) the date on which A first became a member of a KiwiSaver scheme and (if known and different) the date on which A first contributed to a KiwiSaver scheme; and
- ~~(d) if A is an employee,—~~
  - ~~(i) the name and address of each of A's employers; and~~
  - ~~(ii) the rate at which A intends each of those employers to make deductions of contributions from his or her salary or wages; and~~
- (d) (if known) the aggregate amounts of each of—
  - (i) A's contributions to the old scheme; and
  - (ii) the Crown contribution to the old scheme in respect of A; and
  - (iii) any employer contributions to the old scheme in respect of A; and
- (e) the name, address, and tax file number of both the provider and the old scheme; and
- (f) any other information that the Commissioner of Inland Revenue requires the provider of the old scheme to give to the provider of the new scheme.
(3) In this section, provider has the meaning set out in section 5 of the KiwiSaver Act 2006.

Compare: 2006 No 40 s 119F

Provisions as to deferred benefits for superannuation schemes

167 Deferred benefits

(1) A scheme participant in respect of a superannuation scheme who continues to be employed by an employer after the participant's expected age or date of retirement (as defined in the governing document of the scheme) may elect to defer the receipt of any benefit that the participant is eligible to receive under the scheme until the date on which the participant ceases to be employed by that employer.

(2) Subsection (1) applies despite anything to the contrary contained in the governing document of the scheme.

(3) Nothing in subsection (1) or in the Human Rights Act 1993 has the effect of requiring either an employer or a scheme participant to continue to contribute, or to cease to contribute, to the scheme after the participant's expected age or date of retirement, as defined in the governing document of the scheme.

(4) If a scheme participant has the right, under subsection (1), to elect to defer receipt of any benefit that the participant is eligible to receive under the scheme, the manager must inform the participant in writing of that right.

Compare: 1989 No 10 s 9C

Change of manager

168 Application of sections 169 to 176

Sections 169 to 176 apply to—
- (a) the manager of a registered scheme (other than a restricted scheme); or
- (b) each of the trustees of a restricted scheme (including, to avoid doubt, the independent trustee).

169 Removal of manager of registered scheme

(1) A manager of a registered scheme ceases to hold that office if ~~removed~~—
- (a) the manager is removed by written direction of the supervisor after the supervisor certifies that it is in the best interests of scheme participants that the manager be removed; or
- (b) the manager is removed by a special resolution of the scheme participants; or
- (ba) in the case of an independent trustee of a restricted scheme,—
  - (i) the trustee's licence expires or is cancelled under Part 6; or
  - (ii) the trustee is removed by the FMA if it is satisfied that the trustee no longer meets the requirements in section 117(1)(d); or
- (c) the manager is substituted by the court under section 193; or
- (d) the manager is otherwise removed or resigns in accordance with the governing document.
(2) Subsection (1)(a) and (b) ~~does~~ do not apply to a restricted scheme.
(2A) However, a licensed independent trustee may not—
- (a) be removed or resign under subsection (1)(d) unless—
  - (i) all functions and duties of the position have been performed; or
  - (ii) another licensed independent trustee has been appointed, and accepted the appointment, in its place; or
  - (iii) the court consents:
- (b) (despite anything in the governing document) be removed under subsection (1)(d) without the FMA's consent.
(3) If a manager ceases to hold office under subsection (1), the manager and any delegate of the manager must immediately desist from all activities relating to the registered scheme unless the supervisor agrees to the contrary.

Compare: 1960 No 99 s 19

170 Supervisor or FMA may make temporary appointment

(1) This section applies if a registered scheme does not, for any reason, have a manager or (in the case of a restricted scheme) a licensed independent trustee.

(2) The supervisor or the FMA must appoint a person (the temporary manager) to fill the vacancy in the ~~manager's~~ office until a substitute appointment may be made under the governing document.
(3) That person must be,—
- (a) if the appointment is by the supervisor, a person who meets the requirements in section 113(1)(c) and (e):
- (b) if the appointment is by the FMA, a person whom the FMA considers appropriate (but who need not be a person who meets the requirements in section 113(1)(c) and (e) or (in the case of an independent trustee) section 117(1)(d)).
(4) However, the FMA may act under this section only if—
- (a) it is satisfied that the supervisor has had a reasonable opportunity to act under this section but has not done so; or
- (b) it is satisfied that it is necessary as a matter of urgency for the FMA to do so and it is not reasonably practicable to wait for the supervisor to do so; or
- (c) the supervisor requests the FMA to act; or
- (d) there is no supervisor.
(5) If the FMA appoints a person who does not meet the requirements of section 113(1)(c) and (e) or 117(1)(d), that person does not contravene section 387, and the scheme does not fail to meet those registration requirements, as a result of that appointment.

Compare: 1960 No 99 s 23

171 Term, powers, and duties of temporary manager

(1) A temporary manager may hold the appointment until a substitute manager is appointed—
- (a) under the governing document; or
- (b) otherwise under this Act.
(2) The temporary manager has all of the powers and duties of the manager of the registered scheme and (if applicable) of the independent trustee that are conferred or imposed by the governing document or by law.
(3) However, the FMA may, in the prescribed manner, amend a governing document, in so far as it applies to ~~an FMA appointee~~ a temporary manager appointed by the FMA, if—
- (a) the supervisor ~~(if any)~~ consents; and
- (b) the FMA is satisfied that the change will have no material adverse effect on the interests of scheme participants.
(4) An amendment made under this section must be treated for all purposes as if it were made in accordance with the governing document.

(5) Section 128 (lodging of changes to governing document) applies to an amendment to the governing document under this section.

172 FMA's costs must be reimbursed from scheme

(1) The FMA's costs and expenses incurred in connection with ~~the FMA appointee holding the appointment~~ the holding of the appointment by a temporary manager appointed by the FMA must be reimbursed ~~from~~ out of scheme property of the registered scheme.

(2) An amount payable under subsection (1) is recoverable by the FMA in any court of competent jurisdiction as a debt due to the FMA.

173 Supervisor or FMA must take reasonable steps to arrange for new appointment

(1) The supervisor of a registered scheme or the FMA (if there is no supervisor) must, in the prescribed manner (if any), take all reasonable steps to secure, in accordance with the governing document, the appointment of a person as a permanent manager in place of the temporary manager (other than a temporary independent trustee).

(1A) The trustees of a restricted scheme must, in the prescribed manner (if any), take all reasonable steps to secure, in accordance with the governing document, the appointment of a person as a permanent licensed independent trustee in place of the temporary independent trustee.
(2) The temporary manager may be appointed to ~~continue to~~ hold the office as a permanent manager, but in this case—
- (a) if the person was ~~an FMA appointee~~ appointed by the FMA, the person ceases to be ~~an FMA appointee~~ appointed by the FMA for the purposes of sections 170 to 172; and
- (b) must meet the requirements in section 113(1)(c) and (e) or 117(1)(d) (if applicable).

174 Former manager must hand over records and give reasonable assistance

(1) If the person who holds an appointment as a manager of a registered scheme changes, the person who previously held the appointment (the former manager) must,—
- (a) as soon as ~~is reasonably~~ practicable, give the person that currently holds the appointment (the current manager) all of the information or documents held or controlled by the former manager that are reasonably necessary to allow the current manager to hold the office; and
- (b) give the current manager all reasonable assistance to facilitate the change.
(2) The former manager may withhold the information or documents, or retain a copy of the information or documents,—
- (a) with the FMA's written consent; or
- (b) otherwise in the prescribed circumstances.
(3) If a temporary manager has been appointed to an office, for the purposes of this section, former manager includes the person who held the office immediately before the temporary manager and current manager includes the person who held the office immediately after the temporary manager.

175 Statutory novation of rights, obligations, and liabilities of former manager

(1) If the manager of a registered scheme changes, the rights, obligations, and liabilities of the former manager in relation to the scheme become the rights, obligations, and liabilities of the new manager.
(2) Despite subsection (1), the following rights, obligations, and liabilities remain rights, obligations, and liabilities of the former manager:
- (a) any right of the former manager to be paid fees for the performance of its functions, or to be indemnified for liabilities or expenses it incurred, before it ceased to be the manager of the scheme; and
- (b) any right, obligation, or liability that the former manager had as a scheme participant; and
- (c) any liability for which the former manager could not have been indemnified out of the scheme property if it had remained the scheme's manager.
(3) This section is subject to any order of the court under section 193.

176 Lodging of notice of changes to manager

(1) Within 5 working days of a change to the manager of a registered scheme, the new manager must ensure that notice of the change is lodged with the Registrar.

(2) A ~~person who~~ manager that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Change of supervisor

177 Change of supervisor

(1) The supervisor of a registered scheme ceases to hold that appointment (subject to subsection (2)) if the supervisor—
- (a) is removed by the FMA if it is satisfied that the manager and the supervisor no longer meet the requirements in section 113(1)(e) (registration requirements); or
- (b) is removed by the FMA or the issuer under Part 2 of the Financial Markets Supervisors Act 2011; or
- (c) is removed by a special resolution of the scheme participants; or
- (d) is removed or resigns in accordance with the governing document.
~~(2) No manager of a registered scheme may remove a supervisor under subsection (1)(d) without the FMA's consent (even if permitted to do so by the governing document).~~
(2) However, a supervisor may not—
- (a) be removed or resign under subsection (1)(c) or (d) unless—
  - (i) all functions and duties of the position have been performed; or
  - (ii) another licensed supervisor has been appointed, and accepted the appointment, in its place; or
  - (iii) the court consents:
- (b) (despite anything in the governing document) be removed by the manager under subsection (1)(d) without the FMA's consent.
Compare: 1960 No 99 s 10; 1978 No 103 s 48; 2006 No 40 s 116E(2)

178 Lodging of notice of change of supervisor

(1) Within 5 working days of a change of supervisor of a registered scheme, the manager must ensure that notice of the change is lodged with the Registrar.

(2) A ~~person who~~ manager that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Change of independent trustee

179 Change of independent trustee

~~(1) A trustee who is a licensed independent trustee ceases to hold that appointment (subject to subsection (2)) if—~~
- ~~(a) the trustees's licence expires or is cancelled under Part 6; or~~
- ~~(b) the trustee is removed by the FMA under the Financial Markets Supervisors Act 2011; or~~
- ~~(c) the trustee is removed or resigns in accordance with the trust deed.~~
~~(2) No licensed independent trustee may be removed or resign in accordance with the trust deed without the FMA's consent.~~

Cancellation of registration

180 Cancellation of registration

(1) The FMA may direct that the registration of a registered scheme be cancelled—
- (a) ~~on giving 20 working days' notice to the manager of the scheme,~~ if satisfied on reasonable grounds that the scheme does not meet the registration requirements under section 113; or
- (b) ~~on giving 20 working days' notice to the manager of the scheme,~~ if the FMA has reasonable cause to believe that the scheme has no scheme participants; or
- (c) on the written request of the manager of the scheme (subject to subsection (3)), if the supervisor certifies, or the trustees of a restricted scheme certify, that—
  - (i) the ~~removal~~ cancellation has been approved by a special resolution of the scheme participants (subject to any restriction in the governing document); or
  - (ii) there is no material adverse effect on the scheme participants from the ~~removal~~ cancellation; or
- (d) if the scheme has been wound up or dissolved or has otherwise ceased to exist.
(1A) The FMA must not direct cancellation under subsection (1)(a) or (b) unless—
- (a) the FMA gives the manager of the scheme no less than 20 working days' written notice of the following matters before it exercises the power:
  - (i) that the FMA may direct cancellation; and
  - (ii) the reasons why it may exercise that power; and
- (b) the FMA gives the manager or the manager's representative an opportunity to make written submissions on the matter within that notice period.
~~(2) The manager of a registered scheme must, as soon as practicable after being notified of a direction under this section, notify the scheme participants in writing of the direction.~~
(2) If the FMA makes a direction under this section,—
- (a) the FMA must notify the manager and the supervisor of the registered scheme of the direction; and
- (b) as soon as practicable after being notified of the direction, the manager must notify the scheme participants of the direction.
(3) The FMA may, instead of ~~removing~~ cancelling a scheme's registration on the request of the manager under this section, exercise its rights to apply for an order winding up the scheme under section 195 (power to order winding up).

Compare: 1989 No 10 s 19; 2006 No 40 s 168

181 Registrar must remove scheme from register on cancellation of registration

(1) On the cancellation of the registration of a scheme under section 180, the Registrar must remove it from the register of managed investment schemes.

(2) The cancellation must be treated as taking effect on the date on which the scheme is removed from the register.
(3) The Registrar must give notice of the cancellation of registration, as soon as practicable after the registration of the scheme is cancelled, to—
- (a) the manager of the scheme; and
- (ab) the supervisor of the scheme; and
- (b) the Commissioner of Inland Revenue (in the case of a KiwiSaver scheme).
Compare: 2006 No 40 s 170

Subpart 4—Intervention in debt securities offered under regulated offer or registered schemes

Provisions assisting supervisor or FMA to intervene

182 Duty of auditor to report to supervisor or FMA

(1) This section applies to the auditor of an issuer of a debt ~~securities~~ security under a regulated offer or a registered scheme.

(2) If the auditor provides the issuer, any of the issuer's members or shareholders, or any of the holders of the debt ~~securities~~ security or managed investment products with any report, financial statement, certificate, or other document required by an Act or a trust deed relating to the financial products or scheme, the auditor must, as soon as practicable, send a copy to the supervisor of the debt ~~securities~~ security or registered scheme or, if there is no supervisor, to the FMA.
(3) If, in the performance of the auditor's duties, the auditor becomes aware of a matter that, in the auditor's opinion, is relevant to the exercise or performance of the powers or duties of the supervisor of the debt ~~securities~~ security or registered scheme, the auditor must, within 7 working days of becoming aware of the matter, send—
- (a) a written report on the matter to the issuer; and
- (b) a copy of the report to the supervisor or, if there is no supervisor, to the FMA.
(4) The auditor must, from time to time, at the request of the supervisor, provide the supervisor with any information relating to the issuer or registered scheme—
- (a) that the supervisor requests; and
- (b) that is within the auditor's knowledge; and
- (c) that is, in the auditor's opinion, relevant to the exercise or performance of the powers or duties of the supervisor.
(5) Section 199 (protected disclosure) applies to a disclosure in good faith under this section.

(6) This section does not limit the duties or liability of an issuer or a supervisor.

Compare: 1978 No 103 s 50

183 Duty of auditor, investment manager, administration manager, custodian, or actuary to report serious problems

(1) This section applies to an auditor of an issuer of a debt security under a regulated offer and to an investment manager, an administration manager, a custodian, an auditor, or an actuary of a registered scheme.
(2) A person to whom this section applies must take the steps set out in section 184 if the person has reasonable grounds to believe that any of the following has arisen in relation to a relevant financial product (a serious problem):
- (a) the issuer of the relevant financial product has contravened, may have contravened, or is likely to contravene an issuer obligation in a material respect; or
- (b) the issuer or scheme is, or it is likely that the issuer or scheme will become, insolvent; or
- (c) the financial position of the scheme or issuer or the security of benefits or the management of the scheme or issuer is otherwise inadequate; or
- (d) the manager of the scheme has contravened, may have contravened, or is likely to contravene any of the manager's market services licensee obligations in a material respect; or
- (e) the supervisor of the scheme has contravened, may have contravened, or is likely to contravene any of the supervisor's licensee obligations (as defined in section 4 of the Financial Markets Supervisors Act 2011) in a material respect; or
- (f) the custodian of the scheme has contravened, may have contravened, or is likely to contravene any of the custodian's obligations in a material respect.
Compare: 2006 No 40 s 191

184 What person must do if duty to report serious problem applies

(1) If section 183 applies, the person to whom that section applies must, as soon as practicable,—
- (a) report a serious problem to the supervisor or, if subsection (2) applies, to the FMA; and
- (b) disclose to the supervisor or the FMA (as applicable under paragraph (a)) all information relevant to the serious problem that is in the possession or control of the relevant person and was obtained in the course of, or in connection with, the performance of functions of that relevant person.
(2) A serious problem must be reported to the FMA instead of the supervisor if—
- (a) there is no supervisor; or
- (b) the serious problem concerns a contravention or likely contravention of an obligation by the supervisor; or
- (c) the contravention relates to the custodian and the custodian is a ~~related party~~ related body corporate of the supervisor.
(3) Section 199 (protected disclosure) applies to a disclosure in good faith under this section.

(4) To avoid doubt, section 183 and this section do not require a relevant person to carry out functions additional to those functions that the person would ordinarily carry out in the course of holding the person's office (other than as expressly required by subsection (1)).

Compare: 2006 No 40 s 191(2), (4)

185 Protections extend to volunteers of supporting information for other protected disclosures

~~(1) This section applies to an employee of the person in respect of whom any other protected disclosure is made under this Act (A).~~

(1) Section 199 (protected disclosure) applies to a disclosure that is supporting information volunteered by a person under this section.
(2) ~~A disclosure of information under this section qualifies for protection under this subpart if the employee~~A person volunteers supporting information under this section if the person—
- (aa) is an employee of a person in respect of whom a protected disclosure is made by another person under this Act; and
- (a) provides information, in support of ~~another~~ that other protected disclosure ~~made by another person~~, to—
  - (i) the supervisor or the FMA (whichever receives the other protected disclosure); or
  - (ii) the person who made the disclosure; and
- (b) makes the disclosure in good faith; and
- (c) wishes to provide the supporting information so that a serious problem can be investigated.
(3) However, an employee does not volunteer supporting information under this section if the employee provides the supporting information only after being—
- (a) required to do so under any enactment, rule of law, or agreement for the purposes of the investigation; or
- (b) approached during the course of the investigation by, or on behalf of, the FMA or any other person investigating the matter.
~~(4) Section 199 (protected disclosure) applies to a disclosure that qualifies for protection under subsection (2).~~

186 FMA may require supervisor to attest as to issuer's compliance with issuer obligations

(1) The FMA may require a supervisor of a debt security or registered scheme to attest to the FMA, at a time and in a manner specified by the FMA, as to whether the supervisor is satisfied that the issuer has not contravened an issuer obligation in a material respect.
(2) If the FMA requires a supervisor to attest to the FMA under this section, the supervisor must either—
- (a) provide that attestation; or
- (b) if unable to attest to the FMA as required, report the reason, including the details of any contravention or possible contravention and, if applicable, the report under section 187.
(3) Section 199 (protected disclosure) applies to a report made in good faith under this section.

Compare: 2011 No 10 s 45

187 Duty of supervisor to report contravention or possible contravention of issuer obligations to FMA

(1) If a supervisor of a debt security or registered scheme has reasonable grounds to believe that an the issuer has contravened, may have contravened, or is likely to contravene an issuer obligation in a material respect, the supervisor must, as soon as practicable,—
- (a) report the contravention or possible contravention to the FMA; and
- (b) advise the FMA of the steps (if any) that the supervisor intends to take in respect of the contravention or possible contravention and the date by which the steps are to be taken.
(2) Section 199 (protected disclosure) applies to a report made in good faith under this section.

Compare: 2011 No 10 s 46

188 Duty of supervisor to report serious financial problems to FMA

(1) This section applies if a supervisor of a debt security or registered scheme becomes aware, in the course of or in connection with the performance of its functions as supervisor, of information on the basis of which it could reasonably form the opinion that—
- (a) the issuer is, or it is likely that the issuer will become, insolvent; or
- (b) in the case of a registered scheme, the scheme is, or it is likely that the scheme will become, insolvent.
(2) The supervisor must, as soon as practicable,—
- (a) disclose to the FMA all information relevant to that matter that is in the possession or under the control of the supervisor and that was obtained in the course of, or in connection with, the performance of its functions as supervisor; and
- (b) advise the FMA of the steps (if any) that the supervisor intends to take in respect of that matter and the date by which the steps are to be taken.
(3) Section 199 (protected disclosure) applies to a report made in good faith under this section.

Compare: 2011 No 10 s 47

189 FMA's powers of direction

(1) The FMA may exercise a power under subsection (2) if it is satisfied that—
- (a) there is a significant risk that the interests of holders of a debt security under a regulated offer or ~~managed investment product~~ scheme participants in a registered scheme will be materially prejudiced; and
- (b) either—
  - (i) the supervisor of the debt ~~securities~~ security or registered scheme is aware of that risk and has had a reasonable opportunity to take action to eliminate or reduce the risk but has not done so; or
  - (ii) action is urgently required to eliminate or reduce the risk and it is not reasonably practicable to wait for the supervisor to do so; or
  - (iii) there is no supervisor.
(2) The FMA may, by written notice to the supervisor and otherwise in the prescribed manner, give a direction to the supervisor.

(3) If there is no supervisor, the FMA may, by written notice to the issuer and otherwise in the prescribed manner, give a direction to the issuer.

Compare: 2011 No 10 s 49(1), (2)

190 FMA's directions to supervisor (or issuer)

(1) If the notice under section 189 gives a direction to the supervisor (or, if there is no supervisor, the issuer), the notice must specify—
- (a) the step or steps that the supervisor (or issuer) must take in relation to the issuer, the registered scheme (if any), or the financial products; and
- (b) the date by which each step will be taken.
(2) The supervisor or the issuer (as the case may be) must comply with the direction (see subpart 3 of Part 7, which provides for civil remedies for a contravention of this provision).

(3) A supervisor or issuer (as the case may be) ~~who~~ that refuses or fails, without reasonable excuse, to comply with the direction commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $300,000.

Compare: 2011 No 10 s 49(3)–(5)

Powers to obtain court orders to intervene

191 Power of supervisor or FMA to apply for order to remedy problems

(1) A supervisor of a debt security or a registered scheme, or the FMA, may apply for an order under section 192 if it is satisfied that—
- (a) the issuer and any guarantor of the financial products are unlikely to be able to pay all money owing in respect of the financial products when it becomes due; or
- (b) the issuer is insolvent; or
- (c) in the case of a registered scheme, the scheme is insolvent; or
- (d) the financial position of the scheme or issuer or the security of benefits or the management of the scheme or issuer is otherwise inadequate; or
- (e) in the case of a registered scheme, the scheme does not meet the registration requirements, or the requirements for registration as a particular type of scheme, under sections 113 to 119; or
- (f) there is a significant risk that the interests of product holders will be materially prejudiced for any other reason; or
- (g) the provisions of a governing document are no longer adequate to give proper protection to product holders.
(2) However, the FMA may apply for the order only if it is satisfied that—
- (a) the supervisor has had a reasonable opportunity to apply for the order but has not done so; or
- (b) it is necessary as a matter of urgency for the FMA to do so and it is not reasonably practicable to wait for the supervisor to do so; or
- (c) there is no supervisor.
Compare: 1960 No 99 s 19A; 1978 No 103 s 49; 2006 No 40 s 116K(1), (2); 2011 No 10 s 50(1)–(3)

192 Court orders to remedy problems

(1) The court may, on the application by a supervisor or the FMA under section 191 and after giving the issuer and any other person as the court thinks fit the opportunity to be heard, make 1 or more of the orders listed in subsection (2).
(2) The orders may—
- (a) amend the provisions of the governing document:
- (b) impose restrictions on the activities of the issuer (including restrictions on advertising) that the court thinks are necessary to protect the interests of product holders:
- (c) direct that no offers, issues, sales, or transfers of debt securities or managed investment products specified in the order be made while the order is in force:
- (d) direct that an issuer must not accept further contributions or deposits in respect of debt securities or managed investment products specified in the order while the order is in force:
- (e) direct the issuer or the supervisor to convene a meeting of product holders for the purpose of—
  - (i) having placed before the product holders by the issuer or the supervisor the information or proposal that the court, the supervisor, or the FMA thinks necessary or appropriate relating to their interests; and
  - (ii) obtaining the opinions or directions of product holders:
- (f) give directions in relation to the conduct of any meeting convened in accordance with paragraph (e):
- (g) stay any civil actions or civil proceedings before the court by or against the supervisor, the issuer, or any guarantor of the financial products:
- (h) restrain the payment of money by the custodian, the issuer, or any guarantor of the financial products to product holders or a class of product holders or restrain the transfer of scheme property by the custodian:
- (i) appoint a receiver or manager of the property that constitutes the security (if any) for the financial products (with any powers that the court orders):
- (j) give any other directions that the court considers necessary to protect the interests of product holders, any guarantor of the financial products, or the public.
(3) The court may vary or cancel an order made under this section.

(4) In exercising its powers under this section, the court must have regard to the interests of all creditors of the issuer (in the case of a debt security) and all creditors in respect of the registered scheme (in the case of a managed investment product).

Compare: 1960 No 99 s 19A; 1978 No 103 s 49; 2006 No 40 s 116K(3)–(6); 2011 No 10 s 50(4)–(7)

193 Power of court to appoint new manager, provide for manager powers, and deal with changes of managers

(1) The court may, on the application of the supervisor of a registered scheme, the FMA, or a scheme participant in a registered scheme, or (in the case of an order under paragraph (b)) a manager of a registered scheme, make an order to—
- (a) appoint a new manager of a registered scheme (with any powers that the court orders) if there is no manager or in substitution for an existing manager:
- (b) confer an additional power on the manager of a registered scheme (either generally or specifically) to facilitate a transaction or type of transaction that the court considers to be in the interests of the scheme participants, and provide for the exercise of that additional power:
- (c) direct that section 175 not apply in whole or in part and also, if an agreement has been entered into between a manager of a registered scheme that has been removed and any other person,—
  - (i) vary the agreement or any collateral agreement as specified in the order and, if the court thinks fit, declare the agreement to have had effect as so varied on and after a date before the order was made, as specified in the order; or
  - (ii) cancel the agreement and, if the court thinks fit, declare the cancellation to have had effect on and after a date before the order was made, as specified in the order:
- (d) amend the governing document to provide for a new or temporary appointment of a manager of a registered scheme (whether the appointment is by a court order or under the governing document or this Act) or otherwise in connection with another order made under this section:
- (e) cancel in whole or in part any liability of the scheme to make any payment or transfer any property to a manager of a registered scheme that has been removed.
(2) The court may under this section (without limiting subsection (1)) appoint a new manager in substitution for a manager who—
- (a) has been held by the court to have contravened any issuer obligation; or
- (b) is insolvent.
(3) A manager appointed by the court under this section has all of the powers and duties of the manager of the registered scheme that are conferred or imposed by the governing document or by law.

Compare: 1960 No 99 s 22

194 Power of court to direct supervisor

The court may, on the application of the supervisor, the FMA, or a product holder, make an order directing the supervisor (or, if there is no supervisor, the FMA) not to comply with a special resolution of product holders if the court is satisfied that compliance would be objectionable (for example, because it would be oppressive to the minority).

194 Power of court to direct supervisor

(1) The court may, on an application made under subsection (2), make an order directing a supervisor of a debt security under a regulated offer or of a registered scheme not to comply with a special resolution of product holders if the court is satisfied that compliance would be objectionable (for example, because it would be oppressive to the minority).

(2) The supervisor, the FMA, or a product holder may apply for an order under this section within 20 working days after the special resolution (or, with leave of the court, within any longer period).

195 Court power to order winding up of scheme

(1) The court may, on the application of the FMA or a supervisor of the registered scheme, direct that a registered scheme must be wound up if it is satisfied that—
- (a) the manager or the scheme is insolvent; or
- (b) the manager has persistently or seriously failed to comply with this Act or any other financial markets legislation; or
- (c) no permanent manager is appointed under the governing document or this Act; or
- (d) no supervisor is appointed under the governing document or the Financial Markets Supervisors Act 2011 (if required under this Part); or
- (e) the scheme does not meet the registration requirements in sections 113 to 119; or
- (f) it is just and equitable that the scheme be wound up.
(2) However, the FMA may apply for an order to wind up a scheme only if it is satisfied that—
- (a) the supervisor has had a reasonable opportunity to do so but has not done so; or
- (b) it is necessary as a matter of urgency for the FMA to do so rather than wait for the supervisor to do so; or
- (c) there is no supervisor.
(3) The court may give any other directions that it thinks fit for the purpose of facilitating the winding up (and, if there is any conflict between those directions and the provisions of the governing document, those directions prevail).

196 Initial steps in winding up of registered scheme

(1) If a registered scheme is to be wound up, the supervisor or (in the case of a restricted scheme) the trustees must, within 10 working days after a winding-up resolution or an order by the court that the scheme be wound up is made,—
- (a) give a copy of any order or resolution to the FMA; and
- (b) in the case of a KiwiSaver scheme or a complying superannuation fund,—
  - (i) give a copy of any order or resolution to the Commissioner of Inland Revenue; and
  - (ii) give notice to the Commissioner of Inland Revenue of the name, tax file number, and address of each member of the registered scheme.
(2) See sections 50 to 52 of the KiwiSaver Act 2006 (which set out the effect of notice to the Commissioner of Inland Revenue in relation to members of a KiwiSaver scheme) and subpart 3 of Part 2 of the KiwiSaver Act 2006 (which relates to the transfer of members’ interests to another KiwiSaver scheme).

(3) A ~~person who~~ supervisor or trustee that contravenes subsection (1) commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 2006 No 40 s 173

197 Winding up Winding-up report

(1) The person who was the supervisor of the relevant registered scheme or, in the case of a restricted scheme, the persons who were the trustees immediately before the scheme was wound up—
- (a) must, within 4 months of after the date on which the winding up takes effect, ensure that final financial statements of the scheme, showing the financial position of the scheme as at the date on which the winding up takes effect, are prepared in accordance with generally accepted accounting practice and audited; and
- (b) must, within 20 working days after the final financial statements have been audited, ensure that—
  - (i) a copy of those financial statements is sent to the FMA and to every person who was a scheme participant immediately before it was wound up; and
  - (ii) the FMA and the scheme participants are advised in writing as to the manner in which the remaining assets (if any) of the scheme are to be distributed; and
- (ba) may make a partial distribution of assets of the scheme at any time before a copy of the final financial statements is sent to the FMA under paragraph (b) (unless prohibited by the governing document); and
- (c) must inform the FMA of the date on which the distribution of the assets is completed.
(2) The FMA may, by giving notice to the relevant person, extend the time period within which a person must comply with any of the requirements set out in this section.

(3) A ~~person who~~ supervisor or trustee that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1989 No 10 s 21(1), (1A); 2006 No 40 ss 174, 175

Miscellaneous

198 Offence of false or misleading statements

~~(1) Every person commits an offence who, in relation to a document or information required to be supplied to a supervisor or, in the absence of a supervisor, to the FMA by or under this Act,—~~
- ~~(a) makes, or authorises the making of, a statement in it that is false or misleading in a material particular knowing it to be false or misleading; or~~
- ~~(b) omits, or authorises the omission from it of, any matter knowing that the omission makes the document false or misleading in a material particular.~~
~~(2) Every person who commits an offence under subsection (1) is liable on conviction on indictment,—~~
- ~~(a) in the case of an individual, to imprisonment for a term not exceeding 3 years or a fine not exceeding $200,000, or both; and~~
- ~~(b) in any other case, to a fine not exceeding $600,000.~~

199 Protection for relevant persons in respect of disclosure under this subpart or subpart 5

(1) No civil, criminal, or disciplinary proceedings may be brought against a ~~relevant~~ person by reason of the person having made a protected disclosure.

(2) No person may terminate the appointment of a ~~relevant~~ person by reason of the ~~relevant~~ person having made a protected disclosure.

(3) No tribunal, body, or authority that has jurisdiction in respect of the professional conduct of a ~~relevant~~ person may make an order against, or do any act in relation to, the ~~relevant~~ person by reason of the ~~relevant~~ person having made a protected disclosure.

(4) In this ~~section~~ Act, protected disclosure means a disclosure of information to which this section applies under this subpart or subpart 5.

Compare: 1978 No 103 s 50C; 2006 No 40 s 192; 2011 No 10 s 48

Subpart 5—Registers that must be kept by issuers of all regulated products and keeping copies of documents

Registers

200 Issuers must keep registers of regulated products

(1) Every issuer of regulated products must ensure that there is kept, in the manner specified in section 201,—
- (a) a register of those regulated products and of all financial products that are of the same class as those regulated products of which it is the issuer; and
- (b) a register of other financial products of which it is the issuer that is required to be kept by the regulations.
(2) However, subsection (1) does not apply—
- (a) to derivatives (unless those derivatives are of a prescribed type); or
- (b) to prescribed financial products; or
- (c) otherwise in the prescribed circumstances.
(3) If this section does not apply to derivatives of a particular type, the issuer must comply with the requirements prescribed for the purposes of this subsection (if any).

(4) ~~A person who~~ An issuer that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1978 No 103 s 51(1)

201 Manner of keeping registers

(1) A register kept under this subpart must be kept in New Zealand.
(2) A register kept under this subpart may be—
- (a) an electronic register; or
- (b) kept in any other reasonable manner that the issuer thinks fit.

202 Contents of registers

(1) Every issuer of regulated products must ensure that every register kept by, or on behalf of, the issuer under this subpart contains, in respect of every financial product entered in the register,—
- (a) the name and address of the holder; and
- (b) the date on which the product was issued or transferred to the holder, as the case may be; and
- (c) the nature of the product; and
- (d) the amount of the product (if any); and
- (e) the due date of the product (if any); and
- (f) all other prescribed particulars (if any).
(2) No notice of any trust, expressed, implied, or constructive, may be entered on a register kept under this subpart.

(3) Every register kept under this subpart is prima facie evidence of the matters required by this Act to be entered in it.

(4) ~~A person who~~ An issuer that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1978 No 103 s 51(2)–(5)

203 Audit of registers

(1) Every issuer of regulated products must ensure that every register kept by, or on behalf of, the issuer under this subpart is audited by a qualified auditor annually within 5 months after the balance date of the issuer.

~~(2) In this section, balance date has the same meaning as in section 7 of the Financial Reporting Act 1993.~~

(3) ~~A person who~~ An issuer that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1978 No 103 s 51(6)

204 Auditor must advise if auditor considers that subpart is not being complied with

(1) If the auditor referred to in section 203 considers at any time that this subpart is not being complied with, the auditor must, as soon as practicable,—
- (a) advise the issuer and the FMA; and
- (b) advise,—
  - (i) in the case of equity securities, the security holders at their next meeting if the non-compliance is material:
  - (ii) in the case of debt securities or managed investment products, the supervisor.
(2) Section 199 (protected disclosure) applies to a disclosure made in good faith under this section.

Compare: 1978 No 103 s 51(8)

205 Issuer must notify Registrar of registers

(1) Every issuer of regulated products must send a notice to the Registrar of the place where its registers under this subpart are kept and of any change in that place.

(2) The notice must be sent within 10 working days of the register being established or of the change in place (as the case may be).

(3) This section does not apply to an issuer that is a company if the registers of the company are kept at its registered office.

(4) ~~A person who~~ An issuer that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1978 No 103 s 51(9), (10)

206 Public inspection of register

(1) Every issuer of regulated products must ensure that every register kept by, or on behalf of, the issuer under this subpart is available for inspection in the manner referred to in section 207.
(2) Subsection (1) does not apply—
- (a) to a register of managed investment products in respect of a superannuation scheme or KiwiSaver scheme:
- (b) to a register of derivatives:
- (c) in the prescribed circumstances.
(3) However,—
- (a) a register of managed investment products in respect of a superannuation scheme or KiwiSaver scheme must be available for inspection in the manner referred to in section 207 by the supervisor if the supervisor serves on the issuer written notice of intention to inspect:
- (b) the part of a register of derivatives that concerns derivatives entered into by a particular person must be available for inspection in the manner referred to in section 207 by the person if the person serves written notice on the issuer of intention to inspect.
(4) ~~A person who~~ An issuer that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1978 No 103 s 52

207 Manner of inspection

For the purposes of section 206, a register kept under this subpart must—
- (a) be available for inspection, by a person who serves on the issuer written notice of intention to inspect, at the place at which the register is kept between the hours of 9 am and 5 pm on each working day during the inspection period; and
- (b) otherwise be available for inspection in the prescribed manner (if any).
Compare: 1993 No 105 s 217

208 Copies of documents

(1) A person may require a copy of, or an extract from, a register that is available for inspection by the person under section 206 to be sent to the person—
- (a) within 5 working days after the person has made a written request for the copy or extract to the issuer; and
- (b) if the person has paid the prescribed fee (if any).
(2) The issuer must comply with the request (subject to section 209).

(3) ~~A person who~~ An issuer that contravenes subsection (2) commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1993 No 105 s 218

209 Reasons for request must be given and FMA may authorise non-compliance

(1) A person who makes a request under section 208(1) must include in the request a statement of the person's reasons for the request (including the ~~intended use of~~ purpose for which the person intends to use the copy of, or extract from, the register), and the issuer may, if it thinks fit, provide a copy of that statement to the FMA.
(2) If the issuer provides a copy of the statement to the FMA before the expiry of the 5-working-day period referred to in section 208(1)(a),—
- (a) the period within which the request may be complied with is 10 working days after the person made the request (rather than 5 working days); and
- (b) the issuer does not have to comply with the request at all if the FMA, within that 10-working-day period, gives written notice to the issuer that it is not required to comply.

210 Restriction on use of information in registers

(1) A person must not—
- (a) use information about a person obtained from a register kept under this subpart to contact or send material to that person; or
- (b) disclose information of that kind knowing that the information is likely to be used to contact or send material to the person.
Example

An example of using information to send material to a person is putting a person's name and address on a mailing list for advertising material.
(2) Subsection (1) does not apply if the use or disclosure of the information is—
- (a) relevant to the holding of the interests recorded in the register or the exercise of the rights attaching to those interests; or
- (b) approved by the issuer that keeps the register.
(3) A person must not—
- ~~(a) use information obtained from a register kept under this subpart for any prescribed purpose; or~~
- (a) use information obtained from a register kept under this subpart—
  - (i) for any prescribed purpose; or
  - (ii) in the case of a request under section 208(1), for any purpose other than the purpose disclosed in the statement under section 209(1); or
- (b) disclose information of that kind knowing that the information is likely to be used for any such purpose.
Compare: Corporations Act 2001 s 177 (Aust)

211 Issuer to send confirmation of financial products

~~(1) Every issuer of a regulated product must send to the product holder either the product or a confirmation document within the specified period after—~~
- ~~(a) the issue of the product; or~~
- ~~(b) the receipt by or on behalf of the issuer of a duly effected transfer of the product.~~
~~(2) In this section,—~~

~~confirmation document means a document that properly describes the nature, terms, and conditions of the financial product and the name of the product holder~~
~~specified period means—~~
- ~~(a) the period of 1 month; or~~
- ~~(b) if the regulations have prescribed a different period to apply in particular circumstances, that period.~~
~~(3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.~~

~~(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).~~

~~Compare: 1978 No 103 s 54(1), (4)~~

212 Requirement for confirmation document does not apply in certain circumstances

~~(1) Section 211 does not apply—~~
- ~~(a) in respect of any of the following:~~
  - ~~(i) financial products that are approved for transfer under, or in accordance with the rules of, a system that does not require a certificate for the transfer of the products:~~
  - ~~(ii) debt securities or managed investment products of a kind that are continuously offered by a continuous issuer for issue:~~
  - ~~(iii) equity securities or debt securities issued by a co-operative company to persons who are, or immediately after issue will be, transacting shareholders of the co-operative company:~~
  - ~~(iv) equity securities issued by a building society or an industrial and provident society; or~~
- ~~(b) otherwise in the prescribed circumstances.~~
~~(2) In this section, system means the following:~~
- ~~(a) a system approved under section 376:~~
- ~~(b) a designated settlement system (as defined in section 156M(1) of the Reserve Bank of New Zealand Act 1989).~~
~~Compare: 1978 No 103 s 54(3), (4)~~

213 Certain provisions prevail over Companies Act 1993

If a provision of sections 206 to ~~212~~ 210 is inconsistent with a provision in the Companies Act 1993, the provision of sections 206 to ~~212~~ 210 prevails.

Copies of documents to be retained

213A Copies of documents must be retained for 7 years

(1) If this Act or the regulations provide for a certificate, notice, consent, confirmation, or other document to be given, made, or provided in respect of a regulated product, a regulated offer, or a registered scheme, the issuer of the regulated product, the offeror under the regulated offer, or the manager of the scheme must—
- (a) keep a copy of the document for a period of at least 7 years after the date on which the document came into the possession of the issuer, offeror, or manager; and
- (b) comply with the prescribed requirements relating to where the copy is kept, inspection of the copy, and making copies of the document available.
(2) Subsection (1) applies only if the document is given, made, or provided by or to the issuer, offeror, or manager.

(3) A person that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Subpart 6—Accounting records, copies of documents, and audit of financial statements

Accounting records

214 Issuer must keep proper accounting records

~~(1) Every issuer of regulated products must ensure that there are kept at all times accounting records that—~~
- ~~(a) correctly record and explain the transactions,—~~
  - ~~(i) in the case of an issuer of equity securities, debt securities, or derivatives, of the issuer; and~~
  - ~~(ii) in the case of an issuer of managed investment products, of the issuer and of the registered scheme; and~~
- ~~(b) will at any time enable the financial position of the issuer and of any such scheme to be determined with reasonable accuracy; and~~
- ~~(c) will enable the issuer to ensure that the financial statements of the issuer and of any such scheme comply with the Financial Reporting Act 1993 and any prescribed requirements; and~~
- ~~(d) will enable the financial statements of the issuer and of any such scheme to be readily and properly audited.~~
(2) In this subpart, financial statements means the financial statements and any group financial statements that are required to be prepared for the purposes of the Financial Reporting Act 1993, this Act, or the regulations.

~~Compare: 1978 No 103 s 53~~

215 Place where accounting records to be kept

~~(1) Accounting records required to be kept by this subpart must be kept—~~
- ~~(a) at the registered office of the issuer (if any); or~~
- ~~(b) at another place that the directors of the issuer think fit.~~
(2) The accounting records may be kept at a place outside New Zealand only if there are sent to, and kept at a place in, New Zealand documents in respect of the business dealt with in those accounting records that—
- ~~(a) disclose with reasonable accuracy the financial position of the business at intervals not exceeding 6 months; and~~
- ~~(b) will enable the preparation in accordance with the Financial Reporting Act 1993 of—~~
  - ~~(i) the financial statements of the issuer and any registered scheme referred to in section 214; and~~
  - ~~(ii) any other document annexed to any of those statements that gives information that is required by any enactment.~~
~~Compare: 1978 No 103 s 53A~~

216 Accounting records to be in English

~~(1) Accounting records required to be kept by this subpart and the documents in respect of the business dealt with in those accounting records referred to in section 215 must be kept—~~
- ~~(a) in written form and in English; or~~
- ~~(b) in a form or manner in which they are easily accessible and convertible into written form in English.~~
~~(2) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.~~

~~(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).~~

~~Compare: 1978 No 103 s 53B~~

217 Period for which accounting records to be kept

~~(1) Accounting records kept under this subpart, or copies of them, must be retained by the issuer for a period of at least 7 years after the later of—~~
- ~~(a) the date the records are made; and~~
- ~~(b) the date of completion of the transaction to which the records relate.~~
~~(2) Nothing in this section limits any other requirement under an enactment to keep accounting records for a particular time.~~

~~Compare: 1978 No 103 s 53C~~

218 Inspection of accounting records

(1) Every issuer must make the accounting records required to be kept under this subpart and the documents in respect of the business dealt with in those accounting records referred to in section 215 available, in written form in English at all reasonable times for inspection without charge, to—
- ~~(a) the directors of the issuer; and~~
- ~~(b) the supervisor in respect of the financial products (if any); and~~
- ~~(c) any other persons authorised or permitted to inspect the accounting records of the issuer or scheme.~~
~~(2) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.~~

~~(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).~~

~~Compare: 1978 No 103 s 53D~~

Copies of documents to be retained

219 Copies of documents must be retained for 7 years

(1) If this Act or the regulations provide for a certificate, notice, consent, confirmation, or other document to be given, made, or provided in respect of a regulated offer or a registered scheme, the offeror or manager of the scheme must—
- ~~(a) keep a copy of the document for a period of at least 7 years after the date on which the document came into the possession of the offeror or manager; and~~
- ~~(b) comply with the prescribed requirements relating to where the copy is kept, inspection of the copy, and making copies of the document available.~~
~~(2) Subsection (1) applies only if the document is given, made, or provided by or to the offeror or manager.~~

~~(3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.~~

~~(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).~~

Audit requirement

220 Financial statements to be audited

~~(1) Every issuer of regulated products that are equity securities, debt securities, or derivatives must ensure that its financial statements are audited by a qualified auditor.~~

(2) Every issuer of regulated products that are managed investment products must ensure that its financial statements and the financial statements for the scheme to which the products relate are audited by a qualified auditor.

~~(3) This section applies only to financial statements prepared for the purposes of the Financial Reporting Act 1993.~~

~~Compare: 1978 No 103 s 53E~~

221 Meaning of qualified auditor

~~(1) For the purposes of this Act, qualified auditor means—~~
- ~~(a) a licensed auditor; or~~
- ~~(b) a registered audit firm; or~~
- ~~(c) in the case of an issuer that is a public entity under the Public Audit Act 2001, the Auditor-General or any other person who may act as the auditor under that Act.~~
~~(2) In this section, licensed auditor and registered audit firm have the same meanings as in section 6(1) of the Auditor Regulation Act 2011.~~

(3) The appointment of a registered audit firm by the firm name to be the qualified auditor for the purposes of this Act is deemed to be the appointment of all the partners in the firm, from time to time, who are licensed auditors.
~~(4) None of the following persons is qualified for appointment as the qualified auditor of an issuer of financial products:~~
- ~~(a) the issuer, or a director, an officer, or an employee of the issuer:~~
- ~~(b) a person who is a partner, or in the employment, of a person specified in paragraph (a):~~
- ~~(c) a body corporate.~~
(5) A person is not qualified for appointment as the qualified auditor of an issuer of financial products if the person is, by virtue of subsection (4), disqualified for appointment as auditor of a person that is the issuer's subsidiary or holding company or a subsidiary of the issuer's holding company, or would be so disqualified if that person were a company.

~~Compare: 1978 No 103 s 2C~~

Miscellaneous

222 Application of other Acts not affected

~~Nothing in this subpart limits the Companies Act 1993, the Financial Reporting Act 1993, or any other enactment.~~

~~Compare: 1978 No 103 s 53F~~

Subpart 7—Civil liability for certain contraventions of this Part

223 Part 4 governance provisions

(1) All of the provisions specified in subsections (3) and (4) are Part 4 governance provisions.

(2) A contravention of any of the provisions listed in subsection (3) may give rise to ~~a civil remedy~~ civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.
(3) The provisions are the following:
- (a) section 89 (need for governing document and supervisor for regulated offer of debt security):
- (b) section 111 (need to register managed investment scheme for regulated offer of managed investment product):
- (c) sections 143 to 145 (requirements relating to custodianship of scheme property):
- (d) section 169(3) (manager and delegate must desist from all activities relating to scheme on removal).
- ~~(e) section 214 (issuer must keep proper accounting records):~~
- ~~(f) section 220 (financial statements to be audited).~~
(4) A contravention of any of the following may give rise to ~~a civil remedy~~ civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case:
- (a) section 94(2) (changes to trust deed):
- (b) sections 98 and 99 (duties applying to supervisor of debt security):
- (c) sections 100 to 104 and 105(2) (duties on issuer to provide various reports, information, and assistance):
- (d) sections 106 ~~and 147~~, 107, 147, and 148 (meetings of product holders):
- (e) section 120 (manager must ensure that ongoing registration requirements are complied with):
- (f) section 121(5)(b) (manager must notify scheme participants of direction):
- (g) sections 122 to 124 (contents of governing document for registered scheme):
- (h) section 126(2) (changes to governing document):
- (i) sections 130 to 133 (duties applying to manager, investment manager, and directors and senior managers of manager):
- (j) sections 134 to 138 and 142(2) (duties on issuer to provide various reports, information, and assistance):
- (k) sections 140 and 141 (duties applying to supervisor of registered scheme):
- (l) section 146 (duty on supervisor to refuse to act on wrongful directions):
- (m) sections 150 and 151 (requirements relating to statement of investment policy and objectives):
- (n) sections 153 to 155 (actions that must be taken on limit breaks, pricing errors, and other non-compliances, and requirements for actuarial examinations):
- (o) section 157 (limits on reversion of scheme property in certain schemes to non-scheme participant contributor):
- (p) section 159 (general prohibition on related party transactions):
- (q) section 161 (additional restrictions on ~~transactions of restricted schemes~~ restricted schemes' holdings of in-house assets):
- (r) sections 163, 164, 165(4), and 166 (scheme participants transfer rules):
- (s) section 174 (former manager must hand over records and give reasonable assistance):
- (t) section 180(2) (manager must notify scheme participants of direction):
- (u) sections 182 to 184, and 186 to 188 (duties to report problems):
- (v) section 190(2) (FMA’s directions to supervisor):
- (w) section 210 (restriction on use of information in registers).
- ~~(x) sections 215 and 217 (place where, and period for which, accounting records to be kept).~~

Part 5
Dealing in financial products on markets

Subpart 1—Purposes, overview, and interpretation

224 Additional purposes of Part

(1) This Part has the following purposes for financial product markets (in addition to those set out in sections 3 and 4):
- (a) to promote fair, orderly, and transparent financial product markets:
- (b) to encourage a diversity of financial product markets to take account of the differing needs and objectives of issuers and investors.
(2) This section does not limit section 3 or 4.

225 Overview

(1) In this Part,—
- (a) this subpart contains the additional purposes of this Part and interpretation provisions:
- (b) subpart 2 prohibits insider trading on licensed markets:
- (c) subpart 3 prohibits market manipulation on licensed markets ~~(including a general prohibition on false and misleading conduct in relation to any dealing in quoted financial products)~~:
- (d) subpart 4 requires listed issuers to comply with the continuous disclosure provisions of listing rules of a licensed market:
- (e) subpart 5 requires substantial product holders in listed issuers to disclose their interests:
- (f) subpart 6 requires directors and senior managers of listed issuers to disclose their interests and dealings in quoted financial products of or connected to the listed issuer:
- (g) subpart 7 provides for the licensing of financial product markets, the approval of market rules of licensed markets, the ability to impose a control limit on licensed market operators, and the ability to make regulations modifying this subpart for particular markets:
- (h) subpart 8 contains requirements applying in the operation of a licensed market:
- (i) subpart 9 provides for the transfer of transferable financial products:
- (j) subpart 10 regulates the making of unsolicited offers to purchase financial products off-market.
(2) Provisions of this Part may be disapplied or modified in relation to a licensed market (and any issuers listed on that licensed market) under regulations made under section 350.

(3) This section is a guide only to the general scheme and effect of this Part.

Material information and generally available to the market

226 Meaning of material information

(1) In this Part, material information, in relation to a listed issuer, is information that—
- (a) a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of quoted financial products of the listed issuer; and
- (b) relates to particular financial products, a particular listed issuer, or particular listed issuers, rather than to financial products generally or listed issuers generally.
(2) In this Part, material information, in relation to quoted derivatives, the underlying of quoted derivatives, or the issuer of a financial product underlying quoted derivatives, is information that—
- (a) a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of the derivatives; and
- ~~(b) relates to the particular derivatives, rather than to derivatives generally.~~
- (b) relates to particular derivatives, a particular underlying, or a particular issuer of a financial product underlying quoted derivatives, rather than to derivatives generally or underlyings generally or issuers generally.
Compare: 1988 No 234 ss 3, 3A

227 Meaning of generally available to the market

(1) In this Part, information is generally available to the market—
- (a) if—
  - (i) it is information that has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in relevant financial products; and
  - (ii) since it was made known, a reasonable period for it to be disseminated among those persons has expired; or
- (b) if it is likely that persons who commonly invest in relevant financial products can readily obtain the information (whether by observation, use of expertise, purchase from other persons, or any other means); or
- (c) if it is information that consists of deductions, conclusions, or inferences made or drawn from either or both of the kinds of information referred to in paragraphs (a) and (b).
(2) In this section, relevant financial products means financial products of a kind the price of which might reasonably be expected to be affected by the information.

(3) Information that is notified in accordance with a continuous disclosure obligation is generally available to the market under subsection (1)(a) immediately on it being made available to participants in a licensed market (without limiting how quickly the reasonable period of dissemination in subsection (1)(a)(ii) may be satisfied in other cases).

Compare: 1988 No 234 s 4

Certain derivatives treated as being quoted financial products of listed issuer

228 Certain derivatives treated as being quoted financial products of listed issuer

(1) If the underlying of a derivative is a quoted financial product of a listed issuer, the derivative must, for the purposes of this subpart and subpart 2, be treated as being a quoted financial product of the listed issuer (whether the derivative is quoted or not).

(2) See also section 296 (which relates to the disclosure of relevant interests and dealings in relevant interests by directors and senior managers).

Insider conduct

229 Meaning of information insider, inside information, and adviser

(1) In this Part, a person is an information insider of a listed issuer if that person—
- (a) has material information relating to the listed issuer that is not generally available to the market; and
- (b) knows or ought reasonably to know that the information is material information; and
- (c) knows or ought reasonably to know that the information is not generally available to the market.
(2) A listed issuer may be an information insider of itself.
(3) In this Part, a person is an information insider in relation to quoted derivatives if that person—
- (a) has material information relating to any of the following that is not generally available to the market:
  - (i) the derivatives:
  - (ii) the underlying:
  - (iii) the issuer of a financial product underlying the derivatives; and
- (b) knows or ought reasonably to know that the information is material information; and
- (c) knows or ought reasonably to know that the information is not generally available to the market.
(4) In this Part, inside information means—
- (a) the information in respect of which a person is an information insider of the listed issuer in question; or
- (b) in the case of quoted derivatives, the information in respect of which a person is an information insider in relation to the derivatives in question.
(5) In this Part, adviser means an adviser acting in a professional capacity (for example, a lawyer, an accountant, or a financial adviser).

Compare: 1988 No 234 ss 8A, 8B, 11E

Relevant interests

230 Relevant interests in financial products (basic rule)

(1) In this ~~Part~~ Act, a person has a relevant interest in a financial product if the person—
- (a) is a registered holder of the product; or
- (b) is a beneficial owner of the product; or
- (c) has the power to exercise, or to control the exercise of, a right to vote attached to the product; or
- (d) has the power to acquire or dispose of, or to control the acquisition or disposal of, the product.
(2) Subsection (1) applies regardless of whether the power or control is express or implied, direct or indirect, legally enforceable or not, related to a particular financial product or not, exercisable presently or in the future, or exercisable alone or jointly with another person or persons (but a power to cast merely 1 of many votes is not, in itself, a joint power of this kind).

(3) Subsection (1) applies regardless of whether or not the power or control is or can be made subject to restraint or restriction or is exercisable only on the fulfilment of a condition.

(4) If 2 or more persons can jointly exercise a power, each of those persons is taken to have the power.

Compare: 1988 No 234 s 5

231 Extension of basic rule to powers or controls exercisable through trust, agreement, etc

(1) A person has a power or control referred to in section 230 if the power or control is, or may at any time be, exercised under, by virtue of, by means of, or as a result of a revocation or breach of, a trust or agreement (or any combination of them).

(2) Subsection (1) applies regardless of whether or not the trust or agreement is legally enforceable or whether or not the person is a party to it.

Compare: 1988 No 234 s 5A

232 Extension of basic rule to interests held by other persons under control or acting jointly

A person (A) has a relevant interest in a financial product that another person (B) has if—
- (a) B or B's directors are accustomed or under an obligation (whether legally enforceable or not) to act in accordance with A's directions, instructions, or wishes in relation to a power or control referred to in section 230; or
- (b) A has the power to exercise, or control the exercise of, the right to vote attached to 20% or more of the voting products of B; or
- (c) A has the power to acquire or dispose of, or to control the acquisition or disposal of, 20% or more of the voting products of B; or
- (d) A and B are related bodies corporate; or
- (e) A and B have an agreement to act in concert in relation to a power or control referred to in section 230.
Compare: 1988 No 234 s 5B(1)

233 Situations not giving rise to relevant interests

(1) A person (A) does not have a relevant interest in a financial product under sections 230 to 232 merely because—
- (a) the ordinary business of A consists of, or includes, the lending of money or the provision of financial services, or both, and A has the relevant interest only as security given for the purposes of a transaction entered into in the ordinary course of the business of A; or
- (b) A is authorised to undertake trading activities on a licensed market and A acts for another person to acquire or dispose of those products on behalf of that person in the ordinary course of A's business of carrying out those trading activities; or
- (c) A has been authorised by resolution of the directors of a body corporate to act as its representative at a particular meeting of ~~members~~ product holders, or class of ~~members~~ product holders, of a listed issuer, and a copy of the resolution is deposited with the listed issuer before the meeting; or
- (d) A is appointed as a proxy to vote at a particular meeting of ~~members~~ product holders, or of a class of ~~members~~ product holders, of the listed issuer and the instrument of A's appointment is deposited with the listed issuer before the meeting; or
- (e) A is a bare trustee of a trust to which the products are subject; or
- (f) A is a director of a body corporate and the body corporate has a relevant interest in the products; or
- (g) A is a ~~member~~ product holder of a body corporate and the body corporate's constitution gives the ~~member~~ product holder pre-emptive rights on the transfer of the products, if all ~~members~~ product holders of the products have pre-emptive rights on the same terms; or
- (h) A is an operator of a designated settlement system (as defined in section 156M(1) of the Reserve Bank of New Zealand Act 1989) and is acting in the ordinary course of that business.
(2) Subsection (1)(a) to (h) do not apply to a person if the person is currently declared by the FMA, by notice under section 533(1)(f), to be a person that is not exempt under any of those paragraphs.

(3) For the purposes of subsection (1)(e), a trustee may be a bare trustee even if he or she is entitled as a trustee to be remunerated out of the income or property of the trust.

Compare: 1988 No 234 s 6

Subpart 2—Insider trading

Insider conduct prohibited

234 Prohibition of insider conduct

(1) A person must not do any of the things set out in any of sections 235(1), 236(1), and 237(1) if the person is an information insider of the listed issuer.

(2) A person must not do any of the things set out in any of sections 235(2), 236(2), and 237(2) if the person is an information insider in relation to quoted derivatives.

Compare: 1988 No 234 s 8

235 Information insider must not trade

(1) An information insider of a listed issuer must not trade quoted financial products of the listed issuer.

(2) An information insider in relation to quoted derivatives must not trade the derivatives.
(3) In this subpart, trade—
- (a) means acquire or dispose of; but
- (b) does not include acquire, or dispose of, by inheritance or gift.
Compare: 1988 No 234 s 8C

236 Information insider must not disclose inside information

(1) An information insider (A) of a listed issuer must not directly or indirectly disclose inside information to another person (B) if A knows or ought reasonably to know or believes that B will, or is likely to,—
- (a) trade quoted financial products of the listed issuer; or
- (b) advise or encourage another person (C) to trade or hold those products.
(2) An information insider (A) in relation to quoted derivatives must not directly or indirectly disclose inside information to another person (B) if A knows or ought reasonably to know or believes that B will, or is likely to,—
- (a) trade the derivatives; or
- (b) advise or encourage another person (C) to trade or hold those derivatives.
Compare: 1988 No 234 s 8D

237 Information insider must not advise or encourage trading

(1) An information insider (A) of a listed issuer must not—
- (a) advise or encourage another person (B) to trade or hold quoted financial products of the listed issuer:
- (b) advise or encourage B to advise or encourage another person (C) to trade or hold those financial products.
(2) An information insider (A) in relation to quoted derivatives must not—
- (a) advise or encourage another person (B) to trade or hold the derivatives:
- (b) advise or encourage B to advise or encourage another person (C) to trade or hold those derivatives.
Compare: 1988 No 234 s 8E

238 Criminal liability for insider conduct

(1) A person who contravenes any of sections 235 to 237 commits an offence if the person knows—
- (a) that the information is material information; and
- (b) that the information is not generally available to the market; and
- (c) in the case of a contravention of section 236, of any of the matters set out in section 236(1)(a) or (b) or (2)(a) or (b).
(2) A person who commits an offence under subsection (1) is liable on conviction ~~on indictment~~,—
- (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and
- (b) in any other case, to a fine not exceeding $2.5 million.
Compare: 1988 No 234 s 8F

When prohibition on insider conduct does not apply

239 Exception for trading required by enactment or rule of law

Section 235 does not apply to trading in financial products that is required by an enactment or any rule of law.

Compare: 1988 No 234 s 9

240 Exception for disclosure required by enactment or rule of law or by FMA

Section 236 does not apply to disclosure that is required by—
- (a) an enactment or any rule of law; or
- (b) the FMA when exercising a power under this Act or any other enactment.
Compare: 1988 No 234 s 9A

241 Exception for disclosure in connection with preparing PDS or disclosure document

Section 236 does not apply to disclosure that is necessary, in connection with an offer of financial products for sale, in order to assist in the preparation of a PDS, a register entry, or a disclosure document under clause 26 of Schedule 1 for that offer.

242 Exceptions in respect of underwriting agreements

(1) Section 235 does not apply to the acquisition of the financial products of a listed issuer under an underwriting or a sub-underwriting agreement.

(2) Section 236 does not apply if the inside information is disclosed to a person for the sole purpose of negotiating an underwriting or a sub-underwriting agreement with that person in respect of the financial products in question.

(3) Section 237 does not apply if the advice or encouragement is given for the sole purpose of persuading the person to whom it is given to enter into an underwriting or a sub-underwriting agreement in respect of the financial products in question.

Compare: 1988 No 234 s 9B

243 Exception in case of knowledge of person's own intentions or activities

(1) A person (A) does not contravene section 235(1) merely because A trades the financial products with the knowledge that A proposes to enter into, or has previously entered into, 1 or more transactions or agreements in relation to the financial products or the listed issuer or the listed issuer's business activities.

(2) A person (B) does not contravene section 237(1) merely because B advises or encourages another person (A) to trade or hold financial products when B has knowledge acquired in the course of acting as A's adviser that A proposes to enter into, or has previously entered into, 1 or more transactions or agreements in relation to the financial products or the listed issuer or the listed issuer's business activities.

Compare: 1988 No 234 s 9C

244 Exception in case of knowledge in relation to derivatives

(1) A person (A) does not contravene section 235(2) merely because A trades in derivatives with knowledge of A's own past, current, or proposed—
- (a) transactions or agreements concerning those or any other derivatives; or
- (b) business activities, transactions, or agreements concerning the underlying.
(2) If a person (B) advises or encourages another person (A) to trade or hold derivatives, B does not contravene section 237(2) merely because B has knowledge, acquired in the course of acting as A's adviser, of A's past, current, or proposed—
- (a) transactions or agreements concerning derivatives; or
- (b) business activities, transactions, or agreements concerning the underlying.
Compare: SR 2010/354 r 3

245 Exception for agent executing trading instruction only

Section 235 does not apply in the case of a person (A) if,—
- (a) in trading the financial products, A was acting on behalf of another person (B); and
- (b) A traded the financial products on B's specific instruction; and
- (c) before trading, A did not disclose inside information to B; and
- (d) A did not advise or encourage B to instruct A to trade.
Compare: 1988 No 234 s 9D

246 Exceptions from section 235 for takeovers

(1) Section 235 does not apply to—
- (a) trading that results from a takeover offer under the Takeovers Code; or
- ~~(b) trading in compliance with regulations made under section 519(1)(a); or~~
- (c) entering into an agreement to acquire or dispose of financial products at a fixed price under a future takeover offer that complies with the Takeovers Code; or
- (d) the acquisition or disposal of financial products in performance of an agreement to acquire or dispose of those financial products at a fixed price under a future takeover offer that complies with the Takeovers Code.
(2) For the purposes of this section and section 247, if an exemption has been granted under section 45 of the Takeovers Act 1993 in relation to a takeover offer and the offer is made in accordance with the terms and conditions of the exemption and the applicable provisions of the Takeovers Code from which there is no exemption, the offer must be taken to—
- (a) be a takeover offer under the Takeovers Code; and
- (b) comply with the Takeovers Code.
Compare: 1988 No 234 s 9E(1)

247 Exceptions from sections 236 and 237 for takeovers

(1) Section 236 does not apply to the following conduct:
- (a) disclosure of inside information to a prospective offeror or its advisers under a prospective takeover offer under the Takeovers Code:
- (b) disclosure of inside information to encourage competing bona fide offers to be made in competition with a takeover offer under the Takeovers Code:
- (c) disclosure of inside information by a prospective offeror or its advisers under a prospective takeover offer under the Takeovers Code for the purpose of forming a consortium to make a takeover offer:
- (d) disclosure of inside information to an independent adviser to enable that adviser to make a report required by the Takeovers Code.
(2) Reliance of a person on subsection (1)(a) to (c) is subject to the conditions that—
- (a) the recipient of the information is bound by ~~a confidentiality agreement~~ an obligation of confidentiality in respect of the information; and
- (b) the purpose of the conduct is to enable or encourage the recipient to make a takeover offer or to participate in a takeover offer.
(3) Section 237 does not apply to advice or encouragement—
- (a) by the directors of a company that is the target company under a takeover offer under the Takeovers Code, to the extent that the advice or encouragement is given to the company's shareholders and relates to trading or holding their financial products; or
- (b) by a prospective offeror under a prospective takeover offer under the Takeovers Code for the purpose of forming a consortium to make a takeover offer.
(4) A person (A) does not contravene section 236 or 237 merely because A, in relation to a takeover offer or prospective takeover offer under the Takeovers Code, discloses inside information to another person (B) or advises B to trade or hold financial products of the listed issuer when A has that inside information, or is an information insider, only through acting as B's adviser in relation to the takeover offer or prospective takeover offer.

Compare: 1988 No 234 s 9E(2)–(5)

248 Exceptions for schemes of arrangement approved under Companies Act 1993

(1) Section 235 does not apply to trading that results from an arrangement approved under Part 15 of the Companies Act 1993.

(2) Section 237 does not apply to advice or encouragement by the directors of a company that is the subject of an arrangement approved, or a proposed arrangement to be approved, under Part 15 of the Companies Act 1993, to the extent that the advice or encouragement is given to the company's shareholders and relates to trading or holding their shares.

249 Exception for redemption of managed investment products

Section 235 does not apply to the redemption of managed investment products in a managed investment scheme if the redemption price is calculated by reference to the underlying value of the assets of the scheme.

Compare: 1988 No 234 s 9F

250 Exception for Reserve Bank

Section 235 does not apply to trading by the Reserve Bank in financial products issued by the Reserve Bank or by the Crown.

Compare: 1988 No 234 s 9G

Defences

251 Absence of knowledge of trading

In any proceeding against a person (A) for contravention of section 235, it is a defence if A did not know, and could not reasonably be expected to know, that A traded the financial products.

Compare: 1988 No 234 s 10

252 Inside information obtained by independent research and analysis

(1) In any proceeding against a person (A) for contravention of section 235 or 236, it is a defence if the inside information was obtained by research and analysis, and was not obtained directly or indirectly from the listed issuer concerned.

(2) In any proceeding against a person (A) for contravention of section 237, it is a defence if A encouraged or advised on the basis of inside information that was obtained by research and analysis and was not obtained directly or indirectly from the listed issuer concerned.

(3) In subsections (1) and (2), research means planned investigation undertaken to gain new knowledge and understanding.

Compare: 1988 No 234 s 10A

253 Equal information

(1) In any proceeding against a person (A) for contravention of section 235, it is a defence if the opposite party to the transaction knew, or ought reasonably to have known, the same inside information as A.

(2) In any proceeding against a person (A) for contravention of section 236, it is a defence if the person to whom the information is disclosed knew, or ought reasonably to have known, the same inside information as A before it was disclosed.

(3) In any proceeding against a person (A) for contravening section 236 or 237 by disclosing inside information to another person (B) or by advising or encouraging B to trade or hold quoted financial products, it is a defence if A has that inside information, or is an information insider, only through acting as B's adviser in relation to trading or holding those financial products.

Compare: 1988 No 234 s 10B

254 Options and trading plans

(1) In any proceeding against a person (A) for contravention of section 235, it is a defence if—
- (a) A traded the financial products under a fixed trading plan or under options with a fixed exercise price; and
- (b) A entered into the trading plan, or acquired the options, as the case may be,—
  - (i) before A obtained the inside information; and
  - (ii) without any intent to evade section 235.
(2) A fixed trading plan is a trading plan—
- (a) that—
  - (i) is fixed for a period of time; and
  - (ii) gives the investor no right to withdraw before the end of that period; and
  - (iii) is not subject to any influence by the investor as to trading decisions after the plan has begun; or
- (b) that is an employee share purchase scheme that comes within paragraph (a) except that the plan may be earlier terminated, and the investor may withdraw, on the termination of the investor's employment or appointment.
Compare: 1988 No 234 s 10C

255 Chinese wall defence

(1) In any proceeding against a person (A) for contravention of any of sections 235 to 237, it is a defence if—
- (a) arrangements existed that could reasonably be expected to ensure that no individual who took part in the active decision received, or had access to, the inside information or was influenced, in relation to that decision, by an individual who had the information; and
- (b) no individual who took part in the active decision received, or had access to, the inside information or was influenced, in relation to that decision, by an individual who had the information; and
- (c) every individual who had the information and every individual who took part in the active decision acted in accordance with the arrangements referred to in paragraph (a).
(2) In subsection (1), active decision means the decision to trade the financial products or disclose the inside information or advise or encourage, as the case may be.

Compare: 1988 No 234 s 10D

Subpart 3—Market manipulation

256 Misleading or deceptive conduct generally in dealings in quoted financial products

~~(1) A person must not engage in conduct that is misleading or deceptive or likely to mislead or deceive in relation to any dealings in quoted financial products.~~

~~(2) Subsection (1) applies regardless of whether or not the dealings are in trade.~~

~~Compare: 1986 No 121 s 9; 1988 No 234 s 13~~

257 False or misleading statement or information

A person must not make a statement or disseminate information if—
- (a) a material aspect of the statement or information is false or the statement or information is materially misleading; and
- (b) the person knows or ought reasonably to know that a material aspect of the statement or information is false or that the statement or information is materially misleading; and
- (c) the statement or information is likely to—
  - (i) induce a person to trade in quoted financial products; or
  - (ii) have the effect of increasing, reducing, maintaining, or stabilising the price for trading in those financial products; or
  - (iii) induce a person to exercise a voting right attached to a quoted financial product in a particular way, or to abstain from exercising such a right.
Compare: 1988 No 234 s 11

258 Exception for takeovers

~~Sections 256 and 257 do~~ Section 257 does not apply to conduct in relation to a takeover offer for financial products under the Takeovers Code or to conduct under that offer to the extent that the conduct is regulated by the Takeovers Code or the Takeovers Act 1993.

Compare: 1988 No 234 s 14

259 Criminal liability for false or misleading statement or information

(1) A person who contravenes section 257 commits an offence if the person knows that the statement or information is false in a material aspect or is materially misleading.
(2) A person who commits an offence under subsection (1) is liable on conviction ~~on indictment~~,—
- (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and
- (b) in any other case, to a fine not exceeding $2.5 million.
Compare: 1988 No 234 s 11A

260 False or misleading appearance of trading

A person must not do, or omit to do, anything if—
- (a) the act or omission will have, or is likely to have, the effect of creating, or causing the creation of, 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; and
- (b) the person knows or ought reasonably to know that the person's act or omission will, or is likely to have, that effect.
Compare: 1988 No 234 s 11B

261 Exception for short selling and crossings

(1) Short selling and crossings under the business rules of a licensed market do not contravene section ~~256, 257,~~ 257 or 260 merely by reason of being short selling or crossings.
(2) In this section,—
crossing, in relation to a transaction in financial products, means a transaction where a person acts as—
- (a) buyer and seller for that transaction in an agency capacity; or
- (b) buyer or seller on one side of that transaction in an agency capacity and as a principal on the other side
short selling means a sale of any financial product where, at the time of the sale,—
- (a) the seller does not have a presently exercisable and unconditional right to vest the financial product in the buyer except where the ~~buyer~~ seller has ~~a conditional~~ an unconditional agreement to acquire that right before the date required to settle the sale; or
- (b) the financial product being sold has been borrowed and the seller has a presently exercisable and unconditional right to vest the product in the buyer.
Compare: SR 2007/373 rr 19, 20

262 Persons treated as contravening false or misleading appearance of trading prohibition

(1) A person (A) must be treated as contravening section 260 if A is directly or indirectly a party to trading in the quoted financial products of a listed issuer from which no change in beneficial ownership results.
(2) Subsection (1) does not apply if,—
- (a) in trading the financial products, A was acting on behalf of another person; and
- (b) A did not know, and ought not reasonably to have known, when trading the financial products that no change in beneficial ownership would result.
(3) A person (A) must be treated as contravening section 260 if—
- (a) A has made an offer to trade the financial products of a listed issuer; and
- (b) either A or, to A's knowledge, an associated person of A has made or proposes to make an opposite offer (the opposite offer) to trade financial products of the listed issuer; and
- (c) the opposite offer substantially matches A's offer as to the number and price of the financial products.
(4) This section is subject to section 263.

Compare: 1988 No 234 s 11C(1), (2), (4)

263 Defence

In any proceeding against a person (A) for contravention of section 260 it is a defence if the trading in the financial products occurred, or the offer to trade was made, in conformity with accepted market practices and for a proper purpose.

Example

The trustees of the ABC Family Trust hold financial products on trust.

New trustees have been appointed to replace the original trustees. The financial products are transferred to the new trustees in connection with the appointment.

No change in the beneficial ownership results (see section 262(1)). However, there is no contravention of section 260 because the transfer was in conformity with accepted market practices and for a proper purpose.

Compare: 1988 No 234 s 11C(3), (4)

264 Criminal liability for false or misleading appearance of trading

(1) A person who contravenes section 260 commits an offence if the person knows that the act or omission will have, or is likely to have, the effect of creating, or causing the creation of, a false or misleading appearance—
- (a) with respect to the extent of active trading in the financial products of a listed issuer; or
- (b) with respect to the supply of, demand for, price for trading in, or value of those products.
(2) A person who commits an offence under subsection (1) is liable on conviction ~~on indictment~~,—
- (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and
- (b) in any other case, to a fine not exceeding $2.5 million.
Compare: 1988 No 234 s 11D

Subpart 4—Continuous disclosure

265 Listed issuers must disclose in accordance with listing rules if continuous disclosure listing rules apply

(1) A listed issuer must notify information in accordance with the continuous disclosure provisions of the listing rules for the licensed market if—
- (a) the listed issuer is a party to a listing agreement with the licensed market operator; and
- (b) the listed issuer has information that those continuous disclosure provisions require it to notify; and
- (c) the information is material information that is not generally available to the market.
(2) Subsection (1) does not affect or limit the situations in which action can be taken (other than under this Act) for a failure to comply with provisions of the listing rules for a licensed market.

Compare: 1988 No 234 s 19B

266 What are continuous disclosure provisions

~~For the purposes of~~ In this Act, continuous disclosure provisions means provisions ~~for the purposes of this subpart~~ that require a listed issuer that is a party to a listing agreement with a licensed market operator to notify information about events or matters as they arise for the purpose of that information being made available to participants in the licensed market.

Compare: 1988 No 234 s 19D

267 No contravention of continuous disclosure provisions by person who takes reasonable steps to ensure listed issuer complies

A person (A) does not, in relation to the contravention by a listed issuer of a continuous disclosure obligation or a term or condition of a continuous disclosure exemption, contravene that obligation or term or condition if—
- (a) A took all steps (if any) that were reasonable in the circumstances to ensure that the listed issuer complied with the obligation or term or condition; and
- (b) after doing so, A believed on reasonable grounds that the listed issuer was complying with the obligation or term or condition.
Compare: 1988 No 234 s 19PA

Subpart 5—Disclosure of interests of substantial product holders in listed issuers

Substantial holding disclosure obligations

268 Purpose of subpart

(1) The purpose of this subpart is to promote an informed market, and to deter insider conduct, market manipulation, and secret dealings in potential takeover bids, by ensuring that participants in financial product markets have access to information concerning the identity and trading activities of persons who are, or may at any time be, entitled to control or influence the exercise of significant voting rights in a listed issuer.

~~(2) This section does not limit any of section 3, 4, or 224.~~
(2) This section does not limit—
- (a) any of section 3, 4, or 224; or
- (b) the purpose of section 284.

269 Meaning of substantial product holder, substantial holding, and percentage

(1) A person is a substantial product holder in a listed issuer for the purposes of this Act if that person has a substantial holding in that listed issuer.

(2) A person has a substantial holding in a listed issuer for the purposes of this Act if the person has a relevant interest in quoted voting products that comprise 5% or more of a class of quoted voting products of the listed issuer.

(3) A person has a separate substantial holding for the purposes of this Act for each class in respect of which the person has a substantial holding under subsection (2).

(4) The percentage of financial products that a person has in a class, for the purposes of this subpart, is calculated as follows:

( number held ) × 100

total

where—

number held is the number of financial products, in that class, in which the person has a relevant interest

total is the total number of financial products in that class.

Compare: 1988 No 234 s 21

270 Persons must disclose if begin to have substantial holding

(1) A person who begins to have a substantial holding (or another substantial holding for another class) in a listed issuer must disclose that fact in accordance with sections 274 and 275.

(2) The disclosure must be given as soon as the person knows, or ought reasonably to know, that the person has the substantial holding.

Compare: 1988 No 234 s 22

271 Substantial product holders must disclose if subsequent movement of 1% or more in holdings

(1) A substantial product holder in a listed issuer must disclose, in accordance with sections 274 and 275, any movement of 1% or more in the substantial holding.
(2) There is a movement of 1% or more in a substantial holding if—
- (a) there is a change in the number of financial products held by the substantial product holder (where number held has the same meaning as in section 269(4)); and
- (b) the percentage worked out using the formula in section 269(4) increases or decreases by 1 or more percentage points from the percentage last disclosed under this subpart (or subpart 3 of Part 2 of the Securities Markets Act 1988) in relation to the substantial holding.
(3) The disclosure must be given as soon as the person knows, or ought reasonably to know, that that movement has occurred.

Compare: 1988 No 234 s 23

272 Substantial product holders must disclose if subsequent changes in nature of relevant interests

(1) A substantial product holder in a listed issuer must disclose, in accordance with sections 274 and 275, any change in the nature of any relevant interest in the substantial holding.

(2) The disclosure must be given as soon as the person knows, or ought reasonably to know, of the change.

Compare: 1988 No 234 s 24

273 Persons must disclose if cease to have substantial holding

(1) A person who ceases to have a substantial holding (or any of the person's substantial holdings) in a listed issuer must disclose that fact in accordance with sections 274 and 275.

(2) The disclosure must be given as soon as the person knows, or ought reasonably to know, that the person has ceased to have a substantial holding.

Compare: 1988 No 234 s 25

274 What disclosure required

(1) A person must disclose the matters required to be disclosed under any of sections 270 to 273 or section 283, to—
- (a) the listed issuer; and
- (b) every operator of a licensed market by which the financial products of the listed issuer are quoted.
(2) The person must also disclose, in the prescribed manner, any further matters relating to those matters, the relevant event, or the substantial holding that are required by the regulations.

(3) The disclosure must also be accompanied by, or have annexed, any prescribed information or documents.

Compare: 1988 No 234 s 26

275 Form and method of disclosure

A person must give the disclosure in the prescribed manner.

Compare: 1988 No 234 s 27

276 Listed issuer must give acknowledgement of disclosure

Every listed issuer must, at the request of a person by whom disclosure is given to it under this subpart, give to the person an acknowledgement of the disclosure in the prescribed manner.

Compare: 1988 No 234 s 28

277 How to ascertain total financial products in class for purposes of disclosure

(1) For the purposes of this subpart, a person may assume that the total number of financial products of a listed issuer in a class most recently published by the following methods is correct:
- (a) in a document published by a listed issuer and distributed to the holders of that class of products; or
- (b) on an Internet site maintained by the relevant licensed market operator.
(2) Subsection (1) does not apply if that person knows that number is not correct.

Compare: 1988 No 234 s 29

Exemptions

278 Exemption for persons with interest in other substantial product holders who comply

A person (A) need not comply with any of sections 270 to 273 in relation to a substantial holding in a listed issuer if—
- (a) another person (B) is required to comply, and does comply, with that section in relation to the same listed issuer; and
- (b) A has that substantial holding merely for 1 or more of the following reasons:
  - (i) A has a power to exercise, or control the exercise of, the right to vote attached to 20% or more of the voting products of B (see section 232(b)):
  - (ii) A has a power to acquire or dispose of, or control the acquisition or disposition of, 20% or more of the voting products of B (see section 232(c)):
  - (iii) A and B are related bodies corporate (see section 232(d)).
Compare: 1988 No 234 s 30

279 Exemption for corporate trustees and nominee companies

(1) A person (A) need not comply with any of sections 270 to 273 in relation to 1 or more substantial holdings in 1 or more listed issuers if—
- (a) A has that substantial holding merely because A acts for another person in the ordinary course of business as a corporate trustee or a nominee company; and
- (b) A has opted in to this exemption by written notice to the FMA (and not withdrawn the notice by further written notice to the FMA).
(2) Subsection (1) does not apply if A is currently declared by the FMA, by notice under section 533(1)(f), to be a person that is not exempt under this section.

Compare: 1988 No 234 s 31

280 Conditions of exemption for corporate trustees and nominee companies

A person (A) to whom section 279(1) applies must—
- (a) keep under continuing review the transactions of all persons for whom A holds, in A's name, quoted voting products; and
- (b) inform the listed issuer of the financial products and the operator of the licensed market by which those products are quoted if section 270 or 273 applies to any of those persons; and
- (c) inform that operator if A exercises, or proposes to exercise, in A's own right any voting rights in respect of 5% or more of a class of quoted voting products of a listed issuer.
~~(2) Every person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.~~

~~(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).~~

Compare: 1988 No 234 s 32

281 Exemption for persons under control or acting jointly with corporate trustees and nominee companies

(1) A person (A) need not comply with any of sections 270 to 273 in relation to 1 or more substantial holdings in 1 or more listed issuers if A has the substantial holding merely because A has, under section 232, the relevant interests in financial products that a corporate trustee or a nominee company that is exempt in relation to that substantial holding under section 279 has.

(2) Subsection (1) does not apply if A is currently declared by the FMA, by notice under section 533(1)(f), to be a person that is not exempt under this section.

Compare: 1988 No 234 s 32A

282 Extended time for disclosure for trustees, executors, and administrators

If a person is required to comply with section 270, 271, or 273 merely because the person is the trustee of a testamentary trust or the executor or administrator of the estate of a deceased person,—
- (a) the time limit for disclosure in that section does not apply; and
- (b) the disclosure must instead be given before the expiry of 14 days after the grant of administration under the Administration Act 1969.
Compare: 1988 No 234 s 33

Tracing and disclosure of interests in listed issuers

283 FMA may require persons to disclose to market relevant interests and powers to get relevant interests

(1) The FMA may, by written notice given after having regard to the purpose of this subpart in section 268(1), require a person to disclose all (or any class of)—
- (a) relevant interests that the person has in financial products of a listed issuer; or
- (b) powers that the person has or may at any time have to acquire a relevant interest in financial products of a listed issuer.
(2) Subsection (1) applies regardless of whether the financial products referred to in subsection (1)(a) and (b) are voting products or not, are quoted or non-quoted, or are issued or yet to be issued.

(3) The person must disclose the information required under subsection (1) in accordance with sections 274 and 275 as soon as practicable after the person receives the notice.

(4) Sections 230 to 233 apply in determining whether or not a person has a power referred to in subsection (1)(b) (and for this purpose every reference in those sections to a relevant interest must be read as including a reference to a power to acquire a relevant interest).

Compare: 1988 No 234 s 34

284 Listed issuer may require registered holder to disclose relevant interests to it

~~(1) A listed issuer may, by written notice, require a person who is registered as the holder of quoted voting products in the listed issuer to disclose—~~
- ~~(a) the name and address of every person who has a relevant interest in those financial products and the nature of that interest; and~~
- (b) to the extent that that registered holder is unable to supply any of that information in relation to a person having a relevant interest in those financial products, other particulars that will, or are likely to, assist in identifying that person and the nature of the interest.
~~(2) The registered holder must disclose the information required under subsection (1) in writing to the listed issuer as soon as practicable after the holder receives the notice.~~

~~Compare: 1988 No 234 s 35~~

284 Listed issuer may require registered holder or relevant interest holder to disclose relevant interests to it

(1) The purpose of this section is to enable a listed issuer to ascertain who has a relevant interest in quoted voting products of the listed issuer and the nature of that interest (regardless of whether those persons are substantial product holders).
(2) A listed issuer may require a relevant person to disclose—
- (a) the name and address of every person who has a relevant interest in quoted voting products of the listed issuer and the nature of that interest; and
- (b) to the extent that that relevant person is unable to supply any of that information in relation to a person having a relevant interest in those financial products, other particulars that will, or are likely to, assist in identifying that person and the nature of the interest.
(3) The relevant person must disclose the information required under subsection (2) in writing to the listed issuer as soon as practicable after the person receives the notice.
(4) In this section, relevant person, in relation to a listed issuer, means a person who—
- (a) is registered as the holder of quoted voting products of the listed issuer; or
- (b) was named in a previous disclosure under this section as having a relevant interest in quoted voting products of the listed issuer.
Compare: 1988 No 234 s 35; Corporations Act 2001 ss 672A and 672B (Aust)

285 Listed issuer may require person who has relevant interest to disclose information to it

(1) A listed issuer may, by written notice, require a person who the listed issuer believes has, or may have, a relevant interest in quoted voting products in of the listed issuer to disclose the information the listed issuer specifies for the purpose of assisting the listed issuer to ascertain who is, or may be, a substantial product holder in the listed issuer.

(2) The relevant interest holder must disclose the information required under subsection (1) in writing to the listed issuer as soon as practicable after the holder receives the notice.

Compare: 1988 No 234 s 35A

286 Form and method of notice requiring disclosure

The notice requiring disclosure under section 283, 284, or 285 must be given in the prescribed manner (if any).

Compare: 1988 No 234 s 35B

Register and publication of substantial holdings

287 Listed issuers must maintain register of disclosures of substantial holdings

~~(1) A listed issuer must keep a register for the disclosures given to it under this subpart (and must include a disclosure in the register on receiving it).~~

~~(2) Subsection (1) does not apply to disclosures made under section 284 or 285 that do not reveal a substantial holding.~~
~~(3) The register must be kept at—~~
- ~~(a) the registered office of the listed issuer; or~~
- ~~(b) any other place in New Zealand of which notice is given in accordance with subsection (4).~~
(4) If the register is not kept at the listed issuer's registered office, or the place at which it is kept is changed, the listed issuer must give written notice to the Registrar of Companies of the place at which it is kept within 10 working days after it is first kept elsewhere or is moved.

~~(5) This section and section 288 do not limit the Companies Act 1993 or any other enactment.~~

~~Compare: 1988 No 234 s 35C~~

288 Public inspection of register

~~A listed issuer must ensure that a register kept by it under section 287 is—~~
- (a) available for inspection, by a person who serves on the listed issuer a written notice of an intention to inspect, at the place at which the register is kept between the hours of 9 am and 5 pm on each working day during the inspection period; and
- ~~(b) otherwise available for inspection in the prescribed manner (if any).~~

289 Copies of documents

~~A person may require a copy of, or an extract from, a register required under section 287 to be sent to the person—~~
- ~~(a) within 5 working days after the person has made a request in writing for the copy or extract; and~~
- ~~(b) if the person has paid a prescribed fee.~~

290 Offences relating to substantial holdings register

~~(1) Every person who contravenes section 287 or 288 commits an offence and is liable on summary conviction to a fine not exceeding $50,000.~~

(2) If a listed issuer fails to provide a copy of, or an extract from, a register kept under section 287 in accordance with a request under section 289, the issuer commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

~~(3) The offences in this section are infringement offences (see subpart 5 of Part 7).~~

~~Compare: 1988 No 234 s 35E~~

291 Listed issuers must publish make available information on substantial holdings

(1) Every listed issuer must, in accordance with this section, ~~send out a notice stating—~~ make available the following information:
- (a) the names of all persons who, according to the ~~register kept under section 287~~ issuer's records, are substantial product holders in the listed issuer ~~at the record~~ as at each balance date; and
- (b) the number and class of quoted voting products of the listed issuer that, according to the ~~register~~ issuer's records, form part of each substantial holding in the listed issuer ~~at the record~~ as at each balance date; and
- (c) the total number in each of those classes ~~at the record~~ as at each balance date.
~~(2) The notice must be sent,—~~
- ~~(a) for listed issuers that are companies (other than overseas companies within the meaning of the Companies Act 1993), to each shareholder with or in—~~
  - ~~(i) the annual report sent under section 209 of the Companies Act 1993; or~~
  - ~~(ii) the notice sent under that section; and~~
- ~~(b) for every other listed issuer, to every holder of its quoted voting products not later than 30 June in each year.~~
(2) The information must be made available,—
- (a) for listed issuers that are required to prepare an annual report under the Companies Act 1993 or any other enactment, in the annual report for the period ending on the balance date; and
- (b) for every other listed issuer, in a notice sent to every holder of its quoted voting products not later than 3 months after the balance date.
~~(3) The record date is a date stated in the notice that is not earlier than 3 months before the notice is sent.~~

(4) A ~~person who~~ listed issuer that contravenes this section commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(5) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1988 No 234 ss 35F, 35H

292 No liability for publication of substantial holdings

No listed issuer is liable for any false or misleading information ~~published~~ made available under section 291 if the information was derived by the issuer under this subpart and the issuer did not know that the information was false or misleading.

Compare: 1988 No 234 s 35I

293 Notice under this subpart not to affect incorporation of listed issuer or constitute notice of trust

(1) Nothing in, or done under, this subpart—
- (a) affects the incorporation of a listed issuer; or
- (b) limits section 92, 93, or 94 of the Companies Act 1993.
(2) A listed issuer is not, because of anything done for the purposes of this subpart, affected with notice of, or put on inquiry as to, the rights of any person in relation to any financial products.

Compare: 1988 No 234 s 35J

Subpart 6—Disclosure of relevant interests in quoted financial products by directors and senior managers of listed issuers

294 Purpose of subpart

(1) The purpose of this subpart is to promote good corporate governance, and to deter and assist in the monitoring of insider conduct and market manipulation, by—
- (a) ensuring that information about directors' and senior managers' trading activities in listed issuers is available to participants in financial product markets; and
- (b) enabling the dates of trades to be checked against the dates at which material information became generally available to the market.
(2) This section does not limit any of section 3, 4, or 224.

295 Directors and senior managers of listed issuers must disclose relevant interests and dealings in relevant interests

(1) A director or senior manager of a listed issuer who has a relevant interest in a quoted financial product of the listed issuer or a related body corporate must disclose that fact, in accordance with sections 297 and 298, within 5 trading days of this section becoming applicable as a result of—
- (a) the listing of the listed issuer; or
- (b) the person's appointment as a director or senior manager.
(2) A director or senior manager of a listed issuer who acquires or disposes of a relevant interest in a quoted financial product of the listed issuer or a related body corporate must disclose that fact, in accordance with sections 297 and 298, within,—
- ~~(a) in the case of an acquisition under an employee share purchase scheme, a dividend reinvestment plan, or a share top-up plan, 20 working days of the acquisition; or~~
- (a) in the case of any of the following acquisitions or disposals, 20 working days after the acquisition or disposal:
  - (i) an acquisition under an employee share purchase scheme:
  - (ii) an acquisition under a dividend reinvestment plan:
  - (iii) an acquisition under a share top-up plan:
  - (iv) an acquisition or a disposal that results from an amalgamation under Part 13 of the Companies Act 1993:
  - (v) an acquisition or a disposal that results from an arrangement approved under Part 15 of the Companies Act 1993:
  - (vi) a prescribed acquisition or disposal; or
- (b) in any other case, 5 trading days of after the acquisition or disposal.
(3) This section does not apply to specified derivatives.

(4) This section is subject to sections 297 to 301.

(5) In this section,—

dividend reinvestment plan means a plan of the kind referred to in clause 10 of Schedule 1

share top-up plan means a plan established by an issuer under which previously issued shares of the issuer are offered, whether by the issuer or another person, only to some or all existing holders of the same class of shares, and those shares are sold in consideration for a direction made to the issuer to apply amounts that are payable to each existing holder from dividends declared by the issuer to the purchase of the shares.

Compare: 1988 No 234 s 19T

296 Disclosure of relevant interests and dealings in relevant interests in relation to specified derivatives

(1) A director or senior manager of a listed issuer who has a relevant interest in a specified derivative must disclose that fact, in accordance with sections 297 and 298, within 5 trading days of this section becoming applicable as a result of—
- (a) the listing of the listed issuer; or
- (b) the person's appointment as a director or senior manager.
(2) A director or senior manager of a listed issuer who acquires or disposes of a relevant interest in a specified derivative must disclose that fact, in accordance with sections 297 and 298, within 5 trading days of the acquisition or disposal.
(3) In this subpart, specified derivative, in relation to a director or senior manager of a listed issuer, means—
- (a) a quoted derivative where the underlying is a financial product of the listed issuer or a related body corporate; or
- (b) a derivative that is treated as being a quoted financial product of the listed issuer under section 228.
(4) This section is subject to sections 297 to 301.

297 What disclosure required

(1) The director or senior manager must disclose the relevant interest, acquisition, or disposal—
- (a) to the licensed market operator with which the listed issuer is a party to a listing agreement; and
- (b) in the interests register of the listed issuer kept under this subpart.
(2) The director or senior manager must also disclose, in the prescribed manner, any further matters relating to the relevant interest, acquisition, or disposal required by the regulations.

Compare: 1988 No 234 s 19U

298 Form and method of disclosure

The director or senior manager must disclose the relevant interest, acquisition, or disposal in the prescribed manner.

Compare: 1988 No 234 s 19V

299 Disclosure obligation applies for 6 months after ceasing to hold office

A person is treated as being a director or senior manager for the purposes of this subpart for 6 months after that person ceases to be a director or senior manager, and must continue to comply with this subpart for that period.

Compare: 1988 No 234 s 19W

300 Exemption for directors or senior managers who disclose substantial holdings

A director or senior manager who has, or who acquires or disposes of, a relevant interest in a quoted financial product does not have to disclose that fact under section 295 if—
- (a) the director or senior manager must make a disclosure under section 270, 271, or 273 in relation to a substantial holding in the listed issuer of the financial product to which the relevant interest relates or related; and
- (b) the disclosure under that section concerns the same relevant interest; and
- (c) the director or senior manager discloses in accordance with that section; and
- (d) it is stated in the disclosure made in accordance with that section that the director or senior manager is a director or senior manager of the listed issuer.
Compare: SR 2003/382 r 21

301 Exemption for overseas listed issuers

(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 that overseas listed issuer does not have to disclose that fact under section 295.

(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 296 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 295 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 296 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 section, overseas listed issuer means a listed issuer—
- (a) whose financial products are also quoted with a securities exchange that—
  - (i) is not a licensed 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 a market licensed under section 315) has primary jurisdiction for the listing requirements for the listed issuer and the quotation of its financial products.
Compare: SR 2004/105 cl 12

302 Listed issuer must keep interests register

(1) A listed issuer must keep an interests register for disclosures made to it under this subpart.
(2) The interests register must be kept at—
- (a) the registered office of the listed issuer; or
- (b) any other place in New Zealand of which notice is given in accordance with subsection (3).
(3) If the interests register is not kept at the listed issuer's registered office, or the place at which it is kept is changed, the listed issuer must give written notice to the FMA of the place at which it is kept within 10 working days after it is first kept elsewhere or is moved.

(4) The interests register may be the same interests register as that kept under section 189(1)(c) of the Companies Act 1993.

(5) This section and sections 303 and 304 do not limit the Companies Act 1993.

Compare: 1988 No 234 s 19Z

303 Public inspection of interests register

An interests register must—
- (a) be available for inspection, by a person who serves on the listed issuer a written notice of an intention to inspect, at the place at which the register is kept between the hours of 9 am and 5 pm on each working day during the inspection period; and
- (b) otherwise be available for inspection in the prescribed manner (if any).

304 Copies of documents

A person may require a copy of, or an extract from, an interests register to be sent to the person—
- (a) within 5 working days after the person has made a request in writing for the copy or extract; and
- (b) if the person has paid a prescribed fee.

305 Offences relating to interests register

(1) ~~A person who~~ A listed issuer that contravenes section 302(1) to (3) or 303 commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(2) If a listed issuer fails to provide a copy of, or an extract from, an interests register in accordance with a request under section 304, the issuer commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(3) The offences in this section are infringement offences (see subpart 5 of Part 7).

Compare: 1988 No 234 s 19ZF

Subpart 7—Licensing of markets for trading financial products

306 Principles guiding exercise of powers under this subpart

The Minister and the FMA must (without limitation) have regard to the following matters in the exercise of powers under this subpart:
- (a) the purposes of this Part (in addition to the main and additional purposes of this Act set out in sections 3 and 4):
- (b) the following matters (if relevant):
  - (i) the nature of the activities conducted, or proposed to be conducted, on the market; and
  - (ii) the size, or proposed size, of the market; and
  - (iii) the nature of the financial products dealt with, or proposed to be dealt with, on the market; and
  - (iv) the persons who participate in, or are likely to participate in, the market (either directly or by using the services of participants); and
  - (v) the technology used, or proposed to be used, in the operation of the market:
- (c) in relation to an application for a licence issued under section 315, or another power under this subpart relating to a market licensed under that section, the matters set out in that section.
~~(2) The Minister or the FMA must, in applying subsection (1), determine the weight to be given to each of the purposes and other matters referred to in that subsection or section 315.~~

~~(3) Subsection (1) does not limit the matters to which the Minister or the FMA may have regard.~~

Need for financial product market licence

307 What is a financial product market

(1) For the purposes of this Act, a financial product market is a facility by means of which—
- (a) offers to acquire or dispose of financial products are made or accepted; or
- (b) offers or invitations are made to acquire or dispose of financial products that are intended to result or may reasonably be expected to result, directly or indirectly, in—
  - (i) the making of offers to acquire or dispose of financial products; or
  - (ii) the acceptance of offers of that kind.
(2) However, subsection (1) does not apply to the extent that the facility constitutes—
- (a) a person making or accepting offers or invitations to acquire or dispose of financial products on the person's own behalf or on behalf of 1 party to the transaction only (for example, a continuous issuer of financial products):
- (b) an issuer or a related body corporate of an issuer matching persons who wish to acquire financial products of that issuer with persons who wish to dispose of financial products of that issuer (whether at a specified price or otherwise):
- (c) a service that is covered by a market services licence:
- (d) any other conduct of a kind prescribed by the regulations.
(3) Subsection (2)(a) does not apply if the conduct of a person is declared by the FMA, by notice under section 533(1)(f), to be conduct that is not exempt under that paragraph.

Compare: Corporations Act 2001 s 767A (Aust)

308 Need for financial product market licence

A person must not operate, or hold out that the person operates, a financial product market in New Zealand, unless—
- (a) the person has a licence to operate that market under this Part; or
- (b) the market is exempt from the licensing requirement under this subpart under section 310.
Compare: Corporations Act 2001 s 791A (Aust)

309 Prohibitions on holding out

A person must not, if it is not the case, hold out that—
- (a) the person has a financial product market licence; or
- (b) the operation of a financial product market in New Zealand is authorised by a financial product market licence; or
- (c) a financial product market is exempt from this Part; or
- (d) the person is a participant in a licensed market.
Compare: Corporations Act 2001 s 791B (Aust)

310 Exemptions

(1) A financial product market is exempt from the licensing requirement under this subpart if—
- (a) ~~either of the following is satisfied in relation to the market~~ the market satisfies either of the following criteria (assessed in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8):
  - (i) ~~the transactions on the market in the most recently completed financial year for the market operator did~~ the number of relevant transactions on the market does not exceed 100 transactions; or
  - (ii) the aggregate value of the financial products acquired under ~~those transactions was a value of~~ the relevant transactions on the market is less than $2 million; or
- (b) it is a prescribed wholesale market; or
- (c) it is a prescribed exempt market.
(2) The relevant transactions on the market for the purpose of subsection (1)(a) are—
- (a) if the market has been in operation for a full financial year of the market operator, the transactions entered into on the market during that financial year:
- (b) if paragraph (a) does not apply, all of the transactions entered into on the market in the previous 12 months.

311 When financial product market taken to be operated in New Zealand

(1) For the purposes of this subpart, a financial product market is taken to be operated in New Zealand if—
- (a) it is operated by an entity that is incorporated or registered in New Zealand or by an individual who is ordinarily resident in New Zealand; or
- (b) all, or a significant part of, the facility for the financial product market is located in New Zealand; or
- (c) the financial product market is promoted to investors in New Zealand by or on behalf of the operator of that market or by or on behalf of an associated person of that operator.
(2) For the purposes of subsection (1)(c), a financial product market is not promoted to investors in New Zealand merely because it is accessible by those investors.

(3) Subsection (1) does not limit the circumstances in which a financial product market is operated in New Zealand for the purposes of this subpart.

Compare: Corporations Act 2001 s 791D (Aust)

General obligations of licensed market operator

312 General obligations in respect of licensed markets

A licensed market operator must,—
- (a) to the extent that is reasonably practicable, do all things necessary to ensure that each of its licensed markets is a fair, orderly, and transparent market; and
- (b) have adequate arrangements for operating its licensed markets, including arrangements—
  - (i) for notifying disclosures made to it under subparts 4, 5, and 6 and under an alternative disclosure obligation and for continuing to make those disclosures available; and
  - (ii) for handling conflicts between the commercial interests of the licensed market operator and the need for the licensed market operator to ensure that the markets operate in the way referred to in paragraph (a); and
  - (iii) for monitoring the conduct of participants on or in relation to the markets; and
  - (iv) for enforcing compliance with the relevant market rules (for example, by having a sufficiently independent adjudicative body to adjudicate on contraventions of market rules that are referred to it); and
- (c) have sufficient resources (including financial, technological, and human resources) to operate its licensed markets properly; and
- (d) have adequate arrangements for ensuring that the criteria specified in section 314(c) or 315(1)(d), as the case may be, continue to be met.
Compare: 1988 No 234 s 36Y; Corporations Act 2001 s 792A (Aust)

Issue of licence

313 Application for licence

(1) A person may apply for a licence to operate a financial product market in the manner that is specified by the FMA.

(2) The applicant must provide to the FMA or the Minister the information that is required by the FMA or the Minister to assist in determining the application (for example, the draft market rules).

(3) The FMA must, within a reasonable time, give the application to the Minister with advice about the application.

314 When licence may be issued

The Minister, after receiving an application under section 313, may issue a financial product market licence, by written notice to the applicant, if the Minister is satisfied that—
- (a) the applicant is capable of operating a financial product market in accordance with the general obligations under section 312 (having regard to the proposed conditions of the licence); and
- (b) there is no reason to believe that the applicant will not comply with the ~~licensed~~ market operator obligations that will apply if the licence is granted; and
- (c) the applicant is a body corporate and is, or will be, registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 on and from commencing to operate the financial product market.
Compare: Corporations Act 2001 s 795B(1) (Aust)

315 When licence may be issued for overseas-regulated market

(1) If an applicant is authorised to operate a financial product market in an overseas jurisdiction in which its principal place of business is located, the Minister, after receiving an application under section 313, may issue a licence authorising the applicant to operate the same market in New Zealand, by written notice to the applicant, if the Minister is satisfied that—
- (a) there is no reason to believe that the applicant will not comply with the ~~licensed~~ market operator obligations that will apply if the licence is granted; and
- (b) the operation of the market in that jurisdiction is subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of investor protection and market integrity they achieve, to the requirements and supervision to which financial product markets are subject under this Act in relation to those matters; and
- (c) the applicant undertakes to co-operate with the FMA by sharing information and in other appropriate ways; and
- (d) no director, senior manager, or controlling owner of the applicant—
  - (i) would be disqualified under section 14(2) of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (if the applicant were a provider to which that Act applied); or
  - (ii) has been disqualified from managing a body corporate under the laws of any other jurisdiction.
(2) In considering an application for a licence under this section or exercising another power under this subpart in relation to a market licensed under this section, the Minister must have regard to the following matters (in addition to the matters in section 306):
- (a) the criteria that the licensed market operator or applicant satisfied to obtain an authorisation to operate the same market in the overseas jurisdiction in which its principal place of business is located; and
- (b) the obligations the licensed market operator or applicant must continue to satisfy to keep the authorisation; and
- (c) the level of supervision to which the operation of the market in that jurisdiction is subject; and
- (d) whether adequate arrangements exist for co-operation between the FMA and the authority that is responsible for that supervision.
(3) Nothing in this section prevents the Minister from issuing a licence under section 314 to an applicant that is authorised to operate a financial product market in an overseas jurisdiction.

Compare: Corporations Act 2001 s 795B(2) (Aust)

316 Conditions of licence

(1) A financial product market licence is subject to the following conditions:
- (a) a condition that the licensed market operator may, under the licence, operate only the financial product market covered by the licence (as described in the licence); and
- (b) a condition that specifies the clearing and settlement arrangements that must be followed or the type of settlement arrangements that may be used for the financial product markets covered by the licence; and
- (c) a condition that specifies the arrangements for enforcing breaches of the market rules; and
- (d) any other conditions imposed by the Minister ~~under subsection (2) or section 321~~ that the Minister thinks fit.
~~(2) Those conditions must be imposed by the Minister on issue (and may be varied only under section 321).~~

(2) The Minister may only impose those conditions on issue of the licence or by varying the conditions under section 321.

(3) The licensed market operator must comply with the conditions of the licence.

Compare: Corporations Act 2001 s 796A (Aust)

317 Procedural requirements

(1) The Minister must not refuse to issue a licence, or include conditions that are materially more restrictive than those requested in the application, unless—
- (a) the Minister gives the applicant no less than 10 working days' written notice of the following matters before he or she exercises the power:
  - (i) that the Minister may refuse to issue the licence or may include conditions that are materially more restrictive than those requested in the application; and
  - (ii) the reasons why he or she may do so; and
- (b) the Minister gives the applicant or the applicant's representative an opportunity to make written submissions on the matter within that notice period.
(2) The FMA must give written notice of the Minister's decision under section 314 or 315 to the applicant.
- ~~(a) the applicant; and~~
- ~~(b) every other prescribed person.~~

318 Licence may cover more than 1 financial product market

(1) The same financial product market licence may cover 2 or more financial product markets.
(2) In that case,—
- (a) a reference in this Act to the financial product market to which a licence covers is taken instead to be a reference to each of those financial product markets severally; and
- (b) the decision to add another financial product market to a licence must be made on the same basis as a decision to issue a licence; and
- (c) a financial product market licence may be varied, suspended, or cancelled in respect of 1 of those markets only, as if each of those markets were separately licensed.

319 Licence may cover subsidiaries

~~(1) A financial product market licence may authorise subsidiaries of the licensed market operator to operate the financial product market covered by the licence.~~

~~(2) In that case, a reference to the licensed market operator in this Act is a reference to the licensed market operator and any subsidiary of it that is operating the market under the licence~~

320 FMA must maintain list of licensed markets on Internet site

(1) The FMA must maintain a list of licensed markets on its Internet site.
(2) The list must include, for each licensed market,—
- (a) the financial product market that the licence covers; and
- (b) the name of the licensed market operator; and
- (c) when the licence was issued; and
- (d) the conditions of the licence; and
- (e) a reference to the market rules for the financial product market that have been approved under this subpart (but the list need not incorporate them); and
- (f) if it is a market to which regulations apply under section 350, which regulations apply to it; and
- (g) if the licence is issued under section 315, that it is an overseas-regulated market for the purposes of this Act:; and
- ~~(h) the subsidiaries authorised to operate the financial product market (if any); and~~
- (i) if the licence has been suspended or cancelled, that fact and the date on which that action took effect.
(3) The FMA must update the list if it becomes aware that there is a change, or error, in the information on the list (for example, the approval of the market rules or a change in the name of the licensed market operator).

Changes to licences

321 Variation of conditions

(1) The Minister may, on his or her own initiative under subsection (2) or on the application of a licensed market operator, vary the conditions of the licence at any time after the licence is issued by written notice to the licensed market operator.
(2) The Minister may vary the conditions of the licence on his or her own initiative only—
- (a) in 1 of the following circumstances:
  - (i) if there is a significant change in market circumstances that the Minister is satisfied makes it necessary to vary the conditions, having regard to the ~~licensed~~ market operator obligations and the matters referred to in section 306; or
  - (ii) in accordance with section 342; and
- (b) after following the procedure set out in section 323(1).
(3) A licensed market operator may apply, in the manner that is specified by the FMA, for the Minister to vary the conditions of the licence.

(4) A licensed market operator must provide to the FMA or the Minister the information that is required by the FMA or the Minister to assist it in determining the application.

(5) For the purposes of this subpart, vary, in relation to the conditions of a licence, includes to vary, revoke, add to, or substitute any of those conditions.

322 Minister may suspend or cancel licence

The Minister may, by written notice to the licensed market operator, suspend (for a specified period or until a specified condition is met) or cancel a licence—
- (a) if the licensed market operator, by written notice, requests the Minister to do so; or
- (b) if the Minister is satisfied~~, on reasonable grounds,~~ that the licensed market operator has ceased to carry on the business of operating the financial product market; or
- (ba) if—
  - (i) the licensed market operator has ceased to be registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (in the case of a licence issued under section 314); or
  - (ii) the Minister is satisfied that the licensed market operator has ceased to meet the requirement in section 315(1)(d) (in the case of a licence issued under section 315 (overseas-regulated markets)); or
- (c) if the licensed market operator has become subject to an insolvency event; or
- (d) in accordance with section 342; or
- (e) in the case of a licence issued under section 315 (overseas-regulated markets), if—
  - (i) the licensed market operator ceases to be authorised to operate a financial product market in the overseas jurisdiction in which the licensed market operator's principal place of business is located; or
  - (ii) there is a change to the regulatory regime applying in relation to the market to which the licence relates in the jurisdiction in which the licensed market operator's principal place of business is located and, because of that change, the Minister is not satisfied as to the matters in section 315(1)(b).
Compare: Corporations Act 2001 s 797B (Aust)

323 Procedure for varying of conditions or suspension or cancellation of licence

(1) The Minister must not vary the conditions of a licence on his or her own initiative under section 321(1), refuse an application for a variation under section 321, or suspend or cancel a licence under section 322 unless—
- (a) the Minister gives the licensed market operator no less than 10 working days' written notice of the following matters before he or she exercises the power:
  - (i) that the Minister may exercise the power; and
  - (ii) the reasons why he or she may exercise the power; and
- (b) the Minister gives the licensed market operator or the licensed market operator's representative an opportunity to make written submissions on the matter within that notice period.
(2) The FMA must give written notice of the Minister's decision under section 321 or 322 to the licensed market operator.
- ~~(a) the licensed market operator; and~~
- ~~(b) every other prescribed person.~~

324 Effect of suspension

(1) A person whose financial product market licence is suspended is taken not to hold that licence while it is suspended.

(2) However, the Minister may specify in the written notice to the licensed market operator that subsection (1) does not apply for specified purposes.

Compare: Corporations Act 2001 s 797D (Aust)

325 Variation or revocation of suspension

The Minister may at any time vary or revoke a suspension of a financial product market licence by giving written notice to the licensed market operator.

Compare: Corporations Act 2001 s 797E (Aust)

Approval of contractual market rules

326 Licensed markets must be operated under market rules that comply with this subpart

(1) A licensed market operator must not operate a licensed market except in accordance with market rules for that market that—
- (a) include the required matters set out in section 327; and
- (b) have effect under section 328.
(2) This section and sections 327 to 331 do not apply to a licensed market that is licensed under section 315 (overseas-regulated markets).

Compare: 1988 No 234 s 36G

327 Required matters for market rules

(1) Market rules for a financial product market for trading equity securities, debt securities, or managed investment products must include listing rules and business rules (by whatever name called and however they are imposed).

(2) Market rules for a financial product market for trading derivatives must include business rules (by whatever name called and however they are imposed).
(3) Listing rules must include rules that—
- (a) relate to the approval of persons for the purpose of enabling financial products issued by those persons to be traded on the market; and
- (b) require those persons to be party to a listing agreement with the licensed market operator and that relate to the entry into, and revocation of, listing agreements; and
- (c) relate to the governance of those persons; and
- (d) relate to the conduct or activities of those persons in relation to that market or to financial products traded on that market; and
- (e) relate to the monitoring and enforcement of those rules.
(4) Business rules must include rules that—
- (a) relate to the authorisation of persons to undertake trading activities on, or otherwise participate in, the market; and
- (b) relate to the conduct or activities of those persons in relation to the market; and
- (c) govern the conduct of business on the market; and
- (d) relate to the monitoring and enforcement of those rules.
Compare: 1988 No 234 s 36H

328 When market rules have effect

A market rule, or change to a market rule, for a licensed market has no effect, either in contract or for the purposes of section 326, until it has been approved under section 330.

329 Approval process for proposed market rules and rule changes

(1) If a person applies for the approval of any proposed market rules or proposed rule change by the FMA, the FMA must, within the approval period,—
- (a) approve the market rules or rule change; or
- (b) extend the approval period; or
- (c) decline to approve the market rules or rule change.
(2) An application under this section must be made in the manner specified by the FMA.

(3) The approval period is 40 working days, or (if extended under subsection (1)(b)) 60 working days, after the FMA receives the application.
(4) If, during the approval period, the applicant revises and resubmits the proposed market rules or rule change, then this does not result in the commencement of a new approval period under this section if the revision—
- (a) is made in response to comments by the FMA; or
- (b) consists of immaterial changes (for example, typographical changes).
Compare: 1988 No 234 s 36K

330 Approval of proposed market rules and changes

(1) The FMA must approve the proposed market rules or rule change provided to it under section 329 unless the FMA is satisfied that—
- (a) it is not in the public interest to do so after having had regard to—
  - (i) the purposes of this Part (and the main and additional purposes of the Act stated in sections 3 and 4); and
  - (ii) the consistency of the rules or the rule change with the obligations under section 312; or
- (b) (if subpart 4 would apply to the rules once approved) the rules, or the rules as changed, for the financial product market will not provide appropriate continuous disclosure by listed issuers of material information that is not generally available to the market, after having regard to—
  - (i) the purposes of this Part (and the main and additional purposes of the Act stated in sections 3 and 4); and
  - (ii) any other matters that the FMA considers relevant.
(2) The FMA must, in considering whether to approve proposed market rules for a new market, take into account any previously approved market rules that the applicant proposes to also apply to the relevant market.

Compare: 1988 No 234 s 36L

331 Notice of decision on rules

(1) The FMA must give written notice of its decision under section 330 to—
- (a) the applicant for approval; and
- (b) every other prescribed person.
(2) If the FMA extends the approval period under section 329 or declines to approve the rules, the written notice under subsection (1) must include a statement of the FMA's reasons for exercising the power.

(3) If the FMA approves the proposed market rules or rule change, the FMA must also publish a notice in the Gazette, and on an Internet site maintained by or on behalf of the FMA, identifying the market rules approved under section 330 (but need not incorporate them).

(4) The notice in the Gazette is a regulation for the purposes of the Regulations (Disallowance) Act 1989 (but not for the purposes of the Acts and Regulations Publication Act 1989).

332 Power of FMA to request changes to market rules on certain matters

(1) The FMA may, if it considers it necessary or desirable to promote any of the purposes of this Part or the meeting of any of the ~~licensed~~ market operator obligations, request a licensed market operator to prepare a draft change to the market rules for any of its licensed markets on a specified matter.
(2) The FMA may make a request under subsection (1) by written notice to the licensed market operator ~~and~~ only—
- (a) after carrying out a review under section 337(1) or (2); or
- (b) if it believes on reasonable grounds that it is urgent to do so at any other time.
(3) The licensed market operator must, as soon as practicable but, in any case, before the expiry of 60 working days after receiving the written notice (or any further time allowed by the FMA), do either or both of the following things:
- (a) provide a proposed rule change to the FMA under section ~~330~~329 that addresses the requested matter:
- (b) provide the FMA with a written report that—
  - (i) identifies any requested matter or matters that have not been addressed by a proposed rule change; and
  - (ii) explains why the licensed market operator has not done so; and
  - (iii) suggests alternative ways (if any) by which the matter or matters are being or may be dealt with; and
  - (iv) sets out if, when, and how the licensed market operator proposes to provide for the matter or matters (if at all).
(4) This section does not allow the FMA to request a draft market rule or change on a matter that is not within the matters set out in section 327.

Compare: 1988 No 234 s 36M

333 Overseas-regulated markets must give notice of market rules and rule changes to FMA

A licensed market operator of a market licensed under section 315 must—
- (a) provide the market rules of the licensed market to the FMA at the time of the application under section 313; and
- (b) as soon as practicable after any changes are made to those rules, provide the rule change to the FMA together with the date of the change and an explanation of its purpose.
Compare: Corporations Act 2001 s 793D (Aust)

334 Market rules must be available for public inspection

(1) A licensed market operator must ensure that a copy of the market rules for each of its licensed markets is—
- (a) available for public inspection, free of charge and during normal office hours, at the head office of that licensed market operator; and
- (b) published on an Internet site maintained by, or on behalf of, the licensed market operator at all reasonable times.
(2) A licensed market operator that fails to comply with subsection (1) commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000.

(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1988 No 234 s 36Q

335 Application of Acts relating to regulations to contractual market rules

To avoid doubt, market rules are not regulations for the purposes of the Regulations (Disallowance) Act 1989 and the Acts and Regulations Publication Act 1989 or for any other purpose.

Compare: 1988 No 234 s 36R

Monitoring of licensed market operator obligations

336 Licensed market operator must give report on compliance with licensed market operator obligations to FMA

(1) A licensed market operator must, within 3 months after the end of its reporting period, give a report to the FMA and the Minister on the extent to which it has complied with its ~~licensed~~ market operator obligations in the preceding reporting period.

(2) The report must contain, or be accompanied by, the information (if any) in relation to the licensed market operator's performance against its ~~licensed~~ market operator obligations specified by the FMA before the commencement of the relevant reporting period.

(3) The reporting period for the purposes of this subpart is the financial year of the licensed market operator or any longer reporting period set in the conditions of the licence.

Compare: 1988 No 234 s 36YA

337 FMA to carry out licensed market operator obligations reviews

(1) The FMA may, at any time, carry out a review of how well a licensed market operator is meeting any or all of its ~~licensed~~ market operator obligations.

(2) The FMA must carry out a review of how well a licensed market operator is meeting all of its ~~licensed~~ market operator obligations at least once in respect of each reporting period of the licensed market operator.
(3) The FMA—
- (a) may, in carrying out the review, take into account the most recent report and other information provided under section 336 and any other information it considers appropriate; and
- (b) must, after carrying out the review, provide a draft written report on its review to the licensed market operator and take into account any submissions made by the licensed market operator within the reasonable period for submissions specified by the FMA.
(4) The FMA must not carry out a review of a designated settlement system (within the meaning of section 156M(1) of the Reserve Bank of New Zealand Act 1989) of a licensed market operator under this section (but nothing in this subsection prevents a review under that Act being carried out in conjunction with a review under this section).

Compare: 1988 No 234 s 36YB

338 FMA must make written report on licensed market operator obligations review

(1) The FMA must give a written report on a review under section 337 to the Minister and the licensed market operator—
- (a) as soon as practicable after carrying out the review; and
- (b) in any case, within 3 months after the licensed market operator has provided its report to the FMA under section 336.
(2) The FMA must also publish the written report on the review on an Internet site maintained by or on behalf of the FMA.

(3) However, the FMA may, in publishing the written report of its review, omit from the published report any information for which it considers there would be a good reason for withholding under the Official Information Act 1982 if a request for that information were made under that Act.

Compare: 1988 No 234 s 36YC

339 FMA may require licensed market operator to submit action plan on failure to meet licensed market operator obligations

(1) If the FMA considers, after carrying out a review under section 337(1) or (2), that a licensed market operator has failed or is failing to meet any 1 or more of its ~~licensed~~ market operator obligations, it may, by written notice, require the licensed market operator to submit an action plan to the FMA.
(2) The notice must—
- (a) set out the details of the failure; and
- (b) specify the date by which the action plan must be submitted to the FMA.
(3) The licensed market operator must, as soon as practicable but in any case before the date specified by the FMA, do either or both of the following things:
- (a) provide an action plan that addresses the failure and specifies—
  - (i) the actions that the licensed market operator proposes to take to remedy the failure or to avoid any further failure; and
  - (ii) the timetable for taking those actions:
- (b) provide the FMA with a written report that—
  - (i) identifies any matter that has not been addressed by an action plan; and
  - (ii) explains why the licensed market operator does not consider that matter to be a failure or gives any other reasons why the licensed market operator has not provided an action plan on the matter.
Compare: 1988 No 234 s 36YD

340 Approval, amendment, or rejection of action plan

(1) If a licensed market operator submits an action plan, the FMA may—
- (a) approve the action plan; or
- (b) require the licensed market operator to amend the action plan and resubmit it to the FMA by a specified date for approval or rejection; or
- (c) reject the action plan.
(2) If the FMA requires the licensed market operator to amend an action plan provided to the FMA, the licensed market operator must do either or both of the following things:
- (a) provide an amended action plan that addresses the matter required to be amended:
- (b) provide the FMA with a written report that—
  - (i) identifies any matter that has not been addressed by an amendment to the action plan first provided; and
  - (ii) explains why the licensed market operator does not consider that the matter needs amending or gives any other reasons why the licensed market operator has not provided an amendment addressing the matter.
(3) If the FMA approves the action plan (whether as first provided or after amendment), the licensed market operator must comply with the action plan.

(4) An action plan that has been approved by the FMA may be varied at any time by agreement between the licensed market operator and the FMA.

Compare: 1988 No 234 s 36YE

341 Minister may give licensed market operator obligations direction to licensed market operator

(1) The Minister may, after having regard to any advice of the FMA, give a written direction to a licensed market operator if—
- (a) the Minister considers that the licensed market operator has failed or is failing to meet any 1 or more of its ~~licensed~~ market operator obligations; and
- (b) any of the following has occurred:
  - (i) the licensed market operator has not provided an action plan when required under section 339; or
  - (ii) the licensed market operator has not provided an amended action plan when required under section 340; or
  - (iii) the FMA has rejected a licensed market operator's action plan; or
  - (iv) the licensed market operator has not complied with an approved action plan.
(2) The direction may specify—
- (a) the actions that the licensed market operator must take to remedy any failure or to avoid any further failure to meet any 1 or more of its ~~licensed~~ market operator obligations; and
- (b) the timetable for taking those actions.
(3) The licensed market operator must comply with the direction.

Compare: 1988 No 234 s 36YF

342 Minister may vary, suspend, or cancel licence

(1) If the Minister could give a direction under section 341, the Minister may also, by written notice to the licensed market operator, vary the conditions of the licence (following the procedure set out in section 323).

(2) If the Minister could give a direction under section 341 and the Minister is satisfied that the licensed market operator does not meet the requirements referred to in section 314 or 315, the Minister may also, by written notice to the licensed market operator, suspend or cancel the licence (following the procedure set out in section 323).

Control limits on licensed market operators

343 Power to impose control limits on licensed market operators

(1) The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations imposing, altering, or revoking a control limit (which is the highest percentage of voting rights in the body corporate that may be held or controlled by any person) for a body corporate that—
- (a) is, or may be, a licensed market operator; or
- (b) is a holding company of a body corporate referred to in paragraph (a).
(2) A control limit does not apply to a body corporate before its licence~~, or its subsidiary's licence,~~ as a licensed market operator takes effect.

(3) The Minister must not make a recommendation for the purposes of subsection (1) unless he or she has consulted the body corporate and is satisfied that it is in the public interest to make the recommendation.
(4) For the purposes of this section and the rest of this subpart,—

control, in relation to a voting right, means having, directly or indirectly, effective control of the voting right
voting right means a currently exercisable right to cast a vote at meetings of members or shareholders of a body corporate, not being a right to vote that is exercisable only in 1 or more of the following circumstances:
- (a) during a period in which a payment or distribution (or part of a payment or distribution) in respect of the financial product that confers the voting right is in arrears or some other default exists:
- (b) on a proposal that affects rights attached to the financial product that confers the voting right:
- (c) during the liquidation of the body corporate:
- (d) in respect of a special, immaterial, or remote matter that is inconsequential to control of the body corporate.
Compare: 1988 No 234 s 36S

344 Control limit not to be exceeded

(1) No person may hold or control voting rights in a body corporate that exceed any control limit for that body corporate that applies under regulations made under section 343, except in accordance with an approval under section 346.

(2) For the purposes of this section, voting rights held or controlled by an associated person of a person must be treated as voting rights held or controlled by that person.

(3) Subsection (1) does not apply to any voting rights in a body corporate held or controlled by a person to the extent that those rights were held or controlled by that person before the control limit was imposed or decreased, as the case may be.

Compare: 1988 No 234 s 36T

345 Effect of exceeding control limit

(1) Every person who contravenes section 344—
- (a) must take the steps that are necessary to ensure that the person is no longer in contravention of that section at the end of 60 working days after the date of first contravention; and
- (b) must not exercise or control the exercise of any voting rights that exceed the control limit while ~~he or she~~ the person contravenes that section.
(2) An exercise of voting rights in a body corporate by or under the control of a person in contravention of subsection (1)(b) is of no effect, and must be disregarded ~~by the person responsible for~~ in counting the votes concerned.

(3) However, subsections (1)(b) and (2) do not invalidate a resolution if the votes concerned were counted by the body corporate in good faith and without knowledge that the voting rights were exercised in contravention of subsection (1)(b).

Compare: 1988 No 234 s 36U

346 Application for approval to exceed control limit

(1) A person may apply to the FMA for approval for any person or class of persons to exceed a control limit for a body corporate that applies under regulations made under section 343.

(2) The FMA must, within a reasonable time, give the application to the Minister with advice about the application.

(3) The Governor-General may, by Order in Council made on the recommendation of the Minister, approve an application under subsection (1) and specify the terms and conditions (if any) applying to the approval.
(4) The Minister may not make a recommendation for the purposes of subsection (3) unless,—
- (a) if the body corporate is not the applicant or 1 of the applicants for the approval, he or she has consulted the body corporate on the application ~~at least 20 working days before making the recommendation~~; and
- (b) he or she is satisfied that it is in the public interest to make the recommendation.
(5) An approval granted under subsection (3)—
- (a) may have retrospective effect; but
- (b) is of no effect if any term or condition of the approval has not been complied with.
(6) An approval granted under subsection (3) is for the purposes of the control limit only, and not for the purposes of any other enactment.

Compare: 1988 No 234 s 36V

347 Revocation or amendment of approval

(1) The Governor-General may, by Order in Council made on the recommendation of the Minister,—
- (a) revoke an approval granted under section 346; or
- (b) vary, revoke, or suspend any term or condition of such an approval.
(2) The Minister may not make a recommendation for the purposes of subsection (1) unless—
- (a) he or she has consulted the person to whom the approval was granted and the body corporate concerned; and
- (b) he or she is satisfied that it is in the public interest to make the recommendation.
Compare: 1988 No 234 s 36W

Other provisions relating to licensing of financial product markets

348 FMA may give advice to Minister

(1) The FMA may give advice to the Minister in relation to any matter in respect of which the Minister has a discretion under this subpart or any other matter concerning financial product markets.

(2) If the Minister has delegated a function or power to the FMA under this subpart, any obligation under this subpart for the FMA to give advice to the Minister, or for the Minister to have regard to the advice of the FMA, in connection with that matter does not apply.

349 Delegation of Minister's licensing functions and powers to FMA

(1) The Minister may, either generally or particularly, delegate to the FMA all or any of the Minister's functions or powers under this subpart in connection with the licensing of financial product markets.

(2) A delegation under this section must be in writing.

(3) The FMA must not delegate any functions or powers delegated to it under this section except in accordance with the terms of the delegation.
(4) The power of the Minister to delegate under this section—
- (a) is subject to any prohibitions, restrictions, or conditions contained in any other Act in relation to the delegation of the Minister's functions or powers; but
- (b) does not limit any power of delegation conferred on the Minister by any other Act.
(5) The FMA may perform or exercise any functions or powers delegated to it under this section in the same manner and with the same effect as if they had been conferred on the FMA directly (subject to any restrictions or conditions imposed under the delegation).

(6) If the FMA purports to act under a delegation under this section, the FMA must, in the absence of proof to the contrary, be presumed to be acting in accordance with the terms of the delegation.

(7) No delegation affects or prevents the performance or exercise of any function or power by the Minister or affects the responsibility of the Minister for the actions of a person acting under the delegation.

350 Regulations modifying subpart Part for licensed markets

(1) The Governor-General may, on the recommendation of the Minister in accordance with subsection (3), make regulations for any 1 or more of the following purposes:
- (a) providing that any 1 or more of the provisions in subparts 2 to 8 of this Part (including any definitions in this Act as they apply in the relevant provisions, but excluding the obligations in section 312) do not apply in respect of a licensed market or class of licensed markets (and accordingly do not apply in relation to any issuers listed or financial products quoted on those markets):
- (b) providing for replacement or modified provisions to apply in respect of the licensed market or class of licensed markets (for example, instead of having continuous disclosure provisions in the listing rules and requiring listed issuers to comply with those provisions, having periodic or event-based disclosure or some other way of dealing with any information assymmetries in the market):
- (c) stating which provisions of the regulations are Part 5 market provisions for the purposes of this Act (see Part 7, in which Part 5 market provisions are specified to be civil ~~remedy~~ liability provisions), including which provisions are alternative disclosure obligations for the purposes of section 312:
- (d) providing that a financial product market must not be treated as a licensed market for the purposes of any provision or provisions of this Act or any other specified enactment.
(2) Any regulations made under subsection (1) must specify the licensed market or class of licensed market to which they apply.
(3) The Minister must, in relation to a recommendation under this section,—
- (a) have regard to the matters set out in section 306; and
- (b) be satisfied, in relation to any recommendation relating to subsection (1)(a) or (1)(d), that the extent to which the regulations disapply any enactment to a licensed market is not broader than is reasonably necessary to address the matters that gave rise to the regulations.

Subpart 8—Operation of licensed markets

351 Licensed market operator must notify FMA of disciplinary actions and suspected contraventions

(1) A licensed market operator must notify the FMA, in accordance with sections 352 and 353, if—
- (a) the operator takes any disciplinary action against a participant in the licensed market:
- (b) the operator knows or suspects that a person has committed, is committing, or is likely to commit a significant contravention of—
  - (i) the market rules; or
  - (ii) this Act, the Takeovers Act 1993, or any enactment made under either of those Acts.
(2) The FMA must notify the licensed market operator of its decision to take, or not to take, any action in relation to a notification under subsection (1)(b)(ii).

Compare: 1988 No 234 s 36ZD

352 When notification required

The licensed market operator must give the notice under section 351 immediately after taking the disciplinary action or knowing or suspecting the person has committed, is committing, or is likely to commit a significant contravention.

Compare: 1988 No 234 s 36ZE

353 Details and method of notification

(1) The notice under section 351 must include—
- (a) the person's name and contact details; and
- (b) if it relates to a disciplinary action, the grounds for, nature of, and reasons for the action taken; and
- (c) if it relates to a known or suspected contravention, the facts supporting the licensed market operator's view and the obligation to which the known or suspected contravention relates; and
- (d) any other information required by the regulations or by the FMA under section 357.
(2) The licensed market operator must give the notice in the form and by the method required by the regulations (if any).

Compare: 1988 No 234 s 36ZF

354 Licensed market operator must ensure FMA has access to real-time trading and other information

(1) A licensed market operator must, if requested by the FMA, give to the FMA the information that is necessary to enable the FMA to carry out real-time surveillance of the operation of the licensed market.

(2) The FMA must pay all reasonable costs of the licensed market operator in providing the information under this section.

Compare: 1988 No 234 s 36ZFA

355 Licensed market operator must give FMA material information given to market participants

(1) If a licensed market operator makes material information available to participants, or any class of participants, in a licensed market, the licensed market operator must also give that information to the FMA in accordance with this section.

~~(2) The licensed market operator must give that information to the FMA immediately after giving it to the participants.~~

~~(3) The licensed market operator must give that information to the FMA in the same form and by the same method as it gives that information to the participants.~~

~~Compare: 1988 No 234 ss 36ZG, 36ZH, 36ZI~~

356 Waiver of notification and disclosure obligations

(1) Sections 351 to ~~355~~ 354 do not apply to the extent that the FMA—
- (a) waives its entitlement to any notice or information or class or classes of notices or information; or
- (b) agrees with the licensed market operator a different time, form, or method of notification or disclosure.
(2) A waiver or an agreement under this section must be in writing.

Compare: 1988 No 234 s 36ZJ

357 Licensed market operator must give FMA or Takeovers Panel other information and assistance on request

(1) A licensed market operator must give to the FMA or the Takeovers Panel (or any person authorised by the FMA or the Takeovers Panel) information, assistance, and access to the licensed market operator's facilities if the FMA or the Takeovers Panel reasonably requests it in order to carry out its functions.

(2) The FMA or the Takeovers Panel must require that information, assistance, or access by notice in writing to the licensed market operator.

Compare: 1988 No 234 s 36ZK

358 Power to disclose further information

(1) A licensed market operator may provide to the FMA any information that the licensed market operator considers may assist the FMA in the performance of the FMA's functions.

(2) A licensed market operator may provide to the Takeovers Panel any information that the licensed market operator considers may assist the Takeovers Panel in the performance of its functions.

Compare: 1988 No 234 s 36ZL

359 Licensed market operator must give notice and have regard to submissions on continuous disclosure determinations

(1) This section and section 360 apply to a determination by a licensed market operator if—
- (a) the determination exempts from, waives, or determines the meaning of a continuous disclosure provision of its listing rules for a licensed market (or varies or revokes a determination of that kind); and
- (b) that continuous disclosure provision relates to material information that is not generally available to the market.
(2) The licensed market operator must—
- (a) give the FMA no less than 2 trading days' written notice before making the determination of—
  - (i) the proposed terms of the determination; and
  - (ii) the reasons for the proposed determination; and
- (b) have regard to any written submissions made to it by the FMA within that notice period; and
- (c) must, as soon as is reasonably practicable after making the determination, give written notice to the FMA of—
  - (i) the terms of the determination; and
  - (ii) the reasons for the determination.
(3) A failure to comply with this section or section 360 does not affect the validity of a determination.

Compare: 1988 No 234 s 36ZM

360 Limited notice and submissions for urgent determinations

If a licensed market operator thinks it is necessary or desirable in the public interest for a determination to be made more urgently than section 359(2) permits,—
- (a) it may give less than 2 trading days' notice before it makes the determination, and the notice and submissions may be oral rather than written; but
- (b) it must include in that notice the reasons for acting urgently and must otherwise comply with that subsection.
Compare: 1988 No 234 s 36ZN

361 FMA may give directions to licensed market operators

(1) The FMA may give a direction under subsection (2) in accordance with sections 362 to 366 in relation to a licensed market.
(2) The FMA may, for up to 15 trading days,—
- (a) direct a licensed market operator to suspend trading of quoted financial products or a class of quoted financial products; or
- (b) give the licensed market operator any other direction in relation to that trading; or
- (c) direct a licensed market operator to suspend participation by a participant or class of participants in the licensed market.
(3) ~~For the avoidance of~~ To avoid doubt, the FMA may not use its power to direct the licensed market operator to amend the market rules or to direct the licensed market operator on the making of a determination on the market rules.

(4) The direction is subject to appeal only in accordance with section 508.

Compare: 1988 No 234 s 36ZO

362 Grounds for continuous disclosure direction

(1) A direction on the grounds in this section is a continuous disclosure direction.
(2) A direction may be given under section 361 in accordance with sections 364 to 366 if the FMA—
- (a) has regard to the purpose of this Part (and the main and additional purposes of the Act stated in sections 3 and 4) and any other matters it considers relevant; and
- (b) is satisfied that 1 of the following grounds applies:
  - (i) a listed issuer has contravened a continuous disclosure obligation or a term or condition of a continuous disclosure exemption; or
  - (ii) a determination by a licensed market operator to which section 359 applies does not achieve appropriate continuous disclosure by a listed issuer of material information that is not generally available to the market; or
  - (iii) the licensed market operator's administration of the continuous disclosure provisions of its listing rules does not achieve appropriate continuous disclosure by a listed issuer of material information that is not generally available to the market; and
- (c) is also satisfied that the direction is necessary or desirable to protect people who are trading the quoted financial products or the class of quoted financial products and that there is no more appropriate course of action to address the situation.
Compare: 1988 No 234 s 36ZP

363 Grounds for other directions

A direction may also be given under section 361 in accordance with sections 364 to 366 if the FMA is satisfied that—
- (a) the direction is necessary or desirable to protect people who are trading the quoted financial products, or the class of quoted financial products, of 1 or more listed issuers; but
- (b) it is not a matter relating to continuous disclosure.
Compare: 1988 No 234 s 36ZQ

364 Notice, opportunity for licensed market operator to act, and submissions before FMA gives directions

(1) A direction may be given under section 361 only if—
- (a) the FMA has given written notice to the licensed market operator and listed issuer or issuers concerned of—
  - (i) its opinion that the requirements of section 362 or 363 are satisfied; and
  - (ii) the proposed terms of the direction; and
  - (iii) the reasons for its opinion; and
- (b) after receiving the FMA's notice, the licensed market operator does not take, within the reasonable period stated in the notice,—
  - (i) in the case of a proposed direction to suspend trading of the quoted financial products, action to prevent that trading; or
  - (ii) in any other case, any other action that, in the FMA's view, is adequate to address the situation raised in the notice; and
- (c) the FMA has had regard to any written submissions made to it by the licensed market operator and the listed issuer or issuers concerned within that notice period; and
- (d) the FMA still considers that it is appropriate to give the direction to the licensed market operator.
(2) A reasonable period in subsection (1)(b) is, in the case of a continuous disclosure direction, 2 trading days (or any longer time the FMA wishes to allow) and, in the case of any other direction, any longer time that is reasonable in the circumstances.

Compare: 1988 No 234 s 36ZR

365 Limited notice and submissions for urgent continuous disclosure directions

If the FMA thinks it is necessary or desirable in the public interest for a continuous disclosure direction to be made more urgently than section 364 permits,—
- (a) it may give less than 2 trading days' notice before it gives the direction, and the notice and submissions may be oral rather than written; but
- (b) it must include in that notice the reasons for acting urgently and must otherwise comply with that section.
Compare: 1988 No 234 s 36ZS

366 Notice and opportunity to be heard and represented after FMA gives direction

If a direction is given under section 361, the FMA—
- (a) must, as soon as is reasonably practicable, give written notice to the licensed market operator and listed issuer or issuers (if any) concerned of—
  - (i) its opinion that the requirements of section 362 or 363 are satisfied; and
  - (ii) the terms of the direction; and
  - (iii) the reasons for its opinion; and
- (b) must, after the direction is given, give each of those persons or the person's representative an opportunity to make written submissions and to be heard on the matter; and
- (c) may also give notice to any other person of the matters in paragraph (a).
Compare: 1988 No 234 s 36ZT

367 Effect of directions to licensed market operator

(1) A direction under section 361 has effect for the period specified in it (which may be a period of up to 15 working days) and, during that period, the licensed market operator must comply with the direction and must not allow any trading that is contrary to the direction to take place.

(2) If the FMA considers that the direction should have effect for a period longer than 15 working days, it may apply to the court for, and the court may make, an order that the licensed market operator comply with the direction for the period that the court thinks fit.

Compare: 1988 No 234 s 36ZU

368 Provisions as to directions

(1) The FMA may vary a direction under section 361 in the same way as it may make that direction.

(2) The FMA may revoke a direction under section 361 by giving written notice to the licensed market operator.

Compare: 1988 No 234 s 36ZV

369 Contracting out of or modification of continuous disclosure process requirements

(1) The FMA and a licensed market operator may, by agreement in writing, contract out of, or modify, any of the requirements of sections 359, 360, and 364 to 366.

(2) For that purpose, the licensed market operator may agree to waive or modify obligations under those sections that are owed to listed issuers listed on the relevant licensed market.

Compare: 1988 No 234 s 36ZW

370 Offence for failing to comply with direction

A licensed market operator that refuses or fails, without reasonable excuse, to comply with a direction under section 361 commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $300,000.

Compare: 1988 No 234 s 36ZX

Subpart 9—Transfer of transferable financial products

371 Financial products to which this subpart applies

(1) This subpart applies to financial products if—
- (a) the financial products are transferable; and
- (b) the names of the holders of the products are entered in a register kept under this Act or otherwise kept in New Zealand.
(2) However, this subpart does not apply to—
- (a) interests in a superannuation scheme or KiwiSaver scheme:
- (b) derivatives:
- (c) financial products of a prescribed kind.
(3) In this subpart, specified financial product means a financial product to which this subpart applies.

Transfer of specified financial products using transfers in prescribed form or containing prescribed information

372 Transfer of specified financial products by transfer

(1) Specified financial products disposed of in an authorised transaction may be transferred by means of a products transfer that—
- (a) either—
  - (i) is in the form prescribed for the purposes of this section; or
  - (ii) contains the prescribed information; and
- (b) is duly completed; and
- (c) is executed, in New Zealand, by the transferor (whether or not it is also executed by the transferee).
(2) However, subsection (1) does not apply if the specified financial products impose a liability to the issuer on the transferee.
(3) In this subpart, authorised transaction means an acquisition or disposal of financial products in which each of the parties is, or is acting through the agency of, any of the following persons (who are acting in the ordinary course of business):
- (a) a person authorised to undertake trading activities on a licensed market:
- (b) a ~~solicitor~~ lawyer in practice on his or her own account:
- (c) a chartered accountant:
- (d) a trustee corporation (as defined in section 2 of the Trustee Act 1956):
- (e) a registered bank:
- (f) a person prescribed for the purposes of this definition.
Compare: 1991 No 119 s 3

373 Transfer of specified financial products by products transfer and brokers transfer

(1) Specified financial products sold in a licensed market transaction may be transferred by means of—
- (a) a products transfer that—
  - (i) either is in the form prescribed for the purposes of this paragraph or contains the prescribed information; and
  - (ii) is duly completed; and
  - (iii) is executed, in New Zealand, by the transferor (whether or not it is also executed by the transferee); and
  - (iv) specifies financial products that include the financial products sold; and
- (b) a brokers transfer that—
  - (i) either is in the form prescribed for the purposes of this paragraph or contains the prescribed information; and
  - (ii) is duly completed; and
  - (iii) specifies the financial products sold.
(2) Subsection (1) applies whether or not the specified financial products impose a liability to the issuer on the transferee.

(3) In this subpart, licensed market transaction means a sale and purchase of financial products in which each of the parties is, or is acting through the agency of, a person authorised to undertake trading activities on a licensed market who is acting in the ordinary course of that business.

Compare: 1991 No 119 s 4

374 Products transfer does not need to be witnessed

(1) The execution of a products transfer for the purposes of section 372 or 373(1)(a) does not need to be witnessed.

(2) Subsection (1) does not affect any enactment, rule of law, constitution, deed, or agreement regulating the execution of documents by companies or other bodies corporate or by any particular company or body corporate.

Compare: 1991 No 119 s 5

375 Transfers to be instruments of transfer for purposes of other enactments and instruments

For the purposes of any enactment, rule of law, constitution, deed, or agreement that relates to the transfer of financial products or to instruments of transfer of financial products,—
- (a) a products transfer to which section 372 applies must be treated as being an instrument of transfer of the financial products specified in the products transfer:
- (b) a products transfer to which section 373 applies and a brokers transfer together must be treated as being an instrument of transfer of the financial products specified in both transfers.
Compare: 1991 No 119 s 6(1)

Transfer of specified financial products by electronic means

376 Approval of electronic transfer system

(1) The Governor-General may, on the advice of the Minister given in accordance with a recommendation of the FMA, by Order in Council, approve a system or systems that is or that are wholly or partly electronic for the transfer of specified financial products.

(2) A system of transfer may be approved under this section by reference to the name of the system or any name by which it is commonly known.

(3) A system of transfer may be approved under this section whether or not it also involves the use of a procedure or part of a procedure for the transfer of financial products that is authorised under this Act or otherwise.

(4) The FMA must not make a recommendation under subsection (1) unless the FMA has consulted the persons or representatives of the persons that the FMA considers will be substantially affected by the Order in Council.

(5) A failure to comply with subsection (4) does not affect the validity of an Order in Council made under this section.

Compare: 1991 No 119 s 7(1)–(3), (6)–(8)

377 Specified financial products may be transferred under approved system

(1) Specified financial products disposed of, whether in an authorised transaction or licensed market transaction or otherwise, may be transferred in accordance with a system of transfer that is approved under section 376.

(2) Subsection (1) applies whether or not the specified financial products impose a liability to the issuer on the transferee.

Compare: 1991 No 119 s 7(5)

378 Minor technical modifications to system

Modifications of a minor technical nature may, from time to time, be made to a system of transfer approved by an Order in Council made under section 376 and, in any such case, the system incorporating those modifications must be treated as having been approved by the order.

Compare: 1991 No 119 s 7(4)

Registration may not be refused

379 Registration may not be refused on ground that financial products have been transferred under this subpart

(1) If financial products have been transferred in accordance with section 372, 373, or 377, no person may refuse to register the transfer on the ground that the financial products have been so transferred or that the financial products have not been transferred by other means.

(2) Nothing in this section affects any right a person has to refuse to register a transfer of securities on any other ground.

Compare: 1991 No 119 s 8

380 Effect of this Act on other enactments

(1) This subpart has effect despite anything to the contrary in any enactment, rule of law, constitution, deed, or agreement (but subject to any order made under this Act).

(2) Nothing in this subpart affects the validity of any means of transferring financial products other than under this subpart.

(3) Sections 35, 39(1), and 84 of the Companies Act 1993 must be read subject to the provisions of this subpart.

Compare: 1991 No 119 s 9

Subpart 10—Unsolicited offers to purchase financial products off-market

381 Definitions relating to unsolicited offer regulations and related provisions

(1) For the purposes of this Act, an unsolicited offer means an offer to which all of the following apply:
- (a) the offer is to acquire a financial product, to acquire a power to dispose of a financial product, or to acquire another interest in or right attaching to a financial product, made by a person (A) to another person (B) (whether the acquisition is by A or an associated person of A):
- (b) the offer is unsolicited by B:
- (c) the offer is not made on a licensed market:
- (d) the offer is within the class or classes of unsolicited offers to which the regulations apply:
- (e) the offer is not a takeover offer for a financial product under the Takeovers Code nor an acquisition or a redemption by a company of its shares under the Companies Act 1993.
(2) For the purposes of this subpart, and any regulations made under this subpart, an offer made by A includes an invitation or a proposal for A (or an associated person of A) to make an offer.

Compare: 1988 No 234 s 48DA

382 Regulations concerning unsolicited offers

(1) The Governor-General may, on the recommendation of the Minister in accordance with subsection (3), make regulations setting out the rules applying to unsolicited offers for any or all of the purposes set out in subsection (2).
(2) The purposes are—
- (a) ensuring offerees are fully informed of—
  - (i) the current market price of a quoted financial product or, for a non-quoted financial product, a fair estimate of the value of the non-quoted financial product and the basis for making that estimate; and
  - (ii) the material terms of the offer and their effect; and
  - (iii) any warnings issued by the FMA (if ordered by the FMA to be contained in or to accompany offer documents); and
  - (iv) their rights and remedies under the regulations:
- (b) ensuring that notice of an unsolicited offer to product holders is given to the relevant listed issuer or issuer and the FMA:
- (c) ensuring that no agreement to transfer may bind offerees for a minimum period, for the purpose of enabling offerees to consider, and reconsider, any decision to accept an offer:
- (d) requiring a minimum or maximum offer period, or both:
- (e) setting out any other rules applying to unsolicited offers.
(3) In formulating recommendations to make regulations under this section, the Minister must—
- (a) have regard to the objective of preventing unfair practices in the making of unsolicited offers; and
- (b) consult with the FMA.
Compare: 1988 No 234 s 48DB

383 Specific provisions for regulations concerning unsolicited offers

The regulations made under section 382 may, without limiting that section,—
- (a) define the class or classes of unsolicited offers and financial products to which the regulations apply:
- (b) define or clarify the meaning of unsolicited for the purposes of this subpart:
- (c) prescribe requirements in relation to unsolicited offers and the making of those offers, including requirements as to the form and content of those offers, variations of those offers, the updating and resending of offer documents or other corrective statements, and the implication of terms into the offer or any resulting agreement:
- (d) prescribe the information, statements, certificates, or other documents that must be supplied to offerees, the relevant listed issuer or issuer, and the FMA:
- (e) provide for any duties or functions of the FMA in connection with the rules applying to unsolicited offers:
- (f) state which obligations are unsolicited offer provisions for the purposes of this Act:
- (g) provide for the exercise of a right to withdraw a notification of a decision to accept an unsolicited offer, a right to refuse to complete a transfer, or any other right or remedy of offerees, and any consequences and obligations that apply in those cases:
- (h) provide for any powers of, and requirements on, listed issuers, issuers, or their agents in connection with transfers under an unsolicited offer and provide for protections from liability for those persons, persons administering a register of financial products, and other persons for the purposes of section 384:
- (i) provide for the regulations to—
  - (i) extend to or apply in respect of any conduct of an associated person of an offeror and any conduct that, in substance or effect, constitutes an unsolicited offer:
  - (ii) prohibit contracting out of the regulations and include any other provision or provisions designed to prevent avoidance of the regulations (for example, prohibiting persons from inviting others to 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 the regulations applied):
- (j) provide for transitional matters.
Compare: 1988 No 234 s 48DC

384 Protection from liability in connection with unsolicited offer provisions

(1) This section applies to any person who—
- (a) is stated by regulations made under section 382 to be a protected person for the purposes of this section; and
- (b) is not in contravention of an unsolicited offer provision or exemption.
~~(2) A person to whom this section applies is not liable for any act done or omitted to be done by that person in good faith if the act or omission is—~~
- ~~(a) required by an unsolicited offer order made by the FMA; or~~
- ~~(b) required by an order made by the court under Part 7 in connection with a contravention of an unsolicited offer provision or exemption; or~~
- ~~(c) stated by regulations made under section 382 to be a protected act or omission for the purposes of this section.~~
(2) A person to whom this section applies is not liable for any act done or omitted to be done by that person in good faith if the act or omission is stated by regulations made under section 382 to be a protected act or omission for the purposes of this section.

Compare: 1988 No 234 s 47AA

Subpart 11—Civil liability for certain contraventions of this Part

385 Part 5 market provisions

(1) All of the provisions specified in subsections (3) and (4) are Part 5 market provisions.

(2) A contravention of any of the provisions listed in subsection (3) may give rise to ~~a civil remedy~~ civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.
(3) The provisions are the following:
- (a) sections 235 to 237 (insider conduct prohibited):
- (b) sections ~~256, 257,~~ 257 and 260 (market manipulation):
- (c) section 265 (continuous disclosure):
- (d) section 308 (need for financial product market licence):
- (e) section 309 (prohibition on holding out).
(4) A contravention of any of the following may give rise to ~~a civil remedy~~ civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case:
- (a) sections 270 to 273 and sections 283 to 285 (substantial holding disclosure obligations):
- (ab) section 280 (conditions of exemption for corporate trustees and nominee companies):
- (b) sections 295 and 296 (directors' and senior managers' disclosure obligations):
- (c) section 326 (licensed markets must be operated under market rules that comply with subpart):
- (d) section 333 (overseas-regulated markets must give notice of market rules and rule changes to FMA):
- (e) section 341 (Minister may give ~~licensed~~ market operator obligations direction to licensed market operator):
- (f) section 345(1)(a) (effect of exceeding control limit):
- (g) sections 351, 354, ~~355,~~ 357, 359, and 367 (requirements applying in operation of licensed market):
- (h) unsolicited offer provisions imposed under section 382.

Part 6
Licensing and other regulation of market services

386 Overview

(1) This Part provides for the licensing of market services and regulates the provision of market services by licensees and other persons as follows:
- (a) subpart 1 determines which market service providers must be licensed, and which other providers of market services may be licensed:
- (b) the issue of those licences, their conditions, and their expiry or cancellation are dealt with in subpart 2:
- (c) subpart 3 provides for the monitoring and enforcement of those licences:
- (d) subpart 4 ~~requires licensees to give~~ provides for disclosure to investors about certain ~~market~~ services ~~when provided to retail investors~~:
- (e) subpart 5 ~~contains requirements for licensees to provide~~ requires there to be client agreements for certain ~~market~~ services ~~to retail investors under client agreements~~:
- (f) subpart 6 regulates the provision of retail discretionary investment management services ~~by a licensee~~ under ~~its~~ a licence and the provision of related custodial services ~~under that service~~ by a custodian:
- (g) subpart 7 provides for the making of regulations on the holding and application of investors' funds and property by derivatives issuers (whether or not they are licensed or are making regulated offers of derivatives):
- (h) subpart 8 identifies the civil ~~remedy~~ liability provisions under this Part.
(2) This section is a guide only to the general scheme and effect of this Part.

386A Territorial scope for licensing of certain market services

(1) This Part applies to a discretionary investment management service or a prescribed intermediary service received by an investor in New Zealand, regardless of where the person providing the service is resident, is incorporated, or carries on business.

(2) For other licensed market services that relate to regulated offers, see section 34 as to the territorial scope of Part 3.

Subpart 1—Key provisions

387 When provider of market services must needs to be licensed

A person must not provide any of the following market services without holding, or being authorised to provide the service under, a market services licence that covers that service (unless an exemption applies under section 387A):
- (a) acting as a manager of a registered scheme (other than a restricted scheme):
- (b) acting as an independent trustee of a restricted scheme:
- (c) acting as a provider of a discretionary investment management service (see subparts 4 to 6):
- (d) acting as a derivatives issuer in respect of a regulated offer of derivatives (see subpart 5).
~~(2) Subsection (1) does not apply to the extent that the person—~~
- ~~(a) acts as the operator of a designated settlement system (within the meaning of Part 5C of the Reserve Bank of New Zealand Act 1989):~~
- ~~(b) carries out activities that are covered by a financial product market licence:~~
- ~~(c) carries out activities as a participant in a licensed market, or in another prescribed overseas market, in the prescribed circumstances.~~
~~(3) Subsection (1)(c) does not apply (unless a declaration applies under subpart 3 of Part 8) to the extent that—~~
- ~~(a) the person is permitted to provide the discretionary investment management service by sections 17 to 20 of the Financial Advisers Act 2008; or~~
- (b) the discretionary investment management service would not be a financial adviser service for the purposes of the Financial Advisers Act 2008 as a result of an exemption under section 13, 14, or 148 of that Act or the regulations applying under that Act.
~~Example~~

An authorised financial adviser may provide a personalised service that is a discretionary investment management service under section 18 of the Financial Advisers Act 2008 and need not be a DIMS licensee.

A registered person (whether an entity or an individual) may provide a discretionary investment management service of any type to a wholesale client under section 20 of the Financial Advisers Act 2008 and need not be a DIMS licensee.

A lawyer providing a discretionary investment management service in the ordinary course of a business of that kind is not, under section 14 of the Financial Advisers Act 2008, providing a financial adviser service for the purposes of that Act. That exemption applies to the prohibition in this section also.

387A Exemptions from need for market services licence

(1) A person is exempt from the licensing requirement under section 387 to the extent that the person—
- (a) carries out activities that are covered by a financial product market licence:
- (b) acts as the operator of a designated settlement system (within the meaning of Part 5C of the Reserve Bank of New Zealand Act 1989):
- (c) carries out activities as a participant in a licensed market, or in another prescribed overseas market, in the prescribed circumstances.
(2) A person is exempt from the licensing requirement under section 387(c) in respect of a service (unless a declaration applies under subpart 3 of Part 8) to the extent that—
- (a) the service is not a retail service (see clause 33A of Schedule 1); or
  
  Example
  
  A financial services firm may provide a discretionary investment management service to a number of investors using a model portfolio. As long as no retail investor is within the relevant class of investors, the firm need not be a DIMS licensee (and, as a result of section 14(1)(ka)(ii) of the Financial Advisers Act 2008, the firm need not come within sections 17 to 20 of the Financial Advisers Act 2008 either).
- (b) the person provides the service under sections 17 to 20 of the Financial Advisers Act 2008; or
  
  Example
  
  An authorised financial adviser may, under section 18 of the Financial Advisers Act 2008, provide a personalised service that is a discretionary investment management service to a retail client (as defined in that Act) and need not be a DIMS licensee.
  
  A registered person may, under section 20 of the Financial Advisers Act 2008, provide a discretionary investment management service of any type to a wholesale client (as defined in that Act) and need not be a DIMS licensee.
- (c) the service is, under section 13, 14, or 148 of the Financial Advisers Act 2008, or the regulations applying under that Act, exempted from being a financial adviser service for the purposes of that Act.
  
  Example
  
  A trustee corporation providing a discretionary investment management service in the course of its estate administration business under its trustee corporation statute is not, under section 14 of the Financial Advisers Act 2008, providing a financial adviser service for the purposes of that Act. That exemption applies to section 387 of this Act also and so the trustee corporation need not be a DIMS licensee either.

388 When providers of other market services may be licensed

(1) In addition, a person may hold a market services licence to act as a provider of prescribed intermediary services (for example, a person-to-person lending intermediary or a crowd funding intermediary if prescribed by regulations).

(2) See clause 6 of Schedule 1 for exclusions for offers through licensed intermediaries and subparts 4 and 5 for other provisions that may govern these services.

389 Meaning of licensed market services

~~In this Act, licensed market services are those market services—~~
- ~~(a) that are required to be licensed under this Part; or~~
- ~~(b) for which a person holds a licence under this Part (whether or not required to do so).~~

390 Prohibitions on holding out

(1) A person must not hold out that the person holds a market services licence if that is not the case.

(2) A person must not hold out that the person holds a market services licence that covers a service if that is not the case.

390A Meaning of discretionary investment management service and related terms

(1) In this Act, a person (A) provides a discretionary investment management service if—
- (a) A—
  - (i) decides which financial products to acquire or dispose of on behalf of an investor (B); and
  - (ii) in doing so is acting under an authority granted to A to manage some or all of B's holdings of financial products; or
- (b) A provides financial advice in the ordinary course of, and incidentally to, providing a discretionary investment management service under paragraph (a) (for example, as to the appropriate scope of an investment mandate).
(2) In determining whether A has an authority under subsection (1)(a)(ii), it does not matter if B has the right to be consulted on, or to countermand, A's decisions.

(3) In this Act,—

DIMS licensee means a person that acts as a provider of a discretionary investment management service under a licence under this Part

investment authority means, in relation to a discretionary investment management service, the authority granted by an investor to manage some or all of an investor's holdings of financial products under the service

investment mandate means the scope of an investment authority

provider of a discretionary investment management service means a person who is in the business of providing a discretionary investment management service.

Subpart 2—Issue of licences, conditions, and duration

391 Principles guiding the exercise of FMA powers

In exercising a power under this subpart, the FMA must be guided by the following principles:
- (a) exercising the power must be necessary or desirable in order to promote the main purposes of this Act as specified in section 3 or the additional purposes specified in section 4; and
- (b) in exercising the power, the FMA should not unnecessarily restrict the licensing of persons.

Issue of licences

392 FMA may issue licence

The FMA may issue a licence in accordance with this subpart.

393 Application for licence

(1) A person may apply for a licence in the manner that is specified by the FMA.

(2) The application may be for a licence to cover 1 or more market services (or 1 or more classes of services, if the FMA specifies, on its Internet site, classes into which a market service is divided).

(3) An applicant must provide to the FMA the information that is required by the FMA to assist it in determining the application.

394 When licence must be issued

The FMA must, after receiving an application under section 393, issue a licence that covers a market service or the class of market service to which the application relates if the FMA is satisfied that—
- (a) the applicant is a fit and proper person to hold the licence; and
- (b) the eligibility criteria (if any) that are prescribed by the regulations for licences for that service are satisfied in respect of the application; and
- (c) the applicant's directors, senior managers, and proposed directors and senior managers satisfy the requirements that are prescribed by the regulations for licences for that service (if any); and
- (d) the applicant is capable of effectively performing that service (having regard to the proposed conditions of licence); and
- (e) there is no reason to believe that the applicant will not comply with the market services licensee obligations; and
- ~~(f) the applicant—~~
  - ~~(i) is registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008; or~~
  - ~~(ii) complies with section 13(a) and (b) of that Act; and~~
- (f) the applicant is, or will be, registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 on and from commencing to provide that service; and
- (g) in the case of an applicant for a licence to act as a manager of a registered scheme or to be a DIMS licensee, the applicant or any ~~subsidiary~~ authorised body under section 398 does not have in its constitution any provision under which directors of the applicant or ~~subsidiary~~ authorised body (as the case may be) may, when exercising powers or performing duties as a director, act otherwise than in the best interests of the applicant or ~~subsidiary~~ authorised body.

395 Procedural requirements

(1) The FMA must, before making a decision under section 394,—
- (a) have regard to the prescribed matters; and
- ~~(b) have regard to whether the applicant is a QFE or a member of a QFE group or is a registered bank; and~~
- (b) have regard to whether the applicant, or 1 or more of the applicant's directors or senior managers, is a licensed provider (within the meaning of section 4 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008) or a member of a QFE group; and
- (ba) have regard to whether the provision of the market service to which the application relates is merely incidental to the provision of another market service that is or will be covered by a licence; and
- (c) consult with all prescribed persons or classes of prescribed persons (if any).
(2) The FMA must not refuse to issue a licence, or include limits or restrictions under section 401(3)(a) that are materially more restrictive than those requested in the application, unless—
- (a) the FMA gives the applicant no less than 10 working days' written notice of the following matters before it exercises the power:
  - (i) that the FMA may refuse to issue the licence or impose the limits or restrictions; and
  - (ii) the reasons why it may exercise that power; and
- (b) the FMA gives the applicant or the applicant's representative an opportunity to make written submissions on the matter within that notice period.
(3) In this section, member of a QFE group has the same meaning as in section 5 of the Financial Advisers Act 2008.

396 Notice of decision

(1) The FMA must give written notice of its decision under section 394 to—
- (a) the applicant; and
- (b) every other prescribed person.
(2) If the FMA refuses to issue a licence or includes limits or restrictions under section 401(3)(a) that are materially more restrictive than those requested in the application, the written notice under subsection (1) must include a statement of the FMA's reasons for exercising the power.

397 Licence must be issued for particular market services

(1) If the FMA decides to issue a licence, it must ensure that it specifies the particular market services, or class of market services, that it covers.

(2) The same licence may cover more than 1 type of market services.
(3) In that case,—
- (a) a reference in this Act to the market services that a licence covers is taken instead to be a reference to each of those market services severally; and
- (b) the decision to add another market service or class of market services to a licence must be made on the same basis as a decision to issue a licence; and
- (c) a licence may be varied, suspended, or cancelled in respect of 1 of those market services or classes only, as if each were separately licensed.

398 Licence may cover subsidiaries

(1) A licence may authorise 1 or more subsidiaries of the licensee to provide a market service covered by the licence if the FMA is satisfied that the subsidiary meets the eligibility criteria and other requirements prescribed by the regulations for the purposes of this section.

~~(2) In that case, a reference to the licensee in this Act is a reference to the licensee and any subsidiary providing the market service under the licence.~~

398 Licence may cover related bodies corporate as authorised bodies

(1) A licence may, in its conditions, authorise 1 or more named related bodies corporate of the licensee to provide a market service covered by the licence if the FMA is satisfied that—
- (a) arrangements are or will be in place to ensure that the licensee will maintain appropriate control or supervision over the provision of that service by the related body corporate under the licence; and
- (b) the related body corporate is capable of effectively performing that service (having regard to the proposed conditions of licence); and
- (c) there is no reason to believe that the related body corporate will not comply with the market services licensee obligations; and
- (d) the related body corporate is, or will be, registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 on and from commencing to provide that service; and
- (e) the related body corporate meets the eligibility criteria and other requirements prescribed by the regulations for the purposes of this section (if any).
(2) The licence may also, in its conditions, determine that, for the purposes of 1 or more provisions of this Part, notices or reports need to be given to or by, or powers or duties may be exercised or performed by, only—
- (a) the licensee (and in this case the relevant action must be treated, for that purpose, as being given to or by, or exercised or performed by, the 1 or more bodies authorised under subsection (1)); or
- (b) 1 or more bodies authorised under subsection (1) (and in this case the relevant action must be treated, for that purpose, as being given to or by, or exercised or performed by, the licensee).
(3) If an authorised body contravenes any market services licensee obligation, the licensee must be treated as also having contravened that market services licensee obligation.

399 FMA must send licence details to Registrar

(1) The FMA must send the details specified in subsection (2) to the Registrar.
(2) The details, for each licence, are—
- (a) the name of the licensee; and
- (b) the market services or class of market services covered by the licence; and
- (c) the conditions of the licence imposed by the FMA (including whether an associated custodian is permitted for the purposes of a discretionary investment management service); and
- ~~(d) the subsidiaries authorised to provide the market services (if any); and~~
- (d) the authorised bodies (if any); and
- (e) any other prescribed information.
(3) The FMA may publicly notify any details about a licence as it thinks fit.

Conditions of licence

400 Conditions of licence

(1) The licence is subject to—
- (a) a condition that the licensee or authorised body may, under the licence, provide only the market services or class of market services to which the licence relates and for which each person is authorised under the licence; and
- (b) the conditions imposed by the FMA under section 401; and
- (c) the conditions imposed by regulations (if any).
(2) The condition in subsection (1)(a) is subject to the limits and restrictions imposed under section 401(3)(a).

(3) The licensee and every authorised body must comply with the conditions imposed on the licensee's licence.

401 When FMA may impose permitted conditions

(1) The FMA may, by written notice to the applicant or licensee,—
- (a) impose conditions on a licence when the licence is issued; and
- (b) vary, revoke, add to, or substitute any conditions of licence imposed under this section at any time after the licence is issued.
(2) A condition referred to in subsection (1) may only be of a prescribed kind or relate to a prescribed matter (except as set out in subsection (3)).
(3) A condition referred to in subsection (1) may—
- (a) impose limits or restrictions on the services that are covered by the licence (for example, by reference to particular financial products, issuers, or investors, or classes of financial products, issuers, or investors, or by reference to any other matters):
- (b) impose conditions relating to the requirements referred to in section 394 or 398 (for example, to ensure that those requirements continue to be satisfied and to require verification that those requirements continue to be satisfied):
- (c) specify the date of expiry of the licence (the expiry date).

402 Licensee may apply for variation of conditions

(1) A licensee may apply, in the manner that is specified by the FMA, for the FMA to exercise a power under section 401(1)(b) (for example, to vary a condition that imposes restrictions on the services that can be provided under the licence or to vary the authorised bodies or the market services or class of services that those bodies may provide).

(2) A licensee must provide to the FMA the information that is required by the FMA to assist it in determining the application.

403 Procedure for variation of conditions

The FMA must not exercise a power under section 401(1)(b) (except on an application under section 402), or refuse an application for a variation under section 402, unless—
- (a) the FMA gives the licensee no less than 10 working days' written notice of the following matters before it exercises the power:
  - (i) that the FMA may exercise the power; and
  - (ii) the reasons why it may exercise the power; and
- (b) the FMA gives the licensee or the licensee's representative an opportunity to make written submissions on the matter within that notice period.

404 Consequences of contravening conditions

(1) If a licensee or an authorised body contravenes a condition of ~~its~~ a licence, the FMA may exercise a power under subpart 3 (for example, it may require the licensee or authorised body to submit an action plan).

(2) Subsection (1) does not limit subpart 3 of Part 7 (which provides for civil ~~remedies~~ liability that may be imposed in relation to a contravention of a condition imposed by regulations).

Expiry, suspension, or cancellation of licences

405 Duration of licence

(1) A licence continues in force until the close of its expiry date unless sooner cancelled.

(2) If a licensee applies for a new licence no later than 2 months before the expiry date of an existing licence that the new licence is intended to supersede, and the application is not disposed of before the expiry date, the existing licence continues in force until the application is disposed of.

406 When FMA may suspend or cancel licence

The FMA may suspend (for a specified period or until a specified condition is met and in relation to the licensee, any authorised body or bodies, or all of them) or cancel a licence—
- (a) if the licensee, by written notice, requests the FMA to do so; or
- (b) if the FMA is satisfied that the licensee or an authorised body has died, is incapacitated, has ceased to exist, or has become subject to an insolvency event; or
- (c) in accordance with subpart 3.

407 Effect of expiry, suspension, or cancellation of licence on appointments

(1) The expiry or cancellation of ~~the~~ a licence ~~of a person~~ does not, of itself, terminate an appointment held by ~~the person~~ the licensee or any authorised body (but, if the person continues to hold the appointment and does not obtain a licence, or authorisation under a licence, that covers the appointment, the person may contravene section 387).

(2) If a licence is suspended, the person or persons to whom the suspension relates is taken not to hold, or be authorised by, that licence while the suspension is in effect.

Subpart 3—Monitoring and enforcement of licences

408 Meaning of material change of circumstances

In this subpart, material change of circumstances, in relation to a ~~licensee~~ licence, means—
- (a) a change that adversely affects the licensee’s or an authorised body's capacity to perform the market services covered by the licence in an effective manner; or
- (b) a change that means that the requirements referred to in section 394(a) to (g) or 398(1)(a) to (e) are not, or are no longer, satisfied.

Reports

409 Licensee must deliver regular reports to FMA

Every licensee must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, send to the FMA reports that contain the prescribed documents, information, and other matters.

410 Licensee must report certain matters

(1) Every licensee must ensure that there are in place effective methods for—
- (a) monitoring the licensee's and every authorised body's compliance with ~~its~~ the market services licensee obligations; and
- (b) identifying material changes in circumstances.
(2) Subsection (3) applies if a licensee believes that—
- (a) the licensee or an authorised body has contravened, may have contravened, or is likely to contravene a market services licensee obligation in a material respect; or
- (b) a material change of circumstances has occurred, may have occurred, or is likely to occur in relation to the ~~licensee~~ licence; or
- (c) the information provided under section 393 or 402 is false or misleading in a material particular.
(3) The licensee must, as soon as practicable after the licensee forms the belief referred to in subsection (2), send a report containing details of the belief, the licensee's grounds for the belief, and all other prescribed information—
- (a) to the FMA; or
- (b) if the licensee is a manager of a registered scheme (other than a restricted scheme),—
  - (i) to the FMA and the supervisor, if the report is of a contravention or possible contravention of a market services licensee obligation imposed by a condition of the licence; or
  - (ii) to the supervisor, if the report is of a contravention or possible contravention of any other market services licensee obligation.

411 Restriction on section 410

A licensee is not required to provide, under section 410, information that would, if so provided, be likely to incriminate the licensee under New Zealand law for an offence punishable by a fine or imprisonment.

FMA's powers in case of contravention of market services licensee obligation, material change, etc

412 FMA's powers in case of contravention of market services licensee obligation, material change, etc

(1) The FMA may exercise a power under subsection (2) if it is satisfied that—
- (a) a licensee or an authorised body has materially contravened a market services licensee obligation; or
- (b) a material change of circumstances has occurred in relation to a ~~licensee~~ licence; or
- (c) the information provided under section 393 or 402 by a licensee is false or misleading in a material particular; or
- (d) a licensee or an authorised body is likely to materially contravene a market services licensee obligation or a material change of circumstances is likely to occur in relation to a ~~licensee~~ licence.
(2) The FMA may, by written notice to the licensee or an authorised body and otherwise in the prescribed manner, do 1 or more of the following:
- (a) censure the licensee or authorised body (or both):
- (b) require the licensee or authorised body (or both) to submit an action plan to the FMA within the time and in the manner specified by the FMA:
- (c) give a direction to the licensee or authorised body (or both).
(3) The FMA may also, by written notice to the licensee and otherwise in the prescribed manner, suspend (for a specified period or until a specified condition is met and in relation to the licensee, any authorised body or bodies, or all of them) or cancel the licence of the licensee if it is satisfied that—
- (a) subsection (1)(a), (b), or (c) applies; and
- (b) the licensee or an authorised body does not meet, or no longer meets, the requirements referred to in section 394(a) to (g) or 398(1)(a) to (e).
(4) Section 401 also provides for the FMA to vary, revoke, add to, or substitute any conditions of a licence (for example, by removing an authorisation for an authorised body).

413 Procedure for exercising powers

(1) The FMA must not exercise a power under section 412 unless—
- (a) the FMA gives the licensee or an authorised body no less than 10 working days' written notice of the following matters before it exercises the power:
  - (i) that the FMA may exercise the power; and
  - (ii) the reasons why it may exercise the power; and
- (b) the FMA gives the licensee or authorised body or the licensee's or authorised body's representative an opportunity to make written submissions on the matter within that notice period.
(2) The FMA must, before exercising a power under section 412(3), consider whether, in the circumstances, it would be more appropriate to exercise a power under section 412(2).

414 Notice requirements

(1) The notice under section 412(2) or (3) must—
- (a) state the FMA's reasons for giving the notice; and
- (b) in the case of section 412(3), specify the date on which the cancellation takes effect.
(2) The FMA must give a copy of the notice to every prescribed person.

Action plan

415 Action plan

If the notice under section 412 requires ~~the licensee~~ a person to submit an action plan to the FMA, the ~~licensee~~ person must, as soon as practicable but in any case within the time specified by the FMA and otherwise in the manner specified by the FMA, submit to the FMA an action plan that specifies—
- (a) the actions, as the case may be, that the ~~licensee~~ person proposes to take to—
  - (i) remedy or avoid the contravention or likely contravention of the market services licensee obligation; or
  - (ii) avoid any further contravention of the market services licensee obligation; or
  - (iii) mitigate or avoid any adverse effects or changes arising, or likely to arise, from the material change of circumstances; or
  - (iv) correct the false or misleading information or mitigate the adverse consequences of providing the false or misleading information (or both); and
- (b) the date by which each step will be taken.

416 Approval, amendment, or rejection of action plan

(1) If a ~~licensee~~ person submits an action plan, the FMA may—
- (a) approve the action plan; or
- (b) require the ~~licensee~~ person to amend the action plan and resubmit it to the FMA by a specified date for approval or rejection; or
- (c) reject the action plan.
(2) If the FMA requires the ~~licensee~~ person to amend an action plan provided to the FMA, the ~~licensee~~ person must, within the time specified by the FMA, provide an amended action plan that addresses the matter required to be amended.

(3) If the FMA approves the action plan (whether as first provided or after amendment), the ~~licensee~~ person must comply with the action plan.

(4) An action plan that has been approved by the FMA may be varied at any time by agreement between the ~~licensee~~ person and the FMA.

417 Consequences of failure to submit action plan, rejection of action plan, or failure to comply with action plan

(1) The FMA may exercise a power under section 412(2)(a) or (c) or (3) if—
- (a) a ~~licensee~~ person fails to submit an action plan or amended action plan within the time and in the manner specified by the FMA; or
- (b) the FMA rejects an action plan; or
- (c) the FMA is satisfied that an action plan has not been complied with.
(2) A contravention of section 415 or 416 may also give rise to ~~a civil remedy~~ civil liability (see subpart 3 of Part 7).

Directions

418 Directions

(1) If the notice under section 412 gives a direction to ~~the licensee~~ a person, the notice must specify—
- (a) the actions, as the case may be, that the ~~licensee~~ person must take to—
  - (i) remedy or avoid the contravention or likely contravention of the market services licensee obligation; or
  - (ii) avoid any further contravention of the market services licensee obligation; or
  - (iii) mitigate or avoid any adverse effects or changes arising, or likely to arise, from the material change of circumstances; or
  - (iv) correct the false or misleading information or mitigate the adverse consequences of providing the false or misleading information (or both); and
- (b) the date by which each step must be taken.
(2) The ~~licensee~~ person to whom the direction is given must comply with the direction.

419 Consequences of failure to comply with directions

(1) A ~~licensee~~ person that refuses or fails, without reasonable excuse, to comply with a direction under section 412(2)(c) commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $300,000.

(2) If the FMA is satisfied that a direction under section 412(2)(c) has not been complied with, the FMA may (without limitation) exercise a power under section 412(2)(a) or (3).

(3) A contravention of section 418 may also give rise to ~~a civil remedy~~ civil liability (see subpart 3 of Part 7).

Subpart 4—Disclosure obligations for licensees providing market certain services provided to retail investors

420 Application of subpart

This subpart applies to a licensee ~~who, under the licence,~~ or an authorised body in respect of any of the following services provided under a licence:
- (a) ~~acts as a provider~~ the provision of a discretionary investment management service that is a retail service:
- (b) ~~acts as a provider of~~ the provision of a prescribed intermediary services (but only if the regulations state that this subpart applies).

421 Licensee must make disclosure Disclosure must be made before providing service to retail investor

A licensee or an authorised body who provides ~~a market~~ the service ~~to a retail investor~~ must ensure that a disclosure statement relating to the service is given to ~~the~~ each retail investor who receives the service, in accordance with this Act and the regulations.

422 Timing and method of disclosure

(1) The disclosure statement must be provided,—
- (a) in the case of a discretionary investment management service, before the investment authority is granted by the retail investor; or
- (b) in the case of a prescribed intermediary service, at the prescribed time.
(2) However, if it is not practicable to comply with subsection (1) by reason of any prescribed circumstance, the licensee or authorised body must—
- (a) give the minimum prescribed disclosure in accordance with the regulations; and
- (b) give the disclosure statement required by this subpart to the retail investor as soon as practicable afterwards.
(3) The disclosure statement must be provided to the retail investor personally or delivered or sent to the retail investor's last known address or an address (including an electronic address) specified by the investor for that purpose.

423 Purpose of disclosure statement

The purpose of a disclosure under this subpart is to provide certain information that is likely to assist a retail investor to decide—
- (a) whether or not to proceed, or continue to proceed, with the ~~market~~ service by the licensee or authorised body in question; or
- (b) to change any instruction in relation to the provision of that ~~market~~ service by the licensee or authorised body.

424 Disclosure statement

(1) Disclosure under this subpart must be made by 1 or more disclosure statements in accordance with the regulations (and may be combined with other disclosure statements under this Act, the Financial Advisers Act 2008, or the Reserve Bank of New Zealand Act 1989 except in the prescribed circumstances).
(2) A disclosure statement must—
- (a) be in writing; and
- (b) state the date as at which the disclosure statement is prepared; and
- (c) state the name and contact details of the licensee or authorised body providing the service; and
- (d) contain all of the information that it is required to contain by the regulations; and
- (e) be accompanied by all the documents that the regulations require it to be accompanied by; and
- (f) comply with all other requirements of the regulations relating to the content of the disclosure statement.
(3) The disclosure statement must comply with all requirements of the regulations relating to the form and presentation of the statement.

425 Misleading or deceptive False or misleading statements and omissions

(1) A person must not provide a disclosure statement to a person, or continue to provide ~~a market~~ the service for which a disclosure statement is required ~~to which this subpart applies~~ (until subsection (5) applies), if—
- (a) there is—
  - (i) a statement in the disclosure statement that is ~~misleading or deceptive or is likely to mislead or deceive~~ false or misleading or is likely to mislead; or
  - (ii) an omission from the disclosure statement of information that is required to be contained in the disclosure statement by the regulations; and
- (b) the statement or omission is materially adverse from the point of view of the retail investor.
(2) For the purposes of this section, a statement about a future matter (including the doing of, or refusing 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) Subsection (2) does not limit the meaning of a reference to a misleading statement.

(4) This section does not limit sections 421 to 424.

(5) If subsection (1) applies, a person may provide ~~a market~~ the service to a retail investor after providing the investor with a new disclosure statement that ~~complies with this section~~ does not contravene subsection (1).

(6) See section 489 (offence to knowingly or recklessly contravene this section).

426 Further prescribed information to be made available

(1) A licensee or an authorised body who provides ~~a market~~ the service to ~~a retail~~ an investor must,—
- (a) at the request of the investor or at the prescribed times or on the occurrence of the prescribed events, make available to the investor the documents, information, and other matters that are required to be made available under this section by the regulations; and
- (b) at the prescribed times or on the occurrence of the prescribed events, make publicly available the documents, information, and other matters that are required to be made publicly available by the regulations.
(2) The documents, information, and other matters must be made available in the prescribed manner.

Subpart 5—Requirement for licensees to provide service certain services to be provided under client agreements

427 Application of subpart

This subpart applies to a licensee ~~who, under the licence,~~ or an authorised body in respect of any of the following services provided under the licence:
- (a) ~~acts as a provider of~~ the provision of a discretionary investment management service that is a retail service:
- ~~(b) acts as a derivatives issuer:~~
- (b) acting as a derivatives issuer in respect of a derivative offered under a regulated offer:
- (c) ~~acts as a provider~~ the provision of a prescribed intermediary services (but only if the regulations state that this subpart applies).

427A Need for client agreement

(1) The licensee or authorised body who provides the service to an investor must ensure that there is a client agreement governing that service.
(2) The client agreement must be entered into,—
- (a) in the case of a discretionary investment management service, before the investment authority is granted by the investor; and
- (b) in the case of a derivative offered under a regulated offer, before the derivative is issued to the investor; and
- (c) in the case of a prescribed intermediary service, at the prescribed time.

428 Requirement to have Contents, form, and effect of client agreement

~~(1) A licensee must provide the market service to a retail investor under a client agreement.~~

(2) ~~The~~ A client agreement required by this subpart must provide adequately for the matters prescribed by regulations.

(3) The client agreement is treated as containing any provision that is implied into it by or under this Act.

(4) The client agreement must be in writing and be contained in 1 or more documents that are legally enforceable as between the retail investor and the licensee or authorised body.

(5) The client agreement has no effect to the extent that it contravenes, or is inconsistent with, this Act or any term implied into it by or under this Act.

Subpart 6—Provision Additional regulation of discretionary investment management services

429 Application of subpart

This subpart applies to—
- (a) ~~a licensee who, under the licence, acts as a provider~~ a DIMS licensee in respect of the provision of a discretionary investment management service that is a retail service under a licence:
- (b) a person who acts as a custodian of investor property ~~on behalf of a retail investor~~ under a discretionary investment management service ~~provided by a licensee~~ of that kind.

430 Meaning of provider of discretionary investment management service and related terms

(1) In this Act, a person acts as a provider of a discretionary investment management service if the person is in the business of providing a discretionary investment management service in relation to financial products within the meaning of this Act.
~~(2) For the purposes of this Act,—~~

~~class DIMS means a discretionary investment management service that is not a personalised DIMS~~

~~discretionary investment management service has the meaning set out in section 12 of the Financial Advisers Act 2008~~

investment authority means the authority given by an investor to a DIMS licensee to decide which financial products to acquire or dispose of on behalf of the investor, irrespective of whether the investor has the right to be consulted on, or to countermand, the licensee's decisions

~~investment mandate means the scope of an investment authority~~

investor property means a financial product held on behalf of a retail investor, or money or property held for or received from, or on account of, a retail investor in relation to acquiring, holding, or disposing of a financial product
~~personalised DIMS means a discretionary investment management service under which any of the following applies:~~
- (a) the investment mandate has been tailored to take account of the particular financial situation or goals (or any 1 or more of them) of a named investor or an investor that is otherwise readily identifiable by the provider of the service (rather than merely taking into account the fact that the client comes within a class of persons having predefined characteristics):
- ~~(b) the person or persons who exercise the investment authority in fact take into account that particular financial situation or those goals in doing so:~~
- (c) an investor would, in the circumstances in which the service is provided, reasonably expect that the investment mandate has been tailored, or the investment authority will be exercised, in that way.

Duties of DIMS licensee

431 DIMS licensee's duties

(1) A DIMS licensee must—
- (a) act honestly in providing ~~a discretionary investment management~~ the service; and
- ~~(b) provide the service in accordance with the client agreement and the investment mandate and any subsequent instructions given by the retail investor; and~~
- (c) in exercising any powers or performing any duties as a DIMS licensee under the client agreement or investment mandate for the service,—
  - (i) act in the best interests of the investors using the service and treat those investors equitably (if ~~it is a class DIMS~~ the service is provided to a class of investors); and
  - (ii) act in the best interests of the particular investor using the service (if ~~it is a personalised DIMS~~ the service is provided to only that investor); and
- (d) not make use of information acquired through being the DIMS licensee in order to—
  - (i) gain an improper advantage for itself or any other person; or
  - (ii) cause detriment to the investors using the service.
(2) A DIMS licensee must provide the service in accordance with the client agreement and the investment mandate.

432 Duties of directors and senior managers of DIMS licensee

A director or senior manager of a DIMS licensee must—
- (a) not make use of information acquired through being the director or senior manager of the DIMS licensee in order to—
  - (i) gain an improper advantage for itself or any other person; or
  - (ii) cause detriment to the investors using the service; and
- (b) not make improper use of the position as a director or senior manager of the DIMS licensee to gain, directly or indirectly, an advantage for himself or herself or any other person or to cause detriment to the investors using the service.
Compare: Corporations Act 2001 s 601FE (Aust)

433 Duty of DIMS licensee to comply with professional standard of care

A DIMS licensee must, in exercising any power of investment or performing any duties in that capacity in relation to the service, exercise the care, diligence, and skill that a prudent person engaged in that profession would exercise in the same circumstances.

434 Limits on permitted exemptions and indemnities

(1) If a DIMS licensee has any rights to be ~~paid fees or to be reimbursed for expenses by a retail investor for, or to be exempted from or~~ indemnified by ~~a retail~~ an investor for liabilities incurred in relation to, the performance of the ~~DIMS licensee's services~~ service, those rights—
- (a) must be set out in the client agreement; and
- (b) must be available only in relation to the proper performance of the duties under sections 431(1) and 433.
(2) No other agreement has any effect to the extent that it purports to confer a right of a kind set out in subsection (1).

Compare: Corporations Act 2001 s 601GA(2) (Aust)

435 Requirement for agreed investment mandate with retail investor

(1) A DIMS licensee must provide ~~a discretionary investment management service to a retail investor~~ the service under an investment mandate ~~that is agreed in writing with~~ set by a written investment authority granted by the investor.
(2) The DIMS licensee must ensure that the investment mandate provides adequately for the scope of the investment authority, including the following matters (unless subsection (3) applies):
- (a) the nature or type of investments that may be made, and any limits on those; and
- (b) any limits on the proportion of each type of asset invested in; and
- (c) the methodology used for developing and amending the investment strategy and for measuring performance against ~~that investment strategy~~ the investment objectives.
(3) However, if there are no limits on the investment authority, the investment mandate must state that the investment authority is unlimited.

(4) The investment mandate must provide for the matters set out in this section in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8 (if any) that apply to it.

436 Action that must be taken on limit breaks

(1) This section applies to a DIMS licensee if there is a material breach of any limits under an investment mandate ~~agreed with a retail investor~~ referred to in section 435 on either of the following (a limit break):
- (a) the nature or type of investments that may be made:
- (b) the proportion of each type of assets that may be invested in.
(2) If this section applies, the DIMS licensee must report the limit break to the FMA in the prescribed circumstances and in the prescribed manner.

Related party transactions

437 Definition of related party benefits

In sections 438 and 439, a related party benefit, in relation to a DIMS licensee providing the service, is a benefit that—
- (a) is either given out of investor property or creates an exposure to loss for investor property; and
- (b) is given to, or received by, the DIMS licensee or an associated person of the DIMS licensee; but
- (c) does not include fees or expenses that are paid to the DIMS licensee in accordance with the client agreement for that service.

438 General prohibition on transactions giving related party benefits

(1) A DIMS licensee (or any person acting on behalf of the DIMS licensee) must not enter into a transaction that provides for a related party benefit to be given.
(2) However, subsection (1) does not apply to a transaction or series of transactions if 1 of the following applies and the DIMS licensee certifies ~~that—~~to that effect:
- (a) the transaction or transactions are,—
  - (i) ~~in the case of a class DIMS~~ if the service is provided to a class of investors, in the best interests of the investors using the service; or
  - (ii) ~~in the case of a personalised DIMS~~ if the service is provided to only 1 investor, in the best interests of the particular investor affected; or
- (b) section 439 applies to the transaction or transactions or all related party benefits to be given.
(3) A failure to comply with this section does not affect the validity of any transaction (subject to any court order under Part 7).

439 Certain related party benefits permitted

This section applies to—
- Arm's-length terms
- (a) a benefit that is given 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 ~~related party~~ DIMS licensee or the associated person of the DIMS licensee than the terms referred to in subparagraph (i):
- Transactions in registered schemes
- (b) an acquisition or a disposal of a managed investment product in a registered scheme or a benefit or transaction in respect of a prescribed overseas scheme:
- Certain registered bank investments
- (c) ~~investments in category 2 products issued by a registered bank or products prescribed for the purposes of clause 20(c)~~ investments in products referred to in clause 20 of Schedule 1:
- Other prescribed benefits or transactions
- (d) a prescribed benefit or transaction.

439A Requirements for certificates as to related party benefits

(1) A certificate under section 438 is effective only if the certificate—
- (a) states the specific grounds on which it is given under section 438 and (if relevant) section 439 and the basis for relying on those grounds; and
- (b) complies with the prescribed requirements (if any) as to its form, content, or the manner in which it is given.
(2) Nothing in that section requires a new certificate if there is an existing certificate that applies (whether specifically or in general terms) to the transaction or transactions.

DIMS licensees must hold investor money in trust

440 Money paid by, or on account of, investors must be held in trust

(1) This section applies to money paid to a DIMS licensee if the money is paid by, or on account of, an investor in relation to acquiring, holding, or disposing of a financial product under the service.
(2) The DIMS licensee must hold the money in trust for the investor until—
- (a) the financial products are acquired; or
- (b) the money is otherwise applied for the purpose for which it was paid; or
- (c) the money is paid or repaid to the investor; or
- (d) the money is applied in accordance with the investor's express instructions given after the money was paid.
(3) The DIMS licensee must—
- (a) deal with the money, while it is held in trust, in the prescribed manner; and
- (b) if the money needs to be repaid, ensure that the money is repaid as soon as practicable.
Compare: Corporations Act 2001 ss 722, 1017E (Aust)

Custodial service performed as part of discretionary investment management service

441 Application of sections 442 and 443

(1) Sections 442 and 443 apply to investor property only if the financial products constituting investor property are held on behalf of ~~a retail~~ an investor under ~~a discretionary investment management service provided by a DIMS licensee~~ the service.

(2) In this subpart, the person holding the investor property is a custodian.

442 Requirements for custodian

(1) A DIMS licensee must ensure that the investor property is held by a person who meets the custodianship requirements set out in subsection (2).
(2) A custodian of the investor property—
- (a) must be a body corporate (other than the DIMS licensee) that the DIMS licensee believes, on reasonable grounds, to be appropriate to hold, and safeguard, the investor property; and
- (b) may be an associated person of the DIMS licensee (other than ~~in respect~~ by virtue of the custodianship ~~requirements~~) only if—
  - (i) that is permitted by conditions imposed under section 400; and
  - (ii) those conditions are observed.
(3) The DIMS licensee is jointly and severally liable with any custodian for ensuring that investor property covered by an investment authority is held in accordance with this subpart.

443 Certain broker obligations of Financial Advisers Act 2008 apply under this Act

(1) A custodian ~~under this subpart~~ has under this subpart, in relation to property held under the service, all the obligations imposed on a broker by Part 3A of the Financial Advisers Act 2008, and sections 77P to 77T of that Act apply in relation to investor property in the same way as they apply to client money and client property under those sections (but as if each reference to a retail client were to the investor for whom the investor property is held, whether that investor is a retail investor or a wholesale investor).

(2) See Part 7, which provides for enforcement of this obligation under this Act as a civil ~~remedy~~ liability provision.

Subpart 7—Holding and application of investor funds and property by derivatives issuers

444 Application of regulations made under this subpart

Regulations made under this subpart may apply to a derivatives issuer (whether or not it is licensed and whether or not it makes any regulated offer).

445 Regulations regulating holding and application of investor funds and property by derivatives issuers

The Governor-General may, by Order in Council made on the recommendation of the Minister in accordance with section 527(2), make regulations for the purposes of—
- (a) regulating the receipt of money and property from investors by derivatives issuers and the application of that money and property:
- (b) prescribing requirements relating to the deposit of that money and property in separate investors' funds accounts or safe custody:
- (c) specifying the duties and obligations of derivatives issuers in relation to investors' funds accounts, including obligations to make payments into those accounts:
- (d) providing for the protection of money deposited into investors' funds accounts and property deposited in safe custody from claims against derivatives issuers:
- (e) providing for the investment of money referred to in paragraph (d):
- (f) providing for the FMA to carry out functions under the regulations, and its powers and procedures in doing so:
- (g) stating which provisions are Part 6 licence provisions for the purposes of this Act.

Subpart 8—Miscellaneous provisions

Civil liability

446 Part 6 licence provisions

(1) All of the provisions specified in subsections (3) and (4) are Part 6 licence provisions.

(2) A contravention of any of the provisions listed in subsection (3) may give rise to ~~a civil remedy~~ civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.
(3) The provisions are the following:
- (a) section 387 (when provider of market services ~~must~~ needs to be licensed):
- (b) section 390 (prohibitions on holding out):
- (ba) section 425 (false or misleading statements and omissions):
- (bb) section 427A (need for client agreement):
- (c) section 428 (~~requirement to have~~ contents, form, and effect of client agreement):
- (d) section 440(2) (money must be held in trust):
- (e) section 442 (requirement for custodian).
(4) A contravention of any of the following may give rise to ~~a civil remedy~~ civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case:
- (a) section 409 (licensee must deliver ~~regular~~ reports to FMA):
- (b) section 410 (licensee must report certain matters):
- (c) section 415 (action plan):
- (d) section 416 (approval, amendment, or rejection of action plan):
- (e) section 418 (directions):
- (f) section 421 (licensee must make disclosure before providing service to retail investor):
- ~~(g) section 425 (misleading or deceptive statements and omissions):~~
- (h) section 426 (further prescribed information to be made available):
- (i) sections 431 to 433 (duties of DIMS licensee and of directors and senior managers of DIMS licensee):
- (j) section 435 (requirement for agreed investment mandate ~~with retail investor~~):
- (k) section 436 (action that must be taken on limit breaks):
- (l) section 438 (general prohibition on transactions giving related party benefits):
- (m) section 440(3) (money must be dealt with in prescribed manner and repaid as soon as practicable if required):
- (n) section 443 (certain broker obligations of Financial Advisers Act 2008 apply under this Act):
- (o) those provisions of the regulations made under subpart 7 that are stated by those regulations to be Part 6 licence provisions.

Part 6A
Financial reporting

Subpart 1—Overview

446A Overview

This Part provides for issuers to—
- (a) keep proper accounting records; and
- (b) have the issuer's financial statements audited.

446B Interpretation

In this Part, financial statements means the financial statements and any group financial statements that are required to be prepared for the purposes of the Financial Reporting Act 1993, this Act, or the regulations.

Subpart 2—Accounting records

446C Issuer must keep proper accounting records

Every issuer of regulated products must ensure that there are kept at all times accounting records that—
- (a) correctly record and explain the transactions,—
  - (i) in the case of an issuer of equity securities, debt securities, or derivatives, of the issuer; and
  - (ii) in the case of an issuer of managed investment products, of the issuer and of the registered scheme; and
- (b) will at any time enable the financial position of the issuer and of any such scheme to be determined with reasonable accuracy; and
- (c) will enable the issuer to ensure that the financial statements of the issuer and of any such scheme comply with the Financial Reporting Act 1993 and any prescribed requirements; and
- (d) will enable the financial statements of the issuer and of any such scheme to be readily and properly audited.
Compare: 1978 No 103 s 53

446D Place where accounting records to be kept

(1) Accounting records required to be kept by this subpart must be kept—
- (a) at the registered office of the issuer (if any); or
- (b) at another place that the directors of the issuer think fit.
(2) The accounting records may be kept at a place outside New Zealand only if there are sent to, and kept at a place in, New Zealand documents in respect of the business dealt with in those accounting records that—
- (a) disclose with reasonable accuracy the financial position of the business at intervals not exceeding 6 months; and
- (b) will enable the preparation in accordance with the Financial Reporting Act 1993 of—
  - (i) the financial statements of the issuer and any registered scheme referred to in section 446C; and
  - (ii) any other document annexed to any of those statements that gives information that is required by any enactment.
Compare: 1978 No 103 s 53A

446E Accounting records to be in English

(1) Accounting records required to be kept by this subpart and the documents in respect of the business dealt with in those accounting records referred to in section 446D must be kept—
- (a) in written form in English; or
- (b) in a form or manner in which they are easily accessible and convertible into written form in English.
(2) An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1978 No 103 s 53B

446F Period for which accounting records to be kept

(1) Accounting records kept under this subpart, or copies of them, must be retained by the issuer for a period of at least 7 years after the later of—
- (a) the date the records are made; and
- (b) the date of completion of the transaction to which the records relate.
(2) Nothing in this section limits any other requirement under an enactment to keep accounting records for a particular time.

Compare: 1978 No 103 s 53C

446G Inspection of accounting records

(1) Every issuer must make the accounting records required to be kept under this subpart and the documents in respect of the business dealt with in those accounting records referred to in section 446D available, in written form in English at all reasonable times for inspection without charge, to—
- (a) the directors of the issuer; and
- (b) any supervisor (in the case of an issuer of debt securities or the manager of a registered scheme); and
- (c) any other persons authorised or permitted to inspect the accounting records of the issuer or scheme.
(2) An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3) The offence in this section is an infringement offence (see subpart 5 of Part 7).

Compare: 1978 No 103 s 53D

Subpart 3—Audit of financial statements

446H Financial statements to be audited

(1) Every issuer of regulated products that are equity securities, debt securities, or derivatives must ensure that its financial statements are audited by a qualified auditor.

(2) Every issuer of regulated products that are managed investment products must ensure that its financial statements and the financial statements for the scheme to which the products relate are audited by a qualified auditor.

(3) This section applies only to financial statements prepared for the purposes of the Financial Reporting Act 1993.

Compare: 1978 No 103 s 53E

446I Meaning of qualified auditor

(1) For the purposes of this Act, qualified auditor means—
- (a) a licensed auditor; or
- (b) a registered audit firm; or
- (c) in the case of an issuer that is a public entity under the Public Audit Act 2001, the Auditor-General or any other person who may act as the auditor under that Act.
(2) In this section and section 446J, licensed auditor and registered audit firm have the same meanings as in section 6(1) of the Auditor Regulation Act 2011.
(3) None of the following persons is qualified for appointment as the qualified auditor of an issuer of regulated products:
- (a) the issuer, or a director, an officer, or an employee of the issuer:
- (b) a person who is a partner, or in the employment, of a person specified in paragraph (a):
- (c) a body corporate.
(4) A person is not qualified for appointment as the qualified auditor of an issuer of regulated products if the person is, by virtue of subsection (3), disqualified for appointment as auditor of a person that is the issuer's subsidiary or holding company or a subsidiary of the issuer's holding company, or would be so disqualified if that person were a company.

Compare: 1978 No 103 s 2C

446J Appointment of registered audit firm

The appointment of a registered audit firm by the firm name to be the qualified auditor for the purposes of this Act is deemed to be the appointment of all of the partners in the firm, from time to time, who are licensed auditors.

446K Application of other Acts not affected

Nothing in this subpart limits the Companies Act 1993, the Financial Reporting Act 1993, or any other enactment.

Compare: 1978 No 103 s 53F

Subpart 4—Civil liability for certain contraventions of this Part

446L Part 6A financial reporting provisions

(1) All of the provisions specified in subsections (3) and (4) are Part 6A financial reporting provisions.

(2) A contravention of any of the provisions listed in subsection (3) may give rise to civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.
(3) The provisions are the following:
- (a) section 446C (issuer must keep proper accounting records):
- (b) section 446H (financial statements to be audited).
(4) A contravention of any of the following may give rise to civil liability (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case:
- (a) section 446D (place where accounting records to be kept).
- (b) section 446F (period for which accounting records to be kept).

Part 7
Enforcement, liability, and appeals

447 Meaning of contravene

~~In this Act, contravene includes, in relation to a provision, prohibition, obligation, or exemption (a provision),—~~
- ~~(a) a contravention of the provision; or~~
- ~~(b) an attempt to contravene the provision; or~~
- ~~(c) aiding, abetting, counselling, or procuring any other person to contravene the provision; or~~
- ~~(d) inducing, or attempting to induce, any other person, whether by threats or promises or otherwise, to contravene the provision; or~~
- ~~(e) being in any way, directly or indirectly, knowingly concerned in, or a party to, the contravention by any other person of the provision; or~~
- ~~(f) conspiring with any other person to contravene the provision.~~

Subpart 1—FMA's enforcement powers

Stop orders

448 When FMA may make stop orders

The FMA may make a stop order if it is satisfied that—
- (a) a PDS, a register entry, or a disclosure document under clause 26 of Schedule 1 for an offer of financial products—
  - ~~(i) is likely to deceive, mislead, or confuse with regard to any particular that is material to the offer of financial products to which it relates; or~~
  - (i) is false or misleading, or is likely to mislead or confuse, in a material particular; or
  - (ii) contains any material misdescription or material error or any material matter that is not clearly legible; or
  - (iii) does not comply with this Act or the regulations; or
- (b) any provision of Part 3, ~~section 691, or~~ clause 13, 17, 26, or 27 of Schedule 1, or clause 23 of Schedule 5 has been, or is likely to be, contravened in respect of an offer of financial products; or
- (c) section 89 (need for governing document and supervisor) has been, or is likely to be, contravened in respect of debt securities; or
- (d) section 111 (need to register) has been, or is likely to be, contravened in respect of ~~an offer of~~ managed investment products; or
- (e) a registered scheme no longer meets the registration requirements in section 113 or the registration requirements for a particular type of scheme under sections 114 to 119; or
- (f) a restricted communication relating to an offer, or intended offer, of financial products, or the supply, or possible supply, of financial services,—
  - ~~(i) is likely to deceive, mislead, or confuse with regard to any particular that is material to the offer; or~~
  - (i) is false or misleading, or is likely to mislead or confuse, in a material particular; or
  - (ii) is materially inconsistent with any ~~PDS~~ disclosure document referred to in it; or
  - (iii) contains any material misdescription or material error or any material matter that is not clearly legible; or
  - (iv) does not comply with this Act or the regulations; or
- (g) disclosure relating to financial products under subpart 4 of Part 3, or a disclosure statement relating to market services required under subpart 4 of Part 6,—
  - ~~(i) is likely to deceive, mislead, or confuse with regard to any particular that is material to the financial products or market services; or~~
  - (i) is false or misleading, or is likely to mislead or confuse, in a material particular; or
  - (ii) does not comply with this Act or the regulations; or
- (h) any provision of section 387, 390, or 421 has been, or is likely to be, contravened in respect of the supply of market services.

449 Terms of stop order

A stop order may, in relation to the offer, financial products, registered scheme, or market or other financial services referred to in section 448, do 1 or more of the following:
- (a) prohibit offers, issues, sales, or ~~transfers~~ other acquisitions or disposals of financial products specified in the order from being made while the order is in force:
- (b) prohibit an offeror from accepting applications for financial products specified in the order while the order is in force:
- (c) prohibit the distribution of 1 or more of the following while the order is in force:
  - (i) a PDS or any other disclosure document:
  - (ii) a restricted communication referred to in section 448(f):
  - (iii) any restricted communication that relates to the offer of financial products, or supply of financial services, specified in the order:
- (d) prohibit a person from accepting further contributions or deposits in respect of financial products specified in the order while the order is in force:
- (e) prohibit the supply of ~~market~~ financial services specified in the order from being made while the order is in force.

450 Meaning of restricted communication

(1) In this ~~subpart~~ Act, restricted communication means a form of communication—
- (a) that—
  - (i) directly or indirectly refers to an offer, or intended offer, of financial products or the supply, or possible supply, of a financial service; or
  - (ii) is reasonably likely to induce persons to apply for financial products or request the supply of a financial service; or
  - (iii) is reasonably likely to induce persons to make further contributions or deposits referred to in section 10(2)(c); and
- (b) that is authorised or instigated by, or on behalf of, the offeror, the issuer, the service provider, or an associated person of the offeror or issuer or service provider or that is prepared with the co-operation of, or by arrangement with, any of those persons; and
- (c) that is to be, or has been, distributed to a person.
(1A) In this Act, references to a financial product in relation to a restricted communication must be treated as a reference to a financial product as defined in section 15A.

(2) In this ~~subpart,~~ Act, restricted communication includes any advertisement ~~or publication under subpart 3 of Part 3~~.

~~(3) Section 74 applies for the purposes of subsection (1)(a)(ii) or (iii) with any necessary modifications.~~

451 FMA may make interim stop order pending exercise of powers

(1) The FMA may make an interim order (an interim stop order) of the kind referred to in section 449 that is in force for the period referred to in subsection (2) if—
- (a) the FMA is considering, at any time, whether it may exercise a power under section 448; and
- (b) the FMA considers that making an interim stop order is desirable in the public interest.
(2) An interim stop order is in force from the time at which it is made until the close of—
- (a) the date that is 15 working days after the day on which it is made; or
- (b) a later date specified by the FMA by notice to the issuer, offeror, or service provider to which the order relates.
(3) For the purposes of subsection (2)(b),—
- (a) the FMA may specify a later date if the FMA is of the opinion that it is not reasonably practicable for it to complete its consideration as referred to in subsection (1)(a) within the 15-working-day period referred to in subsection (2)(a); and
- (b) the later date must be a date that is no more than 30 working days after the day on which the interim stop order is made.
(4) The FMA—
- (a) may act under subsection (1) or (2)(b) without giving the issuer, offeror, or service provider to which the order relates an opportunity to make submissions to, or be heard before, the FMA in respect of the matter (and, accordingly, section 457 does not apply); but
- (b) must, after acting under subsection (1) or (2)(b), give that issuer, offeror, or service provider or that person's representative an opportunity to make written submissions and to be heard on the matter.
~~(5) In this subpart, service provider means a person that provides a licensed market service.~~

Compare: 1978 No 103 s 43K

452 Persons to whom stop orders and interim stop orders may apply

(1) A stop order or an interim stop order of the kind referred to in—
- (a) section 449(a), (b), (d), or (e) may apply to any person specified in the order (for example, an issuer, an offeror, or a service provider):
- (b) section 449(c) may apply to 1 or more of an issuer, an offeror, a service provider, or any associated persons of an issuer, an offeror, or a service provider.
(2) If a stop order or an interim stop order of the kind referred to in section 449(c) extends to associated persons of the issuer, offeror, or service provider, the order may require—
- (a) all, or any specified class or classes, of the associated persons to comply with the order (including associated persons that may be incorporated or formed after the date of the order); and
- (b) the issuer, offeror, or service provider to provide a copy of the order to all or any of those associated persons.
(3) For the purpose of subsection (2), the order is not required to refer to the associated persons by name.

452A Extended application of subpart

The FMA may make a stop order or an interim stop order in respect of a restricted communication that is distributed or to be distributed to a person outside New Zealand by a person resident, incorporated, or carrying on business in New Zealand.

Direction orders

453 When FMA may make direction orders

(1) The FMA may make a direction order if it is satisfied that, by engaging in any conduct, a person (the relevant person) has contravened, or ~~would~~ is likely to contravene,—
- (a) a Part 2 ~~misleading or deceptive conduct~~ fair dealing provision:
- (b) a Part 3 offer provision:
- (c) a Part 4 governance provision:
- (d) a Part 5 market provision:
- (e) a Part 6 licence provision:
- (ea) a Part 6A financial reporting provision:
- (f) an infringement offence provision:
- ~~(g) section 687, 688(1)(b) or (c), or 691 (transitional requirements).~~
- (g) clause 19, 20(1)(b) or (c), or 23 of Schedule 5 (transitional requirements).
(2) In this section, an infringement offence provision is a provision in respect of which a contravention is an infringement offence.

454 Terms of direction orders

A direction order may—
- (a) direct the relevant person to comply with the relevant provision referred to in section 453 (the provision):
- (b) stipulate any reasonable steps that the relevant person must take in order to comply with the provision or to avoid or mitigate any actual or potential adverse effects of a contravention, including (without limitation)—
  - (i) disclosing, in accordance with the order, information for the purpose of securing compliance with the provision:
  - (ii) publishing, at the relevant person's own expense and in the manner and at the times specified in the order, corrective statements that are specified in, or are to be determined in accordance with, the order:
  - (iii) complying in accordance with the order with a prohibition or restriction on the making of any statement or the distribution of any document by, or on behalf of, the relevant person for the purpose of preventing a contravention or further contravention of the provision:
- (c) require the relevant person to report to the FMA within the time specified in the order stating how and when the order has been or will be implemented.

Unsolicited offer orders

455 When FMA may make unsolicited offer orders

The FMA may make an unsolicited offer order if the FMA is satisfied that a person has acted, is acting, or ~~intends~~ is likely to act in contravention of an unsolicited offer provision.

Compare: 1988 No 234 s 42EA

456 Terms of unsolicited offer orders

(1) An unsolicited offer order may—
- (a) restrain a person from acquiring a financial product, a power to dispose of a financial product, or an interest in or a right attaching to a financial product, as a result of the unsolicited offer:
- (b) restrain a person from taking any action that is, or that may reasonably be expected to constitute, a contravention of an unsolicited offer provision:
- (c) restrain a person from taking specified steps to complete or perform a contract that has been, or may reasonably be expected to be, entered into in contravention of an unsolicited offer provision:
- (d) direct a person not to register the transfer of a financial product:
- (e) direct a person to disclose information, make corrective statements, or take any other specified steps, at the person's own expense and in the manner and at the times specified in the order, for the purpose of securing compliance with an unsolicited offer provision.
(2) An unsolicited offer order may be directed at any person.

Compare: 1988 No 234 s 42EB

Orders that exclusion does not apply

456A FMA may order that exclusion for offers of products of same class as quoted products does not apply

(1) The FMA may make an order that clause 18A of Schedule 1 does not apply in respect of an issuer if the FMA is satisfied that the issuer has failed to comply with a continuous disclosure obligation, or any provision under Part 6A, at any time during the previous 12 months.

(2) Subsection (1) does not limit any other power of the FMA by or under this Act.

Process for FMA's orders

457 FMA must follow steps before making orders

(1) The FMA may make an order under this ~~Act~~ Part only if it first takes the following steps:
- (a) gives the person to whom the order is proposed to be directed written notice—
  - (i) that the FMA may make an order under this ~~Act~~ Part; and
  - (ii) of the reasons why it is considering exercising that power; and
- (b) also gives that written notice to the relevant licensed market operator, in the case of a direction order for a contravention of a continuous disclosure obligation or exemption or an order under section 456A; and
- (c) gives the notice referred to in paragraph (a) or (b) at least 5 working days before the FMA makes the order; and
- (d) gives each person to whom notice of the order must be given or the person's representative an opportunity to make written submissions and to be heard on the matter within that notice period.
(2) However,—
- (a) the FMA may shorten these steps in accordance with section 458; and
- (b) in the case of a stop order under section 449(c), the FMA does not have to give the notice referred to in subsection (1)(a) to any associated persons of the issuer, offeror, or service provider.
- ~~(c) this section does not apply to an interim stop order or an order under section 536.~~
Compare: 1988 No 234 s 42F

458 FMA may shorten steps for specified orders

If the FMA thinks it necessary or desirable in the public interest for any order to be made more urgently than section 457 permits,—
- (a) it may give less than 5 working days' notice before it makes the order, and ~~the notice and~~ the submissions may be oral rather than written; but
- (b) it must include in that notice the reasons for acting urgently and must otherwise comply with that section.
Compare: 1988 No 234 s 42G

459 FMA must give notice after making orders

(1) If the FMA makes an order under this ~~Act~~ Part, the FMA—
- (a) must, as soon as is reasonably practicable, give written notice to the person to whom the order is directed of—
  - (i) the terms and conditions of the order; and
  - (ii) the reasons for the order; and
  - (iii) any other information the FMA thinks relevant in the circumstances; and
- (b) must also give the written notice referred to in paragraph (a) to the Registrar and make the notice available on its Internet site, in the case of a stop order or an interim stop order; and
- (c) in the case of an order other than a stop order or an interim stop order, may also give the written notice referred to in paragraph (a) to the Registrar and make the notice available on its Internet site; and
- (d) must also give the written notice referred to in paragraph (a) to the relevant licensed market operator, in the case of a direction order for a contravention of a continuous disclosure obligation or exemption or an order under section 456A; and
- (e) may also give notice to any other person of those matters.
(2) In the case of a stop order of the kind referred to in section 449(c), the FMA does not have to give the notice referred to in subsection (1)(a) to any associated persons of the issuer, offeror, or service provider (but the issuer, offeror, or service provider may be required to do so).

~~(3) This section does not apply to an order under section 536.~~

Compare: 1988 No 234 s 42H

General provisions

460 General provisions on FMA's orders

(1) The FMA may make an order under this Act on the terms and conditions that the FMA thinks fit.

(2) The FMA may vary an order in the same way as it may make the order under this Act.

(3) The FMA may revoke an order or suspend an order on the terms and conditions it thinks fit.

Compare: 1988 No 234 s 42I

461 Consequences of failing to comply with FMA's orders

(1) If an order made by the FMA under this Act applies to a person, the person must comply with the order (see subpart 3, which provides for civil ~~remedies~~ liability for a contravention of this duty).

(2) A person who refuses or fails, without reasonable excuse, to comply with an order made by the FMA under this Act commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $300,000.

Compare: 1988 No 234 s 42J

Subpart 2—High Court's enforcement powers

Injunctions

462 Court may grant injunctions

The court may, on application by the FMA or any other person, grant an injunction restraining a person from engaging in conduct that constitutes or would constitute a contravention, or involvement in a contravention, of a provision of this Act or the regulations.

Compare: 1988 No 234 s 42K

463 When court may grant injunctions and interim injunctions

(1) The court may grant an injunction restraining a person from engaging in conduct of a particular kind if—
- (a) it is satisfied that the person has engaged in conduct of that kind; or
- (b) it appears to the court that, if an injunction is not granted, it is likely that the person will engage in conduct of that kind.
(2) The court may grant an interim injunction restraining a person from engaging in conduct of a particular kind if in its opinion it is desirable to do so.

(3) Subsections (1)(a) and (2) apply whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of that kind.

(4) Subsections (1)(b) and (2) apply whether or not the person has previously engaged in conduct of that kind or there is an imminent danger of substantial damage to any other person if that person engages in conduct of that kind.

Compare: 1988 No 234 s 42L

464 Undertaking as to damages not required by FMA

(1) If the FMA applies to the court for the grant of an interim injunction under this subpart, the court must not, as a condition of granting an interim injunction, require the FMA to give an undertaking as to damages.

(2) In determining the FMA's application for the grant of an interim injunction, the court must not take into account that the FMA is not required to give an undertaking as to damages.

Compare: 1988 No 234 s 42M

Court may make FMA orders under this Part

465 Court may make FMA orders under this Part

The court may, on application by any person, make any order that the FMA may make under this Part if the court is satisfied of the same matters that the FMA would need to be satisfied of if the FMA were to exercise that power.

Subpart 3—Civil remedies liability

Overview of civil remedies liability

466 Overview of civil remedies liability

(1) The following ~~remedies~~ orders (civil ~~remedy~~ liability orders) are available for a contravention, or involvement in a contravention, of a civil ~~remedy~~ liability provision (except if otherwise provided) under this subpart:
- (a) a declaration of contravention:
- (b) a pecuniary penalty order (on application by the FMA or the Commerce Commission only):
- (c) a compensatory order:
- (d) other civil ~~remedy~~ liability orders under section 481.
(2) This section is a guide only to the general scheme and effect of this subpart.

Compare: 1988 No 234 s 42R

467 What are civil remedy liability provisions

In this subpart, a civil ~~remedy~~ liability provision is—
- (a) a Part 2 ~~misleading or deceptive conduct~~ fair dealing provision:
- (b) a Part 3 offer provision:
- (c) a Part 4 governance provision:
- (d) a Part 5 market provision:
- (e) an unsolicited offer provision:
- (f) a Part 6 licence provision:
- (fa) a Part 6A financial reporting provision:
- (g) section 461(1) (failing to comply with FMA's orders):
- ~~(h) section 687, 688(1)(b) or (c), or 691 (transitional requirements).~~
- (h) clause 19, 20(1)(b) or (c), or 23 of Schedule 5 (transitional requirements).
Compare: 1988 No 234 s 42S

Declarations of contravention and pecuniary penalty orders

468 When court may make declarations of contravention

~~(1) The court may, on the application of the FMA or any other person, make a declaration of contravention if it is satisfied that a person has contravened a civil remedy provision.~~
(1) The court may, on the application of the FMA or any other person, make a declaration of contravention if it is satisfied that a person has—
- (a) contravened a civil liability provision; or
- (b) been involved in a contravention of a civil liability provision.
(2) The court may also make a declaration of contravention under section 471(3)(b).

469 Purpose and effect of declarations of contravention

(1) The purpose of a declaration of contravention is to enable an applicant for a compensatory order or other civil ~~remedy~~ liability order under section 481 to rely on the declaration of contravention in the proceedings for that order, and not be required to prove the contravention or involvement in the contravention.

(2) Accordingly, a declaration of contravention is conclusive evidence of the matters that must be stated in it under section 470.

Compare: 1988 No 234 s 42U

470 What declarations of contravention must state

A declaration of contravention must state the following:
- (a) the civil ~~remedy~~ liability provision to which the contravention or involvement in the contravention relates; and
- (b) the person who engaged in the contravention or was involved in the contravention; and
- (c) the conduct that constituted the contravention or the involvement in the contravention and, if a transaction constituted the contravention, the transaction; and
- (d) the issuer ~~and any other offeror~~, offeror, or service provider to which the conduct relates (if relevant).
Compare: 1988 No 234 s 42V

471 When court may make pecuniary penalty orders

(1) The FMA may apply for a pecuniary penalty order against a person under this Act.

(2) The Commerce Commission may~~, with the FMA's consent,~~ apply for a pecuniary penalty order against a person under this Act in ~~relation to an alleged contravention of any provision of Part 2~~ accordance with section 487A.
(3) If the FMA or the Commerce Commission applies for a pecuniary penalty order against a person under this Act, the court—
- (a) must determine whether the person has contravened, or been involved in a contravention of, a civil ~~remedy~~ liability provision; and
- (b) must make a declaration of contravention if it is satisfied that the person has contravened, or been involved in a contravention of, a civil ~~remedy~~ liability provision; and
- (c) may order the person to pay to the Crown a pecuniary penalty that the court considers appropriate if it is satisfied that the person has contravened, or been involved in a contravention of, a civil ~~remedy~~ liability provision.
(4) However, a pecuniary penalty order may not be made for a contravention, or involvement in a contravention, of section 16 ~~or 256~~.

(5) The court may make a pecuniary penalty order against a director who is treated as contravening a civil liability provision under section 509A (but only if the FMA has applied for the order against the director).

Compare: 1988 No 234 s 42T

472 Directors treated as having contravened in case of defective disclosure and may be ordered to pay pecuniary penalty

~~(1) This section applies if, in a proceeding under section 471, the court is satisfied that—~~
- ~~(a) an offeror has contravened section 65 (defective disclosure in PDS or register entry); or~~
- ~~(b) an issuer has contravened section 83 (defective ongoing disclosure); or~~
- ~~(c) a licensee has contravened section 425 (defective disclosure statement); or~~
- ~~(d) an offeror who provided a disclosure document under clause 26 of Schedule 1 has contravened clause 27 of that schedule (defective disclosure document).~~
~~(2) For the purposes of section 471(3)(c),—~~
- (a) every director of the offeror, issuer, or licensee at the time of the contravention must be treated as also having contravened the provision referred to in subsection (1)(a), (b), (c), or (d) (as the case may be); and
- ~~(b) the court may order, under section 471(3)(c), 1 or more of the following to pay to the Crown a pecuniary penalty that the court considers appropriate:~~
  - ~~(i) the offeror, issuer, or licensee:~~
  - ~~(ii) each director referred to in paragraph (a).~~
~~(3) The court may make an order against a director as referred to in subsection (2)(b) only if the FMA has applied for a pecuniary penalty order against the director.~~

(4) In any proceeding against a director for a pecuniary penalty order in respect of a contravention referred to in subsection (1), it is a defence if the director took reasonable precautions and exercised due diligence to avoid the contravention.

473 Maximum amount of pecuniary penalty

(1) The maximum amount of a pecuniary penalty for a contravention, or involvement in a contravention, of a civil ~~remedy~~ liability provision referred to in subsection (2) is the greatest of—
- (a) the consideration for the transaction that constituted the contravention (if any); and
- (b) if it can be readily ascertained, 3 times the amount of the gain made, or the loss avoided, by the person who contravened the civil ~~remedy~~ liability provision; and
- (c) $1 million in the case of a contravention, or involvement in a contravention, by an individual or $5 million in any other case.
(2) The civil ~~remedy~~ liability provisions to which subsection (1) applies are—
- (a) a Part 2 ~~misleading or deceptive conduct~~ fair dealing provision (other than a provision specified in section 26E(3)):
- (b) a Part 3 offer provision (other than a provision specified in section 84(4)):
- (c) a Part 4 governance provision (other than a provision specified in section 223(4)):
- (d) a Part 5 market provision (other than a provision specified in section 385(4)):
- (e) a Part 6 licence provision (other than a provision specified in section 446(4)):
- (ea) a Part 6A financial reporting provision (other than a provision specified in section 446L(4)):
- (f) an unsolicited offer provision:
- ~~(g) section 687, 688(1)(b) or (c), or 691 (transitional requirements).~~
- (g) clause 19, 20(1)(b) or (c), or 23 of Schedule 5 (transitional requirements).
(3) The maximum amount of a pecuniary penalty for a contravention, or involvement in a contravention, of any other civil ~~remedy~~ liability provision is—
- (a) $200,000 in the case of a contravention, or involvement in a contravention, by an individual; or
- (b) $600,000 in any other case.
Compare: 1988 No 234 s 42W

474 Guidance for court on how to determine gains made or losses avoided for purposes of maximum amount

(1) For the purposes of section 473(1)(b), a person must be treated as—
- (a) making a gain if the person acquires a financial product for less than its value:
- (b) avoiding a loss if the person disposes of a financial product for more than its value.
(2) In this case, the gain made or loss avoided is the difference between the consideration paid or received (as the case may be) and the value the financial product would have had at the time of the sale if,—
- (a) in the case of a contravention of any of sections 235 to 237, the material information had been generally available to the market; or
- (b) in the case of a contravention of section 257 or 260, the conduct, statement, or information had not been misleading, deceptive, or false; or
- (c) in any other case, the contravention had not occurred.
(3) This section does not—
- (a) limit the circumstances in which the court may find that a person has made a gain or avoided a loss; or
- (b) prevent the court from finding that the amount of the gain made, or the loss avoided, by a person exceeds an amount calculated under this section.
Compare: 1988 No 234 s 42X

475 Considerations for court in determining pecuniary penalty

In determining an appropriate pecuniary penalty, the court must have regard to all relevant matters, including—
- (a) the purposes stated in sections 3 and 4 and any other purpose stated in this Act that applies to the civil ~~remedy~~ liability provision; and
- (b) the nature and extent of the contravention or involvement in the contravention; and
- (c) the nature and extent of any loss or damage suffered by any person, or gains made or losses avoided by the person in contravention or who was involved in the contravention, because of the contravention or involvement; and
- (ca) whether or not a person has paid an amount of compensation, reparation, or restitution, or taken other steps to avoid or mitigate any actual or potential adverse effects of the contravention; and
- (d) the circumstances in which the contravention, or involvement in the contravention, took place; and
- (e) whether or not the person in contravention, or who was involved in the contravention, has previously been found by the court in proceedings under this Act, or any other enactment, to have engaged in any similar conduct; and
- (f) in the case of section ~~472~~ 509A (directors treated as having contravened), the circumstances connected with the director's appointment (for example, whether the director is a non-executive or an independent director); and
- (g) the relationship of the parties to the transaction constituting the contravention.
Compare: 1988 No 234 s 42Y

476 Court must order that recovery from pecuniary penalty be applied to FMA's or Commerce Commission's actual costs

If the court orders that a person pay a pecuniary penalty, the court must also order that the penalty must be applied first to pay—
- (a) the FMA's actual costs in bringing the proceedings; or
- (b) in the case of an application under section 471(2), the Commerce Commission's actual costs in bringing the proceedings.
Compare: 1988 No 234 s 42Z

Compensatory orders

477 When court may make compensatory orders

(1) The court may make a compensatory order, on application by the FMA or any other person, if the court is satisfied that—
- (a) there is a contravention of a civil ~~remedy~~ liability provision; and
- (b) a person (the aggrieved person) has suffered, or is likely to suffer, loss or damage because of the contravention.
(2) The court may make a compensatory order whether or not the aggrieved person is a party to the proceedings.

Compare: 1988 No 234 s 42ZA

478 Terms of compensatory orders

(1) If section 477 applies, the court may make any order it thinks just to compensate an aggrieved person in whole or in part for the loss or damage, or to prevent or reduce the loss or damage, referred to in that section.

(2) An order under this section may include an order to direct a relevant person to pay to the aggrieved person the amount of the loss or damage (in whole or in part).

(3) Subsection (2) does not limit subsection (1).
(4) In this section, relevant person means—
- (a) any person in contravention (including any director who is treated as contravening the civil liability provision under section 509A); or
- (b) any person involved in the contravention.
- ~~(b) in the case of a contravention of section 65 (defective disclosure in PDS or register entry), any 1 or more of the following:~~
  - ~~(i) the offeror:~~
  - ~~(ii) any other person who contravened section 65:~~
  - ~~(iii) each director of the offeror at the time of the contravention; or~~
- ~~(c) in the case of a contravention of section 83 (defective ongoing disclosure), any 1 or more of the following:~~
  - ~~(i) the issuer:~~
  - ~~(ii) any other person who contravened section 83:~~
  - ~~(iii) each director of the issuer at the time of the contravention; or~~
- ~~(d) in the case of a contravention of section 425 (defective disclosure statement), any 1 or more of the following:~~
  - ~~(i) the licensee:~~
  - ~~(ii) any other person who contravened section 425:~~
  - ~~(iii) each director of the licensee at the time of the contravention; or~~
- ~~(e) in the case of a contravention of clause 27 of Schedule 1 (defective disclosure document), any 1 or more of the following:~~
  - ~~(i) the offeror who provided the disclosure document:~~
  - ~~(ii) any other person who contravened clause 27 of Schedule 1:~~
  - ~~(iii) each director of the offeror who provided the disclosure document at the time of the contravention.~~
~~(5) Subsection (4)(b) to (e) apply to a director referred to in those paragraphs even if the director did not commit the contravention (subject to section 479).~~

Compare: 1988 No 234 s 42ZB

479 Director has due diligence defence

(1) In any proceeding against a director referred to in section 478(4) for a compensatory order in respect of a contravention referred to in section 478(4)(b) to (e), it is a defence if the director took reasonable precautions and exercised due diligence to avoid the contravention.

~~(2) Section 486 does not limit this section.~~

480 Person treated as suffering loss or damage in case of defective disclosure

(1AA) The purpose of this section is to provide that certain contraventions must be treated as causing a person to suffer loss or damage unless the contrary is proved.
(1) This section applies if—
- (a) a person (A)—
  - (i) acquires financial products under an offer that contravenes section 65; or
  - (ii) acquires financial products, or makes further contributions or deposits in respect of financial products, after the issuer of the financial products contravenes section 83; or
  - (iii) acquires financial products under an offer where ~~the offeror~~ a person contravenes clause 27 of Schedule 1 in relation to that offer; and
- (b) the financial products, contributions, or deposits referred to in paragraph (a) have declined in value after the contravention referred to in paragraph (a).
(2) A must be treated as having suffered loss or damage because of the contravention unless it is proved that the decline in value was caused by a matter other than the relevant statement, omission, or circumstance.
(3) In this section, the relevant statement, omission, or circumstance is, as the case may be,—
- (a) the statement that is false or misleading ~~or deceptive~~ or is likely to be misleading ~~or deceptive~~ referred to in section 65(1)(a)(i) or 83(1)(a)(i) or clause 27(1)(a)(i) of Schedule 1; or
- (b) the omission referred to in section 65(1)(a)(ii) or 83(1)(a)(ii) or clause 27(1)(a)(ii) of Schedule 1; or
- (c) the circumstance referred to in section 63 65(1)(a)(iii).
(4) This section does not limit section 478 (which provides for the court to make any order it thinks just to compensate an aggrieved person for the loss or damage in whole or in part).

Other civil remedy liability orders

481 When court may make other civil remedy liability orders

The court may, on application by the FMA or any other person, make a civil ~~remedy~~ liability order described in section 482 if the court is satisfied that a person has contravened or, intends to contravene, or was involved in a contravention of a civil ~~remedy~~ liability provision.

Compare: 1988 No 234 s 42ZE

482 Terms of other civil remedy liability orders

A civil ~~remedy~~ liability order under section 481 may—
- (a) direct the person in contravention, or person involved in the contravention, to refund money or return property to a person who has suffered, or is likely to suffer, loss or damage because of the contravention (the aggrieved person):
- (b) if an agreement has been entered into between the person in contravention, a person involved in the contravention, or an associated person of either of those persons (A), and the aggrieved person,—
  - (i) vary the agreement or any collateral arrangement as specified in the order and, if the court thinks fit, declare the agreement or arrangement to have had effect as so varied on and after a date before the order was made, as specified in the order:
  - (ii) cancel the agreement and, if the court thinks fit, declare the cancellation to have had effect on and after a date before the order was made, as specified in the order:
  - (iii) require ~~the person in contravention~~ A to take any action the court thinks fit to reinstate the parties as near as may be possible to their former positions:
- (c) restrain the exercise of rights attaching to financial products, or the exercise of relevant interests, or declare an exercise of those rights or relevant interests to be void and of no effect:
- (d) restrain the issue or transfer of financial products or restrain any distribution due in relation to financial products:
- (e) restrain the acquisition or disposal of financial products or of relevant interests, or restrain the registration of any transfer of that kind:
- (f) direct the disposal of financial products or of relevant interests (including the person or class of persons to which the products or interests must, or must not, be disposed of) and direct the payment of the proceeds of any disposal:
- (g) require financial products to be forfeited and require the issuer to cancel the forfeited financial products:
- (h) cancel an agreement for the acquisition or disposal of financial products or relevant interests.
~~(2) In this section, relevant interests has the same meaning as in subpart 1 of Part 5.~~

Compare: 1988 No 234 s 42ZF

Defences for person in contravention of civil liability provisions

482A General defences for person in contravention

(1) In any proceeding under this subpart against a person (A) for a contravention of a civil liability provision, it is a defence if A proves that—
- (a) A's contravention was due to reasonable reliance on information supplied by another person; or
- (b) both of the following apply:
  - (i) A's contravention was due to the act or default of another person, or to an accident or to some other cause beyond A's control; and
  - (ii) A took reasonable precautions and exercised due diligence to avoid the contravention.
(2) For the purposes of subsection (1)(a) and (b), another person does not include a director, an employee, or an agent of A.

(3) Subsection (1)(b) does not apply to a contravention of section 65, 83, or 425 or clause 27 of Schedule 1 (but see the defences in sections 482B and 482C).

Compare: 1986 No 121 s 44(1) and (2)

482B Disclosure defences for person in contravention

(1) In any proceeding under this subpart against a person (A) for a contravention of section 65, 83, or 425 or clause 27 of Schedule 1 because of a statement that is false or misleading or is likely to mislead, it is a defence if A proves that A—
- (a) made all inquiries (if any) that were reasonable in the circumstances; and
- (b) after doing so, believed on reasonable grounds that the statement was not false or misleading.
(2) In any proceeding under this subpart against a person (A) for a contravention of section 65, 83, or 425 or clause 27 of Schedule 1 because of an omission from a disclosure document or register entry in relation to a particular matter, it is a defence if A proves that A—
- (a) made all inquiries (if any) that were reasonable in the circumstances; and
- (b) after doing so, believed on reasonable grounds that there was no omission from the disclosure document or register entry in relation to that matter.
(3) In any proceeding under this subpart against a person (A) for a contravention of section 65 because of a circumstance referred to in section 65(1)(a)(iii), it is a defence if A proves that A was not aware of the matter.

Compare: Corporations Act 2001 ss 731, 733(4) (Aust)

482C Additional disclosure defence for directors who are treated as contravening

(1) This section applies if—
- (a) a person (A) contravenes section 65, 83, or 425 or clause 27 of Schedule 1; and
- (b) a person (B) is a director of A who is treated as being in contravention under section 509A.
(2) In any proceeding under this subpart against B, it is a defence if B proves that B took all reasonable and proper steps to ensure that A complied with the provision referred to in subsection (1)(a).

(3) Subsection (2) does not limit any defence that B may have under sections 482A(1)(a) or 482B (as a person who is treated as contravening a provision referred to in subsection (1)(a)).

482D Conduct still contravenes even if defence is available

In this Act, conduct must still be treated as contravening a civil liability provision even if the conduct does not lead to any liability under this subpart because of the availability of a defence.

Defences for person involved in contravention of civil liability provisions

482E General defences for person involved in contravention

(1) This section applies if—
- (a) a person (A) contravenes a civil liability provision; and
- (b) another person (B) is involved in the contravention.
(2) In any proceeding under this subpart against B for involvement in the contravention of a civil liability provision, it is a defence if B proves that—
- (a) B's involvement in the contravention was due to reasonable reliance on information supplied by another person; or
- (b) B took all reasonable and proper steps to ensure that A complied with the provision.
(3) For the purposes of subsection (2)(a), another person does not include a director, an employee, or an agent of B.

(4) To avoid doubt, this section applies to an involvement in the contravention of any civil liability provision, including sections 65, 83, and 425 and clause 27 of Schedule 1.

Miscellaneous provisions relating to defences

482F Defendant must identify other person

A person (A) is not, without the leave of the court, entitled to rely on the defence provided by section 482A(1)(a) or 482E(2)(a) that the contravention or involvement in the contravention was due to reasonable reliance on information supplied by another person, or provided by section 482A(1)(b) that the contravention was due to the act or default of another person, unless A has, not later than 7 days before the date on which the hearing of the proceeding commences, served on the other party to the proceeding a written notice identifying that person.

Compare: 1986 No 121 s 44(3)

Interrelationship of civil remedies liability orders

483 More than 1 civil remedy liability order may be made for same conduct

The court may make a civil ~~remedy~~ liability order of one kind against a person even though the court has made another civil ~~remedy~~ liability order of a different kind against the person for the same conduct.

Examples

The court may make a compensatory order and a pecuniary penalty order for the same conduct.

The court may make a civil ~~remedy~~ liability order requiring forfeiture of financial products and declaring a previous exercise of voting rights attaching to those products to be void.

Compare: 1988 No 234 s 42ZG

484 Only 1 pecuniary penalty order may be made for same conduct

If conduct by a person constitutes a contravention, or the involvement in the contravention, of 2 or more civil ~~remedy~~ liability provisions, proceedings may be brought against that person for the contravention, or involvement in the contravention, of any 1 or more of the provisions, but no person is liable to more than 1 pecuniary penalty order for the same conduct.

Compare: 1988 No 234 s 42ZH

485 No pecuniary penalty and fine for same conduct

A person cannot be ordered to pay a pecuniary penalty and be liable for a fine under this Act for the same conduct.

Compare: 1978 No 103 s 65F; 1988 No 234 s 43ZC

Limitation defences

485A Limitation defences

(1) The Limitation Act 2010 prescribes a defence to a money claim that is a claim for monetary relief under this subpart (for example, a pecuniary penalty order or a compensatory order).

(2) Subsections (3) to (5) apply to a claim for relief (other than any form of monetary relief or declaratory relief) under this subpart.

(3) It is a defence to the claim if the defendant proves that the date on which the claim is filed is at least 6 years after the date of the act or omission on which the claim is based.
(4) The claim has both a late knowledge period and a longstop period, and sections 11(3)(a) and (b) and 14 of the Limitation Act 2010 apply to it,—
- (a) as if it were a money claim; and
- (b) as if the period in subsection (3) were its primary period.
(5) Every defence prescribed by this section is subject to the exceptions and modifications set out in the Limitation Act 2010 as if prescribed by that Act.

(6) Any term or expression that is defined in the Limitation Act 2010 and used in this section has the same meaning as in the Limitation Act 2010.

Compare: 2010 No 110 s 37

Due diligence defence

486 Defence for persons other than primary person in contravention

~~(1) In any proceeding against a person (A) for contravention of a civil remedy provision, it is a defence if—~~
- ~~(a) the contravention was due to the act or omission of another person, or some other cause beyond A's control; and~~
- ~~(b) A took reasonable precautions and exercised due diligence to avoid the contravention.~~
~~(2) Subsection (1) does not apply to a person if the person contravened the civil remedy provision as referred to in paragraph (a) of the definition of contravene in section 447.~~

~~(3) For the purposes of subsection (1)(a), another person does not include a director, an employee, or an agent of A.~~

(4) A is not, without the leave of the court, entitled as part of a defence provided by this section to rely on any of the matters specified in subsection (1)(a) unless A has, not later than 7 working days before the date on which the hearing of the proceeding commences, served on the other party to the proceeding a notice in writing identifying the act, omission, or cause relied on by A.

General

487 Rules of civil procedure and civil standard of proof apply to civil remedies liability

The proceedings under this subpart are civil proceedings and the usual rules of court and rules of evidence and procedure for civil proceedings apply (including the standard of proof).

Compare: 1988 No 234 s 42ZI

487A Commerce Commission may apply for order in relation to Part 2

The Commerce Commission may apply for an order against a person under this subpart only—
- (a) in relation to an alleged contravention, or involvement in a contravention, of any provision of Part 2; and
- (b) with the FMA's consent.

Subpart 4—Offences of knowingly or recklessly contravening disclosure provisions relating to defective disclosure and false statements

488 Offence of knowingly or recklessly contravening prohibition on offers where defective disclosure in PDS or register entry

~~(1) A person who contravenes section 65 commits an offence if the person—~~
- ~~(a) knows that the statement referred to in section 65(1)(a)(i) is misleading or deceptive or is likely to mislead or deceive; or~~
- ~~(b) knows that information has been omitted as referred to in section 65(1)(a)(ii); or~~
- ~~(c) knows of a circumstance of a kind referred to in section 65(1)(a)(iii); or~~
- ~~(d) is reckless as to any of the matters referred to in paragraph (a), (b), or (c).~~
(1) An offeror that contravenes section 65 commits an offence if the offeror—
- (a) knows that, or is reckless as to whether, the statement referred to in section 65(1)(a)(i) is false or misleading or is likely to mislead; or
- (b) knows that, or is reckless as to whether, there is an omission as referred to in section 65(1)(a)(ii); or
- (c) knows of, or is reckless as to whether there is, a circumstance of a kind referred to in section 65(1)(a)(iii).
(1A) If an offeror contravenes section 65, a director of the offeror commits an offence if—
- (a) the offer, or the continuing of the offer, of the financial products under the regulated offer takes place with the director's authority, permission, or consent; and
- (b) the director—
  - (i) knows that, or is reckless as to whether, the statement referred to in section 65(1)(a)(i) is false or misleading or is likely to mislead; or
  - (ii) knows that, or is reckless as to whether, there is an omission as referred to in section 65(1)(a)(ii); or
  - (iii) knows of, or is reckless as to whether there is, a circumstance of a kind referred to in section 65(1)(a)(iii).
(2) A person who commits an offence under subsection (1) or (1A) is liable on conviction ~~on indictment~~,—
- (a) in the case of an individual, to imprisonment for a term not exceeding 10 years, a fine not exceeding $1 million, or both; and
- (b) in any other case, to a fine not exceeding $5 million.

489 Offence of knowingly or recklessly contravening other provisions relating to defective disclosure

~~(1) A person who contravenes section 83 or 425 or clause 27 of Schedule 1 commits an offence if the person—~~
- (a) knows that the statement referred to in section 83(1)(a)(i) or 425(1)(a)(i) or clause 27(1)(a)(i) of Schedule 1 (as the case may be) is misleading or deceptive or is likely to mislead or deceive; or
- ~~(b) knows that information has been omitted as referred to in section 83(1)(a)(ii) or 425(1)(a)(ii) or clause 27(1)(a)(ii) of Schedule 1 (as the case may be); or~~
- ~~(c) is reckless as to any of the matters referred to in paragraph (a) or (b).~~
(1) A person who contravenes section 83 or 425 or clause 27 of Schedule 1 commits an offence if the person—
- (a) knows that, or is reckless as to whether, the statement referred to in section 83(1)(a)(i) or 425(1)(a)(i) or clause 27(1)(a)(i) of Schedule 1 (as the case may be) is false or misleading or is likely to mislead; or
- (b) knows that, or is reckless as to whether, there is an omission as referred to in section 83(1)(a)(ii) or 425(1)(a)(ii) or clause 27(1)(a)(ii) of Schedule 1 (as the case may be).
(1A) If an entity contravenes section 83 or 425 or clause 27 of Schedule 1, a director of the entity commits an offence if—
- (a) the relevant act takes place with the director's authority, permission, or consent; and
- (b) the director—
  - (i) knows that, or is reckless as to whether, the statement referred to in section 83(1)(a)(i) or 425(1)(a)(i) or clause 27(1)(a)(i) of Schedule 1 (as the case may be) is false or misleading or is likely to mislead; or
  - (ii) knows that, or is reckless as to whether, there is an omission as referred to in section 83(1)(a)(ii) or 425(1)(a)(ii) or clause 27(1)(a)(ii) of Schedule 1 (as the case may be).
(2) A person who commits an offence under subsection (1) or (1A) is liable on conviction ~~on indictment~~,—
- (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and
- (b) in any other case, to a fine not exceeding $2.5 million.
(3) In this section, relevant act means,—
- (a) in relation to section 83, the act of providing or making available the ongoing disclosure:
- (b) in relation to section 425, the act of providing the disclosure statement to a person or continuing to provide the licensed market service:
- (c) in relation to clause 27 of Schedule 1, the act of providing the disclosure document to a person.

489A General offence for false or misleading statements

(1) Every person commits an offence who, with respect to a document required by or for the purposes of this Act, makes, or authorises the making of, a statement in it that is false or misleading in a material particular knowing it to be false or misleading.

(2) A person who commits an offence under subsection (1) is liable on conviction to imprisonment for a term not exceeding 5 years, a fine not exceeding $200,000, or both.

Compare: 1993 No 105 s 377(1)

Subpart 5—Infringement offences

490 Infringement offences

(1) If a person is alleged to have committed an infringement offence, that person may either—
- ~~(a) be proceeded against summarily for the alleged offence under the Summary Proceedings Act 1957; or~~
- (a) be proceeded against by filing a charging document under section 14 of the Criminal Procedure Act 2011; or
- (b) be served with an infringement notice as provided in section 491.
(2) Despite section 21 of the Summary Proceedings Act 1957, leave of a District Court Judge or a Registrar of a court to lay an information is not necessary where the FMA proceeds with an infringement offence summarily.

(2) Proceedings commenced in the way described in subsection (1)(a) do not require leave of a District Court Judge or Registrar under section 21(1)(a) of the Summary Proceedings Act 1957.

491 Infringement notices

(1) The FMA may issue an infringement notice to a person if the FMA believes on reasonable grounds that the person is committing, or has committed, an infringement offence.

(2) The FMA may revoke an infringement notice before the infringement fee is paid, or an order for payment of a fine is made or deemed to be made by a court under section 21 of the Summary Proceedings Act 1957.

(3) An infringement notice is revoked by giving written notice to the person to whom it was issued that the notice is revoked.

492 Procedural requirements for infringement notices

(1) An infringement notice may be served on a person—
- (a) by delivering it, or a copy of it, personally to the person who the FMA believes has committed the infringement offence; or
- (b) by sending it, or a copy of it, by post, addressed to the person at the person's last known place of residence or business.
(2) An infringement notice sent under subsection (1)(b) must be treated as having been served on the person on the date it was posted.
(3) An infringement notice must be in the prescribed form and must contain—
- (a) details of the alleged infringement offence that are sufficient to fairly inform a person of the time, place, and nature of the alleged offence; and
- (b) the amount of the infringement fee; and
- (c) an address at which the infringement fee may be paid; and
- (d) the time within which the infringement fee must be paid; and
- (e) a summary of the provisions of section 21(10) of the Summary Proceedings Act 1957; and
- (f) a statement that the person served with the notice has a right to request a hearing; and
- (g) a statement of what will happen if the person served with the notice does not pay the fee and does not request a hearing; and
- (h) any other prescribed matters.
(4) If an infringement notice has been issued, proceedings in respect of the infringement offence to which the notice relates may be commenced in accordance with section 21 of the Summary Proceedings Act 1957 and, in that case,—
- (a) reminder notices may be prescribed; and
- (b) in all other respects, section 21 of the Summary Proceedings Act 1957 applies with all necessary modifications.
(5) Reminder notices must contain the prescribed information.

493 Payment of infringement fee

The FMA must pay all infringement fees received into a Crown Bank Account.

Subpart 6—Banning orders

494 When court may make banning orders

(1) The court may, on application by an entitled person, make a banning order against a person (A) if—
- (a) a pecuniary penalty order has been made against A under this Act; or
- (b) A has been convicted of an offence under any Act referred to in Part 1 of Schedule 1 of the Financial Markets Authority Act 2011; or
- (c) A has been convicted of an offence under any Act referred to in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 (where A is, or has been, a financial markets participant); or
- (d) A has, while a director of an entity,—
  - (i) persistently contravened, or been involved in the contravention of, any Act specified in Part 1 of Schedule 1 of the Financial Markets Authority Act 2011; or
  - (ii) persistently contravened, or been involved in the contravention of, any Act specified in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 (where A is, or has been, a financial markets participant); or
  - (iii) if the entity has persistently contravened any of the Acts referred to in subparagraph (i) or (ii), persistently failed to take all reasonable steps to obtain compliance with those Acts; or
- (e) A has been convicted of a crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961 (where A is, or has been, a financial markets participant); or
- (f) A has been prohibited in an overseas jurisdiction from carrying on activities that the court is satisfied are substantially similar to any of the activities referred to in section 495 in connection with a contravention of any law relating to the offering or trading of financial products or the supply of financial services.
(2) Subsection (1)(d)(iii) applies in respect of the Acts specified in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 only if the entity is, or has been, a financial markets participant.
(3) An entitled person is—
- (a) the FMA:
- (b) an entity that—
  - (i) A is a director of at the time of the application; or
  - (ii) A was a director of at the time of the ground that triggers the making of the order under subsection (1):
- (c) the liquidator of an entity referred to in paragraph (b):
- (d) a person who is, or has been, a product holder or creditor of an entity referred to in paragraph (b).
(4) An application under this section may be made in the course of any civil or criminal proceedings or at any other time.
(5) In this subpart, director—
- (a) has the same meaning as in section 6(1); and
- (b) includes, in relation to an entity,—
  - (i) a person in accordance with whose directions or instructions a person referred to in paragraph (a) may be required or is accustomed to act; and
  - (ii) a person in accordance with whose directions or instructions the board or other governing body of the entity may be required or is accustomed to act; and
  - (iii) a person who exercises or who is entitled to exercise or who controls or is entitled to control the exercise of powers that, apart from the constitution of the entity, would fall to be exercised by the board or other governing body of the entity; and
  - (iv) a person to whom a power or duty of the board or governing body of the entity has been directly delegated by the board or governing body with that person's consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the board or governing body.
Compare: 1978 No 103 s 60A; 1988 No 234 s 43F

495 Terms of banning orders

(1) A banning order may, permanently or for a period specified in the order, prohibit or restrict the person, without the leave of the court, from doing either or both of the following things:
- (a) being a director or promoter of, or in any way (whether directly or indirectly) being concerned or taking part in the management of, an entity (other than an overseas company, or other entity, that does not carry on business in New Zealand):
- (b) providing financial adviser services or broking services (within the meaning of those terms in section 5 of the Financial Advisers Act 2008), or contributing, as employee or agent, to the provision of those services.
(2) The court may make a banning order permanent or for a period longer than 10 years only in the most serious of cases for which a banning order may be made.

Compare: 1978 No 103 s 60B; 1988 No 234 s 43G

496 Offence of contravening banning order

An individual who contravenes a banning order under this subpart commits an offence and is liable on conviction ~~on indictment~~ to imprisonment for a term not exceeding 3 years, a fine not exceeding $200,000, or both.

Compare: 1978 No 103 s 60C; 1988 No 234 s 43H

497 Only 1 banning order may be made for same conduct

If conduct by a person constitutes grounds for making an order under any 1 or more of this subpart, section 44F of the Takeovers Act 1993, and section 383 of the Companies Act 1993, proceedings may be brought against that person under any 1 or more of those provisions, but no person is liable to more than 1 order under those provisions for the same conduct.

Compare: 1978 No 103 s 60D; 1988 No 234 s 43J

498 General provisions for banning orders

(1) A Registrar of the court must, as soon as practicable after the making of a banning order by the court under this subpart,—
- (a) give notice to the Registrar of Companies, the Registrar of Financial Service Providers, and the FMA that the order has been made; and
- (b) give notice in the Gazette of the name of the person against whom the order is made and the period or dates for which the order applies (or that the order is permanent).
(2) A person intending to apply for the leave of the court as referred to in section 495 must give to the FMA not less than 10 working days' written notice of that person's intention to apply.

(3) The FMA, and any other persons that the court thinks fit, may attend and be heard at the hearing of the application.

Compare: 1978 No 103 s 60F; 1988 No 234 s 43O

Subpart 7—Orders to protect interests of aggrieved persons in case of financial markets investigations or proceedings

499 When court may make order to protect interests of aggrieved persons

(1) This section applies if—
- (a) an investigation is being carried out under the Financial Markets Authority Act 2011 in relation to an act or omission by a person that—
  - (i) constitutes or may constitute a contravention, or involvement in a contravention, of any Act specified in Part 1 of Schedule 1 of the Financial Markets Authority Act 2011; or
  - (ii) constitutes or may constitute a contravention, or involvement in a contravention, of any Act specified in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 (where the person is, or has been, a financial markets participant); or
  - (iii) may result in a prosecution or civil proceedings of the kind referred to in any of paragraphs (b) to (d) being begun against the person; or
- (b) a prosecution has begun against a person for ~~a contravention of~~ an offence under—
  - (i) any Act specified in Part 1 of Schedule 1 of the Financial Markets Authority Act 2011; or
  - (ii) any Act specified in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 (where the person is, or has been, a financial markets participant); or
- (c) civil proceedings have begun against a person under, or in respect of,—
  - (i) any Act specified in Part 1 of Schedule 1 of the Financial Markets Authority Act 2011; or
  - (ii) any Act specified in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 (where the person is, or has been, a financial markets participant); or
- (d) civil proceedings have begun against a person that, in connection with the offer, issue, transfer, supply, or use of financial products or financial services, seek damages or other relief for a contravention, involvement in a contravention, fraud, negligence, ~~default,~~ breach of duty, or other misconduct.
(2) The court may, on application by the FMA or by an aggrieved person, make 1 or more of the orders listed in section 500 if the court considers it necessary or desirable to do so for the purpose of protecting the interests of an aggrieved person.

(3) In this section and section 500,—

aggrieved person means any person to whom a relevant person is liable

associate means an associated person of the relevant person

civil proceedings means proceedings in a court (other than criminal proceedings)

liable means liable, or may be or become liable, to pay money (whether in respect of a debt, by way of damages or compensation, or otherwise) or to account for financial products or other property

relevant person means a person referred to in subsection (1).

Compare: 1978 No 103 s 60G; 1988 No 234 s 43P

500 What orders may be made

(1) The orders that may be made under this subpart are—
- (a) an order prohibiting the relevant person from transferring, charging, or otherwise dealing with money, financial products, or other property held or controlled by the relevant person:
- (b) an order prohibiting a person who is indebted to the relevant person, or to an associate, from making a payment in total or partial discharge of the debt to, or to another person at the direction or request of, the relevant person or associate:
- (c) an order prohibiting a person who holds money on behalf of the relevant person, or on behalf of an associate, from paying all or any of the money to the person, or to another person at the direction or request of that person, on whose behalf the money is held:
- (d) an order prohibiting a person who holds financial products or other property on behalf of the relevant person, or on behalf of an associate, from transferring or otherwise parting with possession of the financial products or property to the person, or to another person at the direction or request of that person, on whose behalf the financial products or other property is held:
- (e) an order prohibiting the taking or sending out of New Zealand by a person of money of the relevant person or of an associate:
- (f) an order prohibiting the taking, sending, or transfer by a person of financial products or other property of the relevant person or of an associate from a place in New Zealand to a place outside New Zealand (including the transfer of financial products from a register in New Zealand to a register outside New Zealand):
- (g) an order requiring the relevant person, or any person holding money, financial products, or other property on behalf of the relevant person or an associate, to pay or transfer money, financial products, or other property to a specified person to be held on trust pending determination of the investigation, prosecution, or civil proceedings referred to in section 499(1):
- (h) an order appointing,—
  - (i) if the relevant person is an individual, a receiver or trustee, having any powers that the court orders, of the property or of part of the property of that person; or
  - (ii) if the relevant person is a body corporate, a receiver or receiver and manager, having any powers that the court orders, of the property or of part of the property of that person:
- (i) an order removing a person from being a manager of a managed investment scheme to which the investigation, prosecution, or civil proceedings referred to in section 499(1) relates or relate:
- (j) an order appointing a person as the manager of a managed investment scheme to which the investigation, prosecution, or civil proceedings referred to in section 499(1) relates or relate (with any powers, rights, and obligations that the court orders):
- (k) if the relevant person is an individual, an order requiring that person to deliver up to the court his or her passport and any other documents that the court thinks fit:
- (l) if the relevant person is an individual, an order prohibiting that person from leaving New Zealand without the consent of the court.
(2) A reference in subsection (1)(f) or (h) to property of a person includes a reference to property that the person holds otherwise than as sole beneficial owner, for example,—
- (a) as trustee for, as nominee for, or otherwise on behalf of or on account of, another person; or
- (b) in a fiduciary capacity.
(3) An order may be expressed to operate for a specified period or until the order is discharged by a further order under this section.

Compare: 1978 No 103 s 60H; 1988 No 234 s 43Q

501 Interim orders

(1) If an application is made to the court for an order under section 499, the court may, if in the opinion of the court it is desirable to do so, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the application.

(2) The court must not require the FMA, as a condition of making an interim order, to give an undertaking as to damages.

(3) In determining the FMA's application for the grant of an interim order, the High Court must not take into account that the FMA is not required to give an undertaking as to damages.

Compare: 1978 No 103 s 60I; 1988 No 234 s 43R

502 Relationship with other law

Nothing in this subpart affects the powers that the court has apart from this subpart.

Compare: 1978 No 103 s 60J; 1988 No 234 s 43S

Subpart 8—Indemnities or insurance for directors, employees, and auditors of issuers and, offerors, and licensees

503 General prohibition on indemnities or insurance for directors, employees, and auditors of issuer or offeror Prohibition on indemnities or insurance for directors or employees of issuers, offerors, or licensees that are not New Zealand companies

(1) A specified person, or ~~an associate~~ a related body corporate, must not indemnify, or directly or indirectly effect insurance for, a director~~, an employee, or an auditor~~ or an employee of the specified person in respect of—
- (a) liability, in connection with conduct regulated by the financial markets legislation, for any contravention, involvement in a contravention, negligence, ~~default,~~ breach of duty, or breach of trust in his or her capacity as a director~~, employee, or auditor~~ or an employee; or
- (b) costs incurred by that director~~, employee, or auditor~~ or employee in defending or settling any claim or proceeding relating to that liability.
(2) An indemnity given in breach of this section is void.

(3) This section does not apply to a specified person or related body corporate that is a company within the meaning of section 2(1) of the Companies Act 1993 (see section 162 of the Companies Act 1993, which provides for limitations on indemnities and insurance).

(4) This section is subject to sections 504 and 505.

~~(3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.~~

~~(4) The offence in this section is an infringement offence (see subpart 5).~~

Compare: 1978 No 103 s 61

504 Permitted indemnities for certain costs of directors, employees, and auditors of issuers or offerors liabilities or costs

(1) A specified person, or ~~an associate~~ a related body corporate, may, if expressly authorised by its constitution, indemnify a director~~, an employee, or an auditor~~ or an employee of the specified person for any costs incurred by him or her in defending or settling a proceeding that relates to liability of a kind referred to in section 503(1)(a) if—
- (a) judgment is given in his or her favour or if he or she is acquitted; or
- (b) the proceeding is discontinued.
(2) A specified person or a related body corporate may, if expressly authorised by its constitution, indemnify a director or an employee of the specified person in respect of—
- (a) liability to any person other than the specified person for any act or omission in his or her capacity as a director or an employee (not being a liability specified in subsection (2A)); or
- (b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability.
(2A) The liability specified in this subsection is—
- (a) criminal liability; or
- (b) a liability that arises out of a failure to act in good faith when acting in the capacity as a director or an employee.
~~(2) This section does not limit section 162 of the Companies Act 1993.~~

~~(3) Section 503 is subject to this section.~~

Compare: 1978 No 103 s 61A

505 Permitted insurance for certain liability or costs of directors and employees of issuer or offeror

(1) A specified person, or ~~an associate~~ a related body corporate, may, if expressly authorised by its constitution and with the prior approval of its board of directors, effect insurance for a director or an employee of the specified person in respect of—
- (a) liability (other than criminal liability) of a kind referred to in section 503(1)(a); or
- (b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to that liability; or
- (c) costs incurred by that director or employee in defending any criminal proceedings—
  - (i) that have been brought against the director or employee in relation to any alleged act or omission in his or her capacity as a director or employee; and
  - (ii) in which he or she is acquitted.
(2) The directors of the specified person, or of the ~~associate~~ related body corporate, who vote in favour of authorising the insurance under subsection (1) must sign a certificate stating that, in their opinion, the cost of effecting the insurance is fair to the specified person or ~~associate~~ related body corporate (as the case may be).
(3) The director or employee who is insured is personally liable to the specified person or ~~associate~~ related body corporate for the cost of effecting insurance if—
- (a) subsection (2) has not been complied with in effecting the insurance; or
- (b) reasonable grounds did not exist for the opinion set out in the certificate given under subsection (2).
(4) However, subsection (3) does not apply to the extent that the insurance was fair to the specified person or ~~associate~~ related body corporate at the time the insurance was effected.

(5) A certificate signed for the purposes of section 162(6) of the Companies Act 1993 is effective also for the purposes of subsection (2); but this section does not limit section 162 of the Companies Act 1993.

~~(6) Section 503 is subject to this section.~~

Compare: 1978 No 103 s 61B

505A Prohibition on indemnity or insurance for auditors of issuers, offerors, or licensees

(1) A specified person, or a related body corporate, must not indemnify, or directly or indirectly effect insurance for, an auditor of the specified person, or an auditor engaged by the specified person, in respect of—
- (a) liability, in connection with conduct regulated by the financial markets legislation, for any contravention, involvement in a contravention, negligence, breach of duty, or breach of trust in his or her capacity as an auditor; or
- (b) costs incurred by that auditor in defending or settling any claim or proceeding relating to that liability.
(2) However, a specified person, or a related body corporate, may indemnify an auditor referred to in subsection (1) for any costs incurred by him or her in defending or settling a proceeding that relates to liability of a kind referred to in subsection (1)(a) if—
- (a) judgment is given in his or her favour or if he or she is acquitted; or
- (b) the proceeding is discontinued.
(3) An indemnity given in breach of this section is void.

506 Interpretation for this subpart

In this subpart,—

~~associate means an associated person of the specified person~~

director includes a former director

effect insurance includes pay, whether directly or indirectly, the costs of the insurance

employee includes a former employee

~~indemnify includes relieve, exempt, or excuse from liability, whether before or after the liability arises~~
specified person means—
- (a) an issuer of financial products offered under a regulated offer; or
- (b) an offeror of financial products offered under a regulated offer; or
- (c) a person that holds a market services licence or is an authorised body; or
- (d) a licensed market operator; or
- (e) a licensed supervisor.
Compare: 1978 No 103 s 61C

Subpart 9—Appeals

507 Appeals against market services licence decisions

A person may appeal to the court against a decision of the FMA under Part 6 to—
- (a) decline to issue a licence to the person or to authorise the person to provide a service under the licence; or
- (b) impose conditions on the person's licence or proposed licence or to vary, revoke, add to, or substitute any conditions on the person's licence; or
- (c) decline an application to vary the conditions of the person's licence; or
- (d) exercise a power in respect of the person under section 412 or 416 (which relates to the FMA's powers in the case of contraventions, etc).

508 Appeals against other decisions of FMA on questions of law only

An aggrieved person that considers that any of the following decisions of the FMA is wrong in law may appeal to the court against the decision on a question of law only:
- (a) a refusal to give a certificate under section 112(2)(f)(iii) (certificate that the FMA is satisfied that a scheme complies with certain requirements):
- (b) a decision under section 121 (direction to change a registration):
- (c) a decision under section 177(1)(a) (removal of a supervisor of a registered scheme):
- (d) a decision under section 180 (cancellation of the registration of a scheme):
- (e) a decision under section 189 (direction to the supervisor or issuer):
- (f) a decision under section 361 (direction to a licensed market operator):
- (g) a decision under subpart 1 (FMA's enforcement powers).
Compare: 1988 No 234 s 47A

Subpart 10—Miscellaneous

509 Time for laying information for summary offences

~~(1) Any information for an offence against this Act punishable on summary conviction may be laid at any time within 3 years after the date of the offence.~~

~~(2) Subsection (1) applies despite section 14 of, or anything else to the contrary in, the Summary Proceedings Act 1957.~~

~~Compare: 1988 No 234 s 43U~~

Accessories and attribution of liability

509 Involvement in contraventions

(1) In this Act, a person is involved in a contravention if the person—
- (a) has aided, abetted, counselled, or procured the contravention; or
- (b) has induced, whether by threats or promises or otherwise, the contravention; or
- (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
- (d) has conspired with others to effect the contravention.
(2) Subsection (1) does not apply to proceedings for offences (but see Part 4 of the Crimes Act 1961, which relates to parties to the commission of offences).

Compare: Corporations Act 2001 s 79 (Aust)

509A Directors treated as having contravened in case of defective disclosure

(1) This section applies if, in a proceeding under subpart 3, the court is satisfied that—
- (a) an offeror has contravened section 65 (defective disclosure in PDS or register entry); or
- (b) an issuer has contravened section 83 (defective ongoing disclosure); or
- (c) a licensee or an authorised body has contravened section 425 (defective disclosure statement); or
- (d) an entity that provided a disclosure document under clause 26 of Schedule 1 has contravened clause 27 of that schedule (defective disclosure document).
(2) For the purposes of subpart 3, every director of the offeror, issuer, licensee, authorised body, or entity at the time of the contravention must be treated as also having contravened the provision referred to in subsection (1)(a), (b), (c), or (d) (as the case may be).

(3) Every director that is treated as contravening a provision under this section may, under subpart 3, be ordered to pay to the Crown a pecuniary penalty, ordered to pay compensation under section 478, or subject to any other order under subpart 3.

(4) Nothing in this section limits the liability of the offeror, issuer, licensee, authorised body, or entity referred to in subsection (1).

(5) See sections 482A(1)(a), 482B, and 482C, which provide defences to a director.

509B State of mind of directors, employees, or agents attributed to body corporate or other principal

(1) If, in a proceeding under this Act in respect of any conduct engaged in by a body corporate, being conduct in relation to which any provision of this Act applies, it is necessary to establish the state of mind of the body corporate, it is sufficient to show that a director, employee, or agent of the body corporate, acting within the scope of his or her actual or apparent authority, had that state of mind.

(2) If, in a proceeding (other than a proceeding for an offence) under this Act in respect of any conduct engaged in by a person other than a body corporate, being conduct in relation to which any provision of this Act applies, it is necessary to establish the state of mind of the person, it is sufficient to show that an employee or agent of the person, acting within the scope of his or her actual or apparent authority, had that state of mind.

(3) In this Act, state of mind, in relation to a person, includes the knowledge, intention, opinion, belief, or purpose of the person and the person's reasons for that intention, opinion, belief, or purpose.

Compare: 1986 No 5 s 90(1), (3)

509C Conduct of directors, employees, or agents attributed to body corporate or other principal

(1) Conduct engaged in on behalf of a body corporate by any of the following must be treated, for the purposes of this Act, to have been engaged in also by the body corporate:
- (a) a director, employee, or agent of the body corporate, acting within the scope of his, her, or its actual or apparent authority:
- (b) any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee, or agent of the body corporate, given within the scope of the actual or apparent authority of the director, employee, or agent.
(2) Conduct engaged in on behalf of a person other than a body corporate (A) by any of the following must be treated, for the purposes of this Act, to have been engaged in also by A:
- (a) an employee or agent of A acting within the scope of his, her, or its actual or apparent authority; or
- (b) any other person at the direction or with the consent or agreement (whether express or implied) either of A or of an employee or agent of A, given within the scope of the actual or apparent authority of the employee or agent.
Compare: 1986 No 5 s 90(2), (4)

Miscellaneous

509D Time for filing charging document for certain offences

(1) Despite anything to the contrary in section 25 of the Criminal Procedure Act 2011, the limitation period in respect of a category 1 offence or a category 2 offence under this Act ends on the date that is 3 years after the date on which the offence was committed.

(2) Nothing in subsection (1) affects the application of section 25 of the Criminal Procedure Act 2011 in relation to any offence not mentioned in that subsection.

(3) In this section, category 1 offence and category 2 offence have the same meanings as in section 6(1) of the Criminal Procedure Act 2011.

510 Jurisdiction of courts in New Zealand

The High Court has exclusive jurisdiction to hear and determine proceedings in New Zealand under this Act, other than proceedings for offences.

Compare: 1978 No 103 s 65A

511 Orders to secure compliance

The court may, for the purpose of securing compliance with any other order it makes under this Act, direct a person to do or refrain from doing a specified act.

Compare: 1978 No 103 s 65C; 1988 No 234 s 43X

512 General provisions as to court's orders

(1) A court order under this Act may be made on the terms and conditions the court thinks fit.

(2) The court may revoke, vary, or suspend an order made under this Act on the terms and conditions the court thinks fit.

Compare: 1978 No 103 s 65E; 1988 No 234 s 43Z

513 Persons entitled to appear before court

The following persons are entitled to appear and be heard at the hearing of an application to the court taken under this Act:
- (a) the applicant:
- (b) a relevant issuer:
- (c) a person who is alleged to have suffered, or to be likely to suffer, loss or damage because of an alleged contravention (whether that person or another person makes the allegation):
- (d) the FMA:
- (e) any relevant licensed market operator:
- (f) a person directed to be given notice of the application:
- (g) with the leave of the court, any other person.
Compare: 1988 No 234 s 43ZA

514 State of mind of directors, employees, or agents attributed to body corporate or other principal

(1) If, in a proceeding under this Act in respect of any conduct engaged in by a body corporate, being conduct in relation to which any provision of this Act applies, it is necessary to establish the state of mind of the body corporate, it is sufficient to show that a director, employee, or agent of the body corporate, acting within the scope of his or her actual or apparent authority, had that state of mind.

(2) If, in a proceeding under this Act in respect of any conduct engaged in by a person other than a body corporate, being conduct in relation to which any provision of this Act applies, it is necessary to establish the state of mind of the person, it is sufficient to show that an employee or agent of the person, acting within the scope of his or her actual or apparent authority, had that state of mind.

(3) In this Act, state of mind, in relation to a person, includes the knowledge, intention, opinion, belief, or purpose of the person and the person's reasons for that intention, opinion, belief, or purpose.

~~Compare: 1986 No 5 s 90(1), (3)~~

515 Conduct of directors, employees, or agents attributed to body corporate or other principal

~~(1) Conduct engaged in on behalf of a body corporate by any of the following must be treated, for the purposes of this Act, to have been engaged in also by the body corporate:~~
- ~~(a) a director, employee, or agent of the body corporate, acting within the scope of his, her, or its actual or apparent authority:~~
- (b) any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee, or agent of the body corporate, given within the scope of the actual or apparent authority of the director, employee, or agent.
~~(2) Conduct engaged in on behalf of a person other than a body corporate (A) by any of the following must be treated, for the purposes of this Act, to have been engaged in also by A:~~
- ~~(a) an employee or agent of A acting within the scope of his, her, or its actual or apparent authority; or~~
- (b) any other person at the direction or with the consent or agreement (whether express or implied) either of A or of an employee or agent of A, given within the scope of the actual or apparent authority of the employee or agent.
~~Compare: 1986 No 5 s 90(2), (4)~~

516 Saving of liability under Crimes Act 1961 and general law

Nothing in this Act limits or diminishes any liability that any person may incur under any rule of law or the Crimes Act 1961 or any other enactment other than this Act (see, for example, sections 220 and 242 of the Crimes Act 1961, which relate to theft by a person in a special relationship and false statements by promoters).

Compare: 1978 No 103 s 65

Part 8
Regulations and exemptions, transitional provisions, and miscellaneous provisions

Subpart 1—Regulations

517 Regulations for purposes of Part 3 (disclosure of offers of financial products)

(1) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section ~~527(2)~~ 522A, make regulations for all or any of the following purposes:
- Product disclosure statements, register entries, and other matters relating to disclosure
- (a) regulating product disclosure statements and register entries, including—
  - (i) prescribing the information that must, or must not, be contained in product disclosure statements or register entries; and
  - (ii) prohibiting or restricting the use in product disclosure statements or register entries of prescribed words, information, sounds, images, graphics, or other matters; and
  - (iii) prescribing requirements as to the layout or method of presentation of product disclosure statements (including the length of a PDS and of parts of a PDS, the size of type used, and when information may be incorporated by reference); and
  - (iv) prescribing the documents that must, or must not, accompany a PDS; and
  - (v) prescribing circumstances for the purposes of sections 38(1)(c) and 42(3); and
  - (vi) prescribing information or documents for the purposes of section 47; and
  - (vii) prescribing circumstances and requirements for the purposes of sections 55(2), 64(4), and 68(6); and
  - (viii) prescribing matters for the purposes of section 67; and
  - (ix) prescribing circumstances in which a register entry is not required for a regulated offer:
- (b) amending any of the dollar amounts specified in Schedule 1 (other than the amounts in clause 12 of that schedule (small offers)) by increasing those amounts:
- (c) providing for the matters referred to in clause 26 of Schedule 1, including prescribing the circumstances in which a disclosure document is required, the period within which the disclosure document must be provided, the information and documents to be contained in, or to accompany, a disclosure document, requirements as to the layout or method of presentation of a disclosure document, and the conditions that must be complied with:
- Ongoing disclosure and updating of registers
- (d) prescribing changes that must be notified under section 80:
- (e) prescribing the documents, information, and other matters that must be made available under section 81 or 82, the times or events referred to in either of those sections, the persons who may make a request under section 81, the persons to whom documents, information, and other matters must be made available under section 81, and the manner of making the documents, information, and other matters available (including prescribing the manner in which the documents, information, or matters are to be presented, calculated, or prepared):
- (ea) prescribing matters for the purposes of section 83A, including prescribing circumstances, prescribing the manner of providing the product or confirmation information, and prescribing information as confirmation information:
- Miscellaneous
- (f) prescribing matters in connection with money for financial products that is held in trust:
- ~~(g) prescribing, for the purposes of provisions of Part 3 that require money to be repaid with interest, the rate of interest:~~
- ~~(h) prescribing circumstances for the purposes of section 71(3)(e):~~
- ~~(i) prescribing kinds of entities for the purposes of section 71(4)(c):~~
- (j) prescribing financial products for the purposes of the definition of specified financial products in clause 8(2) of Schedule 1:
- (k) prescribing schemes for the purposes of clause 11(3)(a) of Schedule 1:
- (l) prescribing markets and persons for the purposes of clause 19(4) of Schedule 1:
- (m) prescribing kinds of category 2 products or currency forwards for the purposes of clause 20(c) or (d) of Schedule 1:
- (n) prescribing matters for the purposes of the definitions of relevant person, relevant time, and prescribed transaction in clause 34 48 of Schedule 1:
- (o) prescribing forms and information for the purposes of clause 45 of Schedule 1.
(2) Subsection (1)(a)(v) and (ix) ~~and (h)~~ are subject to section 523 (which provides for certain procedural requirements relating to regulations made under those provisions).

518 Regulations for purposes of Part 4 (governance of financial products)

(1) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section ~~527(2)~~ 522A, make regulations for all or any of the following purposes:
- Reporting to supervisor
- (a) prescribing the documents, information, and other matters that must be made available under subpart 2 or 3 of Part 4, the times or events referred to in either of those subparts, and the manner of making the documents, information, and other matters available (including prescribing the manner in which the documents, information, or matters are to be presented, calculated, or prepared):
- Particular types of schemes
- (b) prescribing, for registrations as particular types of schemes, additional application requirements:
- (c) prescribing other types of registered schemes, and any additional registration requirements applying to those types of schemes:
- (d) prescribing application and registration requirements for locked-in superannuation schemes:
- Contents of governing documents
- (e) prescribing the matters that must be contained in a trust deed for a debt security required for the purposes of Part 4:
- (f) prescribing provisions to be implied in a governing document (see subsection (2)):
- Meetings of product holders
- (g) authorising a person to call meetings of product holders (whether in general, or at specified times or in relation to events or in connection with specified matters):
- (h) prescribing the methods of holding meetings, the quorum, and the other procedures to be followed in calling and conducting meetings of product holders (including providing for electronic voting by product holders) and providing for the making of written resolutions:
- (ha) prescribing circumstances for the purposes of section 149:
- Custodians
- (i) prescribing the records that must be kept by a custodian for a registered scheme:
- Management of registered schemes
- (ia) prescribing circumstances for the purposes of section 152:
- (j) prescribing matters relating to the reporting of limit breaks and pricing errors and non-compliance with pricing methodologies:
- (k) prescribing the steps that must be taken to remedy or restore the positions of current and former scheme participants and the registered scheme if there is a material pricing error or non-compliance (including whose position needs to be remedied or restored, when, and how, and any related obligations or other matters):
- (ka) prescribing overseas schemes, benefits, or transactions for the purposes of section 160(b) and (d):
- ~~(l) prescribing benefits or transactions that may be entered into without the consent of a supervisor under section 159 (on terms and conditions, if any):~~
- (l) prescribing circumstances for the purposes of section 161:
- (m) prescribing circumstances for the purposes of section 174(2)(b):
- Registers that must be kept by issuers
- (n) prescribing matters for the purposes of subpart 5 of Part 4, including—
  - (i) types of derivatives for the purposes of section 200(2)(a):
  - (ii) matters for the purposes of section 200(2)(b) and (c):
  - (iii) requirements for the purposes of section 200(3), including requirements relating to the keeping of records in respect of derivatives, the audit of those records, the inspection of those records, and making copies of, or extracts from, those records available:
  - (iv) particulars for the purposes of section 202(1)(f):
  - (v) circumstances for the purposes of section 206(2)(c):
  - (vi) purposes for the purposes of section 210(3)(a):
  - ~~(vii) prescribing a different period for the purposes of paragraph (b) of the definition of specified period in section 211(2):~~
  - ~~(viii) prescribing circumstances for the purposes of section 212(1)(b):~~
- Miscellaneous
- (o) prescribing the form of, or information, statements, certificates, or documents that must or must not be contained in or attached to, any document or information required to be provided or made available by or under Part 4 and the manner in which it may be made available or given.
- ~~(p) prescribing, for the purposes of provisions of Part 4 that require money to be repaid with interest, the rate of interest:~~
- ~~(q) requiring any matters prescribed by paragraph (a) to (d) to be provided for in accordance with the frameworks or methodologies specified in a notice issued by the FMA under subpart 4:~~
- ~~(r) prescribing overseas schemes, benefits, or transactions for the purposes of section 160:~~
- ~~(s) prescribing the form or contents of any certificate or other document referred to in Part 4, and the manner in which it may be made or given.~~
(2) A provision prescribed for the purposes of subsection (1)(f) may, without limitation, do any of the following (including to supplement, or to add to, duties and powers prescribed by this Act and, in relation to KiwiSaver schemes, the KiwiSaver Act 2006):
- (a) specify the duties and powers of the supervisor of the debt security or the scheme:
- (b) specify the duties of the issuer of the debt security or the manager of the scheme.
(3) Subsection (1)(ha), (ia), (ka), (l), and (n)(ii) and (v) ~~(n)(ii), (v), and (viii)~~ are subject to section 523 (which provides for certain procedural requirements relating to regulations made under those subparagraphs).

519 Regulations for purposes of Part 5 (dealing in financial products on markets)

(1) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section ~~527(2)~~ 522A, make regulations for all or any of the following purposes:
- Insider conduct and market manipulation
- (a) exempting (on terms and conditions, if any) conduct from being—
  - (i) insider conduct that is conduct that would otherwise fall within section 235, 236, or 237:
  - (ii) market manipulation that is conduct that would otherwise fall within section ~~256, 257,~~ 257 or 260:
- Substantial holding disclosure
- (b) prescribing further matters relating to a matter, a relevant event, or a substantial holding, that must be disclosed under subpart 5 of Part 5, which may include (without limitation)—
  - (i) the nature of the relevant interests in the substantial holding (including before and after the relevant event in the case of sections 271 and 272):
  - (ii) the number, nominal value (if any), and class of financial products in which the person has or had the substantial holding (including before and after the relevant event in the case of sections 271 and 272):
  - (iii) the date of the relevant event:
  - (iv) the terms and conditions (including consideration) of the transaction giving rise to the relevant event:
  - (v) details as to the circumstances in which the relevant event occurred:
  - (vi) the date of the last disclosure by the person under that subpart in respect of the substantial holding:
  - (vii) information relating to the relevant event or substantial holding and concerning other persons who have made disclosures under that subpart:
- (c) prescribing the documents, certificates, and statements that must accompany or be annexed to those disclosures:
- (d) determining when disclosure of the further matters referred to in paragraph (b) is required (including by requiring disclosure only on request):
- (e) prescribing the form of or for, and the method of, disclosure under that subpart (and of any other acknowledgments or notices required by the subpart) or providing for the relevant licensed market operator to determine that form or method and providing for the way in which it must do so:
- (f) exempting (on terms and conditions, if any) classes of persons, classes of transactions, or classes of relevant interests, substantial holdings, or relevant events from compliance with any provisions of that subpart or regulations made under any of paragraphs (b) to (e):
- Directors' and senior managers' disclosure obligations
- (g) prescribing further matters relating to a relevant interest, or acquisition or disposal of a relevant interest, that must be disclosed by directors and senior managers under subpart 6 of Part 5, which may include (without limitation)—
  - (i) the nature of the relevant interest:
  - (ii) the number and class of financial products to which the relevant interest relates or related:
  - (iii) the date of the disclosure obligation becoming applicable, or the date of the acquisition or disposal:
  - (iv) the consideration paid or received for the acquisition or disposal:
  - (v) details as to the circumstances in which the acquisition or disposal occurred:
  - (vi) the date of the last disclosure by the director or senior manager:
- (h) determining when the disclosure in paragraph (g) is required (including by requiring disclosure only on request) and prescribing the form of or for, and the method of, disclosure or providing for the relevant licensed market operator to determine that form or method and for the way in which it must do so:
- (i) exempting (on terms and conditions, if any) classes of persons, classes of transactions, or classes of relevant interests, acquisitions, or disposals from compliance with any provisions of that subpart or regulations made under paragraph (g) or (h):
- (ia) prescribing acquisitions or disposals for the purposes of section 295(2)(a)(vi):
- Licensed markets
- (j) prescribing conduct that does not constitute a financial product market for the purposes of this Act:
- (k) exempting (on terms and conditions, if any) wholesale markets or other financial product markets from the operation of subpart 7 of Part 5:
- (l) prescribing information and the form and method referred to in section 353:
- Transfer of transferable financial products
- (m) prescribing matters for the purposes of subpart 9 of Part 5, including—
  - (i) financial products to which that subpart does not apply:
  - (ii) forms for the purposes of that subpart:
  - (iii) information to be included in products transfers or brokers transfers:
  - (iv) persons for the purposes of paragraph (f) of the definition of authorised transaction in section 372(3).
- ~~Miscellaneous~~
- (n) requiring any matter prescribed in regulations under paragraph (j) or (k) to be calculated or determined by reference to the frameworks or methodologies specified in a notice issued by the FMA under subpart 4.
(2) Subsection (1)(a), (f), (i), and (k) are subject to section 523 (which provides for certain procedural requirements relating to regulations made under those paragraphs).

(3) Before making a recommendation in relation to subsection (1)(j) or (k) the Minister must have regard to the matters set out in section 306.

520 Regulations for purposes of Part 6 (market services)

(1) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section ~~527(2)~~ 522A, make regulations for all or any of the following purposes:
- Issue of licences
- (a) prescribing matters relating to the issue of market services licences, including—
  - (i) eligibility criteria for licences and for the purposes of section 398 (including requirements relating to competence, qualifications, and experience, prudential requirements, and requirements relating to the business, operation, or management of an applicant and, for the purposes of section 398, a related body corporate):
  - (ii) requirements that the applicant's directors, senior managers, and proposed directors and senior managers must satisfy:
  - (iii) matters that the FMA must have regard to:
  - (iv) persons or classes of persons with whom the FMA must consult:
  - (v) eligibility criteria and requirements for the purposes of section 398 (including requirements relating to competence, qualifications, and experience, prudential requirements, and requirements relating to the business, operation, or management of a subsidiary of the applicant):
  - (vi) information for the purposes of section 399(2)(e):
  - (vii) eligibility criteria to be met by a DIMS licensee before a custodian of investor property is, subject to conditions imposed, under paragraph (c)(iii), permitted to be an associated person of the DIMS licensee:
- (b) prescribing overseas markets and circumstances for the purposes of section ~~387(2)(c)~~ 387A(1)(c):
- Conditions of licences
- (c) prescribing conditions that market services licences are subject to, the kinds of conditions that the FMA may impose on those licences, or matters to which conditions imposed by the FMA may relate, including (without limitation) providing for—
  - (i) conditions that regulate the manner in which licensed market services must be carried out under the licence:
  - (ii) conditions that impose prudential requirements on licensees or authorised bodies or otherwise regulate the business, operation, or management of licensees or authorised bodies (for example, requirements to have a credit rating or to maintain a minimum amount of capital, requirements relating to margins, or requirements relating to the receipt of money and property from clients):
  - (iii) in the case of a DIMS licensee, the conditions subject to which a custodian of investor property is permitted to be an associated person of the DIMS licensee:
- (d) stating whether a condition imposed on a market services licence by the regulations is a Part 6 licence provision:
- Reporting
- (e) prescribing matters relating to reports or other disclosure under subpart 3 of Part 6, including the times and events referred to in that subpart and the documents, information, or other matters that must be contained in the reports (including prescribing the manner in which the documents, information, or matters are to be presented, calculated, or prepared):
- Disclosure obligations ~~for licensees providing market services to retail investors~~
- (f) prescribing the information that must, or must not, be contained in disclosure statements for the purposes of subpart 4 of Part 6 (including prescribing the manner in which the documents, information, or matters are to be presented, calculated, or prepared):
- (g) prohibiting or restricting the use in those disclosure statements of prescribed words, information, sounds, images, graphics, or other matters:
- (h) prescribing requirements as to the form, layout, or method of presentation of those disclosure statements (including the length of the whole or any part of the statement, the size of type used, and when information may be incorporated by reference):
- (i) determining when disclosure is required under that subpart (including by requiring disclosure only on request) and what minimum disclosure must be given:
- (j) regulating the combining of disclosure statements:
- ~~Requirement for licensees to provide certain market services under client~~ Client agreements
- (k) prescribing the matters that must be contained in a client agreement required for the purposes of subpart 5 of Part 6:
- (l) prescribing provisions to be implied in a client agreement (see subsection (3)):
- ~~Provision of discretionary~~ Discretionary investment management services
- (m) prescribing matters relating to the reporting of limit breaks:
- (ma) prescribing matters in connection with money paid to a DIMS licensee by, or on account of, investors:
- Miscellaneous
- (n) prescribing persons or classes of persons to whom notices under Part 6 must be given:
- (o) prescribing the circumstances referred to in section 422(2) or 424(1):
- (p) prescribing overseas schemes, benefits, or transactions for the purpose of section 439(b) and (d):
- (q) prescribing the form or contents of any certificate or other document referred to in Part 6, and the manner in which it may be made or given.
(2) Subsection (1)(b) is subject to section 523 (which provides for certain procedural requirements relating to regulations made under that paragraph).

(3) A provision prescribed for the purposes of subsection (1)(l) may, without limitation, specify the duties of the licensee or authorised body under the client agreement (including to supplement, or to add to, any duties prescribed by this Act).

521 Transitionals, savings, and orderly implementation of Act and related enactments

(1) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section ~~527(2)~~ 522A, make regulations for either or both of the following purposes:
- (a) providing that, subject to any conditions stated in the regulations, transitional or savings provisions prescribed by the regulations that relate to the implementation of ~~this Act~~ the specified enactments (in addition to, or in substitution for, any other transitional provisions in ~~Part 9~~ Schedule 5) apply during the whole or any part of the transitional implementation period ending on the 5-year date:
- (b) providing that, subject to any conditions stated in the regulations, specified provisions of ~~this Act~~ the specified enactments (including definitions), or provisions of other enactments amended or repealed by ~~this Act~~ the specified enactments, do not apply, or apply with modifications or additions, or both, during the whole or any part of the transitional implementation period ending on the 5-year date.
(2) The Minister must not recommend the making of regulations under this section unless the Minister is satisfied that the regulations—
- (a) are necessary or desirable for the orderly implementation of ~~this Act~~ the specified enactments; and
- (b) are consistent with the purposes of ~~this Act~~ the specified enactments.
(3) This section is repealed on the close of the 5-year date.

(4) Any regulations made under this section that are in force on the 5-year date are revoked on the close of that day.

~~(5) In this section, 5-year date means the date that is 5 years after the date on which this section comes into force.~~
(5) In this section,—

5-year date means the date that is 5 years after the date on which this section comes into force
specified enactments means—
- (a) this Act; and
- (b) Part 9 and Schedule 4.

522 Other regulations

(1) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section ~~527(2)~~ 522A, make regulations for all or any of the following purposes:
- Part 2 fair dealing
- (aa) prescribing financial products (within the meaning of section 5 of the Financial Advisers Act 2008) as financial products for the purposes of Part 2:
- (ab) prescribing circumstances for the purposes of section 26A(2)(e):
- (ac) prescribing kinds of entities for the purposes of the definition of co-operative in section 26A(4):
- Definitions
- (a) providing for matters relating to terms defined in this Act, including the following:
  - (i) excluding dealing from being dealing in financial products for the purposes of this Act:
  - (ii) declaring classes of services not to be financial services for the purposes of this Act:
  - (iii) prescribing services for the purposes of the definition of prescribed intermediary services:
  - (iiia) prescribing schemes for the purposes of the definition of prescribed workplace scheme:
  - (iv) declaring interests or rights not to be securities for the purposes of this Act:
  - (v) prescribing matters for the purposes of ~~paragraph (a)(ii) of the definition of derivative in~~ section 8(1C)(a)(ii):
- (b) prescribing kinds of schemes and deposit products for the purposes of section 10(2) and specifying conduct for the purposes of section 10(2)(c)(iv) (definitions relating to issued and issuer):
- (c) prescribing matters for the purposes of section 12(3):
- Schedule 3 schemes
- (d) prescribing the documents, information, and other matters that must be prepared and provided under clause 6 of Schedule 3, the times or events referred to in that clause, and the manner of providing the documents, information, and other matters (including prescribing the manner in which the documents, information, or matters are to be presented, calculated, or prepared):
- Registers
- (e) prescribing procedures, requirements, and other matters, not inconsistent with this Act, for any register kept under this Act, including matters that relate to—
  - (i) the operation of the register:
  - (ii) the form of the register:
  - (iii) the information or documents to be contained in the register:
  - (iv) access to the register:
  - (v) search criteria for the register:
  - (vi) circumstances in which amendments must be made to the register:
- Giving of information and other service requirements
- (ea) prescribing how information or documents may or must be given to or served on any person under this Act and other matters relating to that procedure (including as to when the information or documents are treated as received for the purposes of this Act and the regulations):
- Enforcement
- (f) setting the infringement fee for each infringement offence, which must not exceed $20,000:
- (g) prescribing information to be included in infringement notices and reminder notices and the form of notices:
- Fees and charges
- (h) prescribing fees and charges payable in respect of any matter under this Act or the manner in which fees and charges may be calculated:
- Prescribed manner
- (i) prescribing, for the purposes of any provision of this Act that requires a thing to be done in a prescribed manner (or for the purposes of any other regulations empowered to prescribe the manner in which something must be done), the manner in which the thing must be done, including prescribing—
  - (i) when, where, and how the thing must be done:
  - (ii) the form that must be used in connection with doing the thing:
  - (iii) what information or other evidence or documents must be provided in connection with the thing:
  - (iv) requirements with which information, evidence, or documents that are provided in connection with the thing must comply:
  - (v) that fees or charges must be paid in connection with doing the thing:
- General
- (ia) prescribing, for the purposes of provisions of this Act that require money to be repaid with interest, the rate of interest:
- (j) providing for any other matters contemplated by this Act, necessary for its administration, or necessary for giving it full effect.
(2) Subsection (1)(ab) and (a)(i), (ii), and (iv) are subject to section 523 (which provides for certain procedural requirements relating to regulations made under those subparagraphs).

522A Minister must consult FMA about regulations

The Minister must consult with the FMA before making a recommendation under this subpart.

523 Procedural requirements for regulations relating to exemptions, exclusions, and definitions

(1) The Minister must, before making a recommendation in relation to a provision referred to in—
- (a) subsection (2), have regard to the main and additional purposes of this Act set out in sections 3 and 4; and
- (b) subsection (2)(a), (b), or (d), be satisfied that the extent to which requirements are disapplied is not broader than is reasonably necessary to address the matters that gave rise to the regulations; and
- (c) subsection (2)(c) and (e), be satisfied that the extent of the exemption or exclusion is not broader than is reasonably necessary to address the matters that gave rise to the regulations.
(2) The provisions are—
- (a) sections 517(1)(a)(v) and (ix) ~~and (h)~~ and 522(1)(ab) (regulations may prescribe circumstances in which requirements do not apply):
- (b) section 518(1)(ha), (ia), (ka), (l), and (n)(ii) and (v) ~~(n)(ii), (v), and (viii)~~ (regulations may prescribe circumstances in which requirements do not apply):
- (c) section 519(1)(a), (f), (i), and (k) (regulations may provide for exemptions from certain requirements):
- (d) section 520(1)(b) (regulations may prescribe matters relating to requirement to be licensed):
- (e) section 522(1)(a)(i), (ii), and (iv) (regulations relating to definitions).

524 Miscellaneous provisions relating to exemptions

(1) The breach of a term or condition of an exemption provided by regulations is a breach of the obligation for which the exemption applies (unless the regulations otherwise provide).

(2) Exemptions made under regulations may extend to all, or classes of, persons, transactions, or other matters in relation to specified overseas jurisdictions.

(3) Subsection (2) does not limit this subpart.

Compare: 1988 No 234 ss 49E, 49F

525 Miscellaneous provisions relating to fees and charges

(1) Regulations may authorise a person to whom a fee or charge is payable to refund or waive, in whole or in part and on any conditions that may be prescribed, payment of the fee or charge in relation to any person or class of persons.

(2) A person to whom a prescribed fee or charge is payable may refuse to perform a function or exercise a power until the prescribed fee or charge is paid.

(3) Any fee, charge, or other amount payable to a person under this Act is recoverable by the person in any court of competent jurisdiction as a debt due to the person.

(4) This subpart does not limit section 67 of the Financial Markets Authority Act 2011.

526 Regulations or exemptions may require compliance with generally accepted accounting practice, financial reporting standards, or FMA frameworks or methodologies

(1) Regulations, notices issued under subpart 4, or exemptions granted by the FMA, may require any person, class of persons, information, or class of information to comply with any of the following:
- (a) generally accepted accounting practice, either generally or in specified circumstances:
- (b) a financial reporting standard:
- (c) a notice issued under subpart 4.
(2) Regulations, a notice issued under subpart 4, or ~~exemptions~~ an exemption granted by the FMA, may require compliance with generally accepted accounting practice, a financial reporting standard, or a notice issued under subpart 4—
- (a) in whole or in part; and
- (b) with modifications, additions, or variations specified in the regulations, notice, or exemption.
(3) In this section,—

financial reporting standard has the same meaning as in section 2(1) of the Financial Reporting Act 1993

generally accepted accounting practice has the same meaning as in section 3 of the Financial Reporting Act 1993.

527 Miscellaneous provisions relating to regulations Different matters may be prescribed in respect of different circumstances

Different matters may be prescribed, prohibited, restricted, specified, or required under the regulations in respect of different kinds or classes of financial products, services, persons, or other circumstances.

~~(2) The Minister must consult with the FMA before making a recommendation under this subpart.~~

Subpart 2—Exemptions

528 FMA may grant exemptions

(1) The FMA may, on the terms and conditions (if any) that it thinks fit, exempt any person or class of persons or any transaction or class of transactions from compliance with any provision or provisions of—
- (a) Parts 2 to 6A or ~~subparts 8 to 10 of Part 9~~ Schedule 5; or
- (b) any regulations.
(2) Nothing in subpart 6 or 7 limits subsection (1).

(3) Subpart 5 (general provisions relating to FMA instruments) applies to an exemption granted under this section.

529 Restriction on FMA's exemption power

The FMA must not grant an exemption under this subpart unless it is satisfied that—
- (a) granting the exemption is necessary or desirable in order to promote the main purposes of this Act as specified in section 3 or any of the additional purposes specified in section 4; and
- (b) the extent of the exemption is not broader than is reasonably necessary to address the matters that gave rise to the exemption.

530 Exemption in force for not more than 5 years

An exemption granted under this subpart may continue in force for not more than 5 years (and at the close of the date that is 5 years after the exemption first comes into force, the exemption must be treated as having been revoked unless it is sooner revoked or expires).

531 Breach of exemption conditions

The breach of a term or condition of an exemption granted under this subpart is a breach of the obligation for which the exemption applies (unless the terms of the exemption otherwise provide).

Compare: 1988 No 234 s 49E

532 Exemptions in respect of specified overseas jurisdictions

(1) Exemptions granted under this subpart may extend to all, or classes of, persons, transactions, or other matters in relation to specified overseas jurisdictions.

(2) Subsection (1) does not limit this subpart.

Compare: 1988 No 234 s 49F

532A Effect of exemptions on regulated offers

(1) If the FMA grants an exemption under this subpart from any provision of subpart 1 or 2 of Part 3 or Schedule 1 and that exemption applies in respect of an offer of financial products that would be a regulated offer, the offer continues to be a regulated offer unless subsection (2) applies.

(2) An offer of financial products that would, but for this subsection, be a regulated offer is not a regulated offer if the terms of an exemption granted under this subpart state that the offer is not a regulated offer.

(3) A statement under subsection (2) may be in respect of an offer or a class of offers.

Subpart 3—FMA's designation power

533 FMA may designate financial products and offers

(1) The FMA may—
- (a) declare that a security that would not otherwise be a financial product is a financial product of a particular kind:
- (b) declare that a financial product is, or is to become, a financial product of a particular kind (whether or not it was previously a financial product of a different kind):
  
  Example
  
  A share is normally an equity security.
  
  However, a particular type of share may have terms that mean that, in substance, the share is similar to a debt security.
  
  The FMA may declare that a share of that kind is a debt security.
- (c) declare that a security that would otherwise be a financial product of a particular kind is not a financial product:
- (d) declare that an offer of financial products that would not otherwise require disclosure under Part 3 because of an exclusion under Part 1 of Schedule 1 does require disclosure under Part 3:
  
  Example
  
  A small offer is generally excluded from requiring disclosure (see clause 12 of Schedule 1).
  
  However, an offer of a particular kind may involve significant risks for investors that may otherwise be undisclosed to investors.
  
  The FMA may declare that disclosure under Part 3 is required despite the exclusion.
- (da) declare that an offer of financial products for sale that would not otherwise require disclosure under Part 3 does require disclosure under Part 3 (see section 534(1)(ab)):
  
  Example
  
  Offers of financial products for sale generally require disclosure only in limited circumstances (see Part 2 of Schedule 1).
  
  However, an issuer could structure an offer with a view to circumventing, evading, or defeating the disclosure provisions of this Act.
  
  The FMA may declare that disclosure of the offer under Part 3 is required despite the fact that the provisions in Part 2 of Schedule 1 do not apply.
- (e) declare that the exception in section 387(3) does not apply to a person or class of persons (and, accordingly, those persons must be licensed under this Act to act as a provider of a discretionary investment management service):
- (e) declare a person, service, or conduct to be not exempt under any exemption that would otherwise apply under section 387A(2) (and accordingly the licensing requirement under this Act applies):
- (f) declare a person, service, or conduct to be not exempt under any exemption or exclusion that would otherwise apply under section 233(1)(a) to (h) (in relation to either subpart 5 or 6 of Part 5), or under section 279, 281, or 307.
(2) A declaration may specify terms and conditions relating to—
- (a) the circumstances in which the declaration applies, including (without limitation) by reference to ~~an issuer, a class of issuers, an offeror, a class of offerors, an offer, or a class of offers~~ any person or class of persons or any transaction or class of transactions:
- (b) transitional matters.
(3) Nothing in this section prevents the FMA from granting an exemption under subpart 2 that applies to a financial product that is the subject of a declaration under this section.

Example

The FMA declares that a particular type of share (which would otherwise be an equity security) is a debt security.

However, some of the regulatory requirements that relate to debt securities are inappropriate in respect of these shares.

Accordingly, the FMA grants an exemption (on terms and conditions) from those requirements in order to customise the regulatory requirements that will apply.

(3A) The provisions of this Act apply subject to a declaration under this subpart.

(4) Subpart 5 (general provisions relating to FMA instruments) applies to a declaration under this section.

534 Procedural requirements

(1) The FMA must not make a declaration under this subpart unless—
- (a) it is satisfied that the declaration is necessary or desirable in order to promote the main purposes of this Act specified in section 3 or any of the additional purposes specified in section 4; and
- (ab) in the case of section 533(1)(da), it is satisfied that the offer or class of offers has, or would have, a purpose or an effect of circumventing, evading, or defeating any of the purposes referred to in paragraph (a) (having regard to the economic substance of the offer or offers); and
- (b) in the case of section 533(1)(a) to (d), it has had regard to the economic substance of the relevant security; and
- (c) it has consulted the persons or representatives of the persons that the FMA considers will be substantially affected by the declaration.
(2) A failure to comply with subsection (1)(c) does not affect the validity of the declaration.

535 Transitional matters

A declaration under this subpart—
- (a) does not apply to financial products issued or transferred before the commencement of the declaration; and
- (b) applies subject to any terms and conditions of the declaration relating to transitional matters.

536 FMA may make interim orders pending exercise of powers

(1) The FMA may make an interim order that no offers, issues, sales, or transfers of securities specified in the order may be made while the interim order is in force if—
- (a) the FMA is considering, at any time, whether it may exercise a power under this subpart in respect of those securities; and
- (b) the FMA considers that making an interim order is desirable in the public interest.
(2) An order under subsection (1)—
- (a) must specify the offeror or offerors to which the order applies; and
- (b) may require—
  - (i) all, or any specified class or classes, of the associated persons of the offeror or offerors to comply with the order (including associated persons that may be incorporated or formed after the date of the order); and
  - (ii) an offeror to provide a copy of the order to all or any of those associated persons.
(3) For the purpose of subsection (2), the order is not required to refer to the associated persons by name.
(4) The FMA—
- (a) may act under subsection (1) or section 537(1)(b) without giving an offeror to which the order relates an opportunity to make submissions to, or be heard before, the FMA in respect of the matter; but
- (b) must, after acting under subsection (1) or section 537(1)(b), give that offeror or that offeror's representative an opportunity to make written submissions and to be heard on the matter.
(5) The FMA must, immediately after making the order, notify each of the following that the order has been made and the reasons for the order:
- (a) each offeror to which the order relates:
- (b) the Registrar, if the order relates to a regulated offer.

537 Period in which interim order is in force

(1) An interim order under section 536 is in force from the time at which it is made until the close of—
- (a) the date that is 15 working days after the day on which it is made; or
- (b) a later date specified by the FMA by notice to the offeror to which the order relates.
(2) For the purposes of subsection (1)(b),—
- (a) the FMA may specify a later date if the FMA is of the opinion that it is not reasonably practicable for it to complete its consideration as referred to in section 536(1)(a) within the 15-working-day period referred to in subsection (1)(a):
- (b) the later date must be a date that is no more than 30 working days after the day on which the interim order is made.

Subpart 4—Frameworks or methodologies

537A Purpose

(1) The purpose of this subpart is to provide for the FMA to issue frameworks or methodologies relating to detailed or technical matters (rather than matters of general principle).

(2) A notice issued under this subpart applies only to the extent provided for in this Act or the regulations (see section 526).

538 FMA may specify frameworks or methodologies

(1) The FMA may issue a notice that specifies frameworks or methodologies relating to how matters are required or permitted to be determined, calculated, valued, presented, or prepared for the purposes of—
- (a) ~~the manner in which~~ documents, information, or other matters that are to be made available under subpart 4 of Part 3 ~~are to be presented, calculated, or prepared~~:
- (ab) the governing documents for debt securities and registered schemes, statements of investment policy and objectives, and determining the materiality of limit breaks or pricing errors under Part 4:
- (b) the eligibility criteria for the issue of market services licences:
- (c) the conditions that may be imposed on market services licences:
- ~~(d) any regulations that may be made under section 518(1)(a) to (d):~~
- (e) any other matter that, by this Act or any other enactment, is required or permitted to be ~~presented, calculated, prepared, or determined in accordance with frameworks or methodologies prescribed~~ done in accordance with those frameworks or methodologies or the notices issued under this subpart.
(1A) The frameworks or methodologies may (without limitation)—
- (a) include requirements relating to how income, values, assets, revenue, liabilities, financial products, transactions, amounts payable, or other matters are to be determined, calculated, valued, presented, or prepared:
- (b) provide for income, values, assets, revenue, liabilities, financial products, transactions, amounts payable, or other matters to be included or disregarded (in whole or in part) for the purposes of paragraph (a).
~~(2) A notice issued under this subpart applies only to the extent provided for in this Act or the regulations.~~
(3) A notice issued by the FMA—
- (a) may specify different matters and requirements in respect of different kinds or classes of financial products, services, persons, or other circumstances:
- (b) must not specify matters and requirements that are inconsistent with this Act or any regulations.
(4) Subpart 5 (general provisions relating to FMA instruments) applies to a notice issued under this section.

Compare: 1978 No 103 s 54D

539 Consultation

(1) The FMA must not issue a notice under this subpart unless the FMA has consulted the persons or representatives of the persons that the FMA considers will be substantially affected by the issue of the notice.

(2) A failure to comply with subsection (1) does not affect the validity of the notice.

Compare: 1978 No 103 s 54E

Subpart 5—General provisions relating to certain FMA instruments

540 Application of subpart

This subpart applies to the following instruments:
- (a) notices issued under section 53:
- (b) exemptions granted under subpart 2:
- (c) declarations made under subpart 3:
- (d) notices issued under subpart 4.

541 Status and publication of instruments

(1) An instrument to which this subpart applies is a regulation for the purposes of the Regulations (Disallowance) Act 1989.
(2) The following instruments are regulations for the purposes of the Acts and Regulations Publication Act 1989:
- (a) a notice issued under section 53:
- (b) a class exemption:
- (c) a class declaration.
(3) An instrument to which this subpart applies that is not referred to in subsection (2) must, as soon as practicable after it is made, be—
- (a) published on an Internet site maintained by or on behalf of the FMA; and
- (b) notified in the Gazette; and
- (c) made available in printed form for purchase on request by members of the public.
(4) A notification in the Gazette for the purpose of subsection (3)(b) does not have to include the text of the instrument.

(5) The FMA's reasons for making an instrument (including why the instrument is appropriate) must be published together with the instrument.
(6) In this subpart,—
class declaration—
- (a) means a declaration under subpart 3 that is of general application and that applies to a class of persons or a class of transactions; but
- (b) does not include a declaration under that subpart in relation to financial products issued or offered by a particular person or persons associated with a particular person
class exemption—
- (a) means an exemption granted under subpart 2 that is of general application and that applies to a class of persons or a class of transactions; but
- (b) does not include an exemption granted under that subpart in relation to—
  - (i) a particular person or transaction; or
  - (ii) persons associated with, or transactions involving, a particular person.

542 Variation and revocation

The FMA may vary or revoke an instrument to which this subpart applies in the same way as it may make the instrument.

Subpart 6—Recognition and application regimes

543 Purpose of this subpart

The purpose of this subpart is to enable recognition and application regimes to be implemented that—
- (a) provide for exemptions from ~~Parts 3 and 4~~ this Act and the regulations so that issuers may offer financial products in New Zealand in accordance with the securities laws of designated countries:
- (b) extend the territorial scope of ~~Parts 3 and 4~~ this Act and the regulations so that offerors may offer financial products in designated countries in accordance with New Zealand laws, and investors in those countries may rely on and enforce those laws.
Compare: 1978 No 103 s 71

544 Definition of country in this subpart

In this subpart and subpart 7, country includes a state, territory, country, or group of countries in respect of which a single securities law, or set of laws, is in force.

Compare: 1978 No 103 s 72

Exemption from Parts 3 and 4 Act and regulations for New Zealand offers under recognition regime

545 Exemption from Parts 3 and 4 Act and regulations for New Zealand offers under recognition regime

(1) A provision of ~~Part 3 or 4~~ this Act or the regulations does not apply to a financial product offered to a person in New Zealand if—
- (a) a recognition regime set out in regulations made under section 546 applies to the product; and
- (b) the recognition regime provides an exemption from that provision for the product; and
- (c) the offeror of the product has opted into the recognition regime; and
- (d) any other preconditions of the recognition regime are met.
(2) For the purposes of subsection (1), an offeror opts into a recognition regime in respect of a product by notifying the Registrar—
- (a) that an offer of the financial product is to be made under the recognition regime; and
- (b) of 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 offeror.
(3) The Registrar must send a copy of the notification to the FMA.

Compare: 1978 No 103 s 73

546 Power to exempt from Parts 3 and 4 Act and regulations under recognition regime

(1) The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations, for the purpose of implementing a recognition regime for a designated country, that provide for—
- (a) exemptions from provisions of ~~Parts 3 and 4~~ this Act and the regulations; and
- (b) the other matters set out in section 547.
(2) The Minister may recommend making an Order in Council under this section only—
- (a) if he or she is satisfied that it is in the public interest after having regard to—
  - (i) the securities laws of the designated country; and
  - (ii) the interests of New Zealand investors; and
- (b) after consulting with the FMA.
Compare: 1978 No 103 s 74

547 Matters that must be stated in regulations implementing recognition regime

(1) The regulations made under section 546 must state—
- (a) the country to which the recognition regime applies; and
- (b) the classes of financial products to which the recognition regime applies (whether by reference to type of issuer, offeror, offer, or any other matter); and
- (c) the exemptions from provisions of ~~Parts 3 and 4~~ this Act and the regulations for those products; and
- (d) the preconditions that must be met for the recognition regime to apply, for example (without limitation), requiring specified information relating to the offer or financial products to be provided to the FMA or Registrar; and
- (e) the terms and conditions that must be complied with under the recognition regime, for example (without limitation), requiring—
  - (i) the offer of the financial products to be made in accordance with specified provisions of the designated country's laws:
  - (ii) warnings to be given to investors so as to inform them that the offer of the financial products is regulated under the designated country's laws and that New Zealand laws relating to the offer of financial products do not apply to the offer:
  - (iii) specified information relating to the offer or financial products to be provided to the FMA or Registrar.
(2) Regulations may provide different exemptions, preconditions, and terms and conditions for different classes of financial products, offers, persons, or circumstances.

Compare: 1978 No 103 s 75

548 Offence for breach of regulations implementing recognition regime

If there is a contravention, in respect of a financial product, of a term or condition that must be complied with under a recognition regime, each of the following persons commits an offence and is liable on ~~summary~~ conviction to a fine not exceeding $50,000:
- (a) the offeror of the financial product; and
- (b) every person who is a director of the offeror at the time of the contravention; and
- ~~(c) every promoter of the financial product; and~~
- (d) every person who has authorised himself or herself to be named, and is named, in any advertisement relating to the financial product as a director of the offeror or as having agreed to become a director either immediately or after an interval of time.
Compare: 1978 No 103 s 76

Extension of Parts 3 and 4 Act and regulations to overseas offers under application regime

549 Extension of Parts 3 and 4 Act and regulations to overseas offers under application regime

A provision of ~~Part 3 or 4~~ this Act or the regulations applies to a financial product that is offered to a person outside New Zealand if—
- (a) an application regime set out in regulations made under section 550 applies to the financial product; and
- (b) the application regime applies that provision to the financial product; and
- (c) any other preconditions of the application regime are met.
Compare: 1978 No 103 s 77

550 Power to extend Parts 3 and 4 Act and regulations under application regime

(1) The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations, for the purpose of implementing an application regime for a designated country, that provide for—
- (a) the application of provisions of ~~Parts 3 and 4~~ this Act and the regulations to financial products offered to persons in that country; and
- (b) the other matters set out in section 551.
(2) The Minister may recommend making an Order in Council under this section only—
- (a) if he or she is satisfied that it is appropriate for New Zealand laws to apply to financial products offered to persons in the designated country as set out in the proposed application regime; and
- (b) after consulting with the FMA.
Compare: 1978 No 103 s 78

551 Matters that must be stated in regulations implementing application regime

(1) The regulations made under section 550 must state—
- (a) the country to which the application regime applies; and
- (b) the classes of financial products to which the application regime applies (whether by reference to type of issuer, offeror, offer, or any other matter); and
- (c) the provisions of ~~Parts 3 and 4~~ this Act and the regulations that apply to those financial products; and
- (d) whether or not, or the extent to which, exemptions from those provisions granted by the FMA under this Act may also apply for those financial products; and
- (e) the preconditions (if any) that must be met for the application regime to apply; and
- (f) the terms and conditions (if any) that must be complied with under the application regime.
(2) The regulations may provide different applications of provisions, preconditions, and terms and conditions for different classes of financial products, offers, persons, or circumstances.

Compare: 1978 No 103 s 79

Subpart 7—Enforcement of overseas pecuniary penalties under application regime

552 Purpose of this subpart

The purpose of this subpart is to enable application regimes to be implemented that provide for enforcement in New Zealand of fines and pecuniary penalties imposed for breaches of securities laws of designated countries.

Compare: 1978 No 103 s 71

553 Enforcement of overseas pecuniary penalties under application regime

This subpart applies to a judgment given by a court under a provision of the law of another country if—
- (a) an application regime set out in regulations made under section 554 applies this subpart to that provision of the law of that country; and
- (b) the judgment requires payment of a penalty; and
- (c) any other preconditions of the application regime are met.
Compare: 1978 No 103 s 80

554 Power to enforce overseas penalties under application regime

The Governor-General may, by Order in Council made on the recommendation of the Minister, for the purpose of implementing an application regime for a designated country, make regulations that provide for—
- (a) the application of this subpart to provisions of the securities laws of that country under or in respect of which a penalty may be imposed; and
- (b) the preconditions of the application regime (if any).
Compare: 1978 No 103 s 81

555 Interpretation

In this subpart,—

court of rendition, in relation to a judgment, means the court by which the judgment was given

enforcement, in relation to a judgment, includes execution of a judgment

judgment includes an order

penalty means a fine or other pecuniary penalty (whether criminal or civil)

place of rendition, in relation to a judgment, means the country in which the court of rendition is established

registered judgment means a judgment that is registered under section 556.

Compare: 1978 No 103 s 82

556 Registration of judgment

The High Court must register a judgment to which this subpart applies under section 553 as a civil judgment debt if an application is made to it in accordance with regulations made under section 554.

Compare: 1978 No 103 s 83

557 Effect of registration

(1) A registered judgment has the same force and effect, and may give rise to the same proceedings by way of enforcement, as if the judgment had been given by the High Court.

(2) Subsection (1) is subject to sections 558 and 559.

Compare: 1978 No 103 s 84

558 Enforceability of registered judgment

A registered judgment is capable of being enforced in or by the High Court only if, and to the extent that, at the time when the proceeding for enforcement is or is to be taken, the judgment is capable of being enforced in or by—
- (a) the court of rendition; or
- (b) a court in the place of rendition.
Compare: 1978 No 103 s 84

559 Stay may be granted

(1) The High Court may, on application by a person against whom the registered judgment has been given, order that proceedings in the High Court to enforce the judgment—
- (a) not be commenced until a specified time; or
- (b) be stayed for a specified period.
(2) The order—
- (a) must be made subject to conditions that,—
  - (i) within the period specified in the order, the person make and prosecute an appropriate application for relief in respect of the registered judgment; and
  - (ii) the application be prosecuted in an expeditious manner; and
- (b) may be made subject to other conditions, including as to the giving of security, that the High Court thinks fit.
(3) For the purposes of subsection (2)(a)(i), an appropriate application for relief is an application to set aside, vary, or appeal against the registered judgment that is made to a court or tribunal that has jurisdiction under the law in force in the place of rendition to grant the application.

Compare: 1978 No 103 s 86

560 Costs

(1) The following are recoverable in proceedings by way of enforcement of a registered judgment:
- (a) the reasonable costs and expenses of, and incidental to, obtaining and lodging the copy of the judgment; and
- (b) the costs and expenses reasonably incurred in attempting to execute the judgment in the court of rendition.
(2) The entitlement of a person to, and the liability of a person for, the costs or expenses of, and incidental to, those proceedings are the same as they are in proceedings by way of enforcement of—
- (a) a similar judgment given by the High Court; or
- (b) if there is no such similar judgment, the most closely analogous judgment given by the High Court.
Compare: 1978 No 103 s 87

561 Interest

Interest on the amount of a registered judgment—
- (a) is payable at the same rate or rates and in respect of the same period or periods as would be applicable in the court of rendition; and
- (b) is recoverable to the extent that the judgment creditor satisfies the High Court as to the amount of the interest.
Compare: 1978 No 103 s 88

562 Rules of private international law not to apply

If a judgment is registered in the High Court under this subpart, the courts of New Zealand must not, merely because of the operation of a rule of private international law, refuse to permit proceedings by way of enforcement of the registered judgment to be taken or continued.

Compare: 1978 No 103 s 89

563 Other regulations for registration of judgments under application regime

The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations providing for the registration of judgments under this subpart, including (without limitation) providing for—
- (a) the verification requirements for those judgments:
- (b) the registration and service of facsimiles of those judgments:
- (c) the service of notice of registration of those judgments:
- (d) other requirements for the way in which those judgments may be registered (for example, the currency of registrations and the registration of partly satisfied judgments).
Compare: 1978 No 103 s 90

Subpart 8—Transitional and miscellaneous provisions

563A Registers

The provisions in Schedule 2 apply to the keeping of registers under this Act.

563B Transitional provisions

The transitional provisions in Schedule 5 have effect for the purposes of this Act.

Part 9
Repeals, and amendments, and transitional provisions

Subpart 1—Repeals and revocations

564 Repeals

(1) The following Acts are repealed:
- (a) Securities Act 1978 (1978 No 103):
- (b) Securities Markets Act 1988 (1988 No 234):
- (c) Securities Transfer Act 1991 (1991 No 119):
- (d) Superannuation Schemes Act 1989 (1989 No 10):
- (e) Unit Trusts Act 1960 (1960 No 99).
(2) Sections 5(3), 16(3), 22, 40, 43(2), and 49(3) to (6) of the Securities Amendment Act 2011 are repealed.

565 Revocations

The following enactments are revoked:
- (a) Futures Industry (Client Funds) Notice 1991 (SR 1991/43):
- (b) Futures Industry (Client Funds) Regulations 1990 (SR 1990/227):
- (c) Securities Act (Contributory Mortgage) Regulations 1988 (SR 1988/143):
- (d) Securities (Fees) Regulations 1998 (SR 1998/461):
- (e) Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003 (SR 2003/382):
- (f) Securities Markets (Fees) Regulations 2003 (SR 2003/383):
- (g) Securities Markets (Insider Trading Exemption—Futures Contracts) Regulations 2010 (SR 2010/354):
- (h) Securities Markets (Market Manipulation) Regulations 2007 (SR 2007/373):
- (i) Securities Markets (Substantial Security Holders) Regulations 2007 (SR 2007/372):
- (j) Securities (Moratorium) Regulations 2009 (SR 2009/395):
- (k) Securities (Mutual Recognition of Securities Offerings—Australia) Regulations 2008 (SR 2008/153):
- (l) Securities Regulations 2009 (SR 2009/230):
- (m) Superannuation Schemes (Fees) Regulations 1992 (SR 1992/284):
- (n) Unit Trusts (Fees) Regulations 1999 (SR 1999/152).

Subpart 2—Amendments to Fair Trading Act 1986

566 Principal Act amended

This subpart amends the Fair Trading Act 1986.

567 New section 5A substituted

Section 5A is repealed and the following section substituted:
~~“5A Contraventions of financial markets misleading or deceptive conduct or false representation provisions do not contravene sections 9 to 13~~

~~Conduct that contravenes Part 2 of the Financial Markets Conduct Act 2011 does not contravene any of sections 9 to 13.~~
“5A Fair trading provisions that do not apply to financial products or financial services

“(1) Nothing in sections 9 to 11 and 13 applies in relation to financial products or financial services.

“(2) See Part 2 of the Financial Markets Conduct Act 2011 (which relates to fair dealing in relation to financial products and financial services).

“(3) In this section,—

“financial products has the same meaning as in section 15A of the Financial Markets Conduct Act 2011

“financial services has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011.”

567A New section 48B inserted (Commission's powers in relation to Part 2 of Financial Markets Conduct Act 2011)

After section 48A, insert:
“48B Commission's powers in relation to Part 2 of Financial Markets Conduct Act 2011

“(1) The Commission may do any of the following:

“(a) investigate—

“(i) whether a person has engaged in, or is engaging in, conduct that constitutes, or may constitute, a contravention, or involvement in a contravention, of Part 2 of the Financial Markets Conduct Act 2011; and

“(ii) the nature or extent of that conduct:

“(b) gather, obtain, or recover evidence of the conduct referred to in paragraph (a):

“(c) make an application under subpart 3 of Part 7 of the Financial Markets Conduct Act 2011 in accordance with section 487A of that Act.

“(2) The Commission may exercise its powers under this Part for the purposes of subsection (1) (and this Part applies accordingly with all necessary modifications).”

567B Transitional provision for existing offences and contraventions

(1) This section applies to an offence committed under, or a contravention of, the principal Act before the commencement of section 567.
(2) The principal Act continues to have effect as if it had not been amended by this subpart for the purpose of—
- (a) investigating an offence or a contravention to which this section applies:
- (b) commencing or completing proceedings for an offence or a contravention to which this section applies:
- (c) imposing a penalty or other remedy, or making an order, in relation to an offence or a contravention to which this section applies.

Subpart 3—Amendments to Financial Advisers Act 2008

568 Principal Act amended

This subpart amends the Financial Advisers Act 2008.

569 Interpretation

(1) Section 5 is amended by repealing the definitions of call building society share or call credit union share, futures contract, investment statement, issuer, promoter, prospectus, registered exchange, related body corporate, and security.
(2) Section 5 is amended by inserting the following definitions in their appropriate alphabetical order:
~~“acquire includes—~~

~~“(a) obtain by buying, subscribing, entering into the relevant legal relationship, or taking an assignment of; and~~

~~“(b) agree to acquire~~
“acquire includes obtain by buying, subscribing, entering into the relevant legal relationship, or taking an assignment of
“call building society share means a share issued by a building society under which—

“(a) the shareholder has a right to demand repayment of the value of the share in full at any time; and

“(b) the building society has an obligation to repay the value of the share in full not later than 1 working day after the demand is made; and

“(c) the rate of dividend or interest payable or any other benefit provided does not alter as a result of the demand being made; and

“(d) no fee or other amount is payable as a result of the principal sum not having been held by the building society for a particular period of time
“call credit union share means a share referred to in section 107 of the Friendly Societies and Credit Unions Act 1982, and issued by a credit union, under which—

“(a) the member has a right to demand repayment of the value of the share in full at any time; and

“(b) the credit union has an obligation to repay the value of the share in full in accordance with section 107(4) of the Friendly Societies and Credit Unions Act 1982; and

“(c) the rate of dividend or interest payable or any other benefit provided does not alter as a result of the demand being made; and

“(d) no fee or other amount is payable as a result of the principal sum not having been held by the credit union for a particular period of time
“DIMS facility means an agreement, arrangement, or understanding for the provision of a discretionary investment management service under an investment authority

“DIMS licensee means a person who is licensed under the Financial Markets Conduct Act 2011 and whose licence covers acting as a provider of a discretionary investment management service for the purposes of that Act

“DIMS licensee has the same meaning as in section 390A of the Financial Markets Conduct Act 2011

“financial markets legislation has the same meaning as in section 4 of the Financial Markets Authority Act 2011
“FMCA financial product means each of the following within the meaning of the Financial Markets Conduct Act 2011:

“(a) an equity security:

“(b) a debt security:

“(c) a managed investment product:

“(d) a derivative
“investment authority has the meaning set out in section 12(3)

“investment mandate has the meaning set out in section 12(3)

“issuer has the same meaning as in section 10(1)(b) of the Financial Markets Conduct Act 2011

“licensed market has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“offeror has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“product disclosure statement or PDS has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“promoter means, in relation to an FMCA financial product, a person who is instrumental in the formulation of a plan or programme pursuant to which the product is offered

“related body corporate has the same meaning as in section 11(2) of the Financial Markets Conduct Act 2011

“regulated offer has the same meaning as in section 29 of the Financial Markets Conduct Act 2011”.
(3) Section 5 is amended by repealing the definition of category 1 product and substituting the following definition:
“category 1 product means—

“(a) an FMCA financial product (other than a product that is a category 2 product); or

“(b) a DIMS facility (other than a facility that is a category 2 product); or

“(ba) an investment-linked contract of insurance; or

“(c) any other product specified by the regulations; or

“(d) a renewal or variation of the terms or conditions of an existing category 1 product”.
(4) The definition of category 2 product in section 5 is amended by inserting the following paragraph after paragraph (j):
- “(ja) a DIMS facility if the investment mandate covers only category 2 products; or”.
(5) Paragraph (a) of the definition of product provider in section 5 is repealed and the following paragraph substituted:
- “(a) the issuer, in the case of an FMCA financial product:”.
(6) The definition of product provider in section 5 is amended by inserting the following paragraph after paragraph (c):
- “(ca) the person to whom the investment authority is granted, in the case of a DIMS facility:”.

570 Who are wholesale clients

(1) Section 5C(1)(c) is repealed.

(1A) Section 5C(1)(d) is amended by inserting “(except in respect of a discretionary investment management service)” before “an entity”.
(2) Section 5C(1) is amended by repealing paragraphs (f) and (g) and substituting the following paragraphs:
- “(f) a person who is a wholesale investor within the meaning of clause 3(2) of Schedule 1 of the Financial Markets Conduct Act 2011:
- “(g) a person who is, in relation to an offer of financial products, a wholesale investor within the meaning of clause 3(3) of Schedule 1 of the Financial Markets Conduct Act 2011 if the service relates to that offer or to financial products that have been ~~subscribed for~~ acquired by that person under that offer:
- “(ga) a person who is, in relation to an offer of financial products, a close business associate of the offeror, or a relative of the offeror or a director of the offeror, within the meaning of clauses 4 and 5 of Schedule 1 of the Financial Markets Conduct Act 2011 if the service relates to that offer or to financial products that have been ~~subscribed for~~ acquired by that person under that offer:”.
(3) Section 5C(3) is repealed.

571 When person provides discretionary investment management service

Section 12 is amended by adding the following subsection:
- “(3) For the purposes of this Act, the authority referred to in subsection (1)(b) is the investment authority and the scope of that authority is the investment mandate.”

572 Other exemptions

(1) Section 14(1) is amended by inserting the following paragraph after paragraph (k):
- ~~“(ka) a DIMS licensee providing a discretionary investment management service covered by that licence:~~
- “(ka) a person providing a discretionary investment management service if—
  
  “(i) the person is a DIMS licensee providing that service under a market services licence under the Financial Markets Conduct Act 2011; or
  
  “(ii) the person is exempted, by section 387A (other than by section 387A(2)(b)) or otherwise by or under that Act, from the licensing requirement under section 387 of that Act in respect of that service:”.
(2) Section 14(1) is amended by repealing paragraphs (m) and (n) and substituting the following paragraph:
- “(m) any form of communication made by or on behalf of an issuer or offeror that is contained in, or given in connection with, an offer of FMCA financial products that is not a regulated offer (within the meaning of the Financial Markets Conduct Act 2011) because of any of clauses 3 to 5 of Schedule 1 of that Act:”.
(3) Section 14(1)(o) is amended by repealing subparagraph (i) and substituting the following subparagraph:
- “(i) a product disclosure statement, a disclosure document under clause 26 of Schedule 1 of the Financial Markets Conduct Act 2011, information from a register entry (with the meaning of that Act), a document or information under subpart 4 of Part 3 of that Act, or an advertisement or publication referred to in section 73 of that Act:”.

573 When financial adviser service is personalised service or class service

Section 15 is amended by inserting the following subsection after subsection (2):
- ~~“(2A) Subsection (1) does not apply to a discretionary investment management service and, in this case, the service is a personalised service if—~~
  
  ~~“(a) the financial adviser who exercises the investment authority under that service—~~
  
  “(i) has tailored the investment mandate for that service to take into account the particular financial situation or goals (or any 1 or more of them) of a named client or a client that is otherwise readily identifiable by the financial adviser; or
  
  “(ii) in exercising that investment authority. takes into account the particular financial situation or goals (or any 1 or more of them) of a named client or a client that is otherwise readily identifiable by the financial adviser; or
  
  “(b) a client would, in the circumstances in which the service is provided, reasonably expect that financial adviser to tailor the investment mandate, or to exercise the investment authority, in that way.
- “(2A) Subsection (1) does not apply to a discretionary investment management service and, in this case, the service is a personalised service if—
  
  “(a) the service is provided to a named client or a client who is otherwise readily identifiable by the financial adviser exercising the investment authority under that service; and
  
  “(b) the investment strategy and investment mandate have been designed to take account of the client's particular financial situation or goals or any 1 or more of them (rather than merely being customised from an investment strategy or investment mandate that applies to a class of clients, for example by selecting options or making minor changes to the class strategy or mandate).”

574 Who is permitted to provide personalised service to retail clients

(1) Section 18(1)(a) is amended by omitting “or providing a discretionary investment management service”.
(2) Section 18(1)(a)(ii) is repealed and the following subparagraph substituted:
- “(ii) a QFE adviser (but only if the QFE or a member of the QFE group is the product provider (or, in the case of an FMCA financial product, a promoter) of the relevant category 1 product):”.
~~(3) Section 18(1)(c) is amended by omitting “or providing a discretionary investment management service”.~~
~~(4) Section 18 is amended by inserting the following subsection after subsection (1):~~
- ~~“(1A) However, subsection (1) does not apply to a discretionary investment management service and, in this case,—~~
  
  ~~“(a) the following persons are permitted to provide the personalised service if the investment mandate is unlimited or covers any category 1 products:~~
  
  ~~“(i) an authorised financial adviser:~~
  
  “(ii) a QFE adviser (but only if the investment mandate is limited so that any category 1 products it covers are products for which the QFE or a member of the QFE group is the product provider (or, in the case of an FMCA financial product, a promoter):
  
  ~~“(b) the following persons are permitted to provide the personalised service if the investment mandate covers only category 2 products:~~
  
  ~~“(i) an authorised financial adviser:~~
  
  ~~“(ii) a registered individual:~~
  
  ~~“(iii) a QFE adviser.”~~
(3) Section 18(1) is amended by inserting the following paragraph after paragraph (b):
- “(ba) if providing a discretionary investment management service for which the investment mandate is capable of covering a category 1 product:
  
  “(i) an authorised financial adviser:
  
  “(ii) a QFE adviser (but only if the investment mandate is only capable of covering a category 1 product for which the QFE or a member of the QFE group is the product provider (or, in the case of an FMCA financial product, a promoter)):”
(4) Section 18(1)(c) is amended by omitting “if giving financial advice or providing a discretionary investment management service in relation to a category 2 product,—” and substituting “if giving financial advice in relation to category 2 product or providing a discretionary investment management service to which paragraph (ba) does not apply,—”.

(5) Section 18(2) is amended by inserting “and (ba)(ii)” after “Subsection (1)(a)(ii)”.

575 Who is permitted to provide class service to retail clients

Section 19 is amended by adding the following subsection as subsection (2):
- “(2) However,—
  
  “(a) subsection (1) does not apply to a discretionary investment management service if the investment mandate is ~~unlimited or covers any category 1 products~~ capable of covering an FMCA financial product; and
  
  “(b) no person is permitted to provide a class service of that kind under this Act (however, see Part 6 of the Financial Markets Conduct Act 2011 under which persons may be licensed as DIMS licensees or services may be exempted).”

576 Financial adviser must make disclosure before providing personalised service to retail client

(1) The heading to section 22 is amended by omitting “personalised”.
(2) Section 22 is amended by inserting the following subsection after subsection (1):
- “(1A) However, in the case of a discretionary investment management service, a financial adviser who provides that service to a retail client must instead disclose prescribed information relating to the service to the client, in accordance with this Act and the regulations,—
  
  “(a) both—
  
  “(i) before the investment authority is granted; and
  
  “(ii) before any exercise of the investment authority (unless there has been previous disclosure that is not out of date under section 29); or
  
  “(b) if not practicable before, as soon as practicable after, the time applying under paragraph (a).”
(3) Section 22(2) is amended by omitting “Subsection (1) does” and substituting “Subsections (1) and (1A) do”.

577 What financial adviser must disclose

Section 23(2) is amended by inserting the following paragraph after paragraph (c):
- “(ca) information relating to any discretionary investment management service provided by the financial adviser:”.

578 QFE must make disclosure before personalised service provided to retail client

(1) Section 25 is amended by inserting the following subsection after subsection (1):
- “(1A) However, in the case of a discretionary investment management service, a QFE or a member of a QFE group that, acting through a QFE adviser, provides that personalised service to a retail client must ensure that the prescribed information relating to the service is disclosed to the client, in accordance with this Act and the regulations,—
  
  “(a) both—
  
  “(i) before the investment authority is granted; and
  
  “(ii) before any exercise of the investment authority (unless there has been previous disclosure that is not out of date under section 29); or
  
  “(b) if not practicable before, as soon as practicable after, the time applying under paragraph (a).”
(2) Section 25(2) is amended by inserting the following paragraph after paragraph (c):
- “(ca) information relating to any discretionary investment management service provided by the QFE adviser:”.

579 No compliance with disclosure obligation if disclosure out of date

(1) Section 29(1) is amended by adding “or, in the case of a discretionary investment management service, the investment authority is exercised”.

(2) Section 29(2)(b)(iv) is amended by adding “or, in the case of a discretionary investment management service, change any other instruction in relation to the service”.

580 New section 29A inserted

The following section is inserted after section 29:
“29A Further prescribed information to be made available to clients of discretionary investment management service

“(1) A financial adviser who provides a discretionary investment management service to a retail client must at the request of the client or at the prescribed times or on the occurrence of the prescribed events, make available to the client the documents, information, and other matters that are required to be made available under this section by the regulations.

“(2) The documents, information, and other matters must be made available in the prescribed manner.

“(3) The documents, information, and other matters must, if required by the regulations, be presented, calculated, or prepared in accordance with the frameworks or methodologies specified in a notice issued by the FMA under subpart 4 of Part 8 of the Financial Markets Conduct Act 2011.”

581 What is conduct obligation and when does it apply

Section 32(2) is amended by inserting the following paragraph after paragraph (b):
- “(ba) sections 36A to 36D apply to a discretionary investment management service provided to a retail client (whether it is a personalised service or a class service):”.

581A Financial adviser must exercise care, diligence, and skill

Section 33 is amended by adding the following subsection:
- “(3) This section does not apply to a service if section 36C (which relates to discretionary investment management services) applies to the service.”

582 New sections 36A to 36D inserted

The following sections are inserted after section 36:
“36A Requirement to have agreed investment mandate with retail client

“(1) A financial adviser must provide a discretionary investment management service to a retail client under an investment mandate agreed in writing with the client.

“(2) The financial adviser must ensure that the investment mandate clearly ~~provides for~~ discloses any limits of the investment authority (whether by the nature or type of financial products, size of decision, proportion of each type of financial product, or any other matter) or, if there are no limits, clearly discloses that the investment authority is unlimited.

“(3) The investment mandate must provide for the matters set out in this section in accordance with the frameworks or methodologies specified in a notices issued by the FMA under subpart 4 of Part 8 of the Financial Markets Conduct Act 2011 ~~(if any) that apply to it~~.
“36B Duties on financial adviser providing discretionary investment management service

A financial adviser who provides a discretionary investment management service to a retail client must—

“(a) act honestly in providing that service; and

“(b) provide the service in accordance with the agreed investment mandate; and

“(c) in exercising any powers under or performing any duties connected with the investment authority,—

“(i) act in the best interests of the client; or

“(ii) if it is a class service, act in the best interests of the clients of that service and treat the clients equitably; and

“(d) not make use of information acquired through providing that service in order to—

“(i) gain an improper advantage for the adviser or any other person; or

“(ii) cause detriment to the client.
“36C Duty to comply with professional standard of care in providing discretionary investment management service

A financial adviser must, in exercising any power under or performing any duties connected with the investment authority under a discretionary investment management service provided to a retail client, exercise the care, diligence, and skill that a prudent person engaged in that profession would exercise in the same circumstances.
“36D Custodial duties under discretionary investment management service

“(1) This section applies to a financial adviser who provides a discretionary investment management service under which client money or client property is held on behalf of the retail client.

“(2) The financial adviser must ensure that the client money or client property is held by a separate body corporate that is a broker to which Part 3A applies.”

583 New section 38 substituted

Section 38 is repealed and the following section substituted:
“38 Authorised financial adviser must not recommend acquisition of FMCA financial products if offer contravenes financial markets legislation

“(1) An authorised financial adviser (A) must not recommend to a person that that person acquire FMCA financial products if,—

“(a) when the FMCA financial products were or are offered ~~for subscription~~ under a regulated offer, the offer contravened or contravenes any financial markets legislation; and

“(b) the contravention has not been remedied; and

“(c) A knows or ought to know that, when the FMCA financial products were or are offered ~~for subscription~~, the offer contravened or contravenes any financial markets legislation.

“(2) A person who contravenes subsection (1) commits an offence (see section 121).

“Compare: 1988 No 234 s 41S”

584 Other exemptions

Section 77C(1) is amended by repealing paragraph (d) and substituting the following paragraph:
- “(d) a person providing a relevant service in the course of acting as a derivatives issuer under a licence under Part 6 of the Financial Markets Conduct Act 2011:”.

585 What is conduct obligation and when does it apply

Section 77J(3) is amended by adding “; but” and also by adding the following paragraph:
- “(c) do apply to a custodian under a discretionary investment management service provided by a DIMS licensee in the circumstances set out in sections 441 and 443 of the Financial Markets Conduct Act 2011.”

586 Restriction on use of term sharebroker

Section 77N is amended by repealing subsection (1) and substituting the following subsection:
- “(1) In any advertising or promotional material, the term sharebroker must not be used in connection with a person unless the person, or the person's employer, is authorised to be a participant in a licensed market.”

587 New section 77O substituted

Section 77O is repealed and the following section substituted:
“77O Broker must not receive client money if offer contravenes financial markets legislation

“(1) A broker (A) must not receive client money or client property from a person for the acquisition of FMCA financial products if,—

“(a) when the FMCA financial products were or are offered ~~for subscription~~ under a regulated offer, the offer contravened or contravenes any financial markets legislation; and

“(b) the contravention has not been remedied; and

“(c) A knows or ought to know that, when the FMCA financial products were or are offered ~~for subscription~~, the offer contravened or contravenes any financial markets legislation.

“(2) Contravention of this section may give rise to an offence (see section 134B).”

588 Offence of recommending offer of securities when subscription illegal

The heading to section 121 is amended by omitting “of securities when subscription illegal” and substituting “that contravenes financial markets legislation”.

589 Offences of receiving client money if offer for subscription illegal

The heading to section 134B is amended by omitting “for subscription illegal” and substituting “contravenes financial markets legislation”.

590 Heading to subpart 4 of Part 4 amended

The heading to subpart 4 of Part 4 is amended by omitting “, banning orders,”.

591 Sections 137C to 137J and heading repealed

Sections 137C to 137J and the heading above section 137F are repealed.

592 Pecuniary order for contravening wholesale certification requirement

(1) The heading to section 137K is amended by adding “or conduct obligations related to discretionary investment management service”.

(2) Section 137K(1) is amended by adding “or a conduct obligation under any of sections sections 36A to 36D”.

(3) Section 137K(5) is repealed.

(4) The heading above section 137K is consequentially amended by adding “or conduct obligations related to discretionary investment management service”.

(5) Section 137L(1) is consequentially amended by inserting “or a conduct obligation related to a discretionary investment management service” after “certification requirement”.

593 When FMA may make temporary banning orders for financial adviser services or broking services

Section 137M(a) is amended by omitting “Securities Act 1978” and substituting “Financial Markets Conduct Act 2011”.

594 General regulations

Section 154(1)(b) is amended by omitting “a security” and substituting “an FMCA financial product”.

Subpart 4—Financial Markets Authority Act 2011

595 Principal Act amended

This subpart amends the Financial Markets Authority Act 2011.

596 Interpretation

(1) Section 4 is amended by repealing the definition of dealings in securities and substituting the following definition:

“dealing ~~in financial products~~, in relation to financial products, has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011”.

(2) Section 4 is amended by inserting the following definitions in their appropriate alphabetical order:

“financial products has the same meaning as in section 7 of the Financial Markets Conduct Act 2011

“involved in a contravention has the same meaning as in section 509 of the Financial Markets Conduct Act 2011

“issuer has the same meaning as in section 10(1)(b) of the Financial Markets Conduct Act 2011

“offeror has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“product holder has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“regulated offer has the same meaning as in section 29(1) of the Financial Markets Conduct Act 2011

“regulated product has the same meaning as in section 29(2) of the Financial Markets Conduct Act 2011”.
(3) Paragraph (b) of the definition of financial markets participant in section 4 is amended by repealing subparagraphs (i) to (iii) and substituting the following subparagraphs:
- “(i) a person who participates in a regulated offer as an issuer or offeror:
- “(ii) a person who participates in an offer of financial products as an issuer or offeror and who is required to give a disclosure document under clause 26 of Schedule 1 of the Financial Markets Conduct Act 2011:
- “(iii) a person who acts, in respect of regulated products, as a supervisor, a manager, an investment manager, an administration manager, a custodian, or a qualified auditor (within the meaning of those terms in section 6(1) of the Financial Markets Conduct Act 2011):
- “(iviiia) a listed issuer (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011):”.
(4) Paragraph (c) of the definition of financial markets participant in section 4 is amended by repealing subparagraph (i) and substituting the following subparagraph:
- “(i) a body corporate that is related to a person referred to in paragraph (a) or (b) (within the meaning of section 11(2) of the Financial Markets Conduct Act 2011); or ”.
(5) Section 4 is amended by repealing the definition of securities.

597 FMA's functions

(1) Section 9(1)(a) is amended by adding the following subparagraph:
- “(v) stating whether or not, or in what circumstances, the FMA intends to take or not take action over a particular state of affairs or particular conduct (for example, to give a person some level of certainty that the FMA will take no further action in relation to a matter):”.
(2) Section 9(1)(c) is amended by inserting “or an involvement in a contravention” after “contravention”.

597A Power to enter and search place, vehicle, or other thing

(1) Section 29(1) and (3)(a) is amended by inserting “, or being involved in a contravention,” after “constitute a contravention”.

(2) Section 29(1)(a) is amended by inserting “or involvement” after “constitute such a contravention”.

598 FMA may exercise person’s right of action

(1A) Section 34(2)(b) is amended by omitting “fraud, negligence, default” and substituting “a contravention, an involvement in a contravention, fraud, negligence”.
(1) Section 34(3) is amended by repealing paragraph (c) and substituting the following paragraph:
- “(c) if person A is an issuer, any product holders of financial products issued by person A.”
(2) Section 34(4) is repealed.

599 FMA may accept undertakings

Section 46 is amended by inserting the following subsection after subsection (1):
- “(1A) An undertaking may be given in connection with the FMA making a statement under section 9(1)(a)(v) (but this subsection does not limit subsection (1)).”

600 New section 46A inserted

The following section is inserted after section 46:
“46A Undertaking may include requirements as to compensation or penalties

“(1) An undertaking under section 46 may include—

“(a) an undertaking to pay compensation to any person or otherwise to take action to avoid, remedy, or mitigate any actual or likely adverse effects arising from a contravention or possible contravention of any provision of the financial markets legislation:

“(b) an undertaking to pay to the FMA an amount in lieu of a pecuniary penalty.

“(2) The FMA must ensure that each amount paid under subsection (1)(b) is paid into a Crown Bank Account (after deducting the FMA's actual costs incurred in connection with the matter).

“(3) If an undertaking referred to in subsection (1)(b) is given, the FMA must give notice of that undertaking on its Internet site (whether or not it gives notification of other undertakings given in relation to the same matter).

“(4) This section does not limit section 46.”

601 New heading and section 48A inserted

The following heading and section are inserted after section 48:
“Power to appear and be heard and adduce evidence
“48A FMA may appear and be heard and adduce evidence

“(1) The FMA is entitled to appear and be heard in any specified proceedings.

“(2) The FMA has the right to adduce evidence and the right to cross-examine witnesses if the FMA appears under this section, unless the specified proceedings are by way of appeal.

“(3) The rights referred to in this section apply whether or not the FMA was a party to the specified proceedings at any earlier stage in the proceedings.

“(4) In this section, specified proceedings means any of the following kinds of proceedings:

“(a) civil or criminal proceedings under, or in respect of, any financial markets legislation:

“(b) civil proceedings that, in connection with the offer, issue, transfer, supply, or use of financial products or financial services, seek damages or other relief for fraud, negligence, default, breach of duty, or other misconduct.”

602 FMA may require its warning to be disclosed

(1) Section 49(1) is amended by repealing paragraph (b) and substituting the following paragraphs:
- “(b) in the case of a relevant person that is an issuer or offeror, ensure that every disclosure document of the kind that is specified in the order and that is distributed by or on behalf of the issuer or offeror contains a copy of the warning in a prominent position or is accompanied by a copy of the warning:
- “(ba) in the case of a relevant person that is a person to which subpart 4 of Part 6 of the Financial Markets Conduct Act 2011 applies, ensure that every disclosure statement under that subpart of the kind that is specified in the order and that is distributed by or on behalf of the relevant person contains a copy of the warning in a prominent position or is accompanied by a copy of the warning:
- “(bb) ensure that every restricted communication of the kind that is specified in the order and that is distributed by or on behalf of the relevant person or any of those associated persons contains a copy of the warning in a prominent position or is accompanied by a copy of the warning:”.
(2) Section 49(7)(a)(ii) is amended by omitting “securities” and substituting “financial products”.
(3) Section 49(7) is amended by repealing paragraph (b) and substituting the following paragraph:
- “(b) a disclosure document means any of the following:
  
  “(i) a product disclosure statement:
  
  “(ii) a register entry:
  
  “(iii) a disclosure document under clause 26 of Schedule 1 of the Financial Markets Conduct Act 2011:
  
  “(iv) a document made available under subpart 4 of Part 3 of that Act:”.
(4) Section 49(7)(c) is amended by omitting “securities” and substituting “financial products”.
(5) Section 49(7) is amended by repealing paragraph (d) and substituting the following paragraph:
- “(d) product disclosure statement, offer, restricted communication, register entry, associated person, and distributed have the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011.”

603 Schedule 1 amended

(1) Part 1 of Schedule 1 is repealed and the following Part substituted:

“Part 1

“Auditor Regulation Act 2011

“Financial Advisers Act 2008

“Financial Markets Authority Act 2011

“Financial Markets Conduct Act 2011

“Financial Markets Supervisors Act 2011

“Financial Service Providers (Registration and Dispute Resolution) Act 2008

“Part 4 and Schedule 1 of the KiwiSaver Act 2006”.

(2) In Part 2 of Schedule 1, after the item relating to the Trustee Companies Act 1967, insert the following item:

“Trustee Companies Management Act 1975”.

Subpart 5—Amendments to KiwiSaver Act 2006

604 Principal Act amended

This subpart amends the KiwiSaver Act 2006.

605 Purpose

Section 3(2) is amended by omitting “enables the establishment of schemes” and substituting “provides for schemes”.

606 Interpretation

(1) Section 4(1) is amended by repealing the definitions of administration manager, complying superannuation fund, defined contribution scheme, department, exempt employer, fee subsidy, independent trustee, investment manager, investment statement, KiwiSaver scheme, KiwiSaver schemes register, manager, member’s accumulation, member’s interest, Minister, nominated person, nominee, promoter, registered superannuation scheme, related company, restricted KiwiSaver scheme orrestricted scheme, trust deed, trustee corporation, trustees, and umbrella trust.
(2) Section 4(1) is amended by inserting the following definitions in their appropriate alphabetical order:
“administration manager has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“complying superannuation fund means a superannuation scheme that is identified as a complying superannuation fund on the register of managed investment schemes

“department means the department of State that, with the authority of the Prime Minister, is responsible for the administration of Part 4 and Schedule 1
“exempt employer means an employer—

“(a) who was approved as an exempt employer under section 30 (before its repeal by the Financial Markets Conduct Act 2011), or who has been approved to succeed to exempt employer status under section 151; and

“(b) whose approval has not been revoked
“investment manager has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011
“KiwiSaver scheme—

“(a) means a scheme that is identified as a KiwiSaver scheme on the register of managed investment schemes; but

“(b) to avoid doubt, does not include a complying superannuation fund
“manager has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011
“member's accumulation, in relation to a member of a scheme, means the net value of the total of—

“(a) the member’s contributions; and

“(b) any vested employer contributions in respect of the member; and

“(c) any fee subsidies paid in respect of the member under regulations made under section 228(n) or (o) before the revocation of those regulations; and

“(d) the Crown contribution paid in respect of the member
“member's interest, in relation to a member of a scheme, means the net value of the total of—

“(a) the member’s accumulation; and

“(b) any unvested employer contributions
“Minister, in Part 4 and Schedule 1,—

“(a) means the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of Part 4 and Schedule 1; and

“(b) includes, for the purposes of sections 131 to 134, any Ministers of the Crown who are jointly responsible for making an appointment under section 131 (if more than 1 Minister is authorised to act jointly)
“product disclosure statement has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“register of managed investment schemes means the register of managed investment schemes kept under Schedule 2 of the Financial Markets Conduct Act 2011

“restricted scheme means a scheme that is identified as a restricted scheme on the register of managed investment schemes

“scheme means any type or form of managed investment scheme

“superannuation scheme means a scheme that is identified as a superannuation scheme on the register of managed investment schemes

“supervisor has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“trust deed, in relation to a scheme, means the governing document of the scheme within the meaning of section 6(1) of the Financial Markets Conduct Act 2011.”
(3) The definition of default investment product in section 4(1) is amended by omitting “section 177” and substituting “section 131”.

(4) The definition of default KiwiSaver provider in section 4(1) is amended by omitting “section 177” and substituting “section 131”.

(5) The definition of default KiwiSaver scheme in section 4(1) is amended by omitting “section 177” and substituting “section 131”.

(6) Paragraph (a) of the definition of defined benefit scheme member in section 4(1) is amended by omitting “registered superannuation scheme” and substituting “superannuation scheme”.

(7) Subparagraph (a)(i) of the definition of defined benefit scheme member in section 4(1) is amended by inserting “or section 165 of the Financial Markets Conduct Act 2011” after “section 9BAA of the Superannuation Schemes Act 1989”.

(8) Paragraph (d) of the definition of fee is amended by omitting “referred to in section 200 or” and substituting “referred to in section 67 of the Financial Markets Authority Act 2011”.

(9) The definition of KiwiSaver scheme rules in section 4(1) is amended by omitting “section 126” and substituting “section 116”.

607 Meaning of provider

Section 5(1) is amended by repealing subsections (1) and (1A) and substituting the following subsection:
- “(1) For the purpose of anything that must or may be done by or to or in relation to a scheme, provider, unless the context otherwise requires,—
  
  “(a) means the person who is the manager of the scheme; and
  
  “(b) in the case of a restricted scheme, includes any person to whom the manager has made a lawful delegation to do any thing (for example, an administration manager).”

608 Outline

(1) Section 8(3) is amended by omitting “regulates” and substituting “contains additional governance provisions relating to”.

(2) Section 8(5) is amended by omitting “and Schedules 2 and 3 contain” and substituting “contains”.

(3) Section 8(6) is amended by omitting “and the Superannuation Schemes Act 1989”.
(4) Section 8 is amended by adding the following subsection:
- “(7) Also, other rules about KiwiSaver schemes and complying superannuation funds are contained in the Financial Markets Conduct Act 2011 (for example, rules about registration, governance, and offers of interests).”

609 Outline of how people become members of overall KiwiSaver scheme

Section 9(2) is amended by omitting “This subpart” and substituting “Subpart 4 of Part 4”.

610 Extension of opt-out period

Section 18(1)(b) is amended by omitting “an investment statement” in each place where it appears and substituting in each case “the product disclosure statement”.

611 Sections 24 to 32 and heading repealed

Sections 24 to 32 (which relate to exempt employers) and the heading above section 24 are repealed.

612 Employer must also supply investment statement for employer’s chosen KiwiSaver scheme (if any)

(1) The heading to section 43 is amended by omitting “investment statement” and substituting “product disclosure statement”.

(2) Section 43(a) is amended by omitting “an investment statement” and substituting “the product disclosure statement”.

613 Effect of employer choice of KiwiSaver scheme

Section 48 is amended by repealing subsections (2) to (6) and substituting the following subsections:
- “(2) On the first day that this section applies to an employee, the employee is treated as having—
  
  “(a) been given a product disclosure statement for the employer’s chosen KiwiSaver scheme; and
  
  “(b) applied to become a member of that scheme; and
  
  “(c) become a member of that scheme.
- “(3) The provider of the employer’s chosen KiwiSaver scheme must accept that application and register the employee as a member of the scheme.
- “(4) The membership contract of the KiwiSaver scheme is binding on the employee and the provider, and enforceable as if it were a contract that was freely and voluntarily entered into.
- “(5) The contract may be varied, replaced, cancelled, or otherwise terminated, and the managed investment products may be returned,—
  
  “(a) to the extent permitted by sections 129 and 130; and
  
  “(b) except as provided by those sections, in the same way as if the contract were freely and voluntarily entered into.”

614 Commissioner provisionally allocates certain people to default KiwiSaver schemes and sends investment statement

(1) The heading to section 50 is amended by omitting “investment statement” and substituting “product disclosure statement”.

(2) Section 50(3)(c) is amended by omitting “investment statement ”and substituting “product disclosure statement”.
(3) Section 50(4) is amended by repealing paragraphs (b) to (c) and substituting the following paragraphs:
- “(b) the Commissioner receives notice under section 196(1)(b) of the Financial Markets Conduct Act 2011 (which relates to transfers to another scheme on a scheme’s winding up) and paragraph (bb) does not apply; or
- “(bb) a scheme winds up, if that winding up is after the Commissioner receives notice under that section; or
- “(c) the Commissioner receives notice under section 130(2); or”.

615 New section 52 substituted

Section 52 is repealed and the following section substituted:
“52 Effect of completion of allocation

“(1) A person whose allocation is completed under section 51 is treated as having—

“(a) been given a product disclosure statement for the default KiwiSaver scheme; and

“(b) applied to become a member of that scheme; and

“(c) become a member of that scheme.

“(2) The provider of the default KiwiSaver scheme to which the person has been allocated must accept that application and register the person as a member of the scheme.

“(3) The membership contract of the default KiwiSaver scheme is binding on the person and the provider, and enforceable as if it were a contract that was freely and voluntarily entered into.

“(4) The contract may be varied, replaced, cancelled, or otherwise terminated, and the managed investment products may be returned,—

“(a) to the extent permitted by sections 129 and 130; and

“(b) except as provided in those sections, in the same way as if the contract were freely and voluntarily entered into.”

616 Notification of transfers and requirement to transfer funds and information

Section 56 is amended by repealing subsection (6) and substituting the following subsection:
- “(6) The circumstances are that—
  
  “(a) members have been notified of a proposal to transfer all of the members of the old scheme to another scheme under section 164 of the Financial Markets Conduct Act 2011; or
  
  “(b) a copy of a winding-up order or resolution of the old scheme has been lodged with the FMA under section 196 of that Act.”

617 Compulsory employer contribution amount: general rule

Section 101D(5)(b) is amended by—
- (a) omitting “registered superannuation scheme” and substituting “retirement scheme within the meaning of the Financial Markets Conduct Act 2011”; and
- (b) inserting in subparagraph (i) “or section 163 of the Financial Markets Conduct Act 2011” after “or section 119G of this Act”.

618 Sections 101H to 101K and heading repealed

Sections 101H to 101K (which relate to complying superannuation funds) and the heading above section 101H are repealed.

619 Part 4 substituted

Part 4 is repealed and the following Part substituted:
“Part 4
“Additional Governance Provisions

“115 Overview of Part

This Part contains governance provisions relating to schemes that are additional to those contained in the Financial Markets Conduct Act 2011, and other matters related to the functions of the Financial Markets Authority, as follows:

“(a) subpart 1 provides for implied terms in trust deeds and regulates other scheme matters:

“(b) subpart 2 provides for default KiwiSaver schemes:

“(c) subpart 3 provides for certain schemes to continue to be complying superannuation funds:

“(d) subpart 4 provides for certain employers to continue to be exempt employers, with the effect that the automatic enrolment rules will not apply to their employees when they start new employment:

“(e) subpart 5 contains miscellaneous matters.

“Subpart 1—Implied terms and other regulation of schemes

“KiwiSaver scheme rules

“116 KiwiSaver scheme rules are implied in trust deeds establishing KiwiSaver scheme

“(1) The provisions set out in Schedule 1 are to be known as the KiwiSaver scheme rules.

“(2) The KiwiSaver scheme rules set out in Schedule 1 are implied in every trust deed that establishes a KiwiSaver scheme in relation to the KiwiSaver scheme.

“(3) The KiwiSaver scheme rules—

“(a) apply despite anything to the contrary in the trust deed; and

“(b) are enforceable by the manager, the supervisor, or any member of the scheme.

“Compare: 2006 No 40 s 126 as at October 2011

“Provisions about unreasonable fees that apply to both KiwiSaver schemes and complying superannuation funds

“117 Duty to give notice to FMA about fee increases

“(1) Any person who increases a fee must give notice of the increase to the FMA before or as soon as is reasonably practicable after the increase takes effect if—

“(a) the person is referred to in clause 2 of the KiwiSaver scheme rules (which relates to a requirement that fees not be unreasonable), and that clause applies to the fee; or

“(b) the person is a supervisor, manager, administration manager, investment manager, or other person who charges a fee for services in relation to the provision of a complying superannuation fund.

“(2) Every person commits an offence against this Part, and is liable on summary conviction to a fine not exceeding the amount set out in subsection (4), who refuses or fails without reasonable excuse to give notice to the FMA of a fee increase as and when required by this section.

“(3) If any company commits an offence against this Part, every officer of the company who knowingly authorises or permits the offence also commits an offence against this Part.

“(4) A person who is convicted of an offence under this section is liable,—

“(a) the first time that the person is convicted in relation to a particular type of offence, to a fine not exceeding $25,000; and

“(b) on every other occasion that the person is convicted for the same type of offence, to a fine not exceeding $50,000.

“Compare: 1989 No 10 s 39; 2006 No 40 ss 189B, 199 as at October 2011

“118 Exercise of functions by FMA about unreasonable fees

In considering whether a fee is unreasonable in relation to the provision of a KiwiSaver scheme or a complying superannuation fund, the FMA—

“(a) must have regard to any prescribed matter:

“(b) may have regard to any other matter that the FMA considers relevant:

“(c) may make decisions in accordance with any prescribed process.

“Compare: 2006 No 40 s 127 as at October 2011

“119 Powers of High Court in relation to unreasonable fees

“(1) If the High Court is satisfied, on the application of a member of a scheme or the FMA, that any of the persons referred to in section 117 have charged a fee that is unreasonable, it may order that the fee be annulled or reduced.

“(2) The High Court may make any other order it thinks fit for the purpose of giving effect to an order under subsection (1).

“(3) An application for an order may be made within 1 year of the day that the fee is imposed or debited.

“(4) In determining whether a fee is unreasonable for the purposes of this section, the High Court—

“(a) must have regard to any prescribed matter; and

“(b) may have regard to any other matter it thinks fit.

“Compare: 1989 No 10 s 40; 2006 No 40 s 189C as at October 2011

“Other implied terms

“120 Terms relating to backdated validation implied into trust deeds of KiwiSaver schemes

“(1) Terms necessary for giving effect to the law relating to back-dated validation of invalid membership under subpart 4 of Part 2 are implied into the trust deed that establishes a KiwiSaver scheme in relation to the KiwiSaver scheme.

“(2) The terms—

“(a) apply despite anything to the contrary in the trust deed of the scheme; and

“(b) are enforceable by the manager, the supervisor, or a member of the scheme.

“Compare: 2006 No 40 s 128B as at October 2011

“121 Terms relating to members’ tax credits implied into trust deeds of KiwiSaver schemes and complying superannuation funds

“(1) Terms necessary for giving effect to the law relating to the tax credits described in section MK 1 of the Income Tax Act 2007 are implied into the trust deed that establishes—

“(a) a KiwiSaver scheme in relation to the KiwiSaver scheme:

“(b) a complying superannuation fund in relation to the complying superannuation fund.

“(2) The terms—

“(a) apply despite anything to the contrary in the trust deed of the scheme; and

“(b) are enforceable by the manager, the supervisor, or a member of the scheme.

“Compare: 2006 No 40 s 128A as at October 2011

“122 Terms relating to compulsory employer contributions implied into trust deeds of KiwiSaver schemes and complying superannuation funds

“(1) Terms necessary for giving effect to the law relating to compulsory employer contributions are implied into the trust deed that establishes—

“(a) a KiwiSaver scheme in relation to the KiwiSaver scheme:

“(b) a complying superannuation fund in relation to the complying superannuation fund.

“(2) The terms—

“(a) apply despite anything to the contrary in the trust deed of the scheme; and

“(b) are enforceable by the manager, the supervisor, or a member of the scheme.

“Compare: 2006 No 40 s 128D as at October 2011

“123 Terms relating to lump sum payments by complying superannuation funds

“(1) Terms necessary for giving effect to clause 2(c) of Schedule 28 of the Income Tax Act 2007 are implied into the trust deed that establishes a complying superannuation fund in relation to the complying superannuation fund.

“(2) The terms—

“(a) apply despite anything to the contrary in the trust deed of the scheme; and

“(b) are enforceable by the manager, the supervisor, or a member of the scheme.

“Compare: 2006 No 40 s 128C as at October 2011

“Other regulation of schemes

“124 Requirement for annual return

“(1) The manager of a KiwiSaver scheme and the manager of a complying superannuation fund must provide an annual return to the FMA that—

“(a) is in the prescribed form; and

“(b) meets any further prescribed requirements.

“(2) The prescribed requirements may include a requirement to provide statistical information in relation to the KiwiSaver scheme.

“(3) The annual return must be provided before the prescribed date and relate to the prescribed 12-month period.

“(4) Nothing in this section requires the manager to provide—

“(a) information about an identifiable individual; or

“(b) information that is not in the possession or control of the manager; or

“(c) information that is not reasonably ascertainable from information that is in the possession or control of the manager.

“(5) Every person commits an offence against this Part, and is liable on summary conviction to a fine not exceeding the amount set out in subsection (7), who refuses or fails without reasonable excuse to provide an annual return under this section as and when required by this Part or any regulations made under section 228.

“(6) If any company commits an offence against this Part, every officer of the company who knowingly authorises or permits the offence also commits an offence against this Part.

“(7) A person who is convicted of an offence under this section is liable,—

“(a) the first time that the person is convicted in relation to a particular type of offence, to a fine not exceeding $25,000; and

“(b) on every other occasion that the person is convicted for the same type of offence, to a fine not exceeding $50,000.

“Compare: 2006 No 40 ss 125, 199 as at October 2011

“125 Unclaimed money held in KiwiSaver scheme

“(1) Section 77 of the Trustee Act 1956 applies subject to this section in relation to a member’s interest in a KiwiSaver scheme held by, or in the control of, the supervisor or manager of that scheme.

“(2) Section 77 of the Trustee Act 1956 applies to the member’s interest only if, at the time that section is applied,—

“(a) the member of the scheme in respect of which the trust exists is able to be identified, according to the information held by or available to the manager, as being at least 5 years older than the date on which a withdrawal is permitted under clause 4 of the KiwiSaver scheme rules; and

“(b) the manager has ensured that reasonable efforts have been made to locate the member but the member is unable to be found; and

“(c) there has been no contribution made to the member’s account in the preceding 5 years, excluding any Crown contribution.

“Compare: 2006 No 40 s 195 as at October 2011

“125A Restrictions on transactions for scheme with fewer than 20 members

“(1) This section applies to a KiwiSaver scheme if the scheme has fewer than 20 members, treating all interests in the scheme held by persons associated under subpart YB of the Income Tax Act 2007 as being held by 1 person.

“(2) The provider must not lend money or provide financial assistance to—

“(a) a member:

“(b) a person associated (under subpart YB of the Income Tax Act 2007) with a provider or member.

“Compare: 2006 No 40 s 117A as at October 2011

“126 Member’s interest in KiwiSaver scheme not assignable

“(1) Except as expressly provided in this Act, a member’s interest or any future benefits that will or may become payable to a member under the KiwiSaver scheme must not be assigned or charged or passed to any other person whether by way of security, operation of law, or any other means.

“(2) However, subsection (1) does not prevent a member’s interest or any future benefits that will or may become payable to a member under the KiwiSaver scheme from being released, assigned, or charged, or from passing to any other person if it is required by the provisions of any enactment, including a requirement by order of the court under any enactment (including an order made under section 31 of the Property (Relationships) Act 1976).

“Compare: 2006 No 40 s 196 as at October 2011

“127 Application of Financial Transactions Reporting Act 1996 to default allocation of members to KiwiSaver schemes

“(1) This section applies in respect of any allocation of a person (A) to, or any application by a person (A) to become a member of, a KiwiSaver scheme under sections 50 to 52.

“(2) For the purposes of section 6 of the Financial Transactions Reporting Act 1996, an application or allocation to which this section applies is not a request to a financial institution for the person to become a facility holder as defined in section 2(1) of that Act.

“(3) Despite subsection (2),—

“(a) a provider of a KiwiSaver scheme must make reasonable efforts to verify A’s identity at the time that A becomes a member of a KiwiSaver scheme; and

“(b) if A makes a voluntary payment into the KiwiSaver scheme, the payment must, for the purposes of section 6 of the Financial Transactions Reporting Act 1996, unless the provider has already verified A’s identity, be treated as a request to a financial institution for the person to become a facility holder within the meaning of that Act.

“(4) In this section, voluntary payment means,—

“(a) in relation to a member of a KiwiSaver scheme who has become a member of that scheme under section 48 or 52, a payment made by or for the benefit of that person into the KiwiSaver scheme that is not a deduction from salary or wages made under subpart 1 of Part 3; and

“(b) in relation to a member of a KiwiSaver scheme to whom paragraph (a) does not apply, a payment made by or for the benefit of that person into the KiwiSaver scheme that is in excess of the amount the member is contractually bound to pay into the scheme within a defined period.

“Compare: 2006 No 40 s 204 as at October 2011

“128 Product disclosure statements must contain responsible investment statement

“(1) Every product disclosure statement relating to a KiwiSaver scheme or a complying superannuation fund must contain a statement in the following form if it is a scheme that takes responsible investment, including environmental, social, and governance considerations, into account in the investment policies and procedures of the scheme:

“'Responsible investment, including environmental, social, and governance considerations, is taken into account in the investment policies and procedures of the scheme as at the date of this product disclosure statement. You can obtain an explanation of the extent to which responsible investment is taken into account in those policies and procedures at the issuer's Internet site at [specify Internet site address].'

“(2) Every product disclosure statement relating to a KiwiSaver scheme or a complying superannuation fund must contain a statement in the following form if it is a scheme that does not take responsible investment, including environmental, social, and governance considerations, into account in the investment policies and procedures of the scheme:

“'Responsible investment, including environmental, social, and governance considerations, is not taken into account in the investment policies and procedures of the scheme as at the date of this product disclosure statement.'”

“(3) A failure to comply with this section must be treated as if it were a failure to comply with the requirements of regulations made under the Financial Markets Conduct Act 2011 as to the information that a product disclosure statement must contain.

“Compare: 2006 No 40 s 205A as at October 2011

“Interface with securities law

“129 Application of Financial Markets Conduct Act 2011

“(1) An employer does not contravene the Financial Markets Conduct Act 2011 by reason only that, acting as an employer, that person—

“(a) complies with the person’s responsibilities as an employer under this Act; or

“(b) chooses a KiwiSaver scheme as the employer’s chosen KiwiSaver scheme under section 47.

“(2) No act or omission by the Crown, or any officer or employee of the Crown, that occurs during the performance or exercise, or intended performance or exercise, of any functions, duties, or powers in respect of KiwiSaver schemes and complying superannuation funds, gives rise to any civil or criminal liability of the Crown or those officers or employees under the Financial Markets Conduct Act 2011.

“Compare: 2006 No 40 s 209 as at October 2011

“130 Certain sections of Financial Markets Conduct Act 2011 modified in relation to KiwiSaver scheme

“(1) This section applies if an interest in a KiwiSaver scheme is issued in contravention of Part 3 of the Financial Markets Conduct Act 2011.

“(2) The manager must provide the Commissioner with notice of—

“(a) any member who has given notice under section 41(2) of the Financial Markets Conduct Act 2011; and

“(b) any member to whom money would have had to have been repaid under section 64(1)(a) or 68(3)(a) of that Act, but for subsection (3); and

“(c) any member who has not confirmed that he or she still wants to acquire the financial products under section 64(2) or 68(4) of that Act; and

“(d) if all or part of the consideration for the issue of financial products to that member was the transfer of the member’s accumulation from another KiwiSaver scheme, the name of that scheme from which the member’s accumulation was transferred; and

“(e) the name, address, and tax file number of the member.

“(3) If a member is notified to the Commissioner under subsection (2),

“(a) the following do not apply:

“(i) any right of the member to return the financial products and to have the relevant money repaid; and

“(ii) any duty of the issuer or any other person to repay any contribution under section 41, 64, or 68 of the Financial Markets Conduct Act 2011; and

“(b) instead, the following both apply:

“(i) a process for the person to be allocated to a new scheme (see sections 50 to 52 and 211); and

“(ii) a process for the person to be transferred to a new scheme (see section 57).

“Compare: 2006 No 40 s 210 as at October 2011

“Subpart 2—Default KiwiSaver schemes

“131 Appointment of default providers

“(1) The Minister may appoint 1 or more managers for a specified term to provide—

“(a) a default KiwiSaver scheme that is specified in the instrument of appointment; and

“(b) a default investment product of that default KiwiSaver scheme that is specified in the instrument of appointment.

“(2) The appointment may be made subject to such terms and conditions as the Minister considers fit.

“(3) The instrument of appointment must—

“(a) identify the default KiwiSaver scheme and the default investment product of the scheme:

“(b) state any terms and conditions of the appointment:

“(c) state any prescribed information.

“(4) In determining whether to appoint a manager as a default KiwiSaver provider under this section, the Minister must seek the advice of the FMA.

“(5) A restricted scheme is not eligible to be a default KiwiSaver scheme.

“Compare: 2006 No 40 s 177 as at October 2011

“132 Provisions of instrument of appointment to prevail over provisions of trust deed

“(1) The manager and the supervisor must take all reasonable steps to ensure that the trust deed of a default KiwiSaver scheme is consistent with the instrument of appointment.

“(2) The provisions of the instrument of appointment prevail over the terms of the trust deed establishing the KiwiSaver scheme that relate to the KiwiSaver scheme.

“(3) A product disclosure statement relating to a KiwiSaver scheme to which an instrument of appointment under section 131 relates must draw attention to the implications of this section.

“(4) Section 127(1)(a) of the Financial Markets Conduct Act 2011 (which relates to the power to make FMA-approved changes to trust deeds) applies to changes to the trust deed that are required under this section.

“Compare: 2006 No 40 s 178 as at October 2011

“133 Effect of appointment under section 131

If a person is appointed as a provider of a default KiwiSaver scheme under an instrument of appointment under section 131,—

“(a) the default KiwiSaver scheme must be shown as a default KiwiSaver scheme on the register of managed investment schemes; and

“(b) the Commissioner may nominate the default investment product of the scheme as a default investment product to which persons may be allocated for the purposes of sections 50 to 52.

“Compare: 2006 No 40 s 179 as at October 2011

“134 Appointment must be notified

“(1) The Minister must, as soon as practicable after an appointment under section 131 has been made, notify the FMA, the Commissioner, and the Registrar of Financial Service Providers (for the purposes of making the appointment available and updating the register) that the appointment has been made, and provide each of them with a copy of the instrument of appointment.

“(2) This section also applies to any variation, renewal, or revocation of the instrument of appointment.

“Compare: 2006 No 40 s 180 as at October 2011

“135 Power of High Court to act in respect of terms and conditions of appointment as default KiwiSaver scheme and regulations relating to default KiwiSaver schemes

“(1) This section applies if the High Court is satisfied that the manager of a default KiwiSaver scheme appointed under section 131 intends to engage, or is engaging or has engaged, in conduct that constitutes, or would constitute,—

“(a) a breach of the terms and conditions of the instrument of appointment referred to in section 131; or

“(b) a breach of regulations made under section 230.

“(2) Sections 462 and 463 of the Financial Markets Conduct Act 2011 (which relate to injunctions) apply as if that conduct or intended conduct were a contravention of that Act or regulations made under that Act.

“(3) Without limiting those sections, the High Court may make any orders on any terms and conditions that it thinks appropriate, including—

“(a) an order to restrain the manager or the supervisor of the scheme, or both, from engaging in conduct that constitutes, or would constitute, the breach:

“(b) an order to require the manager or the supervisor of the scheme, or both,—

“(i) to do a particular act or thing:

“(ii) to comply with the conditions of the instrument of appointment:

“(c) an interim order.

“Compare: 2006 No 40 s 183 as at October 2011

“136 Revocations, etc, of instruments of appointment

“(1) An instrument of appointment may provide for its renewal or variation or expiry or revocation by the Minister or the provider.

“(2) Despite any matter provided for in an instrument of appointment as to its expiry or revocation, the Minister may, by notice in writing to a provider, revoke an instrument of appointment if—

“(a) the scheme's registration as a KiwiSaver scheme is removed under section 121 of the Financial Markets Conduct Act 2011; or

“(b) the scheme's registration as a managed investment scheme is cancelled under section 180 of that Act; or

“(c) an order or resolution to wind up the scheme is made as referred to in section 196 of that Act; or

“(d) the Minister is satisfied that—

“(i) the provider is not operating in accordance with the terms and conditions of the instrument of appointment; and

“(ii) the failure to operate in accordance with the terms and conditions of the instrument of appointment is a significant breach as prescribed in regulations made under section 230.

“(3) The appointment of the provider under section 131 ceases on revocation of the instrument of appointment.

“(4) The Minister must notify the FMA, the Commissioner, and the Registrar of Financial Service Providers (for the purpose of updating the register) as soon as practicable after an instrument of appointment is revoked.

“Compare: 2006 No 40 s 184 as at October 2011

“137 Duration of obligations as default provider after terminating event

“(1) In this section,—

“reporting obligations, in relation to a provider and the provider’s scheme, means—

“(a) any requirement for the provider to report to persons specified in an instrument of appointment; and

“(b) any requirement for the provider to produce to any persons specified in an instrument of appointment any papers, documents, records, or things in respect of the scheme (and the power of any person to require production of those papers, document, records, or things)

“terminating event means—

“(a) the revocation of an instrument of appointment by the provider or the Minister under the terms and conditions of the instrument of appointment; or

“(b) the revocation of an instrument of appointment in accordance with section 136(2); or

“(c) the expiry of the term of appointment (as specified in the instrument of appointment and in accordance with any renewal of the term of appointment).

“(2) Despite any terminating event,—

“(a) any terms and conditions of the instrument of appointment that relate to a provider’s reporting obligations in respect of the provider’s scheme continue to apply until the date when the term of appointment would have expired but for the terminating event; and

“(b) regulations made under section 230 continue to apply in relation to the provider until the provider has completed every act or thing that the regulations require the provider to do following any terminating event.

“Compare: 2006 No 40 s 185 as at October 2011

“Subpart 3—Complying superannuation funds

“138 Outline of subpart

“(1) This subpart contains rules relating to complying superannuation funds (which are superannuation schemes that were approved for the purposes of the Income Tax Act 2007 under section 35 of the Superannuation Schemes Act 1989 before its repeal) as follows:

“(a) the rules that apply to complying superannuation funds:

“(b) the rules relating to revocation of approval of complying superannuation funds.

“(2) These rules are in addition to rules elsewhere in this Act that apply to complying superannuation funds (for example, in relation to implied terms and unreasonable fees).

“139 Failure to pay: provider notice

“(1) This section applies if the provider of a complying superannuation fund knows that an employer has failed to pay to the provider an amount of compulsory employer contribution in accordance with subpart 3A of Part 3.

“(2) The provider must, as soon as practicable, give a notice to the employer requesting the payment of the amount of compulsory employer contribution. The provider must send to the FMA a copy of the notice.

“(3) If the employer does not pay the amount of compulsory employer contribution to the provider within 1 month of this section first applying for the amount, and the total of the amounts of compulsory employer contributions unpaid is more than $500, then the provider must immediately give a notice to the FMA.

“(4) A notice under subsection (3) must specify the following:

“(a) the name of the employer; and

“(b) the amounts of compulsory employer contributions unpaid; and

“(c) the employer’s name, address, and tax file number (if known); and

“(d) the relevant employees to whom the failure to pay relates and their tax file numbers and addresses; and

“(e) the pay periods and relevant amounts for the employees to whom the failure to pay relates; and

“(f) other information required by the FMA.

“(5) If the employer pays an amount of compulsory employer contribution remedying a failure to pay that was notified to the FMA under subsection (3), the provider must immediately give a notice to the FMA showing relevant details of the employer’s payment.

“Compare: 2006 No 40 s 101H as at October 2011

“140 Failure to pay: FMA's duties

“(1) If the FMA receives a notice under section 139(3), the FMA must decide the amount of compulsory employer contribution that an employer to which the notice relates has failed to pay for the relevant calendar months.

“(2) The FMA may use any power (with necessary modifications for complying superannuation funds) that the FMA has in respect of KiwiSaver schemes in the performance of the duty to decide imposed by subsection (1).

“(3) As soon as practicable, the FMA must give a notice to the employer showing the information described in subsection (4).

“(4) A notice under subsection (3) must—

“(a) require the payment of the amount (the liable amount) that the FMA has decided, under subsection (1), that an employer has failed to pay to the provider; and

“(b) specify the relevant calendar months and related amounts; and

“(c) specify that the employer must pay the liable amount within 28 days after the notice is given; and

“(d) specify the employer's name, address, and tax file number (if known); and

“(e) specify the relevant employees to whom the failure to pay relates and their tax file numbers and addresses; and

“(f) specify the pay periods and relevant amounts for the employees to whom the failure to pay relates; and

“(g) inform the employer that failure to comply with the notice will result in the Commissioner receiving notice of the failure to comply; and

“(h) show other information required by the Commissioner.

“(5) If the employer does not pay the liable amount in the period specified in subsection (4)(c) and the employer has not objected to the FMA's decision under subsection (1) within the time allowed under section 155, the FMA must immediately—

“(a) give to the Commissioner a notice showing the information described in subsection (6); and

“(b) send to the provider a copy of the notice.

“(6) A notice under subsection (5) must—

“(a) state that the employer has failed to comply with notices under section 139(3) and subsection (3); and

“(b) show the information described in subsection (4); and

“(c) specify the extent to which an amount of compulsory employer contributions remains unpaid for the liable amount; and

“(d) specify the relevant employees to whom the unpaid amounts relate and their tax file numbers and addresses; and

“(e) specify the pay periods and relevant amounts for the employees to whom the unpaid amounts relate.

“(7) If the FMA makes a decision, upon an employer's objection to the FMA's decision under subsection (1), and the decision is that the employer to which the notice under section 139(3) relates has failed to pay an amount of compulsory employer contribution for the relevant calendar months, the employer is treated as having not objected, and the FMA must immediately give the Commissioner the notice described in subsection (5).

“Compare: 2006 No 40 s 101I as at October 2011

“141 Failure to pay: Commissioner

“(1) If the Commissioner receives a notice under section 140(5), the amount of compulsory employer contributions unpaid for the liable amount, specified in that notice, is treated as an amount due and payable by the employer to the Commissioner on the 20th working day after the Commissioner receives the notice under section 140(5).

“(2) The Commissioner must send the employer a notice of the amount due and payable, and the due date, specified in subsection (1).

“Compare: 2006 No 40 s 101J as at October 2011

“142 Recovered amounts

An amount of compulsory employer contribution for an employee's complying superannuation fund that is received by the FMA or the Commissioner by virtue of subpart 3A of Part 3 must be paid by them to the relevant provider. The relevant amount of compulsory employer contributions remaining unpaid for the relevant liable amount is consequentially reduced.

“Compare: 2006 No 40 s 101K as at October 2011

“143 Reduction of scheme insurance upon transfer out of complying superannuation fund

“(1) This section applies to a complying superannuation fund (scheme A) if—

“(a) scheme A provides or facilitates the provision of insurance (the scheme insurance) to a member or other beneficiary (the person); and

“(b) the benefit of the scheme insurance is calculated by reference to contributions for the person held by a complying superannuation fund (the contributions); and

“(c) an amount of contributions is transferred out of the complying superannuation fund to a complying superannuation fund or KiwiSaver scheme (other than scheme A).

“(2) A term is implied into the trust deed of scheme A. That term must have the effect of allowing the benefit of the person's scheme insurance to be reduced in proportion to the amount of contributions transferred out of the complying superannuation fund to a complying superannuation fund or KiwiSaver scheme (other than scheme A).

“Compare: 1989 No 10 s 9D

“144 Revocation of approval of complying superannuation funds

“(1) The FMA may revoke the approval of a scheme as a complying superannuation fund if either—

“(a) the FMA is satisfied that the scheme no longer meets the requirements in subsection (2); or

“(b) the manager of the scheme makes an application for revocation.

“(2) The requirements are that—

“(a) the complying fund section of the scheme and any relevant participation agreement must contain rules that subject the following to complying fund rules (as defined in section YA 1 of the Income Tax Act 2007):

“(i) relevant contributions:

“(ii) returns on relevant contributions:

“(iii) relevant benefits; and

“(b) the scheme must have at least 20 members, treating all interests in the registered scheme or account held by associated persons within the meaning of section YA 1 of the Income Tax Act 2007 as being held by 1 person; and

“(c) the fund must have rules that meet all the requirements set out in Schedule 28 of the Income Tax Act 2007 (requirements for complying fund rules) or do not detract from those requirements.

“(3) The FMA must not exercise a power under subsection (1)(a), or refuse an application for a revocation made by a manager of a scheme, unless—

“(a) the FMA gives the manager of the scheme no less than 10 working days' written notice of the following matters before it exercises the power:

“(i) that the FMA may exercise the power or refuse the application (as the case may be); and

“(ii) the reasons why it may do so; and

“(b) the FMA gives the manager or the manager's representative an opportunity to make written submissions on the matter within that notice period.

“(4) The FMA must, as soon as practicable after revoking the approval, give notice to—

“(a) the manager of the scheme; and

“(b) the Registrar of Financial Service Providers, for the purpose of updating the register of managed investment schemes; and

“(c) any person who originally applied for approval under section 34 of the Superannuation Schemes Act 1989; and

“(d) the Commissioner.

“(5) The manager of a scheme who is notified that approval is revoked must immediately—

“(a) give notice of that revocation to each member who may be affected, and to their employers; and

“(b) give notice to the Commissioner of each member who may be affected, and of their employers.

“(6) Each of those notices must specify an effective revocation date.

“Compare: 1989 No 10 ss 35, 36

“Subpart 4—Exempt employers

“145 Effect of being exempt employer and outline of subpart

“(1) A person who starts new employment with an exempt employer is exempt from the automatic enrolment rules.

“(2) For the avoidance of doubt, subsection (1)—

“(a) does not prevent an employee of an exempt employer from opting in under ~~this subpart~~ subpart 1 of Part 2; and

“(b) does not prevent a person who is already a member of a KiwiSaver scheme from becoming liable for automatic deduction of contributions from the salary or wages paid in respect of employment with an exempt employer under section 15(1)(a)(ii) or 36(1)(a)(ii).

“(3) This subpart contains rules relating to exempt employers (as approved under section 30 before its repeal by the Financial Markets Conduct Act 2011) as follows:

“(a) the rules that apply to exempt employers:

“(b) the rules relating to revocation of approval of exempt employers.

“(4) These rules are in addition to rules elsewhere in this Act that apply to exempt employers.

“Compare: 2006 No 40 s 24 as at October 2011

“146 Eligibility to continue to be exempt employer

“(1) An employer is eligible to continue to be an exempt employer if the FMA is satisfied that the employer provides access to a superannuation scheme for its employees that complies with the following rules:

“(a) every person who becomes a permanent employee (including a part-time employee) of that employer, and who is aged 18 or over but less than the New Zealand superannuation qualification age, must be eligible, in practice, at the time when the person so becomes an employee,—

“(i) to become a member of the scheme; and

“(ii) to transfer to the scheme the member’s accumulation in relation to other superannuation schemes (to the extent that transfers are available from those other superannuation schemes); and

“(b) the trust deed of the scheme must have the effect that each member who satisfies the scheme’s requirements for a withdrawal benefit, and who elects to withdraw from membership of the scheme, may transfer the member’s accumulation to another superannuation scheme or KiwiSaver scheme (to the extent that transfers are available to those other schemes); and

“(c) the trust deed of the scheme must provide for an amount equal to at least 4% of annual gross base salary or wages to be contributed to, or otherwise credited within, the scheme in respect of each person who becomes a permanent employee of that employer and a member of the scheme.

“(2) However, subsection (1)(c) does not apply—

“(a) to the extent that an employee is, in accordance with the terms of the scheme, temporarily relieved from contributions at that rate (for example, in the event of financial hardship); or

“(b) if the scheme is a defined benefit scheme of a type that does not satisfy the 4% minimum amount rule in subsection (1)(c), and if the actuary of the scheme certifies, to the satisfaction of the FMA, that the value of each employee’s accrued benefits to be provided by the scheme is, as a matter of fact, increasing, during each membership period, by an amount at least equivalent to such minimum amount that would otherwise be required by this section and section 147.

“(3) In this section,—

“defined benefit scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“permanent employees means employees—

“(a) who are not employed in temporary employment (as described in section 12); and

“(b) to whom the automatic enrolment rules would apply, but for the application of this section.

“Compare: 2006 No 40 s 25 as at October 2011

“147 How 4% minimum amount may be calculated for exempt employer defined contribution schemes

“(1) For the purposes of section 146(1)(c),—

“(a) the minimum amount required by section 146(1)(c) may be made up—

“(i) entirely of contributions by the employee; or

“(ii) entirely of contributions by an employer; or

“(iii) partially of contributions by the employee and partially of contributions by an employer; and

“(b) the minimum amount required by section 146(1)(c) must be treated as satisfied if the sum of the following amounts is equal to at least 4% of annual gross base salary or wages:

“(i) the minimum prescribed amount that the employee must contribute:

“(ii) the maximum prescribed amount that the employer would be required to contribute if the member were to contribute the maximum prescribed amount:

“(c) any amount contributed to the scheme by an employer in respect of an employee does not count towards the minimum amount required by section 146(1)(c) unless—

“(i) the employee is legally entitled to require the employer to contribute that amount on his or her behalf; and

“(ii) the trust deed of the scheme provides for the minimum amount required by section 146(1)(c) to vest completely in the employee no later than the time when the employee begins his or her sixth year as a member of the scheme; and

“(d) any amount contributed to the scheme by an employer in respect of an employee must be calculated, for the purposes of the minimum amount required by section 146(1)(c), before any ESCT payable under the ESCT rules is deducted.

“(2) Subsection (1)(b) does not limit subsection (1)(c) or (d).

Example

Company A provides access to a superannuation scheme for its employees. The trust deed provides that employees, if they decide to become members, must contribute at either 1% or 3% of annual gross base salary. The employer is obliged to match the employee’s contributions (eg, if employee contributes 1%, company must contribute 1%).

The scheme complies with the rule as to the 4% minimum contribution as follows:

Minimum amount employee member must contribute

1%

Maximum amount that employer must contribute in respect of employee member

3%

4%

“Compare: 2006 No 40 s 26 as at October 2011

“148 Exempt employers who provide access to more than 1 scheme

An employer who provides access to more than 1 superannuation scheme for its employees is eligible to continue to be an exempt employer if the FMA is satisfied that, if all of those schemes were considered as a whole (as if they were 1 scheme), the rules in section 146 would be complied with.

“Compare: 2006 No 40 s 27 as at October 2011

“149 Exempt employers who have schemes established under master trusts

An employer who provides access to a superannuation scheme for its employees that is established under a master trust is eligible to continue to be an exempt employer if the FMA is satisfied that the rules in section 146 would be complied with if the FMA considered only—

“(a) the master trust in so far as it relates to the employer’s scheme; and

“(b) the participation agreement executed by the employer in relation to the membership of the employer’s employees in the scheme; and

“(c) anything else that the FMA decides is relevant to evidencing compliance with the rules in section 146, in respect of the employer’s employees.

“Compare: 2006 No 40 s 28 as at October 2011

“150 Employers may apply to succeed to former employer's exempt employer status

“(1) A person may make an application to the FMA for approval to succeed to an exempt employer's exempt employer status if the person is a succeeding employer for that exempt employer.

“(2) The application must be accompanied by—

“(a) information that satisfies the FMA that the scheme complies with the rules in section 146 (or, if applicable, section 148 or 149); and

“(b) the names, addresses, and tax file numbers of each employer in respect of whom the application is made; and

“(c) if the application is made in respect of an employer that is part of a group of companies, any details of the names, addresses, tax file numbers, and payroll arrangements of any other members of the group that the FMA may request.

“(3) In this section, succeeding employer means an employer who succeeds an exempt employer because of a merger with, or an acquisition of, the exempt employer.

“Compare: 2006 No 40 s 29 as at October 2011

“151 How applications to succeed to former employer's exempt employer status must be dealt with

“(1) The FMA must, within 20 working days after receiving an application made under section 150(1) and the documents required under section 150(2) to accompany the application,—

“(a) consider whether the FMA is satisfied that each employer in respect of whom the application is made complies with the rules in section 146 or, if applicable, section 148 or 149; and

“(b) if so satisfied, approve the employer as an exempt employer and register the employer on the register of exempt employers kept under section 154.

“(2) The FMA must—

“(a) give notice to the employer as soon as practicable after approving, or declining to approve, the employer as an exempt employer; and

“(b) specify in that notice an effective date after which an employee who starts new employment with the employer will be exempt from the automatic enrolment rules (unless those rules do not otherwise apply).

“Compare: 2006 No 40 s 30 as at October 2011

“152 Revocation of exempt employer approval

“(1) The FMA may revoke an approval as an exempt employer given under this Act if either—

“(a) the FMA is satisfied that the employer is no longer eligible to be an exempt employer because the employer no longer provides access to a scheme for its employees that complies with the rules in section 146 or, if applicable, section 148 or 149; or

“(b) the employer makes an application for revocation.

“(2) The FMA must not exercise a power under subsection (1)(a), or refuse an application for a revocation made by an employer, unless—

“(a) the FMA gives the employer no less than 10 working days' written notice of the following matters before it exercises the power:

“(i) that the FMA may exercise the power or refuse the application (as the case may be); and

“(ii) the reasons why it may do so; and

“(b) the FMA gives the employer or the employer's representative an opportunity to make written submissions on the matter within that notice period.

“(3) The FMA must—

“(a) give notice to the employer as soon as practicable after revoking the approval; and

“(b) specify in that notice an effective revocation date after which an employee who starts new employment with the employer will be subject to the automatic enrolment rules (unless those rules do not otherwise apply); and

“(c) ensure that the employer is removed from the register of exempt employers.

“Compare: 2006 No 40 s 31 as at October 2011

“153 FMA must give notice to Commissioner of exempt employers

The FMA must give notice to the Commissioner as soon as practicable after an employer is approved under section 151 or an approval is revoked under section 152.

“Compare: 2006 No 40 s 32 as at October 2011

“154 Register of exempt employers

“(1) The FMA must ensure that a register is kept that contains the names of employers who are exempt employers.

“(2) That register may be part of the register of managed investment schemes, in which case the Financial Markets Conduct Act 2011 applies to the keeping of the register accordingly.

“Subpart 5—Miscellaneous

“155 Right of appeal against certain decisions of FMA

“(1) A person affected by a decision of the FMA under any of the following provisions may appeal against the decision to the High Court:

“(a) section 140 (failure to pay: FMA's duties):

“(b) section 144 (revocation of approval of complying superannuation funds):

“(c) section 151 (how applications to succeed to former employer's exempt employer status must be dealt with):

“(d) section 152 (revocation of exempt employer approval).

“(2) A decision against which an appeal is lodged under this section continues in force unless the High Court orders otherwise.

“Compare: 2006 No 40 s 186 as at October 2011

“156 Sharing of information and documents with Commissioner for purpose of administering KiwiSaver schemes

“(1) The FMA may provide to the Commissioner any information, or a copy of any document, that the FMA—

“(a) holds in relation to the performance or exercise of the FMA’s functions, powers, or duties under this Act or in connection with 1 or more KiwiSaver schemes or complying superannuation funds under this Act or any other enactment; and

“(b) considers may assist the Commissioner in the performance or exercise of the Commissioner's functions, powers, or duties under this Act or in connection with 1 or more KiwiSaver schemes or complying superannuation funds under this Act or any other enactment.

“(2) The FMA may use any information, or a copy of any document, provided to it by the Commissioner under any enactment in the FMA’s performance or exercise of its functions, powers, or duties under this Act or in connection with 1 or more KiwiSaver schemes or complying superannuation funds under this Act or any other enactment.

“(3) This section applies despite anything to the contrary in any contract, deed, or document.

“Compare: 2006 No 40 s 188 as at October 2011

“157 Conditions that may be imposed on providing information, documents, or evidence to Commissioner

“(1) The FMA may impose any conditions in relation to providing information or documents to the Commissioner (whether in compliance with a request or otherwise).

“(2) The FMA must, in considering what conditions to impose, have regard to whether conditions are necessary or desirable in order to protect the privacy of any individual.

“(3) Those conditions may include, without limitation, conditions relating to—

“(a) maintaining the confidentiality of anything provided (in particular, information that is personal information within the meaning of the Privacy Act 1993):

“(b) the storing of, use of, or access to anything provided:

“(c) the copying, returning, or disposing of copies of documents provided.

“Compare: 2006 No 40 s 189 as at October 2011

“158 Annual report by FMA

“(1) The FMA must, within 3 months after the end of every financial year, report to the Minister on the principal matters transacted under this Act during that year.

“(2) Every report must be presented to the House of Representatives by the Minister as soon as practicable after it has been received by that Minister.

“Compare: 1989 No 10 s 28; 2006 No 40 s 194 as at October 2011

“159 Offence to supply false or misleading information, etc

“(1) Every person commits an offence against this Part, and is liable on summary conviction to a fine not exceeding the amount set out in subsection (3), who makes any statement or supplies any paper, document, record, report, copy, thing, or certificate required by this Act knowing that it is false or misleading.

“(2) If any company commits an offence against this Act, every officer of the company who knowingly authorises or permits the offence also commits an offence against this Act.

“(3) A person who is convicted of an offence under this section is liable to a fine not exceeding $300,000.

“Compare: 2006 No 40 ss 198(1)(f), 199 as at October 2011

“160 No Crown guarantee of KiwiSaver schemes or products

“(1) There is no Crown guarantee in respect of any KiwiSaver scheme or investment product of a KiwiSaver scheme.

“(2) Every product disclosure statement relating to a KiwiSaver scheme must contain a statement to that effect.

“Compare: 2006 No 40 s 205 as at October 2011

“161 Factual description of, or transmission of information about, KiwiSaver scheme not financial adviser service

For the avoidance of doubt, the Crown or any other person does not perform a financial adviser service for the purposes of the Financial Advisers Act 2008 if the Crown or that person—

“(a) supplies an information pack as required or authorised by this Act; or

“(b) gives a factual description to another person of the features of a KiwiSaver scheme or of KiwiSaver schemes (for example, information about admission as a member or termination of membership); or

“(c) gives information of the type referred to in paragraph (b) in the course of promoting the benefits of retirement savings in general; or

“(d) acts only as an intermediary who transmits information about a KiwiSaver scheme; or

“(e) otherwise exercises or carries out a function, duty, or power under this Act.

“Compare: 2006 No 40 s 206 as at October 2011”

620 Sections 205 to 206 repealed

Sections 205 to 206 are repealed.

621 Sections 209 and 210 and heading repealed

Sections 209 and 210 and the heading above section 209 are repealed.

622 Duty of Commissioner under section 50 modified in certain cases in which section 210 applies

(1) The heading to section 211 is amended by omitting “section 210” and substituting “section 130”.

(2) Section 211(1)(a) is amended by omitting “section 210(2)” and substituting “section 130(2)”.

623 Section 220 substituted

Section 220 is repealed and the following section substituted:
“220 Special rules about giving of product disclosure statements

Sections 217 to 219 apply to the giving or supplying of a product disclosure statement under this Act as if it were the giving of a notice.”

624 Administration of Act

(1) Section 224(1) is amended by omitting “and Schedule 3”.

(2) Section 224(2) is amended by omitting “Schedules 1 and 2” and substituting “Schedule 1”.

625 Section 225 repealed

Section 225 is repealed.

626 Status of Crown contribution and fee subsidy for tax purposes

(1) The heading to section 227 is amended by omitting “and fee subsidy”.

(2) Section 227 is amended by omitting “or a fee subsidy paid in respect of a member of a KiwiSaver scheme under regulations made under section 228(n)”.

627 Section 228 substituted

Section 228 is repealed and the following section substituted:
“228 Regulations

“(1) The Governor-General may, by Order in Council, make regulations for all or any of the following purposes:

“(a) prescribing fees payable to the Commissioner or the FMA in respect of any matter under this Act or the manner in which fees may be calculated:

“(b) prescribing the information or matters that must be included in the information packs referred to in Part 2:

“(c) providing for operational matters and electronic compatibility between the Commissioner and all or any class of providers, including—

“(i) requiring the Commissioner and all or any class of providers to sign scheme provider agreements before registration of a scheme as a KiwiSaver scheme; and

“(ii) providing for the updating of those agreements after registration; and

“(iii) specifying the matters that may be required to be covered in all or any of those agreements:

“(d) prescribing requirements in relation to annual returns for the purposes of section 124, including the date by which the return must be provided and the 12-month period to which it must relate (by reference to annual dates):

“(e) prescribing what must be treated as reasonable efforts for the purposes of section 127:

“(f) specifying information that must be contained in the instrument of appointment referred to in section 131:

“(g) providing for fees or charges that must be treated as fees for the purposes of this Act:

“(h) prescribing matters that are relevant to a determination or consideration as to whether a fee is unreasonable for the purposes of clause 2 of the KiwiSaver scheme rules or section 118:

“(i) prescribing circumstances in which the purchase of an estate in land enables a withdrawal under clause 8 of the KiwiSaver scheme rules:

“(j) prescribing circumstances for the purposes of clause 8(3)(a) of the KiwiSaver scheme rules or prescribing who is a qualifying person for the purpose of clause 8(3)(c)(ii) of the KiwiSaver scheme rules:

“(k) prescribing matters that may be regarded as matters from which significant financial difficulties have arisen for the purposes of clause 11 of the KiwiSaver scheme rules:

“(l) recognising specific foreign superannuation schemes or classes of specific foreign superannuation schemes that are based in named countries as schemes to which funds can be transferred on permanent emigration under the provision implied by clause 14 of the KiwiSaver scheme rules:

“(m) providing for any other matters contemplated by this Act, necessary for its administration, or necessary for giving it full effect.

“(2) Regulations may be made under this section for the purpose of a matter dealt with in Part 4 only on the recommendation of the Minister.”

628 Regulations relating to default KiwiSaver providers

(1) Section 230(1)(a) is amended by omitting “section 184(2)” and substituting “section 136(2)”.

(2) Section 230(1)(b)(iii) is amended by omitting “section 184(2)” and substituting “section 136(2)”.

629 Sections 231 to 237 repealed

Sections 231 to 237 are repealed.

630 Amendments to Schedule 1 (KiwiSaver scheme rules)

Clauses 1 to 1E of Schedule 1 are repealed and the following clause is substituted:
“1 Application

The KiwiSaver scheme rules apply to all KiwiSaver schemes.”

631 Further amendments to Schedule 1 (KiwiSaver scheme rules)

(1) Clause 2(1) of Schedule 1 is amended by repealing paragraphs (a) and (ab) and substituting the following paragraphs:
- “(a) the manager of the scheme:
- “(ab) the supervisor of the scheme:”.
(2) Clause 2(1) of Schedule 1 is amended by repealing paragraph (d).

(3) Clause 4B of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

(4) The heading to clause 5 of Schedule 1 is amended by omitting “Trustees and managers” and substituting “Manager”.

(5) Clause 5(1) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

(6) The heading to clause 6 of Schedule 1 is amended by omitting “Trustees and managers” and substituting “Manager”.

(7) Clause 6 of Schedule 1 is amended by omitting “trustee (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

(8) Clause 7(1) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

(9) Clause 8(7)(b) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

(10) Clause 8(7)(b)(ii) of Schedule 1 is amended by omitting “trustees or the manager (as the case may be) make” and substituting “manager makes”.

(11) Clause 8(7)(iii) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

(12) Clause 9 of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

(13) Clause 10(1) of Schedule 1 is amended by omitting “trustees” and substituting “manager (in the case of a restricted KiwiSaver scheme) or the supervisor (in the case of any other KiwiSaver scheme)”.

(14) Clause 10(2) of Schedule 1 is amended by omitting “the trustees' approval” and substituting “the manager's approval (in the case of a restricted KiwiSaver scheme) or the supervisor's approval (in the case of any other KiwiSaver scheme)”.

(15) Clause 10(3) of Schedule 1 is amended by omitting “trustees” and substituting “manager (in the case of a restricted KiwiSaver scheme) or the supervisor (in the case of any other KiwiSaver scheme)”.

(16) Clause 10(3)(b) of Schedule 1 is amended by omitting “trustees' opinion” and substituting “opinion of the manager (in the case of a restricted KiwiSaver scheme) or the supervisor (in the case of any other KiwiSaver scheme)”.

(17) Clause 12(1) of Schedule 1 is amended by omitting “trustees are” and substituting “manager (in the case of a restricted KiwiSaver scheme) or the supervisor (in the case of any other KiwiSaver scheme) is”.

(18) Clause 12(1) of Schedule 1 is amended by omitting “trustees in” and substituting “manager (in the case of a restricted KiwiSaver scheme) or the supervisor (in the case of any other KiwiSaver scheme) in”.

(19) Clause 13(1) of Schedule 1 is amended by omitting “trustees” and substituting “manager (in the case of a restricted KiwiSaver scheme) or the supervisor (in the case of any other KiwiSaver scheme)”.

(20) Clause 13(2) of Schedule 1 is amended by omitting “trustees” and substituting “manager (in the case of a restricted KiwiSaver scheme) or the supervisor (in the case of any other KiwiSaver scheme)”.

(21) Clause 14(1) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

(22) Clause 14(2) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

(23) Clause 14(2) of Schedule 1 is amended by omitting “trustees or manager (as the case may be)” and substituting “manager”.

(24) Clause 14(3) of Schedule 1 is amended by omitting “trustees or manager (as the case may be)” and substituting “manager”.

(25) Clause 14(3)(b) of Schedule 1 is amended by omitting “trustees or manager (as the case may be)” and substituting “manager”.

(26) Clause 14(4) of Schedule 1 is amended by omitting “trustees or manager (as the case may be)” and substituting “manager”.

(27) Clause 14B(1) of Schedule 1 is amended by omitting “trustees or manager (as the case may be)” and substituting “manager”.

(28) Clause 14B(2) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme), have the trustees or the manager (as the case may be)” and substituting “manager, have the manager”.

(29) Clause 14B(3) of Schedule 1 is amended by omitting “trustees or the manager (as the case may be)” and substituting “manager”.

(30) Clause 14B(4) of Schedule 1 is amended by omitting “trustees or the manager (as the case may be)” and substituting “manager”.

(31) Clause 14B(4)(b) of Schedule 1 is amended by omitting “trustees or the manager (as the case may be)” and substituting “manager”.

(32) Clause 14B(5) of Schedule 1 is amended by omitting “trustees or the manager (as the case may be)” and substituting “manager”.

(33) Clause 16(1) of Schedule 1 is amended by omitting “trustees, apply to have the trustees” and substituting “manager, apply to have the manager”.

(34) Clause 16(2) of Schedule 1 is amended by omitting “trustees” and substituting “manager”.

632 Schedules 2 and 3 repealed

Schedules 2 and 3 are repealed.

Subpart 6—Amendments to Securities Trustees and Statutory Supervisors Act 2011

633 Principal Act amended

This subpart amends the Act that was previously called the Securities Trustees and Statutory Supervisors Act 2011.

634 Name of principal Act changed

(1) As from the commencement of this section,—
- (a) the Securities Trustees and Statutory Supervisors Act 2011 is called the Financial Markets Supervisors Act 2011; and
- (b) every reference in any enactment and in any document to the Securities Trustees and Statutory Supervisors Act 2011 must, unless the context otherwise provides, be read as a reference to the Financial Markets Supervisors Act 2011.
(2) Section 1 is amended by omitting “Securities Trustees and Statutory” and substituting “Financial Markets”.

635 New section 3 substituted

Section 3 is repealed and the following section substituted:
“3 Purpose

The purpose of this Act is to protect the interests of product holders, and of residents of retirement villages, and to enhance investor confidence in financial markets and retirement villages, by—

“(a) requiring persons who wish to be appointed as supervisors to be capable of effectively performing the functions of supervisors; and

“(b) requiring supervisors to perform their functions effectively; and

“(c) enabling supervisors to be held accountable for any failure to perform their functions effectively.”

636 Interpretation

(1) The definitions of deed of participation, governing document, issuer, issuer obligation, KiwiSaver scheme, KiwiSaver trustee, licensee, licensee obligation, restricted scheme, security, statutory supervisor, supervised issuer, trust deed, trustee, and unit trustee in section 4(1) are repealed.
(2) Section 4(1) is amended by inserting the following definitions in their appropriate alphabetical order:
“debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011

“financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011
“governing document means, as the context requires,—

“(a) a governing document within the meaning of section 6(1) of the Financial Markets Conduct Act 2011:

“(b) a deed of supervision
“issuer,—

“(a) in respect of a debt security, means the issuer of the debt security within the meaning of section 10 of the Financial Markets Conduct Act 2011:

“(b) in respect of a registered scheme, means the manager of the scheme within the meaning of section 6(1) of the Financial Markets Conduct Act 2011
“issuer obligation means an obligation imposed on the issuer of a financial product by or under any or all of the following:

“(a) the governing document that relates to the product:

“(b) the terms of any offer of the product:

“(c) a court order relating to the product:

“(d) this Act:

“(e) the Financial Markets Conduct Act 2011:

“(f) the KiwiSaver Act 2006:

“(g) Part 5D of the Reserve Bank of New Zealand Act 1989
“licensee—

“(a) means a supervisor that holds a licence; and

“(b) includes an FMA appointee, whether or not that appointee holds a licence
“licensee obligation means an obligation imposed on a licensee by or under any or all of the following:

“(a) every governing document:

“(b) the terms of the offer of the financial product:

“(c) a court order relating to a supervised interest:

“(d) this Act:

“(e) the Financial Markets Conduct Act 2011:

“(f) the KiwiSaver Act 2006:

“(g) Part 5D of the Reserve Bank of New Zealand Act 1989:

“(h) the Retirement Villages Act 2003
“product holder has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“registered scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“supervised issuer, in relation to a supervisor of a debt security or registered scheme, means the issuer of the debt security or managed investment products in the scheme
“supervisor or statutory supervisor means,—

“(a) in relation to a debt security or registered scheme, a supervisor within the meaning of section 6(1) of the Financial Markets Conduct Act 2011:

“(b) in relation to a retirement village, a statutory supervisor as defined in section 5 of the Retirement Villages Act 2003”.
(3) Paragraph (a) of the definition of material change of circumstances in section 4(1) is amended by omitting “trustee or statutory supervisor in respect of a security” and substituting “supervisor in respect of a debt security or registered scheme”.
(4) The definition of supervised interest in section 4(1) is amended by repealing paragraph (a) and substituting the following paragraph:
- “(a) in relation to a supervisor of a debt security or registered scheme (S), a debt security or scheme in respect of which S is the supervisor:”.
(5) Section 4(2) is amended by omitting “Securities Act 1978 (in relation to securities)” and substituting “Financial Markets Conduct Act 2011 (in relation to financial products)”.

637 Heading to Part 2

The heading to Part 2 is amended by omitting “trustees and statutory”.

638 Heading to subpart 1 of Part 2

The heading to subpart 1 of Part 2 is amended by omitting “trustees and statutory”.

639 New section 6 substituted

Section 6 is repealed and the following section substituted:
“6 Supervisor must be licensed

“(1) A supervisor in respect of a debt security must hold a licence that covers supervision of the security.

“(2) A supervisor in respect of a registered scheme must hold a licence that covers supervision of the scheme.

“(3) A statutory supervisor in respect of a retirement village must hold a licence that covers supervision of the retirement village.

“(4) A contravention of this section may give rise to a pecuniary penalty under section 41.”

640 New section 8 substituted

Section 8 is repealed and the following section substituted:
“8 Prohibition on holding out

“(1) A person must not represent that the person is licensed to be a supervisor in respect of a debt security, registered scheme, or retirement village if the person does not hold a licence that covers supervision of the debt security, registered scheme, or retirement village.

“(2) A contravention of this section may give rise to a pecuniary penalty under section 41.”

641 Requirement to be licensed: exception for certain FMA appointees

Section 9 is amended by omitting “Sections 6 and 8(1) and (2) do” and substituting “Section 6 does”.

642 New section 10 substituted

Section 10 is repealed and the following section substituted:
“10 FMA may license supervisors

“(1) The FMA may license a person to be 1 or more of the following:

“(a) a supervisor in respect of debt securities:

“(b) a supervisor in respect of registered schemes:

“(c) a statutory supervisor in respect of retirement villages.

“(2) A licence may cover supervision of all debt securities, all registered schemes, all retirement villages, or any 1 or more of the following:

“(a) debt securities of 1 or more classes:

“(b) 1 or more particular issues of debt securities:

“(c) registered schemes of 1 or more classes:

“(d) 1 or more particular registered schemes:

“(e) retirement villages of 1 or more classes:

“(f) 1 or more particular retirement villages.

“(3) A class may be defined (to include or exclude supervision of a debt security, registered scheme, or retirement village) in any way, including, without limitation, by reference to—

“(a) a particular issuer or operator; or

“(b) a particular class of issuer or operator.”

643 FMA may impose conditions on licence

(1) Section 11(2)(b) is amended by repealing subparagraph (i) and substituting the following subparagraphs:
- “(i) supervisor in respect of a particular debt security or class of debt security; or
- “(ia) supervisor in respect of a particular registered scheme or class of registered scheme; or”.
(2) Section 11(4) is amended by repealing paragraphs (a) and (b) and substituting the following paragraphs:
- “(a) limiting the number of appointments as supervisor that may be held by the licensee:
- “(b) setting a maximum value for supervised interests that are debt securities or registered schemes:”.

644 Information to be stated in licence

Section 13 is amended by repealing paragraphs (b) and (c) and substituting the following paragraphs:
- “(b) in the case of debt securities, the debt security or debt securities the supervision of which is covered by the licence:
- “(c) in the case of registered schemes, the scheme or schemes the supervision of which is covered by the licence:
- “(ca) in the case of retirement villages, the retirement village or villages the supervision of which is covered by the licence:”.

645 FMA must send licence and details to licensee and others

(1) Section 14(4)(a) is amended by omitting “security” and substituting “debt security or registered scheme”.

(2) Section 14(4)(b) is amended by omitting “trustee of” and substituting “supervisor of a debt security issued by”.

646 Decision on application for, or to vary, licence

(1) Section 16 is amended by repealing subsection (1) and substituting the following subsection:
- “(1) The FMA may issue or vary a licence only if the FMA is satisfied that, having regard to any conditions imposed on the licence, the applicant is capable of effectively performing (or will, after the variation, be capable of effectively performing)—
  
  “(a) the functions of a supervisor in respect of debt securities or registered schemes the supervision of which is covered by the licence:
  
  “(b) the functions of a statutory supervisor in respect of retirement villages the supervision of which is covered by the licence.”
~~(2) Section 16(2)(c) is amended by omitting “a security” and substituting “supervision of a debt security or registered scheme”.~~
(2) Section 16(2) is amended by repealing paragraph (c) and substituting the following paragraph:
- “(c) in the case of an applicant for a licence that covers supervision of a debt security or a registered scheme, the applicant is, or will be, registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 on and from commencing to perform the functions of a supervisor:”.
(3) Section 16(2)(d) is amended by inserting “supervision of” after “covers”.
(4) Section 16(3)(e) is amended by repealing subparagraph (i) and substituting the following subparagraph:
- “(i) in the case of a licence relating to debt securities or registered schemes, issuers of those debt securities or of managed investment products in those schemes comply with the issuer obligations; and”.
(5) Section 16(3) is amended by repealing paragraph (i) and substituting the following paragraph:
- “(i) other prescribed matters that relate to the applicant, to debt securities, registered schemes, or retirement villages the supervision of which is covered by the licence, and to issuers or operators covered by the licence:”.

647 Application to cancel licence

Section 17(2) is amended by omitting “trustee or statutory”.

648 Notice, consultation, and submissions concerning decision under section 16(1)

Section 18(1)(a) and (b) are amended by inserting “supervision of” after “covers”.

649 Appeal to High Court against FMA's decision on application

Section 19 is amended by repealing subsection (2) and substituting the following subsection:
- “(2) If a supervisor in respect of a debt security, registered scheme, or retirement village lodges an appeal against a decision not to issue a new licence that covers supervision of the debt security, scheme, or retirement village, the court may extend the validity of the supervisor's current licence, to the extent that it covers supervision of the debt security, scheme, or retirement village, until the appeal has been determined or withdrawn.”

649A Cross-heading amended

The cross-heading above section 20 is amended by inserting “and temporary appointment powers for expiries and other vacancies” after “licences”.

650 Effect of expiry of licence

Section 20(1) is amended by omitting “trustee or statutory”.

651 Licensee must apply for new licence or notify issuer or operator before licence expires

Section 21 is amended by repealing subsection (1) and substituting the following subsection:
- “(1) A licensee appointed as a supervisor in respect of a debt security, registered scheme, or retirement village must, between 9 and 12 months before the expiry date of the licence, either—
  
  “(a) make an application under section 16 for a new licence that covers supervision of that debt security, scheme, or retirement village; or
  
  “(b) notify the issuer of the debt security or managed investment products in the scheme or the operator of that retirement village (as the case may be) and the FMA, in writing, that the licensee does not intend to make the application referred to in paragraph (a).”

652 Rejection of application for new licence: FMA may replace existing appointee

(1) Section 22 is amended by omitting the heading and substituting the following heading:“FMA may make temporary appointment”.
(2) Section 22 is amended by repealing subsections (1) and (2) and substituting the following subsections:
- “(1) This section applies if—
  
  “(a) all of the following are satisfied in relation to a supervisor in respect of a debt security or registered scheme or a statutory supervisor in respect of a retirement village (the existing appointee):
  
  “(i) the FMA rejects an application by ~~a supervisor in respect of a debt security or registered scheme or a statutory supervisor in respect of a retirement village (the existing appointee)~~ the existing appointee for a new licence that covers supervision of the debt security, scheme, or retirement village; and
  
  “(ii) the existing appointee no longer holds a licence that covers supervision of the debt security, registered scheme, or retirement village; and
  
  “(iii) the existing appointee has not been replaced; or
  
  “(ab) the existing appointee wishes, at any time, to resign, ceases to carry on business, refuses to act as a supervisor, or is for any reason incapable of acting as a supervisor and the existing appointee has not been replaced; or
  
  “(b) a debt security, a registered scheme, or a retirement village does not, for any reason, have a supervisor.
- “(2) The FMA may,—
  
  “(a) in the case of subsection (1)(a) or (ab), remove ~~the~~ an existing appointee as supervisor in respect of the debt security or registered scheme, or as statutory supervisor in respect of the retirement village, by written notice to the existing appointee; and
  
  “(b) appoint a person (the FMA appointee) to the position of supervisor of the debt security, registered scheme, or retirement village for a period of 6 months.”
(3) Section 22(4) is amended by omitting “of the security, or the operator of the retirement village” and substitute “or the operator”.

(4) Section 22(6) is amended by omitting “under which the existing appointee was appointed” and substitute “relating to the debt security, registered scheme, or retirement village”.

(5) Section 22(7)(b) is amended by omitting “of the security” and substituting “of the debt security or managed investment product”.
(6) Section 22(9) is amended by repealing paragraph (b) and substituting the following paragraph:
- “(b) appoint the FMA appointee as the supervisor on a continuing basis (provided that the FMA appointee holds a licence that covers supervision of the debt security, registered scheme, or retirement village).”

653 Expiry of licence: issuer or operator may replace existing appointee or FMA appointee

(1) Section 23 is amended by repealing subsections (1) and (2) and substituting the following subsections:
- “(1) This section applies if—
  
  “(a) the licence of a supervisor in respect of a debt security or registered scheme or of a statutory supervisor of a retirement village (the existing appointee) is due to expire; and
  
  “(b) the existing appointee will, on the expiry of the licence, no longer hold a licence that covers supervision of the debt security, registered scheme, or retirement village.
- “(2) For the purposes of subsection (1)(a), a licence is due to expire if—
  
  “(a) the licensee has given notice in accordance with section 21(1)(b) (notice that the licensee does not intend to apply for a new licence that covers supervision of the debt security, registered scheme, or retirement village); or
  
  “(b) the FMA has given notice in accordance with section 18(3)(b) (notice that the FMA will not be issuing a new licence as proposed in the application).”
(2) Section 23 is amended by repealing subsection (4) and substituting the following subsection:
- “(4) If the issuer of the debt security or managed investment products, or the operator of the retirement village, appoints a person (the new appointee) as the supervisor in place of the existing appointee or the FMA appointee, and the new appointee accepts the appointment, the issuer or operator may remove the existing appointee or the FMA appointee by written notice to the existing appointee or the FMA appointee.”

654 Expiry of licence: existing appointee must provide documents

(1) The heading to section 24 is amended by omitting “Expiry of licence: existing” and substituting “Existing”.
(2) Section 24 is amended by repealing subsection (4) and substituting the following subsection:
- “(4) An existing appointee or a FMA appointee to whom a notice is given under subsection (1) or (2) must comply with the notice.”
(3) Section 24 is amended by repealing subsection (6) and substituting:
- “(6) A contravention of subsection (4) or (5) may give rise to a pecuniary penalty under section 41.”
(4) Section 24(7) is amended by repealing the definition of existing appointee and substituting the following definition:
“existing appointee—

“(a) has the meaning given in section 22(1)(a)(i) or 23(1)(a); and

“(b) includes, in relation to an FMA appointee who is appointed in the circumstances referred to in section 22(1)(b), the person who held the position of supervisor of the debt security, registered scheme, or retirement village before the FMA appointee was appointed”.

655 FMA may vary licence because of material change of circumstances, etc

(1) Section 30(1)(c)(iii) is amended by omitting “, 36, or 49” and substituting “or 36”.
(2) Section 30(1)(c) is amended by inserting the following subparagraph after subparagraph (iii):
- “(iiia) fails to comply with a direction of the FMA under section 189 of the Financial Markets Conduct Act 2011 by the date specified in the direction; or”.
(3) Section 30(3) is amended by omitting “a trustee or statutory supervisor in respect of securities” and substitute “a supervisor in respect of debt securities or registered schemes”.

656 FMA's powers if action plan not submitted, etc

(1) Section 32(1)(c) is amended by omitting “, 36, or 49” and substituting “or 36”.
(2) Section 32(1) is amended by inserting the following paragraph after paragraph (c):
- “(ca) fails to comply with a direction of the FMA under section 189 of the Financial Markets Conduct Act 2011 by the date specified in the direction; or”.

657 Removal notice

(1) Section 33 is amended by repealing subsection (4) and substituting the following subsection:
- “(4) The removal of the existing appointee as supervisor in respect of an affected debt security or scheme, or as statutory supervisor of an affected retirement village, takes effect on the final removal date unless the existing appointee is removed from that appointment before that date (whether under section 38(1) or otherwise).”
(2) Section 33(5) is amended by repealing the definition of affected person and substituting the following definition:
“affected person means—

“(a) the issuer in respect of an affected debt security or scheme:

“(b) the operator of an affected retirement village”.
(3) Section 33(5) is amended by repealing the definition of affected security and substituting the following definition:

“affected debt security or scheme means a debt security or registered scheme to which a removal notice applies”.

658 Removal notice: FMA may give direction to existing appointee

(1) Section 36(1) is amended by omitting “trustee or statutory supervisor in respect of an affected security” and substituting “supervisor in respect of an affected debt security or scheme”.
(2) Section 36 is amended by repealing subsection (5) and substituting the following subsection:
- “(5) A person who refuses or fails, without reasonable excuse, to comply with a direction under subsection (1) commits an offence and is liable on summary conviction to a fine not exceeding $300,000.”

659 Removal notice: FMA may replace existing appointee

(1) Section 37(1) is amended by omitting “trustee or statutory”.

(2) Section 37(2) is amended by omitting “relevant issuer or operator” and substituting “affected person”.

(3) Section 37(6)(b) is amended by omitting “security” and substituting “debt security or managed investment products”.
(4) Section 37(8) is amended by repealing paragraph (b) and substituting the following paragraph:
- “(b) appoint the FMA appointee as the supervisor on a continuing basis (provided that the FMA appointee holds a licence that covers supervision of the debt security, registered scheme, or retirement village).”

660 Replacement notice: affected person may replace existing appointee or FMA appointee

Section 38(1) is amended by omitting “trustee or statutory”.

661 Notice requiring documents: existing appointee, etc, must provide documents

(1) Section 39(4)(b) and (6)(a) are amended by omitting “trustee or statutory supervisor in respect of the affected security” and substituting in each case “supervisor in respect of the affected debt security or scheme”.
(2) Section 39 is amended by repealing subsection (5) and substituting the following subsection:
- “(5) An existing appointee, a FMA appointee, or a new appointee to whom a notice is given under any of subsections (1) to (3) must comply with the notice.”
(3) Section 39 is amended by repealing subsection (7) and substituting:
- “(7) A contravention of subsection (5) or (6) may give rise to a pecuniary penalty under section 41.”

662 New section 41 substituted

Section 41 is repealed and the following section substituted:
“41 Pecuniary penalty orders

“(1) The High Court may, on application by the FMA, order a licensee or other person to pay a pecuniary penalty to the Crown if the court is satisfied that—

“(a) the licensee or other person has contravened section 6, 8, 24(4) or (5), or 39(5) or (6); or

“(b) the licensee has contravened a licensee obligation.

“(2) In determining whether or not to make a pecuniary penalty order and (if an order is to be made) the amount of the penalty to be imposed, the court must have regard to all relevant matters, including—

“(a) the nature and extent of the contravention:

“(b) in the case of a contravention relating to a debt security or registered scheme, the likelihood, nature, and extent of any damage to the integrity or reputation of New Zealand's financial markets as a result of the contravention:

“(c) the nature and extent of any loss or damage suffered by product holders or residents because of the contravention:

“(d) the circumstances in which the contravention occurred:

“(e) whether or not the licensee or other person has previously contravened this Act or a licensee obligation:

“(f) the public benefit in encouraging prompt and honest self-reporting of breaches or possible breaches of licensee obligations:

“(g) any other circumstances that the court considers relevant.

“(3) The maximum amount of a pecuniary penalty under this section is $600,000.

“(4) If conduct by a person constitutes a contravention of 2 or more provisions referred to in subsection (1) or licensee obligations, proceedings may be brought against that person for the contravention of any 1 or more of the provisions or obligations, but a person is not liable to more than 1 pecuniary penalty order for the same conduct.”

663 Compensation orders

Section 42(1) is amended by omitting “security holder, or a resident, order a licensee to pay compensation to any security holder” and substituting “product holder, or a resident, order a licensee to pay compensation to any product holder”.

663 Compensation orders

Replace section 42(1) with:
- “(1) The High Court may, on application by the FMA, a product holder, or a resident, order a licensee to pay compensation to any product holder or resident (the aggrieved person) if the court is satisfied that—
  
  “(a) the licensee has contravened a licensee obligation; and
  
  “(b) the aggrieved person has suffered, or is likely to suffer, loss or damage because of the contravention.”

664 Part 3 repealed

Part 3 is repealed.

665 FMA may vary or cancel direction

Section 51(1) is amended by omitting “, 36, or 49” and substituting “or 36”.

666 New section 52 substituted

Section 52 is repealed and the following section substituted:
“52 Protection for supervisor who complies with FMA's direction

“(1) No civil, criminal, or disciplinary proceedings may be brought against a supervisor in respect of a protected act.

“(2) No person may terminate the appointment of a supervisor by reason of a protected act.

“(3) No tribunal, body, or authority that has jurisdiction in respect of the professional conduct of a supervisor may make an order against, or do any act in relation to, the supervisor in respect of a protected act.

“(4) In this section, protected act, in relation to a supervisor means an act of, or omission to act on the part of, the supervisor in compliance in good faith with a direction under section 29 or 36.

“Compare: 1989 No 157 s 157ZH”

Transitional provisions

667 FMA may vary licences under Financial Markets Supervisors Act 2011

(1) The FMA may, by written notice to a licensee, vary a licence if the FMA is satisfied that the variation is necessary or desirable in connection with the orderly implementation of Parts 1 to 8 or this Part (for example, to change the matters referred to in section 10 of the principal Act or impose further conditions as referred to in section 11 of the principal Act).
(2) A power under subsection (1) may be exercised—
- (a) only on or before the date that is 2 years after the commencement of this section:
- (b) despite anything to the contrary in the principal Act.
(3) The FMA may vary a licence under this section only if the FMA gives the licensee—
- (a) at least 10 working days' written notice of the following matters before the FMA varies the licence:
  - (i) that the FMA may vary the licence; and
  - (ii) the reasons why it is considering taking that action; and
- (b) an opportunity to make written submissions and to be heard on the matter within that notice period.
(4) The notice under subsection (3) must state—
- (a) the FMA's reasons for varying the licence; and
- (b) the date on which the variation takes effect.
(5) In this section and section 668,—

licence means a licence issued under the principal Act before the commencement of this section

licensee means a person who holds a licence.

668 Appeal against licence decision

(1) A licensee who is dissatisfied with the FMA's decision under section 667 may appeal to the High Court no later than 20 working days, or such further period as the court may allow, after receiving written notice of the decision.

(2) A decision against which an appeal is lodged remains valid pending the determination of the appeal unless the court orders otherwise.

Subpart 7—Amendments to other enactments

669 Amendments to other enactments

The enactments specified in Schedule 4 are amended in the manner indicated in that schedule.

Subpart 8—Transitional provisions for offers of financial products

670 Act applies to offer unless former enactments continue to apply

~~(1) This Act applies to an offer of financial products unless the former enactments apply in accordance with this subpart.~~
~~(2) In this subpart,—~~

~~1978 Act means the Securities Act 1978~~

~~12-month date means the date that is 12 months after the commencement of this section~~
~~former enactments means each of the following (as in force immediately before the commencement of this section):~~
- ~~(a) the 1978 Act:~~
- ~~(b) the Securities Regulations 2009 and any other regulations made under the 1978 Act:~~
- ~~(c) exemptions granted under the 1978 Act (to the extent that those exemptions apply to the relevant offer of securities).~~
~~(3) In this subpart, issuer, prospectus, registered prospectus, and securities have the same meanings as in the 1978 Act.~~

671 Former enactments continue to apply if prospectus registered before commencement

If securities are offered in a prospectus that is registered under the 1978 Act before the commencement of this section, the former enactments continue to apply to the offer and allotment of those securities under that prospectus as if this Act had not been enacted.

672 Issuer may elect to comply with former enactments instead of this Act if prospectus registered within 12 months of commencement

~~(1) Despite the repeal of the 1978 Act, an issuer of securities may register a prospectus in respect of the securities in accordance with the former enactments on or before the 12-month date.~~

(2) If securities are offered in a prospectus that is registered under subsection (1), the former enactments apply, as if this Act had not been enacted, to the offer and allotment of those securities under that prospectus only if the issuer makes an election under subsection (3).

(3) For the purposes of subsection (2), an issuer may elect for the former enactments to apply to an offer of securities by including a statement in the prospectus to the effect that the Securities Act 1978 applies to the offer.

(4) The statement referred to in subsection (3) may include additional information about an applicable exemption granted under the 1978 Act that is necessary to ensure that the statement is not misleading.

673 Former enactments apply if no prospectus is required unless issuer elects otherwise

(1) If, under the 1978 Act or an exemption granted under that Act, no registered prospectus is required for an offer of securities to the public in New Zealand, the former enactments apply, as if this Act had not been enacted, to any offer and allotment of those securities that is made before the close of the 12-month date unless the issuer makes an election, under subsection (2), for this Act to apply.
~~(2) For the purposes of subsection (1), an issuer may elect for this Act to apply to an offer of securities made after a particular date by—~~
- ~~(a) giving to the FMA, before that date, a notice to the effect that this Act applies to the offer of the securities made after that date; and~~
- (b) including a copy of that notice on an Internet site maintained by, or on behalf of, the issuer at all reasonable times during the period between that date and the earlier of the close of the offer or the close of the 12-month date.

674 Transitional provisions that apply after 12-month date in respect of registered prospectuses

If, before the close of the 12-month date, the former enactments apply to an offer of securities in a registered prospectus, those securities may continue to be offered and allotted under that prospectus and, for that purpose, the former enactments continue to apply as if this Act had not been enacted.

675 This Act and 1978 Act are (on transitional basis) alternative means of compliance

~~If, in accordance with this subpart,—~~
- ~~(a) this Act applies to an offer of securities, the former enactments do not apply to the offer:~~
- ~~(b) the former enactments apply to an offer of securities, this Act does not apply to the offer.~~

676 All offers and allotments under old law must cease

Despite sections 670 to 675, no offer or allotment of managed investment products may be made under the former enactments after the date on which the managed investment scheme to which the products relate becomes a registered scheme (or is treated as being a registered scheme under subpart 9).

677 All offers and allotments under old law must cease within 2 years of commencement

~~Despite sections 670 to 675, no offer or allotment of securities may be made under the former enactments after the date that is 2 years after the commencement of this section.~~

678 FMA may continue to perform and exercise functions, duties, and powers

If the former enactments continue to apply to an offer of securities, the FMA may continue to perform and exercise all of its functions, duties, and powers conferred or imposed on it by or under the former enactments as if this Act had not been enacted (for example, it may grant an exemption under section 70B of the 1978 Act).

679 Subpart does not prevent PDS from being lodged

~~Nothing in this subpart prevents an issuer from lodging a PDS in preparation for making an offer of financial products under Part 3.~~

680 Transitional and application provisions subject to exemption

~~This subpart is subject to—~~
- ~~(a) any regulations made under section 521:~~
- ~~(b) any exemption granted under subpart 2 of Part 8.~~

Subpart 9—Transitional provisions relating to securities offered under Securities Act 1978

681 Subpart applies to securities offered under Securities Act 1978

(1) This subpart applies to a security offered pursuant to an offer for which, or for which but for an exemption granted by the FMA or the Securities Commission under the 1978 Act, an investment statement or a registered prospectus, or both, is or was required under that Act.

(2) However, this subpart does not apply to a security if, before the commencement of this section, the security was cancelled, redeemed, or forfeited, or all of the obligations owing under the security had been discharged.

~~(3) The securities referred to in subsection (1) include securities offered under an offer to which the 1978 Act applies under subpart 8.~~

682 Interpretation in this subpart

~~(1) In this subpart,—~~

~~1978 Act means the Securities Act 1978~~

~~effective date, in relation to a particular security, means the earlier of the dates set out in section 685(1)~~
~~issuer, in relation to a security, means,—~~
- ~~(a) before the effective date, the issuer within the meaning of the 1978 Act:~~
- ~~(b) on and after the effective date, the issuer within the meaning of section 10~~
~~KiwiSaver schemes register means the KiwiSaver schemes register established under the KiwiSaver Act 2006.~~
~~(2) In this subpart, investment statement, registered prospectus, and securities have the same meanings as in the 1978 Act (as in force immediately before the commencement of this section).~~

683 Former enactments continue to apply until effective date

(1) To the extent that the former enactments (as in force immediately before the commencement of this section) would otherwise apply to a security to which this subpart applies (or to any scheme to which the security relates), those enactments continue to apply during the transition period as if this Act had not been enacted.
~~(2) In this section, former enactments—~~
- ~~(a) means the 1978 Act, the Securities Regulations 2009, exemptions granted under the 1978 Act, and any other enactments made under the 1978 Act:~~
- ~~(b) includes,—~~
  - ~~(i) in relation to an interest in a KiwiSaver scheme, the KiwiSaver Act 2006:~~
  - ~~(ii) in relation to an interest in a superannuation scheme (other than a KiwiSaver scheme), the Superannuation Schemes Act 1989:~~
  - ~~(iii) in relation to a unit in a unit trust, the Unit Trusts Act 1960:~~
  - ~~(iv) the Securities Trustees and Statutory Supervisors Act 2011.~~
(4) In this section and section 684, KiwiSaver scheme, scheme, superannuation scheme, unit, and unit trust have the same meanings as in section 2(1) of the 1978 Act (as in force immediately before the commencement of this section).

684 KiwiSaver schemes, superannuation schemes, and unit trusts continue under former enactments until effective date

~~(1) If a security to which this subpart applies is—~~
- ~~(a) an interest in a KiwiSaver scheme, the KiwiSaver scheme continues to be registered in the KiwiSaver schemes register during the transition period as if this Act had not been enacted:~~
- (b) an interest in a superannuation scheme (other than a KiwiSaver scheme), the superannuation scheme continues to be registered under the Superannuation Schemes Act 1989 during the transition period as if this Act had not been enacted:
- ~~(c) a unit in a unit trust, the unit trust continues to be subject to the Unit Trusts Act 1960 during the transition period as if this Act had not been enacted.~~
~~(2) This section does not limit section 683.~~

685 Transition period

(1) In this subpart, the transition period for a particular security is the period beginning on the date on which this section comes into force and ending on the close of the day before the earlier of the following dates:
- ~~(a) the date that the issuer of the security elects to comply with subpart 4 of Part 3 and Part 4 in accordance with subsection (2); or~~
- ~~(b) the date that is 2 years after the commencement of this section.~~
(2) If the issuer elects an effective date that is earlier than 2 years after the commencement of this section, the issuer must notify the FMA and the Registrar of the elected date at least 20 working days before that date.

686 Ongoing requirements of this Act apply on and after effective date

(1) On and after the effective date for a particular security to which this subpart applies, the following apply to the security (and, in the case of a managed investment product, to the managed investment scheme to which it relates):
- ~~(a) subpart 4 of Part 3 (ongoing disclosure and updating of registers):~~
- ~~(b) Part 4 (governance of financial products):~~
- ~~(c) any regulations made for the purposes of subpart 4 of Part 3 or Part 4:~~
- ~~(d) any other provision of this Act relating to the enforcement, application, or effect of subpart 4 of Part 3 or Part 4.~~
~~(2) However, subsection (1) and sections 687 and 688 do not apply if,—~~
- ~~(a) before the effective date, the security is cancelled, redeemed, or forfeited, or all of the obligations owing under the security have been discharged; or~~
- ~~(b) on the effective date, the security is not a financial product within the meaning of section 7.~~
~~(3) The provisions referred to in subsection (1) apply—~~
- ~~(a) with all necessary modifications as if the security had been offered under a regulated offer under this Act; and~~
- ~~(b) subject to any applicable exemption from the provisions granted under subpart 2 of Part 8.~~

687 Issuer of debt security must lodge trust deed and supply information

~~(1) If a security to which this subpart applies is a debt security (within the meaning of section 8), the issuer must—~~
- ~~(a) ensure that a copy of the trust deed that complies with sections 90 to 92 is lodged with the Registrar on or before the effective date; and~~
- ~~(b) supply to the Registrar and the FMA, before the effective date,—~~
  - ~~(i) the names and addresses of the persons who, on the effective date, will be the issuer and the licensed supervisor; and~~
  - ~~(ii) all other prescribed information and documents relating to the debt security.~~
~~(2) See subpart 3 of Part 7, which provides for civil remedies for a contravention of subsection (1).~~

688 Managed investment scheme treated as being registered and issuer must supply information

~~(1) If a security to which this subpart applies is a managed investment product,—~~
- ~~(a) the managed investment scheme to which the product relates (the scheme) must, on and after the effective date, be treated as being a registered scheme; and~~
- ~~(b) the issuer must ensure that a copy of the governing document for the scheme that complies with sections 122 to 124 is lodged with the Registrar on or before the effective date; and~~
- ~~(c) the issuer must supply to the Registrar and the FMA, before the effective date,—~~
  - ~~(i) the names and addresses of the persons who, on the effective date, will be the manager and the licensed supervisor; and~~
  - ~~(ii) all other prescribed information and documents relating to the managed investment product and the scheme.~~
~~(2) See subpart 3 of Part 7, which provides for civil remedies for a contravention of subsection (1)(b) or (c).~~
~~(3) Nothing in this section or section 689 prevents the FMA from—~~
- ~~(a) directing that the registration of a scheme to which this section applies be cancelled under section 180; or~~
- ~~(b) exercising any other power in respect of such a scheme.~~

689 Type of registration

~~(1) A managed investment scheme that is treated as being registered under section 688 must be treated as being registered on the register of managed investment schemes as a—~~
- ~~(a) KiwiSaver scheme if, immediately before the effective date, the scheme was registered as a KiwiSaver scheme in the KiwiSaver schemes register:~~
- (b) KiwiSaver scheme that is a restricted scheme if paragraph (a) applies and, immediately before the effective date, the scheme was identified as a restricted scheme on the KiwiSaver schemes register:
- ~~(c) superannuation scheme if, immediately before the effective date, the scheme was registered under the Superannuation Schemes Act 1989:~~
- ~~(d) superannuation scheme that is a restricted scheme if paragraph (c) applies and an Order in Council has designated the scheme as a restricted scheme under subsection (2):~~
- (e) a complying superannuation fund if paragraph (c) applies and, immediately before the effective date, the scheme was approved as a complying superannuation fund under section 35 of the Superannuation Schemes Act 1989.
(2) The Governor-General may, by Order in Council, on the advice of the Minister given in accordance with a recommendation of the FMA, designate a scheme as a restricted scheme for the purposes of subsection (1)(d).

(3) Section 117(1)(c) (which prevents certain changes without the FMA's consent to the conditions of entry of scheme participants) applies to a restricted scheme on and after the date on which a designation by Order in Council comes into force under subsection (2) in all cases as if that date of designation were the date of the scheme's registration under this subpart.

690 Registrar to amend register

(1) The Registrar must, on or as soon as practicable after the effective date for a managed investment scheme to which section 688(1)(a) applies, amend the register of managed investment schemes to include an entry relating to the scheme.

~~(2) Subsection (1) does not apply if section 688(1)(b) or (c) has not been complied with.~~

691 Restriction on making regulated offers and accepting contributions if requirements have not been complied with

~~(1) This section applies if an issuer contravenes section 688(1)(b) or (c) in respect of a managed investment scheme that is treated as being a registered scheme under section 688(1)(a).~~

~~(2) The issuer must not, on and after the effective date, make a regulated offer of a managed investment product, or accept further contributions, in respect of that managed investment scheme.~~
~~(3) Subsection (2) ceases to apply if—~~
- ~~(a) the issuer lodges with the Registrar a copy of the governing document for the scheme that complies with sections 122 to 124; and~~
- ~~(b) the issuer supplies to the Registrar and the FMA the prescribed information and documents; and~~
- ~~(c) the register of managed investment schemes includes an entry relating to the scheme.~~
~~(4) See subpart 3 of Part 7, which provides for civil remedies for a contravention of this section.~~

692 Issuer may amend or replace governing document with FMA's consent

~~(1) This section applies—~~
- ~~(a) to a governing document that, immediately before the commencement of this section, relates to a debt security or constitutes or governs a scheme; and~~
- (b) despite anything to the contrary in the governing document or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the governing document.
(2) The issuer of the debt security or the manager of the scheme (as the case may be) may amend or replace the governing document with the FMA’s consent if the FMA is satisfied that the amendment or replacement is necessary or desirable to ensure, or in connection with ensuring, that the governing document complies with the requirements of this Act.

~~(3) An amendment or replacement made under this section must be treated for all purposes as if it were made in accordance with the governing document.~~
~~(4) On the amendment or replacement under this section of a governing document that constitutes or governs a scheme,—~~
- ~~(a) the scheme must be treated as the same scheme as it was immediately before the replacement of the existing governing document; and~~
- ~~(b) the persons who were members of the scheme immediately before the replacement of the existing governing document continue to be members of the same scheme; and~~
- (c) the assets or liabilities of a scheme or fund must be treated as if they vested in the scheme or fund immediately after the replacement of the existing governing document, but for the purposes of the Inland Revenue Acts this must be treated as if it is not a transfer (as defined in section YA 1 of the Income Tax Act 2007).
~~(5) In this section and sections 693 and 694, scheme has the same meaning as in section 2(1) of the 1978 Act (as in force immediately before the commencement of this section).~~

~~(6) To avoid doubt, this section does not limit the ways in which a governing document may be amended or replaced in accordance with its terms or any enactment or rule of law.~~

693 Conversion of governing documents to separate governing documents

~~(1) This section applies—~~
- ~~(a) to a governing document (existing governing document) that, immediately before the commencement of this section, constitutes or governs 2 or more schemes or funds; and~~
- (b) despite anything to the contrary in the governing document or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the governing document.
(2) The parties to an existing governing document may rescind the existing governing document, provided that the existing governing document is immediately replaced with a new governing document in respect of each scheme or fund constituted or governed by the existing governing document.
~~(3) However,—~~
- ~~(a) an existing governing document must not be rescinded, and new governing documents must not be executed, under this section without the prior written consent of the FMA; and~~
- (b) the parties to, and provisions of, a new governing document must differ from the parties to, and provisions of, the existing governing document only to the extent that is necessary or desirable to ensure, or in connection with ensuring, that the new governing document complies with this Act.
~~(4) On the replacement of an existing governing document with new governing documents under this section,—~~
- ~~(a) the 2 or more schemes or funds are governed by separate governing documents rather than by the existing governing document; and~~
- ~~(b) a scheme or fund must be treated as the same scheme or fund as it was immediately before the replacement of the existing governing document; and~~
- ~~(c) the persons who were members of a scheme or fund immediately before the replacement of the existing governing document continue to be members of the same scheme or fund; and~~
- ~~(d) no assets or liabilities are removed from any of the schemes or funds; and~~
- ~~(e) the 2 or more schemes must be treated as separate persons for the purposes of the Inland Revenue Acts; and~~
- ~~(f) no new settlement (as defined in section YA 1 of the Income Tax Act 2007) occurs.~~
~~(5) This section expires, and is repealed, 2 years after the commencement of this section.~~

(6) To avoid doubt, this section does not limit the ways in which a scheme or fund may be divided into separate schemes in accordance with the terms of the governing document or any enactment or rule of law.

~~Compare: 2011 No 8 s 64~~

694 Amalgamation of schemes

~~(1) This section applies—~~
- (a) to 2 or more governing documents (existing governing documents) that, immediately before the commencement of this section, constitute or govern 2 or more schemes or funds (existing separate schemes); and
- (b) despite anything to the contrary in the existing governing documents or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the existing governing documents.
(2) The parties to the existing governing documents may rescind the existing governing documents, provided that the existing governing documents are immediately replaced with 1 new governing document and 1 scheme or fund (amalgamated scheme) in respect of all of the existing separate schemes constituted or governed by the existing governing documents.
~~(3) However,—~~
- ~~(a) existing governing documents must not be rescinded, and a new governing document must not be executed, under this section without the prior written consent of the FMA; and~~
- (b) the parties to, and provisions of, a new governing document must differ from the parties to, and provisions of, the existing governing documents only to the extent that is necessary or desirable to ensure, or in connection with ensuring, that the new governing document complies with this Act.
~~(4) On the replacement of the existing governing documents with 1 new governing document and the amalgamated scheme under this section,—~~
- ~~(a) the amalgamated scheme is governed by 1 governing document rather than each existing separate scheme being governed by separate governing documents; and~~
- ~~(b) the amalgamated scheme must be treated as the same scheme as the existing separate schemes combined for all purposes (other than as specified in paragraphs (d) to f)); and~~
- ~~(c) the persons who were members of each existing separate scheme immediately before the replacement of the existing governing documents are members of the amalgamated scheme; and~~
- ~~(d) the amalgamated scheme must be treated as the same person as the existing separate schemes combined for the purposes of the Inland Revenue Acts other than—~~
  - ~~(i) for the purposes of the PIE rules (as defined in section YA 1 of the Income Tax Act 2007); and~~
  - ~~(ii) as specified in paragraph (f)); and~~
- (e) the assets or liabilities of the existing separate schemes must be treated as if they vested in the amalgamated scheme immediately after the replacement of the existing governing document, but for the purposes of the Inland Revenue Acts this must be treated as if it is not a transfer (as defined in section YA 1 of the Income Tax Act 2007); and
- (f) subparts IA and IQ of Part I of the Income Tax Act 2007 (which relate to the treatment of tax losses) do not apply to any carry forward of a loss balance of an existing separate scheme to the amalgamated scheme for the income year in which the existing governing document is replaced or for any later income year.
~~(5) This section expires, and is repealed, 2 years after the commencement of this section.~~

~~(6) To avoid doubt, this section does not limit the ways in which schemes or funds may be amalgamated in accordance with the terms of their governing documents or any enactment or rule of law.~~

695 Amended enactments continue to apply or have effect in connection with securities

(1) If, before the commencement of this section, an enactment that is amended by this Act applied, or had an effect, in connection with a security to which this subpart applies, the enactment continues to apply or have the effect in connection with the security as if this Act had not been enacted until the effective date (unless the context otherwise requires).

~~(2) Subsection (1) must be treated as applying to a security offered under the 1978 Act in accordance with subpart 8.~~

~~(3) See section 702 (amended enactments continue to apply or have effect in connection with schemes).~~

696 Issuer must send notification to security holders

(1) The issuer of a security must, before or within 3 months after the effective date, send a written notice containing the following information to the security holder at the holder's last known address:
- ~~(a) the effective date and a statement to the effect that requirements of this Act will apply after that date:~~
- ~~(b) the names and addresses of the issuer, the supervisor (if any), and the custodian (if any):~~
- ~~(c) in the case of a debt security or managed investment product,—~~
  - ~~(i) a statement to the effect that the holder may obtain a copy of the governing document by electronic means; and~~
  - (ii) a statement to the effect that the holder has a right to receive from the issuer, free of charge, a copy of the governing document if the holder, within 15 working days of receiving the notice, makes a request to the issuer to receive a copy of the governing document:
- ~~(d) if a PDS has been lodged for an offer of financial products of the same class as the security, a statement to the effect that the holder may obtain a copy of the PDS by electronic means:~~
- (e) in the case of a managed investment product, the statement of investment policy and objectives or a statement to the effect that the holder may obtain a copy of that statement by electronic means:
- (f) if the notice contains a statement to the effect that the holder may obtain a copy of a document by electronic means, a statement as to how the holder may obtain a copy of the document by electronic means (for example, from a specified Internet site address):
- ~~(g) any other prescribed information.~~
(2) If a security holder, within 15 working days of receiving the notice, makes a request to the issuer to receive a copy of the governing document, the issuer must, as soon as practicable, send to the holder, free of charge, a copy of that document.

~~(3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.~~

~~(4) The offence in this section is an infringement offence (see subpart 5 of Part 7).~~
~~(5) In this section and section 697, security holder means,—~~
- ~~(a) in the case of a security to which section 200 does not apply, the holder of that security on the date that the notice is sent under subsection (1); or~~
- (b) in the case of any other security, the person who is registered as the holder of the security in a register kept under subpart 5 of Part 4 on the date that the notice is sent under subsection (1).

697 PDS treated as having been given

~~(1) This section applies if—~~
- ~~(a) a notice is sent to a security holder under section 696 before the effective date; and~~
- ~~(b) a PDS has, before the effective date, been lodged for an offer of financial products of the same class as the security held by the security holder; and~~
- ~~(c) a statement is included in the notice referred to in paragraph (a) as required by section 696(1)(d); and~~
- ~~(d) the security held by the security holder is a financial product that the issuer, in the ordinary course of its business, continuously offers for issue.~~
~~(2) The PDS referred to in subsection (1)(b) must be treated as having been given to the security holder for the purposes of section 37.~~

698 FMA may continue to perform and exercise functions, duties, and powers

If the former enactments continue to apply to securities or a scheme under this subpart, the FMA may continue to perform and exercise all of its functions, duties, and powers conferred or imposed on it by or under the former enactments as if this Act had not been enacted (for example, it may grant an exemption under section 70B of the 1978 Act).

699 Transitional and application provisions subject to exemption

~~This subpart is subject to—~~
- ~~(a) any regulations made under section 521:~~
- ~~(b) any exemption granted under subpart 2 of Part 8.~~

Subpart 10—Other transitional provisions

Unit trusts and superannuation schemes in relation to which offers to the public have not been made

700 Unit trusts in relation to which offers to public have not been made

~~(1) This section applies to a unit trust to which the Unit Trusts Act 1960 applied immediately before the commencement of this section unless subpart 9 applies to any unit in the unit trust.~~

(2) The Unit Trusts Act 1960 (as in force immediately before the commencement of this section) continues to apply during the transition period described in subsection (3) as if this Act had not been enacted.
~~(3) The transition period for a unit trust is the period beginning on the date on which this section comes into force and ending on the close of the day before the earlier of the following dates:~~
- ~~(a) the date that the unit trust is registered as a registered scheme under this Act; or~~
- ~~(b) the date that is 2 years after the commencement of this section.~~
~~(4) In this section, unit and unit trust have the same meanings as in section 2(1) of the Securities Act 1978.~~

701 Superannuation schemes in relation to which offers to public have not been made

(1) This section applies to a superannuation scheme that, immediately before the commencement of this section, was registered under the Superannuation Schemes Act 1989 unless subpart 9 applies to any interest in the scheme.

(2) The Superannuation Schemes Act 1989 (as in force immediately before the commencement of this section) continues to apply during the transition period described in subsection (3) as if this Act had not been enacted.
(3) The transition period for a superannuation scheme is the period beginning on the date on which this section comes into force and ending on the close of the day before the earlier of the following dates:
- ~~(a) the date that the scheme is registered as a registered scheme under this Act or is approved as a Schedule 3 scheme; or~~
- ~~(b) the date that is 2 years after the commencement of this section.~~

Amended enactments continue to apply or have effect in connection with schemes

702 Amended enactments continue to apply or have effect in connection with schemes

(1) If, before the commencement of this section, an enactment that is amended by this Act applied, or had an effect, in connection with a specified scheme, the enactment continues to apply, or have the effect, in connection with the specified scheme as if this Act had not been enacted until the end of the transition period (unless the context otherwise requires).

~~(2) A specified scheme that is a KiwiSaver scheme or superannuation scheme must, during the transition period, be treated as being a retirement scheme under section 111(4).~~
~~(3) In this section,—~~
~~specified scheme means any of the following:~~
- ~~(a) a KiwiSaver scheme, superannuation scheme, or unit trust referred to in section 684:~~
- ~~(b) a unit trust referred to in section 700:~~
- ~~(c) a superannuation scheme referred to in section 701~~
~~transition period means, in relation to a specified scheme, the transition period that applies to the scheme under subpart 9 or section 700 or 701 (as the case may be).~~

Extra transitional provisions relating to managed investment schemes

703 Remaining trustees (if any) cease to hold office

~~(1) This section applies to a person (if any) who is a trustee of a registered scheme that is a trust and who is not the manager or supervisor of the scheme under this Act.~~

~~(2) The person ceases to hold office at the end of the transition period referred to in section 702(3), provided that there is a manager or supervisor for the scheme as required by this Act.~~

704 Restricted schemes have 3 years to comply with related party asset cap rule

Section 161 (which requires the manager of a restricted scheme to ensure that the restricted scheme does not have more than 5% of the scheme property in investments related to or managed by a related party of the scheme or a scheme participant) does not apply to the scheme until the 3rd anniversary of the date on which this section comes into force.

705 Savings related to Superannuation Schemes Act 1976

(1) All superannuation annuities, superannuation allowances, annuities, amounts, expenses, and refunds that were payable out of the Consolidated Account under sections 5A(2), 6(4), and 7(6) of the Superannuation Schemes Act 1976 (which related to certain payments out of the Consolidated Account as a result of the dissolution of the New Zealand Superannuation Corporation and the New Zealand Superannuation Scheme) continue to be so payable as if those sections and section 5A(3) of that Act had not been repealed.
~~(2) This section applies despite the repeal of—~~
- ~~(a) the Superannuation Schemes Act 1976 by section 32 of the Superannuation Schemes Act 1989; and~~
- ~~(b) section 33 of the Superannuation Schemes Act 1989 by section 564 of this Act.~~
~~Compare: 1989 No 10 s 33~~

Repealed enactments continue to be financial markets legislation

706 Repealed enactments continue to be financial markets legislation

Every enactment that is repealed or revoked by this Act and that was, immediately before the commencement of this section, financial markets legislation within the meaning of section 4 of the Financial Markets Authority Act 2011 must be treated as continuing to be financial markets legislation within the meaning of that Act.

Licensing of financial product markets

707 Transition process for existing financial product markets

~~(1) In this section,—~~

~~deemed licence means a financial product market licence that an existing exchange is, by subsection (2), deemed to hold~~

existing exchange means a person that, immediately before the commencement of subsection (2), was a registered exchange within the meaning of section 2(1) of the Securities Markets Act 1988 or an authorised futures exchange within the meaning of section 37(1) of that Act

existing market means a market that, immediately before the commencement of subsection (2), was a registered market within the meaning of section 2(1) of the Securities Markets Act 1988 or an authorised futures market within the meaning of section 37(1) of that Act

existing market rules means market rules, within the meaning of section 2(1) of the Securities Markets Act 1988, that, immediately before the commencement of subsection (2), applied to an existing market

existing unlicensed market operator means a person other than an existing exchange that, immediately before the commencement of subsection (7), lawfully operated a securities market or futures market within the meaning of the Securities Markets Act 1988

market of an existing exchange, in relation to an existing exchange, means an existing market that the existing exchange was, immediately before the commencement of subsection (2), authorised to operate

~~transitional period means the period that commences on the commencement of subsection (7) and ends on the commencement of section 308.~~

~~Existing exchanges~~

(2) On and from the commencement of this subsection, every existing exchange is deemed to hold, under this Act, for each market of the existing exchange a financial product market licence that authorises the existing exchange to operate a financial product market that is of the same kind as the existing market of the existing exchange.

(3) Every existing market rule for an existing market continues to have effect in relation to that market as if it had been approved under section 330 or, as the case requires, been notified under section 333.
(4) Section 320, so far as applicable and with any necessary modifications, applies to each existing market, and the FMA must, as soon as practicable after the commencement of this subsection, set out, for each existing market, the matters required to be included by subsection (2) of that section and, in doing so, must—
- ~~(a) treat the commencement of this subsection as the date on which the deemed licence was issued; and~~
- ~~(b) formulate, in consultation with the existing exchange, the conditions of the deemed licence, being conditions of the kind described in section 316(1)(a) to (d); and~~
- ~~(c) determine whether the deemed licence is deemed to have been issued under section 314 or 315.~~
~~(5) Any matter stated under section 320(2), as applied by subsection (4), is deemed to be incorporated into the deemed licence.~~
~~(6) Nothing in this section prevents—~~
- ~~(a) the Minister from exercising a power under this Act—~~
  - ~~(i) to vary, revoke, add to, or substitute the conditions of a deemed licence; or~~
  - ~~(ii) to suspend or cancel a deemed licence; or~~
- ~~(b) the exercise, in respect of a deemed licence, of any other power that may, under this Act, be exercised in respect of a financial product market licence.~~
~~Existing unlicensed market operator~~

(7) On an application to the Minister by an unlicensed market operator, the Minister may, during the transitional period, issue a financial product market licence to the existing unlicensed market operator and, after the transitional period, that licence has effect as if it had been issued under section 314 or, as the case requires, section 315.

(8) During the transitional period, the Minister may approve any proposed market rules for the market operated by an existing unlicensed market operator and, after the transitional period, that approval has effect as if it had been given by the FMA under section 330.

Market services licences

708 Authorised dealers treated as holding market services licence

(1) Every person who, immediately before the commencement of this section, is authorised or approved to carry on the business of dealing in futures contracts under section 38 of the Securities Markets Act 1988 must be treated as holding, on and from the commencement of this section, a licence issued under subpart 2 of Part 6.

~~(2) Subsection (1) does not apply if the person is not required to hold a licence under Part 6.~~
~~(3) The licence under subsection (1) must be treated as—~~
- ~~(a) covering the same service that is authorised or approved under section 38 of the Securities Markets Act 1988:~~
- (b) subject to the conditions, limitations, or restrictions that, immediately before the commencement of this section, were imposed by or under the Securities Markets Act 1988 on the authorisation or approval:
- ~~(c) in the case of a registered bank, covering the service of acting as a derivatives issuer for all derivatives:~~
- ~~(d) expiring on the earlier of—~~
  - ~~(i) the date that the licence is cancelled; or~~
  - ~~(ii) the date that is 2 years after the commencement of this section.~~
~~(4) Subsection (3)(a) and (b) do not limit subsection (3)(c).~~

709 FMA may exercise powers in respect of licences

~~(1) Nothing in section 708 prevents the FMA from exercising—~~
- ~~(a) a power to vary, revoke, add to, or substitute any of the conditions of a licence referred to in that section; or~~
- ~~(b) any other powers under this Act in respect of the licence.~~
~~(2) A licence referred to in section 708 may be subject to the conditions prescribed by the regulations.~~

Approval of electronic transfer systems continues

710 Approval of electronic transfer systems continues

An Order in Council made under section 7 of the Securities Transfer Act 1991 that is in force immediately before the repeal of that Act continues in force as if it had been made under section 376 (and may be amended or revoked as if it had been made under that section).

References to banning orders under this Act include references to banning orders under former enactments

711 References to banning orders under this Act include references to banning orders under former enactments

(1) This section applies to a provision of any enactment that refers to a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an incorporated or unincorporated body under this Act (or any similar reference).

(2) The provision must be treated as including a reference to a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an incorporated or unincorporated body under the Securities Act 1978, the Securities Markets Act 1988, or the Financial Advisers Act 2008.

~~Example~~

~~Section 151(2)(ea) of the Companies Act 1993 specifies that a person is disqualified from being a director of a company if the person is prohibited from being a director or promoter under this Act.~~

~~If a person has been so prohibited under the Securities Act 1978, the Securities Markets Act 1988, or the Financial Advisers Act 2008, the person will be disqualified under section 151(2)(ea).~~

Financial Reporting Act 1993

712 Issuers continue to be issuers under Financial Reporting Act 1993

(1) A person who, immediately before the commencement of this section, was an issuer under section 4(1)(a) to (b) of the Financial Reporting Act 1993 (as in force before the commencement of this section) in relation to securities continues to be an issuer in respect of those securities for the purposes of the Financial Reporting Act 1993 until—
- ~~(a) all of those securities are cancelled, redeemed, or forfeited; or~~
- ~~(b) all of the obligations owing under those securities have been discharged.~~
~~(2) Subsection (1) must be treated as applying to a person—~~
- ~~(a) who makes an offer of securities to which the Securities Act 1978 continues to apply in accordance with subpart 8; and~~
- ~~(b) who would, if this Act had not been enacted, have been an issuer under section 4(1)(a) to (b) of the Financial Reporting Act 1993 (as in force before the commencement of this section).~~

713 External Reporting Board must review tiers of financial reporting

The External Reporting Board must, within 6 months after the commencement of this section, review the strategy that has been approved under section 34C of the Financial Reporting Act 1993 in order to consider whether a variation of the strategy is necessary or desirable in connection with the enactment of this Act.

ss 27, 28

Part 1
Disclosure exclusions for offers of financial products for issue or sale

1 Overview of Part

2 Part subject to FMA's power to require disclosure

Exclusion for wholesale investors

3 Offer to wholesale investor

Exclusion for persons in close relationship

4 Offers to close business associates

5 Offers to relatives

Exclusion for offers through licensed intermediaries and DIMS licensees

6 Offers of financial products through licensed intermediaries

7 Offers of financial products through DIMS licensees

Exclusion for employee share purchase schemes

8 Offers under employee share purchase schemes

Exclusion for persons under control

9 Offers to persons under control do not need disclosure

Exclusion for dividend reinvestment plan

10 Offers of financial products under dividend reinvestment plans

Exclusion for financial products for no consideration

11 Offers of financial products for no consideration

Exclusion for small offers

12 Small offers

13 Advertising restriction for small offers

14 Matters relating to calculation

Exclusion for transfer of controlling interest

15 Offers of controlling interest where there are 5 or fewer investors

Exclusion for small schemes

16 Exclusion for small schemes

17 Advertising restriction for small schemes

18 Counting of scheme participants

Exclusion for quoted financial products

18A Exclusion for offers of financial products of same class as quoted financial products

Exclusions for derivatives

19 Exclusions for certain offers of derivatives

Exclusion for registered banks

20 Offers of category 2 products or debt securities by registered banks

Exclusion for the Crown, local authorities, etc

21 Offers by the Crown, local authorities, etc

Exclusion for retirement villages

22 Offers of interests in retirement villages

Exclusion for renewals or variations

23 Offers of renewals or variations

Exclusion for contributory mortgages

24 Offers of interests in contributory mortgages offered by lawyers

Limited disclosure and other requirements

25 Purposes of clauses 26 to 28

26 Disclosure and other requirements

27 False or misleading statements and omissions

28 Regulations may prevent exclusions from applying in inappropriate circumstances

Part 2
Which offers of financial products for sale require disclosure

29 Application of this Part

30 Sale where financial products issued with view to original holder dealing with products

31 Sale where issuer advises, encourages, or knowingly assists offeror

32 Off-market sale by controller

33 Sale amounting to indirect off-market sale by controller

Part 3
Definitions and certificates for exclusions for offers and services

~~Definitions relating to wholesale investor and retail investor~~

33A Meaning of retail investor and retail service

33B Meaning of wholesale investor

~~34 Meaning of retail investor and definitions of certain other terms~~

35 Investment businesses

36 Investment activity criteria

37 Meaning of large

38 Definition of government agency

39 Eligible investors

40 Offeror may not rely on eligible investor certificate in certain circumstances

41 Confirmation of certification

42 Safe harbour if certificate given

43 Offeror or provider may not rely on safe harbour certificate that was given more than 2 years before offer or provision of service

44 Offeror or provider may not rely on safe harbour certificate if knew that A was not in fact wholesale investor

45 Other provisions relating to certificates

46 Offences relating to certificates

Control and other definitions for schedule

47 Meaning of control in this schedule

48 Other definitions for schedule

Part 1
Disclosure exclusions for offers of financial products for issue or sale

1 Overview of Part

In this Part,—
- (a) clauses 3 to 11 specify that offers to particular persons do not require disclosure under Part 3 of this Act (although disclosure to other persons may be required):
- (b) clauses 12 to 24 specify that certain offers as a whole do not require disclosure under Part 3 of this Act, whether as a result of the nature of the offer (for example, a small offer) or the nature of the issuer (for example, an offer by the Crown):
- (c) clauses 25 to 28 provide for limited disclosure and other requirements, and for restrictions, in relation to the exclusions.

2 Part subject to FMA's power to require disclosure

This Part is subject to a declaration under section 533(1)(d) (FMA's power to declare that offer requires disclosure).

Exclusion for wholesale investors

3 Offer to wholesale investor

(1) An offer of financial products to a wholesale investor does not require disclosure under Part 3 of this Act.
(2) A person is a wholesale investor if—
- (a) the person is an investment business (see clause 35); or
- (b) the person meets the investment activity criteria specified in clause 36; or
- (c) the person is large (see clause 37); or
- (d) the person is a government agency (see clause 38).
(3) A person is also a wholesale investor, in relation to an offer of financial products (or other prescribed transaction), if—
- (a) the person is an eligible investor (see clause 39); or
- (b) in relation to an offer of financial products for issue or sale,—
  - (i) the minimum amount payable by the person on acceptance of the offer is at least $500,000; or
  - (ii) the amount payable by the person on acceptance of the offer plus the amounts previously paid by the person for financial products of the issuer of the same class that are held by the person add up to at least $500,000; or
  - (iii) it is proposed that the person will acquire the financial products under a bona fide underwriting or sub-underwriting agreement; or
- (c) in relation to an offer of a derivative for issue or sale, the notional value of the derivative is at least $5 million (see clause 48).
(4) In calculating the amount payable, or paid, for financial products for the purposes of subclause (3)(b)(i) or (ii), any amount payable, or paid, must be disregarded to the extent to which it is to be paid, or was paid, out of money lent by the offeror or any associated person of the offeror.

Exclusion for persons in close relationship

4 Offers to close business associates

(1) An offer of financial products to a close business associate of the offeror does not require disclosure under Part 3 of this Act.
(2) A person (A) is a close business associate of the offeror if—
- (a) A is a director or senior manager of the offeror or of a related body corporate of the offeror; or
- (b) A holds or controls 5% or more of the voting products of the offeror; or
- (ba) A is a related body corporate of the offeror; or
- (c) A holds or controls 20% or more of the voting products of a related body corporate of the offeror; or
- (d) A is a partner of the offeror or of a director of the offeror (under the Partnership Act 1908); or
- (e) A is a spouse, civil union partner, or de facto partner of a person who is a close business associate of the offeror under any of paragraphs (a) to (d) or subclause (3); or
- (f) A is a child, parent, brother, or sister of a person who is a close business associate of the offeror under any of paragraphs (a) to (e) or subclause (3) (whether or not by a step relationship).
(3) A person (A) is also a close business associate of the offeror, in relation to an offer of financial products, if A has a close professional or business relationship with the offeror, or a director or senior manager of the offeror, that allows A to obtain the information that will enable A to assess—
- ~~(a) the merits of the offer; and~~
- ~~(b) the adequacy of any information provided by the offeror and any other person involved in the offer.~~
(3) A person (A) is also a close business associate of the offeror, in relation to an offer of financial products, if A has a close professional or business relationship with the offeror, or a director or senior manager of the offeror, that allows A to—
- (a) assess the merits of the offer; or
- (b) obtain information from the offeror or any other person involved in the offer that will enable A to assess the merits of the offer.
(4) In this clause, control, in relation to a voting product, means having, directly or indirectly, effective control of the voting rights attached to the product.

5 Offers to relatives

(1) An offer of financial products to a relative of the offeror or of a director of the offeror does not require disclosure under Part 3 of this Act.
(2) In this clause, relative, in relation to a person (A), means any of the following:
- (a) A's spouse, civil union partner, or de facto partner (B):
- (b) a grandparent, parent, child, grandchild, brother, sister, nephew, niece, uncle, aunt, or first cousin of A or B, whether or not by a step relationship:
- (c) a spouse, civil union partner, or de facto partner of a person who is a relative under paragraph (b):
- (d) a trustee of a trust under which A, or a relative of A (under paragraphs (a) to (c)), is a beneficiary who—
  - (i) is presently entitled to a share of the trust estate or of the income of the trust estate; or
  - (ii) is, individually or together with other beneficiaries, in a position to control the trustee:
- (e) a trustee of a trust if—
  - (i) the trust is a family trust within the meaning of section 173M(5) of the Tax Administration Act 1994; and
  - (ii) a majority of the individuals who are beneficiaries under the trust are relatives of A (under paragraphs (a) to (c)).

Exclusion for offers through licensed intermediaries and DIMS licensees

6 Offers of financial products through licensed intermediaries

(1) An offer of financial products to a person (A) does not require disclosure under Part 3 of this Act if—
- (a) the offer is by or through a licensed intermediary in the course of providing prescribed intermediary services to A; and
- (b) the prescribed intermediary services provided to A by the licensed intermediary in relation to the offer are covered by the market services licence held by the licensed intermediary.
(2) In this clause, licensed intermediary means a person who holds a market services licence that covers prescribed intermediary services.

7 Offers of financial products through DIMS licensees

An offer of financial products to a person (A) does not require disclosure under Part 3 of this Act if—
- (a) the offer is through a DIMS licensee; and
- (b) the DIMS licensee decides whether to acquire the financial products on behalf of A in the course of providing a discretionary investment management service to A.

Exclusion for employee share purchase schemes

8 Offers under employee share purchase schemes

(1) An offer of specified financial products to an eligible person under an employee share purchase scheme does not require disclosure under Part 3 of this Act if—
- (a) the offer is made as part of the remuneration arrangements for the eligible person or is otherwise made in connection with the employment or engagement of the eligible person~~, and is separate from any other offer of specified financial products by the issuer~~; and
- (b) raising funds for the issuer is not the primary purpose of the offer to the eligible person; and
- (c) the total number of specified financial products issued or transferred under all of the issuer's employee share purchase schemes to eligible persons in any 12-month period does not exceed,—
  - (i) in the case of an offer of voting products or options over voting products, 10% of the voting products of the issuer as at the start of the 12-month period:
  - (ii) in the case of any other offer of specified financial products, 10% of the specified financial products of the issuer that are of the same class as at the start of the 12-month period.
(2) In this clause,—
eligible person—
- (a) means an employee or a director of the issuer of the specified financial products or of any of its subsidiaries; and
- (b) includes a person who provides personal services (other than as an employee) principally to the issuer of the specified financial products or any of its subsidiaries
specified financial products means—
- (a) equity securities; or
- (b) prescribed financial products.
(3) In calculating the total number of specified financial products issued or transferred under all of the issuer's employee share purchase schemes to eligible persons for the purposes of subclause (1)(c), an issue or a sale to a person must be disregarded if the issue or sale results from an offer that—
- (a) does not require disclosure under Part 3 of this Act because of any other exclusion under this schedule; or
- (b) is not received in New Zealand; or
- (c) is a regulated offer that is separate from the offer under the employee share purchase scheme.

Exclusion for persons under control

9 Offers to persons under control do not need disclosure

If, under any of clauses 3 to 8, an offer of financial products to a person (A) would not require disclosure under Part 3 of this Act, an offer of financial products to a person controlled by A does not require disclosure under Part 3 of this Act.

Exclusion for dividend reinvestment plan

10 Offers of financial products under dividend reinvestment plans

(1) An offer of specified financial products to a person (A) under a dividend reinvestment plan does not require disclosure under Part 3 of this Act if—
- (a) A already holds financial products of the issuer that are of the same class as the specified financial products, and—
  - (i) A is entitled to ~~subscribe for~~ acquire those products by applying all or any specified part of any dividends declared by the issuer and payable to A; or
  - (ii) A has a right to require the issuer to issue those products to A as fully paid financial products in consideration only for A forgoing the right to receive all or any specified part of any dividends declared by the issuer and otherwise payable to A; and
- (b) the dividend reinvestment plan contains provisions requiring that,—
  - (i) at the time the price of the specified financial products is set, the issuer has no information that is not publicly available that would, or would be likely to, have a material adverse effect on the realisable price of the financial products if the information were publicly available; and
  - (ii) the right to ~~subscribe for~~ acquire, or require the issuer to issue, specified financial products is offered to all holders of financial products of the issuer of the same class, other than product holders who are resident outside New Zealand and who are excluded by the issuer to avoid a risk of breaching the laws of the relevant overseas country; and
  - (iii) every product holder to whom the right is offered is given a reasonable opportunity to accept it; and
  - (iv) the specified financial products issued to a product holder are issued on the terms disclosed to the holder; and
  - (v) the specified financial products issued to a product holder are subject to the same rights as the financial products issued to all holders of financial products of the same class who agree to receive the financial products.
(2) In this clause,—
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 ~~the Companies Act 1993~~ that Act; and
- (ab) 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); and
- (b) in relation to managed investment products, a distribution of the financial benefits of the scheme to a holder of the product
specified financial products means—
- (a) equity securities in a company:
- (b) managed investment products.

Exclusion for financial products for no consideration

11 Offers of financial products for no consideration

(1) An offer of financial products (other than options or other financial products to which this clause does not apply) does not require disclosure under Part 3 of this Act if no consideration is to be provided for the issue or transfer of the products.
(2) An offer of an option to a person does not require disclosure under Part 3 of this Act if—
- (a) no consideration is to be provided for the issue or transfer of the option; and
- (b) no consideration is to be provided for the underlying financial products on the exercise of the option.
(3) This clause does not apply if the financial products—
- (a) are interests in a KiwiSaver scheme, a superannuation scheme, or a prescribed scheme; or
- (ab) are derivatives other than options; or
- (b) impose or may impose a liability on the product holder in respect of the issuer or a registered scheme (for example, an obligation to make contributions or to pay a call).

Exclusion for small offers

12 Small offers

(1) Specified offers of financial products do not require disclosure under Part 3 of this Act if—
- (a) the financial products are equity securities or debt securities; and
- (b) none of the offers results in a breach of the 20-investor limit under subclause (2)(a) or (3)(a); and
- (c) none of the offers results in a breach of the $2 million limit under subclause (2)(b) or (3)(b).
(2) An offer by a person to issue financial products—
- (a) results in a breach of the 20-investor limit if it results in the number of persons to whom financial products of the issuer have been issued exceeding 20 in any 12-month period:
- (b) results in a breach of the $2 million limit if it results in the amount being raised from the issue of financial products of the issuer exceeding $2 million in any 12-month period.
(3) An offer by a person to sell financial products of an issuer—
- (a) results in a breach of the 20-investor limit if it results in the number of persons to whom the person sells financial products of the issuer exceeding 20 in any 12-month period:
- (b) results in a breach of the $2 million limit if it results in the amount being raised by the person from selling financial products of the issuer exceeding $2 million in any 12-month period.
(4) Subclause (1) does not apply to an offer for sale to which clause 30 or 33 applies.
(5) In this clause,—

financial products of the issuer means equity securities and debt securities issued by the issuer (regardless of whether or not those products are of the same class or kind as those under offer)

income year has the same meaning as in section YA 1 of the Income Tax Act 2007
specified offer means an offer that is made to, and may only be accepted by, a person who—
- (a) is likely to be interested in the offer, having regard to—
  - (i) previous contact between the person making the offer and that person; or
  - (ii) some professional or other connection between the person making the offer and that person; or
  - (iii) statements or actions by that person that indicate that that person is interested in offers of that kind (for example, through that person's membership of or participation in an angel network); or
- (b) has an annual gross income of at least $200,000 for each of the person’s 2 most recently completed ~~financial~~ income years before the relevant time; or
- (c) is controlled by a person referred to in paragraph (b).

13 Advertising restriction for small offers

(1) A person must not advertise an offer or intended offer of financial products that would be a regulated offer but for clause 12.

(2) Subclause (1) does not apply to a communication that is distributed by or on behalf of the offeror if the offeror took all reasonable steps to ensure that the only persons who received the communication were persons referred to in the definition of specified offer in clause 12(5) or persons acting on their behalf.

(3) A contravention of this clause does not prevent the exclusion referred to in clause 12 from continuing to apply (but may give rise to consequences under Part 7 of this Act).

14 Matters relating to calculation

(1) In calculating issues and sales of the financial products of an issuer, and the amount raised from issues and sales, for the purposes of clause 12, an issue or a sale to a person must be disregarded if the issue or sale results from an offer that—
- (a) does not require disclosure under Part 3 of this Act because of any other exclusion under this schedule; or
- (b) is not received in New Zealand; or
- (c) is a regulated offer that is separate from the small offer.
(1A) If financial products are issued or sold to 2 or more persons as joint holders of the products, those persons must be treated as a single person for the purposes of counting the number of persons to whom financial products are issued or sold under clause 12.
(2) In calculating the amount of money raised by the person by issuing financial products, the following must be included:
- (a) the amount payable for the products at the time when the products are issued:
- (b) if the products are shares issued partly paid, any amount payable at a future time if a call is made:
- (c) if the product is an option, any amount payable on the exercise of the option:
- (d) if the products carry a right to convert the products into other financial products, any amount payable on the exercise of that right.
(3) For the purposes of paragraph (b) of the definition of specified offer in clause 12,—
- (a) in determining the annual gross income of the person, the annual gross income of an entity controlled by the person may be included in the annual gross income of the person; and
- (b) the frameworks and methodologies prescribed by the FMA under subpart 4 of Part 8 of this Act for the purposes of that paragraph (if any) must be complied with when determining whether the paragraph is satisfied.
~~(4) The frameworks or methodologies may, without limitation,—~~
- ~~(a) include requirements relating to how gross income is to be determined, calculated, or valued:~~
- ~~(b) provide for income to be included or disregarded (in whole or in part) for the purposes of paragraph (a).~~

Exclusion for transfer of controlling interest

15 Offers of controlling interest where there are 5 or fewer investors

(1) An offer of equity securities that comprise more than 50% of the voting products of an entity does not require disclosure under Part 3 of this Act if—
- (a) 5 or fewer persons acquire equity securities under the offer; and
- (b) if more than 1 person acquires equity securities under the offer, those persons are acting jointly or in concert; and
- ~~(c) in the circumstances, the persons who acquire equity securities under the offer are in a position to obtain from the offeror the information that will enable those persons to assess—~~
  - ~~(i) the merits of the offer; and~~
  - ~~(ii) the adequacy of any information provided by the offeror and any person involved in the offer.~~
- (c) in the circumstances, the persons who acquire equity securities under the offer are in a position to—
  - (i) assess the merits of the offer; or
  - (ii) obtain information from the offeror or any other person involved in the offer that will enable them to assess the merits of the offer.
(2) If equity securities are acquired by 2 or more persons as joint holders of the securities, those persons must be treated as a single person for the purposes of counting the number of persons who acquire the securities under subclause (1).

Exclusion for small schemes

16 Exclusion for small schemes

An offer of managed investment products does not require disclosure under Part 3 of this Act if the relevant managed investment scheme—
- (a) has 5 or fewer scheme participants (see clause 18); and
- (b) is not promoted by a person, or an associate of a person, who is in the business of promoting managed investment schemes.

17 Advertising restriction for small schemes

(1) A person must not advertise an offer or intended offer of financial products that would be a regulated offer but for clause 16.

(2) A contravention of this clause does not prevent the exclusion referred to in clause 16 from continuing to apply (but may give rise to consequences under Part 7 of this Act).

18 Counting of scheme participants

(1) For the purposes of counting the number of scheme participants in a managed investment scheme,—
- (a) joint holders of a managed investment product count as a single scheme participant; and
- (b) a managed investment product held on trust for a beneficiary is taken to be held by the beneficiary (rather than the trustee) if the beneficiary is presently entitled to a share of the trust estate or of the income of the trust estate or the beneficiary is, individually or together with other beneficiaries, in a position to control the trustee.
(2) The FMA may, in writing, determine that the total number of scheme participants in all of the schemes subject to the determination must be counted (as if they were 1 scheme) for the purposes of determining the number of scheme participants of any 1 of those schemes under this Part.

(3) The FMA must give written notice of the determination to the manager of each of the schemes.

Exclusion for quoted financial products

18A Exclusion for offers of financial products of same class as quoted financial products

(1) An offer of financial products does not require disclosure under Part 3 of this Act if—
- (a) the financial products are equity securities, debt securities, or managed investment products; and
- (b) the financial products are of the same class as quoted financial products that have been quoted on a licensed market at all times during the 3-month period before the time of the offer; and
- (c) trading in that class of financial products on the licensed market on which they are quoted was not suspended for more than a total of 5 days during the 3-month period referred to in paragraph (b); and
- (d) it is a term of the offer that the issuer will take any necessary steps to ensure that the financial products are, immediately after the issue or sale, quoted; and
- (e) the market rules of the licensed market on which the financial products are quoted contain continuous disclosure provisions.
(2) However, this clause does not apply to the financial products of an issuer if the FMA has made an order under section 456A in respect of the issuer.

Exclusions for derivatives

19 Exclusions for certain offers of derivatives

(1) An offer of a derivative for issue does not require disclosure under Part 3 of this Act if the person who offers the derivative is not a derivatives issuer.

(2) An offer of a derivative for sale does not require disclosure under Part 3 of this Act if the derivative was issued by a person who is not a derivatives issuer.

(3) An offer of a quoted derivative for issue or sale does not require disclosure under Part 3 of this Act if the derivative is issued by a participant in the licensed market on which the derivative is quoted.
(4) An offer of a derivative for issue or sale does not require disclosure under Part 3 of this Act if the derivative is—
- (a) ~~quoted~~ approved for trading on a prescribed overseas market; and
- (b) issued by a prescribed person.

Exclusion for registered banks

20 Offers of category 2 products or debt securities by registered banks

An offer of financial products does not require disclosure under Part 3 of this Act if the financial products are—
- (a) category 2 products issued by a registered bank; or
- (b) debt securities issued by a registered bank; or
- (c) category 2 products of a kind prescribed for the purposes of this paragraph that are issued by a subsidiary of a registered bank; or
- (d) prescribed currency forwards that are issued by a registered bank or a subsidiary of a registered bank.

Exclusion for the Crown, local authorities, etc

21 Offers by the Crown, local authorities, etc

(1) An offer of financial products does not require disclosure under Part 3 of this Act if the issuer of the financial products is—
- (a) the Crown; or
- (b) a local authority; or
- (c) the Board of Trustees of the National Provident Fund continued under the National Provident Fund Restructuring Act 1990; or
- (d) the Reserve Bank; or
- (e) Housing New Zealand Corporation established by the Housing Corporation Act 1974; or
- (f) the Maori Trustee, but in relation only to money constituted in the common fund of the Maori Trustee that is entitled to the protection against deficiency afforded by section 27 of the Maori Trustee Act 1953; and
- (g) Public Trust, but in relation only to money constituted in the common fund of Public Trust that is entitled to the protection against deficiency afforded by section 52 of the Public Trust Act 2001.
(2) An offer of an interest in the Government Superannuation Fund does not require disclosure under Part 3 of this Act.

Exclusion for retirement villages

22 Offers of interests in retirement villages

An offer of an interest in a retirement village does not require disclosure under Part 3 of this Act if the interest is exempted from requiring disclosure by section 107(1) of the Retirement Villages Act 2003.

Exclusion for renewals or variations

23 Offers of renewals or variations

An offer of a renewal or variation of the terms or conditions of a financial product does not require disclosure under Part 3 of this Act.

Exclusion for contributory mortgages

24 Offers of interests in contributory mortgages offered by solicitors lawyers

(1) An offer of an interest in a contributory mortgage by a ~~solicitor~~ lawyer does not require disclosure under Part 3 of this Act if—
- (a) the ~~solicitor~~ lawyer is not a mortgagor under the mortgage; and
- (b) the ~~solicitor~~ lawyer is not a person to whom or for whose benefit any money is lent in consideration for the mortgage given by the mortgagor; and
- (c) the ~~solicitor~~ lawyer complies, in relation to the offer, with—
  - (i) regulations made under section 115 of the Lawyers and Conveyancers Act 2006 (relating to trust accounts); and
  - (ii) rules made under section 96 of that Act (practice rules in relation to nominee companies).
(1A) For the purposes of subclause (1), an offer of an interest in a contributory mortgage by an incorporated law firm (within the meaning of section 6 of the Lawyers and Conveyancers Act 2006) must be treated as being made by the directors of that firm.
~~(2) In this clause, contributory mortgage means a mortgage of land that—~~
- ~~(a) secures money owing to a nominee company on behalf of 2 or more persons, whether or not the mortgage originally secured money owing to only 1 person; or~~
- ~~(b) has the same priority in respect of the land as another mortgage or mortgages of that land.~~
(2) In this clause, contributory mortgage means a mortgage of land (within the meaning of the Property Law Act 2007) that secures money owing to 2 or more persons or a nominee company on behalf of 2 or more persons, whether or not the mortgage originally secured money owing to only 1 person.

(3) For the purposes of the definition of contributory mortgage, money owing to ~~not more than 5~~ persons as joint tenants must be treated as being owed to 1 person.

Limited disclosure and other requirements

25 Purposes of clauses 26 to 28

The purposes of clauses 26 to 28 are to—
- (a) provide for limited disclosure and conditions to apply where, although PDS disclosure and governance requirements under Part 4 of this Act are not necessary, some disclosure and other requirements are necessary or desirable in order to promote the main purposes of this Act specified in section 3 or the additional purposes specified in section 4; and
- (b) prevent an exclusion from applying in inappropriate circumstances (having regard to whether the exclusion may cause significant detriment to retail investors).

26 Disclosure and other requirements

~~(1) This clause applies to a person (A) who offers financial products to another person (B) without disclosure under Part 3 of this Act in reliance upon—~~
- ~~(a) clause 6 (offers through licensed intermediaries); or~~
- ~~(b) clause 7 (offers through DIMS licensees); or~~
- ~~(c) clause 8 (offers under employee share purchase schemes); or~~
- ~~(d) clause 10 (offers of financial products under dividend reinvestment plan); or~~
- ~~(e) clause 11 (offers of financial products for no consideration); or~~
- ~~(f) clause 12 (small offers); or~~
- ~~(g) clause 15 (offers of controlling interest); or~~
- ~~(h) clause 16 (offers for small schemes); or~~
- ~~(i) clause 19 (offers of derivatives); or~~
- ~~(j) clause 20 (offers of category 2 products or debt securities by registered banks); or~~
- ~~(k) clause 21 (offers by the Crown, local authorities, etc); or~~
- ~~(l) clause 23 (offers of renewals or variations).~~
(1) This clause applies to a person (A) who offers financial products to another person (B) without disclosure under Part 3 of this Act in reliance upon any of clauses 4 to 24.
(2) A must ensure that—
- (a) B or a prescribed person is provided with a disclosure document that ~~contains, or is accompanied by, the prescribed information and documents (if any)~~ complies with subclause (3A); and
- (b) all other prescribed conditions (if any) are complied with (for example, restrictions on advertising and publicity, a requirement to keep records, or a requirement to provide information or documents to the Registrar or the FMA that relate to an offer).
(3) A must perform the duty under subclause (2)(a) in the prescribed manner.
(3A) The disclosure document under subclause (2)(a) must—
- (a) contain, or be accompanied by, the prescribed information and documents (if any); and
- (b) comply with all requirements of the regulations relating to the form and presentation of the document.
(4) Subclauses (2)(a) and (3) apply only if the regulations require a disclosure document to be provided.

(5) A contravention of this clause does not prevent the exclusion referred to in subclause (1) from continuing to apply (but may give rise to consequences under Part 7 of this Act).

27 Misleading or deceptiveFalse or misleading statements and omissions

(1) A person must not provide a disclosure document to a person under clause 26 if—
- (a) there is—
  - ~~(i) a statement in the disclosure document that is misleading or deceptive or is likely to mislead or deceive; or~~
  - (i) a statement in the disclosure document that is false or misleading or is likely to mislead; or
  - (ii) an omission from the disclosure document of information that is required to be contained in the disclosure document by the 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 clause, a statement about a future matter (including the doing of, or refusing 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) Subclause (2) does not limit the meaning of a reference to a misleading statement.

(4) This clause does not limit clause 26(2) ~~or (3)~~ to (3A).

(5) See section 489 (offence to knowingly or recklessly contravene this clause) and section 480 (which provides that a person may be treated as suffering loss or damage in the case of a contravention of this clause).

28 Regulations may prevent exclusions from applying in inappropriate circumstances

(1) An exclusion under any of clauses ~~8, 11 to 16, and 23~~ 4 to 24 does not apply—
- (a) in the circumstances prescribed by regulations made under this clause; or
- (b) if any additional requirements prescribed by regulations made under this clause are not satisfied.
(2) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with subclause (3), make regulations—
- (a) prescribing circumstances in which an exclusion referred to in subclause (1) does not apply:
- (b) prescribing additional requirements that must be satisfied before an exclusion referred to in subclause (1) may apply:
- (c) prescribing transitional and savings provisions in connection with any regulations made under paragraph (a) or (b).
(3) The Minister must, before making a recommendation under subclause (2),—
- (a) consult with the FMA; and
- (b) be satisfied that the regulations are needed in order to prevent an exclusion referred to in subclause (1) from applying in inappropriate circumstances, having regard to whether the exclusion may, in relation to particular financial products, cause significant detriment to ~~subscribers for~~ persons who may acquire those products who are retail investors.

Part 2
Which offers of financial products for sale require disclosure

29 Application of this Part

(1) Clauses 30 to 33 specify when an offer of financial products for sale requires disclosure under Part 3 of this Act.

(2) ~~However,~~ Despite subclause (1), an offer of financial products for sale does not require such disclosure if an exclusion under Part 1 of this schedule applies to the ~~sale~~ offer of financial products for sale.

(3) An offer of financial products for sale may also require disclosure under Part 3 of this Act as a result of a declaration under section 533(1)(da).

30 Sale where financial products issued with view to original subscriber holder dealing with products

(1) An offer of financial products for sale requires disclosure under Part 3 of this Act if—
- (a) the issuer issued the financial products with a view to the original ~~subscriber~~ holder dealing with the products; and
- (b) the offer of the financial products for sale is made within 12 months after the date on which the financial products were issued; and
- (c) the financial products have not previously been offered for issue or sale under—
  - (i) a regulated offer; or
  - (ii) an offer outside New Zealand under an application regime under subpart 6 of Part 8 of this Act.
(2) An offer of financial products for sale to a person outside New Zealand requires disclosure under Part 3 of this Act if—
- (a) section 37 (when PDS must be given) applies to the products under section 549; and
- (b) the issuer issued the financial products with a view to the financial products being offered for sale outside New Zealand in circumstances in which an application regime under subpart 6 of Part 8 of this Act would have applied to the products; and
- (c) the offer of the financial products for sale is made within 12 months after the date on which the financial products were issued; and
- (d) the financial products have not previously been offered for issue or sale under a regulated offer or outside New Zealand under an application regime under subpart 6 of Part 8 of this Act.
(3) Financial products must be taken to be issued with the view referred to in subclause (1)(a) or (2)(b) if there are reasonable grounds for concluding that the products were issued with the view (whether or not there may have been other reasons or purposes for the issue).

(4) In this clause,—

dealing with the products means selling or transferring the financial products, or granting, issuing, or transferring interests in, or options over, the financial products

original ~~subscriber~~ holder means the person to whom the financial products were issued.

Compare: 1978 No 103 s 6(2), (2AA); Corporations Act 2001 s 707(3), (4) (Aust)

31 Sale where issuer advises, encourages, or knowingly assists offeror

(1) An offer of financial products for sale requires disclosure under Part 3 of this Act if either—
- (a) the issuer advises, encourages, or knowingly assists the offeror in connection with the offer of the financial products; or
- (b) the issuer is the offeror.
(2) However, subclause (1) does not apply—
- (a) if the offer of the financial products is made only to persons who, at the time of the offer, are holders of financial products of the issuer under terms of ~~the constitution of the issuer~~ a relevant instrument that require the offer to be made to those persons; or
- (b) to an offer of quoted financial products for sale; or
- (c) to an offer of financial products for sale through a facility that is described in section 307(2)(b).
(3) In subclause (2)(a), relevant instrument, in relation to an offer of financial products, means—
- (a) the constitution of the issuer; or
- (b) a pre-emptive rights agreement between all of the product holders of the class of financial products under offer.
Compare: 1978 No 103 s 6(2A), (3)

32 Off-market sale by controller

An offer of financial products for sale requires disclosure under Part 3 of this Act if—
- (a) the offeror controls the issuer; and
- (b) either—
  - (i) the financial products are not quoted; or
  - (ii) although the financial products are quoted, the products are not offered for sale in the ordinary course of trading on a licensed market.
Compare: Corporations Act 2001 s 707(2) (Aust)

33 Sale amounting to indirect off-market sale by controller

(1) An offer of financial products for sale requires disclosure under Part 3 of this Act if—
- (a) the offer of the financial products is made within 12 months after the date on which the products were sold by a person who controlled the issuer (the controller) at the time of the sale; and
- (b) the controller sold the financial products with a view to the purchaser dealing with the products; and
- (c) at the time of the sale by the controller, either—
  - (i) the financial products were not quoted; or
  - (ii) although the financial products were quoted, those products were not offered for sale in the ordinary course of trading on a licensed market; and
- (d) the controller sold the financial products otherwise than under a regulated offer.
(2) Financial products must be taken to be sold with the view referred to in subclause (1)(b) if there are reasonable grounds for concluding that the products were sold with that view (whether or not there may have been other reasons or purposes for the sale).

(3) In this clause,—

dealing with the products means selling or transferring the financial products, or granting, issuing, or transferring interests in, or options over, the financial products

purchaser means the person to whom the financial products were sold by the controller.

Compare: Corporations Act 2001 s 707(5), (6) (Aust)

Part 3
Definitions and certificates for exclusions for offers and services

Definitions relating to wholesale investor and retail investor

33A Meaning of retail investor and retail service

(1) A person is a retail investor, in relation to an offer of financial products or the provision of a market service, if the person is not a wholesale investor in relation to the offer or service.
(2) A service is a retail service if that service is provided—
- (a) to a retail investor; or
- (b) to a class of investors where there is at least 1 retail investor in that class.

33B Meaning of wholesale investor

A person is a wholesale investor,—
- (a) in relation to an offer of financial products, when the person is a wholesale investor under the definition of that term in clause 3; or
- (b) in relation to the provision of a market service, if—
  - (i) the person is an investment business (see clause 35); or
  - (ii) the person meets the investment activity criteria specified in clause 36; or
  - (iii) the person is large (see clause 37); or
  - (iv) the person is a government agency (see clause 38); or
  - (v) the person is an eligible investor (see clause 39).

34 Meaning of retail investor and definitions of certain other terms

~~(1) A person is a retail investor, in relation to a transaction, if the person is not a wholesale investor in relation to the transaction.~~

~~(2) See clause 3 for the definition of wholesale investor.~~
~~(3) In this schedule,—~~

~~control has the meaning set out in clause 47~~
~~relevant person, in relation to—~~
- ~~(a) an offer of financial products, means the offeror:~~
- ~~(b) a prescribed transaction, means the person prescribed for the purposes of this definition~~
~~relevant time, in relation to—~~
- ~~(a) a certificate given under clause 42, means immediately before the certificate is given (see clause 42(4)):~~
- ~~(b) an offer of financial products to a person in any other case, means immediately before financial products are issued or transferred to the person under the offer:~~
- ~~(c) a prescribed transaction in any other case, means the time prescribed for the purposes of this definition.~~
~~transaction means—~~
- ~~(a) an offer of financial products for issue or sale; or~~
- ~~(b) any other prescribed transaction involving any dealing in financial products or any supply of market services.~~

35 Investment businesses

(1) A person is an investment business if the person is—
- (a) an entity whose principal business consists of 1 or more of the following:
  - (i) investing in financial products; or
  - (ia) acting as an underwriter; or
  - (ii) providing any of the financial services referred to in section 5(1)(a), (d), or (k) of the Financial Service Providers (Registration and Dispute Resolution) Act 2008; or
- (b) a registered bank; or
- (c) a deposit taker (within the meaning of section 157C of the Reserve Bank of New Zealand Act 1989); or
- (d) a licensed insurer (within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2010); or
- (e) a manager of a registered scheme, or a discretionary investment management service, that holds a market services licence; or
- (f) a derivatives issuer that holds a market services licence; or
- (g) a QFE or an authorised financial adviser.
(2) Subclause (1)(a) does not apply to an entity if the entity was established or acquired with a view to using it as an entity to which offers of financial products may be made in reliance upon the exclusion in clause 3.

(3) Subclause (2) does not limit clause 9.

36 Investment activity criteria

(1) A person (A) meets the investment activity criteria for the purposes of clause 3(2)(b) or clause 33B(b)(ii) if ~~2 or more~~ at least 1 of the following paragraphs ~~apply~~ applies:
- (a) A owns, or at any time during the 2-year period before the relevant time has owned, a portfolio of specified financial products of a value of at least $1 million (in aggregate):
- (b) A has, during the 2-year period before the relevant time, carried out 10 or more separate transactions to acquire specified financial products where the price under each of those transactions is at least $20,000 and the person who is disposing of the specified financial products is not an associated person of A:
- (c) A has, during the 2-year period before the relevant time, carried out 5 or more separate transactions to acquire specified financial products where the price under each of those transactions is at least $100,000 and the person who is disposing of the specified financial products is not an associated person of A:
- (d) A has net assets of at least $2 million as at the last day of A's most recently completed financial year before the relevant time or an annual gross income of at least $200,000 for each of A's 2 most recently completed financial years before the relevant time:
- (b) A has, during the 2-year period before the relevant time, carried out 1 or more transactions to acquire specified financial products where the amount payable under those transactions (in aggregate) is at least $1 million and the other parties to the transactions are not associated persons of A:
- (e) A is an individual who has, within the last 10 years before the relevant time, been employed or engaged in an investment business and has, for at least ~~1 year~~ 2 years during that 10-year period, participated to a material extent in the investment decisions made by the investment business.
(2) For the purposes of—
- (a) subclause (1)(a), in determining the specified financial products owned by A, the specified financial products owned by an entity controlled by A may be treated as being owned by A:
- (b) subclause (1)(b) ~~and (c)~~, in determining the transactions carried out by A, transactions carried out by an entity controlled by A may be treated as carried out by A:
- (c) subclause (1)(d), in determining the net assets or annual gross income of A, the net assets or annual gross income of an entity controlled by A may be included in the net assets or annual gross income of A.
- (c) applying subclause (1)(a) and (b) in relation to derivatives, the value of a derivative or the amount payable under a transaction to acquire a derivative must be treated as being the notional value of the derivative divided by 10 (see clause 48).
~~(3) A particular transaction may be taken into account for the purposes of subclause (1)(b) or (c) but not for the purposes of both of those paragraphs.~~

(4) The frameworks and methodologies prescribed by the FMA under subpart 4 of Part 8 of this Act for the purposes of this clause (if any) must be complied with when determining whether any of the paragraphs of subclause (1) are satisfied.
~~(5) The frameworks or methodologies may, without limitation,—~~
- ~~(a) include requirements relating to how financial products, transactions, prices, net assets, or gross income are to be determined, calculated, or valued:~~
- ~~(b) provide for assets, liabilities, or income to be included or disregarded (in whole or in part) for the purposes of paragraph (a).~~
(6) In this clause, specified financial products, in relation to A, means financial products other than—
- (a) category 2 products:
- (b) interests in a KiwiSaver scheme or a superannuation scheme:
- (c) financial products issued by an associated person of A.

37 Meaning of large

(1) A person is large if at least 1 of the following paragraphs ~~apply~~ applies:
- (a) as at the last day of each of the relevant periods, the ~~total assets (including intangible assets)~~ net assets of the person and the entities controlled by the person exceeded ~~$10 million~~ $5 million:
- (b) in each of the relevant periods ~~or in the last 24 months before the relevant time~~, the total consolidated turnover of the person and the entities controlled by the person exceeded ~~$20 million~~ $5 million.
(2) The frameworks and methodologies prescribed by the FMA under subpart 4 of Part 8 of this Act for the purposes of this clause (if any) must be complied with when determining whether either of the paragraphs of subclause (1) is satisfied.
~~(3) The frameworks or methodologies may, without limitation,—~~
- ~~(a) include requirements relating to how total assets or turnover are to be determined, calculated, or valued:~~
- ~~(b) provide for assets or revenue to be included or disregarded (in whole or in part) for the purposes of paragraph (a).~~
(4) In this clause, relevant periods, in relation to—
- (a) a certificate given under clause 42, means the 2 most recently completed financial years of the person giving the certificate immediately before the certificate is given:
- (b) an offer of financial products to a person in any other case, means the 2 most recently completed financial years of the person immediately before financial products are issued or transferred to the person under the offer:
- (ba) the provision of a discretionary investment management service, means the 2 most recently completed financial years of the person immediately before the investment authority for the service is granted by the person:
- (c) a prescribed transaction in any other case, means the periods prescribed for the purposes of this definition.

38 Definition of government agency

A government agency is any of the following:
- (a) a government department named in Schedule 1 of the State Sector Act 1988:
- (b) a Crown entity under section 7 of the Crown Entities Act 2004:
- (c) a local authority:
- (d) a State enterprise (within the meaning of section 2 of the State-Owned Enterprises Act 1986):
- (e) the Reserve Bank:
- (f) the Board of Trustees of the National Provident Fund continued under the National Provident Fund Restructuring Act 1990 (and a company appointed under clause 3(1)(b) of Schedule 4 of that Act).

39 Eligible investors

(1) A person (A) is an eligible investor, in relation to a prescribed transaction or class of prescribed transactions, if—
- (a) A certifies in writing, before the relevant time,—
  - (i) as to the matters specified in subclause (2) or (3) (as the case may be); and
  - (ii) that A understands the consequences of certifying himself, herself, or itself to be an eligible investor; and
- (b) A states in the certificate the grounds for this certification; and
- (c) an authorised financial adviser, a chartered accountant, or a ~~solicitor~~ lawyer signs a written confirmation of the certification in accordance with clause 41.
(2) In relation to an offer of financial products or any other transaction involving a dealing in financial products (or a class of those transactions), A must certify that A has previous experience in acquiring or disposing of financial products that allows A to assess—
- (a) the merits of the transaction or class of transactions (including assessing the value of the financial products involved); and
- (b) A's own information needs in relation to the transaction or those transactions; and
- (c) the adequacy of the information provided by any person involved in the transaction or those transactions.
(3) In relation to a transaction involving the ~~supply~~ provision of market services (or a class of those transactions), A must certify that A has previous experience in acquiring or disposing of financial products that allows A to assess—
- (a) the merits of the transaction or class of transactions; and
- (b) the merits of the service or services to be provided; and
- (c) A's own information needs in relation to the transaction or those transactions; and
- (d) the adequacy of the information provided by any person involved in the transaction or those transactions.
(4) The certification must specify the prescribed transaction or class of prescribed transactions to which it applies.

40 Offeror may not rely on eligible investor certificate in certain circumstances

~~(1) Clause 39 does not apply to an offer of financial products or any other transaction if the offeror or other relevant person, before the relevant time,—~~
- ~~(a) knew that A did not in fact have previous experience of the kind referred to in clause 39(2) or (3) (as the case may be); or~~
- ~~(b) had reasonable grounds to believe that the certification was incorrect.~~
(1) Clause 39 does not apply to an offer of financial products, the provision of a market service, or any other prescribed transaction if the offeror or other relevant person, before the relevant time, knew that A did not in fact have previous experience of the kind referred to in clause 39(2) or (3) (as the case may be).

(2) Clause 39 does not apply to an offer of financial products or any other transaction if the authorised financial adviser, chartered accountant, or solicitor referred to in clause 39(1)(c) is an associated person of the offeror or other relevant person.
(2) Clause 39 does not apply to an offer of financial products, the provision of a market service, or any other prescribed transaction if the offeror or other relevant person knew, or had reasonable grounds to believe, that the authorised financial adviser, chartered accountant, or lawyer referred to in clause 39(1)(c)—
- (a) was an associated person of the offeror, provider, or other relevant person; or
- (b) had, within the 2 years immediately before the relevant time,—
  - (i) provided professional services to the offeror, provider, or other relevant person, or a related body corporate of the offeror, provider, or relevant person; or
  - (ii) a continuing business relationship with the offeror, provider, or other relevant person or a related body corporate of the offeror, provider, or relevant person.
(3) Clause 39 does not apply to an offer of financial products, the provision of a market service, or any other prescribed transaction if the certificate was given more than 2 years before the relevant time.

41 Confirmation of certification

(1) An authorised financial adviser, a chartered accountant, or a ~~solicitor~~ lawyer (A) must not confirm a certification of a person (B) under clause 39 unless A, having considered B's grounds for the certification,—
- (a) is satisfied that B has been sufficiently advised of the consequences of the certification; and
- (b) has no reason to believe that the certification is incorrect or that further information or investigation is required as to whether or not the certification is correct.
(2) ~~The person who confirms the certification of a person~~A may be the financial adviser, chartered accountant, or ~~solicitor~~ lawyer of ~~the person~~ B (but does not need to be).

42 Safe harbour if certificate given

(1) The purpose of this clause is to provide certainty to an offeror (or other relevant person) that a person is a wholesale investor of the kind referred to in clause 3(2) (subject to clauses 43 to 45).
(1) The purpose of this clause is to provide certainty (subject to clauses 43 to 45) to—
- (a) an offeror (or other relevant person) that a person is a wholesale investor of the kind referred to in clause 3(2); or
- (b) a provider (or other relevant person) that a person is a wholesale investor of the kind referred to in clause 33B(b).
(2) A person (A) must be treated as being a wholesale investor if A—
- (a) certifies in writing that A—
  - (i) is a wholesale investor within the meaning of clause 3(2) or 33B(b); and
  - (ii) understands the consequences of certifying himself, herself, or itself to be a wholesale investor; and
- (b) states in the certificate—
  - (i) the paragraph in clause 3(2) or 33B(b) that is claimed to apply to A; and
  - (ii) the grounds on which A claims that the paragraph applies; and
- (c) gives a copy of the certificate to the offeror, provider, or other relevant person.
(3) A certificate under this clause ceases to be effective on the date that is 2 years after the date on which it was given.

(4) If A is giving a certificate under this clause on the basis of meeting the investment activity criteria under clause 36, or of being large under clause 37, the relevant time for the purposes of the application of those clauses is immediately before the certificate is given.

43 Offeror or provider may not rely on safe harbour certificate that was given more than 2 years before offer or provision of service

Clause 42(2) does not apply to an offer of financial products, the provision of a market service, or other prescribed transaction if the certificate was given more than 2 years before the time that the offer is made, the service was provided, or the transaction is entered into (as the case may be).

44 Offeror or provider may not rely on safe harbour certificate if knew that A was not in fact wholesale investor

~~(1) Clause 42(2) does not apply to an offer of financial products to A if the offeror, before the financial products are issued or transferred to A under the offer,—~~
- ~~(a) knew that A was not in fact a wholesale investor within the meaning of clause 3(2) at the time the certificate was given; or~~
- ~~(b) had reasonable grounds to believe that the certification was incorrect.~~
(1) Clause 42(2) does not apply to an offer of financial products to A if the offeror, before the financial products are issued or transferred to A under the offer, knew that A was not in fact a wholesale investor within the meaning of clause 3(2) at the time the certificate was given.
~~(2) Clause 42(2) does not apply to any transaction (other than an offer of financial products) entered into with A if the relevant person, before the transaction is entered into,—~~
- ~~(a) knew that A was not in fact a wholesale investor within the meaning of clause 3(2) at the time the certificate was given; or~~
- ~~(b) had reasonable grounds to believe that the certification was incorrect.~~
(2) Clause 42(2) does not apply to the provision of a market service to A if the provider, before the investment authority is exercised under the service, knew that A was not in fact a wholesale investor within the meaning of clause 33B(b) at the time the certificate was given.

(3) Clause 42(2) does not apply to any other prescribed transaction entered into with A if the relevant person, before the transaction is entered into, knew that A was not in fact a wholesale investor within the meaning of clause 3(2) or 33B(b) at the time the certificate was given.

45 Other provisions relating to certificates

(1) A certificate under clause 39 or 42 is effective only if the certificate is—
- (a) in a separate written document; and
- (b) in the prescribed form (if any); and
- (c) contains the prescribed information (if any).
(2) If a person gives written notice to an offeror, provider, or other relevant person that the certificate under clause 39 or 42 is revoked, the offeror, provider, or relevant person may not rely on the certificate in respect of any subsequent offer, service, or transaction.

46 Offences relating to certificates

(1) Every person commits an offence who gives a certificate under clause 39 or 42 knowing that it is false or misleading in a material particular.

(2) Every person (A) commits an offence who incites, counsels, or procures any person to give a certificate under clause 39 or 42 that A knows is false or misleading in a material particular.

(3) Every person who commits an offence under this clause is liable, on ~~summary~~ conviction, to a fine not exceeding $50,000.

Control and other definitions for schedule

47 Meaning of control in this schedule

~~(1) In this schedule, a person controls an entity if the person has the capacity to determine the outcome of decisions about the entity's financial and operating policies.~~
(1) In this schedule, a person controls an entity if the person—
- (a) is the entity's holding company (within the meaning of section 5 of the Companies Act 1993); or
- (b) has the capacity to determine the outcome of decisions about the entity's financial and operating policies.
(2) In determining whether the person has ~~this capacity~~ the capacity referred to in subclause (1)(b),—
- (a) the practical influence the person can exert (rather than the rights the person can enforce) is the issue to be considered; and
- (b) any practice or pattern of behaviour affecting the entity's financial or operating policies must be taken into account (even if it involves a breach of an agreement or a breach of trust).
(3) The person does not control the entity by virtue of subclause (1)(b) merely because the person and another person jointly have the capacity to determine the outcome of decisions about the entity's financial and operating policies.

Compare: Corporations Act 2001 s 50AA (Aust)

48 Other definitions for schedule

(1) In this schedule,—

notional value, in relation to a derivative, means the face value or the notional amount in respect of the derivative as at the date on which the relevant agreement is entered into by the parties (see subclause (2))
prescribed transaction means—
- (a) an offer of financial products for issue or sale; or
- (b) the provision of a discretionary investment management service; or
- (c) any other prescribed transaction involving any dealing in financial products or any supply of market services
relevant person, in relation to—
- (a) an offer of financial products, means the offeror:
- (b) the provision of a discretionary investment management service, means the provider:
- (c) a prescribed transaction, means the person prescribed for the purposes of this definition
relevant time, in relation to—
- (a) a certificate given under clause 42, means immediately before the certificate is given (see clause 42(4)):
- (b) an offer of financial products to a person in any other case, means immediately before financial products are issued or transferred to the person under the offer:
- (c) the provision of a discretionary investment management service to a person in any other case, means immediately before the investment authority for the service is granted:
- (d) a prescribed transaction in any other case, means the time prescribed for the purposes of this definition.
(2) For the purposes of determining the notional value of a derivative under this schedule, the frameworks and methodologies prescribed by the FMA under subpart 4 of Part 8 of this Act for the purposes of this subclause (if any) must be complied with.

~~s 6~~ ss 6, 563A

Register of offers of financial products

1 Register of offers of financial products

A register called the register of offers of financial products is established.

Compare: 1978 No 103 s 43N

2 Purposes of register

The purposes of the register of offers of financial products are—
- (a) to give public notice of offers of financial products; and
- (b) to enable any person to—
  - (i) obtain information contained in, or concerning, product disclosure statements; and
  - (ii) obtain other information about, or copies of documents relating to, offers of financial products; and
  - (iii) compare information about offers of financial products; and
- (c) to assist any person to decide whether or not to ~~subscribe for~~ acquire financial products under an offer of financial products; and
- (d) to assist any person to perform a financial adviser service (within the meaning of the Financial Advisers Act 2008) or to otherwise comment on an offer of financial products; and
- (e) to assist any person—
  - (i) in the exercise of the person's powers under this Act or any other enactment; or
  - (ii) in the performance of the person's functions or duties under this Act or any other enactment.
Compare: 1978 No 103 s 43O

3 Contents of register

(1) The register of offers of financial products must contain all of the following information and documents, to the extent that the information or documents are relevant, for each regulated offer:
- (a) the name of the issuer and the issuer's financial service provider number (if any):
- (b) in the case of a sale offer, the name of the offeror and the offeror's financial service provider number (if any):
- (c) the name of any supervisor and the supervisor's financial service provider number (if any):
- (ca) a copy of the PDS:
- (d) the name of the offer that is specified in the PDS and the offer number given by the Registrar on lodgement of the PDS:
- (e) the kind of financial product or products being offered (for example, an equity security, a debt security, a managed investment product, or a derivative):
- (f) the date of the PDS:
- (g) the status of the PDS (being a status that is determined and described in the prescribed manner):
- (h) any other prescribed information or documents.
~~(2) However, a register entry for a regulated offer is not required in the prescribed circumstances.~~

(3) The register must contain any other prescribed information and documents (whether or not relating to a regulated offer).

(4) In this clause, 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.

Register of managed investment schemes

4 Register of managed investment schemes

A register called the register of managed investment schemes is established.

5 Purposes of register

The purposes of the register of managed investment schemes are—
- (a) to give public notice of the registration of managed investment schemes; and
- (b) to enable any person to—
  - (i) obtain information about, and copies of documents relating to, registered schemes; and
  - (ii) know how to contact the managers and supervisors of registered schemes; and
- (c) to assist any person—
  - (i) in the exercise of the person's powers under this Act or any other enactment; or
  - (ii) in the performance of the person's functions or duties under this Act or any other enactment.

6 Contents of register

(1) The register of managed investment schemes must contain all of the following information and documents, to the extent that the information or documents are relevant, for each scheme:
- (a) the name of the scheme:
- (b) what type of scheme it is (if any) (for example, whether it is a KiwiSaver scheme or a superannuation scheme or other prescribed type of scheme):
- (c) whether the scheme is a restricted scheme or a complying superannuation fund or a default KiwiSaver scheme:
- (d) the names of each person who is a licensed manager or licensed supervisor of the scheme and an address for service in each case:
- (e) for a restricted scheme, the name of the licensed independent trustee:
- (f) any other prescribed information and documents.
(2) However, the register of managed investment schemes is not required to contain information or documents in the prescribed circumstances.

7 Registration decisions by FMA

The Registrar must make the appropriate entry in the register of managed investment schemes (or not enter a matter in the register) in accordance with any direction made by the FMA that a scheme be registered or is not entitled to be registered, or otherwise made by the FMA in the exercise of any other discretion under Part 4 relating to, or affecting, the register.

Keeping of registers under this schedule

8 Registrar may keep other registers

The Registrar may keep any other registers that he or she considers necessary for the purposes of this Act.

9 Registers to be kept by Registrar

Each register established under this schedule (the register) must be kept by the Registrar in accordance with this schedule and the regulations.

10 Operation of and access to registers

(1) The register may be—
- (a) an electronic register; or
- (b) kept in any other manner that the Registrar thinks fit.
(2) The register must be operated at all times unless—
- (a) the Registrar suspends the operation of the register, in whole or in part, in accordance with subclause (3); or
- (b) otherwise provided in regulations.
(3) The Registrar may refuse access to the register or otherwise suspend the operation of the register, in whole or in part, if the Registrar considers that it is not practical to provide access to the register.

11 Amendments to registers

(1) The Registrar may amend the register if—
- (a) an issuer or the FMA informs the Registrar of information that is different from the information entered on the register; or
- (b) the Registrar is satisfied at any time that the register contains a typographical error or a mistake, or omits information supplied to the Registrar.
(2) The Registrar must amend the register if the regulations require the Registrar to do so in circumstances specified by the regulations.

Compare: 1978 No 103 s 43R

12 Search of register

(1) A person may search the register in accordance with this Act or the regulations.

(2) The register may be searched only by reference to the contents of the register required by this schedule or any other prescribed criteria.
(3) A search of the register may be carried out only by the following persons for the following purposes:
- (a) a person, for a purpose referred to in clause 2 or 5 or, in the case of a register kept under clause 8, a prescribed purpose:
- (b) a person, for the purpose of advising another person in connection with any of the purposes referred to in this clause:
- (c) an individual, or a person with the consent of the individual, for the purpose of searching for information about that individual.
(4) A person who searches the register for personal information in breach of this clause must be treated, for the purposes of Part 8 of the Privacy Act 1993, as having breached an information privacy principle under section 66(1)(a)(i) of that Act.

Compare: 1978 No 103 s 43S

Miscellaneous

13 Lodging or giving documents or otherwise notifying Registrar

(1) If this Act requires a document or notification to be lodged with or given to the Registrar, the document or notification must be lodged or given in the manner specified by the Registrar (who, for example, may specify a form to be used or require notification by electronic means, or may specify any of the matters referred to in section 522(1)(i)(i) to (iv)).

(2) The Registrar may refuse to perform or exercise a function, power, or duty in relation to the document or notification if subclause (1) is not complied with.

14 Certificate of lodgement or registration

(1) The Registrar must, on the lodgement of a PDS, give a certificate of the lodgement (and the certificate is conclusive evidence that the PDS has been lodged).

(2) The Registrar must, on the registration of a managed investment scheme, give a certificate of the registration (and the certificate is conclusive evidence that the scheme has been registered).

(3) The certificate must, in the case of a PDS, specify an offer number for the regulated offer.

Compare: 1978 No 103 s 42(3), (4)

15 When documents are lodged

A document is lodged when—
- (a) the document itself is constituted as part of the register; or
- (b) particulars of the document are entered in the register.

16 Registrar may give notice of lodgement or notification

(1) If a document or notification is lodged with or given to the Registrar under this Act, the Registrar may, in any manner that the Registrar thinks fit, give notice of the lodgement or notification to any person or class of persons or to the public generally.

(2) The Registrar may, in any manner that the Registrar thinks fit, give notice to any person or class of persons or to the public generally of any changes in the information kept in a register.

17 Certified copy of information on register

(1) The Registrar must provide a copy, or a certified copy, of any information on a register to any person who applies for it and pays the prescribed fee (if any).

(2) A certified copy of information on a register purporting to be signed by the Registrar is conclusive evidence for all purposes that the information in the certified copy has been duly entered in the register.

18 Power of Registrar to delegate

(1) The Registrar may delegate to any person, either generally or particularly, any of the Registrar's functions, duties, and powers under this Act except the power of delegation.
(2) A delegation—
- (a) must be in writing; and
- (b) may be made subject to any restrictions and conditions the Registrar thinks fit; and
- (c) is revocable at any time, in writing; and
- (d) does not prevent the performance or exercise of a function, duty, or power by the Registrar.
(3) A person to whom any functions, duties, or powers are delegated may perform and exercise them in the same manner and with the same effect as if they had been conferred directly by this Act and not by delegation.

(4) A person who appears to act under a delegation is presumed to be acting in accordance with the terms of the delegation in the absence of evidence to the contrary.

s 6(1)

1 Purpose of schedule

The purpose of this schedule is to provide for the statutory recognition of single person self-managed superannuation schemes.

2 Approval of Schedule 3 schemes

The FMA may, by written notice to the trustees of a scheme,—
- (a) approve the scheme as a Schedule 3 scheme if it is satisfied the scheme meets the approval criteria set out in clause 3:
- (b) withdraw an approval of the scheme if—
  - (i) it is no longer satisfied that the scheme meets those approval criteria; or
  - (ii) the trustees have contravened the obligations relating to the scheme under this schedule.

3 Criteria for approving Schedule 3 schemes

(1) A scheme may be approved as a Schedule 3 scheme if—
- (a) the scheme meets the following requirements:
  - (i) it is a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law; and
  - (ii) its purpose is to provide retirement benefits to the scheme participant; and
  - (iii) participation is restricted to persons who meet the New Zealand criteria set out in subclause (2); and
- (b) the scheme has only 1 scheme participant who is an individual; and
- (c) the scheme participant is either a trustee, or a director of a sole corporate trustee, of the scheme.
(2) The New Zealand criteria are that the person, at the time of becoming a participant,—
- (a) is, or normally is, living in New Zealand, or is an employee of the State services (within the meaning of the State Sector Act 1988) who is—
  - (i) serving outside New Zealand; and
  - (ii) employed on New Zealand terms and conditions; and
  - (iii) serving in a jurisdiction where offers of superannuation scheme membership are lawful; and
- (b) is a New Zealand citizen or is entitled, in terms of the Immigration Act 2009, to be in New Zealand indefinitely.

4 Procedure for exercising powers

The FMA must not exercise a power under clause 2(b) unless—
- (a) the FMA gives the trustees no less than 10 working days' written notice of the following matters before it exercises the power:
  - (i) that the FMA may exercise the power; and
  - (ii) the reasons why it may exercise the power; and
- (b) the FMA gives the trustees or the trustees' representative an opportunity to make written submissions on the matter within that notice period.

5 Notice requirements

(1) The notice under clause 2(b) must—
- (a) state the FMA's reasons for giving the notice; and
- (b) specify the date on which the withdrawal of the approval takes effect.
(2) The FMA must give a copy of the notice to every prescribed person.

6 Reporting obligations for approved Schedule 3 schemes

The trustees of an approved Schedule 3 scheme must,—
- (a) if the scheme is a defined benefit scheme within the meaning of section 155(1)(a), comply with that section as if they were the manager of the scheme; and
- (b) at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, prepare and provide to the FMA reports that contain the documents, information, or other matters that are required to be provided by the regulations.

s 669

Part 1
Amendments to Acts

Accident Compensation Act 2001 (2001 No 49)

Section 11(1)(g): omit “a superannuation scheme or pension fund not registered under the Superannuation Schemes Act 1989” and substitute “a retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011) or pension fund that is not such a retirement scheme”.

Section 11(1)(g): repeal and substitute:

“(g) any pension from a superannuation scheme, or pension fund, that is not a retirement scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011) nor a superannuation scheme registered under the Superannuation Schemes Act 1989; or”.

Section 321(5)(b): omit “registered superannuation scheme” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Airport Authorities Act 1966 (1966 No 51)

Definitions of debt security and equity security in section 2: repeal and substitute:

“debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011

“equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (2009 No 35)

Section 5: insert in their appropriate alphabetical order:

“KiwiSaver scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“superannuation scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011”.

Paragraph (b)(ii) of the definition of facility in section 5: repeal and substitute:

“(ii) membership of a superannuation scheme or KiwiSaver scheme:”.

Paragraph (c) of the definition of facility holder in section 5: repeal and substitute:

“(c) if that facility consists of membership of a superannuation scheme or KiwiSaver scheme, means the product holder of the managed investment product in the scheme (within the meanings of product holder and managed investment product in section 6(1) of the Financial Markets Conduct Act 2011)”.

Section 18(2)(a): repeal and substitute:

“(a) a company that is a listed issuer (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011):”.

Section 48(b)(vi) and (vii): repeal and substitute:

“(vi) the Financial Markets Conduct Act 2011.”

Section 137(4) and (5): omit “Securities Act 1978, the Securities Markets Act 1988” and substitute in each case “Financial Markets Conduct Act 2011”.

Section 140(2)(k) and (l): repeal and substitute:

“(k) the Financial Markets Conduct Act 2011:”.

Armed Forces Canteens Act 1948 (1948 No 51)

Section 15A(1): omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Auditor Regulation Act 2011 (2011 No 21)

Definition of director in section 6(1): omit “section 2 of the Securities Act 1978” and substitute “section 6(1) of the Financial Markets Conduct Act 2011”.

Paragraph (b) of the definition of issuer audit in section 6(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Bank of New Zealand Officers' Provident Association Act 1971 (1971 No 3 (P))

Insert after section 9:

“9A Application of Financial Markets Conduct Act 2011

~~For the purposes of the Financial Markets Conduct Act 2011,—~~ The Financial Markets Conduct Act 2011 applies to the Association as follows:

“(a) the Association must be treated as if it were a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law for the purposes of section 115(1)(a) and as a defined benefit scheme for the purposes of section 115(1)(f) and otherwise for that Act; and

“(b) this Act and the rules of the Association must be treated as if they were the trust deed of the scheme; and

“(c) the members of the Board of Management of the Association must be treated as if they were the trustees of the scheme.; and

“(d) accordingly, to avoid doubt, on and after its registration under clause 20 of Schedule 5 as a restricted scheme, the Association may be the custodian of the scheme under section 143(2)(a).”

Building Act 2004 (2004 No 72)

Clause 2(2)(b) of Schedule 3: omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Building Societies Act 1965 (1965 No 22)

Definition of debt security in section 2(1): repeal and substitute:

“debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Definition of participatory security in section 2(1): repeal.

Section 113I(1) and (2): omit “debt or participatory securities” and substitute in each case “debt securities”.

Section 113J(1), (2), and (3)(b): omit “debt or participatory securities” in each place where it appears and substitute in each case “debt securities”.

Charities Act 2005 (2005 No 39)

Section 16(2)(d): omit “Securities Act 1978, the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Chartered Professional Engineers of New Zealand Act 2002 (2002 No 17)

Clause 2(b) of Schedule 1: omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Children's Commissioner Act 2003 (2003 No 121)

Clause 6(1) of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Commerce Act 1986 (1986 No 5)

Section 10(5): omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Companies Act 1993 (1993 No 105)

Definition of securities in section 2(1): repeal.

Section 2(1): insert in their appropriate alphabetical order:

“financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011

“licensed market has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“listed issuer has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“stock exchange means—

“(a) a licensed market; or

“(b) a financial product market that is authorised to operate in an overseas jurisdiction in accordance with the laws of that jurisdiction”.

Section 40: omit “securities” and substitute “financial products”.

Section 46: omit “securities” and substitute “financial products”.

Section 47(8)(a): omit “securities” and substitute “financial products”.

Heading to section 49: omit “securities” and substitute “financial products”.

Section 49: omit “securities” in each place where it appears and substitute in each case “financial products”.

Section 61(7): repeal and substitute:

“(7) Nothing in subsections (5) and (6) applies to an offer to a shareholder by a company if—

“(a) the company is a listed issuer; and

“(b) the offer is to acquire fewer of the quoted shares of the company than the minimum holding of those shares in the company determined by the operator of the relevant licensed market.”

Section 67C(2): omit “section 7 of the Securities Transfer Act 1991” and substitute “section 376 of the Financial Markets Conduct Act 2011”.

Section 67C(4): repeal and substitute:

“(4) A company must not grant an option to acquire a share it holds in itself or enter into any obligations to transfer such a share if—

“(a) the company has received notice in writing of a takeover offer made under the takeovers code in force under the Takeovers Act 1993; or

“(b) in the case of shares that are quoted on a stock exchange, the stock exchange makes a public release that a takeover offer for more than 20% of the quoted shares is to be made.”

Section 85(1) and (2): omit “section 7 of the Securities Transfer Act 1991” in each place where it appears and substitute in each case “section 376 of the Financial Markets Conduct Act 2011”.

Section 95(2): omit “authorised or approved under the Securities Transfer Act 1991” and substitute “approved under section 376 of the Financial Markets Conduct Act 2011”.

Section 95(6A): omit “section 54 of the Securities Act 1978” and substitute “section 211 of the Financial Markets Conduct Act 2011”.

Section 147(1)(b): repeal and substitute:

“(b) that person is authorised to undertake trading activities on a licensed market and has the relevant interest by reason only of acting for another person to acquire or dispose of that share on behalf of the other person in the ordinary course of business of carrying out those trading activities; or”.

Section 149(1), (2), (4), (5): omit “securities” in each place where it appears and substitute in each case “financial products”.

Section 149(3): omit “security” and substitute “financial product”.

Section 149(6): repeal and substitute:

“(6) Nothing in this section applies to financial products that are quoted on a licensed market.”

Section 151(2)(ea): omit “Securities Act 1978 or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Section 225A(3): omit “security” in each place where it appears and substitute in each case “financial product”.

Section 225A(4): repeal.

Section 237(1)(b): omit “securities” and substitute “financial products”.

Section 239AI(1)(b)(ii) and (iii): repeal and substitute:

“(ii) the Financial Markets Conduct Act 2011:”.

Definition of promoter in section 239AM(3): repeal.

Definition of promoter in section 245A(3): repeal.

Section 258A(1)(b) and (c): repeal and substitute:

“(b) the Financial Markets Conduct Act 2011:”.

Section 266(4): omit “section 60A of the Securities Act 1978, section 43F of the Securities Markets Act 1988” and substitute “subpart 6 of Part 7 of the Financial Markets Conduct Act 2011”.

Section 280(1)(ka): omit “Securities Act 1978, or the Securities Markets Act 1988,” and substitute “Financial Markets Conduct Act 2011”.

Section 371A(3): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Section 373(1)(3): omit “securities” and substitute “financial products”.

Section 374(2)(7): omit “securities” and substitute “financial products”.

Section 383(1)(c)(i): omit “or the Companies Act 1955, the Securities Act 1978, the Securities Markets Act 1988” and substitute: “, the Financial Markets Conduct Act 2011”.

Section 383(1): omit “for such period not exceeding 10 years as may be specified in the order” and substitute “permanently or for a period specified in the order”.

Section 383: insert after subsection (1):

“(1A) The court may make an order under this section permanent or for a period longer than 10 years only in the most serious of cases for which an order may be made.”

Section 383(4A): omit “section 43F of the Securities Markets Act 1988, section 44F of the Takeovers Act 1993, and section 60A of the Securities Act 1978” and substitute “section 44F of the Takeovers Act 1993, and subpart 6 of Part 7 of the Financial Markets Conduct Act 2011”.

Section 385(3): omit “5 years” and substitute “10 years”.

Paragraph (da) of Schedule 2: omit “securities” and substitute “financial products”.

Paragraph (h) of Schedule 4: omit “if the company is a party to a listing agreement with a registered exchange (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “in respect of shares of the company that are quoted on a stock exchange”.

Paragraph (i) of Schedule 4: omit “if the company is not a party to a listing agreement with a registered exchange (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “in respect of shares of the company that are not quoted on a stock exchange”.

Schedule 4: insert after paragraph (j):

“(ja) a statement as to whether the company at any time since the last annual return or, in the case of the first annual return, since the date of registration has been the offeror of financial products under a regulated offer (as defined in section 29 of the Financial Markets Conduct Act 2011):

“(jb) a statement as to whether the company at any time since the last annual return or, in the case of the first annual return, since the date of registration has been the offeror of financial products for which a disclosure document was required to be provided under clause 26 of Schedule 1 of the Financial Markets Conduct Act 2011, and, if so, the exclusion under that schedule that the offeror relied on:

“(jc) a statement as to whether the company at any time since the last annual return or, in the case of the first annual return, since the date of registration has been the offeror of financial products and has knowingly relied on an exclusion under clause 3(2)(b), 3(3), 4(3), 8, 10, 11, 12, 15, or 16, or 18A of Schedule 1 of the Financial Markets Conduct Act 2011, and, if so, which of those exclusions the offeror relied on:”.

Construction Contracts Act 2002 (2002 No 46)

Section 7(1)(a)(ii): omit “section 5B(2) of the Securities Markets Act 1988” and substitute “section 11(2) of the Financial Markets Conduct Act 2011”.

Definition of control right in section 7(2): omit “voting security” and substitute “voting product”.

Section 7(3): repeal and substitute:

“(3) For the purposes of this section, a person has a control right if the person would have a relevant interest, under sections 230 to 233 of the Financial Markets Conduct Act 2011, in the voting products that confer that right,—

“(a) if voting product, in relation to a body, meant a financial product of the body that confers a right to vote at meetings of members (whether or not there is any restriction or limitation on the number of votes that may be cast by, or on behalf of, the holder of the financial product); and includes a financial product that, in accordance with the terms of the financial product, is convertible into a financial product of that kind; and

“(b) if references in those sections to a number or percentage of voting products were a reference to the number or percentage of the votes conferred by those financial products.

“(4) In subsection (3), financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011.”

Co-operative Companies Act 1996 (1996 No 24)

Section 26(3): repeal and substitute:

“(3) A company must not grant an option to acquire a share it holds in itself or enter into any obligations to transfer such a share if—

“(a) the company has received notice in writing of a takeover offer made under the takeovers code in force under the Takeovers Act 1993; or

“(b) in the case of shares that are quoted on a stock exchange, the stock exchange makes a public release that a takeover offer for more than 20% of the quoted shares is to be made.”

Heading above section 29: omit “and Securities Act 1978”.

Section 29A: repeal.

Crimes Act 1961 (1961 No 43)

Section 242(1): omit “, whether in any prospectus, account, or otherwise,”.

Section 242(1)(a): repeal and substitute:

“(a) to induce any person, whether ascertained or not, to ~~subscribe to~~ acquire any financial product within the meaning of the Financial Markets Conduct Act 2011; or”.

Crown Entities Act 2004 (2004 No 115)

Section 12(3): omit “securities, borrowing, derivatives” and substitute “financial products, borrowing”.

Paragraph (b)(i) and (ii) of the definition of natural person act in section 24: repeal and substitute:

“(i) acquisition of financial products or borrowing:”.

Section 30(2)(b): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Definitions of debt security, derivative transaction, and security in section 136(1): repeal.

Section 136(1): insert in their appropriate alphabetical order:

“debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011

“derivative—

“(a) has the same meaning as in section 8 of the Financial Markets Conduct Act 2011; and

“(b) includes a foreign exchange transaction

“financial product means any of the following:

“(a) an equity security (within the meaning given in the Financial Markets Conduct Act 2011):

“(b) a debt security:

“(c) a managed investment product within the meaning of that Act (except a managed investment product in a superannuation scheme or a KiwiSaver scheme):

“(d) a derivative”.

Heading above section 159: omit “securities, borrowing, guarantees, indemnities, and derivative transactions” and substitute “financial products, borrowing, guarantees, indemnities, and derivatives”.

Heading to section 159: omit “securities, borrowing, guarantees, indemnities, and derivative transactions” and substitute “financial products, borrowing, guarantees, indemnities, and derivatives”.

Heading to section 160: omit “securities, borrowing, guarantees, indemnities, and derivative transactions” and substitute “financial products, borrowing, guarantees, indemnities, and derivatives”.

Heading to section 161: omit “securities” and substitute “financial products”.

Section 161(1): omit “acquire securities” and substitute “acquire financial products”.

Section 161(2): omit “security” and substitute “financial product”.

Section 161: insert after subsection (2):

“(2A) This section does not apply to derivatives.”

Section 164: repeal and substitute:

“164 Restrictions on use of derivatives

A Crown entity must not enter into an agreement constituting a derivative, or amend the terms of that agreement, other than as provided in section 160.”

Section 173(1)(c): repeal and substitute:

“(c) prescribing the nature and extent of the acquisition of financial products that may be undertaken by Crown entities, the financial products that Crown entities may acquire, the persons with whom a Crown entity may enter into agreements that constitute financial products, and any other matters relating to the acquisition of financial products or entering into those agreements:”.

Section 173(1)(f): repeal.

Section 173(1)(i): omit “securities” and substitute “financial products”.

Column headings in Schedule 1 and Schedule 2: omit “securities” in each place where it appears and substitute in each case “financial products”.

Schedule 3: omit “securities, borrowing, guarantees, indemnities, and derivative transactions” in the first place where it appears and substitute “financial products, borrowing, guarantees, indemnities, and derivatives”.

Schedule 3: omit “Restrictions on acquisition of securities, borrowing, guarantees, indemnities, and derivative transactions” and substitute “Restrictions on acquisition of financial products, borrowing, guarantees, indemnities, and derivatives”.

Crown Research Institutes Act 1992 (1992 No 47)

Paragraph (d) of the definition of assets in section 23(1): omit “securities within the meaning of the Securities Act 1978” and substitute “financial products within the meaning of the Financial Markets Conduct Act 2011”.

Paragraph (b) of the definition of liabilities in section 23(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Crown Retail Deposit Guarantee Scheme Act 2009 (2009 No 30)

Definition of debt security in section 3: repeal and substitute:

“debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Dairy Industry Restructuring Act 2001 (2001 No 51)

Section 102(3): repeal and substitute:

“(3) New co-op may not issue capital notes under section 101 if,—

“(a) during the month immediately before the capital notes are to be issued, capital notes of the same class as the capital notes to be issued have not been traded on a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011); or

“(b) capital notes of the same class as the capital notes to be issued have not been quoted continuously on the licensed market for 6 months or more.”

Section 106(2) and (3): repeal and substitute:

“(2) New co-op must ensure that the terms and effect of financial products offered or issued in new co-op are the same for new entrants as for shareholding farmers.

“(3) In this section, financial products has the same meaning as in section 7 of the Financial Markets Conduct Act 2011.”

Section 116(2): repeal and substitute:

“(2) Nothing in Part 3 of the Financial Markets Conduct Act 2011 applies to the disclosure of information required by regulations made under subsection (1).”

Defence Act 1990 (1990 No 28)

Section 73A: omit “has the same meaning as in the Superannuation Schemes Act 1989” and substitute “means a retirement scheme within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011”.

Section 73C(a): repeal.

Education Act 1989 (1989 No 80)

Section 67B(2): omit “a derivative transaction, or amend the terms of that transaction,” and substitute “an agreement constituting a derivative, or amend the terms of that agreement,”.

Section 103(1)(d): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Paragraph (d) of the definition of assets in section 216(1): omit “securities within the meaning of the Securities Act 1978” and substitute “financial products within the meaning of the Financial Markets Conduct Act 2011”.

Paragraph (b) of the definition of liabilities in section 216(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Paragraph (b)(i) and (ii) of the definition of natural person act in clause 1C(2) of Schedule 6: repeal and substitute:

“(i) acquisition of financial products (within the meaning of section 7 of the Financial Markets Conduct Act 2011) or borrowing of money; or”.

Electoral Act 1993 (1993 No 87)

Clause 4(1) of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Electricity Industry Act 2010 (2010 No 116)

Clause 4(1)(c) of Schedule 2: repeal and substitute:

“(c) that person is authorised to undertake trading activities on a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011) and has the involvement by reason only of acting for another person to acquire or dispose of a financial product on behalf of the other person in the ordinary course of business of carrying out those trading activities; or”.

Clause 5(1) of Schedule 2: omit “voting security” and substitute “voting product”.

Clause 5(2) of Schedule 2: repeal and substitute:

“(2) A person has a control right if the person would have a relevant interest, under sections 230 to 233 of the Financial Markets Conduct Act 2011, in the voting products that confer that right,—

“(a) if voting product, in relation to a body, meant a financial product of the body that confers a right to vote at meetings of members (whether or not there is any restriction or limitation on the number of votes that may be cast by, or on behalf of, the holder of the financial product); and includes a financial product that, in accordance with the terms of the financial product, is convertible into a financial product of that kind; and

“(b) if references in those sections to a number or percentage of voting products were a reference to the number or percentage of the votes conferred by those financial products.

“(3) In subclause (2), financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011.”

Clause 8(1)(a)(ii) of Schedule 2: omit “section 5B(2) of the Securities Markets Act 1988” and substitute “section 11(2) of the Financial Markets Conduct Act 2011”.

Energy Companies Act 1992 (1992 No 56)

Definition of debt security in section 2(1): repeal and substitute:

“debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Definition of equity security in section 2(1): repeal and substitute:

“equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Estate and Gift Duties Act 1968 (1968 No 35)

Paragraph (c) of the definition of group superannuation scheme in section 2(1): repeal and substitute:

“(c) any registered scheme within the meaning of section 6(1) of the Financial Markets Conduct Act 2011 that is—

“(i) a superannuation scheme or KiwiSaver scheme within the meaning of section 6(1) of the Financial Markets Conduct Act 2011; and

“(ii) established for the benefit of contributors to the scheme otherwise than as employees of any employer”.

Finance Act (No 2) 1990 (1990 No 73)

Section 3(1): omit “established under the Unit Trusts Act 1960” and substitute “(within the meaning of section YA 1 of the Income Tax Act 2007)”.

Section 5(3): repeal.

Section 8: repeal.

Section 9A: repeal.

Financial Reporting Act 1993 (1993 No 106)

Paragraph (a) of the Long Title: omit “issuers of securities to the public” and substitute “certain issuers of financial products”.

Paragraph (e) of the definition of director in section 2(1): repeal.

Definition of equity security in section 2(1): repeal and substitute:

“equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Section 2(1): insert in their appropriate alphabetical order:

“financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011

“manager, in relation to a registered scheme, has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“registered scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011

“regulated offer has the same meaning as in section 29 of the Financial Markets Conduct Act 2011”.

Definition of security in section 2(1): repeal.

Paragraphs (a) to (b) of the definition of issuer in section 4(1): repeal and substitute:

“(a) every person who is an issuer of financial products that are, or have been, offered under a regulated offer (where issuer in this paragraph has the same meaning as in section 10 of the Financial Markets Conduct Act 2011):

“(b) every person who is a manager of a registered scheme:”.

Paragraph (c) of the definition of issuer in section 4(1): repeal and substitute:

“(c) every listed issuer that has financial products quoted on a licensed market (where listed issuer, quoted, and licensed market have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011):

“(ca) every registered bank (within the meaning of section 2(1) of the Reserve Bank of New Zealand Act 1989):”.

Section 4(2) to (4): repeal and substitute:

“(2) If an offer of financial products would require disclosure under Part 3 of the Financial Markets Conduct Act 2011 but for an exemption granted by the FMA under that Act, the person who is the issuer of the financial products under the offer for the purposes of that Act must be treated as being an issuer under subsection (1)(a) by virtue of that offer unless the exemption contains a statement that this subsection does not apply.

“(3) In subsection (1)(a), a reference to financial products must be taken to be a reference to financial products that have not been cancelled, redeemed, forfeited, or in respect of which obligations owing under them have not been discharged.”

Section 4A(1)(b): repeal and substitute:

“(b) the conduit issuer raises an amount of money by the issue of financial products under a regulated offer; and”.

Section 9A(1) to (3): repeal and substitute:

“(1) For the purposes of this Act, a requirement on the directors of an issuer of financial products in relation to a registered scheme to prepare and register financial statements must be construed as including a requirement to prepare and register (in addition to financial statements in respect of the issuer itself),—

“(a) if the liabilities of the issuer and the scheme are not limited to a particular group of assets (a separate fund), financial statements in respect of the scheme; or

“(b) if the liabilities of the issuer or the scheme are limited to a separate fund, financial statements in respect of both the scheme and that fund.”

Section 15(3): repeal.

Section 18(1A): repeal and substitute:

“(1A) Any financial statements to which subsection (1) applies and that are required for the purposes of this Act may also contain or be accompanied by financial statements, and any auditor's report on those statements, that are required for the purposes of a product disclosure statement, or register entry, under the Financial Markets Conduct Act 2011.”

Section 34B: insert after subsection (3):

“(3A) Nothing in this Act prevents—

“(a) different tiers of financial reporting from applying in respect of different classes of issuers:

“(b) the tier of financial reporting that applies in respect of the financial statements of an issuer of managed investment products from being different from the tier of financial reporting that applies in respect of the financial statements of a scheme or separate fund referred to in section 9A(1).”

Section 35A(2)(a): repeal and substitute:

“(a) the exemption would not cause significant detriment to subscribers for the financial products of the issuer in New Zealand, having regard to the financial reporting requirements that must be complied with in relation to the issuer under the law in force in the country where the issuer is incorporated or constituted; and”.

Financial Service Providers (Registration and Dispute Resolution) Act 2008 (2008 No 97)

Section 5(i) and (ia): repeal and substitute:

“(i) participating in a regulated offer as the issuer or offeror of the financial products:

“(ia) acting in any of the following capacities in respect of regulated products:

“(i) as an issuer:

“(ii) as a supervisor:

“(iii) as an investment manager:

“(ib) a licensed market service:

“(ic) acting as a custodian:

~~“(id) acting as a licensed market operator:~~

“(id) operating a financial product market:”.

Section 5: add as subsection (2):

“(2) In this section, custodian, financial product market, investment manager, issuer, ~~licensed market operator,~~ licensed market service, offeror, regulated offer, regulated products, and supervisor have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.”

Section 7(2)(d): add “(other than Public Trust)”.

Section 7(2)(j): repeal and substitute:

“(j) an employer while providing services to enable employees of the employer to obtain rights or benefits under a retirement scheme (as defined in section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011), being a scheme in which that employer participates for the benefit of its employees:”.

Section 8A(b): add “; or”.

Section 8A: add:

“(c) is, or is required to be, registered under this Act under any other enactment.”

Section 14(2)(b) and (c): omit “Securities Act 1978, the Securities Markets Act 1988” and substitute in each case “Financial Markets Conduct Act 2011”.

Section 14(2): insert after paragraph (c):

“(ca) a person who is prohibited from 1 or more of the following under an order made, or a notice given, under a law of a country, State, or territory outside New Zealand that is prescribed for the purposes of section 151(2)(eb) of the Companies Act 1993:

“(i) being a director of a body corporate incorporated outside New Zealand (an overseas company):

“(ii) being a promoter of an overseas company:

“(iii) being concerned or taking part in the management of an overseas company:”.

Section 44(1)(a): omit “5(n)” and substitute “5(1)(n)”.

Section 48(3): repeal and substitute:

“(3) However, this obligation does not apply to—

“(a) a financial service provider in relation to providing a financial service referred to in section 5(1)(i) or (ia)(i) if providing that service is not the provider's only or principal business; or

“(b) a financial service provider in relation to the financial service of ~~acting as a licensed market operator~~ operating a financial product market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011); or

“(c) a financial service provider (whether generally or in respect of a particular financial service or class of financial service) if it is exempted from the obligation by or under any other Act or by regulations made under section 79.”

Section 49(2)(b): repeal.

Section 49(2)(d) to (f): repeal and substitute:

“(d) a related body corporate (within the meaning of section 11(2) of the Financial Markets Conduct Act 2011) of an entity to which paragraph (c) applies:

“(e) a person who is a wholesale investor (within the meaning of clause 3(2) of Schedule 1 of the Financial Markets Conduct Act 2011):

“(f) a person who is, in relation to an offer of financial products, a wholesale investor (within the meaning of clause 3(3) of Schedule 1 of the Financial Markets Conduct Act 2011), if the service relates to that offer or to financial products that have been ~~subscribed for~~ acquired by that person under that offer:

“(fa) a person who is, in relation to an offer of financial products, a close business associate of the offeror (within the meaning of clause 4 of Schedule 1 of the Financial Markets Conduct Act 2011), if the service relates to that offer or to financial products that have been ~~subscribed for~~ acquired by that person under that offer:

“(fb) a person who is, in relation to an offer of financial products, a relative of the offeror or a director of the offeror (within the meaning of clause 5 of Schedule 1 of the Financial Markets Conduct Act 2011), if the service relates to that offer or to financial products that have been ~~subscribed for~~ acquired by that person under that offer:”.

Definition of private offer of securities in section 49(4): repeal.

Schedule 2: item relating to the Securities Trustees and Statutory Supervisors Act 2011: omit and substitute:

Financial Markets Authority Licensed supervisors in respect of debt securities and managed investment schemes Financial Markets Supervisors Act 2011

Schedule 2: add:

Financial Markets Authority Persons who hold, or are authorised bodies under, a market services licence Financial Markets Conduct Act 2011

Financial Transactions Reporting Act 1996 (1996 No 9)

Section 2(1): insert in its appropriate alphabetical order:

“KiwiSaver scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011”.

Paragraph (b)(ii) of the definition of facility in section 2(1): repeal and substitute:

“(ii) membership of a superannuation scheme or KiwiSaver scheme:”.

Paragraph (d) of the definition of facility holder in section 2(1): repeal and substitute:

“(d) if that facility consists of membership of a superannuation scheme or KiwiSaver scheme, means the product holder of the managed investment product in the scheme (within the meanings of product holder and managed investment product in section 6(1) of the Financial Markets Conduct Act 2011)”.

Definition of superannuation scheme in section 2(1): repeal and substitute:

“superannuation scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011”.

Section 3(1)(h) to (i): repeal and substitute:

“(h) a supervisor or a manager of a registered scheme (within the meanings of those terms in section 6(1) of the Financial Markets Conduct Act 2011):”.

Friendly Societies and Credit Unions Act 1982 (1982 No 118)

Section 78(2)(a) and (b): repeal and substitute:

“(a) a member, or a person claiming through a member (unless that member or person is a supervisor appointed for the purposes of subpart 2 of Part 4 of the Financial Markets Conduct Act 2011) or under the rules of a registered society or branch, and the society or branch or an officer of the society or branch; or

“(b) any person aggrieved who has ceased to be a member of a registered society or branch, or any person claiming through such person aggrieved (unless that person aggrieved or other person claiming through that person is a supervisor appointed for the purposes of subpart 2 of Part 4 of the Financial Markets Conduct Act 2011), and the society or branch or an officer of the society or branch; or”.

Section 99(1)(d): repeal.

Section 109A: repeal and substitute:

“109A Power of credit union to appoint supervisor for debt securities

“(1) A credit union may appoint a supervisor and sign or amend a trust deed for the purposes of subpart 2 of Part 4 of the Financial Markets Conduct Act 2011.

“(2) This section applies regardless of anything to the contrary in the rules of a credit union.”

Section 112(1A): repeal and substitute:

“(1A) However, regardless of the rules of a credit union, if a supervisor has been appointed in respect of a debt security for the purposes of subpart 2 of Part 4 of the Financial Markets Conduct Act 2011, then that supervisor may exercise any rights it has under that Act in respect of the property of the credit union.”

Goods and Services Tax Act 1985 (1985 No 141)

Section 3(1)(j): omit “superannuation scheme” in each place where it appears and substitute in each case “retirement scheme”.

Section 3(1)(ka): omit “superannuation scheme” and substitute “retirement scheme”.

Section 3(2): insert in its appropriate alphabetical order:

“contributory scheme—

“(a) means any scheme or arrangement that, in substance and irrespective of the form of the scheme or arrangement, involves the investment of money where—

“(i) the investor acquires or may acquire an interest in or right in respect of property; and

“(ii) that interest or right will or may be, under the terms of investment, used or exercised in conjunction with any other interest in or right in respect of property acquired in similar circumstances, whether at the same time or not; but

“(b) does not include a scheme or arrangement described in paragraph (a) that has 5 or fewer investors, provided that neither the manager of the scheme nor any associated person of the manager is the manager of another such scheme or arrangement”.

Definition of participatory security in section 3(2): omit “(as defined in section 2 of the Securities Act 1978); and includes an interest in a unit trust within the meaning of the Unit Trusts Act 1960;” and substitute “; and includes an interest in a unit trust (within the meaning of section YA 1 of the Income Tax Act 2007);”.

Definition of superannuation scheme in section 3(2): repeal and substitute:

“retirement scheme has the meaning given in section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011”.

Section 3(3)(d): omit “superannuation scheme” and substitute “retirement scheme”.

Government Superannuation Fund Act 1956 (1956 No 47)

Section 15C(1)(c): repeal and substitute:

“(c) enter into an agreement constituting a derivative (within the meaning of section 8 of the Financial Markets Conduct Act 2011) or amend the terms of that agreement.”

Section 19H: repeal and substitute:

“19H Application of Part 4 of Financial Markets Conduct Act 2011

Each of the schemes must be treated for the purposes of this Act and any other Act as if it is registered on the register of managed investment schemes under the Financial Markets Conduct Act 2011 as a superannuation scheme, but Part 4 of that Act otherwise does not apply to it.”

Section 61S(1)(c): omit “superannuation scheme nominated by the contributor that is approved by the Authority and is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011) that is nominated by the contributor and approved by the Authority”.

Section 71K(3): omit “superannuation scheme nominated by the contributor that is approved by the Authority and is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011) that is nominated by the contributor and approved by the Authority”.

Section 81P(1)(b): omit “superannuation scheme nominated by him or her that is approved by the Authority and is approved under the Superannuation Schemes Act 1976 and classified under that Act as an employee pension superannuation scheme or a personal pension superannuation scheme or is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011) that is nominated by him or her and approved by the Authority”.

Health Sector (Transfers) Act 1993 (1993 No 23)

Paragraph (c) of the definition of assets in section 2(1): omit “securities within the meaning of the Securities Act 1978” and substitute “financial products within the meaning of the Financial Markets Conduct Act 2011”.

Paragraph (b) of the definition of liabilities in section 2(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Housing Restructuring and Tenancy Matters Act 1992 (1992 No 76)

Paragraph (c) of the definition of Corporation assets in section 2(1): omit “securities within the meaning of the Securities Act 1978” and substitute “financial products within the meaning of the Financial Markets Conduct Act 2011”.

Paragraph (b) of the definition of liabilities in section 2(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Human Rights Act 1993 (1993 No 82)

Section 70(5): omit “or the trustees of the scheme” and substitute “or the supervisor or manager of the scheme”.

Section 70(5)(d): omit “section 9C of the Superannuation Schemes Act 1989” and substitute “section 167 of the Financial Markets Conduct Act 2011”.

Clause 6(1) of Schedule 2: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Income Tax Act 2007 (2007 No 97)

Section EY 11(3): repeal and substitute:

“(3) At all times in the income year, the fund must be registered as a superannuation scheme on the register of managed investment schemes (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011).”

Heading above section EY 11(13) and section EY 11(13): repeal and substitute:

“Objection against FMA decision

“(13) A person dissatisfied with the FMA's decision may appeal against the decision to the High Court and has no right of objection under the Tax Administration Act 1994.

“(13A) A decision against which an appeal is lodged under subsection (13) continues in force unless the High Court orders otherwise.”

Section HM 18(1)(c): omit “prospectus” and substitute “product disclosure statement”.

Section HM 19B(2)(a): omit “to which the Unit Trusts Act 1960 applies”.

Section RH 3(2)(b)(iv): omit “under the KiwiSaver Act 2006”.

Definition of complying superannuation fund in section YA 1: repeal and substitute:

“complying superannuation fund has the same meaning as in section 4(1) of the KiwiSaver Act 2006”.

Definition of defined benefit fund in section YA 1: repeal and substitute:

“defined benefit fund means a superannuation scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011) that operates on the principle of unallocated funding”.

Paragraph (a) of the definition of public unit trust in section YA 1: omit “that offers securities to the public under the Securities Act 1978” and substitute “in respect of which regulated offers are made under the Financial Markets Conduct Act 2011”.

Paragraph (b)(vi) and (vii) of the definition of public unit trust in section YA 1: omit “if the unit trust offers securities to the public under the Securities Act 1978” and substitute in each case “if regulated offers in respect of the unit trust are made under the Financial Markets Conduct Act 2011”.

Paragraph (c) of the definition of relative in section YA 1: repeal.

Definition of superannuation fund in section YA 1: repeal and substitute:

“superannuation fund means—

“(a) a retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011); and

“(b) for a retirement scheme that is a trust, the trustees of the retirement scheme”.

Clause 1(a) of Schedule 28: omit “196” and substitute “126”.

Independent Police Conduct Authority Act 1988 (1988 No 2)

Section 11: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Insolvency Act 2006 (2006 No 55)

Paragraph (w)(v) of Schedule 1: repeal and substitute:

“(v) financial products (within the meaning of section 7 of the Financial Markets Conduct Act 2011) if sold on a stock exchange (within the meaning of section 2(1) of the Companies Act 1993).”

Insurance Intermediaries Act 1994 (1994 No 41)

Section 15(1): omit “section 2 of the Securities Act 1978” and substitute “section 8 of the Financial Markets Conduct Act 2011”.

Insurance (Prudential Supervision) Act 2010 (2010 No 111)

Section 6(1): insert in its appropriate alphabetical order:

“derivative transaction means—

“(a) a transaction that is a rate swap transaction, swap option, basis swap, forward rate transaction, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread transaction, forward purchase or sale of a security, or commodity or other financial instrument or interest (including an agreement or option that relates to any of these transactions); or

“(b) a transaction that is similar to any transaction referred to in paragraph (a) that—

“(i) is currently, or in the future becomes, recurrently entered into in the financial markets; and

“(ii) is a forward, swap, future, option, or other derivative on 1 or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt instruments, economic indices or measures of economic risk or value, environmental or climatic variable, or other benchmarks against which payments or deliveries are to be made”.

Section 7(3)(a): omit “(within the meaning of section 136(1) of the Crown Entities Act 2004)”.

Section 7(3)(e): omit “superannuation scheme (within the meaning of section 2A of the Superannuation Schemes Act 1989) or a KiwiSaver scheme (within the meaning of section 4(1) of the KiwiSaver Act 2006)” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Section 99(8): repeal and substitute:

“(8) In this section, public issuer means a person who is a party to a listing agreement with, or whose securities are otherwise quoted on,—

“(a) a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011); or

“(b) a securities market that is authorised to operate in an overseas jurisdiction in accordance with the laws of that jurisdiction.”

Judicature Act 1908 (1908 No 89)

Section 24B(1)(e): omit “Securities Act 1978 or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Section 26G: omit “registered superannuation scheme” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Lawyers and Conveyancers Act 2006 (2006 No 1)

Section 322(5)(d): omit “body that is a party to a listing agreement with a stock exchange” and substitute “listed issuer”.

Paragraph (c) of the definition of company in section 322(6): omit “party to a listing agreement with a stock exchange” and substitute “listed issuer”.

Section 322(6): add:

“listed issuer has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011.”

Clause 9(1) of Schedule 5: omit “scheme registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Local Government Act 2002 (2002 No 84)

Definition of equity security in section 5(1): repeal and substitute:

“equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Section 71A(1) : omit “listed on a stock exchange” and substitute “quoted on a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.

Section 122: repeal and substitute:

“122 Disclosure document and loan documents to contain statement that the Crown does not guarantee financial products or loan

“(1) If a local authority is named as the issuer, or is otherwise named with its consent, in a disclosure document (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011), that disclosure document must, unless the financial products being offered under the disclosure document are expressly guaranteed by the Crown under the Public Finance Act 1989, contain a statement that the financial products being offered under the disclosure document are not guaranteed by the Crown.

“(2) If a local authority enters into any loan agreement or incidental arrangement, that agreement or arrangement must include a statement that the loan or other liability under the incidental arrangement is not guaranteed by the Crown.

“(3) Subsection (2) does not apply in relation to liability for any sum of a kind described in section 49 of the Public Finance Act 1989.”

Clause 21(5)(c)(ii)(D) of Schedule 7: omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Local Government (Auckland Council) Act 2009 (2009 No 32)

Clause 5(2)(c) of Schedule 2: omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Local Government Borrowing Act 2011 (2011 No 77)

~~Heading above section 8 and section 8: repeal.~~

Heading above section 8 and section 8: repeal and substitute:

“Application of Financial Markets Conduct Act 2011

“8 Financial Markets Conduct Act 2011 applies to Funding Agency as if it were local authority

The Financial Markets Conduct Act 2011 applies to the Funding Agency as if it were a local authority.”

Mackelvie Trust Act 1958 (1958 No 2 (P))

Section 7(2): omit “stock, shares, or debentures of any company quoted on a registered exchange's securities market (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “quoted financial products of a listed issuer”.

Section 7(3): omit “stock, shares, or debentures of any company” and substitute “quoted financial products”.

Section 7(3): omit “a registered exchange's securities market (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “a licensed market”.

Section 7: add:

“(4) In this section, quoted, financial products, and licensed market have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011”.

Maori Language Act 1987 (1987 No 176)

Clause 10(1) of Schedule 2: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Maori Reserved Land Amendment Act 1997 (1997 No 101)

Section 8(1) to (3): omit “voting securities” and substitute in each case “voting products”.

Section 8(5)(a): repeal and substitute:

“(a) company includes any body corporate with voting products; but does not include a company that is a listed issuer (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011):”.

Section 8(5)(c): omit “sections 5 to 5B of the Securities Markets Act 1988” and substitute “sections 230 to 233 of the Financial Markets Conduct Act 2011”.

Section 8(5)(e): repeal and substitute:

“(e) voting product has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011.”

Māori Television Service (Te Aratuku Whakaata Irirangi Māori) Act 2003 (2003 No 21)

Clause 2(2)(b) of Schedule 2: omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Masterton Trust Lands Act 2003 (2003 No 1 (L))

Clause 8(1) of Schedule 2: omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Mental Health Commission Act 1998 (1998 No 5)

Clause 10(1) of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Methodist Charitable and Educational Trusts Act 1911 (1911 No 1 (L))

Section 30(1)(e): omit “company that is party to a listing agreement with a registered exchange (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “listed issuer”.

Section 30(1)(f): omit “the securities of any company whether incorporated in New Zealand or elsewhere, which are listed on a registered exchange's securities market (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “quoted financial products of any listed issuer that is a company whether incorporated in New Zealand or elsewhere”.

Section 30(2) and (6): omit “securities” and substitute in each case “financial products”.

Section 30: add:

“(7) In this section, listed issuer, quoted, and financial products have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.”

Motor Vehicle Sales Act 2003 (2003 No 12)

Section 24(i): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Section 68(1)(c)(i): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Museum of New Zealand Te Papa Tongarewa Act 1992 (1992 No 19)

Clause 7(1) of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

National Heart Foundation of New Zealand Empowering Act 1970 (1970 No 3 (P))

Section 3(1): omit “the securities of any company, whether incorporated in New Zealand or elsewhere, which are officially listed on a registered exchange's securities market (within the meaning of section 2(1) of the Securities Markets Act 1988 and which comprise” and substitute “quoted financial products of any company whether incorporated in New Zealand or elsewhere and that comprise”.

Section 3(2) and (3): omit “securities” and substitute in each case “financial products”.

Section 3: add:

“(6) In this section, quoted and financial products have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.”

National Provident Fund Restructuring Act 1990 (1990 No 126)

Definition of debt security in section 2: repeal and substitute:

“debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Definition of equity security in section 2: repeal and substitute:

“equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Section 2: insert in their appropriate alphabetical order:

“managed investment product has the same meaning as in section 8 of the Financial Markets Conduct Act 2011

“registered scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011”.

Paragraph (b) of the definition of market value in section 2: omit “under section 14 of the Superannuation Schemes Act 1989”.

Definition of superannuation scheme in section 2: omit “has the same meaning as in section 2 of the Superannuation Schemes Act 1989” and substitute “means a retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Section 20(3): omit “a trustee of a superannuation scheme registered under the Superannuation Schemes Act 1989” and substitute “a manager of a registered scheme under the Financial Markets Conduct Act 2011”.

Section 25(1)(a): omit “the Superannuation Schemes Act 1989” and substitute “subpart 3 of Part 4 of the Financial Markets Conduct Act 2011”.

Section 25(1): insert after paragraph (a):

“(ab) be treated as meeting the registration requirements for a restricted superannuation scheme for the purposes of section 113, 115, and 117 of the Financial Markets Conduct Act 2011; and”.

Section 41(2)(c): repeal.

Section 42(2): omit “Notwithstanding section 9B of the Superannuation Schemes Act 1989” and substitute “Despite sections 162 to 166 of the Financial Markets Conduct Act 2011”.

Section 43(b): repeal.

Section 53(1) and (2): omit “participatory securities” and substitute in each case “managed investment products”.

Section 53(4): omit “section 8 of the Superannuation Schemes Act 1989 or”.

Section 57(1)(a): repeal.

Section 57(2): repeal.

Part 4: insert after section 59:

“Application of Financial Markets Conduct Act 2011

“59A Application of Financial Markets Conduct Act 2011

“(1) The Financial Markets Conduct Act 2011 applies to an existing scheme on and after the effective date for the scheme in accordance with section 682 of that Act as follows:

“(a) the scheme must be treated, for the purposes of that Act, as a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law, rather than under this Act; and

“(b) the Board is the manager of the scheme for the purposes of that Act; and

“(c) the trust deed of the scheme must be treated as including the terms and conditions contained or implied in the trust deed by that Act and this Act; and

“(d) the scheme must be treated as meeting the registration requirements for a restricted superannuation scheme for the purposes of sections 113, 115, and 117 of the Financial Markets Conduct Act 2011; and

“(e) to avoid doubt, the obligation under that Act to have an independent trustee does not apply; and

“(ea) the duty on the manager under section 130(1)(c) of that Act applies only after taking account of the Crown's interest as guarantor of the benefits and liabilities under the existing scheme and investment arrangements; and

“(f) the duty on the manager under section 131 of that Act is subject to section 53 of this Act.

“(2) On and after the effective date for an existing scheme, every reference in the trust deed of the scheme to—

“(a) participatory securities must be read as a reference to managed investment products; and

“(b) a registered superannuation scheme or a superannuation scheme registered under the Superannuation Schemes Act 1989 must be read as a reference to a retirement scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011).”

National Provident Fund Restructuring Amendment Act 1997 (1997 No 83)

Section 17(3): repeal.

Section 20(4)(b): repeal.

Section 27(3): omit “the Superannuation Schemes Act 1989 or any other” and substitute “any”.

Section 30(1): omit “, the Superannuation Schemes Act 1989,”.

Section 30(2): omit “, the Superannuation Schemes Act 1989,”.

Clause 3(c) of Schedule 1: repeal.

New Zealand Council for Educational Research Act 1972 (1972 No 35

Section 15(2): omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

New Zealand Horticulture Export Authority Act 1987 (1987 No 93)

Section 19: omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

New Zealand Maori Arts and Crafts Institute Act 1963 (1963 No 51)

Section 18(3): omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

New Zealand Public Health and Disability Act 2000 (2000 No 91)

Clause 45A(2) of Schedule 3: omit “a derivative transaction” and substitute “an agreement constituting a derivative”.

New Zealand Stock Exchange Restructuring Act 2002 (2002 No 1 (P))

Section 12(1): repeal and substitute:

“(1) There must be a control limit under section 343 of the Financial Markets Conduct Act 2011 in respect of the Company on and from the commencement of this subsection.”

New Zealand Superannuation and Retirement Income Act 2001 (2001 No 84)

Clause 1(1) of Schedule 6: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989 and” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011) that is”.

Ombudsmen Act 1975 (1975 No 9)

Section 12: omit “scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Personal Property Securities Act 1999 (1999 No 126)

Definition of futures contract in section 16(1): repeal.

Definition of investment security in section 16(1): omit “futures contract” and substitute “derivative (within the meaning of section 8 of the Financial Markets Conduct Act 2011)”.

Section 17A(b): omit “security (as defined in section 2D of the Securities Act 1978)” and substitute “financial product (within the meaning of section 7 of the Financial Markets Conduct Act 2011)”.

Port Companies Act 1988 (1988 No 91)

Definition of debt security in section 2(1): repeal and substitute:

“debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Definition of equity security in section 2(1): repeal and substitute:

“equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Section 13: omit “listing of the shares of a port company on a registered exchange's securities market (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “quotation of the shares of a port company on a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.

Privacy Act 1993 (1993 No 28)

Part 1 of Schedule 2: insert after the item relating to the Electricity Act 1992:

Financial Markets Conduct Act 2011 ~~Sections 200 and 287~~Section 200 and clauses 1 and 4 of Schedule 2

Items relating to the Securities Act 1978 in Part 1 of Schedule 2: repeal.

Property Law Act 2007 (2007 No 91)

Section 167(1)(b)(ii): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Property (Relationships) Act 1976 (1976 No 166)

Section 44D(4): omit “section 2 of the Securities Act 1978” and substitute “section 8 of the Financial Markets Conduct Act 2011”.

Public Finance Act 1989 (1989 No 44)

Section 1A(2)(f)(iii): omit “derivative transactions” and substitute “derivatives”.

Definition of derivative transaction in section 2(1): repeal and substitute:

“derivative—

“(a) has the same meaning as in section 8 of the Financial Markets Conduct Act 2011; and

“(b) includes a foreign exchange transaction”.

Heading to Part 6: omit “derivative transactions” and substitute “derivatives”.

Heading to subpart 3 of Part 6: omit “Derivative transactions” and substitute “Derivatives”.

Heading above section 65F: omit “derivative transactions” and substitute “derivatives”.

Heading to section 65F: omit “derivative transactions” and substitute “derivatives”.

Section 65F: omit “derivative transaction” and substitute “derivative”.

Heading to section 65G: omit “derivative transactions” and substitute “derivatives”.

Section 65G(1) and (2): omit “derivative transaction” and substitute in each case “derivative”.

Heading above section 65H: omit “derivative transactions” and substitute “derivatives”.

Heading to section 65H: omit “derivative transactions” and substitute “derivatives”.

Section 65H(1) and (2): omit “derivative transaction” in each place where it appears and substitute in each case “derivative”.

Public Trust Act 2001 (2001 No 100)

Section 66: add:

“(5) In this section, stock exchange has the same meaning as in section 2(1) of the Companies Act 1993.”

Section 71(2)(c): repeal and substitute:

“(c) a product disclosure statement in relation to the investment of that money in the fund has been lodged in accordance with the requirements of Part 3 of the Financial Markets Conduct Act 2011 and regulations made under that Act.”

New section 72C: insert after section 72B:

“72C Public Trust may not make regulated offer of managed investment products in certain group investment funds

“(1) Public Trust may not make a regulated offer of managed investment products in a group investment fund established by it under this Part if the fund was established after the date on which this section comes into force.

“(2) Nothing in subsection (1) affects the rights, powers, and duties of Public Trust under sections 61 to 72B.

“(3) In this section, regulated offer and managed investment products have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.”

Heading above section 166 and section 166: repeal.

Racing Act 2003 (2003 No 3)

Clause 31 of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Clause 7(1) of Schedule 3: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Real Estate Agents Act 2008 (2008 No 66)

Section 37(1)(g): omit “Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Section 137(2)(i): repeal and substitute:

“(i) an entity that has an interest in the licensee or an entity in which the licensee has an interest (except where either interest is in quoted financial products within the meaning given for those terms in section 6(1) of the Financial Markets Conduct Act 2011).”

Receiverships Act 1993 (1993 No 122)

Section 5(1)(k): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Section 28(1)(b): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Remuneration Authority Act 1977 (1977 No 110)

Section 2: insert in its appropriate alphabetical order:

“retirement scheme has the same meaning as in section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011.”

Section 12(2A)(a) and (b) and (2B): omit “registered superannuation scheme” and substitute in each case “retirement scheme”.

Section 12(2C): repeal.

Section 12AA(1)(a) and (b) and (6)(c): omit “registered superannuation scheme” and substitute in each case “retirement scheme”.

Section 12AA(7): repeal.

Section 12B(3)(a) and (b) and (7): omit “registered superannuation scheme” and substitute in each case “retirement scheme”.

Section 12B(8): repeal.

Reserve Bank of New Zealand Act 1989 (1989 No 157)

Section 2(1): insert in their appropriate alphabetical order:

“debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011

“financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011

“managed investment scheme has the same meaning as in section 9 of the Financial Markets Conduct Act 2011”.

Paragraph (e) of the definition of foreign exchange in section 2(1): omit “security” and substitute “debt security”.

Definition of security in section 2(1): repeal.

Section 2(3)(a) and (b): omit “securities” and substitute in each case “financial products”.

Heading to section 35: omit “Securities” and substitute “Financial products”.

Section 35(1): omit “securities” in each place where it appears and substitute in each case “financial products”.

Section 35(1)(c): omit “security” and substitute “financial product”.

Section 35(2): omit “Securities” and substitute “Financial products”.

Section 39(b): omit “securities” and substitute “financial products”.

Section 46(1)(j): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Section 58(h): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Section 64(3): omit “unit trust of which the registered bank is a trustee or a manager within the meaning of the Unit Trusts Act 1960” and substitute “managed investment scheme of which the registered bank is a supervisor or a manager within the meaning of section 6(1) of the Financial Markets Conduct Act 2011”.

Section 65(1)(e): omit “unit trust of which the registered bank or the associated person is a trustee or manager within the meaning of the Unit Trusts Act 1960” and substitute “managed investment scheme of which the registered bank or the associated person is a supervisor or a manager within the meaning of section 6(1) of the Financial Markets Conduct Act 2011”.

Section 156K(2): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Definition of Minister responsible for the Securities Act 1978 in section 156M(1): repeal and substitute:

“Minister responsible for the Financial Markets Conduct Act 2011 means the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of the Financial Markets Conduct Act 2011”.

Section 156N(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Section 156P(1)(g): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Section 156Y(3)(d): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Section 156ZA(1)(a): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Section 156ZD: omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Section 156ZE: omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Section 156ZG(3): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Definitions of collective investment scheme, debt security, trust deed, and trustee in section 157B(1): repeal.

Section 157B(1): insert in their appropriate alphabetical order:

“regulated offer has the same meaning as in section 29 of the Financial Markets Conduct Act 2011

“trust deed, in relation to a deposit taker, means—

“(a) a trust deed required by subpart 2 of Part 4 of the Financial Markets Conduct Act 2011 in respect of any debt security offered under a regulated offer by the deposit taker; or

“(b) a trust deed required by section 33(2)(a) of the Securities Act 1978 in respect of any debt security offered to the public by the deposit taker

“trustee, in relation to a deposit taker, means—

“(a) a licensed supervisor who, for the purposes of subpart 2 of Part 4 of the Financial Markets Conduct Act 2011, is designated or appointed as the trustee under a trust deed (or under the Financial Markets Supervisors Act 2011) in respect of any debt security offered under a regulated offer by the deposit taker; or

“(b) a person appointed as trustee in accordance with the Securities Act 1978 in respect of any debt security offered to the public by the deposit taker”.

Section 157C(1)(a)(i): repeal and substitute:

“(i) makes regulated offers of debt securities in New Zealand; and”.

Section 157C(1)(c)(i): repeal.

Section 157C(2) to (4): repeal and substitute:

“(2) A person must be treated as satisfying the requirement in subsection (1)(a)(i) if—

“(a) either—

“(i) the person has, before this subsection comes into force, offered debt securities to the public in New Zealand; or

“(ii) the person makes an offer of debt securities to the public in New Zealand to which the Securities Act 1978 continues to apply in accordance with sections 670 to 677 of the Financial Markets Conduct Act 2011; and

“(b) any of those debt securities remain unpaid.

“(3) For the purposes of subsection (2), a reference to an offer of debt securities to the public has the same meaning as an offer of debt securities to the public as set out in section 3 of the Securities Act 1978.

“(4) A person remains a deposit taker until all debt securities offered by the person under regulated offers (or offers referred to in subsection (2)) are repaid.”

Section 157D: repeal and substitute:

“157D Application of Part

This Part, in so far as it applies to trust deeds, applies to every trust deed—

“(a) whether or not the trust deed was registered under the Securities Act 1978 or lodged under the Financial Markets Conduct Act 2011; and

“(b) regardless of when it was so registered or lodged.”

Section 173(f): omit “securities” and substitute “financial products”.

Retirement Villages Act 2003 (2003 No 112)

Section 5: insert in its appropriate alphabetical order:

“financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011”.

Definition of security interest in section 5: repeal and substitute:

“security interest, in relation to a retirement village, means an interest that a person has in all or any part of the retirement village as a consequence of a mortgage (within the meaning of the Property Law Act 2007) over that part of the retirement village”.

Section 38(1): omit “Securities Trustees and Statutory Supervisors Act 2011 that covers” and substitute “Financial Markets Supervisors Act 2011 that covers supervision of”.

Section 39(3): omit “Securities Trustees and Statutory Supervisors Act 2011” and substitute “Financial Markets Supervisors Act 2011”.

Section 43(1)(c): repeal and substitute:

“(c) apply to the court for an order under section 43A.”

New section 43A: insert after section 43:

“43A Court may make orders

“(1) The court may, on application by a statutory supervisor under section 43(1)(c) and after giving the operator and any other person that the court thinks fit the opportunity to be heard, make 1 or more of the orders listed in subsection (2).

“(2) The orders may—

“(a) amend the provisions of the deed of supervision:

“(b) impose restrictions on the activities of the operator (including restrictions on advertising) that the court thinks are necessary to protect the interests of the residents:

“(c) direct that no offer of occupation of the kind specified in the order be made while the order is in force:

“(d) direct the operator to convene a meeting of the residents (and give any other directions it thinks fit relating to the conduct of that meeting) for the purpose of—

“(i) having placed before the residents by the statutory supervisor the information or proposal that the court or the statutory supervisor thinks necessary or appropriate and that relates to their interests; and

“(ii) obtaining the opinions or directions of the residents:

“(e) give directions in relation to the conduct of any meeting convened in accordance with paragraph (d):

“(f) stay any civil actions or civil proceedings before the court by or against the statutory supervisor or the operator:

“(g) restrain the transfer of an interest in all or any part of the retirement village:

“(h) appoint a receiver or manager of the property that constitutes the retirement village (with any powers that the court orders):

“(i) give any other directions that the court considers necessary to protect the interests of the residents or the public.

“(3) The court may vary or cancel an order made under this section.

“(4) In exercising its powers under this section, the court must have regard to the interests of all creditors of the operator.”

Section 107(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Section 107(2): repeal and substitute:

“(2) Subsection (1) does not exempt any person from the application of any provision of the Financial Markets Conduct Act 2011—

“(a) in relation to the offer of any financial products (other than a financial product arising out of a matter referred to in subsection (1)(a)),—

“(i) in the retirement village; or

“(ii) by any operator of a retirement village; or

“(b) in relation to an offer of financial products to any person who is already a resident and who is not obliged to ~~subscribe for~~ acquire the products by an occupation right agreement.”

Royal Society of New Zealand Act 1997 (1997 No 2 (P))

Clause 6(1) of the Schedule: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Sale of Liquor Act 1989 (1989 No 63)

Section 2: insert in its appropriate alphabetical order:

“stock exchange has the same meaning as in section 2(1) of the Companies Act 1993”.

Section 200(1A): omit “is a party to a listing agreement with a stock exchange and that has issued securities which are quoted on such an exchange” and substitute “has issued equity securities that are quoted on a stock exchange”.

Section 225(1) and (2): repeal and substitute:

“(1) A company registered under the Companies Act 1993 that holds a licence must notify the Secretary of the Licensing Authority of—

“(a) any change in the directors of the company; and

“(b) in respect of shares of the company that are not quoted on a stock exchange, any change in the shareholding of the company; and

“(c) in respect of shares of the company that are quoted on a stock exchange, any change in the shareholding of the company under which any person becomes the holder of at least 20% of the quoted shares or of any particular class of quoted shares of the company, if that person did not hold at least 20% of the quoted shares or of that class of quoted shares when the licence was issued to the company.”

Section 225(3): omit “or subsection (2)”.

Section 225(4): omit “incorporated under the Companies Act 1955 or” and substitute “registered under”.

Social Security Act 1964 (1964 No 136)

Section 3(3)(c): omit “superannuation scheme registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Definition of cash assets in section 61E(1): omit “the KiwiSaver Act 2006” in each place where it appears and substitute in each case “subpart 3 of Part 4 of the Financial Markets Conduct Act 2011”.

Paragraph (ea) of the definition of exempt assets in clause 4 of Schedule 27: omit “the KiwiSaver Act 2006” and substitute “subpart 3 of Part 4 of the Financial Markets Conduct Act 2011”.

Paragraph (ea)(ii) of the definition of exempt assets in clause 4 of Schedule 27: omit “that Act” and substitute “the KiwiSaver Act 2006”.

Sports Anti-Doping Act 2006 (2006 No 58)

Section 11(1): omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

State Sector Act 1988 (1988 No 20)

Definition of superannuation scheme or scheme in section 84: repeal and substitute:

“superannuation scheme or scheme means any retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011).”

Section 84B(a): repeal.

State Sector Amendment Act 1990 (1990 No 78)

Section 3: omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

St John's College Trusts Act 1972 (1972 No 6 (P))

Section 11(1)(c): omit “securities of any company, whether incorporated in New Zealand or elsewhere, which is officially listed on a registered exchange's securities market (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “financial products of a company, whether incorporated in New Zealand or elsewhere, that is a listed issuer (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.

Section 11(1)(c): omit “made in the securities” and substitute “made in the financial products”.

State-Owned Enterprises Act 1986 (1986 No 124)

Section 12(2)(c): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Section 18(4) and (5): omit “Securities Markets Act 1988” and substitute in each case “Financial Markets Conduct Act 2011”.

Paragraph (d) of the definition of assets in section 29(1): omit “securities within the meaning of the Securities Act 1978” and substitute “financial products within the meaning of the Financial Markets Conduct Act 2011”.

Paragraph (b) of the definition of liabilities in section 29(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Summary Proceedings Act 1957 (1957 No 87)

Definition of infringement notice in section 2(1): insert after paragraph (b):

“(baa) section 491 of the Financial Markets Conduct Act 2011; or”.

~~Part 2 of Schedule 1: items relating to the Securities Act 1978 and the Securities Markets Act 1988: repeal.~~

~~Part 2 of Schedule 1: insert in its appropriate alphabetical order:~~

~~Financial Markets Conduct Act 2011~~ 35 ~~Failure to prepare and lodge PDS~~

40 ~~Offence to knowingly or recklessly contravene section 37~~

70 ~~Offering financial products in entity that does not exist~~

~~198~~ ~~Offence of false or misleading statements~~

~~238~~ ~~Contravention of insider conduct prohibition~~

~~259~~ ~~False or misleading statement or information~~

~~264~~ ~~Creating false or misleading appearance of trading~~

~~488~~ ~~Offence of knowingly or recklessly contravening prohibition on further offers where defective disclosure in PDS or register entry~~

~~489~~ ~~Offence of knowingly or recklessly contravening other provisions relating to defective disclosure~~

~~496~~ ~~Offence of contravening management banning order~~

Takeovers Act 1993 (1993 No 107)

Paragraph (a) of the definition of code company in section 2(1): repeal and substitute:

“(a) is a listed issuer that has financial products that confer voting rights quoted on the relevant licensed market; or”.

Definitions of quoted, registered exchange, registered exchange's securities market, and security in section 2(1): repeal.

Section 2(1): insert in their appropriate alphabetical order:

“financial product, in relation to a code company,—

“(a) means—

“(i) an equity security within the meaning of section 8 of the Financial Markets Conduct Act 2011, whether or not the security carries voting rights:

“(ii) a debt security, within the meaning of section 8 of the Financial Markets Conduct Act 2011, which carries the right to vote at any annual or general meeting of the code company:

“(iii) a managed investment product, within the meaning of section 8 of the Financial Markets Conduct Act 2011, which carries the right to vote at any annual or general meeting of the code company; and

“(b) includes a financial product that is convertible, at the option of the product holder, into a financial product of the type referred to in paragraph (a)(i), (ii), or (iii)

“licensed market has the meaning set out in section 6(1) of the Financial Markets Conduct Act 2011

“licensed market operator has the meaning set out in section 6(1) of the Financial Markets Conduct Act 2011

“listed issuer has the meaning set out in section 6(1) of the Financial Markets Conduct Act 2011

“quoted in relation to financial products of a person, means financial products of the person that are approved for trading on a licensed market (and, ~~for the avoidance of~~ to avoid doubt, financial products do not cease to be quoted merely because trading in those financial products is suspended)”.

Paragraphs (a) and (b) of the definition of voting right in section 2(1): omit “security” and substitute in each case “financial product”.

Section 20(1)(c) and (e): omit “securities” and substitute in each case “financial products”.

Section 21(b), (c), and (f): omit “security” in each place where it appears and substitute in each case “financial product”.

Section 21(e) and (f): omit “securities” and substitute in each case “financial products”.

Section 22(b): omit “securities” and substitute “financial products”.

Section 22(c): omit “security” and substitute “financial product”.

Section 23(a) and (b): omit “securities” and substitute in each case “financial products”.

Section 33(a) to (c) and (e) to (g): omit “securities” in each place where it appears and substitute in each case “financial products”.

Section 33C(1)(a)(ii): omit “, the Securities Act 1978, or the Securities Markets Act 1988” and substitute “or the Financial Markets Conduct Act 2011”.

Section 33J(a) to (h): omit “securities” in each place where it appears and substitute in each case “financial products”.

Section 33J(e): omit “public”.

Section 33M(c)(ii): omit “securities” and substitute “financial”.

Section 33Q(c): omit “securities” and substitute “financial”.

Section 35(1)(b): repeal and substitute:

“(b) if the code company's financial products are, or were at any material time, quoted on a licensed market, the licensed market operator:”.

Section 35(1)(d) and (e): omit “security” and substitute in each case “financial product”.

Section 35(1)(f): omit “securities” and substitute “financial products”.

Section 35(3)(a): repeal and substitute:

“(a) if the code company's financial products are, or were at any material time, quoted on a licensed market, the licensed market operator:”.

Section 35(3)(c) and (d): omit “security” and substitute in each case “financial product”.

Section 35(3)(e): omit “securities” and substitute “financial products”.

Section 42(1)(a) and (b): omit “security” and substitute in each case “financial product”.

Example in section 43: omit “securities” in each place where it appears and substitute in each case “financial products”.

Section 44B(1)(b)(i) and (ii) and (2): omit “securities” and substitute in each case “financial products”.

Section 44F(b)(i): omit “the Securities Markets Act 1988, the Securities Act 1978, the Securities Trustees and Statutory Supervisors Act 2011,” and substitute “the Financial Markets Conduct Act 2011, the Financial Markets Supervisors Act 2011,”.

Section 44G: omit “for a period stated in the order of 10 years or less” and substitute “permanently or for a period specified in the order”.

Section 44I: omit “section 60A of the Securities Act 1978, section 43F of the Securities Markets Act 1988,” and substitute “subpart 6 of Part 7 of the Financial Markets Conduct Act 2011,”.

Definition of associated persons in section 44L(3): repeal and substitute:

“associated person has the same meaning as in section 11(1) of the Financial Markets Conduct Act 2011”.

Definition of liable in section 44L(3): omit “securities” and substitute “financial products”.

Section 44M(1)(a), (c), (e), and (f): omit “securities” in each place where it appears and substitute in each case “financial products”.

Section 44V(c): repeal and substitute:

“(c) if the code company's financial products are, or were at any material time, quoted on a licensed market, the licensed market operator:”.

Section 44V(f): omit “security” and substitute “financial product”.

Section 44V(g): omit “securities” and substitute “financial products”.

Tarawera Forest Act 1967 (1967 No 45)

Section 10(3): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Trustee Act 1956 (1956 No 61)

Section 42E: omit “, in the Superannuation Schemes Act 1989,” and substitute “, in the Financial Markets Conduct Act 2011,”.

Trustee Companies Act 1967 (1967 No 35)

Section 7(2)(m): omit “Securities Trustees and Statutory Supervisors Act 2011” and substitute “Financial Markets Supervisors Act 2011”.

Section 7(2)(p): repeal and substitute:

“(p) supervisor (as defined in section 4(1) of the Financial Markets Supervisors Act 2011) in respect of a financial product or scheme the supervision of which is covered by the trustee company's licence under that Act:”.

Section 31: add:

“(4) In this section, stock exchange has the same meaning as in section 2(1) of the Companies Act 1993.”

Section 32A(2)(c): repeal and substitute:

“(c) a product disclosure statement in relation to the investment of that money in the fund has been lodged in accordance with the requirements of Part 3 of the Financial Markets Conduct Act 2011 and regulations made under that Act.”

New section 33C: insert after section 33B:

“33C Trustee company may not make regulated offer of managed investment products in certain group investment funds

“(1) A trustee company may not make a regulated offer of managed investment products in a group investment fund established by it under this Part if the fund was established after the date on which this section comes into force.

“(2) Nothing in subsection (1) affects the rights, powers, and duties of a trustee company under sections 29 to 33B.

“(3) In this section, regulated offer and managed investment products have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.”

Veterinarians Act 2005 (2005 No 126)

Clause 22 of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Wellington Methodist Charitable and Educational Trusts Act 1916 (1916 No 13 (L))

Section 31(1)(b): omit “securities of any company, whether incorporated in New Zealand or elsewhere, which are officially listed on a registered exchange's securities market (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “financial products of any company, whether incorporated in New Zealand or elsewhere, that is a listed issuer”.

Section 31(2) and (6): omit “securities” and substitute in each case “financial products”.

Section 31: add:

“(7) In this section, financial products and listed issuer have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.”

Winston Churchill Memorial Trust Act 1965 (1965 No 39)

Section 27(3): omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011)”.

Part 2
Amendments to regulations

Building Societies Regulations 1989 (SR 1989/33)

Definition of equity security in regulation 17(1): revoke and substitute:

“equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Definition of security in regulation 17(1): revoke and substitute:

“security means any financial product within the meaning of section 7 of the Financial Markets Conduct Act 2011”.

Regulation 31(b)(v): omit “other bodies corporate that are parties to listing agreements with a registered exchange (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “listed issuers (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.

Climate Change (Unit Register) Regulations 2008 (SR 2008/357)

Paragraph (c)(ii)(F) of the definition of qualified person in regulation 3: omit “Securities Act 1978, the Securities Markets Act 1988,” and substitute “Financial Markets Conduct Act 2011”.

Deer Industry New Zealand Regulations 2004 (SR 2004/323)

Definition of associated persons in regulation 3: omit “section 2 of the Securities Act 1978” and substitute “section 11(1) of the Financial Markets Conduct Act 2011”.

Electricity (Statistics) Regulations 1996 (SR 1996/17)

Definition of equity security in regulation 2(1): revoke and substitute:

“equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Financial Advisers (Definitions, Voluntary Authorisation, Prescribed Entities, and Exemptions) Regulations 2011 (SR 2011/50)

Regulation 4(3): revoke and substitute:

“(3) Unless the context otherwise requires, any term or expression that is defined in the Financial Markets Conduct Act 2011 or the regulations made under that Act and used, but not defined, in this regulation has the same meaning as in that Act or those regulations.”

Regulation 6(2)(a) and (b): revoke and substitute:

“(a) associated persons within the meaning of section 11(1) of the Financial Markets Conduct Act 2011 (whether or not that Act otherwise applies to those persons); or

“(b) related bodies corporate within the meaning of section 11(2) of the Financial Markets Conduct Act 2011 (whether or not that Act otherwise applies to those bodies corporate); or”.

Regulation 7: revoke.

Financial Service Providers (Exemptions) Regulations 2010 (SR 2010/423)

Regulation 5(2): omit “section 5B(2) of the Securities Markets Act 1988” and substitute “section 11(2) of the Financial Markets Conduct Act 2011”.

Gas Governance (Compliance) Regulations 2008 (SR 2008/253)

Regulation 63(b): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Gas (Information Disclosure) Regulations 1997 (SR 1997/127)

Definition of equity security in regulation 2(1): revoke and substitute:

“equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Definition of security in regulation 2(1): revoke and substitute:

“security means any of the following within the meanings given in section 8 of the Financial Markets Conduct Act 2011:

“(a) an equity security:

“(b) a debt security:

“(c) a managed investment product”.

Gas (Statistics) Regulations 1997 (SR 1997/128)

Definition of equity security in regulation 2(1): revoke and substitute:

“equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Government Superannuation Fund (Ceasing Contributions) Regulations 1995 (SR 1995/172)

Definition of registered superannuation scheme in regulation 2(1): omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.

Health Entitlement Cards Regulations 1993 (SR 1993/169)

Paragraph (c) of the definition of net income in regulation 2(1): omit “superannuation scheme registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.

Lawyers and Conveyancers Act (Lawyers: Nominee Company) Rules 2008 (SR 2008/213)

Paragraph (e) and (f) of the definition of lawyer attorney and lawyer trustee in rule 3.1: omit “party to a listing agreement with a stock exchange” and substitute in each case “listed issuer”.

Rule 3.1: insert in its appropriate alphabetical order:

“listed issuer has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011”.

Overseas Investment Regulations 2005 (SR 2005/220)

Regulation 33(1)(l): omit “trustee of a superannuation scheme registered under the Superannuation Schemes Act 1989” and substitute “supervisor or manager of a retirement scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.

Public Trust Regulations 2002 (SR 2002/198)

Paragraph (a)(i) of the definition of continuing investment in regulation 13(2): revoke and substitute:

“(i) a disclosure statement has been lodged in accordance with the requirements of Part 3 of the Financial Markets Conduct Act 2011 and regulations made under that Act; or”.

Regulation 15: revoke and substitute:

“15 Dispensation from ongoing disclosure

Public Trust is not required to make ongoing disclosure in respect of a qualifying beneficiary to whom, in accordance with the requirements of—

“(a) Part 3 of the Financial Markets Conduct Act 2011 and regulations made under that Act, a product disclosure statement was ~~required to be, and was,~~ given; or

“(b) sections 33 and 37A of the Securities Act 1978 and regulations made under that Act, an investment statement was ~~required to be, and was,~~ issued.”

Real Estate Agents (Duties of Licensees) Regulations 2009 (SR 2009/281)

Paragraph (i) of the definition of related person in form 2 of the Schedule: revoke and substitute:

“(i) an entity that has an interest in the licensee or an entity in which the licensee has an interest (except where either interest is in quoted financial products within the meanings given for those terms in section 6(1) of the Financial Markets Conduct Act 2011).”

Real Estate Agents (Licensing) Regulations 2009 (SR 2009/282)

Paragraph 11 of form 5 in Schedule 2: omit “Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Reserve Bank of New Zealand (Designated Settlement System—NZCDC) Order 2010 (SR 2010/277)

Paragraph (d) of the definition of NZCDC settlement system in clause 3: replace “securities” with “financial products”.

Clause 1(h) of the Schedule: replace “securities” with “financial products” in each place.

Paragraph (d) of the definition of specified agreements in clause 2 of the Schedule: replace “securities” with “financial products”.

Securities Transfer (Approval of Austraclear New Zealand Electronic Registries Interface System) Order 2010 (SR 2010/4)

Clause 3: omit “Securities Transfer Act 1991” and substitute “Financial Markets Conduct Act 2011”.

Heading to clause 4: omit “securities” and substitute “financial products”.

Clause 4: omit “securities” and substitute “financial products to which subpart 9 of Part 5 of the Financial Markets Conduct Act 2011 applies”.

Clause 1 of the Schedule: insert in its appropriate alphabetical order:

“security means a financial product to which subpart 9 of Part 5 of the Financial Markets Conduct Act 2011 applies”.

Clause 2(o)(iii) of the Schedule: omit “conduct rules of an exchange registered under Part 2B of the Securities Markets Act 1988” and substitute “market rules of a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011”.

Securities Transfer (Approval of FASTER System) Order 2001 (SR 2001/238)

Clause 3: omit “Securities Transfer Act 1991” and substitute “Financial Markets Conduct Act 2011”.

Heading to clause 4: omit “securities” and substitute “financial products”.

Clause 4: omit “securities” and substitute “financial products to which subpart 9 of Part 5 of the Financial Markets Conduct Act 2011 applies”.

Definition of securities in clause 1 of the Schedule: omit “securities within the meaning of section 2 of the Securities Transfer Act 1991” and substitute “financial products to which subpart 9 of Part 5 of the Financial Markets Conduct Act 2011 applies”.

Securities Transfer (Approval of System for Electronic Transfer of Securities on Australian Stock Exchange) Order 1997 (SR 1997/102)

Clause 2: omit “Securities Transfer Act 1991” and substitute “Financial Markets Conduct Act 2011”.

Heading to clause 3: omit “securities” and substitute “financial products”.

Clause 3: omit “securities on the Australian Stock Exchange, the essential requirements of which are described in the Schedule, is approved for the transfer of securities” and substitute “financial products on the Australian Stock Exchange, the essential requirements of which are described in the Schedule, is approved for the transfer of financial products to which subpart 9 of Part 5 of the Financial Markets Conduct Act 2011 applies”.

Definition of approved security in the Schedule: omit “means a security” and substitute “means a financial product”.

Social Security (Income and Cash Assets Exemptions) Regulations 2011 (SR 2011/287)

Definition of non-KiwiSaver scheme in regulation 32: revoke and substitute:

“non-KiwiSaver scheme means a scheme that is registered as a superannuation scheme under subpart 3 of Part 4 of the Financial Markets Conduct Act 2011”.

Definition of scheme in regulation 32: revoke and substitute:

“scheme means a retirement scheme within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011 (for example, a KiwiSaver scheme or a non-KiwiSaver scheme)”.

Social Security (Long-term Residential Care) Regulations 2005 (SR 2005/183)

Regulation 10(1D): omit “subclause (1)(i)” and substitute “this subclause and in subclause (1)(i)”.

Regulation 10(1D): insert in its appropriate alphabetical order:

“benefit means any lump sum, annuity, pension, allowance, refund, or other payment arising from membership of a superannuation scheme”.

Paragraph (a) of the definition of specified non-KiwiSaver scheme or scheme in regulation 10(1D): revoke and substitute:

“(a) is registered as a superannuation scheme under subpart 3 of Part 4 of the Financial Markets Conduct Act 2011; and”.

Paragraph (a) of the definition of withdrawal in regulation 10(1D): omit “(as defined in section 2(1) of the Superannuation Schemes Act 1989)”.

Social Security (Temporary Additional Support) Regulations 2005 (SR 2005/334)

Definition of non-KiwiSaver scheme in regulation 8B(5): revoke and substitute:

“non-KiwiSaver scheme means a scheme that is registered as a superannuation scheme under subpart 3 of Part 4 of the Financial Markets Conduct Act 2011”.

Definition of scheme in regulation 8B(5): revoke and substitute:

“scheme means a retirement scheme within the meaning of section ~~111(4)~~ 6(1) of the Financial Markets Conduct Act 2011 (for example, a KiwiSaver scheme or a non-KiwiSaver scheme)”.

Takeovers Code Approval Order 2000 (SR 2000/210)

Paragraph (a) of the definition of code company in rule 3(1) of the Schedule: revoke and substitute:

“(a) is a listed issuer and that has financial products that confer voting rights quoted on the relevant licensed market; or”.

Paragraph (c) of the definition of equity security in rule 3(1) of the Schedule: omit “securities” and substitute “financial products”.

Definitions of listed, registered exchange, and registered exchange's securities market in rule 3(1) of the Schedule: revoke.

Rule 3(1) of the Schedule: insert in their appropriate alphabetical order:

“licensed market has the meaning set out in section 6(1) of the Financial Markets Conduct Act 2011

“licensed market operator has the meaning set out in section 6(1) of the Financial Markets Conduct Act 2011

“listed issuer has the meaning set out in section 6(1) of the Financial Markets Conduct Act 2011”.

Rule 25(5)(c) of the Schedule: revoke and substitute:

“(c) the licensed market operator (if any voting securities of the target company are quoted on a licensed market operated by the operator).”

Rule 26(2)(c) of the Schedule: revoke and substitute:

“(c) the licensed market operator (if any voting securities of the target company are quoted on a licensed market operated by the operator).”

Rule 28(1)(d) of the Schedule: revoke and substitute:

“(d) the licensed market operator (if any voting securities of the target company are quoted on a licensed market operated by the operator).”

Rule 36(2)(a) of the Schedule: revoke and substitute:

“(a) be given no later than the day after the date of acquisition,—

“(i) if any of the offeror, any holding company of the offeror, or the target company is a listed issuer, to the target company, the licensed market operator, and the Panel; or

“(ii) if none of the offeror, any holding company of the offeror, or the target company is a listed issuer, to the target company and the Panel; and”.

Rule 41(2) and (3) of the Schedule: revoke and substitute:

“(2) If the offer will involve a regulated offer under the Financial Markets Conduct Act 2011, the notice referred to in subclause (1) must be accompanied by a copy of every relevant document.

“(3) In subclause (2), every relevant document means every document that must be registered or lodged with, or produced to, any of the following persons or bodies for the offer to comply with the Financial Markets Conduct Act 2011 (including any exemption granted under the Financial Markets Conduct Act 2011 or any mutual recognition scheme established under that Act) or with the laws of any overseas jurisdiction in which the offer of the equity securities is to be made:

“(a) the Registrar of Financial Service Providers (including any equivalent person or body in an overseas jurisdiction):

“(b) any regulatory body (including a regulator in an overseas jurisdiction):

“(c) any offeree of the securities.

“(4) Subclauses (2) and (3), as in force before the commencement of this subclause, continue to apply to an offer of securities to which the Securities Act 1978 applies as if the Financial Markets Conduct Act 2011 had not been enacted.”

Rule 41A(1) of the Schedule: revoke and substitute:

“(1) If the target company is a listed issuer, the offeror must send (electronically, if possible) to the licensed market operator a copy of the documents that the offeror is required to send under rule 41.”

Rule 41A(2) of the Schedule: omit “registered exchange” and substitute “licensed market operator”.

Rule 42(1) of the Schedule: revoke and substitute:

“(1) If it is a listed issuer, the target company must, immediately on receipt of a takeover notice,—

“(a) notify the licensed market operator in writing that a takeover notice has been received; and

“(b) send (electronically, if possible) to the licensed market operator a copy of the notice and the documents that accompanied it under rule 41.”

Rule 42(2) of the Schedule: omit “listed company” and substitute “listed issuer”.

Rule 44(1)(d)(ii) of the Schedule: omit “Securities Act 1978 or any other applicable law to accompany an offer of securities” and substitute “Financial Markets Conduct Act 2011, the Securities Act 1978, or any other applicable law to accompany an offer of equity securities”.

Rule 45(1)(b) of the Schedule: omit “registered exchange” and substitute “licensed market operator”.

Rule 45(2) of the Schedule: revoke and substitute:

“(2) Subclause (1)(b) applies only if the offeror's or the target company's voting securities are quoted on a licensed market that is operated by the licensed market operator.”

Rule 46(a)(ii)(C) of the Schedule: revoke and substitute:

“(C) the licensed market operator (if the voting securities of the target company or the offeror are quoted on a licensed market that is operated by the operator); and”.

Rule 49A(2) of the Schedule: revoke and substitute:

“(2) If the target company or the offeror or any holding company of the offeror is a listed issuer, the offeror must provide the licensed market operator with the same notification that is required under subclause (1).”

Rule 51 of the Schedule: revoke and substitute:

“51 Notification of dominant ownership

If a person becomes a dominant owner in a code company, that person must immediately send a written notice of that fact to the code company, the Panel, and the licensed market operator (if any voting securities of the code company are quoted on a licensed market that is operated by the operator).”

Rule 54(4)(a) of the Schedule: revoke and substitute:

“(a) sent immediately to the code company, the Panel, and (if the code company is a listed issuer) the licensed market operator; and”.

Rule 57(5)(a) of the Schedule: revoke and substitute:

“(a) immediately to the Panel and, if the target company is a listed issuer, to the licensed market operator; and”.

Rule 57(6)(a) of the Schedule: revoke and substitute:

“(a) immediately to the Panel and, if the target company is a listed issuer, to the licensed market operator; and”.

Paragraph (a) of the definition of annual report in clause 18(6) of Schedule 2 of the Schedule: revoke and substitute:

“(a) if any voting securities of the target company are quoted on a licensed market, the annual report and financial statements (including the auditor's report on those financial statements) that the target company is required by the licensed market operator to send to the target company's equity security holders; or”.

Paragraph (a) of the definition of half-yearly report in clause 18(6) of Schedule 2 of the Schedule: revoke and substitute:

“(a) if any voting securities of the target company are quoted on a licensed market, the half-yearly report and half-yearly financial statements (including the auditor's report on such financial statements, if any) that the issuer is required by the rules of the licensed market to send to equity security holders of the issuer; or”.

Clause 22 of Schedule 2 of the Schedule: omit “stock exchange” and substitute “licensed market”.

Clause 23(1) of Schedule 2 of the Schedule: omit “stock exchange” and substitute “licensed market”.

Clause 23(1)(b) of Schedule 2 of the Schedule: omit “exchange” and substitute “licensed market”.

Clause 23(2) of Schedule 2 of the Schedule: omit “exchange” and substitute “licensed market”.

Trustee Companies (Group Investment Funds: Disclosure of Expenses and Management Fees) Regulations 2003 (SR 2003/121)

Paragraph (a)(i) of the definition of continuing investment in regulation 13(2): revoke and substitute:

“(i) a disclosure statement has been lodged in accordance with the requirements of Part 3 of the Financial Markets Conduct Act 2011 and regulations made under that Act; or”.

Regulation 15: revoke and substitute:

“15 Dispensation from ongoing disclosure

The trustee company is not required to make ongoing disclosure in respect of a qualifying beneficiary to whom, in accordance with the requirements of—

“(a) Part 3 of the Financial Markets Conduct Act 2011 and regulations made under that Act, a product disclosure statement was ~~required to be, and was,~~ given; or

“(b) sections 33 and 37A of the Securities Act 1978 and regulations made under that Act, an investment statement was ~~required to be, and was,~~ issued.

“Compare: SR 2002/198 r 15”.

s 563B

1 Transitional provisions subject to transitional regulations and exemptions

2 Interpretation

Part 1
Transitional provisions for offers of financial products

3 Act applies to offer unless former enactments continue to apply

4 Former enactments continue to apply if prospectus registered before commencement

5 Issuer may elect to comply with former enactments instead of this Act if prospectus registered within 12 months of commencement

6 Transitional provisions that apply after 12-month date in respect of registered prospectuses

7 Former enactments apply if no prospectus is required unless issuer elects otherwise

8 This Act and 1978 Act are (on transitional basis) alternative means of compliance

9 All offers and allotments under old law must cease after scheme registered

10 All offers and allotments under old law must cease within 2 years of commencement

11 FMA may continue to perform and exercise functions, duties, and powers

12 Part does not prevent PDS from being lodged

Part 2
Transitional provisions relating to securities allotted under Securities Act 1978

13 Part applies to securities allotted under Securities Act 1978

14 Interpretation in this Part

Until effective date

15 Former enactments continue to apply until effective date

16 KiwiSaver schemes, superannuation schemes, and unit trusts continue under former enactments until effective date

17 Transition period

Transitional provisions on and after effective date

18 Ongoing requirements of this Act apply on and after effective date

19 Issuer of debt security must lodge trust deed and supply information

20 Managed investment scheme treated as being registered and issuer must supply information

21 Type of registration

22 Registrar to amend register

23 Restriction on making regulated offers and accepting contributions if requirements have not been complied with

24 Issuer may amend or replace governing document with FMA's consent

25 Conversion of governing documents to separate governing documents

26 Amalgamation of schemes

27 Amended enactments continue to apply or have effect in connection with securities

28 Issuer must send notification to security holders

29 PDS treated as having been given

30 FMA may continue to perform and exercise functions, duties, and powers

31 Certain requirements of former law continue for participatory securities that are not financial products

Part 3
Other transitional provisions

Unit trusts and superannuation schemes in relation to which offers to public have not been made

32 Unit trusts in relation to which offers to public have not been made

33 Superannuation schemes in relation to which offers to public have not been made

Amended enactments continue to apply or have effect in connection with schemes

34 Amended enactments continue to apply or have effect in connection with schemes

Extra transitional provisions relating to managed investment schemes

35 Remaining trustees (if any) cease to hold office

36 Restricted schemes have 3 years to comply with related party asset 5% cap rule

Repealed enactments continue to be financial markets legislation

38 Repealed enactments continue to be financial markets legislation

Licensing of financial product markets

39 Transition process for existing financial product markets

Market services licences

40 Authorised dealers treated as holding market services licence

41 FMA may exercise powers in respect of licences

Approval of electronic transfer systems continues

42 Approval of electronic transfer systems continues

References to banning orders under this Act include references to banning orders under former enactments

43 References to banning orders under this Act include references to banning orders under former enactments

Financial reporting

44 Issuers continue to be issuers under Financial Reporting Act 1993

Offences and contraventions under repealed and revoked enactments

45 Transitional provision for offences and contravention under repealed and revoked enactments

Contributory mortgages

46 Former law continues for contributory mortgages

1 Transitional provisions subject to transitional regulations and exemptions

This schedule is subject to—
- (a) any regulations made under section 521:
- (b) any exemption granted under subpart 2 of Part 8 of this Act.

2 Interpretation

In this schedule, this Act includes Part 9 and Schedule 4.

Part 1
Transitional provisions for offers of financial products

3 Act applies to offer unless former enactments continue to apply

(1) This Act applies to an offer of financial products unless the former enactments apply in accordance with this Part.
(2) In this Part,—

1978 Act means the Securities Act 1978

12-month date means the date that is 12 months after the commencement of this clause
former enactments means each of the following (as in force immediately before the commencement of this clause):
- (a) the 1978 Act:
- (b) the Securities Regulations 2009 and any other regulations made under the 1978 Act:
- (c) exemptions granted under the 1978 Act (to the extent that those exemptions apply to the relevant offer of securities).
(3) In this Part, issuer, prospectus, registered prospectus, and securities have the same meanings as in the 1978 Act.

4 Former enactments continue to apply if prospectus registered before commencement

If securities are offered in a prospectus that is registered under the 1978 Act before the commencement of this clause, the former enactments continue to apply to the offer and allotment of those securities under that prospectus as if this Act had not been enacted.

5 Issuer may elect to comply with former enactments instead of this Act if prospectus registered within 12 months of commencement

(1) Despite the repeal of the 1978 Act, an issuer of securities may register a prospectus in respect of the securities in accordance with the former enactments on or before the 12-month date.

(2) If securities are offered in a prospectus that is registered under subclause (1), the former enactments apply, as if this Act had not been enacted, to the offer and allotment of those securities under that prospectus only if the issuer makes an election under subclause (3).

(3) For the purposes of subclause (2), an issuer may elect for the former enactments to apply to an offer of securities by including a statement in the prospectus to the effect that the Securities Act 1978 applies to the offer.

(4) The statement referred to in subclause (3) may include additional information about an applicable exemption granted under the 1978 Act that is necessary to ensure that the statement is not misleading.

6 Transitional provisions that apply after 12-month date in respect of registered prospectuses

If, before the close of the 12-month date, the former enactments apply to an offer of securities in a registered prospectus, those securities may continue to be offered and allotted under that prospectus and, for that purpose, the former enactments continue to apply as if this Act had not been enacted.

7 Former enactments apply if no prospectus is required unless issuer elects otherwise

(1) If, under the 1978 Act or an exemption granted under that Act, no registered prospectus is required for an offer of securities to the public in New Zealand, the former enactments apply, as if this Act had not been enacted, to any offer and allotment of those securities that is made before the close of the date that is 2 years after the commencement of this clause unless the issuer makes an election, under subclause (2), for this Act to apply.
(2) For the purposes of subclause (1), an issuer may elect for this Act to apply to an offer of securities made after a particular date by—
- (a) giving to the FMA, before that date, a notice to the effect that this Act applies to the offer of the securities made after that date; and
- (b) including a copy of that notice on an Internet site maintained by, or on behalf of, the issuer at all reasonable times during the period between that date and the earlier of the close of the offer or the close of the date that is 2 years after the commencement of this clause.

8 This Act and 1978 Act are (on transitional basis) alternative means of compliance

If, in accordance with this Part,—
- (a) this Act applies to an offer of securities, the former enactments do not apply to the offer:
- (b) the former enactments apply to an offer of securities, this Act does not apply to the offer.

9 All offers and allotments under old law must cease after scheme registered

Despite clauses 3 to 8, no offer or allotment of managed investment products may be made under the former enactments after the date on which the managed investment scheme to which the products relate becomes a registered scheme (or is treated as being a registered scheme under Part 2 of this schedule).

10 All offers and allotments under old law must cease within 2 years of commencement

Despite clauses 3 to 8, no offer or allotment of securities may be made under the former enactments after the date that is 2 years after the commencement of this clause (and this Act applies to all offers of financial products made after that date).

11 FMA may continue to perform and exercise functions, duties, and powers

If the former enactments continue to apply to an offer of securities, the FMA may continue to perform and exercise all of its functions, duties, and powers conferred or imposed on it by or under the former enactments as if this Act had not been enacted (for example, it may grant an exemption under section 70B of the 1978 Act).

12 Part does not prevent PDS from being lodged

Nothing in this Part prevents an issuer from lodging a PDS in preparation for making an offer of financial products under Part 3 of this Act.

Part 2
Transitional provisions relating to securities allotted under Securities Act 1978

13 Part applies to securities allotted under Securities Act 1978

(1) This Part applies to an allotted security offered pursuant to an offer for which, or for which but for an exemption granted by the FMA or the Securities Commission under the 1978 Act, an investment statement or a registered prospectus, or both, is or was required under that Act.

(2) However, this Part does not apply to a security if, before the commencement of this clause, the security was cancelled, redeemed, or forfeited, or all of the obligations owing under the security had been discharged.

(3) A security referred to in subclause (1) includes a security allotted under an offer to which the 1978 Act applies under Part 1 of this schedule.

14 Interpretation in this Part

(1) In this Part,—

1978 Act means the Securities Act 1978

effective date, in relation to a particular security, means the earlier of the dates set out in clause 17(1)
former enactments—
- (a) means the 1978 Act, the Securities Regulations 2009, exemptions granted under the 1978 Act, and any other enactments made under the 1978 Act; and
- (b) includes,—
  - (i) in relation to an interest in a KiwiSaver scheme, the KiwiSaver Act 2006:
  - (ii) in relation to an interest in a superannuation scheme (other than a KiwiSaver scheme), the Superannuation Schemes Act 1989:
  - (iii) in relation to a unit in a unit trust, the Unit Trusts Act 1960:
  - (iv) the Securities Trustees and Statutory Supervisors Act 2011
issuer, in relation to a security, means,—
- (a) before the effective date, the issuer within the meaning of the 1978 Act:
- (b) on and after the effective date, the issuer within the meaning of section 10
KiwiSaver schemes register means the KiwiSaver schemes register established under the KiwiSaver Act 2006

transition period has the meaning set out in clause 17(1).
(2) In this Part, investment statement, registered prospectus, and securities have the same meanings as in the 1978 Act (as in force immediately before the commencement of this clause).

(3) In this clause and clause 16, KiwiSaver scheme, scheme, superannuation scheme, unit, and unit trust have the same meanings as in section 2(1) of the 1978 Act (as in force immediately before the commencement of this clause).

Until effective date

15 Former enactments continue to apply until effective date

To the extent that the former enactments would otherwise apply to a security to which this Part applies (or to any scheme to which the security relates), those enactments continue to apply during the transition period as if this Act had not been enacted.

16 KiwiSaver schemes, superannuation schemes, and unit trusts continue under former enactments until effective date

(1) If a security to which this Part applies is—
- (a) an interest in a KiwiSaver scheme, the KiwiSaver scheme continues to be registered in the KiwiSaver schemes register during the transition period as if this Act had not been enacted:
- (b) an interest in a superannuation scheme (other than a KiwiSaver scheme), the superannuation scheme continues to be registered under the Superannuation Schemes Act 1989 during the transition period as if this Act had not been enacted:
- (c) a unit in a unit trust, the unit trust continues to be subject to the Unit Trusts Act 1960 during the transition period as if this Act had not been enacted.
(2) This clause does not limit clause 15.

17 Transition period

(1) In this Part, the transition period for a particular security is the period beginning on the date on which this clause comes into force and ending on the close of the day before the earlier of the following dates:
- (a) the date that the issuer of the security elects; or
- (b) the date that is 2 years after the commencement of this clause.
(2) If the issuer elects an effective date that is earlier than 2 years after the commencement of this clause, the issuer must notify the FMA and the Registrar of the elected date at least 20 working days before that date.

Transitional provisions on and after effective date

18 Ongoing requirements of this Act apply on and after effective date

(1) On and after the effective date for a particular security to which this Part applies, the following apply to the security (and, in the case of a managed investment product, to the managed investment scheme to which it relates):
- (a) subpart 4 of Part 3 of this Act (ongoing disclosure and updating of registers):
- (b) Part 4 of this Act (governance of financial products):
- (c) Part 6A of this Act (financial reporting):
- (d) any regulations made for the purposes of subpart 4 of Part 3, Part 4, or Part 6A of this Act:
- (e) any other provision of this Act relating to the enforcement, application, or effect of subpart 4 of Part 3, Part 4, or Part 6A.
(2) The provisions referred to in subclause (1) apply with all necessary modifications as if the security had been offered and allotted under a regulated offer under this Act.
(3) However, subclause (1) and clauses 19, 20, and 28 (obligations relating to registration of scheme under this Act) do not apply to a security if,—
- (a) before the effective date, the security is cancelled, redeemed, or forfeited, or all of the obligations owing under the security have been discharged; or
- (b) on the effective date, the security is not a financial product within the meaning of section 7 (but see clause 31); or
- (c) under the 1978 Act, the security was a debt security but, as a result of section 5(2C) or (3) of that Act, section 33(2) of that Act did not apply to the security; or
- (d) under the 1978 Act, the security was a participatory security but, as a result of section 5(3) of that Act, section 33(3) of that Act did not apply to the security.

19 Issuer of debt security must lodge trust deed and supply information

(1) If a security to which this Part applies is a debt security (within the meaning of section 8), the issuer must—
- (a) ensure that a copy of the trust deed that complies with sections 90 to 92 is lodged with the Registrar before the effective date; and
- (b) supply to the Registrar and the FMA, before the effective date,—
  - (i) the names and addresses of the persons who, on the effective date, will be the issuer and the licensed supervisor; and
  - (ii) all other prescribed information and documents relating to the debt security.
(2) See subpart 3 of Part 7 of this Act, which provides for civil liability for a contravention of subclause (1).

20 Managed investment scheme treated as being registered and issuer must supply information

(1) If a security to which this Part applies is a managed investment product,—
- (a) the managed investment scheme to which the product relates (the scheme) must, on and after the effective date, be treated as being a registered scheme; and
- (b) the issuer must ensure that a copy of the governing document for the scheme that complies with sections 122 to 124 is lodged with the Registrar before the effective date; and
- (c) the issuer must supply to the Registrar and the FMA, before the effective date,—
  - (i) the name and address of the person who, on the effective date, will be the manager; and
  - (ii) the name and address of the person who, on the effective date, will be the licensed supervisor (unless the scheme is a restricted scheme); and
  - (iii) all other prescribed information and documents relating to the managed investment product and the scheme.
(2) See subpart 3 of Part 7 of this Act, which provides for civil liability for a contravention of subclause (1)(b) or (c).
(3) Nothing in this clause or clause 21 prevents the FMA from—
- (a) directing that the registration of a scheme to which this clause applies be cancelled under section 180; or
- (b) exercising any other power in respect of such a scheme.

21 Type of registration

(1) A managed investment scheme that is treated as being registered under clause 20 must be treated as being registered on the register of managed investment schemes as the 1 or more of the following types of scheme that apply to it:
- (a) a KiwiSaver scheme if, immediately before the effective date, the scheme was registered as a KiwiSaver scheme in the KiwiSaver schemes register:
- (b) a KiwiSaver scheme that is a restricted scheme if paragraph (a) applies and, immediately before the effective date, the scheme was identified as a restricted scheme on the KiwiSaver schemes register:
- (c) a superannuation scheme if, immediately before the effective date, the scheme was registered under the Superannuation Schemes Act 1989:
- (d) a superannuation scheme that is a restricted scheme if paragraph (c) applies and an Order in Council has designated the scheme as a restricted scheme under subclause (2):
- (e) a restricted scheme that is an employer-related scheme if either paragraph (b) or (d) applies and an Order in Council under subclause (2) has designated the scheme as an employer-related scheme:
- (f) a complying superannuation fund if paragraph (c) applies and, immediately before the effective date, the scheme was approved as a complying superannuation fund under section 35 of the Superannuation Schemes Act 1989.
(2) The Governor-General may, by Order in Council, on the advice of the Minister given in accordance with a recommendation of the FMA,—
- (a) designate a scheme as a restricted scheme for the purposes of subclause (1)(d):
- (b) designate any scheme that will be a restricted scheme under this section as being an employer-related scheme for the purposes of section 158.
(3) Section 117(1)(c) (which prevents certain changes without the FMA's consent to the conditions of entry of scheme participants) applies to a restricted scheme on and after the date on which a designation by Order in Council comes into force under subclause (2) in all cases as if that date of designation were the date of the scheme's registration under this Part.

22 Registrar to amend register

(1) The Registrar must, on or as soon as practicable after the effective date for a managed investment scheme to which clause 20(1)(a) applies, amend the register of managed investment schemes to include an entry relating to the scheme.

(2) The Registrar is not required to act under subclause (1) before clause 20(1)(b) and (c) have been complied with.

23 Restriction on making regulated offers and accepting contributions if requirements have not been complied with

(1) This clause applies if an issuer contravenes clause 20(1)(b) or (c) in respect of a managed investment scheme that is treated as being a registered scheme under clause 20(1)(a).

(2) The issuer must not, on and after the effective date, make a regulated offer of a managed investment product, or accept further contributions, in respect of that managed investment scheme.
(3) Subclause (2) ceases to apply if—
- (a) the issuer lodges with the Registrar a copy of the governing document for the scheme that complies with sections 122 to 124; and
- (b) the issuer supplies to the Registrar and the FMA the prescribed information and documents; and
- (c) the register of managed investment schemes includes an entry relating to the scheme.
(4) See subpart 3 of Part 7 of this Act, which provides for civil liability for a contravention of this clause.

24 Issuer may amend or replace governing document with FMA's consent

(1) This clause applies—
- (a) to a governing document that, immediately before the commencement of this clause, relates to a debt security or constitutes or governs a scheme; and
- (b) despite anything to the contrary in the governing document or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the governing document.
(2) The issuer of the debt security or the manager of the scheme (as the case may be) may amend or replace the governing document with the FMA’s consent if the FMA is satisfied that—
- (a) the amendment or replacement is necessary or desirable to ensure, or in connection with ensuring, that the governing document complies with the requirements of this Act; or
- (b) (for any amendments or differences in the replaced governing document to which paragraph (a) does not apply) the procedures of the existing governing document for amendments have been complied with.
(3) An amendment or a replacement made under this clause must be treated for all purposes as if it were made in accordance with the governing document.
(4) On the amendment or replacement under this clause of a governing document that constitutes or governs a scheme,—
- (a) the scheme must be treated as the same scheme as it was immediately before the amendment or replacement of the existing governing document; and
- (b) the persons who were members of the scheme immediately before the amendment or replacement of the existing governing document continue to be members of the same scheme; and
- (c) the assets or liabilities of a scheme or fund must be treated as if they vested in the scheme or fund immediately after the amendment or replacement of the existing governing document, but for the purposes of the Inland Revenue Acts this must be treated as if it is not a transfer (as defined in section YA 1 of the Income Tax Act 2007).
(5) In this clause and clauses 25 and 26, scheme has the same meaning as in section 2(1) of the 1978 Act (as in force immediately before the commencement of this clause).

(6) To avoid doubt, this clause does not limit the ways in which a governing document may be amended or replaced in accordance with its terms or any enactment or rule of law.

25 Conversion of governing documents to separate governing documents

(1) This clause applies—
- (a) to a governing document (existing governing document) that, immediately before the commencement of this clause, constitutes or governs 2 or more schemes or funds; and
- (b) despite anything to the contrary in the governing document or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the governing document.
(2) The parties to an existing governing document may rescind the existing governing document, provided that the existing governing document is immediately replaced with a new governing document in respect of each scheme or fund constituted or governed by the existing governing document.
(3) However,—
- (a) an existing governing document must not be rescinded, and new governing documents must not be executed, under this clause without the prior written consent of the FMA; and
- (b) the parties to, and provisions of, a new governing document must differ from the parties to, and provisions of, the existing governing document only to the extent that—
  - (i) it is necessary or desirable to ensure, or in connection with ensuring, that the new governing document complies with this Act; or
  - (ii) (for any differences to which subparagraph (i) does not apply) the procedures of the existing governing document for amendments have been complied with in relation to those differences.
(4) On the replacement of an existing governing document with new governing documents under this clause,—
- (a) the 2 or more schemes or funds are governed by separate governing documents rather than by the existing governing document; and
- (b) a scheme or fund must be treated as the same scheme or fund as it was immediately before the replacement of the existing governing document; and
- (c) the persons who were members of a scheme or fund immediately before the replacement of the existing governing document continue to be members of the same scheme or fund; and
- (d) no assets or liabilities are removed from any of the schemes or funds; and
- (e) the 2 or more schemes must be treated as separate persons for the purposes of the Inland Revenue Acts; and
- (f) no new settlement (as defined in section YA 1 of the Income Tax Act 2007) occurs.
(5) This clause expires, and is repealed, 2 years after the commencement of this clause.

(6) To avoid doubt, this clause does not limit the ways in which a scheme or fund may be divided into separate schemes in accordance with the terms of the governing document or any enactment or rule of law.

Compare: 2011 No 8 s 64

26 Amalgamation of schemes

(1) This clause applies—
- (a) to 2 or more governing documents (existing governing documents) that, immediately before the commencement of this clause, constitute or govern 2 or more schemes or funds (existing separate schemes); and
- (b) despite anything to the contrary in the existing governing documents or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the existing governing documents.
(2) The parties to the existing governing documents may rescind the existing governing documents, provided that the existing governing documents are immediately replaced with 1 new governing document and 1 scheme or fund (amalgamated scheme) in respect of all of the existing separate schemes constituted or governed by the existing governing documents.
(3) However,—
- (a) existing governing documents must not be rescinded, and a new governing document must not be executed, under this clause without the prior written consent of the FMA; and
- (b) the parties to, and provisions of, a new governing document must differ from the parties to, and provisions of, the existing governing documents only to the extent that—
  - (i) it is necessary or desirable to ensure, or in connection with ensuring, that the new governing document complies with this Act; or
  - (ii) (for any differences to which subparagraph (i) does not apply) the procedures of the existing governing documents for amendments have been complied with in relation to those differences.
(4) On the replacement of the existing governing documents with 1 new governing document and the amalgamated scheme under this clause,—
- (a) the amalgamated scheme is governed by 1 governing document rather than each existing separate scheme being governed by separate governing documents; and
- (b) the amalgamated scheme must be treated as the same scheme as the existing separate schemes combined for all purposes (other than as specified in paragraphs (d) to f)); and
- (c) the persons who were members of each existing separate scheme immediately before the replacement of the existing governing documents are members of the amalgamated scheme; and
- (d) the amalgamated scheme must be treated as the same person as the existing separate schemes combined for the purposes of the Inland Revenue Acts other than—
  - (i) for the purposes of the PIE rules (as defined in section YA 1 of the Income Tax Act 2007); and
  - (ii) as specified in paragraph (f)); and
- (e) the assets or liabilities of the existing separate schemes must be treated as if they vested in the amalgamated scheme immediately after the replacement of the existing governing documents, but for the purposes of the Inland Revenue Acts this must be treated as if it is not a transfer (as defined in section YA 1 of the Income Tax Act 2007); and
- (f) subparts IA and IQ of Part I of the Income Tax Act 2007 (which relate to the treatment of tax losses) do not apply to any carry forward of a loss balance of an existing separate scheme to the amalgamated scheme for the income year in which an existing governing document is replaced or for any later income year.
(5) This clause expires, and is repealed, 2 years after the commencement of this clause.

(6) To avoid doubt, this clause does not limit the ways in which schemes or funds may be amalgamated in accordance with the terms of their governing documents or any enactment or rule of law.

27 Amended enactments continue to apply or have effect in connection with securities

(1) If, before the commencement of this clause, an enactment that is amended by this Act applied, or had an effect, in connection with a security to which this Part applies, the enactment continues to apply or have the effect in connection with the security as if this Act had not been enacted until the effective date (unless the context otherwise requires).

(2) Subclause (1) must be treated as applying to a security offered under the 1978 Act in accordance with Part 1 of this schedule.

(3) See clause 34 (amended enactments continue to apply or have effect in connection with schemes).

28 Issuer must send notification to security holders

(1) The issuer of a security must, before or within 3 months after the effective date, send a written notice containing the following information to the security holder at the holder's last known address:
- (a) the effective date and a statement to the effect that the requirements of this Act will apply after that date:
- (b) the names and addresses of the issuer, the supervisor (if any), and the custodian (if any):
- (c) in the case of a debt security or managed investment product,—
  - (i) a statement to the effect that the holder may obtain a copy of the governing document by electronic means; and
  - (ii) a statement to the effect that the holder has a right to receive from the issuer, free of charge, a copy of the governing document if the holder, within 15 working days of receiving the notice, makes a request to the issuer to receive a copy of the governing document:
- (d) if a PDS has been lodged for an offer of financial products of the same class as the security, a statement to the effect that the holder may obtain a copy of the PDS by electronic means:
- (e) in the case of a managed investment product, the statement of investment policy and objectives or a statement to the effect that the holder may obtain a copy of that statement by electronic means:
- (f) if the notice contains a statement to the effect that the holder may obtain a copy of a document by electronic means, a statement as to how the holder may obtain a copy of the document by electronic means (for example, from a specified Internet site address):
- (g) any other prescribed information.
(2) This section does not apply to a security referred to in clause 18(3).

(3) If a security holder, within 15 working days of receiving the notice, makes a request to the issuer to receive a copy of the governing document, the issuer must, as soon as practicable, send to the holder, free of charge, a copy of that document.

(4) A person who contravenes this clause commits an offence and is liable on conviction to a fine not exceeding $50,000.

(5) The offence in this clause is an infringement offence (see subpart 5 of Part 7 of this Act).
(6) In this clause and clause 29, security holder means,—
- (a) in the case of a security to which section 200 does not apply, the holder of that security on the date that the notice is sent under subclause (1); or
- (b) in the case of any other security, the person who is registered as the holder of the security in a register kept under subpart 5 of Part 4 of this Act on the date that the notice is sent under subclause (1).

29 PDS treated as having been given

(1) This clause applies if—
- (a) a notice is sent to a security holder under clause 28 before the effective date; and
- (b) a PDS has, before the effective date, been lodged for an offer of financial products of the same class as the security held by the security holder; and
- (c) a statement is included in the notice referred to in paragraph (a) as required by clause 28(1)(d); and
- (d) the security held by the security holder is a financial product that the issuer, in the ordinary course of its business, continuously offers for issue.
(2) The PDS referred to in subclause (1)(b) must be treated as having been given to the security holder for the purposes of section 37.

30 FMA may continue to perform and exercise functions, duties, and powers

If the former enactments continue to apply to securities or a scheme under this Part, the FMA may continue to perform and exercise all of its functions, duties, and powers conferred or imposed on it by or under the former enactments as if this Act had not been enacted (for example, it may grant an exemption under section 70B of the 1978 Act).

31 Certain requirements of former law continue for participatory securities that are not financial products

(1) This clause applies to a participatory security to which this Part applies if—
- (a) a statutory supervisor was, or was required to be, appointed in respect of the security under section 33(3) of the Securities Act 1978; and
- (b) on the effective date, the security is not a financial product within the meaning of section 7.
(2) However, this clause—
- (a) does not apply in relation to a participatory security if, before the effective date, the security was cancelled, redeemed, or forfeited, or all of the obligations owing under the security had been discharged:
- (b) ceases to apply to a security (and the scheme to which it relates) if the participatory security holders in the scheme opt out of this clause by way of a resolution approved by those holders holding no less than 75% of the value of the participatory securities.
(3) The following enactments continue to apply on and after the effective date (as if this Act had not been enacted) to a security to which this clause applies, the scheme to which the security relates, and the statutory supervisor of the security:
- (a) sections 45, 48, and 49 of the 1978 Act:
- (b) regulations 41 and 42 and Schedules 16 and 17 of the Securities Regulations 2009:
- (c) any other provision of the 1978 Act or the Securities Regulations 2009 relating to the enforcement, application, or effect of the provisions referred to in paragraph (a) or (b) or the making of regulations relating to, or the granting of exemptions from compliance with, those provisions:
- (d) the Securities Trustees and Statutory Supervisors Act 2011.
(4) For the purposes of this clause, the Governor-General may, by Order in Council, make regulations under section 70(1)(g) of the 1978 Act (as if that Act continued in force) for the purpose of replacing any regulations made under that paragraph (and those regulations that are replaced then cease to apply under subclause (3)).

Part 3
Other transitional provisions

Unit trusts and superannuation schemes in relation to which offers to public have not been made

32 Unit trusts in relation to which offers to public have not been made

(1) This clause applies to a unit trust to which the Unit Trusts Act 1960 applied immediately before the commencement of this clause unless Part 2 of this schedule applies to any unit in the unit trust.

(2) The Unit Trusts Act 1960 continues to apply during the transition period described in subclause (3) as if this Act had not been enacted.
(3) The transition period for a unit trust is the period beginning on the date on which this clause comes into force and ending on the close of the day before the earlier of the following dates:
- (a) the date that the unit trust is registered as a registered scheme under this Act; or
- (b) the date that is 2 years after the commencement of this clause.
(4) In this clause, unit and unit trust have the same meanings as in section 2(1) of the Securities Act 1978.

33 Superannuation schemes in relation to which offers to public have not been made

(1) This clause applies to a superannuation scheme that, immediately before the commencement of this clause, was registered under the Superannuation Schemes Act 1989 unless Part 2 of this schedule applies to any interest in the scheme.

(2) The Superannuation Schemes Act 1989 continues to apply during the transition period described in subclause (3) as if this Act had not been enacted.
(3) The transition period for a superannuation scheme is the period beginning on the date on which this clause comes into force and ending on the close of the day before the earlier of the following dates:
- (a) the date that the scheme is registered as a registered scheme under this Act or is approved as a Schedule 3 scheme; or
- (b) the date that is 2 years after the commencement of this clause.

Amended enactments continue to apply or have effect in connection with schemes

34 Amended enactments continue to apply or have effect in connection with schemes

(1) If, before the commencement of this clause, an enactment that is amended by this Act applied, or had an effect, in connection with a specified scheme, the enactment continues to apply, or have the effect, in connection with the specified scheme as if this Act had not been enacted until the end of the transition period (unless the context otherwise requires).

(2) A specified scheme that is a KiwiSaver scheme or superannuation scheme must, during the transition period, be treated as being a retirement scheme (as defined in section 6(1)).
(3) In this clause,—
specified scheme means any of the following:
- (a) a KiwiSaver scheme, superannuation scheme, or unit trust referred to in clause 16:
- (b) a unit trust referred to in clause 32:
- (c) a superannuation scheme referred to in clause 33
transition period means, in relation to a specified scheme, the transition period that applies to the scheme under Part 2 of this schedule or clause 32 or 33 (as the case may be).

Extra transitional provisions relating to managed investment schemes

35 Remaining trustees (if any) cease to hold office

(1) This clause applies to a person (if any) who is a trustee of a registered scheme that is a trust and who is not the manager or supervisor of the scheme under this Act.

(2) The person ceases to hold office at the end of the transition period referred to in clause 34(3), provided that there is a manager or supervisor for the scheme as required by this Act.

36 Restricted schemes have 3 years to comply with related party asset 5% cap rule

The manager of a restricted scheme must ensure that, on or before the 3rd anniversary after the date on which this clause comes into force, the restricted scheme does not have an in-house assets ratio of 5% or more in relation to any related party or scheme participant (as determined in accordance with section 161).

37 Savings related to Superannuation Schemes Act 1976

(1) All superannuation annuities, superannuation allowances, annuities, amounts, expenses, and refunds that were payable out of the Consolidated Account under sections 5A(2), 6(4), and 7(6) of the Superannuation Schemes Act 1976 (which related to certain payments out of the Consolidated Account as a result of the dissolution of the New Zealand Superannuation Corporation and the New Zealand Superannuation Scheme) continue to be so payable as if those sections and section 5A(3) of that Act had not been repealed.
(2) This clause applies despite the repeal of—
- (a) the Superannuation Schemes Act 1976 by section 32 of the Superannuation Schemes Act 1989; and
- (b) section 33 of the Superannuation Schemes Act 1989 by this Act.
Compare: 1989 No 10 s 33

Repealed enactments continue to be financial markets legislation

38 Repealed enactments continue to be financial markets legislation

Every enactment that is repealed or revoked by this Act and that was, immediately before the commencement of this clause, financial markets legislation within the meaning of section 4 of the Financial Markets Authority Act 2011 must be treated as continuing to be financial markets legislation within the meaning of that Act (and to be specified within the same Part of Schedule 1 of that Act).

Licensing of financial product markets

39 Transition process for existing financial product markets

(1) In this clause,—

deemed licence means a financial product market licence that an existing exchange is, by subclause (2), deemed to hold

existing exchange means a person that, immediately before the commencement of subclause (2), was a registered exchange within the meaning of section 2(1) of the Securities Markets Act 1988 or an authorised futures exchange within the meaning of section 37(1) of that Act

existing market means a market that, immediately before the commencement of subclause (2), was a registered market within the meaning of section 2(1) of the Securities Markets Act 1988 or an authorised futures market within the meaning of section 37(1) of that Act

existing market rules means market rules, within the meaning of section 2(1) of the Securities Markets Act 1988, that, immediately before the commencement of subclause (2), applied to an existing market

existing unlicensed market operator means a person other than an existing exchange that, immediately before the commencement of subclause (7), lawfully operated a securities market or a futures market within the meaning of the Securities Markets Act 1988

market of an existing exchange, in relation to an existing exchange, means an existing market that the existing exchange was, immediately before the commencement of subclause (2), authorised to operate

transitional period means the period that commences on the commencement of subclause (7) and ends on the commencement of section 308.

Existing exchanges

(2) On and from the commencement of this subclause, every existing exchange is deemed to hold, under this Act, for each market of the existing exchange, a financial product market licence that authorises the existing exchange to operate a financial product market that is of the same kind as the existing market of the existing exchange.

(3) Every existing market rule for an existing market continues to have effect in relation to that market as if it had been approved under section 330 or, as the case requires, been notified under section 333.
(4) Section 320, so far as applicable and with any necessary modifications, applies to each existing market, and the FMA must, as soon as practicable after the commencement of this subclause, set out, for each existing market, the matters required to be included by subsection (2) of that section and, in doing so, must—
- (a) treat the commencement of this subclause as the date on which the deemed licence was issued; and
- (b) formulate, in consultation with the existing exchange, the conditions of the deemed licence, being conditions of the kind described in section 316(1)(a) to (d); and
- (c) determine whether the deemed licence is deemed to have been issued under section 314 or 315.
(5) Any matter stated under section 320(2), as applied by subclause (4), is deemed to be incorporated into the deemed licence.
(6) Nothing in this clause prevents—
- (a) the Minister from exercising a power under this Act—
  - (i) to vary, revoke, add to, or substitute the conditions of a deemed licence; or
  - (ii) to suspend or cancel a deemed licence; or
- (b) the exercise, in respect of a deemed licence, of any other power that may, under this Act, be exercised in respect of a financial product market licence.
Existing unlicensed market operator

(7) On an application to the Minister by an unlicensed market operator, the Minister may, during the transitional period, issue a financial product market licence to the existing unlicensed market operator and, after the transitional period, that licence has effect as if it had been issued under section 314 or, as the case requires, section 315.

(8) During the transitional period, the Minister may approve any proposed market rules for the market operated by an existing unlicensed market operator and, after the transitional period, that approval has effect as if it had been given by the FMA under section 330.

Market services licences

40 Authorised dealers treated as holding market services licence

(1) Every person who, immediately before the commencement of this clause, is authorised or approved to carry on the business of dealing in futures contracts under section 38 of the Securities Markets Act 1988 must be treated as holding, on and from the commencement of this clause, a licence issued under subpart 2 of Part 6 of this Act.

(2) Subclause (1) does not apply if the person is not required to hold a licence under Part 6 of this Act.
(3) The licence under subclause (1) must be treated as—
- (a) covering the same service that is authorised or approved under section 38 of the Securities Markets Act 1988 (and that service must be treated as a market service for the purposes of this Act):
- (b) subject to the conditions, limitations, or restrictions that, immediately before the commencement of this clause, were imposed by or under the Securities Markets Act 1988 on the authorisation or approval (and those conditions, limitations, or restrictions must be treated as the conditions of the licence for the purposes of this Act):
- (c) in the case of a registered bank, covering the service of acting as a derivatives issuer for all derivatives:
- (d) expiring on the earlier of—
  - (i) the date that the licence is cancelled under Part 6; or
  - (ii) the date that is 2 years after the commencement of this clause.
(4) Subclause (3)(a) and (b) do not limit subclause (3)(c).

41 FMA may exercise powers in respect of licences

(1) Nothing in clause 40 prevents the FMA from exercising—
- (a) a power under Part 6 to vary, revoke, add to, or substitute any of the conditions of a licence referred to in that clause; or
- (b) any other powers under this Act in respect of the licence.
(2) A licence referred to in clause 40 may also be subject to the conditions prescribed by the regulations.

Approval of electronic transfer systems continues

42 Approval of electronic transfer systems continues

An Order in Council made under section 7 of the Securities Transfer Act 1991 that is in force immediately before the repeal of that Act continues in force as if it had been made under section 376 (and may be amended or revoked as if it had been made under that section).

References to banning orders under this Act include references to banning orders under former enactments

43 References to banning orders under this Act include references to banning orders under former enactments

(1) This clause applies to a provision of any enactment that refers to a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an incorporated or unincorporated body under this Act (or any similar reference).

(2) The provision must be treated as including a reference to a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an incorporated or unincorporated body under the Securities Act 1978, the Securities Markets Act 1988, or the Financial Advisers Act 2008.

Example

Section 151(2)(ea) of the Companies Act 1993 specifies that a person is disqualified from being a director of a company if the person is prohibited from being a director or promoter under this Act.

If a person has been so prohibited under the Securities Act 1978, the Securities Markets Act 1988, or the Financial Advisers Act 2008, the person will be disqualified under section 151(2)(ea).

Financial reporting

44 Issuers continue to be issuers under Financial Reporting Act 1993

(1) A person who, immediately before the commencement of this clause, was an issuer under section 4(1)(a) to (b) of the Financial Reporting Act 1993 (as in force before the commencement of this clause) in relation to securities continues to be an issuer in respect of those securities for the purposes of the Financial Reporting Act 1993 until—
- (a) all of those securities are cancelled, redeemed, or forfeited; or
- (b) all of the obligations owing under those securities have been discharged.
(2) Subclause (1) must be treated as applying to a person—
- (a) who makes an offer of securities to which the Securities Act 1978 continues to apply in accordance with Part 1 of this schedule; and
- (b) who would, if this Act had not been enacted, have been an issuer under section 4(1)(a) to (b) of the Financial Reporting Act 1993 (as in force before the commencement of this clause).

Offences and contraventions under repealed and revoked enactments

45 Transitional provision for offences and contravention under repealed and revoked enactments

(1) This section applies to an offence committed under, or a contravention of, any of the enactments referred to in section 564 or 565.
(2) The enactments referred to in section 564 or 565 continue to have effect as if they had not been repealed or revoked for the purpose of—
- (a) investigating an offence or a contravention to which this section applies:
- (b) commencing or completing proceedings for an offence or a contravention to which this section applies:
- (c) imposing a penalty or other remedy, or making an order, in relation to an offence or a contravention to which this section applies.

Contributory mortgages

46 Former law continues for contributory mortgages

(1) This clause applies in relation to an interest in a contributory mortgage that was offered to the public for subscription by a contributory mortgage broker under the Securities Act 1978.

(2) However, this clause does not apply in relation to an interest in a contributory mortgage if, before the commencement of this clause, the interest was cancelled, redeemed, or forfeited, or all of the obligations owing under the interest had been discharged.
(3) To the extent that the following enactments would otherwise apply to an interest to which this clause applies, those enactments continue to apply as if this Act had not been enacted:
- (a) the Securities Act 1978:
- (b) the Securities Act (Contributory Mortgage) Regulations 1988:
- (c) the Securities Act (Contributory Mortgage) Regulations (Solicitors) Exemption Notice 1996.
(4) For the purposes of an interest to which this clause applies, the Governor-General may, by Order in Council, make regulations under section 70(1)(h) of the Securities Act 1978 (as if that Act continued in force) for the purpose of replacing any regulations made under that paragraph (and those regulations that are replaced then cease to apply under subclause (3)).

Legislative history
12 October 2011	Introduction (Bill 342–1)
7 March 2012	First reading and referral to Commerce Committee

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Financial Markets Conduct Bill