Dated at Wellington this 19th day of October 2021.
Liam Mason,
General Counsel,
Financial Markets Authority.
Statement of reasons
This notice applies to overseas banks that are registered and overseas insurers that are licensed by the Reserve Bank of New Zealand (the Reserve Bank).
This notice exempts overseas registered banks and overseas licensed insurers from the following provisions of the Financial Markets Conduct Act 2013 (the Act):
section 455(1)(c) (which requires an FMC reporting entity to keep accounting records that will enable it to ensure that its financial statements comply with generally accepted accounting practice):
sections 460 and 461 to the extent that those sections require the financial statements that are prepared to comply with New Zealand generally accepted accounting practice (NZ GAAP) and to be dated and signed by 2 directors (or, if the entity has only 1 director, by that director):
section 461B (which relates to financial statements for the New Zealand business):
The exemptions are subject to conditions. These include requirements that—
the entities prepare financial statements that comply with the laws and regulatory requirements of their home jurisdiction:
the home jurisdiction, through a securities regulator in that jurisdiction, be a full signatory to the International Organization of Securities Commissions Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information. This would allow the Financial Markets Authority (the FMA) to seek the assistance of the equivalent authority in the home jurisdiction should enforcement issues arise.
The main effects of the exemptions for entities relying on them are as follows:
Preparation of financial statements
rather than complying with NZ GAAP, the financial statements that are prepared will comply with the overseas generally accepted accounting practice or principles that is or are required or permitted in the home jurisdiction or, in the case of United States insurers, with United States statutory accounting principles (overseas GAAP):
those financial statements will be audited by an auditor who is qualified under the laws of the home jurisdiction (an overseas approved auditor):
if the entity has a New Zealand business, those financial statements will be accompanied by separate financial statements for the New Zealand business that comply with NZ GAAP:
those New Zealand business financial statements will be audited by a qualified auditor (as that term is defined in the Act), an auditor who is qualified under the laws of Australia, or an overseas approved auditor, and that audit must be carried out in accordance with New Zealand auditing and assurance standards:
however, if the applicable overseas GAAP is not considered to be equivalent to IFRS, the auditor of the New Zealand business financial statements may not be an overseas approved auditor:
Additional disclosure requirements
if the applicable overseas GAAP is not considered to be equivalent to IFRS or US GAAP, additional disclosure requirements apply.
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—
the Reserve Bank is required to assess the financial reporting and audit requirements of the home jurisdiction of any overseas bank or insurer seeking registration or licensing in New Zealand. In these circumstances, the FMA is satisfied that the financial reporting and audit requirements of the home jurisdiction will provide sufficient and appropriate information to the Reserve Bank for it to undertake its prudential regulation of these entities and to investors for them to make investment decisions:
the securities regulators in the home jurisdictions of the overseas entities that will rely on the notice are signatories to the International Organization of Securities Commissions Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information. The FMA will therefore be able to seek assistance from relevant regulators if compliance concerns arise:
the costs associated with an entity having to prepare and audit financial statements in accordance with the requirements of a home jurisdiction, in addition to the costs associated with preparing NZ GAAP-compliant financial statements audited by a New Zealand qualified auditor, would outweigh the benefits to investors in having access to financial statements prepared according to NZ GAAP rather than overseas GAAP:
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 avoid unnecessary compliance costs and promote flexibility in the financial markets:
the exemptions only address the particular difficulties experienced by entities that are overseas registered banks or licensed insurers. Given the limited application of the exemptions and that investors will still have access to financial statements, lodged in New Zealand, that meet financial reporting and audit requirements in reputable jurisdictions, the exemptions are not broader than is reasonably necessary to address the matters that gave rise to them.
Issued under the authority of the Legislation Act 2012.
Date of notification in Gazette: 22 October 2021.
This notice is administered by the Financial Markets Authority.