The Securities Commission has issued a new exemption notice - the Securities Act (Directors) Certificates - Collective Investment Schemes) Exemption Notice 2009 (Notice).

The Notice provides similar exemptions to those in the temporary exemption gazetted in December of last year.

The Notice applies to unit trusts, participatory securities and superannuation schemes (including Kiwisaver schemes).

There are restrictions on which schemes can utilise the exemption based on liquidity of underlying assets and an exposure to particular issuers.

Under section 37A(1A)(c)(i) of the Securities Act 1978 a certificate extending the life of a prospectus for up to nine months may be registered. Two directors must certify on behalf of all directors that the financial position of the relevant scheme has not materially and adversely changed in the period from the date of the statement of financial position in the prospectus, to the date of the certificate.

This causes problems where adverse financial change is caused solely by reason of market performance. The Notice provides for a prospectus to be extended by a directors' certificate where adverse financial change is caused by market performance, and the prospectus is not otherwise false or misleading.

Relevant conditions are that:

  1. The certificate:
    • complies with section 37A(1A) in all respects except regarding the financial position not material and adversely changing
    • is delivered to the Companies Office for registration with a copy of interim financial statements for the relevant fund
    • is copied to the Securities Commission together with the interim financial statements
    • contains the prescribed statements required in the notice.
  2. The issuer's internet contains a copy of the certificate and the interim financial statements, including any internet page on which the current unit price for the relevant scheme is stated.
  3. No allotments are made nine months after the date of the interim financial statements.
  4. No allotments are made after 30 September 2010 (for a prospectus registered before 31 December 2009) or 30 September 2011 (for a prospectus registered before 31 December 2010).

The certificate must contain the following:

  1. A statement to the effect that the value of the net assets of the scheme has reduced from that shown in the statement of financial position in the prospectus and the reduction is mainly due to:
    • (a) a decline in market prices of assets
    • (b) a significant amount of investor redemptions, or
    • (c) a combination of both.
  2. A statement that, in the opinion of all directors of the issuer after due inquiry, the prospectus is not, at the date of the certificate, false or misleading in a material particular by reason of failing to refer or give proper emphasis to adverse circumstances.
  3. A statement to the effect that interim financial statements have been registered and are available on the issuer's website is sued previously and that investors should review those financial statements to understand the updated financial position of the scheme.

For an offer to which the Securities Regulations 1983 apply, the interim financial statements must be prepared in accordance with either NZ IAS 34 (except that comparative information may be prepared on the basis of a comparison with the most recent audited financial statements), or the Securities Regulations 1983, (except those statements need not be audited and a similar provision applies in relation to comparative financial information).

Where the Securities Regulations 2009 apply to the offer, they must be prepared in accordance with NZ IAS 34 (except with the similar provision applying, as detailed above, in respect of corporate financial information).

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