The formal warning recently issued by the New Zealand Financial Markets Authority (FMA) to Vanguard Investments Australia Limited (Vanguard Australia) on 29 March 2023 provides a timely reminder of the ongoing notifications requirements applicable to New Zealand and Australian financial product issuers relying on the trans-Tasman mutual recognition scheme (TMRS).
On 2 December 2022, the Australian Securities and Investments Commission (ASIC) issued three infringement notices to Vanguard Australia for statements that may have been misleading, contained in the product disclosure statements for the Vanguard International Shares Select Exclusions Index Funds. Understood at the time to be indicative of a broader ASIC crackdown on 'greenwashing', the infringement notices have since triggered a formal warning by the FMA to Vanguard Australia for failing to lodge a required notice on the New Zealand Companies Office Disclose Register.
While Vanguard Australia is an Australian financial services (AFS) licensee regulated by ASIC, like many other AFS licensees, it offers a number of its Australian funds to New Zealand investors through the TMRS. The TMRS offers regulatory convenience and cost efficiency to Australian and New Zealand financial product issuers by allowing them to issue certain products in both jurisdictions using a single disclosure document prepared under the laws of their home country.
Despite the mutual recognition, the TMRS maintains certain obligations for issuers to protect investors and ensure transparent and fair markets. These include ongoing notification requirements codified in the Australian Corporations Act 2001 (Cth) and New Zealand Financial Markets Conduct Regulations 2014 (FMCR) respectively.
The FMA's formal warning to Vanguard Australia was because of the issuer's breach of such notification requirements, specifically its failure to lodge a "Notice of enforcement action or exercise of power by Australian regulator" within 5 working days of ASIC issuing the infringement notices in contravention of regulation 273(7) of the FMCR.
The FMA's public response demonstrates the regulator's intention to take action against breaches of TMRS obligations in order to maintain the integrity of the regime. Both Australian and New Zealand product issuers should consider reviewing their compliance procedures to ensure they understand and are able to attend to their obligations under the TMRS.
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