The Financial Markets Conduct Act 2013 (Act)
was passed into law in September 2013 and various parts of the Act
came into effect between then and 1 December 2014. The Act replaces
a number of pieces of legislation, principally the Securities Act
1978 and the Securities Markets Act 1988.
The Act was seen as a once in a generation opportunity to
re-write New Zealand's investment law in an integrated and
coherent manner.The previous legislation had been subject to
decades of ad hoc reform and parts of it had become unclear and
difficult to understand. The Act seeks to restore investor
confidence and develop fair, efficient and transparent financial
Key changes under the Act
The most notable change under the new Act is replacing the
requirement for issuers to prepare an investment statement and
prospectus with a requirement to prepare a single product
disclosure statement or PDS (which should be short, clear and
concise) and to enter other material information in an online
register of offers of financial products, which can be easily
updated over time. The intentions are to reduce the amount of
"less relevant" information previously provided to
investors and to reduce the cost and time involved.
Other key changes include:
Replacing the concept of "offers to the public" with
a distinction between "regulated offers" and
"excluded offers" based on a retail/wholesale
replacing the old terminology of equity, debt and participatory
securities with the new categories of "financial
products", being equity securities, debt securities, managed
investment products and derivatives; and
the establishment of licensing regimes for specific financial
sector participants, including fund managers, independent trustees
of restricted schemes, providers of discretionary investment
management services (DIMS), derivatives issuers and prescribed
intermediaries (including crowd funding and peer to peer lending
Employee Share Schemes: The process for
offering financial products to employees and directors under
employee share purchase schemes has become clearer and simpler (see
link below to article on employee share purchase schemes).
Small Offers: Businesses also have the
opportunity to make "small offers" of debt or equity
securities to investors, provided that such offers are
"personal offers" and that they do not exceed the limits
of 20 persons (to whom securities are issued) and $2 million
(raised from such issues) in any 12 month period. See link below to
article on start up businesses having better access to
Prescribed Intermediary Services: The Act also
provides for prescribed intermediary services, such as:
Equity crowd funding, which consists of a (usually online)
platform hosted by a licensed intermediary to facilitate the
matching of companies who wish to raise funds with many investors
who are seeking to invest relatively small amounts (see link below
to article on equity crowd funding); and
Peer to peer lending, which involves the provision of a
(usually online) facility by a licensed intermediary to match
investors (lenders) who are seeking to offer debt securities (or
loans) with issuers (borrowers) who require loans for personal,
charitable or small business purposes (see link below to article on
peer to peer lending).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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