Last week the Financial Markets Conduct Amendment Bill passed its first reading. One of the key changes introduced by the Bill is a new change of control approval regime that will apply to Financial Markets Conduct Act (FMCA) licensees or any of their related “authorised bodies”.
This means that regulatory approval will be required for M&A transactions involving a broader group of financial market participants than is currently the case. The FMA’s approval would be required for a change of control transaction involving parties with FMCA licences such as:
• Managers and trustees of retail funds
• Providers of financial advice
• Providers of discretionary investment management services, and
• Derivatives issuers.
The regime will sit alongside the current change of control regimes for licensed insurers, registered banks and other deposit takers which require approval from the RBNZ in advance of a change of control.
The proposed new FMCA change of control regime would mean that a prospective purchaser or investor must obtain the FMA’s approval before giving effect to a transaction that would result in it acquiring a “significant influence” over an FMCA licensee or authorised body. Broadly speaking, the thresholds for obtaining significant influence are:
• 25% or more of voting rights (e.g., ordinary shares) in the licensee or authorised body, or
• the right to appoint 50% or more of directors of the licensee or authorised body’s board.
The tests are applied directly or indirectly. So, an upstream change of control of a New Zealand incorporated licensee or authorised body would likely require approval.
There is a similar approval requirement for asset sales, with approval being required for the transfer of all or a material part of the licensee or authorised body’s business. There is also an approval requirement for amalgamations.
The regime will apply slightly differently to overseas licensees or authorised bodies. A change of control of an overseas company that holds an FMCA market services licence (or is an authorised body) will require notification to the FMA but not approval. However, FMA approval would be required if an overseas licensee or authorised body was to sell a material part of its New Zealand business. Approval would also be required if an overseas licensee or authorised body proposes to acquire all or part of a New Zealand business that will be a material part of its New Zealand business after completion.
The drafting of the regime is based on the equivalent regime in the Deposit Takers Act 2023. Similar to that regime, the FMA must give notice of its decision within 20 working days after having received all relevant information and reports. In practice this may take months, not weeks, given the 20 working day period only starts once the FMA is satisfied that it has all of the information it needs.
The policy behind this change is to address a perceived regulatory gap that has left the FMA without effective tools to prevent consumer harm that can occur following a change of control. Currently the FMA’s ability to assess the change in control in advance and respond proactively is limited and is considered by the government not to be in keeping with New Zealand’s twin peaks model of regulation which places equal importance on prudential and conduct considerations.
The submission process
The Bill is currently being considered by the Finance and Expenditure Committee.
If you would like assistance to put together a submission on the Bill, or if you would like more information about the proposed changes, please get in touch with the contacts listed or your usual Bell Gully adviser.
The closing date for submissions on the Bill is 23 June 2025. The Financial and Expenditure Committee Report is due by 20 October 2025.
A copy of the Bill is available here.
Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
