Dated at Wellington this 10th day of June 2021.
Liam Mason,
General Counsel,
Financial Markets Authority.
Statement of reasons
This notice comes into force on 21 June 2021 and is revoked on the close of 20 June 2026.
This notice exempts issuers from the disclosure and governance requirements in Parts 3 and 4 of the Financial Markets Conduct Act 2013 (the Act) in relation to—
offers of the same class as financial products that are quoted on the Catalist Public Market (Catalist Public Market), a licensed market operated by Catalist Markets Limited (same class offers):
offers of $2 million or less that are made through the Catalist Public Market (small offers).
This notice also provides that offers made in reliance on this notice are not regulated offers under the Act. This means that legislative requirements that apply to regulated offers will not apply (unless there is some other reasons why they apply). Any other financial markets conduct obligations that the exempt issuer may have, including obligations under Part 2 of the Act, are not affected. The obligations that apply to exempt issuers under Parts 5 and 7 of the Act are modified by the Financial Markets Conduct (Catalist Public Market) Regulations 2021.
Holders of an exempt issuer’s financial products are also exempt where they are offering those products by way of sale. Those offerors may otherwise have been required to comply with the disclosure requirements because of Part 2 of Schedule 1 of the Act, which requires disclosure under Part 3 of the Act in certain circumstances.
The exemptions for same class offers—
are similar to an exclusion relating to same class offers of quoted financial products in clause 19 of Schedule 1 of the Act (the clause 19 exclusion). The clause 19 exclusion is not available because the Catalist market rules do not contain continuous disclosure provisions, which is required by clause 19. Instead, Catalist Public Market listed issuers must comply with alternative disclosure obligations provided for in the Catalist market rules and the Financial Markets Conduct (Catalist Public Market) Regulations 2021. Those regulations allow for periodic, rather than continuous, disclosure of all material information. This reflects that trading of financial products on the Catalist Public Market occurs only during set periods of time (auctions). Disclosure obligations apply only during these periodic auctions rather than continuously:
are subject to requirements and conditions that are consistent, as far as practicable, with the requirements of clause 19 of Schedule 1 of the Act and clauses 19 to 22 and 46 of Schedule 8 of the Financial Markets Conduct Regulations 2014 (which relate to the clause 19 exclusion). Some modifications have been made to reflect the periodic nature of trading and disclosure on the Catalist Public Market. This includes new requirements, that are not included in the clause 19 exclusion, requiring at least 3 previous public auctions to have been held, for the Catalist market rules to contain alternative disclosure provisions (rather than continuous disclosure provisions), and for issuers to provide material information about events or matters that arose during the 3 month period before the offer is made, including when those events or matters arose:
are subject to a limit of $20 million on the amount that can be raised by an offeror in any 12-month period.
The exemptions for small offers are similar to an exclusion for small personal offers in clause 12 of Schedule 1 of the Act, and an exclusion for offers through licensed intermediaries, such as providers of crowd funding or peer-to-peer lending services, in clause 6 of Schedule 1 of the Act. Consistent with those exclusions, offerors are limited to raising $2 million in any 12-month period, and are subject to a condition requiring offerors to take reasonable steps to ensure that a prescribed warning statement is made available to investors before investment.
The FMA, after satisfying itself as to the matters set out in section 557 of the Act, considers it appropriate to grant the exemptions because—
granting the exemptions should promote innovation and flexibility in the financial markets by facilitating the development of an innovative growth market. This is also consistent with the Part 5 objective of encouraging a diversity of financial product markets to take account of the differing needs and objectives of issuers and investors; and
providing relief from regulated offer requirements (for example, preparing a product disclosure statement) should assist small growth companies to raise capital at lower cost, as an alternative to seeking private capital. This has the potential to offer small growth companies more funding options at an earlier stage in their growth cycle, helping to address a funding gap within New Zealand’s capital markets. This in turn enables investors to participate in offers that might otherwise not be made available, providing a greater range of investment opportunities; and
appropriate exemption requirements and conditions seek to ensure investors are in a position to make confident and informed investment decisions. For the exemptions for same class offers, this includes requirements for the financial products to have been quoted for at least 3 months and for at least 3 public auctions to have been held. The exemptions for small offers require issuers to make available a warning statement to investors, and take into account the requirements that apply to the licensed market operator under Part 5 of the Act and its conditions of licence. Additionally, the Catalist market rules and the Financial Markets Conduct (Catalist Public Market) Regulations 2021 require issuers to disclose material information to investors no later than the start of an auction period; and
for these reasons, the FMA is satisfied that the exemptions are desirable in order to promote the purposes of the Act. Specifically, the exemptions should promote fair and efficient financial markets, promote the confident and informed participation of businesses and investors in the financial markets, avoid unnecessary compliance costs, and promote innovation and flexibility in the financial markets; and
given the exemptions apply only to offers made by offerors on the Catalist Public Market and are subject to issuer and offer size restrictions, and in view of the exemptions being granted on a similar basis to existing exclusions in Schedule 1 of the Act, the FMA is also satisfied that the exemptions are not broader than reasonably necessary to address the matters that give rise to the exemptions.
Issued under the authority of the Legislation Act 2012.
Date of notification in Gazette: 16 June 2021.
This notice is administered by the Financial Markets Authority.