Financial Markets Conduct Regulations 2014

Schedule 26 Passport fund statement

r 24(1A)(b)

Schedule 26: inserted, on 14 June 2019, by regulation 17 of the Financial Markets Conduct (Asia Region Funds Passport) Amendment Regulations 2019 (LI 2019/101).

Offer made under the Asia region funds passport initiative

From the home jurisdiction of [specify the home economy]

The Product Disclosure Statement relating to [specify financial products to which the PDS relates] is for an offer made under the Asia Region Funds Passport initiative (ARFP). The manager ([name]) has completed the notification process required to make an offer in New Zealand under the ARFP and this has been recorded on the following Internet site: [home page of the Internet site maintained by or on behalf of the FMA]

[Name of manager] confirms that, at all times during the period in which [name of foreign passport fund] operates in New Zealand,—

  • that fund will comply with the law of [specify the home economy] and the passport rules (which are rules that apply under the ARFP); and

  • [name of manager] will, in relation to that fund, comply with the law of [home economy] and the passport rules.

About the Asia region funds passport initiative (ARFP)

The intent of the ARFP is to allow managers from countries that are members of the ARFP to offer interests in funds in other countries that are members of the ARFP. Key aspects of the ARFP are that,—

  • before a country can become a member of the ARFP, it must satisfy the existing members that—

    • its securities regime meets internationally recognised eligibility criteria (based on principles of the International Organization of Securities Commissions); and

    • it is committed to implementing the ARFP rules:

  • the ARFP rules include requirements that—

    • the manager must meet minimum requirements relating to assets under management (US$500 million) and capital (US$1 million plus an additional capital amount based on assets under management):

    • the manager has a proven track record and key staff that meet minimum experience thresholds:

    • an ARFP fund cannot offer interests in the fund in New Zealand unless there is an ongoing offer of interests in the fund (or in a subfund that forms part of the same regulated scheme as the fund) in its home economy, or at least 30% of the value of interests in funds operated by the manager are held by persons with addresses in the home jurisdiction; and

    • investments are highly diversified and meet investment criteria:

  • an ARFP fund is first registered in its home jurisdiction and then it goes through a streamlined recognition process in each other country in which the offer is made:

  • there is mutual cooperation between member countries to give effect to the ARFP.

Differences between Asia region funds passport offers and “standard” retail funds registered in New Zealand under the Financial Markets Conduct Act 2013

Before you invest in an ARFP fund, you should be aware that there are different risks and benefits from those that arise from investing in a “standard” retail fund that is registered in New Zealand under the Financial Markets Conduct Act 2013. Some issues to consider are set out below. If you are uncertain about whether this investment is appropriate for you, you should seek the advice of a financial advice provider to help you make an investment decision.

Additional rules

ARFP funds are required to comply with some rules that do not apply as a matter of course to “standard” retail managed investment schemes that have interests offered under the Financial Markets Conduct Act 2013. For example, the specific rules relating to minimum capital requirements, minimum assets under management, and what the fund can invest in to ensure that it is highly diversified.

Differences in regulation

There are differences in how an ARFP fund is regulated under the law of its home jurisdiction. For example, the rights, remedies, and compensation arrangements available to New Zealand investors in these investments may differ from the rights, remedies, and compensation arrangements for investments in “standard” retail managed investment schemes.

Oversight by regulators in more than 1 country

An ARFP fund will be registered in its home jurisdiction (ie, [specify]) and that registration will then be recognised in New Zealand.

Despite primarily being regulated overseas, the manager must comply with the ARFP rules and the disclosure and fair dealing rules of New Zealand law in respect of the New Zealand offer. Further, the manager must agree to be bound by any decisions made by the New Zealand courts in respect of any aspect of the New Zealand offer.

To the extent possible, the New Zealand and home regulators have agreed to cooperate in order to facilitate the enforcement of the ARFP. However, the primary regulator of the manager is the home regulator (ie, the regulator in [specify]) and practical enforcement of any New Zealand judgment is an issue to consider.

Exemptions from New Zealand law

Some exemptions from the usual operation of New Zealand laws may be in place for ARFP funds. For example, the overseas registration requirements may not be the same as the registration requirements for New Zealand schemes, and financial reporting may not be made in accordance with New Zealand generally accepted accounting practice and therefore may not be comparable. You may want to seek advice from a financial advice provider when considering the effect of these differences on your investment decision.

Tax

The tax implications of investing in an overseas fund can be complex and may require independent advice.

Currency issues

The offer may involve a currency exchange risk.

*The currency for the investment in the fund is not New Zealand dollars. The value of the investment will go up or down according to changes in the exchange rate between that currency and New Zealand dollars. These changes may be significant.

*If you expect the returns from the investment to pay any amounts in a currency that is not New Zealand dollars, you may incur significant fees in having the funds credited to a bank account in New Zealand in New Zealand dollars.

*The fund may invest in a foreign currency, in which case there is additional currency exposure to consider.

*Omit if inapplicable.
Are there any exemptions from the ARFP rules?

No—this offer complies with all of the rules of the ARFP./The following exemptions from the ARFP rules apply to this offer: [briefly describe the exemptions].*

*Select one.
Further information

For further information about how managers are regulated in [specify], go to the following Internet site: [specify the home page of the Internet site maintained by or on behalf of the home regulator]

Schedule 26: amended, on 15 March 2021, by regulation 38 of the Financial Markets Conduct Amendment Regulations 2020 (LI 2020/315).