In these regulations,—

• (a) this Part provides for preliminary matters, including prescribing certain matters relating to interpretation for the purposes of Part 1 of the Act:

• (b) Part 2 declares, for the purposes of Part 2 of the Act (Fair dealing), that the service of providing credit under a credit contract is not a financial service:

• (c) Part 3 and Schedule 1 provide for the early application of disclosure exclusions by way of transitional exemptions under the Securities Act 1978:

• (d) Part 4 prescribes—

  • (i) intermediary services, licensing criteria, conditions, and other matters to facilitate the issue of licences for market services under Part 6 of the Act; and

  • (ii) other requirements applying to licensees:

• (e) Part 5 provides for entities that rely on the small offer exclusion to be FMC reporting entities for the purposes of Part 7 of the Act (Financial reporting):

• (f) Part 6 provides for enforcement matters under Part 8 of the Act to the extent that the Act is in force:

• (g) Part 7 concerns transitional matters.

Schedule 5 contains transitional provisions that affect the application of the Act and certain other enactments (see regulation 53).

(1) In these regulations, unless the context otherwise requires,—

(2) Section 13(1) of the Act applies (with all necessary modifications) to a reference in these regulations to a statement or other information that is false, misleading, deceptive, or confusing.

If a provision of these regulations requires a warning statement to be provided, a warning statement provided for this purpose is not invalid just because it contains minor differences from the requirements prescribed by these regulations if the differences are necessary because—

• (a) particular information required by these regulations is inapplicable to the particular offer or service; or

• (b) additional or modified information relating to the offer, the financial products, or service needs to be included to ensure that the statement is not false, misleading, or confusing.

(1) An example used in these regulations is only illustrative of the provisions to which it relates. It does not limit those provisions.

(2) If an example and a provision to which it relates are inconsistent, the provision prevails.

For the purposes of section 6(3) of the Act, a prescribed circumstance is where the different redemption date will result in the debt securities being issued for a different duration.

(1) For the purposes of section 8(4)(a)(ii) of the Act, the prescribed time is,—

• (a) for a foreign exchange agreement, 3 working days; and

• (b) in any other case, 1 working day.

(2) In this regulation, working day, in relation to a derivative,—

• (a) has the same meaning as in section 29 of the Interpretation Act 1999; but

• (b) if a payment or delivery under the derivative is made or received in an overseas jurisdiction, does not include a day that, under the law of that jurisdiction, is a public holiday or a bank holiday in that jurisdiction.

For the purposes of paragraph (c) of the definition of financial service in section 6(1) of the Act, the service of providing credit under a credit contract is declared not to be a financial service for the purposes of any provision of Part 2 of the Act.

The provisions in Schedule 1 of these regulations have effect for the purposes of prescribing—

• (a) limited disclosure and other requirements for the purposes of clause 26 of Schedule 1 of the Act; and

• (b) other matters for the purposes of Schedule 1 of the Act.

(1) The following clauses of Schedule 1 of the Act are prescribed for the purposes of clause 59(1) of Schedule 4 of the Act:

• (a) clause 6 (prescribed intermediary services):

• (b) clause 8 (employee share purchase schemes):

• (c) clause 9 (persons under control) (but see subclause (2)(a)):

• (d) clause 10 (dividend reinvestment plans):

• (e) clause 12 (small offers):

• (f) clause 15 (transfer of controlling interest):

• (g) clause 19 (quoted financial products):

• (h) clause 21 (registered banks) (but see subclause (2)(b)).

(2) An exemption in clause 59(1) of Schedule 4 of the Act relating to—

• (a) clause 9 of Schedule 1 of the Act applies only if an offer of financial products to person A (as defined in that clause) would not require disclosure as a result of clause 8 of Schedule 1 of the Act (as applied under subclause (1)):

• (b) clause 21 of Schedule 1 of the Act applies only to an offer of a financial product of the kind referred to in clause 21(a), (c), or (d) of Schedule 1 of the Act.

The limited disclosure and other requirements prescribed under Schedule 1 of these regulations in relation to a clause specified in regulation 12(1) (the relevant clause) apply to an offer made in reliance upon the relevant clause by virtue of clause 59(1) of Schedule 4 of the Act with all necessary modifications (see clause 59(2) of Schedule 4 of the Act).

(1) For the purposes of section 389(2)(c) of the Act, the following are exempt services:

• (a) a service provided by a trustee corporation in the ordinary course of providing—

  • (i) legal or financial services relating to the preparation or drafting of a will; or

  • (ii) estate management and administration services (and associated legal, financial, and other services carried out under the relevant enactment governing the trustee corporation):

• (b) a service provided by a statutory officer, a Crown organisation (other than Public Trust), or the Reserve Bank in—

  • (i) discharging any duties or exercising any powers of the statutory officer, the Crown organisation, or the Reserve Bank under any enactment; or

  • (ii) doing anything that is incidental to the discharge of the functions of the statutory officer, the Crown organisation, or the Reserve Bank under any enactment:

• (c) a service relating to category 2 products only that is provided—

  • (i) by a non-profit organisation in the course of providing a money management service for budgeting assistance purposes; and

  • (ii) without charge or for a charge set at a level to recover no more than the costs of providing the service.

(2) In this regulation, Crown organisation, non-profit organisation, statutory officer, and trustee corporation have the same meanings as in section 5 of the Financial Advisers Act 2008.

The following services are prescribed intermediary services:

• (a) a crowd funding service:

• (b) a peer-to-peer lending service.

(1) In these regulations,—

• (a) a person (A) provides a crowd funding service if—

  • (i) A provides a facility by means of which offers of shares in a company are made; and

  • (ii) the principal purpose of the facility is to facilitate the matching of companies who wish to raise funds with many investors who are seeking to invest relatively small amounts:

• (b) a person (A) provides a peer-to-peer lending service if—

  • (i) A provides a facility by means of which offers of debt securities are made; and

  • (ii) the principal purpose of the facility is to facilitate the matching of lenders with borrowers who are seeking loans for personal, charitable, or small business purposes.

(2) A crowd funding service or a peer-to-peer lending service also includes—

• (a) any broking services that are provided in the course of providing the service referred to in subclause (1)(a) or (b) (as the case may be):

• (b) any service of operating an ancillary financial product market for trading financial products that have been offered on the facility referred to in subclause (1)(a) or (b) (as the case may be).

(3) If a facility referred to in—

• (a) subclause (1)(a)(i) allows offers of financial products other than shares in a company, the crowd funding service does not include providing the facility to the extent that it relates to offers of those other financial products:

• (b) subclause (1)(b)(i) allows offers of financial products other than debt securities, the peer-to-peer lending service does not include providing the facility to the extent that it relates to offers of those other financial products.

(4) For the purposes of this regulation,—

(1) The eligibility criteria for a crowd funding service under section 396(a) of the Act are as follows:

• (a) the provider has fair, orderly, and transparent systems and procedures for providing the service:

• (b) the service is designed primarily for offers by persons other than the provider and its associated persons:

• (c) the provider has an adequate policy for identifying and managing the risk of fraud by issuers using the service (the anti-fraud policy) that, at a minimum,—

  • (i) checks, against publicly available and readily accessible information, the identity of the issuer and information provided by the issuer relating to the identity and character of its directors and senior managers; and

  • (ii) excludes an issuer from using the service if the provider—

    • (A) is not satisfied as to the identity of the issuer or of the issuer's directors and senior managers; or

    • (B) has reason to believe that any of the issuer's directors or senior managers are not of good character; or

    • (C) has reason to believe that the issuer is not likely to comply with the obligations imposed on it under the service:

• (d) the provider has adequate disclosure arrangements to give investors, or to enable investors to readily obtain, timely and understandable information to assist investors to decide whether to acquire the shares (for example, through initial disclosure, or question and answer forums, or other information that is made available) (see subclause (2)):

• (e) the provider has an adequate policy (a fair dealing policy) for excluding an issuer from using the service if the provider has information (for example, from checks or assessments it carries out (if any)) that gives it reason to believe that the issuer, in relation to any dealing in shares using the service, has—

  • (i) engaged in conduct that is misleading or deceptive or likely to mislead or deceive; or

  • (ii) made a false or misleading representation in contravention of section 22 of the Act; or

  • (iii) made an unsubstantiated representation in contravention of section 23 of the Act:

• (f) the provider has adequate systems and procedures for implementing the anti-fraud policy and the fair dealing policy:

• (g) the provider has adequate systems and procedures for ensuring that each issuer does not raise more than $2 million in any 12-month period under the service:

• (h) the provider has adequate systems and procedures for handling conflicts between the commercial interests of the provider (or of its associated persons) and the need for the provider to have fair, orderly, and transparent systems and procedures for providing the service:

• (i) if a broking service is to be provided by the provider in the course of providing the service, the provider is, or will be, registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 for the broking service on and from commencing to provide the broking service.

(2) In considering whether disclosure arrangements are adequate, the FMA must have regard to—

• (a) the limits (if any) on the amount that retail investors may invest under the service; and

• (b) the amount that issuers may raise under the service.

The eligibility criteria for a peer-to-peer lending service under section 396(a) of the Act are as follows:

• (a) the provider has fair, orderly, and transparent systems and procedures for providing the service:

• (b) the service is designed primarily for offers by persons other than the provider and its associated persons:

• (c) the provider has adequate systems and procedures for—

  • (i) checking the identity of each issuer of debt securities, and of each director and senior manager of the issuer, before the issuer is authorised to offer debt securities using the service; and

  • (ii) assessing, before debt securities are offered using the service, the risk of investors not being repaid in full or not receiving the interest or other returns that will be offered (for example, assessing the creditworthiness of the issuer, any guarantees, and any charge or other security to secure the performance of obligations under the securities); and

  • (iii) disclosing information about that checking and assessment to investors:

• (d) the provider has an adequate policy (a fair dealing policy) for excluding an issuer from using the service if the provider has information (for example, from checks or assessments it carries out (if any)) that gives it reason to believe that the issuer, in relation to any dealing in debt securities using the service, has—

  • (i) engaged in conduct that is misleading or deceptive or likely to mislead or deceive; or

  • (ii) made a false or misleading representation in contravention of section 22 of the Act; or

  • (iii) made an unsubstantiated representation in contravention of section 23 of the Act:

• (e) the provider has adequate systems and procedures for implementing the fair dealing policy:

• (f) to the extent that the provider, under the service, carries out the activities referred to in regulation 46(d) and (e), the provider has adequate arrangements for ensuring the orderly administration of the debt securities in the event that it ceases to operate the service:

• (g) the provider has adequate systems and procedures for ensuring that each issuer does not raise more than $2 million in any 12-month period under the service:

• (h) the provider has adequate systems and procedures for handling conflicts between the commercial interests of the provider (or of its associated persons) and the need for the provider to have fair, orderly, and transparent systems and procedures for providing the service:

• (i) if a broking service is to be provided by the applicant in the course of providing the service, the applicant is, or will be, registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 for the broking service on and from commencing to provide the broking service.

(1) The eligibility criteria for a related body corporate under section 400(1)(e) of the Act are that the key personnel of the related body corporate are fit and proper persons to hold their respective positions.

(2) In this regulation and regulation 22, key personnel, in relation to a body corporate (A), means—

• (a) the executive directors of A; and

• (b) those senior managers of A who will perform duties in connection with providing a market service covered by the licence.

(1) The FMA must, before making a decision in relation to the matters in section 396(c) and (d) of the Act, have regard to any conviction, order made, or successful disciplinary action taken under a relevant proceeding or action against any person that the FMA considers to be a relevant party.

(2) Subclause (1) applies only to the extent that the FMA is aware of the relevant proceeding or action.

(3) In this regulation,—

• (a) a person (R) is a relevant party in relation to an applicant (A) if—

  • (i) A is a body corporate and R has the power, directly or indirectly, to exercise, or control the exercise of, the rights to vote attaching to 25% or more of the voting products of A; or

  • (ii) A and R are acting jointly or in concert; or

  • (iii) A acts, or is accustomed to act, in accordance with the wishes of R; or

  • (iv) R is able, directly or indirectly, to exert a substantial degree of influence over the activities of A; or

  • (v) R is a director or senior manager of A or of a relevant party of A under subparagraphs (i) to (iv):

• (b) relevant proceeding or action means civil or criminal proceedings, regulatory action, or disciplinary action (whether in New Zealand or overseas) that the FMA considers is relevant to the carrying out of the service to which an application for a licence relates.

The FMA must, before making a decision under section 396 of the Act, consult the Reserve Bank if the applicant, or a proposed authorised body, is a registered bank, an NBDT, or a licensed insurer.

(1) A market services licence is subject to a condition that, if any of the following occur, the licensee or an authorised body must, as soon as practicable, send a report containing details of the matter to the FMA:

• (a) the licensee or an authorised body becomes aware or has reasonable grounds to believe that—

  • (i) the licensee or an authorised body is, or it is likely that the licensee or authorised body will become, subject to an insolvency event; or

  • (ii) a director or senior manager of the licensee, or any of the key personnel of an authorised body, is adjudicated bankrupt or it is likely that that person will be adjudicated bankrupt (whether in New Zealand or overseas); or

• (b) the licensee or an authorised body becomes aware that a relevant proceeding or action has been commenced or taken against any of the following:

  • (i) the licensee:

  • (ii) an authorised body:

  • (iii) a director or senior manager of the licensee:

  • (iv) any of the key personnel of an authorised body; or

• (c) a director or senior manager of the licensee, or any of the key personnel of an authorised body,—

  • (i) resigns, is removed, or otherwise ceases to hold the office or position:

  • (ii) is appointed, employed, or engaged; or

• (d) an auditor of the licensee or an authorised body—

  • (i) resigns or otherwise ceases to hold the office:

  • (ii) is appointed (other than by way of reappointment); or

• (e) the licensee or an authorised body proposes to change its name or its legal structure (for example, by virtue of an amalgamation); or

• (f) the licensee or an authorised body proposes to enter into a major transaction (within the meaning of section 129 of the Companies Act 1993 applied to a licensee or an authorised body whether or not it is a company); or

• (g) the licensee or an authorised body becomes aware that a transaction or an arrangement has been entered into, or it is likely that a transaction or arrangement will be entered into, that will result or has resulted in a person obtaining or losing control of the licensee or the authorised body.

(2) In subclause (1)(b), relevant proceeding or action, in relation to a licence,—

• (a) means a civil or criminal proceeding, regulatory action, or disciplinary action (whether in New Zealand or overseas) in relation to the contravention of any enactment, overseas law, or professional code of conduct, that regulates the supply of any financial service, any dealing in financial products, or the management of a body corporate; and

• (b) includes a criminal proceeding—

  • (i) for a crime involving dishonesty (within the meaning of section 2(1) of the Crimes Act 1961); or

  • (ii) in an overseas jurisdiction for a crime that, if committed in New Zealand, would be a crime involving dishonesty within the meaning of that Act; but

• (c) does not include any proceeding commenced, or action taken, by the FMA.

(3) In subclause (1)(g), control has the same meaning as in clause 48 of Schedule 1 of the Act.

(1) A market services licence for an independent trustee of a restricted scheme is subject to a condition that, if the licensee has reasonable grounds to believe that a serious problem has arisen in relation to a managed investment product in the scheme, the licensee must, as soon as practicable,—

• (a) report the serious problem to the FMA; and

• (b) disclose to the FMA all information relevant to the serious problem that is in the possession or control of the independent trustee and was obtained in the course of, or in connection with, the performance of the functions of that trustee.

(2) In subclause (1), serious problem has the same meaning as in section 199(2) of the Act.

(1) A market services licence for a provider of a discretionary investment management service, a crowd funding service, or a peer-to-peer lending service is subject to a condition that the provider must, in respect of any document required by or for the purposes of the Act or these regulations in connection with the service,—

• (a) keep a copy of the document for a period of at least 7 years after the date on which the document comes into the possession of the provider; and

• (b) provide, on request and on payment of the relevant fee, to an investor a copy of, or an extract from, a document that is relevant to the investor (and the copy or extract must be provided in accordance with subclause (3) within 10 working days after receiving the request).

(2) The condition in subclause (1) applies to a document only if the document is given, made, or provided by or to the provider.

(3) The document must be provided by giving it to the investor or delivering or sending it to the investor's address.

(4) In this regulation,—

• (a) a document is relevant to an investor if the investor has or had a right to access or obtain a copy of the document under the Act, regulations made under the Act, a governing document, or the terms of the offer of a financial product or a discretionary investment management service:

• (b) relevant fee means a reasonable printing and administration fee set by the provider.

(1) A market services licence for a provider of a discretionary investment management service that is not a retail service is subject to a condition that the provider must not acquire or dispose of a financial product under the service for an investor, or accept an investment authority from an investor, unless a warning statement has been provided to the investor before the investor grants an investment authority to the provider.

(2) A warning statement must be provided by giving it to the investor or delivering or sending it to the investor's address.

(3) The warning statement must—

• (a) contain a statement to the effect that—

  • (i) the service is not a retail service:

  • (ii) the service is not covered by the licence (and, accordingly, the protections and requirements of the Financial Markets Conduct Act 2013 may not apply); and

• (b) if it is included in another document, be in a prominent position in that document.

(1) A market services licence for a provider of a crowd funding service or a peer-to-peer lending service is subject to a condition that the provider must notify the FMA, in accordance with subclauses (2) and (3), if the provider knows or suspects that an issuer that uses the service has committed, is committing, or is likely to commit—

• (a) a significant contravention of Part 2 of the Act (which relates to fair dealing) in connection with the use of the service; or

• (b) a contravention of the $2 million aggregate limit referred to in clause 4 of Schedule 1.

(2) The provider must give the notice immediately after knowing or suspecting the person has committed, is committing, or is likely to commit the contravention.

(3) The notice must include—

• (a) the issuer’s name and contact details; and

• (b) the obligation to which the known or suspected contravention relates; and

• (c) the facts supporting the provider’s view relating to the known or suspected contravention; and

• (d) any supporting evidence for that view.

(1) A market services licence for a provider of a crowd funding service is subject to a condition that the provider must,—

• (a) if the facility is available through an Internet site, ensure that a warning statement is prominently displayed—

  • (i) on the home page of the site; and

  • (ii) to an investor, on a page on the site, immediately before the investor uses the site to apply for, or otherwise acquire, financial products; and

• (b) in all cases, ensure that a warning statement is prominently displayed in all application forms for acquiring financial products using the service.

(2) The warning statement must be in the following form:

(1) A market services licence for a provider of a crowd funding service is subject to a condition that the provider must obtain from each investor, in accordance with subclauses (2) and (3), a confirmation to the following effect:

(2) The confirmation must be obtained in writing in a separate document or, if it is obtained by electronic means, through a process by which it is obtained separately from the agreement to use the service.

(3) The confirmation must be obtained by the provider before the investor is authorised to use the service.

The conditions imposed under regulations 22 to 28 are Part 6 services provisions that give rise to civil liability under section 449(4) of the Act.

(1) The FMA may impose on a market services licence 1 or more of the following conditions:

• (a) conditions concerning the insurance of a licensee, an authorised body, or any director, employee, or agent of a licensee or an authorised body against claims made against any of them in respect of anything done or omitted by them in connection with a market service and for any costs associated with those claims, including—

  • (i) requiring a licensee or an authorised body to hold professional indemnity insurance:

  • (ii) requiring that insurance be held only with insurers approved by the FMA:

  • (iii) specifying the minimum terms and conditions that an insurance policy must satisfy for the purposes of subparagraph (i):

• (b) conditions requiring the licensee or an authorised body to periodically report information to the FMA concerning the nature, scale, and operation of the service (including statistical information about numbers of transactions entered into and amounts involved):

• (c) conditions under section 400(1) of the Act to authorise 1 or more named related bodies corporate of the licensee to provide a market service covered by the licence:

• (d) conditions for the purposes of section 400(2) of the Act.

(2) See also section 403(3) of the Act (which allows the FMA to impose conditions that, for example, impose limits or restrictions on the services that are covered by the licence).

The FMA may impose on a market services licence for a provider of a discretionary investment management service 1 or more of the following conditions:

• (a) conditions regulating the provision of financial advice referred to in section 392(1)(b) of the Act:

• (b) conditions that—

  • (i) permit the custodian of investor money and investor property to be an associated person of the DIMS licensee (other than by virtue of the custodianship); and

  • (ii) impose limitations on that permission (for example, limiting the permission to a specified period); and

  • (iii) specify requirements that must be observed relating to that permission for the purposes of section 445(2)(b)(ii) of the Act, including requirements that relate to the systems or procedures that must be maintained to identify, disclose, or manage any risks associated with the custodian being an associated person of the DIMS licensee.

(1) The FMA may impose on a market services licence for a derivatives issuer conditions that do 1 or more of the following:

• (a) require the licensee or an authorised body to maintain a minimum level of capital that the FMA considers is adequate:

• (b) regulate the form of that capital (for example, the financial instruments that may be taken into account in calculating capital):

• (c) require the licensee or an authorised body to maintain a capital ratio (including providing for the capital ratio to be set at a specified minimum level):

• (d) require the licensee or an authorised body to maintain minimum amounts of liquid assets relative to liabilities that the FMA considers is adequate:

• (e) specify the assets that qualify as liquid assets, and requirements concerning matching maturity of assets and liabilities, for the purposes of paragraph (d):

• (f) impose other requirements to better ensure that a licensee or an authorised body maintains prudent cash flows and a level of liquid assets sufficient to enable it to withstand a plausible range of liquidity shocks (for example, events that result in it experiencing a significantly reduced inflow of liquid assets):

• (g) require the licensee or an authorised body to have systems or procedures for assessing the suitability of a derivative for a retail investor or class of retail investors and for preventing the issue of a derivative to a retail investor where the derivative is assessed as not suitable under those systems or procedures:

• (h) require the licensee or an authorised body to maintain and enforce limits on the extent to which a retail investor is permitted to be leveraged under a derivative issued by the licensee or authorised body.

(2) The FMA may not impose a condition under subclause (1)(a) to (f) (capital and liquidity) for a derivatives issuer that is a registered bank, an NBDT, or a licensed insurer.

The FMA may impose on a market services licence for a provider of a crowd funding service or a peer-to-peer lending service any or all of the following conditions:

• (a) conditions that restrict or prohibit the provider or its associated persons from issuing under or using the service:

• (b) conditions that specify requirements that must be observed relating to that issuing or use, including requirements that relate to the systems or procedures that must be maintained to identify, disclose, and manage any risks associated with the provider or its associated persons issuing under or using the service.

For the purposes of section 422(b) of the Act, subpart 4 of Part 6 of the Act applies to each of the following:

• (a) the provision of a crowd funding service:

• (b) the provision of a peer-to-peer lending service.

The prescribed time under section 424(1)(b) of the Act (for providing a disclosure statement to a retail investor relating to a prescribed intermediary service) is before the investor enters into a client agreement for the crowd funding service or peer-to-peer lending service.

(1) A disclosure statement under section 423 of the Act for a crowd funding service or a peer-to-peer lending service must contain a brief description of—

• (a) the nature of the service provided; and

• (b) how investors apply for, and obtain, access to the facility and the eligibility criteria that apply; and

• (c) how issuers apply for, and obtain, access to the facility and the eligibility criteria that apply; and

• (d) how investments are made and financial products are issued under the service; and

• (e) how investor money is received and dealt with; and

• (f) the nature and extent of the checks and assessments made by the provider of the following:

  • (i) each issuer that offers financial products under the service:

  • (ii) the directors and senior managers of those issuers:

  • (iii) the risks involved in those financial products (or, if checks and assessments of those risks are not made as part of the service, a statement to that effect); and

• (g) the nature and extent of the disclosure arrangements that apply in relation to the financial products offered under the service; and

• (h) the charges that may be payable to the provider by an investor under the service (or, if those charges are not fixed, the types and bases on which charges will be imposed) and when the investor must pay the charges; and

• (i) the rights of the provider or any other person to alter any of the charges applicable to the service; and

• (j) the charges that may be payable to the provider by an issuer under the service (or, if those charges are not fixed, the types and bases on which charges will be imposed); and

• (k) if the provider, or issuers that are associated with the provider, are restricted or prohibited from issuing under or using the service, the nature of the restrictions or prohibitions (see also subclause (2)); and

• (l) the nature and extent of any interest held by or in the provider that may materially adversely impact on the provider's ability to have fair, orderly, and transparent systems and procedures for providing the service, and of the steps taken to manage any risks of that adverse impact; and

• (m) contact details of the provider; and

• (n) how investors may complain about the service to the provider and to any dispute resolution scheme that is available; and

• (o) the type of information relating to the service that is required to be, or otherwise will be, available on request from the provider and how the request should be made (including whether any charge may be made for the information and the amount of the charge).

(2) If subclause (1)(k) does not apply in relation to the provider or issuers that are associated with the provider (or both), a disclosure statement under section 423 of the Act for a crowd funding service or a peer-to-peer lending service must also contain a statement to the effect that the provider or those issuers (or both) are not restricted or prohibited from issuing under or using the service.

(3) A disclosure statement under section 423 of the Act for a crowd funding service must also contain the warning statement required by regulation 27.

(4) A disclosure statement under section 423 of the Act for a peer-to-peer lending service must also contain—

• (a) a brief description of the nature and extent of the provider’s monitoring of compliance by the issuer with its obligations to make repayments and payments under the debt securities (or, if such monitoring is not part of the service, a statement to that effect); and

• (b) a brief description of processes in the event of a default by an issuer of those obligations or (if such processes are not part of the service) of the investor’s remedies in the event of a default.

A disclosure statement under section 423 of the Act for a crowd funding service or a peer-to-peer lending service must be worded and presented in a clear, concise, and effective manner.

(1) If the facility is available through an Internet site, the disclosure statement under section 423 of the Act may incorporate the information required by regulation 36(1), (2), and (4) by reference to the page or section of the Internet site on which the information is located.

(2) The reference in the disclosure statement must include—

• (a) a link or URL to the page or section of the Internet site where that information is located; and

• (b) a brief description of the information on the relevant page or section.

(3) In this regulation, URL means a World Wide Web uniform resource locator.

(1) A licensee or an authorised body that provides a prescribed intermediary service must, in accordance with regulation 40, make available the information specified in subclause (2) to each investor who makes transactions under the service.

(2) The information is a record of all transactions made by the investor under the service, including for each transaction (to the extent applicable)—

• (a) the names of the parties (unless the parties are anonymous under the service); and

• (b) a product description; and

• (c) the price per product; and

• (d) the quantity of products; and

• (e) the total amount of the transaction; and

• (f) the date of the transaction; and

• (g) in the case of a loan, any security given.

(1) This regulation applies for the purposes of regulation 39.

(2) The information must be made available to the investor (A)—

• (a) through an electronic facility on a substantially continuous basis (but only if A has agreed to this method); or

• (b) by giving it to A or delivering or sending it to A’s address not later than 10 working days after the last day of each reporting period in each year (but only if A has agreed to this method); or

• (c) by giving it to A or delivering or sending it to A’s address not later than 5 working days after a financial product is issued or transferred under each transaction.

(3) The information must cover,—

• (a) in the case of subclause (2)(a), the transactions entered into in the period starting when regulation 39 first applies to the provider and ending at a stated time that is not earlier than 48 hours before the information is made available:

• (b) in the case of subclause (2)(b), the transactions entered into in the last reporting period.

(4) The information under subclause (2)(a) or (b) must state the period that it covers.

(5) No information is required to be made available under subclause (2)(b) for a reporting period if no transactions are entered into in that period.

(6) In this regulation, reporting period means—

• (a) each of the 4 quarters of a year ending on 30 June, 30 September, 31 December, and 31 March; or

• (b) any period shorter than a quarter of a year that is agreed with A.

For the purposes of section 429(c) of the Act, subpart 5 of Part 6 of the Act applies to each of the following:

• (a) the provision of a crowd funding service:

• (b) the provision of a peer-to-peer lending service.

For the purposes of section 430(2)(c) of the Act, a client agreement required by subpart 5 of Part 6 of the Act for a crowd funding service or a peer-to-peer lending service must be entered into before the investor applies for or acquires any financial products under the service.

The following provisions are treated as being implied into a client agreement required by subpart 5 of Part 6 of the Act:

(1) A client agreement required by subpart 5 of Part 6 of the Act for a discretionary investment management service must provide adequately for the following matters:

• (a) if investor money or investor property is to be held under the service on behalf of investors,—

  • (i) how custodianship will be provided under the service and the process for appointing and removing a custodian; and

  • (ii) whether and, if so, how the investor may give instructions to exercise rights over the investor’s financial products (for example, a right to vote at meetings of product holders); and

  • (iii) how the investor may acquire legal title to the investor’s financial products, or dispose of those financial products, within a reasonable period after termination of the client agreement; and

  • (iv) how holdings of wholesale products (if any) will be dealt with on termination of the client agreement:

• (b) how the investment authority may be changed:

• (c) a right for the investor to terminate the client agreement without penalty:

• (d) how the right under paragraph (c) may be exercised within a reasonable notice period.

(2) In subclause (1)(a)(iv), wholesale products means financial products that the investor is eligible to acquire only by virtue of the investor acquiring the products through a discretionary investment management service.

A client agreement required by subpart 5 of Part 6 of the Act for a crowd funding service must provide adequately for the use and operation of the facility, including in relation to the following matters:

• (a) how investors and issuers apply for, and obtain, access to the facility and the eligibility criteria that apply in each case:

• (b) how investments are made and financial products are issued under the service:

• (c) how investor money is received and dealt with (to the extent that this is part of the service):

• (d) the nature, extent, and frequency of monitoring of issuers undertaken by the provider (to the extent that this is part of the service):

• (e) the charges that may be payable to the provider by an investor under the service (or, if those charges are not fixed, the types and bases on which charges will be imposed) and when the investor must pay the charges.

A client agreement required by subpart 5 of Part 6 of the Act for a peer-to-peer lending service must provide adequately for the use and operation of the facility, including in relation to the following matters:

• (a) how investors and issuers apply for, and obtain, access to the facility and the eligibility criteria that apply in each case:

• (b) how investments are made and financial products are issued under the service:

• (c) how investor money is received and dealt with:

• (d) how the provider will monitor compliance by the issuer with its obligations to make repayments and payments under the debt securities (to the extent that this is part of the service):

• (e) processes in the event of a default by an issuer of its obligations under the terms of a debt security (to the extent that this is part of the service):

• (f) the charges that may be payable to the provider by an investor under the service (or, if those charges are not fixed, the types and bases on which charges will be imposed) and when the investor must pay the charges.

Regulations 44 to 46 do not require client agreements to use the same terminology as is used in those regulations (for example, in relation to a peer-to-peer lending service, an agreement may refer to a borrower, a lender, or a loan rather than to an issuer, an investor, or a debt security).

(1) For the purposes of clause 27A of Schedule 1 of the Act, an entity that has made an offer in reliance upon clause 12 of Schedule 1 of the Act is an FMC reporting entity if it has 50 or more relevant shareholders and 50 or more parcels of relevant shares.

(2) In subclause (1),—

For the purposes of section 453(b)(ii) of the Act (recipients of money from conduit issuers), the prescribed circumstances are where the offer is made in reliance upon clause 12 of Schedule 1 of the Act by an entity that—

• (a) is an FMC reporting entity as a result of regulation 48; or

• (b) will be an FMC reporting entity as a result of regulation 48 immediately after the issue or transfer of voting products under the offer.

For the purposes of paragraph (c) of the definition of financial service in section 6(1) of the Act, the service of providing credit under a credit contract is declared not to be a financial service for the purposes of section 464 of the Act (which relates to the meaning of restricted communication).

The infringement fee for an infringement offence is the fee specified in relation to the offence in the third column of Schedule 2.

(1) An infringement notice issued under section 514 of the Act must be in the form set out in Schedule 3.

(2) A reminder notice issued under section 515(4) of the Act must be in the form set out in Schedule 4.

(1) The transitional provisions in Schedule 5 have effect.

(2) See clause 58 of Schedule 4 of the Act for another transitional provision relating to Schedule 1 of the Act.

(3) This regulation and Schedule 5 are revoked on the close of 1 December 2014.