Supplementary Order Paper No 19

No 19

House of Representatives

Supplementary Order Paper

Tuesday, 16 March 2021

Financial Market Infrastructures Bill

Proposed amendments

Hon Grant Robertson, in Committee, to move the following amendments:

Clause 2

In clause 2(1)(c), delete “and section 149 (interaction with the Legislation Act 2012)” (page 8, lines 11 and 12).

Replace clause 2(1)(d) (page 8, lines 13 to 15) with:

(d)

Part 5 (offences and pecuniary penalties), other than sections 124(4)(b)(ii), (c)(ii) and (iii), (d)(i) to (iii), and (e) and 127(1)(a), (b), and (d) to (f) and (2):

(da)

Part 6 (regulations, amendments, and other miscellaneous provisions), other than section 159:

In clause 2(1)(e), replace “).” (page 8, line 16) with “):”.

After clause 2(1)(e) (page 8, after line 16), insert:

(f)

Schedule 1A (consequential amendments that come into force on the day after Royal assent).

After clause 2(3) (page 8, after line 23), insert:

(4)

An Order in Council made under this section is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).

Clause 5

In clause 5, after the definition of indirect participant default (page 14, after line 11), insert:

information includes documents

Clause 10

Replace clause 10(1) and (2) (page 18, lines 9 to 13) with:

(1)

The regulator’s functions must be carried out by the RBNZ if an FMI is a pure payment system.

(2)

An FMI is a pure payment system if—

(a)

the FMI is a designated FMI and the FMI’s designation notice specifies under section 29(2)(c) that the FMI is a pure payment system; or

(b)

the FMI is not a designated FMI but the FMI is a multilateral system solely for the clearing or settlement of payment obligations.

Clause 11(2)(b)(i)

Delete clause 11(2)(b)(i) (page 19, lines 3 to 5).

Clause 12(1)(a)

In clause 12(1)(a), after “FMIs” (page 19, line 16), insert “and the amendment or revocation of designation notices”.

Clause 16(2)(a)

In clause 16(2)(a), after “information” (page 21, line 16), insert “within the period, and otherwise in the manner, specified in the notice”.

Clause 31

After clause 31(3) (page 27, after line 16), insert:

(4)

Standards issued under this section are secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).

Clause 32(1)

In clause 32(1)(b)(ii), replace “standard.” (page 27, line 28) with “standard; and”.

After clause 32(1)(b) (page 27, after line 28), insert:

(c)

if a requirement under the proposed standard will apply as referred to in section 35(3A)(a), comply with section 35(3A)(b).

Clause 33

Delete clause 33 (page 28, lines 2 and 3).

Clause 35

After clause 35(3) (page 29, after line 26), insert:

(3A)

The following applies in relation to a requirement imposed under subsection (1)(k):

(a)

the requirement may apply in relation to a designated FMI and its operator even if the FMI or operator—

(i)

operates wholly or substantially only within the financial system in New Zealand; or

(ii)

for any other reason, would not otherwise be subject to a standard issued by an international organisation; but

(b)

before issuing a standard under subsection (1)(k) that applies to an FMI or operator as referred to in paragraph (a), the regulator must, in addition to being satisfied under section 31(1), be satisfied that it is necessary or desirable for the requirement to apply for 1 or more of the following reasons:

(i)

applying the requirement will help ensure that a proposed standard will not apply to a particular operator or designated FMI in an unreasonable way (as referred to in section 32(1)(b)):

(ii)

applying the requirement will help maintain and enhance New Zealand’s international reputation by adopting, where appropriate in the New Zealand context, international standards:

(iii)

applying the requirement will help ensure that New Zealand’s law and regulatory requirements for FMIs can be recognised (in whole or in part) as equivalent, or substantially equivalent, to the law and regulatory requirements of 1 or more other jurisdictions.

Clause 50

In clause 50, insert as subclause (2) (page 34, after line 28):

(2)

See section 146 for supplementary provisions about giving information to the regulator.

Clause 53(1)

In clause 53(1), after “contravenes” (page 35, line 31), insert “a requirement under”.

Clause 63(3)

In clause 63(3), replace “of the regulator” (page 40, line 29) with “of the RBNZ or the FMA”.

Clause 72(1)(b)

In clause 72(1)(b), after “contravention” (page 43, line 34), insert “to which the undertaking relates”.

Clause 73(1)(b)(ii)

In clause 73(1)(b)(ii), after “contravention” (page 44, line 8), insert “to which the undertaking relates”.

Clause 80

In clause 80(2), delete “(without limitation)” (page 47, line 27).

After clause 80(2)(c)(ii) (page 47, after line 37), insert:

(iii)

any other event or circumstance that has resulted in the FMI being distressed:

Clause 82A(3)

In clause 82A(3)(b), replace “operator.” (page 49, line 5) with “operator; or”.

After clause 82A(3)(b) (page 49, after line 5), insert:

(c)

be inconsistent with the purposes set out in section 78.

Clause 89

After clause 89(4) (page 51, after line 4), insert:

(5)

The publication requirements in section 148(2) apply to an Order in Council made under this section.

Clause 99(1)

In clause 99(1), before “rules” (page 54, line 21), insert “FMI’s”.

Clause 101

In clause 101, replace , 103, and 104 (page 55, line 13) with to 104A.

Clause 103 heading

In the heading to clause 103 (page 56, line 24), replace operating with operator.

Clause 104

In the heading to clause 104 (page 57, line 6), replace operating with operator.

In clause 104(2), replace “operating” (page 57, line 9) with “operator”.

In clause 104(3), replace “operating” (page 57, line 12) with “operator”.

Clause 106(2)

In clause 106(2)(a), replace section 98 or 99 (page 58, line 23) with sections 98 to 100.

In clause 106(2)(c), replace “taking any action” (page 58, line 26) with “doing anything”.

Clause 114

After clause 114(3) (page 63, after line 27), insert:

(4)

The publication requirements in section 148(2) apply to an Order in Council made under this section.

Clause 118(3)

In clause 118(3), replace “fees” (page 65, line 10) with “expenses”.

Clause 138

In clause 138(1), replace “disclose” (page 74, line 21) with “publish or disclose”.

In clause 138(2), replace “disclosure” (page 74, line 24) with “publication or disclosure”.

Clause 139

In clause 139(2)(a), after “enactment” (page 75, line 5), insert “(other than the Official Information Act 1982)”.

In clause 139(2)(c), replace “disclosure” (page 75, line 8) with “publication or disclosure”.

In clause 139(2)(d), replace “disclosure” (page 75, line 11) with “publication or disclosure”.

In clause 139(2)(e), replace “disclosure” (page 75, line 17) with “publication or disclosure”.

In clause 139(2)(f), replace “disclosure” (page 75, line 19) with “publication or disclosure”.

In clause 139(3), replace “disclose” (page 75, line 23) with “publish or disclose”.

In clause 139(3), replace “section 2(1) of the Privacy Act 1993” (page 75, lines 26 and 27) with “section 7(1) of the Privacy Act 2020”.

In clause 139(4), replace “disclose” (page 75, line 29) with “publish or disclose”.

In clause 139(5), replace “disclosed” (page 75, line 34) with “published or disclosed”.

After clause 139(5) (page 75, after line 35), insert:

(5A)

The RBNZ may make information to which this section applies available under the Official Information Act 1982 only if 1 or more grounds under subsection (2) apply.

Clause 140

In clause 140(1), replace “discloses” (page 76, line 3) with “publishes or discloses”.

Clause 141

In clause 141(1), replace “disclosed” (page 76, line 8) with “published or disclosed”.

In clause 141(1), replace “disclosure or” (page 76, line 9) with “publication, disclosure, or”.

In clause 141(3)(a), replace “within the meaning of the Privacy Act 1993” (page 76, lines 16 and 17) with “as defined in section 7(1) of the Privacy Act 2020”.

Clause 142

In clause 142(1), replace “disclosed” (page 76, line 21) with “published or disclosed”.

In clause 142(1), replace “disclose or” (page 76, line 22) with “publish, disclose, or”.

In clause 142(2), replace “disclosed to a person under section 139(2)(e), the person may disclose or use the information only if the disclosure” (page 76, lines 26 and 27) with “published or disclosed to a person under section 139(2)(e), the person may publish, disclose, or use the information only if the publication, disclosure,”.

In clause 142(3), replace “disclosed to a person under section 139(2)(f), the person may disclose” (page 76, lines 32 and 33) with “published or disclosed to a person under section 139(2)(f), the person may publish, disclose,”.

Clause 143

In clause 143(1), replace “discloses” (page 76, line 36) with “publishes, discloses,”.

Clause 148

In clause 148(1), delete 33, (page 79, line 15).

In clause 148(1), replace 96(5), (page 79, line 15) with 89(1), 96(5), 114(1),.

Delete clause 148(5) (page 79, lines 32 to 37).

New clause 148A

After clause 148 (page 80, after line 1), insert:

148A Regulator must publish statements of policies

The regulator must also publish in accordance with section 148(2)(b) and (c) statements that outline in general terms the following:

(a)

the regulator’s policies for determining whether an FMI should be declared to be a designated FMI under section 20:

(b)

the regulator’s policies relating to the carrying out of the regulator’s functions in relation to designated FMIs.

Clause 149

Delete clause 149 (page 80, lines 2 to 13).

Clause 150

In the heading to clause 150 (page 80, line 15), delete by Order in Council.

In clause 150(2), replace “Any Order in Council” (page 80, line 31) with “Regulations”.

After clause 150(4) (page 80, after line 37), insert:

(5)

Regulations made under this section are secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).

(6)

If the regulations authorise the regulator under subsection (2),—

(a)

an instrument by which the regulator grants a refund or waiver is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements), unless it applies only to 1 or more named persons; and

(b)

the regulations must contain a statement to that effect.

Clause 151

Replace clause 151 (page 81, lines 2 to 25) with:

151 RBNZ to have regard to directions about government policy objectives

(1)

The RBNZ Minister may direct the RBNZ to have regard to a government policy that relates to the RBNZ’s functions under this Act.

(2)

The RBNZ must have regard to every direction given by the RBNZ Minister under this section.

(3)

The RBNZ Minister must consult the RBNZ before giving a direction under this section.

(4)

A direction must—

(a)

be set out in a written statement signed by the RBNZ Minister; and

(b)

as soon as practicable after it is given, be—

(i)

presented to the House of Representatives by the RBNZ Minister; and

(ii)

published in the Gazette.

(5)

The RBNZ Minister may not give a direction that requires the performance or non-performance of a particular act by the RBNZ or any employee or office holder of the RBNZ, or the bringing about of a particular result, in respect of a particular person.

New clause 158A

Before clause 159 (page 85, before line 7), insert:

158A Consequential amendments that come into force on day after Royal assent

Amend the Acts specified in Schedule 1A as set out in that schedule.

Clause 159 heading

In the heading to clause 159 (page 85, line 7), replace to Acts and instruments with that come into force by Order in Council.

Schedule 1

In Schedule 1, clause 4(5), definition of designation order, after “settlement system” (page 87, lines 31 and 32), insert “as in force immediately before the regulator acts under clause 4(2).

In Schedule 1, after clause 6(2) (page 88, after line 13), insert:

(3)

See also clause 4(4), which provides for the regulator to act without any involvement from the Minister.

In Schedule 1, after clause 9 (page 88, after line 31), insert:

Part 2 Provisions relating to Legislation Act 2019

10 Application of Part

This Part applies until the main commencement date (as defined in clause 2 of Schedule 1 of the Legislation Act 2019).

11 Status and publication of standards

Standards issued under section 31

(a)

are disallowable instruments, but not legislative instruments, for the purposes of the Legislation Act 2012 and must be presented to the House of Representatives under section 41 of that Act; and

(b)

must be published and made available in accordance with section 148(2) to (4).

12 Status and publication of Orders in Council relating to statutory management

An Order in Council made under section 89 or 114

(a)

is not a legislative instrument or a disallowable instrument for the purposes of the Legislation Act 2012; and

(b)

must be published and made available in accordance with section 148(2) to (4).

New Schedule 1A

After Schedule 1 (after page 88), insert:

Schedule 1A Consequential amendments that come into force on day after Royal assent

s 158A

Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (2009 No 35)

In section 137(2), after “Act 2010,”, insert “the Financial Market Infrastructures Act 2019,”.

In section 137(3), after “Act 2010,”, insert “the Financial Market Infrastructures Act 2019,”.

In section 137(4), after “Act 2011”, insert “, the Financial Market Infrastructures Act 2019,”.

In section 137(5), after “Act 2011”, insert “, the Financial Market Infrastructures Act 2019,”.

Financial Markets Authority Act 2011 (2011 No 5)

In section 4, definition of financial markets participant, after paragraph (b)(iiia), insert:

(iiib)

an operator of an FMI within the meaning of section 5 of the Financial Market Infrastructures Act 2019 (other than a pure payment system within the meaning of section 10(2) of that Act):

In Schedule 1, Part 1, insert in its appropriate alphabetical order:

Financial Market Infrastructures Act 2019

Personal Property Securities Act 1999 (1999 No 126)

In section 103A(1)(a)(ii), replace “the operator’s interest” with “the participant’s interest”.

Reserve Bank of New Zealand Act 1989 (1989 No 157)

In section 39, after “2013,”, insert “the Financial Market Infrastructures Act 2019,”.

After section 41(1)(d), insert:

(e)

the Financial Market Infrastructures Act 2019.

In section 46(1)(b), after “insurer”, insert “or of a relevant operator of an FMI”.

After section 46(3), insert:

(4)

In subsection (1)(b), relevant operator of an FMI

(a)

means an operator of an FMI within the meaning of those terms in section 5 of the Financial Market Infrastructures Act 2019; but

(b)

does not include an operator that is the Bank or a subsidiary of the Bank.

In section 47(1) and (4), after “2010,”, insert “the Financial Market Infrastructures Act 2019,”.

In section 49(2)(h)(iii), after “insurer”, insert “or a relevant operator of an FMI as defined in section 46(4).

In section 50(2)(d)(iii), after “insurer”, insert “or a relevant operator of an FMI as defined in section 46(4).

After section 51(5)(c), insert:

(d)

the Financial Market Infrastructures Act 2019.

After section 51(9)(c), insert:

(d)

the Financial Market Infrastructures Act 2019.

In section 53(3)(f)(iii) and (4)(d)(iii), after “insurer”, insert “or a relevant operator of an FMI as defined in section 46(4).

In section 58(b), after “2013)”, insert “or a relevant operator of an FMI (as defined in section 46(4))”.

After section 159(1)(ea), insert:

(eb)

the Financial Market Infrastructures Act 2019:

Replace section 162AB(1)(a) and (b) with:

(a)

assess the expected regulatory impacts of any policy that it intends to adopt under any of the following:

(i)

Part 5:

(ii)

the Insurance (Prudential Supervision) Act 2010:

(iii)

the Non-bank Deposit Takers Act 2013:

(iv)

the Financial Market Infrastructures Act 2019; and

(b)

assess the regulatory impacts of the policies adopted under the enactments listed in paragraph (a)(i) to (iv) at intervals appropriate to the nature of the policy being assessed; and

In Schedule 2, after clause 11(2)(b)(iii), insert:

(iv)

a relevant operator of an FMI as defined in section 46(4); or

Schedule 2

In the Schedule 2 heading (page 89, line 2), after amendments, insert that come into force by Order in Council.

In Schedule 2, Part 1, delete the item relating to the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (page 89, lines 6 to 15).

In Schedule 2, Part 1, after the item relating to section 42(9) of the Corporations (Investigation and Management) Act 1989 (page 90, after line 24), insert:

In section 44(4), replace “section 156T of the Reserve Bank of New Zealand Act 1989” with section 58(1) and (2) of the Financial Market Infrastructures Act 2019.

In Schedule 2, Part 1, delete the item relating to the Financial Advisers Act 2008 (page 90, lines 25 to 34).

In Schedule 2, Part 1, item relating to the Financial Markets Authority Act 2011, delete the item relating to the definition of financial markets participant (page 90, line 36 to page 91, line 3) and the item relating to Part 1 of Schedule 1 (page 91, lines 4 and 5).

In Schedule 2, Part 1, replace the item relating to the Income Tax Act 2007 (page 91, lines 32 to 35) with:

Income Tax Act 2007 (2007 No 97)

Replace section RE 10C(2), other than the subsection heading, with:

(2)

This section does not apply to a custodial institution that is the specified operator of a designated FMI to the extent that the designated FMI is a settlement system. The exclusion extends to a nominee or agent of the specified operator.

Meaning of settlement system and other terms

(2B)

For the purposes of subsection (2) and this subsection,—

(a)

FMI settlement means a settlement within the meaning of section 5 of the Financial Market Infrastructures Act 2019:

(b)

settlement system

(i)

means a system or arrangement for effecting FMI settlements or processing settlement instructions in accordance with rules; and

(ii)

includes a payment system:

(c)

designated FMI, rules, settlement instruction, and specified operator have the same meanings as in section 5 of the Financial Market Infrastructures Act 2019.

In section RE 10C(6)(b), after “Financial Markets Conduct Act 2013,”, insert “the Financial Market Infrastructures Act 2019,”.

In section RE 10C, in the list of defined terms, insert in their correct alphabetical order, “designated FMI”, “FMI settlement”, “rules”, “settlement instruction”, “settlement system”, and “specified operator”.

In section YA 1, insert in their appropriate alphabetical order:

designated FMI is defined in section RE 10C(2B) (Obligations of custodial institutions in relation to certain payments of investment income) for the purposes of that section

FMI settlement is defined in section RE 10C(2B) (Obligations of custodial institutions in relation to certain payments of investment income) for the purposes of that section

rules is defined in section RE 10C(2B) (Obligations of custodial institutions in relation to certain payments of investment income) for the purposes of that section

settlement instruction is defined in section RE 10C(2B) (Obligations of custodial institutions in relation to certain payments of investment income) for the purposes of that section

settlement system is defined in section RE 10C(2B) (Obligations of custodial institutions in relation to certain payments of investment income) for the purposes of that section

specified operator is defined in section RE 10C(2B) (Obligations of custodial institutions in relation to certain payments of investment income) for the purposes of that section

Overseas Investment Act 2005 (2005 No 82)

Replace section 111(1)(e) with:

(e)

an operator of a designated FMI (within the meaning of section 5 of the Financial Market Infrastructures Act 2019).

In Schedule 2, Part 1, item relating to the Personal Property Securities Act 1999, delete the item relating to section 103A(1)(a)(ii) (page 92, lines 6 and 7).

In Schedule 2, Part 1, item relating to the Reserve Bank of New Zealand Act 1989, delete the items relating to sections 39, 41, 46, 47, 49, 50, 51, 53, 58, and 68A (page 92, line 26 to page 93, line 14), section 159(1)(eb) (page 94, lines 10 and 11), section 162AB (page 94, lines 12 to 21), and Schedule 2 (page 94, lines 22 and 23).

In Schedule 2, Part 1, replace the item relating to the Tax Administration Act 1994 (page 94, lines 27 to 32) with:

Tax Administration Act 1994 (1994 No 166)

Replace section 25MB(2) and the heading above that subsection with:

Specified operators of designated FMIs

(2)

Despite subsection (1) and section 25E(1), the rules in this subpart do not apply to a custodial institution that is the specified operator of a designated FMI to the extent that the FMI is a settlement system. The exclusion extends to a nominee or agent of the specified operator.

Meaning of settlement system and other terms

(2B)

For the purposes of subsection (2) and this subsection,—

(a)

settlement system

(i)

means a system or arrangement for effecting settlements or processing settlement instructions in accordance with rules; and

(ii)

includes a payment system:

(b)

designated FMI, FMI, rules, settlement, settlement instruction, and specified operator have the same meanings as in section 5 of the Financial Market Infrastructures Act 2019.

In section 25MB(7)(b), after “Financial Markets Conduct Act 2013,”, insert “the Financial Market Infrastructures Act 2019,”.

In Schedule 2, Part 3, after the item relating to the Reserve Bank of New Zealand (Designated Settlement System—NZClear) Order 2012 (page 95, after line 23), insert:

Reserve Bank of New Zealand (Designated Settlement System—ASXCF) Order 2020 (LI 2020/207)

Explanatory note

This Supplementary Order Paper makes minor and technical amendments to the Financial Market Infrastructures Bill. These amendments include—

  • amending clause 2 (commencement) to provide for most of Parts 5 and 6 to come into force on the day after the Bill receives the Royal assent (rather than on a date appointed by Order in Council). Parts 5 and 6 relate to offences, penalties, regulations, and various other supplementary provisions that support the performance of the regulator’s functions. In addition, some consequential amendments to other Acts (set out in new Schedule 1A) will come into force at the same time. The consequential amendments set out in Schedule 2 will continue to come into force on a date appointed by Order in Council:

  • amending clause 10 to clarify that the regulator’s functions must be carried out by the Reserve Bank of New Zealand (the RBNZ) in relation to all financial market infrastructures (FMIs) that are pure payment systems regardless of whether the FMI has been designated under the Bill. A pure payment system is a multilateral system solely for the clearing or settlement of payment obligations:

  • amending clause 35 to clarify when international standards may be imposed under standards issued under the Bill on FMIs that operate wholly or substantially within New Zealand. Requirements under international standards may be imposed if, for example, imposing the requirements will help maintain and enhance New Zealand’s international reputation by adopting, where appropriate in the New Zealand context, international standards:

  • amending clause 80 to clarify what directions the regulator may give to an operator of an FMI. This includes a direction to take an action to remedy, or mitigate the consequences of, any event or circumstance that has resulted in the FMI being distressed (as defined in clause 5):

  • amending clause 139 to clarify its relationship with the Official Information Act 1982. Clause 139 protects the confidentiality of information provided to the RBNZ under the Bill by preventing the RBNZ from publishing or disclosing the information unless 1 or more specified grounds apply. The amendment clarifies that the RBNZ may make this information available under the Official Information Act 1982 only if 1 or more of the grounds apply:

  • amending clauses 138 to 143 (which relate to the disclosure of information) to ensure that the provisions refer to the publication of information. This is more consistent with other similar legislation:

  • amending clause 151 to narrow it so that it allows the RBNZ Minister to issue a direction to have regard to a government policy only to the RBNZ. Clause 151 previously also applied to the Financial Markets Authority:

  • inserting consequential amendments relating to the Legislation Act 2019 and the Privacy Act 2020.

Departmental disclosure statement

The Reserve Bank of New Zealand is required to prepare a disclosure statement to assist with the scrutiny of this Supplementary Order Paper. The disclosure statement provides access to information about any material policy changes to the Bill and identifies any new significant or unusual legislative features of the Bill as amended.