This notice comes into force on the day after the date of its notification in the Gazette and is revoked on the close of 4 February 2017. The notice applies to offers of certain debt securities made in reliance on the $750,000 minimum investment wholesale investor exclusion in clause 3 of Schedule 1 of the Financial Markets Conduct Act 2013 (the Act). Generally, offerors relying on this exclusion must include a warning statement in every offer document and obtain an acknowledgement of the warning from investors (see clauses 3 to 5 of Schedule 8 of the Financial Markets Conduct Regulations 2014). The effect of the notice is that—

• offerors of Kauri bonds are exempted from the warning and investor acknowledgement requirements (without conditions):

• offerors on the issue of other unsubordinated debt securities must include a warning statement only in the principal terms sheet (which must be given to the investor) and are exempted from the investor acknowledgement requirement:

• warnings for secondary sales of unsubordinated debt securities must be given in any principal terms sheet provided to the investor. However, it is only mandatory to give the principal terms sheet to the investor if the Bloomberg page does not contain a link to the principal terms sheet (which includes a warning statement). Offerors on the secondary sale of unsubordinated debt securities are exempted from the investor acknowledgement requirement.

The Financial Markets Authority (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,—

• in relation to Kauri bond offers, there is a real risk that the cost and complexities of the usual warning and investor acknowledgement requirements would discourage overseas issuers from making those offers into New Zealand altogether considering the relative size of New Zealand’s debt capital market. This would have a significant effect on investment opportunities for New Zealand businesses given the importance of Kauri bond issuances. The FMA therefore considers that the exemption for Kauri bonds promotes the confident and informed participation of businesses, investors, and consumers in the financial markets:

• in relation to offers of other unsubordinated debt securities, the usual warning and investor acknowledgement requirements will have a disproportionate effect on those offers in comparison to offers of other financial products. Wholesale markets for those products are highly fluid, market conditions may change rapidly, and offers must be quickly concluded while market conditions are favourable. The time and monitoring processes required with the usual warning and investor acknowledgement requirements would limit the ability of the market to operate efficiently. This is particularly the case for sales in the secondary market:

• the interests of investors can be appropriately addressed, and unnecessary compliance costs avoided, by a prominent warning in the principal terms sheet (rather than in every offer document) for initial offers under the $750,000 wholesale investor exclusion and by warnings for secondary offers under this exclusion being included in the principal terms sheet that is given to investors or made available through a link on Bloomberg:

• for these reasons, the exemptions are desirable to promote the purposes of the Act, specifically the confident and informed participation of businesses, investors, and consumers in the financial markets, the development of fair, efficient, and transparent financial markets, and the avoidance of unnecessary compliance costs:

• the exemptions are not broader than is reasonably necessary to address the matters that gave rise to the exemptions because they are limited to specific types of debt offerings where the workability issues are particularly difficult. They are also limited to a period of 12 months to allow the FMA to monitor reliance on the exemptions.