Explanatory note
This note is not part of the regulations, but is intended to indicate their general effect.
The amendments are in 4 broad groups relating to annual reports, confirmation notices, civil liability, and minor technical changes.
Annual reports
New regulations 61B to 61F provide an alternative process for FMC reporting entities (as defined in the Financial Markets Conduct Act 2013 (the FMC Act)) to distribute their annual reports. Under the Companies Act 1993, the process for distributing annual reports to shareholders is a largely paper-based process. That Act was amended in 2016 to allow the principal regulations to establish an alternative process to allow annual reports to be made available and distributed electronically. New regulations 61B to 61F establish the new process.
Companies that are issuers of equity securities may use the new process for their 2017 annual report, and must use it from 1 January 2018. Other FMC reporting entities can choose to use the new process or continue to use the process under the Companies Act 1993. Under the new process, a company has to make its annual reports available on its website and give a hard copy or an electronic copy to shareholders who ask for one.
Confirmation notices
Currently, regulation 52B of the principal regulations requires that, if a product disclosure statement (a PDS) has a closed status, a confirmation notice must be lodged before its status can be changed to open. A confirmation is also required before a closed specified fund covered by a PDS changes its status. As a PDS may also relate to multi-fund investment options or life cycle investment options and their status may also change, regulation 52B is amended to also require a confirmation notice before changes are made to the status of those investment options.
Civil liability
Under section 101(3)(l) and (4)(ga) of the FMC Act, contravention of a prescribed provision of the principal regulations may give rise to civil liability and a pecuniary penalty. New regulation 72AA prescribes the relevant provisions of the principal regulations for this purpose. Those listed in new regulation 72AA(1) attract a maximum penalty of $1 million for an individual or $5 million for any other person. Those listed in new regulation 72AA(2) attract a maximum penalty of $200,000 for an individual or $600,000 for any other person.
Clauses 24(3), 25(1), 30(3), 31(1), and 34(2)(b) of Schedule 8 of the principal regulations require compliance with various provisions of the FMC Act. Those clauses are amended so that non-compliance with the specified provisions will give rise to civil liability with different levels of maximum penalties. Having different levels of liability is now possible as a result of amendments to the FMC Act being made by the Regulatory Systems (Commercial Matters) Amendment Act 2017, which will commence on the same day as these regulations.
Minor technical changes
The rest of these regulations make changes to the principal regulations to address minor technical issues that have emerged as industry participants begin to operate under the new financial markets conduct regime.
Credit ratings agencies
Under the principal regulations, different requirements apply to non-bank deposit takers depending on whether they have an investment-grade credit rating, which is defined by reference to each registered credit rating agency. Equifax Australasia Credit Ratings Pty Limited has recently been registered as a credit rating agency. The definition of investment-grade credit rating is therefore amended to include it.
Information disclosure for defined benefit retirement schemes
The principal regulations require the manager of a managed fund to make certain information about fund performance publicly available each quarter. Defined benefit retirement schemes are exempt from this requirement because that information is not relevant for participants in those schemes. Under Schedule 4 of the principal regulations, the information that must be recorded in the register of offers of financial products also includes fund performance information. Schedule 4 is also amended so that defined benefit schemes are also exempt from the need to record this information in the register.
Issued under the authority of the Legislation Act 2012.
Date of notification in Gazette: 8 August 2017.
These regulations are administered by the Ministry of Business, Innovation, and Employment.