Yesterday Parliament passed the Financial Markets Conduct Act (FMC
Act), a little over three years since the initial discussion document
was released on a new securities law framework. The FMC Act represents the most
sweeping reform of New Zealand's securities laws in several decades and is a
culmination of a considerable law reform initiative by law makers, the
officials, market participants, and the legal community.
The Financial Markets Conduct Bill was divided into two separate bills just
prior to being passed. In addition to the FMC Act, Parliament has passed the
Financial Markets (Repeals and Amendments) Act. This Act contains provisions
that were previously in Part 9 and Schedule 4 of the FMC Bill relating to the
repeal of, and amendments to, existing securities and financial services
Parts of both Acts will come into force after the Acts receive Royal assent,
mainly to allow for regulations required under the Acts to be progressed. The
provisions relating to the new register of securities offers (which has been in
place since 1 July this year) will be repealed at that time.
The key provisions of both Acts will not be brought into force until next
year. The FMA has indicated that the implementation dates will be in two phases
as outlined below:
Phase 1 on 1 April 2014
For the general fair dealing obligations in Part 2, key growth-focussed
initiatives (e.g., the changes for employee share schemes) and to enable
financial market participants to become licensed.
Phase 2 on 1 December 2014
For the new disclosure requirements, the go-live of the two new online
registers (i.e., the register of managed investment schemes and the register of
offers of financial products), licensing obligations and the remainder of the
There are also transitional periods built into the Acts to allow time to
implement various changes. This includes a one year transition period (which
will start from December 2014) for issuers to elect to comply with the current
securities offering rules, and a two year transition period (also starting from
December 2014) for issuers that continuously issue debt securities or managed
Final amendments to the FMC Bill
Before the FMC Act was passed, Supplementary Order Paper 337 was released with some final
substantive and technical changes to the FMC Bill. Key aspects of that SOP are
Unsubstantiated representations: the provisions regarding
making unsubstantiated representations have been amended to provide that they do
not apply to representations in product disclosure statements, register entries,
and other disclosure documents. A similar change will be made in relation to the
corresponding provision that will be inserted into the Fair Trading Act 1986 by
the Consumer Law Reform Bill.
One month withdrawal period for applicants: in circumstances
where disclosure for an offer is defective, the FMC Act now provides that an
offeror may, if permitted by the regulations, give an applicant a period to
withdraw their application (as an alternative to requiring the offeror to give
the applicant one month to confirm whether he or she still wants to acquire the
products). We will wait to see how the regulations prescribe when a withdrawal
right will be able to be exercised, and what the period of withdrawal will be.
This late change appears to have been made to allow for different regimes and
time periods in relation to an ongoing continuous offer and an initial public
offering. On recent IPOs, the FMA has granted exemptions from the existing
Securities Act to permit a shorter withdrawal period (five working days on the
Mighty River Power offer and seven working days on the Z Energy offer). It
is hoped that similar time periods will be prescribed in the regulations for
Disclosure exclusions: the disclosure rules for sale offers
will not apply in respect of financial products that have previously been
offered, in prescribed circumstances, under an offer of financial products of
the same class as quoted financial products.
Transitional provisions: the existing wholesale investor and
eligible person exclusions in the Securities Act 1978 will continue for a
transitional period to allow new compliance processes to be put in place.
We are pleased that changes have been made to the provisions regarding
unsubstantiated representations and investor withdrawal rights. We have
advocated for changes to those provisions in recent weeks.
For further information, please contact your usual Bell Gully
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.