Cabinet approval given for new securities law policies

Further details on the shape of the Government's proposed overhaul of New Zealand's securities laws have been revealed with the release of a Cabinet paper last month containing high-level policy recommendations on some key areas.

This follows the completion of public consultation last year on a discussion document covering proposed reforms to New Zealand's securities laws. (For more information on this consultation click here).

Cabinet has given its approval to:

• move to more principle-based classifications of regulated financial products (debt securities, equity securities, collective investment schemes, derivatives) and giving the Financial Markets Authority (FMA) the ability to determine which of these categories a financial product comes within;
• replace the requirement for issuers to prepare a prospectus and investment statement with a requirement to prepare a single product disclosure statement (PDS) tailored to retail investors;
• tailor the content of the PDS to specific financial products and make it heavily prescribed for standardised products;
• make the exemption from the regime for sophisticated investors principles-based with some clear, bright-line tests;
• create a new small-offers exemption from the regime, similar to that in Australia, to help small companies raise capital;
• create a single collective investment regime where schemes will have to comply with a common set of substantive requirements to ensure an adequate level of investor protection. The schemes will have an external supervisor responsible for custodianship of the scheme and the supervision of the manager; and
• require fund managers to be authorised by the FMA and subject to a fit-and-proper-person test.

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