Financial Markets Conduct Bill

  • enacted

Hon Craig Foss

Financial Markets Conduct Bill

Government Bill

342—2

As reported from the Commerce Committee

Contents

Commentary

Key

1 Title

2 Commencement

Part 1
Preliminary provisions

Purposes

3 Main purposes

4 Additional purposes

Overview

5 Overview

Interpretation

6 Interpretation

7 Meaning of financial product

8 Definitions relating to kinds of financial products

9 Definitions of financial benefit and of managed investment scheme

9A Miscellaneous matters relating to definition of derivative

10 Definitions of issued and issuer

11 Meaning of associated person and related body corporate

12 Miscellaneous interpretation provisions relating to statements and information

13 Status of examples

Act binds the Crown

14 Act binds the Crown

General application provision

15 Application of Act

Part 2
Fair dealing

15A Interpretation in this Part

Misleading or deceptive conduct and false or misleading representations

16 Misleading or deceptive conduct generally

17 Misleading conduct in relation to financial products

18 Misleading conduct in relation to financial services

19 False or misleading representations

20 Certain conduct does not contravene various provisions

21 Limited application of provisions in relation to newspapers, magazines, broadcasting, etc

22 Defence for publisher

23 Defence for reasonable reliance on information supplied by another person

24 Licensed market operator does not contravene by notifying disclosures

25 Other exceptions

26 Territorial scope of sections 16 to 19

Offers in course of unsolicited meetings

26A Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade

26B Right to withdraw

26C Offeror obligations if notice of withdrawal given

26D Director not liable if no misconduct or negligence

Civil liability

26E Civil liability for certain contraventions of this Part

Part 3
Disclosure of offers of financial products

Subpart 1Application

27 Issue offers that need disclosure

28 Sale offers that need disclosure

29 Meaning of regulated offer and of regulated product

30 Regulated offers that need to meet additional governance requirements

31 Options over financial products

32 Treatment of offers of convertible financial products

33 Treatment of offers of renewals and variations

33A Offers of financial products involving customised terms

34 Territorial scope of Part

Subpart 2Procedure for making regulated offers

Product disclosure statement must be prepared and lodged

35 PDS must be prepared and lodged

36 Purpose of PDS

Disclosure to investors

37 PDS must be given if offer requires disclosure

38 Certain situations in which section 37 does not need to be complied with

39 PDS treated as having been given if application form used was included in, or accompanied by, PDS

40 Offence to knowingly or recklessly contravene section 37

41 Right to withdraw

41A Offeror obligations if notice of withdrawal given

41B Director not liable if no misconduct or negligence

Content and presentation of product disclosure statements and register entries

42 Disclosure of material information and content of PDS and register entry

42A Register entry not required in prescribed circumstances

43 Meaning of material information in this Part

44 Consent of experts and persons who make endorsements

45 PDS must be worded and presented in clear, concise, and effective manner

46 PDS must comply with prescribed requirements relating to form and presentation

Other provisions relating to lodging of PDS and other documents

47 Supply of prescribed information and documents

48 Registrar must notify FMA of lodgement of PDS

49 Waiting period after lodgement before processing applications for financial products

50 FMA may extend period

51 Waiting period restriction does not prevent offeror from acting under another PDS

52 FMA may remove restrictions if its consideration complete or consideration or further consideration unnecessary

53 Waiting period does not usually apply to continuous issue PDSs

54 No guarantee or representation as to compliance

55 When supplementary document or replacement PDS may be lodged

56 Supplementary document

57 Replacement PDS

58 Registrar must notify FMA of lodgement of supplementary document or replacement PDS

59 Publication of lodgement

Amending register entry

60 When register entry may be amended

Conditions referred to in PDS

61 Minimum number or amount condition must be fulfilled before issue or transfer

62 Issue or transfer void if quotation condition not fulfilled

Dealing with applications where condition referred to in PDS is not met or disclosure is defective

63 Application of section 64

64 Choices open to offeror

64A Director not liable if no misconduct or negligence

Prohibition of offers where defective disclosure in PDS or register entry

65 False or misleading statements, omissions, and new matters requiring disclosure

66 Persons who must inform offeror about disclosure deficiencies

Expiry

67 Expiry

68 How offeror must deal with applications on expiry

68A Director not liable if no misconduct or negligence

Money for financial products must be held in trust

69 Money for financial products must be held in trust

Offering financial products in entity that does not exist

70 Offering financial products in entity that does not exist

71 Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade

72 Right to withdraw and have money returned

Subpart 3Advertising

73 Advertising for regulated offers

74 Inducements to apply

75 Distribution of PDS or registered documents

76 Advertising before PDS lodged

77 Advertising after PDS lodged

78 General exceptions

78 Documents to which subpart does not apply

79 Defence for publishers

Subpart 4Ongoing disclosure and updating of registers

Duty to update register of offers of financial products and register of managed investment schemes

80 Duty to notify changes to Registrar

Disclosure to particular persons

81 Information to be made available to investors or other prescribed persons

Public disclosure

82 Information to be made publicly available

82A Issuer must provide document, information, and matters to Registrar

Defective ongoing disclosure

83 Defective ongoing disclosure

Confirmation

83A Issuer or offeror must provide confirmation

Subpart 5Civil liability for certain contraventions of this Part

84 Part 3 offer provisions

Part 4
Governance of financial products

86 Overview

Subpart 1Application and overview

85 Part applies to all regulated products

86 Regulated offers of debt securities need governing document and supervisor

87 Regulated offers of managed investment products need to be in registered scheme

88 All regulated products have other accountability requirements under this Part

Subpart 2Governance of debt securities

89 Need for governing document and supervisor for regulated offer of debt security

Governing document requirements

90 Contents of trust deed for debt securities

91 Limits on permitted exemptions and indemnities

92 Trust deed must be legally enforceable

93 Effect of trust deed

94 Changes to trust deed

95 Power to make FMA-approved changes to trust deeds

96 Lodging of changes to trust deed

Role of supervisor

97 Functions of supervisor

98 General duties applying in exercise of supervisor's functions

99 Duty of supervisor to comply with professional standard of care

100 Duty of issuer to provide reports to supervisor

101 Duty of issuer to provide requested information and reports to supervisor

102 Issuer must report contravention or possible contravention of issuer obligations

103 Restriction on section 102

104 Duty of issuer to report serious financial problems

105 Power of supervisor to engage expert

Meetings of product holders

106 Meetings of product holders

107 Power of supervisor to attend meetings and appoint chair

107 Supervisor's attendance at meetings of product holders and power to appoint chair

Change of supervisor

108 Change of supervisor

109 Lodging of notice of change of supervisor

Subpart 3Governance of managed investment products

110 Overview

Need to register

111 Need to register managed investment scheme for regulated offer of managed investment product

Registration

112 Application for registration

113 Initial and ongoing registration requirements for all managed investment schemes

114 Additional initial and ongoing registration requirements for KiwiSaver schemes

115 Additional initial and ongoing registration requirements for superannuation schemes

116 Extent to which superannuation scheme may provide non-retirement benefits

117 Additional ongoing registration requirements for restricted schemes

118 Additional initial and ongoing registration requirements for locked-in superannuation schemes

119 Additional prescribed registration requirements for other particular prescribed types of schemes

120 Manager must ensure that ongoing registration requirements are complied with

121 Changes to registration as particular type of registered scheme

Governing document requirements

122 Contents of governing document for registered scheme

123 Limits on permitted exemptions and indemnities

124 Governing document must be legally enforceable

125 Effect of governing document

126 Changes to governing document

127 Power to make FMA and court-approved changes to governing documents

128 Lodging of changes to governing document

Role of manager

129 Management and administration functions of manager

130 General duties applying in exercise of manager's functions

131 Duty of manager and investment manager to comply with relevant professional standard of care

132 Duties of directors and senior managers of manager

133 Contracting out of management functions

134 Duty of manager to provide reports to supervisor or FMA

135 Duty of manager to provide requested information and reports to supervisor

136 Duty of manager to report contravention or possible contravention of issuer obligations

137 Restriction on section 136

138 Duty of manager to report serious financial problems

Role of supervisor

139 Functions of supervisor

140 General duties applying in exercise of supervisor's functions

141 Duty of supervisor to comply with professional standard of care

142 Power of supervisor to engage expert

Custodianship of scheme property

143 Requirement to have supervisor or other independent person as custodian

144 Custodian holds scheme property on trust

145 Custodian must keep records of scheme property

146 Duty of supervisor to refuse to act on wrongful directions

Meetings of scheme participants

147 Meetings of scheme participants

148 Power of supervisor to attend meetings and appoint chair

148 Supervisor's attendance at meetings of scheme participants and power to appoint chair

149 Manager and associated persons cannot vote if interested in resolution

Management of scheme

150 Requirement for statement of investment policy and objectives

151 Changes to statement of investment policy and objectives

152 Lodging of statement of investment policy and objectives and changes to statement

153 Action that must be taken on limit breaks

154 Action that must be taken on pricing errors and failure to comply with pricing methodologies

155 Actuarial examination of defined benefit scheme or life benefit scheme

156 Power of manager to adjust financial benefits to comply with portfolio investment entity rules

157 Limits on reversion of scheme property in certain schemes to non-scheme participant contributor

Related party transactions

158 Definition of related party benefit

159 General prohibition on transactions giving related party benefits

160 Certain related party benefits permitted

160A Requirements for certificates as to related party benefits

161 Additional restrictions on related party transactions of restricted schemes

161 Additional restrictions on restricted schemes' holdings of in-house assets

Scheme participant transfer rules for KiwiSaver and superannuation schemes

162 Application of scheme participant transfer rules

163 Methods of transfer of scheme participants to another scheme or another section of scheme

164 Transfer of substantial numbers of scheme participants with scheme participant consent

165 Transfer with FMA consent

166 Transfers from KiwiSaver scheme

Provisions as to deferred benefits for superannuation schemes

167 Deferred benefits

Change of manager

168 Application of sections 169 to 176

169 Removal of manager of registered scheme

170 Supervisor or FMA may make temporary appointment

171 Term, powers, and duties of temporary manager

172 FMA's costs must be reimbursed from scheme

173 Supervisor or FMA must take reasonable steps to arrange for new appointment

174 Former manager must hand over records and give reasonable assistance

175 Statutory novation of rights, obligations, and liabilities of former manager

176 Lodging of notice of changes to manager

Change of supervisor

177 Change of supervisor

178 Lodging of notice of change of supervisor

Change of independent trustee

179 Change of independent trustee

Cancellation of registration

180 Cancellation of registration

181 Registrar must remove scheme from register on cancellation of registration

Subpart 4Intervention in debt securities offered under regulated offer or registered schemes

Provisions assisting supervisor or FMA to intervene

182 Duty of auditor to report to supervisor or FMA

183 Duty of auditor, investment manager, administration manager, custodian, or actuary to report serious problems

184 What person must do if duty to report serious problem applies

185 Protections extend to volunteers of supporting information for other protected disclosures

186 FMA may require supervisor to attest as to issuer's compliance with issuer obligations

187 Duty of supervisor to report contravention or possible contravention of issuer obligations to FMA

188 Duty of supervisor to report serious financial problems to FMA

189 FMA's powers of direction

190 FMA's directions to supervisor (or issuer)

Powers to obtain court orders to intervene

191 Power of supervisor or FMA to apply for order to remedy problems

192 Court orders to remedy problems

193 Power of court to appoint new manager, provide for manager powers, and deal with changes of managers

194 Power of court to direct supervisor

194 Power of court to direct supervisor

195 Court power to order winding up of scheme

196 Initial steps in winding up of registered scheme

197 Winding-up report

Miscellaneous

198 Offence of false or misleading statements

199 Protection for persons in respect of disclosure under this subpart or subpart 5

Subpart 5Registers and keeping copies of documents

Registers

200 Issuers must keep registers of regulated products

201 Manner of keeping registers

202 Contents of registers

203 Audit of registers

204 Auditor must advise if auditor considers that subpart is not being complied with

205 Issuer must notify Registrar of registers

206 Public inspection of register

207 Manner of inspection

208 Copies of documents

209 Reasons for request must be given and FMA may authorise non-compliance

210 Restriction on use of information in registers

211 Issuer to send confirmation of financial products

212 Requirement for confirmation document does not apply in certain circumstances

213 Certain provisions prevail over Companies Act 1993

Copies of documents to be retained

213A Copies of documents must be retained for 7 years

Subpart 6Accounting records, copies of documents, and audit of financial statements

Accounting records

214 Issuer must keep proper accounting records

215 Place where accounting records to be kept

216 Accounting records to be in English

217 Period for which accounting records to be kept

218 Inspection of accounting records

Copies of documents to be retained

219 Copies of documents must be retained for 7 years

Audit requirement

220 Financial statements to be audited

221 Meaning of qualified auditor

Miscellaneous

222 Application of other Acts not affected

Subpart 7Civil liability for certain contraventions of this Part

223 Part 4 governance provisions

Part 5
Dealing in financial products on markets

Subpart 1Purposes, overview, and interpretation

224 Additional purposes of Part

225 Overview

Material information and generally available to the market

226 Meaning of material information

227 Meaning of generally available to the market

Certain derivatives treated as being quoted financial products of listed issuer

228 Certain derivatives treated as being quoted financial products of listed issuer

Insider conduct

229 Meaning of information insider, inside information, and adviser

Relevant interests

230 Relevant interests in financial products (basic rule)

231 Extension of basic rule to powers or controls exercisable through trust, agreement, etc

232 Extension of basic rule to interests held by other persons under control or acting jointly

233 Situations not giving rise to relevant interests

Subpart 2Insider trading

Insider conduct prohibited

234 Prohibition of insider conduct

235 Information insider must not trade

236 Information insider must not disclose inside information

237 Information insider must not advise or encourage trading

238 Criminal liability for insider conduct

When prohibition on insider conduct does not apply

239 Exception for trading required by enactment or rule of law

240 Exception for disclosure required by enactment or rule of law or by FMA

241 Exception for disclosure in connection with preparing PDS or disclosure document

242 Exceptions in respect of underwriting agreements

243 Exception in case of knowledge of person's own intentions or activities

244 Exception in case of knowledge in relation to derivatives

245 Exception for agent executing trading instruction only

246 Exceptions from section 235 for takeovers

247 Exceptions from sections 236 and 237 for takeovers

248 Exceptions for schemes of arrangement approved under Companies Act 1993

249 Exception for redemption of managed investment products

250 Exception for Reserve Bank

Defences

251 Absence of knowledge of trading

252 Inside information obtained by independent research and analysis

253 Equal information

254 Options and trading plans

255 Chinese wall defence

Subpart 3Market manipulation

256 Misleading or deceptive conduct generally in dealings in quoted financial products

257 False or misleading statement or information

258 Exception for takeovers

259 Criminal liability for false or misleading statement or information

260 False or misleading appearance of trading

261 Exception for short selling and crossings

262 Persons treated as contravening false or misleading appearance of trading prohibition

263 Defence

264 Criminal liability for false or misleading appearance of trading

Subpart 4Continuous disclosure

265 Listed issuers must disclose in accordance with listing rules if continuous disclosure listing rules apply

266 What are continuous disclosure provisions

267 No contravention of continuous disclosure provisions by person who takes reasonable steps to ensure listed issuer complies

Subpart 5Disclosure of interests of substantial product holders in listed issuers

Substantial holding disclosure obligations

268 Purpose of subpart

269 Meaning of substantial product holder, substantial holding, and percentage

270 Persons must disclose if begin to have substantial holding

271 Substantial product holders must disclose if subsequent movement of 1% or more in holdings

272 Substantial product holders must disclose if subsequent changes in nature of relevant interests

273 Persons must disclose if cease to have substantial holding

274 What disclosure required

275 Form and method of disclosure

276 Listed issuer must give acknowledgement of disclosure

277 How to ascertain total financial products in class for purposes of disclosure

Exemptions

278 Exemption for persons with interest in other substantial product holders who comply

279 Exemption for corporate trustees and nominee companies

280 Conditions of exemption for corporate trustees and nominee companies

281 Exemption for persons under control or acting jointly with corporate trustees and nominee companies

282 Extended time for disclosure for trustees, executors, and administrators

Tracing and disclosure of interests in listed issuers

283 FMA may require persons to disclose to market relevant interests and powers to get relevant interests

284 Listed issuer may require registered holder to disclose relevant interests to it

284 Listed issuer may require registered holder or relevant interest holder to disclose relevant interests to it

285 Listed issuer may require person who has relevant interest to disclose information to it

286 Form and method of notice requiring disclosure

Register and publication of substantial holdings

287 Listed issuers must maintain register of disclosures of substantial holdings

288 Public inspection of register

289 Copies of documents

290 Offences relating to substantial holdings register

291 Listed issuers must make available information on substantial holdings

292 No liability for publication of substantial holdings

293 Notice under this subpart not to affect incorporation of listed issuer or constitute notice of trust

Subpart 6Disclosure of relevant interests in quoted financial products by directors and senior managers of listed issuers

294 Purpose of subpart

295 Directors and senior managers of listed issuers must disclose relevant interests and dealings in relevant interests

296 Disclosure of relevant interests and dealings in relevant interests in relation to specified derivatives

297 What disclosure required

298 Form and method of disclosure

299 Disclosure obligation applies for 6 months after ceasing to hold office

300 Exemption for directors or senior managers who disclose substantial holdings

301 Exemption for overseas listed issuers

302 Listed issuer must keep interests register

303 Public inspection of interests register

304 Copies of documents

305 Offences relating to interests register

Subpart 7Licensing of markets for trading financial products

306 Principles guiding exercise of powers under this subpart

Need for financial product market licence

307 What is a financial product market

308 Need for financial product market licence

309 Prohibitions on holding out

310 Exemptions

311 When financial product market taken to be operated in New Zealand

General obligations of licensed market operator

312 General obligations in respect of licensed markets

Issue of licence

313 Application for licence

314 When licence may be issued

315 When licence may be issued for overseas-regulated market

316 Conditions of licence

317 Procedural requirements

318 Licence may cover more than 1 financial product market

319 Licence may cover subsidiaries

320 FMA must maintain list of licensed markets on Internet site

Changes to licences

321 Variation of conditions

322 Minister may suspend or cancel licence

323 Procedure for varying of conditions or suspension or cancellation of licence

324 Effect of suspension

325 Variation or revocation of suspension

Approval of contractual market rules

326 Licensed markets must be operated under market rules that comply with this subpart

327 Required matters for market rules

328 When market rules have effect

329 Approval process for proposed market rules and rule changes

330 Approval of proposed market rules and changes

331 Notice of decision on rules

332 Power of FMA to request changes to market rules on certain matters

333 Overseas-regulated markets must give notice of market rules and rule changes to FMA

334 Market rules must be available for public inspection

335 Application of Acts relating to regulations to contractual market rules

Monitoring of market operator obligations

336 Licensed market operator must give report on compliance with market operator obligations to FMA

337 FMA to carry out market operator obligations reviews

338 FMA must make written report on market operator obligations review

339 FMA may require licensed market operator to submit action plan on failure to meet market operator obligations

340 Approval, amendment, or rejection of action plan

341 Minister may give market operator obligations direction to licensed market operator

342 Minister may vary, suspend, or cancel licence

Control limits on licensed market operators

343 Power to impose control limits on licensed market operators

344 Control limit not to be exceeded

345 Effect of exceeding control limit

346 Application for approval to exceed control limit

347 Revocation or amendment of approval

Other provisions relating to licensing of financial product markets

348 FMA may give advice to Minister

349 Delegation of Minister's licensing functions and powers to FMA

350 Regulations modifying Part for licensed markets

Subpart 8Operation of licensed markets

351 Licensed market operator must notify FMA of disciplinary actions and suspected contraventions

352 When notification required

353 Details and method of notification

354 Licensed market operator must ensure FMA has access to real-time trading and other information

355 Licensed market operator must give FMA material information given to market participants

356 Waiver of notification and disclosure obligations

357 Licensed market operator must give FMA or Takeovers Panel other information and assistance on request

358 Power to disclose further information

359 Licensed market operator must give notice and have regard to submissions on continuous disclosure determinations

360 Limited notice and submissions for urgent determinations

361 FMA may give directions to licensed market operators

362 Grounds for continuous disclosure direction

363 Grounds for other directions

364 Notice, opportunity for licensed market operator to act, and submissions before FMA gives directions

365 Limited notice and submissions for urgent continuous disclosure directions

366 Notice and opportunity to be heard and represented after FMA gives direction

367 Effect of directions to licensed market operator

368 Provisions as to directions

369 Contracting out of or modification of continuous disclosure process requirements

370 Offence for failing to comply with direction

Subpart 9Transfer of transferable financial products

371 Financial products to which this subpart applies

Transfer of specified financial products using transfers in prescribed form or containing prescribed information

372 Transfer of specified financial products by transfer

373 Transfer of specified financial products by products transfer and brokers transfer

374 Products transfer does not need to be witnessed

375 Transfers to be instruments of transfer for purposes of other enactments and instruments

Transfer of specified financial products by electronic means

376 Approval of electronic transfer system

377 Specified financial products may be transferred under approved system

378 Minor technical modifications to system

Registration may not be refused

379 Registration may not be refused on ground that financial products have been transferred under this subpart

380 Effect of this Act on other enactments

Subpart 10Unsolicited offers to purchase financial products off-market

381 Definitions relating to unsolicited offer regulations and related provisions

382 Regulations concerning unsolicited offers

383 Specific provisions for regulations concerning unsolicited offers

384 Protection from liability in connection with unsolicited offer provisions

Subpart 11Civil liability for certain contraventions of this Part

385 Part 5 market provisions

Part 6
Licensing and other regulation of market services

386 Overview

386A Territorial scope for licensing of certain market services

Subpart 1Key provisions

387 When provider of market services needs to be licensed

387A Exemptions from need for market services licence

388 When providers of other market services may be licensed

389 Meaning of licensed market services

390 Prohibitions on holding out

390A Meaning of discretionary investment management service and related terms

Subpart 2Issue of licences, conditions, and duration

391 Principles guiding the exercise of FMA powers

Issue of licences

392 FMA may issue licence

393 Application for licence

394 When licence must be issued

395 Procedural requirements

396 Notice of decision

397 Licence must be issued for particular market services

398 Licence may cover subsidiaries

398 Licence may cover related bodies corporate as authorised bodies

399 FMA must send licence details to Registrar

Conditions of licence

400 Conditions of licence

401 When FMA may impose permitted conditions

402 Licensee may apply for variation of conditions

403 Procedure for variation of conditions

404 Consequences of contravening conditions

Expiry, suspension, or cancellation of licences

405 Duration of licence

406 When FMA may suspend or cancel licence

407 Effect of expiry, suspension, or cancellation of licence on appointments

Subpart 3Monitoring and enforcement of licences

408 Meaning of material change of circumstances

Reports

409 Licensee must deliver reports to FMA

410 Licensee must report certain matters

411 Restriction on section 410

FMA's powers in case of contravention of market services licensee obligation, material change, etc

412 FMA's powers in case of contravention of market services licensee obligation, material change, etc

413 Procedure for exercising powers

414 Notice requirements

Action plan

415 Action plan

416 Approval, amendment, or rejection of action plan

417 Consequences of failure to submit action plan, rejection of action plan, or failure to comply with action plan

Directions

418 Directions

419 Consequences of failure to comply with directions

Subpart 4Disclosure obligations for certain services provided to retail investors

420 Application of subpart

421 Disclosure must be made before providing service to retail investor

422 Timing and method of disclosure

423 Purpose of disclosure statement

424 Disclosure statement

425 False or misleading statements and omissions

426 Further prescribed information to be made available

Subpart 5Requirement for certain services to be provided under client agreements

427 Application of subpart

427A Need for client agreement

428 Contents, form, and effect of client agreement

Subpart 6Additional regulation of discretionary investment management services

429 Application of subpart

430 Meaning of provider of discretionary investment management service and related terms

Duties of DIMS licensee

431 DIMS licensee's duties

432 Duties of directors and senior managers of DIMS licensee

433 Duty of DIMS licensee to comply with professional standard of care

434 Limits on permitted indemnities

435 Requirement for agreed investment mandate

436 Action that must be taken on limit breaks

Related party transactions

437 Definition of related party benefits

438 General prohibition on transactions giving related party benefits

439 Certain related party benefits permitted

439A Requirements for certificates as to related party benefits

DIMS licensees must hold investor money in trust

440 Money paid by, or on account of, investors must be held in trust

Custodial service performed as part of discretionary investment management service

441 Application of sections 442 and 443

442 Requirements for custodian

443 Certain broker obligations of Financial Advisers Act 2008 apply under this Act

Subpart 7Holding and application of investor funds and property by derivatives issuers

444 Application of regulations made under this subpart

445 Regulations regulating holding and application of investor funds and property by derivatives issuers

Subpart 8Miscellaneous provisions

Civil liability

446 Part 6 licence provisions

Part 6A
Financial reporting

Subpart 1Overview

446A Overview

446B Interpretation

Subpart 2Accounting records

446C Issuer must keep proper accounting records

446D Place where accounting records to be kept

446E Accounting records to be in English

446F Period for which accounting records to be kept

446G Inspection of accounting records

Subpart 3Audit of financial statements

446H Financial statements to be audited

446I Meaning of qualified auditor

446J Appointment of registered audit firm

446K Application of other Acts not affected

Subpart 4Civil liability for certain contraventions of this Part

446L Part 6A financial reporting provisions

Part 7
Enforcement, liability, and appeals

447 Meaning of contravene

Subpart 1FMA's enforcement powers

Stop orders

448 When FMA may make stop orders

449 Terms of stop order

450 Meaning of restricted communication

451 FMA may make interim stop order pending exercise of powers

452 Persons to whom stop orders and interim stop orders may apply

452A Extended application of subpart

Direction orders

453 When FMA may make direction orders

454 Terms of direction orders

Unsolicited offer orders

455 When FMA may make unsolicited offer orders

456 Terms of unsolicited offer orders

Orders that exclusion does not apply

456A FMA may order that exclusion for offers of products of same class as quoted products does not apply

Process for FMA's orders

457 FMA must follow steps before making orders

458 FMA may shorten steps for specified orders

459 FMA must give notice after making orders

General provisions

460 General provisions on FMA's orders

461 Consequences of failing to comply with FMA's orders

Subpart 2High Court's enforcement powers

Injunctions

462 Court may grant injunctions

463 When court may grant injunctions and interim injunctions

464 Undertaking as to damages not required by FMA

Court may make FMA orders under this Part

465 Court may make FMA orders under this Part

Subpart 3Civil liability

Overview of civil liability

466 Overview of civil liability

467 What are civil liability provisions

Declarations of contravention and pecuniary penalty orders

468 When court may make declarations of contravention

469 Purpose and effect of declarations of contravention

470 What declarations of contravention must state

471 When court may make pecuniary penalty orders

472 Directors treated as having contravened in case of defective disclosure and may be ordered to pay pecuniary penalty

473 Maximum amount of pecuniary penalty

474 Guidance for court on how to determine gains made or losses avoided for purposes of maximum amount

475 Considerations for court in determining pecuniary penalty

476 Court must order that recovery from pecuniary penalty be applied to FMA's or Commerce Commission's actual costs

Compensatory orders

477 When court may make compensatory orders

478 Terms of compensatory orders

479 Director has due diligence defence

480 Person treated as suffering loss or damage in case of defective disclosure

Other civil liability orders

481 When court may make other civil liability orders

482 Terms of other civil liability orders

Defences for person in contravention of civil liability provisions

482A General defences for person in contravention

482B Disclosure defences for person in contravention

482C Additional disclosure defence for directors who are treated as contravening

482D Conduct still contravenes even if defence is available

Defences for person involved in contravention of civil liability provisions

482E General defences for person involved in contravention

Miscellaneous provisions relating to defences

482F Defendant must identify other person

Interrelationship of civil liability orders

483 More than 1 civil liability order may be made for same conduct

484 Only 1 pecuniary penalty order may be made for same conduct

485 No pecuniary penalty and fine for same conduct

Limitation defences

485A Limitation defences

Due diligence defence

486 Defence for persons other than primary person in contravention

General

487 Rules of civil procedure and civil standard of proof apply to civil liability

487A Commerce Commission may apply for order in relation to Part 2

Subpart 4Offences relating to defective disclosure and false statements

488 Offence of knowingly or recklessly contravening prohibition on offers where defective disclosure in PDS or register entry

489 Offence of knowingly or recklessly contravening other provisions relating to defective disclosure

489A General offence for false or misleading statements

Subpart 5Infringement offences

490 Infringement offences

491 Infringement notices

492 Procedural requirements for infringement notices

493 Payment of infringement fee

Subpart 6Banning orders

494 When court may make banning orders

495 Terms of banning orders

496 Offence of contravening banning order

497 Only 1 banning order may be made for same conduct

498 General provisions for banning orders

Subpart 7Orders to protect interests of aggrieved persons in case of financial markets investigations or proceedings

499 When court may make order to protect interests of aggrieved persons

500 What orders may be made

501 Interim orders

502 Relationship with other law

Subpart 8Indemnities or insurance for directors, employees, and auditors of issuers, offerors, and licensees

503 Prohibition on indemnities or insurance for directors or employees of issuers, offerors, or licensees that are not New Zealand companies

504 Permitted indemnities for certain liabilities or costs

505 Permitted insurance for certain liability or costs

505A Prohibition on indemnity or insurance for auditors of issuers, offerors, or licensees

506 Interpretation for this subpart

Subpart 9Appeals

507 Appeals against market services licence decisions

508 Appeals against other decisions of FMA on questions of law only

Subpart 10Miscellaneous

509 Time for laying information for summary offences

Accessories and attribution of liability

509 Involvement in contraventions

509A Directors treated as having contravened in case of defective disclosure

509B State of mind of directors, employees, or agents attributed to body corporate or other principal

509C Conduct of directors, employees, or agents attributed to body corporate or other principal

Miscellaneous

509D Time for filing charging document for certain offences

510 Jurisdiction of courts in New Zealand

511 Orders to secure compliance

512 General provisions as to court's orders

513 Persons entitled to appear before court

514 State of mind of directors, employees, or agents attributed to body corporate or other principal

515 Conduct of directors, employees, or agents attributed to body corporate or other principal

516 Saving of liability under Crimes Act 1961 and general law

Part 8
Regulations, transitional provisions, and miscellaneous provisions

Subpart 1Regulations

517 Regulations for purposes of Part 3 (disclosure of offers of financial products)

518 Regulations for purposes of Part 4 (governance of financial products)

519 Regulations for purposes of Part 5 (dealing in financial products on markets)

520 Regulations for purposes of Part 6 (market services)

521 Transitionals, savings, and orderly implementation of Act and related enactments

522 Other regulations

522A Minister must consult FMA about regulations

523 Procedural requirements for regulations relating to exemptions, exclusions, and definitions

524 Miscellaneous provisions relating to exemptions

525 Miscellaneous provisions relating to fees and charges

526 Regulations or exemptions may require compliance with generally accepted accounting practice, financial reporting standards, or FMA frameworks or methodologies

527 Different matters may be prescribed in respect of different circumstances

Subpart 2Exemptions

528 FMA may grant exemptions

529 Restriction on FMA's exemption power

530 Exemption in force for not more than 5 years

531 Breach of exemption conditions

532 Exemptions in respect of specified overseas jurisdictions

532A Effect of exemptions on regulated offers

Subpart 3FMA's designation power

533 FMA may designate financial products and offers

534 Procedural requirements

535 Transitional matters

536 FMA may make interim orders pending exercise of powers

537 Period in which interim order is in force

Subpart 4Frameworks or methodologies

537A Purpose

538 FMA may specify frameworks or methodologies

539 Consultation

Subpart 5General provisions relating to certain FMA instruments

540 Application of subpart

541 Status and publication of instruments

542 Variation and revocation

Subpart 6Recognition and application regimes

543 Purpose of this subpart

544 Definition of country in this subpart

Exemption from Act and regulations for New Zealand offers under recognition regime

545 Exemption from Act and regulations for New Zealand offers under recognition regime

546 Power to exempt from Act and regulations under recognition regime

547 Matters that must be stated in regulations implementing recognition regime

548 Offence for breach of regulations implementing recognition regime

Extension of Act and regulations to overseas offers under application regime

549 Extension of Act and regulations to overseas offers under application regime

550 Power to extend Act and regulations under application regime

551 Matters that must be stated in regulations implementing application regime

Subpart 7Enforcement of overseas pecuniary penalties under application regime

552 Purpose of this subpart

553 Enforcement of overseas pecuniary penalties under application regime

554 Power to enforce overseas penalties under application regime

555 Interpretation

556 Registration of judgment

557 Effect of registration

558 Enforceability of registered judgment

559 Stay may be granted

560 Costs

561 Interest

562 Rules of private international law not to apply

563 Other regulations for registration of judgments under application regime

Subpart 8Transitional and miscellaneous provisions

563A Registers

563B Transitional provisions

Part 9
Repeals and amendments

Subpart 1Repeals and revocations

564 Repeals

565 Revocations

Subpart 2Amendments to Fair Trading Act 1986

566 Principal Act amended

567 New section 5A substituted

567A New section 48B inserted (Commission's powers in relation to Part 2 of Financial Markets Conduct Act 2011)

567B Transitional provision for existing offences and contraventions

Subpart 3Amendments to Financial Advisers Act 2008

568 Principal Act amended

569 Interpretation

570 Who are wholesale clients

571 When person provides discretionary investment management service

572 Other exemptions

573 When financial adviser service is personalised service or class service

574 Who is permitted to provide personalised service to retail clients

575 Who is permitted to provide class service to retail clients

576 Financial adviser must make disclosure before providing personalised service to retail client

577 What financial adviser must disclose

578 QFE must make disclosure before personalised service provided to retail client

579 No compliance with disclosure obligation if disclosure out of date

580 New section 29A inserted

581 What is conduct obligation and when does it apply

581A Financial adviser must exercise care, diligence, and skill

582 New sections 36A to 36D inserted

583 New section 38 substituted

584 Other exemptions

585 What is conduct obligation and when does it apply

586 Restriction on use of term sharebroker

587 New section 77O substituted

588 Offence of recommending offer of securities when subscription illegal

589 Offences of receiving client money if offer for subscription illegal

590 Heading to subpart 4 of Part 4 amended

591 Sections 137C to 137J and heading repealed

592 Pecuniary order for contravening wholesale certification requirement

593 When FMA may make temporary banning orders for financial adviser services or broking services

594 General regulations

Subpart 4Financial Markets Authority Act 2011

595 Principal Act amended

596 Interpretation

597 FMA's functions

597A Power to enter and search place, vehicle, or other thing

598 FMA may exercise person’s right of action

599 FMA may accept undertakings

600 New section 46A inserted

601 New heading and section 48A inserted

602 FMA may require its warning to be disclosed

603 Schedule 1 amended

Subpart 5Amendments to KiwiSaver Act 2006

604 Principal Act amended

605 Purpose

606 Interpretation

607 Meaning of provider

608 Outline

609 Outline of how people become members of overall KiwiSaver scheme

610 Extension of opt-out period

611 Sections 24 to 32 and heading repealed

612 Employer must also supply investment statement for employer’s chosen KiwiSaver scheme (if any)

613 Effect of employer choice of KiwiSaver scheme

614 Commissioner provisionally allocates certain people to default KiwiSaver schemes and sends investment statement

615 New section 52 substituted

616 Notification of transfers and requirement to transfer funds and information

617 Compulsory employer contribution amount: general rule

618 Sections 101H to 101K and heading repealed

619 Part 4 substituted

KiwiSaver scheme rules

Provisions about unreasonable fees that apply to both KiwiSaver schemes and complying superannuation funds

Other implied terms

Other regulation of schemes

Interface with securities law

620 Sections 205 to 206 repealed

621 Sections 209 and 210 and heading repealed

622 Duty of Commissioner under section 50 modified in certain cases in which section 210 applies

623 Section 220 substituted

624 Administration of Act

625 Section 225 repealed

626 Status of Crown contribution and fee subsidy for tax purposes

627 Section 228 substituted

628 Regulations relating to default KiwiSaver providers

629 Sections 231 to 237 repealed

630 Amendments to Schedule 1 (KiwiSaver scheme rules)

631 Further amendments to Schedule 1 (KiwiSaver scheme rules)

632 Schedules 2 and 3 repealed

Subpart 6Amendments to Securities Trustees and Statutory Supervisors Act 2011

633 Principal Act amended

634 Name of principal Act changed

635 New section 3 substituted

636 Interpretation

637 Heading to Part 2

638 Heading to subpart 1 of Part 2

639 New section 6 substituted

640 New section 8 substituted

641 Requirement to be licensed: exception for certain FMA appointees

642 New section 10 substituted

643 FMA may impose conditions on licence

644 Information to be stated in licence

645 FMA must send licence and details to licensee and others

646 Decision on application for, or to vary, licence

647 Application to cancel licence

648 Notice, consultation, and submissions concerning decision under section 16(1)

649 Appeal to High Court against FMA's decision on application

649A Cross-heading amended

650 Effect of expiry of licence

651 Licensee must apply for new licence or notify issuer or operator before licence expires

652 Rejection of application for new licence: FMA may replace existing appointee

653 Expiry of licence: issuer or operator may replace existing appointee or FMA appointee

654 Expiry of licence: existing appointee must provide documents

655 FMA may vary licence because of material change of circumstances, etc

656 FMA's powers if action plan not submitted, etc

657 Removal notice

658 Removal notice: FMA may give direction to existing appointee

659 Removal notice: FMA may replace existing appointee

660 Replacement notice: affected person may replace existing appointee or FMA appointee

661 Notice requiring documents: existing appointee, etc, must provide documents

662 New section 41 substituted

663 Compensation orders

663 Compensation orders

664 Part 3 repealed

665 FMA may vary or cancel direction

666 New section 52 substituted

Transitional provisions

667 FMA may vary licences under Financial Markets Supervisors Act 2011

668 Appeal against licence decision

Subpart 7Amendments to other enactments

669 Amendments to other enactments

Subpart 8Transitional provisions for offers of financial products

670 Act applies to offer unless former enactments continue to apply

671 Former enactments continue to apply if prospectus registered before commencement

672 Issuer may elect to comply with former enactments instead of this Act if prospectus registered within 12 months of commencement

673 Former enactments apply if no prospectus is required unless issuer elects otherwise

674 Transitional provisions that apply after 12-month date in respect of registered prospectuses

675 This Act and 1978 Act are (on transitional basis) alternative means of compliance

676 All offers and allotments under old law must cease

677 All offers and allotments under old law must cease within 2 years of commencement

678 FMA may continue to perform and exercise functions, duties, and powers

679 Subpart does not prevent PDS from being lodged

680 Transitional and application provisions subject to exemption

Subpart 9Transitional provisions relating to securities offered under Securities Act 1978

681 Subpart applies to securities offered under Securities Act 1978

682 Interpretation in this subpart

683 Former enactments continue to apply until effective date

684 KiwiSaver schemes, superannuation schemes, and unit trusts continue under former enactments until effective date

685 Transition period

686 Ongoing requirements of this Act apply on and after effective date

687 Issuer of debt security must lodge trust deed and supply information

688 Managed investment scheme treated as being registered and issuer must supply information

689 Type of registration

690 Registrar to amend register

691 Restriction on making regulated offers and accepting contributions if requirements have not been complied with

692 Issuer may amend or replace governing document with FMA's consent

693 Conversion of governing documents to separate governing documents

694 Amalgamation of schemes

695 Amended enactments continue to apply or have effect in connection with securities

696 Issuer must send notification to security holders

697 PDS treated as having been given

698 FMA may continue to perform and exercise functions, duties, and powers

699 Transitional and application provisions subject to exemption

Subpart 10Other transitional provisions

Unit trusts and superannuation schemes in relation to which offers to the public have not been made

700 Unit trusts in relation to which offers to public have not been made

701 Superannuation schemes in relation to which offers to public have not been made

Amended enactments continue to apply or have effect in connection with schemes

702 Amended enactments continue to apply or have effect in connection with schemes

Extra transitional provisions relating to managed investment schemes

703 Remaining trustees (if any) cease to hold office

704 Restricted schemes have 3 years to comply with related party asset cap rule

705 Savings related to Superannuation Schemes Act 1976

Repealed enactments continue to be financial markets legislation

706 Repealed enactments continue to be financial markets legislation

Licensing of financial product markets

707 Transition process for existing financial product markets

Market services licences

708 Authorised dealers treated as holding market services licence

709 FMA may exercise powers in respect of licences

Approval of electronic transfer systems continues

710 Approval of electronic transfer systems continues

References to banning orders under this Act include references to banning orders under former enactments

711 References to banning orders under this Act include references to banning orders under former enactments

Financial Reporting Act 1993

712 Issuers continue to be issuers under Financial Reporting Act 1993

713 External Reporting Board must review tiers of financial reporting

Schedule 1
Provisions relating to when disclosure is required and exclusions for offers and services

Schedule 2
Registers

Schedule 3
Schedule 3 schemes

Schedule 4
Consequential amendments

Schedule 5
Transitional provisions

Legislative history


The Parliament of New Zealand enacts as follows: