Part 1 amends the Financial Markets Conduct Act 2013 (the FMCA).

Clause 4 amends section 6, which relates to interpretation. The clause replaces the definition of financial advice product with a definition of FMC product. This reflects the fact that the definition is used in some contexts other than in relation to financial advice.

The Bill contains related amendments to replace references to financial advice product with references to FMC product throughout the FMCA and other financial markets legislation. See, in particular, Schedules 2 and 3.

Clause 6 inserts new section 131A. The new section moves into the FMCA the substance of the Financial Markets Conduct (Licensed Independent Trustees of Restricted Schemes) Exemption Notice 2021. The provision relates to an independence requirement for the licensed independent trustee of a restricted scheme. The provision disapplies, in limited situations, a restriction on a licensed independent trustee being a director of certain related bodies corporate.

Clauses 7 to 10 amend sections 216 and 220 to 222, which relate to an issuer’s duties to keep a register of regulated products and to make the register available for inspection. The main changes are to—

• modify the requirement for the register to be kept only in New Zealand. Instead, the Bill allows the register to be kept in a place in New Zealand, Australia, or any other country prescribed by the regulations:

• modify the requirement for the register to be made available for inspection at the place in New Zealand at which the register is kept to allow inspection at some other place in New Zealand:

• allow the register to be made available for inspection on an internet site (as an alternative to a place in New Zealand):

• consequentially modify the duty for the issuer to give notice to the Registrar of where the register is available for inspection.

Clause 11 amends section 238, which sets out situations in which a person is not treated as having a relevant interest in a financial product. The amendment provides that a regulatory agency is not treated as having a relevant interest if it is merely performing or exercising a statutory function, power, or duty.

Clauses 12 to 15 amend sections 304 to 307, which relate to a listed issuer’s duties to keep an interests register and to make the register available to the public for inspection. The main changes are to—

• clarify that an interests register may be an electronic register:

• modify the requirement for the interests register to be kept only in New Zealand. Instead, the Bill allows the register to be kept in a place in New Zealand, Australia, or any other country prescribed by the regulations:

• modify the requirement for the interest register to be made available for inspection at the place in New Zealand at which the register is kept to allow inspection at some other place in New Zealand:

• allow the interest register to be made available for inspection on an Internet site (as an alternative to a place in New Zealand):

• consequentially modify the duty for the listed issuer to give notice to the FMA of where its interests register is available for inspection.

Clause 17 amends section 399, which provides for a market services licence to specify the particular market services to which it relates. The amendment provides that a person may now hold only 1 market services licence (rather than multiple licences). However, the same licence may cover more than 1 type of market service. New clause 101 of Schedule 4 (in Schedule 1 of this Bill) contains a transitional provision to provide for situations where a person currently holds 2 or more market services licences. The transitional provides for the licences to be consolidated into a single licence.

Clause 18 inserts new subpart 3A of Part 6. The new subpart requires the FMA’s approval for certain changes relating to market service licence holders or authorised bodies. The provisions are similar to subpart 5 of Part 2 of the Deposit Takers Act 2023, which will require the Reserve Bank’s approval for certain changes to banks or other deposit takers that are licensed under that Act. In summary,—

• a person who obtains significant influence over a licensee or an authorised body must obtain the FMA’s approval. A person obtains significant influence if they obtain (either alone or together with related persons) the power to exercise, or control the exercise of, 25% or more of the voting rights in the licensee or authorised body or to appoint 50% or more of its directors. The requirement does not apply in relation to an overseas licensee or authorised body, which must instead notify the FMA if a person obtains significant influence:

• a licensee or an authorised body must obtain the FMA’s approval before entering into a significant transaction. This includes transferring all or a material part of its business (or its New Zealand business) or acquiring all or part of a business that will be a material part of its business (or its New Zealand business). What is material must be determined under the regulations:

• a licensee or an authorised body must obtain the FMA’s approval before amalgamating with 1 or more other entities. The requirement does not apply in relation to an overseas licensee or authorised body, which must instead notify the FMA if it amalgamates with another entity:

• the subpart provides for the process for obtaining approval. In considering a request for approval, the FMA must consider whether the licensing requirements of the FMCA will still be met if the change occurs. The FMA must consult the Reserve Bank if the licensee or authorised body is an entity regulated by the Reserve Bank:

• the FMA’s approval may be subject to terms and conditions.

For related amendments, see—

• clause 22, which amends section 449 to provide for civil liability consequences for a contravention of the duties in new subpart 3A of Part 6. For example, the High Court may order a person in contravention to pay a pecuniary penalty; and

• clause 30, which amends section 546 to allow regulations to exempt licensees or authorised bodies from the requirements in new subpart 3A of Part 6. Regulations that grant an exemption are subject to procedural requirements under section 550 (as amended by clause 31).

Clause 19 amends section 446J, which sets the minimum requirements for a fair conduct programme of a bank, an insurer, or another financial institution. A fair conduct programme is designed to ensure that a financial institution complies with the principle that a financial institution must treat its consumers fairly (the fair conduct principle). In summary, the changes—

• omit a requirement about enabling the financial institution to meet its legal obligations to consumers. Clauses 20 and 29 make consequential amendments:

• omit a requirement about regularly reviewing the effectiveness of the programme (but a requirement for deficiencies to be promptly remedied is retained):

• disapply requirements about distribution methods for providing services or products to consumers if the financial institution no longer uses such methods. Similarly, requirements about incentives apply only if relevant:

• clarify or simplify requirements about the financial institution’s employees and agents. For example, the requirements for managing or supervising, and providing training to, employees are clarified and simplified to focus on ensuring that employees are supporting the financial institution’s compliance with the fair conduct principle:

• add a requirement about resolving consumers’ complaints in a timely and effective manner. Clause 21 adds a definition of complaint to section 446P:

• clarify the requirement about communicating with consumers in a timely, clear, concise, and effective manner to expressly include communicating about the price of services or products.

Clause 21 adjusts the definition of insurer in section 446P, which applies for the purposes of the fair conduct obligations in subpart 6A of Part 6. The change ensures that the definition is more consistent with concepts in the Insurance (Prudential Supervision) Act 2010 (for example, section 8 of that Act refers to being liable as an insurer under a contract of insurance rather than entering into a contract of insurance).

Clause 23 amends section 456. This section currently allows an FMC reporting entity’s accounting records to be kept outside New Zealand only if there are sent to New Zealand documents that will enable the preparation of the entity’s financial statements. The amendment extends this to allow the documents to be sent to Australia or another country prescribed by the regulations.

Clause 24 amends section 459, which relates to the inspection of accounting records. The amendment provides that the accounting records and documents referred to in section 456 must be available for inspection electronically.

Clause 25 amends a requirement in section 461 for the balance date of a FMC reporting entity to be the same as the balance date of its subsidiaries. The amendment disapplies the requirement if a subsidiary is incorporated overseas and the balance date can not be changed at the absolute discretion of the subsidiary or FMC reporting entity. The change moves into the FMCA the substance of the Financial Markets Conduct (Overseas Subsidiary Balance Date Alignment) Exemption Notice 2021.

Clauses 26 and 28 move into the FMCA the substance of the Financial Markets Conduct (Financial Statements for Schemes Consisting Only of Separate Funds) Exemption Notice 2022. Where a registered scheme consists only of separate funds, the amendment ensures that financial statements are required to be prepared only for each fund and not for the scheme as a whole.

Clause 35 inserts new section 558A, which provides for the Financial Markets Conduct (Multiple-participant Schemes—Participation Agreements) Exemption Notice 2022 to continue in force for more than 5 years despite section 558.

Clause 40 inserts new section 561B. Section 561A already provides for when exemptions granted by the FMA from financial reporting and climate-related disclosure requirements may apply to accounting periods that have commenced before the exemption is granted. That section ensures that the temporal application of the FMA’s exemption power is clear. New section 561B applies in a similar way to FMA exemptions from other duties imposed under the FMCA or the regulations that apply in connection with a period of time (for example, a duty to prepare an annual report for a 12-month period).

Clause 48 repeals subpart 5 of Part 9. This subpart contains general provisions relating to various instruments issued or made by the FMA. This includes, in particular, exemptions granted under subpart 2 of Part 9 and declarations made under subpart 3 of Part 9. The subpart—

• provides for the various instruments to be secondary legislation; and

• requires the FMA to publish its reasons for issuing or making an instrument.

Instead of having these provisions located in subpart 5 of Part 9, the Bill moves them to each of the provisions that give the FMA the power to issue or make the instruments. The Bill consequentially updates various cross-references. See clauses 5, 27, 32 to 34, 37 to 39, 41 to 47.

Clause 49 amends clause 19 of Schedule 1, which relates to a disclosure exclusion for offers of financial products of the same class as quoted financial products. The amendment clarifies how the exclusion applies to offers of options by way of sale.

Clause 50 and Schedule 1 amend Schedule 4 to provide for transitional and savings provisions.

Part 2 amends the Financial Markets Authority Act 2011.

Clause 55 amends the section 4, which relates to interpretation. The main amendment relates to the definition of financial markets participant. The Act provides for the FMA to perform or exercise functions, powers, and duties in connection with financial market participants.

The definition already provides that if a company or another body corporate is a financial market participant, related companies or bodies corporate will also be financial markets participants. The amendment extends this to ensure that if an individual is a financial market participant, related companies or bodies corporate of that individual will also be financial markets participants.

Clause 56 inserts new sections 28A to 28D. The new sections give the FMA an on-site inspection power similar to the power that the Reserve Bank has under subpart 2 of Part 4 of the Deposit Takers Act 2023. In summary,—

• the purpose of the power is to facilitate the FMA’s ability to monitor compliance with financial markets legislation by, for example, assessing the adequacy of a financial markets participant’s policies, processes, controls, or other arrangements or verifying the reliability of information supplied to the FMA:

• the power allows the FMA to enter a participant’s place of business to carry out an on-site inspection for the purposes of doing any of the things referred to in new section 28A. The FMA may exercise the power only at a reasonable time and in a reasonable manner, but is not required to give notice of the exercise of the power:

• an employee, director, or agent of the financial markets participant may be required to answer questions relating to its records and documents and to supply other information:

• if the FMA finds evidence of a contravention, it is not required to obtain a search warrant to continue exercising its on-site inspection powers.

Clause 57 amends section 55, which gives a person who is exercising a power under the Act protection from liability (unless the person acts in bad faith). The amendment extends this provision to cover the new on-site inspection power.

Clause 58 amends section 61, which imposes criminal liability for obstructing the exercise of powers under the Act. The amendment extends this provision to cover the new on-site inspection power.