This Supplementary Order Paper makes adjustments to Supplementary Order Paper No 220 (which contains proposed amendments to the Financial Markets Conduct Bill). The adjustments include—
replacing the definition of same class in clause 6 (which concerns classes of financial products) with a definition of class. This will allow the definition to apply to other references in the Bill to a class of financial products. In addition, the definition in clause 6(3) has been adjusted so that debt securities with different redemption dates or interest rates, but otherwise with identical rights, will be of the same class unless regulations prescribe otherwise:
clarifying the definition of scheme participant in clause 6 to align it with the definition of product holder and to remove any possible circularity:
clarifying, in relation to KiwiSaver schemes and certain other schemes, when a special resolution is approved and when scheme participants can require a meeting to be called (see clause 147):
providing that clause 19A (which prohibits making unsubstantiated representations) does not apply to representations in PDSs, register entries, and other disclosure documents. Existing provisions of the Bill already set requirements for representations in these documents. A similar change has been made in relation to the corresponding provision that will be inserted into the Fair Trading Act 1986 by the Consumer Law Reform Bill (see new clause 19CA, new section 48QA in clause 567A, and new clause 12B in Schedule 5):
amending clause 64 (which specifies the choices open to an offeror for dealing with applications for financial products where disclosure for the offer is defective). The amendment allows an offeror, if permitted by the regulations, to give the applicant a period to withdraw their application (rather than requiring the offeror to give the applicant 1 month to confirm whether he or she still wants to acquire the products). New clause 64(1)(d) applies only if regulations are made for the purposes of that paragraph:
amending clause 197 (which relates to winding-up reports for schemes) to allow different levels of infringement fee to be prescribed in respect of each duty specified in the clause:
amending clause 213A to provide for issuers to make documents available on payment of a reasonable printing and administration fee set by the issuer (rather than as prescribed in regulations):
amending clause 394 (which specifies the criteria for the issue of a licence under Part 6). Clause 394(e) requires the FMA to be satisfied that there is no reason to believe that the applicant will not comply with certain obligations. This has been amended to refer to the FMA being satisfied that there is no reason to believe that the applicant is likely to contravene the obligations. This amendment is the same as a change to the equivalent Australian licensing criteria (which was made to address problems in using the previous test in relation to persons who had committed past breaches):
inserting new clause 454B to allow the FMA to make an order prohibiting a person from making an offer under a recognition regime set out in regulations made under clause 546. The provision is similar to regulation 13(4) of the Securities (Mutual Recognition of Securities Offerings—Australia) Regulations 2008. The provision has been inserted into the Bill (rather than being retained in regulations) to allow general provisions in the Bill relating to FMA orders to apply (including appeal rights) and because it is considered more appropriate that a provision of this kind is included in the Bill. A related transitional provision has been included in clause 54 of Schedule 5:
clarifying that regulations may enable the FMA to prescribe the manner in which a thing is done (see clause 522(1)(i)(vi)). For example, the FMA may prescribe a form that must be used. However, fees or charges must still be prescribed by regulations:
clarifying that regulations made under clause 522(1)(ea) may prescribe when information is treated as having been given, provided, or served under the Bill:
inserting new clause 547A to allow the FMA to declare that a failure to meet a precondition of a recognition regime is non-material (with the effect that the precondition is treated as having been met). The provision is similar to regulation 8(3) and (4) of the Securities (Mutual Recognition of Securities Offerings—Australia) Regulations 2008. It is considered more appropriate that a provision of this kind is included in the Bill (rather than being retained in regulations). A related transitional provision has been included in clause 55 of Schedule 5:
amending clause 627 (which replaces the regulation-making section in the KiwiSaver Act 2006 (new section 228)). The amendment re-inserts a paragraph from the current section 228, which allows regulations to prescribe the maximum number of persons that the Minister may appoint as default KiwiSaver providers:
making various changes to the amendments to the Securities Trustees and Statutory Supervisors Act 2011 (the Act) in subpart 6 of Part 9. The changes include—
allowing regulations to prescribe conditions that are imposed on licences, consistent with the licensing framework applying to other licensees under the Bill. These conditions may require a licensee to accept a temporary appointment as a supervisor under section 22 or 37 of the Act (see new section 7 substituted by new clause 639A and amendments to section 53 in new clause 666A):
improving and clarifying the provisions relating to the appointment of FMA appointees under sections 22 and 37 of the Act (see the amendments to clauses 652 and 659). These FMA appointees act as temporary supervisors of a debt security, managed investment scheme, or retirement village where, for example, the existing appointee wishes to resign or is removed. The amendments allow the FMA to reappoint the FMA appointee for a further period that it thinks fit and clarify how the associated costs and charges are to be met. The amendments also clarify that if an FMA appointee does not hold a licence, the appointee must be treated as holding a licence for the purposes of the Financial Markets Conduct Bill. New clause 661A clarifies that an FMA appointee has the powers and duties of the supervisor that are conferred or imposed by the governing document or by law:
amending clauses 30 and 33 of Schedule 1 (which provide for when disclosure is required for sale offers) so that the provisions do not apply if the financial products have previously been offered, in prescribed circumstances, under an offer made in reliance upon the exclusion in clause 18A of Schedule 1:
amending section 46 of the Trustee Act 1956 (Schedule 4) to remove the amendment inserted by the Trustee (Public Trust) Amendment Act 2013. That amendment clarified the circumstances in which Public Trust would be appointed as trustee of last resort in place of a securities trustee. That change was designed as an interim solution pending the implementation of the new supervisor replacement mechanism by this Bill. Supervisors will no longer be able to use the Trustee Act 1956 to require Public Trust to be appointed as trustee of last resort in their place:
inserting a new transitional provision (clause 51 of Schedule 5) that, in effect, allows existing wholesale investor exclusions in the Securities Act 1978 to continue for a transitional period to allow new compliance processes to be put in place. The transitional exclusion will apply if the offer would not be an offer to the public as a result of section 3(2)(a)(i) to (iii) of the Securities Act 1978 or if an exemption under section 5(2CB) or (2CBA) of that Act would apply (exemption for wealthy and experienced investors). The exclusion will apply only if it is made before a prescribed date:
inserting a new transitional provision (clause 52 of Schedule 5) that allows calculations made for the purposes of the employee share purchase scheme exclusion (clause 8 of Schedule 1) and the small offer exclusion (clause 12 of Schedule 1) to take into account offers made to the public under the Securities Act 1978:
inserting a new transitional provision (clause 53 of Schedule 5) that creates a new exemption from Part 2 of the Securities Act 1978 where certain exclusions under Schedule 1 would apply (transitional regulations will prescribe which exclusions apply for this purpose). In this situation, the offeror must comply with conditions and requirements prescribed for the purposes of clause 26 of Schedule 1. This new exemption will cease on the repeal of the Securities Act 1978:
making other minor or technical drafting changes.
This Supplementary Order Paper also makes drafting changes to the Financial Markets Conduct Bill consequential on the division of the Financial Markets Conduct Bill into the Financial Markets Conduct Bill and the Financial Markets (Repeals and Amendments) Bill. When Part 9 and Schedule 4 are divided into a separate Bill, the subpart headings and references to subparts will no longer be appropriate. This Supplementary Order Paper therefore changes the subpart headings into ordinary headings and replaces the references to subparts with references to the appropriate provisions.
Departmental disclosure statement
The Ministry of Business, Innovation, and Employment considers that a departmental disclosure statement is not required to be prepared for this Supplementary Order Paper.