Financial Markets Conduct Act 2013

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Sections 414(3)(b) and 462(1)(h) corrected on 15 March 2021 under section 25(1)(j)(ii) of the Legislation Act 2012.

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Reprint as at 15 March 2021

Financial Markets Conduct Act 2013

Public Act		2013 No 69
Date of assent		13 September 2013
Commencement		see section 2

Note

Changes authorised by subpart 2 of Part 2 of the Legislation Act 2012 have been made in this official reprint.

Note 4 at the end of this reprint provides a list of the amendments incorporated.

This Act is administered by the Ministry of Business, Innovation, and Employment.

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
10	Miscellaneous matters relating to definition of derivative
11	Definitions of issued and issuer
12	Meaning of associated person and related body corporate
13	Miscellaneous interpretation provisions relating to statements and information
14	Status of examples
	Transitional, savings, and related provisions
14A	Transitional, savings, and related provisions
	Act binds the Crown
15	Act binds the Crown
	General application provision
16	Application of Act
	Part 2 Fair dealing
17	Overview
18	Interpretation in this Part
	Misleading or deceptive conduct, false or misleading representations, and unsubstantiated representations
19	Misleading or deceptive conduct generally
20	Misleading conduct in relation to financial products
21	Misleading conduct in relation to financial services
22	False or misleading representations
23	Unsubstantiated representations
24	Court must have regard to certain matters
25	Limitation on commencement of proceedings in relation to unsubstantiated representations
26	Section 23 does not apply to representations in PDSs, register entries, or other disclosure documents
27	Section 23 subject to other enactments
28	Certain conduct does not contravene various provisions
29	Limited application of provisions in relation to newspapers, magazines, broadcasting, etc
30	Defence for publisher
31	Licensed market operator does not contravene by notifying disclosures
32	Other exceptions
33	Territorial scope of sections 19 to 23
	Offers in course of unsolicited meetings
34	Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade
35	Right to withdraw
36	Offeror obligations if notice of withdrawal given
37	Director not liable if no misconduct or negligence
	Civil liability
38	Civil liability for certain contraventions of this Part
	Part 3 Disclosure of offers of financial products
	Subpart 1—Application
39	Issue offers that need disclosure
40	Sale offers that need disclosure
41	Meaning of regulated offer and of regulated product
42	Regulated offers that need to meet additional governance requirements
43	Options over financial products
44	Treatment of offers of convertible financial products
45	Treatment of offers of renewals and variations
46	Offers of financial products involving customised terms
47	Territorial scope of Part
	Subpart 2—Procedure for making regulated offers
	Product disclosure statement must be prepared and lodged
48	PDS must be prepared and lodged
49	Purpose of PDS
	Disclosure to investors
50	PDS must be given if offer requires disclosure
51	Certain situations in which section 50 does not need to be complied with
52	PDS treated as having been given if application form used was included in, or accompanied by, PDS
53	Offence to knowingly or recklessly contravene section 50
54	Right to withdraw
55	Offeror obligations if notice of withdrawal given
56	Director not liable if no misconduct or negligence
	Content and presentation of product disclosure statements and register entries
57	Disclosure of material information and content of PDS and register entry
58	Register entry not required in prescribed circumstances
59	Meaning of material information in this Part
60	Consent of experts and persons who make endorsements
61	PDS must be worded and presented in clear, concise, and effective manner
62	PDS must comply with prescribed requirements relating to form and presentation
	Other provisions relating to lodging of PDS and other documents
63	Supply of prescribed information
64	Registrar must notify FMA of lodgement of PDS
65	Waiting period after lodgement before processing applications for financial products
66	FMA may extend period
67	Waiting period restriction does not prevent offeror from acting under another PDS
68	FMA may remove restrictions if its consideration complete or consideration or further consideration unnecessary
69	Waiting period does not usually apply to continuous issue PDSs
70	No guarantee or representation as to compliance
71	When supplementary document or replacement PDS may be lodged
72	Supplementary document
73	Replacement PDS
74	Registrar must notify FMA of lodgement of supplementary document or replacement PDS
75	Publication of lodgement
	Amending register entry
76	When register entry may be amended
	Conditions referred to in PDS
77	Minimum number or amount condition must be fulfilled before issue or transfer
78	Issue or transfer void if quotation condition not fulfilled
	Dealing with applications where condition referred to in PDS not met or disclosure defective
79	Application of section 80
80	Choices open to offeror
81	Director not liable if no misconduct or negligence
	Prohibition of offers where defective disclosure in PDS or register entry
82	False or misleading statements, omissions, and new matters requiring disclosure
83	Persons who must inform offeror about disclosure deficiencies
	Expiry
84	Expiry
85	How offeror must deal with applications on expiry
86	Director not liable if no misconduct or negligence
	Money for financial products must be held in trust
87	Money for financial products must be held in trust
	Offering financial products in entity that does not exist
88	Offering financial products of entity that does not exist
	Subpart 3—Advertising
89	Advertising for regulated offers
90	Distribution of PDS or registered documents
91	Advertising before PDS lodged
92	Advertising after PDS lodged
93	Documents to which subpart does not apply
94	Defence for publishers
	Subpart 4—Ongoing disclosure and updating of registers
	Duty to update register of offers of financial products and register of managed investment schemes
95	Duty to notify changes to Registrar
	Disclosure to particular persons
96	Information to be made available to investors, FMA, Registrar, or other prescribed persons
	Public disclosure
97	Information to be made publicly available
98	Issuer must provide information to Registrar
	Defective ongoing disclosure
99	Defective ongoing disclosure
	Confirmation
100	Issuer or offeror must provide confirmation
	Subpart 5—Civil liability for certain contraventions of this Part
101	Part 3 offer provisions
	Part 4 Governance of financial products
102	Overview
	Subpart 1—Governance of debt securities
103	Need for governing document and supervisor for regulated offer of debt security
	Governing document requirements
104	Contents of trust deed for debt securities
105	Limits on permitted exemptions and indemnities
106	Trust deed must be legally enforceable
107	Effect of trust deed
108	Changes to trust deed
109	Power to make FMA-approved changes to trust deeds
110	Lodging of changes to trust deed
	Application of Trusts Act 2019
110A	Application of Trusts Act 2019
	Role of supervisor
111	Functions of supervisor
112	General duties applying in exercise of supervisor’s functions
113	Duty of supervisor to comply with professional standard of care
114	Duty of issuer to provide reports to supervisor
115	Duty of issuer to provide requested information and reports to supervisor
116	Issuer must report contravention or possible contravention of issuer obligations
117	Restriction on use of reports on contraventions
118	Duty of issuer to report serious financial problems
119	Power of supervisor to engage expert
	Meetings of product holders
120	Meetings of product holders
121	Supervisor’s attendance at meetings of product holders and power to appoint chair
	Change of supervisor
122	Change of supervisor
123	Lodging of notice of change of supervisor
	Subpart 2—Governance of managed investment products
124	Overview
	Need to register
125	Need to register managed investment scheme for regulated offer of managed investment product
	Registration
126	Application for registration
127	Initial and ongoing registration requirements for all managed investment schemes
128	Additional initial and ongoing registration requirements for KiwiSaver schemes
129	Additional initial and ongoing registration requirements for superannuation schemes
130	Additional initial and ongoing registration requirements for workplace savings schemes
131	Additional ongoing registration requirements for restricted schemes
132	Additional prescribed registration requirements for other particular prescribed types of schemes
133	Manager must ensure that ongoing registration requirements are complied with
134	Changes to registration as particular type of registered scheme
	Governing document requirements
135	Contents of governing document for registered scheme
136	Limits on permitted exemptions and indemnities
137	Governing document must be legally enforceable
138	Effect of governing document
139	Changes to governing document
140	Power to make FMA and court-approved changes to governing documents
141	Lodging of changes to governing document
	Role of manager
142	Management and administration functions of manager
143	General duties applying in exercise of manager’s functions
144	Duty of manager and investment manager to comply with relevant professional standard of care
145	Duties of directors and senior managers of manager
146	Contracting out of management functions
147	Duty of manager to provide reports to supervisor or FMA
148	Duty of manager to provide requested information and reports to supervisor
149	Duty of manager to report contravention or possible contravention of issuer obligations
150	Restriction on use of reports on contraventions
151	Duty of manager to report serious financial problems
	Role of supervisor
152	Functions of supervisor
153	General duties applying in exercise of supervisor’s functions
154	Duty of supervisor to comply with professional standard of care
155	Power of supervisor to engage expert
	Application of Trusts Act 2019
155A	Application of Trusts Act 2019
	Custodianship of scheme property
156	Requirement to have supervisor or other independent person as custodian
157	Custodian holds scheme property on trust
158	Custodian must keep records of scheme property
159	Custodian must report on scheme property
160	Duty of supervisor to refuse to act on wrongful directions
	Meetings of scheme participants
161	Meetings of scheme participants
162	Supervisor’s attendance at meetings of scheme participants and power to appoint chair
163	Manager and associated persons cannot vote if interested in resolution
	Management of scheme
164	Requirement for statement of investment policy and objectives
165	Changes to statement of investment policy and objectives
166	Lodging of statement of investment policy and objectives and changes to statement
167	Action that must be taken on limit breaks
168	Action that must be taken on pricing errors and failure to comply with pricing methodologies
169	Actuarial examination of defined benefit scheme or life benefit scheme
170	Power of manager to adjust financial benefits to comply with portfolio investment entity rules
171	Limits on reversion of scheme property in certain schemes to non-scheme participant contributor
	Related party transactions
172	Definition of related party benefit
173	General prohibition on transactions giving related party benefits
174	Certain related party benefits permitted
175	Requirements for certificates as to related party benefits
176	Additional restrictions on acquisitions by restricted schemes of in-house assets
177	General duties not affected
	Scheme participant transfer rules for KiwiSaver, superannuation, and workplace savings schemes
178	Application of scheme participant transfer rules
179	Methods of transfer of scheme participants to another scheme or another section of scheme
180	Transfer of substantial numbers of scheme participants with scheme participant consent
181	Transfer with FMA consent
182	Transfers from KiwiSaver scheme
	Provisions as to deferred benefits for superannuation schemes and workplace savings schemes
183	Deferred benefits
	Change of manager
184	Application of sections 185 to 192
185	Removal of manager of registered scheme
186	Supervisor or FMA may make temporary appointment
187	Term, powers, and duties of temporary manager
188	FMA’s costs must be reimbursed from scheme
189	Supervisor or FMA must take reasonable steps to arrange for new appointment
190	Former manager must hand over records and give reasonable assistance
191	Statutory novation of rights, obligations, and liabilities of former manager
192	Lodging of notice of changes to manager
	Change of supervisor
193	Change of supervisor
194	Lodging of notice of change of supervisor
	Cancellation of registration
195	Cancellation of registration
196	Registrar must remove scheme from register on cancellation of registration
	Subpart 3—Intervention in debt securities offered under regulated offer or registered schemes
	Provisions assisting supervisor or FMA to intervene
197	Application
198	Duty of auditor to report to supervisor or FMA
199	Duty of auditor, investment manager, administration manager, custodian, or actuary to report serious problems
200	What person must do if duty to report serious problem applies
201	Protections extend to volunteers of supporting information for other protected disclosures
202	FMA may require supervisor to attest as to issuer’s compliance with issuer obligations
203	Duty of supervisor to report contravention or possible contravention of issuer obligations to FMA
204	Duty of supervisor to report serious financial problems to FMA
205	FMA’s powers of direction
206	FMA’s directions to supervisor (or issuer)
	Powers to obtain court orders to intervene
207	Power of supervisor or FMA to apply for order to remedy problems
208	Court orders to remedy problems
209	Power of court to appoint new manager, provide for manager powers, and deal with changes of managers
210	Power of court to direct supervisor
211	Court power to order winding up of scheme
212	Initial steps in winding up of registered scheme
213	Winding-up report
	Miscellaneous
214	Protection for persons in respect of disclosure under this subpart or subpart 4
	Subpart 4—Registers and keeping copies of documents
	Registers
215	Issuers must keep registers of regulated products
216	Manner of keeping registers
217	Contents of registers
218	Audit or review of registers
219	Auditor must advise if auditor considers that subpart is not being complied with
220	Issuer must notify Registrar of registers
221	Public inspection of register
222	Manner of inspection
223	Copies of documents
224	Reasons for request must be given and FMA may authorise non-compliance
225	Restriction on use of information in registers
226	Certain provisions prevail over Companies Act 1993
	Copies of documents to be retained
227	Copies of documents must be retained for 7 years
	Subpart 5—Civil liability for certain contraventions of this Part
228	Part 4 governance provisions
	Part 5 Dealing in financial products on markets
	Subpart 1—Purposes, overview, and interpretation
229	Additional purposes of Part
230	Overview
	Material information and generally available to the market
231	Meaning of material information
232	Meaning of generally available to the market
	Certain derivatives treated as being quoted financial products of listed issuer
233	Certain derivatives treated as being quoted financial products of listed issuer
	Insider conduct
234	Meaning of information insider, inside information, and adviser
	Relevant interests
235	Relevant interests in financial products (basic rule)
236	Extension of basic rule to powers or controls exercisable through trust, agreement, etc
237	Extension of basic rule to interests held by other persons under control or acting jointly
238	Situations not giving rise to relevant interests
	Territorial scope
239	Territorial scope
	Subpart 2—Insider trading
	Insider conduct prohibited
240	Prohibition on insider conduct
241	Information insider must not trade
242	Information insider must not disclose inside information
243	Information insider must not advise or encourage trading
244	Criminal liability for insider conduct
	When prohibition on insider conduct does not apply
245	Exception for trading required by enactment or rule of law
246	Exception for disclosure required by enactment or rule of law or by FMA
247	Exception for disclosure in connection with preparing PDS or limited disclosure document
248	Exceptions in respect of underwriting agreements
249	Exceptions in case of knowledge of person’s own intentions or activities
250	Exceptions in case of knowledge in relation to derivatives
251	Exception for agent executing trading instruction only
252	Exceptions from section 241 for takeovers
253	Exceptions from sections 242 and 243 for takeovers
254	Exceptions for schemes of arrangement approved under Companies Act 1993
255	Exception for redemption of managed investment products
256	Exception for Reserve Bank
	Defences
257	Absence of knowledge of trading
258	Inside information obtained by independent research and analysis
259	Equal information
260	Options and trading plans
261	Chinese wall defence
	Subpart 3—Market manipulation
262	False or misleading statement or information
263	Exception for takeovers
264	Criminal liability for false or misleading statement or information
265	False or misleading appearance of trading
266	Exception for short selling and crossings
267	Persons treated as contravening false or misleading appearance of trading prohibition
268	Defence
269	Criminal liability for false or misleading appearance of trading
	Subpart 4—Continuous disclosure
270	Listed issuers must disclose in accordance with listing rules if continuous disclosure listing rules apply
271	What are continuous disclosure provisions
272	No contravention of continuous disclosure provisions by person who takes reasonable steps to ensure listed issuer complies
	Subpart 5—Disclosure of interests of substantial product holders in listed issuers
	Substantial holding disclosure obligations
273	Purposes of subpart
274	Meaning of substantial product holder, substantial holding, and percentage
275	Person may be treated as holding financial products where person has relevant interest in certain derivatives
276	Persons must disclose if begin to have substantial holding
277	Substantial product holders must disclose if subsequent movement of 1% or more in holdings
278	Substantial product holders must disclose if subsequent changes in nature of relevant interests
279	Persons must disclose if cease to have substantial holding
280	What disclosure required
281	Form and method of disclosure
282	Listed issuer must give acknowledgement of disclosure
283	How to ascertain total financial products in class for purposes of disclosure
	Exemptions
284	Exemption for persons with interest in other substantial product holders who comply
285	Exemption for corporate trustees and nominee companies
286	Conditions of exemption for corporate trustees and nominee companies
287	Exemption for persons under control or acting jointly with corporate trustees and nominee companies
288	Extended time for disclosure for trustees, executors, and administrators
	Tracing and disclosure of interests in listed issuers
289	FMA may require persons to disclose to market relevant interests and powers to acquire relevant interests
290	Listed issuer may require registered holder or relevant interest holder to disclose relevant interests to it
291	Listed issuer may require person who has relevant interest to disclose information to it
292	Form and method of notice requiring disclosure
293	Listed issuers must make available information on substantial holdings
294	No liability for publication of substantial holdings
295	Notice under this subpart not to affect incorporation of listed issuer or constitute notice of trust
	Subpart 6—Disclosure of relevant interests in quoted financial products by directors and senior managers of listed issuers
296	Purposes of subpart
297	Directors and senior managers of listed issuers must disclose relevant interests and dealings in relevant interests
298	Disclosure of relevant interests and dealings in relevant interests in relation to specified derivatives
299	What disclosure required
300	Form and method of disclosure
301	Disclosure obligation applies for 6 months after ceasing to hold office
302	Exemption for directors or senior managers who disclose substantial holdings
303	Exemption for overseas listed issuers
303A	Extended time for disclosure for trustees, executors, and administrators
304	Listed issuer must keep interests register
305	Public inspection of interests register
306	Copies of documents
307	Offences relating to interests register
	Subpart 7—Licensing of markets for trading financial products
308	Principles guiding exercise of powers under this subpart
	Need for financial product market licence
309	What is a financial product market
310	Need for financial product market licence
311	Prohibitions on holding out
312	Exemptions
313	When financial product market taken to be operated in New Zealand
	General obligations of licensed market operator
314	General obligations in respect of licensed markets
	Issue of licence
315	Application for licence
316	When licence may be issued
317	When licence may be issued for overseas-regulated market
318	Conditions of licence
319	Procedural requirements
320	Licence may cover more than 1 financial product market
321	FMA must maintain list of licensed markets on Internet site
	Changes to licences
322	Variation of conditions
323	Minister may suspend or cancel licence
324	Procedure for varying of conditions or suspension or cancellation of licence
325	Effect of suspension
326	Variation or revocation of suspension
	Approval of contractual market rules
327	Licensed markets must be operated under market rules that comply with this subpart
328	Required matters for market rules
329	When market rules have effect
330	Approval process for proposed market rules and rule changes
331	Approval of proposed market rules and changes
332	Notice of decision on rules
333	Power of FMA to request changes to market rules on certain matters
334	Overseas-regulated markets must give notice of market rules and rule changes to FMA
335	Market rules must be available for public inspection
336	Application of Acts relating to regulations to contractual market rules
	Monitoring of market operator obligations
337	Licensed market operator must give report on compliance with market operator obligations to FMA
338	FMA to carry out market operator obligations reviews
339	FMA must make written report on market operator obligations review
340	FMA may require licensed market operator to submit action plan on failure to meet market operator obligations
341	Approval, amendment, or rejection of action plan
342	Minister may give market operator obligations direction to licensed market operator
343	Minister may vary, suspend, or cancel licence
	Control limits on licensed market operators
344	Power to impose control limits on licensed market operators
345	Control limit not to be exceeded
346	Effect of exceeding control limit
347	Application for approval to exceed control limit
348	Revocation or amendment of approval
	Other provisions relating to licensing of financial product markets
349	FMA may give advice to Minister
350	Delegation of Minister’s licensing functions and powers to FMA
351	Regulations modifying this Part or Part 7 for licensed markets
	Subpart 8—Operation of licensed markets
352	Licensed market operator must notify FMA of disciplinary actions and suspected contraventions
353	When notification required
354	Details and method of notification
355	Licensed market operator must ensure FMA has access to real-time trading and other information
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 9—Transfer 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 products 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 10—Unsolicited 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 11—Civil liability for certain contraventions of this Part
385	Part 5 market provisions
	Part 6 Licensing and other regulation of market services
386	Overview
387	Territorial scope for licensing and other regulation of certain market services
387A	Other provisions relating to financial advice services and client money or property services
	Subpart 1—Key provisions
388	When provider of market services needs to be licensed
389	Exemptions from need for market services licence
390	When providers of other market services may be licensed
391	Prohibitions on holding out
392	Meaning of discretionary investment management service and related terms [Repealed]
	Subpart 2—Issue of licences, conditions, and duration
393	Principles guiding the exercise of FMA powers
	Issue of licences
394	FMA may issue licence
395	Application for licence
396	When licence must be issued
397	Procedural requirements
398	Notice of decision
399	Licence must be issued for particular market services
400	Licence may cover authorised bodies
401	FMA must send licence details to Registrar
	Conditions of licence
402	Conditions of licence
403	When FMA may impose permitted conditions
404	Licensee may apply for variation of conditions
405	Procedure for variation of conditions
406	Consequences of contravening conditions
406A	Effect of condition requiring giver of advice or interposed person to be authorised by licence or registered
	Expiry, suspension, or cancellation of licences
407	Duration of licence
408	When FMA may suspend or cancel licence
409	Effect of expiry, suspension, or cancellation of licence on appointments
	Subpart 3—Monitoring and enforcement of licences
410	Meaning of material change of circumstances
	Reports
411	Licensee must deliver reports to FMA
412	Licensee must report certain matters
413	Restriction on use of report
	FMA’s powers in case of contravention of market services licensee obligation, material change, etc
414	FMA’s powers in case of contravention of market services licensee obligation, material change, etc
415	Procedure for exercising powers
416	Notice requirements
	Action plan
417	Action plan
418	Approval, amendment, or rejection of action plan
419	Consequences of failure to submit action plan, rejection of action plan, or failure to comply with action plan
	Directions
420	Directions
421	Consequences of failure to comply with directions
	Subpart 4—Disclosure obligations for certain services provided to retail investors
422	Application of subpart
423	Disclosure must be made to retail investor
424	Timing and method of disclosure
425	Purpose of disclosure statement
426	Disclosure statement
426A	Further prescribed information to be made available
427	False or misleading statements and omissions
428	Miscellaneous provisions relating to false or misleading statements and omissions
	Subpart 5—Requirement for certain services to be provided under client agreements
429	Application of subpart
430	Need for client agreement
431	Contents, form, and effect of client agreement
	Subpart 5A—Additional regulation of financial advice and financial advice services
	Preliminary matters
431A	Overview of financial advice and financial advice services regime
431B	Additional purpose of subpart
	Interpretation
431C	Meaning of financial advice and regulated financial advice
431D	When financial advice service is provided
431E	Meaning of engaged
	Limitations on giving regulated financial advice and holding out
431F	Limitation on who can give regulated financial advice to retail clients on behalf of financial advice provider
431G	Prohibitions on holding out in relation to giving financial advice
	Duties on persons giving regulated financial advice
431H	Liability for duties
431I	Duty to meet standards of competence, knowledge, and skill
431J	Duty to ensure client understands nature and scope of advice
431K	Duty to give priority to client’s interests
431L	Duty to exercise care, diligence, and skill
431M	Duty to comply with code of conduct
431N	Duty relating to offer that contravenes Act or regulations
431O	Duty to make prescribed information available
431P	False or misleading statements and omissions
	Additional duties on financial advice providers and interposed persons that engage others to give advice
431Q	Persons engaging others to give advice must ensure compliance with duties
431R	Duties of persons who engage nominated representatives
	Miscellaneous provisions
431S	Protection of individual who reports breach
431T	Nomination of nominated representatives
431U	Limitation on pecuniary penalty orders against financial advice providers
	Subpart 5B—Regulation of client money or property services
431V	Overview of client money or property services regime
	Interpretation
431W	Meaning of client money or property service and certain other terms
	Disclosure obligations for services for retail clients
431X	Provider must make disclosure before receiving client money or client property from retail client
431Y	False or misleading statements and omissions
	Conduct obligations
431Z	Application of conduct obligations
431ZA	Provider must exercise care, diligence, and skill
431ZB	Provider must not receive client money if offer contravenes Act or regulations
	Obligations for handling client money and client property
431ZC	Provider must pay client money into separate trust account and hold client property on trust
431ZD	Provider must account for client money and client property
431ZE	Provider must keep records of client money and client property
431ZF	Provider must report on client money and client property
431ZG	Restrictions on use of client money and client property
431ZH	Protection of client money and client property held on trust
	Persons acting in course of business of employers or principals
431ZI	Who is responsible for obligations
	Application of Trusts Act 2019
431ZJ	Application of Trusts Act 2019
	Subpart 6—Additional regulation of discretionary investment management services
432	Application of subpart
432A	Meaning of discretionary investment management service and related terms
	Duties of DIMS licensee
433	DIMS licensee’s duties
434	Duties of directors and senior managers of DIMS licensee
435	Duty of DIMS licensee to comply with professional standard of care
436	Limits on permitted indemnities
437	Requirement for agreed investment authority
438	Action that must be taken on limit breaks
	Related party transactions
439	Definition of related party benefits
440	General prohibition on transactions giving related party benefits
441	Certain related party benefits permitted
442	Requirements for certificates as to related party benefits
443	General duties still apply
	Broking and custodial service performed as part of discretionary investment management service
444	Meaning of investor money and investor property
445	Requirements for custodian
446	Certain client money or property service obligations under subpart 5B apply
	Subpart 7—Holding and application of investor funds and property by derivatives issuers
447	Application of regulations made under this subpart
448	Regulations regulating holding and application of investor funds and property by derivatives issuers
	Subpart 7A—Additional regulation of licences relating to financial benchmarks
448A	Application of subpart
448B	Additional purposes for licences relating to financial benchmarks
448C	FMA’s powers to direct contributor to provide information or data
448D	FMA’s powers to direct administration of financial benchmark
448E	Duration of direction
448F	FMA must follow steps for giving direction
448G	FMA may give interim direction pending exercise of power
448H	FMA must give notice after giving interim direction
448I	General provisions on FMA’s directions
448J	Protection for persons in respect of provision of material, information, or data under this subpart
	Subpart 8—Miscellaneous provisions
	Civil liability
449	Part 6 services provisions
	Part 7 Financial reporting
	Subpart 1—Overview, application, and interpretation
450	Overview
451	Meaning of FMC reporting entity
452	Company that issues equity securities not FMC reporting entity if fewer than 50 shareholders
453	Recipients of money from conduit issuers
454	Miscellaneous provisions relating to application
	Subpart 2—Accounting records
455	FMC reporting entities must keep proper accounting records
456	Place where accounting records to be kept
457	Accounting records to be in English
458	Period for which accounting records to be kept
459	Inspection of accounting records
	Subpart 3—Preparation, audit, and lodgement of financial statements
	Preparation of financial statements
460	Financial statements must be prepared
461	Group financial statements must be prepared
461A	Financial statements for registered schemes and funds
461B	Financial statements for overseas FMC reporting entity to include financial statements for New Zealand business
461C	Failure to comply with authoritative notice does not give rise to pecuniary penalty
	Audit of financial statements
461D	Financial statements must be audited
461E	Meaning of qualified auditor
461F	Audit must be carried out in accordance with auditing and assurance standards
461G	Auditor’s report
	Lodgement of financial statements
461H	Lodgement of financial statements
	Offences
461I	Offence to knowingly fail to comply with financial reporting standards
	FMC reporting entities with higher level of public accountability
461J	External Reporting Board must have regard to indication of level of public accountability
461K	FMC reporting entities considered to have higher level of public accountability
461L	FMA may issue notice relating to level of public accountability
	Subpart 4—Civil liability for certain contraventions of this Part
461M	Part 7 financial reporting provisions
	Part 8 Enforcement, liability, and appeals
	Subpart 1—FMA’s enforcement powers
	Stop orders
462	When FMA may make stop orders
463	Terms of stop order
464	Meaning of restricted communication
465	FMA may make interim stop order pending exercise of powers
466	Persons to whom stop orders and interim stop orders may apply
467	Extended application of subpart
	Direction orders
468	When FMA may make direction orders
469	Terms of direction orders
	Order to prohibit use of simplified disclosure PDS
470	FMA may order that simplified disclosure PDS may not be used
	Order to prohibit offer under recognition regime
471	FMA may order that offer may not be made under recognition regime
	Unsolicited offer orders
472	When FMA may make unsolicited offer orders
473	Terms of unsolicited offer orders
	Orders that exclusion does not apply
474	FMA may order that exclusion for offers of products of same class as quoted products does not apply
	Process for FMA’s orders
475	FMA must follow steps before making orders
476	FMA may shorten steps for specified orders
477	FMA must give notice after making orders
	General provisions
478	General provisions on FMA’s orders
479	Consequences of failing to comply with FMA’s orders
	Subpart 2—High Court’s enforcement powers
	Injunctions
480	Court may grant injunctions
481	When court may grant injunctions and interim injunctions
482	Undertaking as to damages not required by FMA
	Court may make FMA orders under this Part
483	Court may make FMA orders under this Part
	Subpart 3—Civil liability
	Overview of civil liability
484	Overview of civil liability
485	What are civil liability provisions
	Declarations of contravention and pecuniary penalty orders
486	When court may make declarations of contravention
487	Purpose and effect of declarations of contravention
488	What declarations of contravention must state
489	When court may make pecuniary penalty orders
490	Maximum amount of pecuniary penalty
491	Guidance for court on how to determine gains made or losses avoided for purposes of maximum amount
492	Considerations for court in determining pecuniary penalty
493	Court must order that recovery from pecuniary penalty be applied to FMA’s actual costs
	Compensatory orders
494	When court may make compensatory orders
495	Terms of compensatory orders
496	Person treated as suffering loss or damage in case of defective disclosure
	Other civil liability orders
497	When court may make other civil liability orders
498	Terms of other civil liability orders
	Defences for person in contravention of civil liability provisions
499	General defences for person in contravention
500	Disclosure defences for person in contravention
501	Additional disclosure or financial reporting defence for directors who are treated as contravening
501A	Additional defence for licensees who are treated as contravening
502	Conduct still contravenes even if defence is available
	Defences for person involved in contravention of civil liability provisions
503	General defences for person involved in contravention
	Miscellaneous provisions relating to defences
504	Defendant must identify other person
	Interrelationship of civil liability orders
505	More than 1 civil liability order may be made for same conduct
506	Only 1 pecuniary penalty order may be made for same conduct
507	No pecuniary penalty and fine for same conduct
	Limitation defences
508	Limitation defences
	General
509	Rules of civil procedure and civil standard of proof apply to civil liability
	Subpart 4—Offences relating to defective disclosure and false statements
510	Offence of knowingly or recklessly contravening prohibition on offers where defective disclosure in PDS or register entry
511	Offence of knowingly or recklessly contravening other provisions relating to defective disclosure
512	General offence for false or misleading statements
	Subpart 5—Infringement offences
513	Infringement offences
514	Infringement notices
515	Procedural requirements for infringement notices
516	Payment of infringement fee
	Subpart 6—Banning orders
517	When court may make banning orders
518	Terms of banning orders
519	Offence of contravening banning order
520	Only 1 banning order may be made for same conduct
521	General provisions for banning orders
	Subpart 7—Orders to protect interests of aggrieved persons in case of financial markets investigations or proceedings
522	When court may make order to protect interests of aggrieved persons
523	What orders may be made
524	Interim orders
525	Relationship with other law
	Subpart 8—Indemnities or insurance for directors, employees, and auditors of issuers, offerors, and licensees
526	Prohibition on indemnities or insurance for directors or employees of issuers, offerors, or licensees that are not New Zealand companies
527	Permitted indemnities for certain liabilities or costs
528	Permitted insurance for certain liability or costs
529	Prohibition on indemnity or insurance for auditors of issuers, offerors, or licensees
530	Interpretation for this subpart
	Subpart 9—Appeals
531	Appeals against market services licence decisions
532	Appeals against other decisions of FMA on questions of law only
532A	Appeals against decisions of disciplinary committee
532B	Orders as to publication of names
532C	Appeal on question of law
	Subpart 10—Miscellaneous
	Accessories and attribution of liability
533	Involvement in contraventions
534	Directors treated as having contravened in case of defective disclosure or financial reporting contravention
535	State of mind of directors, employees, or agents attributed to body corporate or other principal
536	Conduct of directors, employees, or agents attributed to body corporate or other principal
	Miscellaneous
537	Time for filing charging document for certain offences
538	Jurisdiction of courts in New Zealand
539	Orders to secure compliance
540	General provisions as to court’s orders
541	Persons entitled to appear before court
542	Saving of liability under Crimes Act 1961 and general law
	Part 9 Regulations, transitional provisions, and miscellaneous provisions
	Subpart 1—Regulations
543	Regulations for purposes of Part 3 (Disclosure of offers of financial products)
544	Regulations for purposes of Part 4 (governance of financial products)
545	Regulations for purposes of Part 5 (dealing in financial products on markets)
546	Regulations for purposes of Part 6 (market services)
547	Transitionals, savings, and orderly implementation of Act and related enactments [Repealed]
548	Other regulations
549	Minister must consult FMA about regulations
550	Procedural requirements for regulations relating to exemptions, exclusions, and definitions
551	Miscellaneous provisions relating to exemptions
552	Miscellaneous provisions relating to fees and charges
553	Miscellaneous provisions relating to implied provisions
554	Regulations or exemptions may require compliance with generally accepted accounting practice, standards, or FMA frameworks or methodologies
555	Different matters may be prescribed in respect of different circumstances
	Subpart 2—Exemptions
556	FMA may grant exemptions
557	Restriction on FMA’s exemption power
558	Exemption in force for not more than 5 years
559	Breach of exemption conditions
560	Exemptions in respect of specified overseas jurisdictions
561	Effect of exemptions on regulated offers
561A	Financial reporting exemptions
	Subpart 3—FMA’s designation power
562	FMA’s designation power
563	Procedural requirements
564	Transitional matters
565	FMA may make interim orders pending exercise of powers
566	Period in which interim order is in force
	Subpart 4—Frameworks or methodologies
567	Purpose
568	FMA may specify frameworks or methodologies
569	Consultation
	Subpart 5—General provisions relating to certain FMA instruments
570	Application of subpart
571	Status and publication of instruments
571A	Deferral of obligations to publish, notify, and make available non-class exemptions
572	Variation and revocation
	Subpart 6—Recognition and application regimes
573	Purpose of this subpart
574	Definition of country in this subpart
	Exemption from Act and regulations for New Zealand offers under recognition regime
575	Exemption from Act and regulations for New Zealand offers under recognition regime
576	Power to exempt from Act and regulations under recognition regime
577	Matters that must be stated in regulations implementing recognition regime
578	FMA may declare failure to meet preconditions of recognition regime to be non-material
579	Offence for breach of regulations implementing recognition regime
	Extension of Act and regulations to overseas offers under application regime
580	Extension of Act and regulations to overseas offers under application regime
581	Power to extend Act and regulations under application regime
582	Matters that must be stated in regulations implementing application regime
	Subpart 7—Enforcement of overseas pecuniary penalties under application regime
583	Purpose of this subpart
584	Enforcement of overseas pecuniary penalties under application regime
585	Power to enforce overseas penalties under application regime
586	Interpretation
587	Registration of judgment
588	Effect of registration
589	Enforceability of registered judgment
590	Stay may be granted
591	Costs
592	Interest
593	Rules of private international law not to apply
594	Other regulations for registration of judgments under application regime
	Subpart 8—Miscellaneous provisions
595	Registers
596	Schedule 3 schemes
597	Transitional provisions [Repealed]
	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 Transitional, savings, and related provisions
	Schedule 5 Other provisions relating to financial advice services and client money or property services
	Reprint notes

The Parliament of New Zealand enacts as follows:

1 Title

This Act is the Financial Markets Conduct Act 2013.

2 Commencement

(1)

Section 351, subpart 10 of Part 5, subpart 7 of Part 6, and subparts 1 to 7 of Part 9 come into force on the day after the date on which this Act receives the Royal assent.

(2)

The rest of this Act comes into force on a date appointed by the Governor-General by Order in Council; and 1 or more orders may be made appointing different dates for different provisions and for different purposes.

(3)

To the extent that it is not previously brought into force under subsection (1) or (2), the rest of this Act comes into force on 1 April 2017.

(4)

In this section, provision includes any item, or any part of an item, in any of the schedules.

Section 2(2): Part 1, Part 2 (other than sections 23–27 and 34–37), those provisions of Part 6 not already in force (other than sections 388, 389, 422(a), 429(a) and (b), and subpart 6), Part 7, Part 8 (other than sections 470–473, 510 and 511), section 597 (but only for the purpose of the provisions of Schedule 4 that are coming into force under paragraph (h)), clauses 1, 2, 6, 8, 9, 10, 12–14, 15, 19, 21 (other than paragraph (b)), 25–29, 48 and 49 of Schedule 1, clauses 1–3, 13(2) and (3), 14, 51, 58, and 59 of Schedule 4 brought into force, on 1 April 2014, by clause 2(1) of the Financial Markets Legislation (Phase 1) Commencement Order 2014 (LI 2014/51).

Section 2(2): sections 23 to 27 brought into force, on 17 June 2014, by clause 2(2) of the Financial Markets Legislation (Phase 1) Commencement Order 2014 (LI 2014/51).

Section 2(2): the remaining provisions that have not earlier been brought into force, except section 310, section 597 in so far as it relates to clause 42(7) and (8) of Schedule 4, and clause 42(7) and (8) of Schedule 4, brought into force, on 1 December 2014, by clause 2 of the Financial Markets Legislation (Phase 2) Commencement Order 2014 (LI 2014/325).

Section 2(2): section 310, section 597 in so far as it relates to clause 42(7) and (8) of Schedule 4, and clause 42(7) and (8) of Schedule 4 brought into force, on 1 December 2015, by section 2 of the Financial Markets Legislation (Phase 3) Commencement Order 2015 (LI 2015/252).

Part 1 Preliminary provisions

Purposes

3 Main purposes

The main purposes of this Act are to—

(a)

promote the confident and informed participation of businesses, investors, and consumers in the financial markets; and

(b)

promote and facilitate the development of fair, efficient, and transparent financial markets.

4 Additional purposes

This Act has the following additional purposes:

(a)

to provide for timely, accurate, and understandable information to be provided to persons to assist those persons to make decisions relating to financial products or the provision of financial services:

(b)

to ensure that appropriate governance arrangements apply to financial products and certain financial services that allow for effective monitoring and reduce governance risks:

(c)

to avoid unnecessary compliance costs:

(d)

to promote innovation and flexibility in the financial markets.

Overview

5 Overview

(1)

In this Act,—

(a)

this Part deals with preliminary matters, including specifying the purposes of this Act and interpretation:

(b)

Part 2 provides for fair dealing matters, including—

(i)

prohibiting misleading or deceptive conduct, false or misleading representations, and the making of unsubstantiated representations in connection with financial products and financial services:

(ii)

prohibiting offers of financial products in the course of unsolicited meetings:

(c)

Part 3 provides for—

(i)

disclosure to investors in relation to certain offers of financial products (Schedule 1 contains provisions relating to when disclosure is required, including exclusions):

(ii)

advertisements for those offers:

(iii)

ongoing disclosure to investors:

(d)

Part 4 provides for the governance of regulated products, including—

(i)

the governance of debt securities (including the need for a trust deed and a supervisor):

(ii)

the governance of managed investment products (including the need for registration of the managed investment scheme, a governing document, and a supervisor):

(iii)

the duties of persons associated with debt securities or registered schemes to make protected disclosures:

(iv)

the powers of intervention to enable the supervision of debt securities and registered schemes by a supervisor or the FMA:

(v)

ongoing duties of issuers of all regulated products (for example, to maintain registers of regulated products):

(e)

Part 5 provides for matters relating to dealing in financial products on markets, including—

(i)

prohibiting insider trading and market manipulation:

(ii)

providing for continuous disclosure by listed issuers:

(iii)

providing for the disclosure of interests of substantial product holders in listed issuers and the disclosure of relevant interests by directors and senior managers of listed issuers:

(iv)

providing for the licensing of markets for trading financial products:

(v)

providing for the transfer of financial products:

(vi)

the making of regulations setting rules for unsolicited offers to purchase financial products:

(f)

Part 6 regulates certain financial market services, including—

(i)

the licensing of certain financial market service providers (for example, providers of financial advice services, managers of registered schemes, certain issuers of derivatives, and providers of intermediary services):

(ii)

providing for disclosure obligations and the need for client agreements in connection with some of those financial market services:

(iia)

imposing other obligations on providers of financial advice services and persons who give financial advice:

(iib)

providing for disclosure and conduct obligations for providers of client money or property services:

(iii)

imposing other conduct obligations on providers of discretionary investment management services and on their custodians:

(iv)

providing for the making of regulations regulating the holding and application of investor funds and property by issuers of derivatives:

(g)

Part 7 provides for financial reporting obligations:

(h)

Part 8 provides for enforcement and liability matters and for appeals, including—

(i)

providing the FMA and the High Court with certain powers to avoid, remedy, or mitigate any actual or likely adverse effects of contraventions of this Act or the regulations:

(ii)

the imposition of civil liability (including pecuniary penalty orders and compensation orders):

(iii)

offences:

(iv)

providing for appeals against the FMA’s decisions or (in the case of financial advisers) the disciplinary committee’s decisions:

(i)

Part 9 provides for—

(i)

regulations and exemptions, including powers to prescribe matters relating to the form and content of product disclosure statements, and powers for the FMA to designate financial products and offers, and to grant exemptions, where this is necessary or desirable in order to promote the main purposes of this Act specified in section 3 or any of the additional purposes of this Act specified in section 4:

(ii)

transitional provisions (see Schedule 4) and miscellaneous matters.

(2)

This section is only a guide to the general scheme and effect of this Act.

(3)

In addition, the Financial Markets (Repeals and Amendments) Act 2013 repeals and revokes the legislation replaced by this Act and makes amendments to other enactments.

Section 5(1)(f)(i): amended, on 15 March 2021, by section 4(1) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 5(1)(f)(iia): inserted, on 15 March 2021, by section 4(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 5(1)(f)(iib): inserted, on 15 March 2021, by section 4(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 5(1)(h)(iv): amended, on 15 March 2021, by section 4(3) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Interpretation

6 Interpretation

(1)

In this Act, unless the context otherwise requires,—

accounting period has the same meaning as in section 5(1) of the Financial Reporting Act 2013

acquire—

(a)

includes obtain by buying, subscribing, or taking an assignment or transfer of; and

(b)

includes, in Part 5, agreeing to acquire; and

(c)

in relation to a derivative, a contract of insurance, a consumer credit contract, or a DIMS facility, includes entering into the legal relationship that constitutes the derivative, contract, or facility; and

(d)

in relation to a renewal or variation of the terms or conditions of an existing financial advice product, includes entering into the legal relationship that provides for the renewal or variation

administration manager, in relation to a managed investment scheme, means a person to whom a manager of the scheme has contracted some or all of the administration of the scheme

administrator of a financial benchmark means a person that controls the generation and operation of a financial benchmark, including administering and applying the rules or procedures by which a financial benchmark is generated

advertisement,—

(a)

in relation to an offer, or intended offer, of financial products, means any form of communication made to the public or a section of the public for the purpose of promoting the offer or intended offer:

(b)

in relation to the supply of financial services, means any form of communication made to the public or a section of the public for the purpose of promoting the supply of the services

agreement includes any contract, arrangement, or understanding

alternative disclosure obligation means any provision of regulations made under section 351 that is stated by those regulations to be an alternative disclosure obligation

applicable auditing and assurance standard has the same meaning as in section 5(1) of the Financial Reporting Act 2013

applicable financial reporting standard has the same meaning as in section 5(1) of the Financial Reporting Act 2013

application, in relation to financial products, includes an offer to acquire the financial products whether in writing or otherwise

associated person or associated has the meaning set out in section 12(1)

audio or visual service means an audio or visual service provided to users of the service by means of telecommunications

authorised body, in relation to a market services licence, means an entity that is authorised under section 400 to provide a market service under the licence

balance date has the same meaning as in section 41 of the Financial Reporting Act 2013

broadcaster has the same meaning as in section 2(1) of the Broadcasting Act 1989

broadcasting has the same meaning as in section 2(1) of the Broadcasting Act 1989

building society has the same meaning as in section 2(1) of the Building Societies Act 1965

business includes any profession, trade, or undertaking, whether or not carried on with the intention of making a pecuniary profit

business rules means the rules for a financial product market that deal with the matters set out in section 328(4)(a) to (d)

civil liability order has the meaning set out in section 484

civil liability provision has the meaning set out in section 485

class, in relation to financial products, has the meaning set out in subsection (3)

client, in relation to a financial advice service or client money or property service, has the meaning set out in clause 2 of Schedule 5

client money or property service has the meaning set out in section 431W(1)

code of conduct or code means the code of professional conduct in force under clause 39 of Schedule 5

company—

(a)

means a company, or an overseas company, within the meaning of section 2(1) of the Companies Act 1993; but

(b)

does not include an overseas limited partnership (within the meaning of section 4 of the Limited Partnerships Act 2008)

complying superannuation fund means a superannuation scheme or workplace savings scheme that is identified as a complying superannuation fund on the register of managed investment schemes (or, if the scheme is identified as a complying superannuation fund in respect of only a section of the scheme, means the scheme in respect of that section)

conduct in relation to a takeover offer—

(a)

means conduct following the public announcement by a person of an intention to make an offer (being an offer that is regulated by the Takeovers Code), whether or not the offer has already begun and whether or not the offer proceeds; and

(b)

includes conduct incidental or preliminary to a takeover that is regulated by the Takeovers Code

constitution means,—

(a)

in the case of a company within the meaning of section 2(1) of the Companies Act 1993, the constitution of the company; and

(b)

in the case of any other entity, the documents or instruments constituting or defining the constitution of the entity

consumer credit contract has the same meaning as in section 11 of the Credit Contracts and Consumer Finance Act 2003

continuous disclosure exemption means an exemption or a waiver of a continuous disclosure provision or provisions of the listing rules of the licensed market

continuous disclosure obligation means an obligation under section 270 and any listing rules with which that section requires compliance

continuous disclosure provisions has the meaning set out in section 271

continuous issue PDS means a PDS that—

(a)

relates to financial products that the issuer, in the ordinary course of its business, continuously offers; and

(b)

is not the first PDS to be lodged with the Registrar in respect of that class of financial products

continuous issuer means an issuer that in the ordinary course of its business continuously offers financial products

contract of insurance has the same meaning as in section 7 of the Insurance (Prudential Supervision) Act 2010

contributor, in relation to a financial benchmark, has the meaning set out in section 448C(4)

controlling owner, in relation to any person, has the meaning set out in section 4 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (applied to that person as if it were a financial service provider even if it is not)

convertible note has the same meaning as in section YA 1 of the Income Tax Act 2007

co-operative company means a company registered as a co-operative company under the Co-operative Companies Act 1996

court means, in relation to any matter, the court before which the matter is to be determined (see section 538, which confers exclusive jurisdiction on the High Court in proceedings other than proceedings for offences)

credit union has the same meaning as in section 2 of the Friendly Societies and Credit Unions Act 1982

custodial service has the meaning set out in section 431W(2)

custodian means,—

(a)

in relation to a managed investment scheme, each person who is designated or appointed to perform, or to whom is contracted, the function of holding some or all of the scheme property under the scheme:

(b)

in relation to a discretionary investment management service, each person holding investor money or investor property under that service (whether or not appointed by that investor)

dealing, in relation to financial products,—

(a)

means any of the following:

(i)

acquiring or disposing of financial products; or

(ii)

offering financial products for issue or sale and issuing and transferring financial products; or

(iii)

underwriting financial products; or

(iv)

promoting by any means the acquisition or disposal of financial products; or

(v)

in relation to a derivative, discharging obligations under the derivative; or

(vi)

anything that is preparatory to, or related to, any dealing in financial products (for example, giving financial advice), unless an exception applies to the dealing under this Act; but

(b)

does not include a dealing excluded by the regulations

debt security has the meaning set out in section 8(1)

defined benefit scheme means a scheme that operates on the principle of unallocated funding, and includes a scheme under which contributions are not allocated on a defined basis to individual members

derivative has the meaning set out in section 8(4)

derivatives issuer means a person that is in the business of entering into derivatives

DIMS facility means an agreement for the provision of a discretionary investment management service

DIMS licensee has the meaning set out in section 432A(3)

direction order means an order under section 468

director means,—

(a)

in relation to a company, any person occupying the position of a director of the company by whatever name called:

(b)

in relation to a partnership (other than a limited partnership), any partner:

(c)

in relation to a limited partnership, any general partner:

(d)

in relation to a body corporate or unincorporate, other than a company, partnership, or limited partnership, any person occupying a position in the body that is comparable with that of a director of a company:

(e)

in relation to any other person, that person

disciplinary committee means the disciplinary committee established under clause 49 of Schedule 5

disclosure document means any of the following:

(a)

a PDS:

(b)

a limited disclosure document under clause 26 of Schedule 1:

(c)

information made available under subpart 4 of Part 3:

(d)

a disclosure statement or other information made available under subpart 4, 5A, or 5B of Part 6

discretionary investment management service or DIMS has the meaning set out in section 432A(1)

dispose of—

(a)

includes dispose of by issuing, selling, assigning, or transferring; and

(b)

includes withdrawing from, terminating, or closing out the legal relationship that constitutes the financial product or other financial advice product; and

(ba)

in relation to a renewal or variation of the terms or conditions of an existing financial advice product, includes withdrawing from or terminating the product or refusing to agree to the renewal or variation; and

(c)

includes agreeing to dispose of

distribute includes—

(a)

make available, publish, and circulate; and

(b)

communicate by letter, newspaper, an Internet site, broadcasting, an audio or visual service, sound recording, television, film, video, or any form of electronic or other means of communication

document has the same meaning as in section 4(1) of the Evidence Act 2006

employee share purchase scheme means a scheme established by an entity under which employees or directors of the entity or of any of its subsidiaries (or other eligible persons referred to in clause 8 of Schedule 1) may acquire specified financial products (as defined in that clause) that are issued by the entity

encourage, in subpart 2 of Part 5, includes incite, counsel, or procure

engaged, in relation to a person who gives financial advice, has the meaning set out in section 431E

engaging in conduct means doing or refusing to do an act, and includes—

(a)

omitting to do an act; or

(b)

making it known that an act will or will not be done

entity means any of the following:

(a)

a company or other body corporate:

(b)

a corporation sole:

(c)

in the case of a trust that has—

(i)

only 1 trustee, the trustee acting in his, her, or its capacity as trustee:

(ii)

more than 1 trustee, the trustees acting jointly in their capacity as trustees:

(d)

an unincorporated body (including a partnership)

equity security has the meaning set out in section 8(2)

exhibiting films to the public means to exhibit to the public films within the meaning of section 2 of the Films, Videos, and Publications Classification Act 1993

financial advice has the meaning set out in section 431C(1)

financial advice product means—

(a)

a financial product (as defined in section 7); or

(b)

a DIMS facility; or

(c)

a contract of insurance; or

(d)

a consumer credit contract; or

(e)

any other product declared by the regulations to be a financial advice product; or

(f)

a renewal or variation of the terms or conditions of an existing financial advice product

financial advice provider means a person that provides a financial advice service (see section 431D)

financial advice service means the service of giving regulated financial advice as referred to in section 431D

financial adviser—

(a)

means an individual who is registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 in relation to a financial advice service; but

(b)

does not include a financial advice provider

financial benchmark has the meaning set out subsections (6) and (7)

financial markets—

(a)

means the financial markets in New Zealand; and

(b)

includes—

(i)

markets in New Zealand for the provision of financial services; and

(ii)

the capital markets in New Zealand

financial markets legislation means the Acts listed in Schedule 1 of the Financial Markets Authority Act 2011 and the enactments made under those Acts

financial markets participant has the same meaning as in section 4 of the Financial Markets Authority Act 2011

financial product has the meaning set out in section 7 (but in Part 2 has the meaning set out in section 18)

financial product market has the meaning set out in section 309

financial product market licence means a licence issued under subpart 7 of Part 5

financial service—

(a)

has the same meaning as in section 5 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008; and

(b)

includes a market service; but

(c)

does not include, for the purposes of any provision of this Act, any class or classes of services declared by the regulations not to be financial services for the purposes of that provision

financial statements has the same meaning as in section 6 of the Financial Reporting Act 2013

FMA means the Financial Markets Authority established by Part 2 of the Financial Markets Authority Act 2011

FMC reporting entity has the meaning set out in section 451

generally accepted accounting practice has the same meaning as in section 8 of the Financial Reporting Act 2013

generally available to the market has the meaning set out in section 232

give, in relation to information or any other matter, includes give by electronic or other means that enable the recipient to readily store the matter in a permanent and legible form

governing document—

(a)

means (in the case of a debt security) a trust deed:

(b)

means (in the case of a managed investment scheme constituted as a trust) the 1 or more trust deeds that constitutes the scheme or (in the case of any other managed investment scheme) the 1 or more deeds, agreements, or instruments that constitute or govern the scheme (for example, a partnership agreement):

(c)

includes (in each case) any amendments to a document referred to in paragraph (a) or (b)

group, in Part 7, means a group comprising an FMC reporting entity and its subsidiaries

group financial statements has the same meaning as in section 7 of the Financial Reporting Act 2013

in the business of, in relation to any service or other activity, means carrying on a business of that type (whether or not the business is the person’s only business or the person’s principal business)

indemnify includes relieve, exempt, or excuse from liability, whether before or after the liability arises

independent trustee, in relation to a restricted scheme, means the trustee, or director of a sole corporate trustee, who is the licensed independent trustee for the purposes of the restricted scheme

industrial and provident society means a society registered under the Industrial and Provident Societies Act 1908

information includes documents

information insider has the meaning set out in section 234

infringement fee, in relation to an infringement offence, means the amount prescribed by the regulations as the infringement fee for the offence

infringement notice means a notice issued under section 514

infringement offence means an offence identified in this Act as being an infringement offence

Inland Revenue Acts means the Acts listed in the Schedule of the Tax Administration Act 1994

inside information has the meaning set out in section 234

insolvency event has the meaning set out in subsection (4)

insolvent means that,—

(a)

in relation to an issuer of a debt security or a managed investment product,—

(i)

the issuer is unable to pay the issuer’s debts as they become due in the normal course of business; or

(ii)

the value of the issuer’s assets is less than the value of the issuer’s liabilities, including contingent liabilities (and for this purpose section 4(4) of the Companies Act 1993 applies in respect of the issuer as if it were a company even if it is not):

(b)

in relation to a registered scheme that is a defined benefit scheme, the value of the assets in the scheme is less than the value of the vested benefits that may in due course flow from, or are attributable to, membership of the scheme:

(c)

in relation to any other registered scheme,—

(i)

the funds in the scheme are not sufficient to enable debts in respect of the scheme to be paid as they become due in the normal course of business; or

(ii)

the value of the assets in the scheme is less than the value of the liabilities in respect of the scheme, including contingent liabilities (and for this purpose section 4(4) of the Companies Act 1993 applies in respect of the scheme as if it were a company)

inspection period means the period commencing on the third working day after the day on which notice of intention to inspect is served on the issuer by the person concerned and ending with the eighth working day after the day of service

interim stop order has the meaning set out in section 465

investment authority has the meaning set out in section 432A(3)

investment manager means, in relation to a managed investment scheme, a person to whom a manager of the scheme has contracted the investment of some or all of the scheme property

investor includes—

(a)

a person to whom an offer of financial products is made; and

(b)

a person who acquires, or may acquire, a financial product; and

(c)

a person who receives, or may receive, a financial service

investor money has the meaning set out in section 444

investor property has the meaning set out in section 444

involved in a contravention has the meaning set out in section 533

issued and issuer have the meanings set out in section 11

issuer obligation means an obligation imposed on the issuer of a financial product by or under any of the following:

(a)

a governing document that relates to the financial product:

(b)

the terms of any regulated offer of the financial product:

(c)

a court order relating to the financial product:

(d)

this Act (including, in relation to a managed investment product, all obligations as manager):

(e)

the KiwiSaver Act 2006:

(f)

the Non-bank Deposit Takers Act 2013

KiwiSaver scheme means a scheme that is registered on the register of managed investment schemes as a KiwiSaver scheme

lawyer has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006

licence means a licence under this Act or, in relation to a supervisor, the Financial Markets Supervisors Act 2011, and licensed means having a licence, or being authorised under a licence, under this Act or, in relation to a supervisor, having a licence under the Financial Markets Supervisors Act 2011

licensed insurer—

(a)

has the same meaning as in section 6 of the Insurance (Prudential Supervision) Act 2010; but

(b)

in Part 7, does not include a Lloyd’s underwriter (within the meaning of that Act) or an insurer that is included in a class of insurers that is the subject of an exemption under section 238(1)(b) of that Act

licensed market means a financial product market that is licensed under Part 5 (subject to any regulations made under section 351(1)(d))

licensed market operator means a person that is authorised to operate a licensed market under a financial product market licence

licensed market services means those market services—

(a)

that are required to be licensed under Part 6; or

(b)

for which a person holds a licence under Part 6 (whether or not required to do so)

limited disclosure document or LDD, in relation to an offer referred to in clause 26(1) of Schedule 1, means a limited disclosure document for the offer required by regulations made for the purposes of that clause

listed issuer means—

(a)

a person that is a party to a listing agreement with a licensed market operator in relation to a licensed market (and includes a licensed market operator that has financial products quoted on its own licensed market):

(b)

a person to which paragraph (a) previously applied, in respect of any action or event or circumstance to which this Act applied at that time

listing rules means the rules for a financial product market that deal with the matters set out in section 328(3)(a) to (e)

local authority has the meaning set out in section 5(1) of the Local Government Act 2002 (and see also section 8 of the Local Government Borrowing Act 2011)

managed investment product has the meaning set out in section 8(3)

managed investment scheme has the meaning set out in section 9

manager means,—

(a)

in relation to a registered scheme (other than a restricted scheme), the person designated or appointed as the manager of the scheme:

(b)

in relation to a restricted scheme, the persons designated or appointed as trustees of the scheme or, if only 1 person is designated or appointed as a trustee of the scheme, that person:

(c)

in relation to a managed investment scheme if there is no person to whom paragraph (a) or (b) applies or if it is not a registered scheme, a person occupying the position of, and carrying out any of the functions of, the manager set out in section 142

market operator obligation means an obligation imposed on a licensed market operator in respect of a licensed market by or under any of the following:

(a)

a condition of the licence:

(b)

section 314 (general obligations in respect of licensed markets):

(c)

section 333 (power to request changes to market rules):

(d)

sections 337, 340, 341, and 342 (monitoring obligations)

market rules means—

(a)

the rules for a financial product market that deal with the matters required for that market by section 328; or

(b)

in the case of a financial product market licensed, or applying to be licensed, under section 317, the rules for the market specified by the FMA under section 334

market service means any of the following:

(a)

acting as a manager of a registered scheme:

(b)

acting as an independent trustee of a restricted scheme:

(c)

acting as a provider of a discretionary investment management service:

(d)

acting as a derivatives issuer:

(e)

acting as a custodian in respect of a registered scheme or a discretionary investment management service:

(ea)

acting as a provider of a financial advice service:

(eb)

providing a client money or property service:

(f)

acting as a provider of prescribed intermediary services:

(g)

acting as an administrator of a financial benchmark

market services licence means a licence issued under Part 6

market services licensee obligation means an obligation imposed on a licensee or an authorised body by or under any of the following:

(a)

a condition of the licence:

(b)

this Act:

(c)

the terms of the offer of a financial product or the provision of a market service:

(d)

a court order made in connection with the offer of a financial product or the provision of a market service:

(e)

in the case of a manager or an independent trustee of a registered scheme,—

(i)

a governing document:

(ii)

the KiwiSaver Act 2006

material information,—

(a)

in Part 3, has the meaning set out in section 59:

(b)

in Part 5, has the meaning set out in section 231

Minister means the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of this Act

money includes money’s worth (except in the definitions of debt security, investor money, and investor property)

NBDT has the same meaning as in section 5 of the Non-bank Deposit Takers Act 2013

New Zealand resident for tax purposes means a person that is a New Zealand resident, as determined under sections YD 1 and YD 2 of the Income Tax Act 2007

nominated representative means an individual who is nominated by a financial advice provider under section 431T

non-quoted financial products means financial products that are not quoted

offer includes—

(a)

inviting applications for the issue of financial products:

(b)

inviting applications to purchase financial products

offeror means,—

(a)

in relation to an offer of financial products for issue, the issuer; or

(b)

in any other case of an offer of financial products, the person who has the capacity, or who agrees, to transfer the financial products if the offer is accepted

Part 2 fair dealing provision means any of the provisions specified in section 38(1)

Part 3 offer provision means any of the provisions specified in section 101(3) or (4)

Part 4 governance provision means any of the provisions specified in section 228(3) or (4)

Part 5 market provision means any of the provisions specified in section 385(3) or (4)

Part 6 services provision means any of the provisions specified in section 449(3) or (4)

Part 7 financial reporting provision means any of the provisions specified in section 461M(3) or (4)

participant means, in relation to a licensed market, a person authorised by the licensed market operator to participate in that market

person includes any entity

prescribed intermediary services means services of a kind that are prescribed for the purposes of this definition and involve a person acting as an intermediary in relation to a financial product or financial service

product disclosure statement or PDS, in relation to a regulated offer, means a product disclosure statement for the offer

product holder, in relation to a financial product, means,—

(a)

in the case of a financial product to which section 215(1) does not apply, the holder of the financial product (subject to paragraph (c)); or

(b)

in the case of any other financial product, the person who is registered as the holder of the product in a register kept under subpart 4 of Part 4 (subject to paragraph (c)); or

(c)

in the case of a derivative, any party to the derivative that did not make a regulated offer of the derivative

product provider, in relation to a financial advice product, means,—

(a)

for a financial product, the issuer:

(b)

for a DIMS facility, the person to whom the investment authority is granted:

(c)

for a contract of insurance, the insurer:

(d)

for a consumer credit contract, the creditor:

(e)

for any other financial advice product, the person specified in the regulations

protected disclosure has the meaning set out in section 214(4)

provider of a discretionary investment management service has the meaning set out in section 432A(3)

qualified auditor has the meaning set out in section 461E

qualified statutory accountant has the same meaning as in section 5(1) of the Financial Reporting Act 2013

quoted, in relation to—

(a)

financial products of a listed issuer, means financial products of the issuer that are approved for trading on a licensed market (and, to avoid doubt, financial products do not cease to be quoted merely because trading in those products is suspended):

(b)

derivatives, means derivatives that are approved for trading on a licensed market (and, to avoid doubt, derivatives do not cease to be quoted merely because trading in those products is suspended)

redeemable has the meaning set out in subsection (5)

(a)

in relation to a regulated offer, means the entry for the offer in the register of offers of financial products:

(b)

in relation to an offer referred to in clause 26(1) of Schedule 1, means the entry for the offer in the register of offers of financial products that is required by regulations made for the purposes of that clause

registered bank has the same meaning as in section 2(1) of the Reserve Bank of New Zealand Act 1989

registered scheme means a managed investment scheme that is registered on the register of managed investment schemes

Registrar means the Registrar of Financial Service Providers appointed under section 35 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008

regulated client money or property service has the meaning set out in section 431W(4)

regulated financial advice has the meaning set out in section 431C(3)

regulated offer has the meaning set out in section 41

regulated product has the meaning set out in section 41

regulations means regulations made under this Act

related, in relation to a body corporate, has the meaning set out in section 12(2)

related party,—

(a)

in relation to a registered scheme, has the meaning set out in section 172:

(b)

in relation to a DIMS licensee, has the meaning set out in section 439

related party benefit,—

(a)

in relation to a registered scheme, has the meaning set out in section 172:

(b)

in relation to a DIMS licensee, has the meaning set out in section 439

relative has the meaning set out in clause 5(2) of Schedule 1

relevant event means an event that results in a person having to disclose matters under sections 276 to 279

relevant interest has the meaning set out in sections 235 to 238

relevant money, in relation to financial products, means the money paid—

(a)

to acquire the financial products or an increased interest in the financial products; or

(b)

as a further contribution or investment or a further deposit as referred to in section 11(2)(c)

reporting period has the meaning set out in section 337

representation, in sections 23 to 27, has the meaning set out in section 23(4)

Reserve Bank means the Reserve Bank of New Zealand

restricted communication has the meaning set out in section 464

restricted scheme means a scheme that is registered on the register of managed investment schemes as a KiwiSaver scheme, a superannuation scheme, or a workplace savings scheme and that is identified as a restricted scheme on that register

retail client, in relation to a financial advice service or a client money or property service, has the meaning set out in clause 3 of Schedule 5

retail investor has the meaning set out in clause 35 of Schedule 1

retail service has the meaning set out in clause 35 of Schedule 1

retirement scheme means any of the following schemes for the purposes of any enactment:

(a)

a registered scheme that is a KiwiSaver scheme or a superannuation scheme:

(b)

a workplace savings scheme (subject to the enactment and the regulations):

(c)

a Schedule 3 scheme (subject to the enactment and the regulations)

Schedule 3 scheme means a scheme that, under Schedule 3, is approved as a Schedule 3 scheme

scheme participant, in relation to a managed investment scheme, means a product holder of a managed investment product in the scheme

scheme property or property of the scheme, in relation to a managed investment scheme, means the property to which the scheme relates, including—

(a)

contributions of money to the scheme; and

(b)

money borrowed or raised for the purposes of the scheme; and

(c)

financial products or other property acquired, directly or indirectly, with, or with the proceeds of, contributions or money referred to in paragraph (a), (b), or (d); and

(d)

income and property derived, directly or indirectly, from contributions, money, or property referred to in paragraphs (a) to (c) or this paragraph

security—

(a)

means an arrangement or a facility that has, or is intended to have, the effect of a person making an investment or managing a financial risk; and

(b)

includes—

(i)

a financial product; and

(ii)

any interest or right to participate in any capital, assets, earnings, royalties, or other property of any person; and

(iii)

any interest in, or right to be paid, money that is, or is to be, deposited with, lent to, or otherwise owing by, any person (whether or not the interest or right is secured by a charge over any property); and

(iv)

any renewal or variation of the terms or conditions of any existing security; but

(c)

does not include any interest or right that is declared by regulations not to be a security for the purposes of this Act

senior manager, in relation to a person (A), means a person who is not a director but occupies a position that allows that person to exercise significant influence over the management or administration of A (for example, a chief executive or a chief financial officer)

service provider or provider, in relation to a financial service, means a person who supplies a financial service

special resolution, in relation to—

(a)

holders of a financial product issued by a credit union, means a resolution approved by no less than 75% of the number of members of the credit union who are entitled to vote and who vote on the question:

(b)

holders of managed investment products in a superannuation scheme, a KiwiSaver scheme, a workplace savings scheme, or any other prescribed scheme, means a resolution approved by no less than 75% of the number of scheme participants who are entitled to vote and who vote on the question:

(c)

holders of debt securities in any other case, means a resolution approved by product holders holding debt securities with a combined nominal value of no less than 75% of the nominal value of the debt securities held by those persons who are entitled to vote and who vote on the question:

(d)

holders of managed investment products in any other case, means a resolution approved by product holders holding managed investment products with a combined value of no less than 75% of the value of the managed investment products held by those persons who are entitled to vote and who vote on the question

stop order means an order under section 462

subsidiary—

(a)

has the meaning set out in section 5 of the Companies Act 1993; and

(b)

in Part 7, includes any entity that is classified as a subsidiary in any applicable financial reporting standard

substantial holding has the meaning set out in section 274

substantial product holder has the meaning set out in section 274(1)

superannuation scheme means a scheme that is registered on the register of managed investment schemes as a superannuation scheme (or, if the scheme is registered as a superannuation scheme in respect of only a section of the scheme, means the scheme in respect of that section)

supervisor means a person designated or appointed as a supervisor in relation to a debt security or managed investment scheme for the purposes of any financial markets legislation

supply, in relation to a service, includes provide, grant, or confer

Takeovers Code means the Takeovers Code in force under the Takeovers Act 1993

trade, in Part 2, has the meaning set out in section 18

trading day means, in relation to a licensed market, a day on which the market is open for the trading of financial products

transacting shareholder, in relation to a co-operative company,—

(a)

has the same meaning as in section 4 of the Co-operative Companies Act 1996; and

(b)

includes a supplying shareholder within the meaning of section 34 of that Act

underlying, in relation to a derivative, means the underlying asset, rate, index, commodity, or other thing referred to in section 8(4)(a)(iii)

unsolicited offer has the meaning set out in section 381(1)

unsolicited offer order means an order under section 472

unsolicited offer provision means any provision of any regulations made under section 382 that is stated by those regulations to be an unsolicited offer provision

unsubstantiated, in sections 23 to 27, has the meaning set out in section 23(2)

voting product, in relation to an entity,—

(a)

means a financial product of the entity that confers a right to vote at meetings of members or shareholders (whether or not there is any restriction or limitation on the number of votes that may be cast by or on behalf of the holder of the product); and

(b)

includes a financial product that is convertible into a financial product of the kind referred to in paragraph (a); but

(c)

does not include a financial product that confers only a right to vote that, under the conditions attached to the product, is exercisable only in 1 or more of the following circumstances:

(i)

during a period in which a dividend (or part of a dividend) in respect of the product is in arrears:

(ii)

on a proposal to reduce the capital of the entity:

(iii)

on a proposal that affects rights attached to the product:

(iv)

on a proposal to put the entity into liquidation:

(v)

on a proposal for the disposal of the whole or a material part of the property, business, and undertaking of the entity:

(vi)

during the liquidation of the entity

wholesale client, in relation to a financial advice service or a client money or property service, has the meaning set out in clause 4 of Schedule 5

wholesale investor—

(a)

has the meaning set out in clause 3(2) and (3) of Schedule 1, in relation to an offer of financial products; and

(b)

has the meaning set out in clause 36(b) of Schedule 1, in relation to the supply of a discretionary investment management service or any other relevant transaction (as defined in clause 49 of that schedule)

workplace savings scheme means a scheme that is registered on the register of managed investment schemes as a workplace savings scheme (or, if the scheme is registered as a workplace savings scheme in respect of only a section of the scheme, means the scheme in respect of that section).

(2)

Terms defined in other provisions of this Act have the meanings given unless the context otherwise requires.

(3)

In this Act, financial products are of the same class if those financial products have attached to them identical rights, privileges, limitations, and conditions (but, in the case of debt securities, the securities may, except in the prescribed circumstances, have a different redemption date or interest rate or both).

(4)

In this Act, an insolvency event is any of the following events, and a person becomes subject to an insolvency event on the date on which, and (if specified) the time at which, that event occurs:

(a)

a liquidator is appointed in respect of a liquidation under Part 16 of the Companies Act 1993 or under any other Act; or

(b)

an administrator is appointed in respect of a voluntary administration under Part 15A of the Companies Act 1993; or

(c)

a receiver is appointed in relation to the whole, or substantially the whole, of the assets and undertaking of the person; or

(d)

a liquidator is appointed in respect of a liquidation of an overseas company under section 342 of the Companies Act 1993; or

(e)

a statutory manager is appointed in respect of a statutory management under Part 3 of the Corporations (Investigation and Management) Act 1989 or any other enactment; or

(f)

a person is appointed in respect of, or another event occurs that indicates the start of, a process in New Zealand or in any other country in which the company or other body corporate was incorporated, created, or established that is similar to any of those set out in paragraphs (a) to (e).

(5)

In this Act, a share in an entity or a managed investment product in a scheme is redeemable if—

(a)

the constitution of the entity, the governing documents of the scheme, or the terms of issue of the share or product make provision for the redemption of the share or product by the entity or the manager of the scheme in 1 or more of the following circumstances:

(i)

at the option of the entity or manager:

(ii)

at the option of the holder of the share or product:

(iii)

on a date specified in those documents or in those terms; and

(b)

that redemption is for a consideration that is 1 or more of the following:

(i)

specified:

(ii)

to be calculated by reference to a formula:

(iii)

required to be fixed by a suitably qualified person who is not associated with or interested in the entity or manager of the scheme.

(6)

In this Act, a financial benchmark is a price, estimate, rate, index, or value that is—

(a)

referenced or otherwise used for purposes that include 1 or more of the following:

(i)

calculating the interest, or other amounts, payable under financial products or other securities:

(ii)

calculating the price at which a financial product or other security may be traded, redeemed, or dealt in:

(iii)

calculating the value of a financial product or other security:

(iv)

measuring the performance of a financial product or other security; and

(b)

made available to users (whether or not for a fee); and

(c)

generated periodically from 1 or more—

(i)

transactions, instruments, currencies, prices, estimates, rates (including an interest rate or exchange rate), indices, values, financial products or other securities; or

(ii)

other interests or property (whether tangible or intangible).

(7)

A financial benchmark does not include any price, estimate, rate, index, or value that is excluded (whether by class or in a particular case) by the regulations.

Section 6(1) accounting period: inserted, on 1 April 2014, by section 46(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) acquire paragraph (c): replaced, on 15 March 2021, by section 5(3) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) acquire paragraph (d): inserted, on 15 March 2021, by section 5(3) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) administrator of a financial benchmark: inserted, on 14 March 2021, by section 33(2) of the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act 2019 (2019 No 46).

Section 6(1) applicable auditing and assurance standard: inserted, on 1 April 2014, by section 46(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) applicable financial reporting standard: inserted, on 1 April 2014, by section 46(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) authorised body: replaced, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) authorised financial adviser: repealed, on 15 March 2021, by section 5(1) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) balance date: replaced, on 1 April 2014, by section 46(2) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) category 2 product: repealed, on 15 March 2021, by section 5(1) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) chartered accountant: repealed, on 1 July 2015, by section 17 of the Financial Reporting Amendment Act 2014 (2014 No 64).

Section 6(1) client: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) client money or property service: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) code of conduct or code: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) consumer credit contract: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) contract of insurance: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) contributor: replaced, on 14 March 2021, by section 33(2) of the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act 2019 (2019 No 46).

Section 6(1) custodial service: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) DIMS facility: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) DIMS licensee: amended, on 15 March 2021, by section 5(4) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) disciplinary committee: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) disclosure document paragraph (b): amended, on 9 August 2017, by section 47(1) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Section 6(1) disclosure document paragraph (d): amended, on 15 March 2021, by section 5(5) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) discretionary investment management service: repealed, on 15 March 2021, by section 5(1) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) discretionary investment management service or DIMS: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) dispose of paragraph (b): amended, on 15 March 2021, by section 5(6) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) dispose of paragraph (ba): inserted, on 15 March 2021, by section 5(7) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) engaged: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) financial advice: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) financial advice product: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) financial advice provider: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) financial advice service: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) financial adviser: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) financial benchmark: inserted, on 14 March 2021, by section 33(2) of the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act 2019 (2019 No 46).

Section 6(1) financial statements: inserted, on 1 April 2014, by section 46(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) FMC reporting entity: inserted, on 1 April 2014, by section 46(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) generally accepted accounting practice: inserted, on 1 April 2014, by section 46(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) group: inserted, on 1 April 2014, by section 46(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) group financial statements: inserted, on 1 April 2014, by section 46(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) investment authority: amended, on 15 March 2021, by section 5(8) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) issuer obligation paragraph (f): replaced, on 1 May 2014, by section 102 of the Non-bank Deposit Takers Act 2013 (2013 No 104).

Section 6(1) licensed insurer: inserted, on 1 April 2014, by section 46(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) limited disclosure document: inserted, on 9 August 2017, by section 47(2) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Section 6(1) market service paragraph (ea): inserted, on 15 March 2021, by section 5(9) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) market service paragraph (eb): inserted, on 15 March 2021, by section 5(9) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) market service paragraph (g): inserted, on 14 March 2021, by section 33(1) of the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act 2019 (2019 No 46).

Section 6(1) NBDT: inserted, on 1 May 2014, by section 102 of the Non-bank Deposit Takers Act 2013 (2013 No 104).

Section 6(1) nominated representative: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) Part 7 financial reporting provision: replaced, on 1 April 2014, by section 46(3) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) product provider: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) provider of a discretionary investment management service: amended, on 15 March 2021, by section 5(10) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) QFE or qualifying financial entity: repealed, on 15 March 2021, by section 5(1) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) QFE adviser: repealed, on 15 March 2021, by section 5(1) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) qualified auditor: replaced, on 1 April 2014, by section 46(4) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) qualified statutory accountant: inserted, on 1 July 2015, by section 17 of the Financial Reporting Amendment Act 2014 (2014 No 64).

Section 6(1) register entry: replaced, on 9 August 2017, by section 47(3) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Section 6(1) regulated client money or property service: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) regulated financial advice: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) retail client: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(1) subsidiary: replaced, on 1 April 2014, by section 46(5) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 6(1) wholesale client: inserted, on 15 March 2021, by section 5(2) of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 6(6): inserted, on 14 March 2021, by section 33(3) of the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act 2019 (2019 No 46).

Section 6(7): inserted, on 14 March 2021, by section 33(3) of the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act 2019 (2019 No 46).

7 Meaning of financial product

(1)

In this Act, financial product means—

(a)

a debt security; or

(b)

an equity security; or

(c)

a managed investment product; or

(d)

a derivative.

(2)

If an interest or a right is declared by regulations not to be a security for the purposes of this Act, the interest or right is not a financial product for the purposes of this Act.

8 Definitions relating to kinds of financial products

(1)

In this Act, subject to subsection (5)(a) and (b), debt security—

(a)

means a right to be repaid money or paid interest on money that is, or is to be, deposited with, lent to, or otherwise owing by, any person; and

(b)

includes—

(i)

a security commonly referred to in the financial markets as a debenture, bond, or note; and

(ii)

a convertible note; and

(iii)

a redeemable share in an entity that would otherwise be an equity security (except a share redeemable only at the option of the entity or a redeemable share in an industrial and provident society); but

(c)

does not include—

(i)

a share in a co-operative company that is issued or transferred to a transacting shareholder and that is, or may become, subject to the right of a transacting shareholder to surrender the share under section 20 of the Co-operative Companies Act 1996; or

(ii)

a derivative of the kind referred to in subsection (4)(b); or

(iii)

a unit, proportionate interest, or membership interest in a registered scheme.

(2)

In this Act, subject to subsection (5)(a) and (b), equity security—

(a)

means—

(i)

a share in a company; and

(ii)

a share in an industrial and provident society; and

(iii)

a share in a building society; but

(b)

does not include a debt security.

(3)

In this Act, subject to subsection (5)(a) and (b), managed investment product—

(a)

means the interest in a managed investment scheme referred to in paragraph (b) of the definition of that term in section 9(1); but

(b)

does not include—

(i)

an equity security; or

(ii)

a debt security.

(4)

In this Act, subject to subsection (5)(a) and (b) and section 10, derivative—

(a)

means an agreement in relation to which the following conditions are satisfied:

(i)

under the agreement, a party to the agreement must, or may be required to, provide at some future time consideration of a particular kind or kinds to another person; and

(ii)

that future time is not less than the time, prescribed for the purposes of this subparagraph, after the time at which the agreement is entered into; and

(iii)

the amount of the consideration, or the value of the agreement, is ultimately determined, is derived from, or varies by reference to (wholly or in part) the value or amount of something else (of any nature whatsoever and whether or not deliverable), including, for example, 1 or more of the following:

(A)

an asset:

(B)

a rate (including an interest rate or exchange rate):

(C)

an index:

(D)

a commodity; and

(b)

includes a transaction that is recurrently entered into in the financial markets in New Zealand or overseas and is commonly referred to in those markets as—

(i)

a futures contract or forward; or

(ii)

an option (other than an option to acquire by way of issue an equity security, a debt security, or a managed investment product); or

(iii)

a swap agreement; or

(iv)

a contract for difference, margin contract, or rolling spot contract; or

(v)

a cap, collar, floor, or spread; but

(c)

does not include—

(i)

an agreement for the future provision of services; or

(ii)

a debt security, an equity security, or a managed investment product; and

(d)

does not include an agreement in relation to which all of the following subparagraphs are satisfied:

(i)

a party has, or may have, an obligation to buy, and another party has, or may have, an obligation to sell, property (other than financial products or New Zealand or foreign currency) at a price and on a date in the future; and

(ii)

the agreement does not permit the seller’s obligations to be wholly settled by cash, or by set-off between the parties, rather than by delivery of the property; and

(iii)

neither usual market practice nor the rules of a market permit the seller’s obligations to be closed out by the matching up of the agreement with another agreement of the same kind under which the seller has offsetting obligations to buy.

(5)

A financial product of a particular kind defined in subsection (1), (2), (3), or (4)—

(a)

includes—

(i)

a security declared to be a financial product of that kind under subpart 3 of Part 9; or

(ii)

a right attaching to, or a legal or an equitable interest in, a financial product of that kind; or

(iii)

an option to acquire, by way of issue, a financial product of that kind; but

(b)

does not include—

(i)

a security that is declared under subpart 3 of Part 9 to be a financial product of a different kind:

(ii)

a security that is declared under subpart 3 of Part 9 not to be a financial product.

Section 8(1)(b)(iii): amended, on 9 April 2019, by section 6 of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

9 Definitions of financial benefit and of managed investment scheme

(1)

In this Act,—

financial benefit means capital, earnings, or other financial returns

managed investment scheme means a scheme to which each of the following applies:

(a)

the purpose or effect of the scheme is to enable persons taking part in the scheme to contribute money, or to have money contributed on their behalf, to the scheme as consideration to acquire interests in the scheme; and

(b)

those interests are rights to participate in, or receive, financial benefits produced principally by the efforts of another person under the scheme (whether those rights are actual, prospective, or contingent, and whether they are enforceable or not); and

(c)

the holders of those interests do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions).

(2)

However, a managed investment scheme does not include—

Scheme only involves management of separate and direct interests in underlying property

(a)

a scheme under which each participant takes part in the scheme only by holding 1 or more interests in property if, in respect of each interest,—

(i)

it is an interest in separately identifiable underlying property; and

(ii)

either the participant holds both the legal and beneficial interest in the property or the legal interest in the property is held on a bare trust for the participant; and

(iii)

the value of the interest is not substantially dependent on contributions being made by other participants or the use of other participants’ contributions:

Discretionary investment management services

(b)

a discretionary investment management service supplied by a DIMS licensee:

Insurance contracts

(c)

a scheme that would be a managed investment scheme only because it involves pure risk contracts of insurance:

(d)

a scheme that would be a managed investment scheme only because it involves life insurance policies (within the meaning of section 2(1) of the Securities Act 1978) that were issued before this section comes into force.

(3)

In subsection (2), pure risk contract of insurance means a contract of insurance that does not, and never will, have a value on its cancellation or surrender that is greater than the sum of premiums paid to the insurer.

(4)

A managed investment scheme as defined in subsection (1) also includes a scheme declared to be a managed investment scheme under subpart 3 of Part 9.

Section 9(2)(b): replaced, on 15 March 2021, by section 7 of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

10 Miscellaneous matters relating to definition of derivative

(1)

Section 8(4)(d) applies only to the extent that the agreement deals with the purchase and sale referred to in that paragraph.

(2)

An agreement under which one party has an obligation to buy, and the other has an obligation to sell, property is not a derivative merely because the agreement provides for the consideration to be varied by reference to a general inflation index (for example, the Consumers Price Index (All Groups) published by Statistics New Zealand).

(3)

Subsection (2) is subject to section 8(5)(a).

11 Definitions of issued and issuer

(1)

In this Act,—

(a)

a financial product is issued to a person when it is first issued, granted, or otherwise made available to a person (subject to subsection (2)):

(b)

issuer means, in relation to—

(i)

a debt security, the person that is liable to repay money or pay interest or other returns under the security (other than as a guarantor):

(ii)

an equity security, the company, industrial and provident society, building society, or other entity to which the security relates:

(iii)

a managed investment product, the manager of the managed investment scheme to which the product relates:

(iv)

a derivative, the derivatives issuer that entered into the derivative.

(2)

Despite subsection (1)(a),—

(a)

a managed investment product that is an interest in a superannuation scheme, KiwiSaver scheme, workplace savings scheme, or other prescribed scheme is issued to a person when the person becomes a member of the scheme:

(b)

a derivative is issued to a person when the person enters into the legal relationship that constitutes the derivative:

(c)

none of the following are taken to give rise to the issue of a financial product to a person (A):

(i)

A making a further contribution to, or investment in, a superannuation scheme, a KiwiSaver scheme, a workplace savings scheme, or any other prescribed scheme of which A is already a scheme participant:

(ii)

an employer of A or any other person making, for the benefit of A, a further contribution to, or investment in, a superannuation scheme, a KiwiSaver scheme, a workplace savings scheme, or any other prescribed scheme of which A is already a scheme participant:

(iii)

A making a further deposit into a prescribed deposit product:

(iv)

A engaging in conduct specified in regulations made for the purposes of this subparagraph in relation to a financial product already held by A.

(3)

Despite subsection (1)(b), if a debt security is offered for the purposes of a managed investment scheme, the manager of the scheme is the issuer for the purposes of this Act.

(4)

If each person that enters into a derivative is a derivatives issuer, each of those persons is the issuer.

Example

A and B enter into a futures contract.

Both A and B are derivatives issuers. Accordingly, both A and B are issuers of the futures contract.

Although both parties are issuers, whether any particular party has disclosure or other obligations will depend on the circumstances.

If both A and B hold a market services licence, both A and B will be wholesale investors under clause 37(1)(f) of Schedule 1. Accordingly, neither party will be required to make disclosure under Part 3 to the other party.

(5)

In this Act, a reference to an issuer in relation to events, circumstances, or other matters before the financial products are issued is a reference to the person that will be, or is intended to be, the issuer when those products are issued.

(6)

In this Act, a person ceases to be an issuer in relation to financial products when those products are cancelled, redeemed, or forfeited, or all of the obligations owing under those products have been discharged.

(7)

Subsections (1) to (6) are subject to a declaration under section 562(1)(g).

(8)

For the purposes of this Act, the issue of a financial product is not a sale of the financial product.

(9)

If the terms of a financial product require or allow the person acquiring the product to pay separate amounts of money at different times, each of those payments must, for the purposes of this Act, be treated as payment for the same financial product as each of those other payments.

12 Meaning of associated person and related body corporate

(1)

In this Act, a person (A) is associated with, or an associated person of, another person (B) if—

(a)

A is a body corporate and B has the power, directly or indirectly, to exercise, or control the exercise of, the rights to vote attaching to 25% or more of the voting products of the body corporate (or vice versa):

(b)

A and B are relatives or related bodies corporate:

(c)

A and B are partners to whom the Partnership Law Act 2019 applies:

(d)

A is a director or senior manager of B (or vice versa):

(e)

A and B are acting jointly or in concert:

(f)

A acts, or is accustomed to act, in accordance with the wishes of B (or vice versa):

(g)

A is able, directly or indirectly, to exert a substantial degree of influence over the activities of B (or vice versa):

(h)

A and B are bodies corporate that consist substantially of the same members or shareholders or that are under the control of the same persons:

(i)

there is another person with which A and B are both associated.

(2)

In this Act, a body corporate (A) is related to another body corporate (B) if—

(a)

B is A’s holding company or subsidiary within the meaning of section 5 of the Companies Act 1993; or

(b)

more than half of A’s voting products (other than voting products that carry no right to participate beyond a specified amount in a distribution of either profits or capital) are held by B and bodies corporate that are related to B (whether directly or indirectly, but other than in a fiduciary capacity), or vice versa; or

(c)

more than half of the voting products (other than voting products that carry no right to participate beyond a specified amount in a distribution of either profits or capital) of each of A and B are held by members of the other (whether directly or indirectly, but other than in a fiduciary capacity); or

(d)

the businesses of A and B have been so carried on that the separate business of each body corporate, or a substantial part of that business, is not readily identifiable; or

(e)

there is another body corporate to which A and B are both related.

Section 12(1)(c): amended, on 21 April 2020, by section 86 of the Partnership Law Act 2019 (2019 No 53).

13 Miscellaneous interpretation provisions relating to statements and information

(1)

In this Act and the regulations, a reference to a statement or other information that is false, misleading, deceptive, or confusing includes a reference to a statement or information that is false, misleading, deceptive, or confusing (as the case may be) by reason of—

(a)

the form or context in which the statement or information is made, published, or provided; or

(b)

the omission of any other information that is material in the form and context in which it is made, published, or provided.

(2)

For the purpose of considering whether a PDS, a register entry, or any other document or communication provided under this Act is false, misleading, deceptive, or confusing, a statement or other information must be treated as being included in the PDS, register entry, or other document or communication if it—

(a)

is contained in the PDS, register entry, or document or communication (as the case may be); or

(b)

appears on the face of the PDS, register entry, or document or communication (as the case may be); or

(c)

is contained in any financial statements, report, or other document that accompanies, or is incorporated by reference or referred to in, or distributed with, the PDS, register entry, or document or communication (as the case may be).

(3)

For the purposes of this section, if a PDS, a register entry, or any other document or communication specifically identifies a particular page or section of an Internet site or of another document, only that page or section is incorporated by reference or referred to in the PDS, register entry, or other document or communication (except in the prescribed circumstances).

(4)

If this Act or the regulations require information or any other matter to be contained or included in a PDS, register entry, or document or communication, the information or other matter may be incorporated by reference only if this is authorised by the regulations.

Section 13(1): amended, on 9 August 2017, by section 48 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

14 Status of examples

(1)

An example used in this Act is only illustrative of the provisions to which it relates. It does not limit those provisions.

(2)

If an example and a provision to which it relates are inconsistent, the provision prevails.

Transitional, savings, and related provisions

Heading: inserted, on 9 April 2019, by section 8 of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

14A Transitional, savings, and related provisions

The transitional, savings, and related provisions set out in Schedule 4 have effect according to their terms.

Section 14A: inserted, on 9 April 2019, by section 8 of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Act binds the Crown

15 Act binds the Crown

This Act binds the Crown.

General application provision

16 Application of Act

(1)

The provisions of this Act have effect despite anything to the contrary in any other enactment or in any agreement, deed, application, disclosure document, or advertisement.

(2)

A provision of an agreement or a deed is void if it provides that a party to the agreement or deed is—

(a)

required or bound to waive compliance with any requirement of this Act or the regulations; or

(b)

taken to have notice of any agreement, document, or matter not specifically referred to in the relevant disclosure document (if any).

(3)

Nothing in this section or in any other provision of this Act or the regulations limits subpart 5 of Part 2 of the Contract and Commercial Law Act 2017 (which relates to illegal contracts).

Section 16(3): amended, on 1 September 2017, by section 347 of the Contract and Commercial Law Act 2017 (2017 No 5).

Part 2 Fair dealing

17 Overview

(1)

This Part provides for fair dealing in relation to financial products and financial services as follows:

(a)

sections 19 to 33 prohibit misleading or deceptive conduct, the making of false or misleading representations, and the making of unsubstantiated representations:

(b)

sections 34 to 37 prohibit offers of financial products in the course of unsolicited meetings.

(2)

Subsection (1) is only a guide to the general scheme and effect of this Part.

18 Interpretation in this Part

In this Part,—

financial product—

(a)

has the meaning set out in section 7; and

(b)

includes, for the purposes of any provision of this Part or section 464,—

(i)

any class or classes of financial advice product declared by the regulations to be a financial product for the purposes of that provision; and

(ii)

any security of a kind referred to in section 6(6)(c) (being a security that is used to generate a financial benchmark)

trade means any trade, business, industry, profession, occupation, activity of commerce, or undertaking.

Section 18 financial product paragraph (b): replaced, on 14 March 2021, by section 34 of the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act 2019 (2019 No 46).

Section 18 financial product paragraph (b)(i): amended, on 15 March 2021, by section 9 of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Misleading or deceptive conduct, false or misleading representations, and unsubstantiated representations

19 Misleading or deceptive conduct generally

(1)

A person must not, in trade, engage in conduct that is misleading or deceptive or likely to mislead or deceive in relation to—

(a)

any dealing in financial products; or

(b)

the supply or possible supply of a financial service or the promotion by any means of the supply or use of financial services.

(2)

A person must not engage in conduct that is misleading or deceptive or likely to mislead or deceive in relation to any dealing in quoted financial products.

(3)

Subsection (2) applies regardless of whether or not the dealing is in trade.

Compare: 1986 No 121 s 9; 1988 No 234 s 13

20 Misleading conduct in relation to financial products

A person must not, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of financial products.

Compare: 1986 No 121 s 10

21 Misleading conduct in relation to financial services

A person must not, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of financial services.

Compare: 1986 No 121 s 11

22 False or misleading representations

A person must not, in trade, in connection with any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services, make a false or misleading representation—

(a)

that the products or services are of a particular kind, standard, quality, grade, quantity, composition, or value, or have had a particular history; or

(b)

that the products or services are offered, issued, transferred, or supplied by a particular person, by a person of a particular trade, qualification, or skill, or by a person who has other particular characteristics; or

(c)

that a particular person has agreed to acquire the products or services; or

(d)

that the products or services have any sponsorship, approval, endorsement, performance characteristics, accessories, uses, or benefits; or

(e)

that a person has any sponsorship, approval, endorsement, or affiliation; or

(f)

with respect to the price of the products or services; or

(g)

concerning the need for the products or services; or

(h)

concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right, or remedy, including (to avoid doubt) in relation to any guarantee, right, or remedy available under the Consumer Guarantees Act 1993; or

(i)

concerning the place of origin of the products or services.

Compare: 1986 No 121 s 13

23 Unsubstantiated representations

(1)

A person must not, in trade, make an unsubstantiated representation.

(2)

A representation is unsubstantiated if the person making the representation does not, when the representation is made, have reasonable grounds for the representation, irrespective of whether the representation is false or misleading.

(3)

This section does not apply to a representation that a reasonable person would not expect to be substantiated.

(4)

In this section and sections 24 to 27, representation means a representation that is made—

(a)

in respect of financial products or financial services; and

(b)

in connection with—

(i)

any dealing in financial products; or

(ii)

the supply or possible supply of financial services or the promotion by any means of the supply or use of financial services.

24 Court must have regard to certain matters

(1)

In a proceeding concerning a contravention of section 23, and in assessing whether a person had reasonable grounds for a representation, a court must have regard to all of the circumstances, including—

(a)

the nature of the financial products or financial services in respect of which the representation was made:

(b)

the nature of the representation (for example, whether it was a representation about quality or quantity):

(c)

any research or other steps taken by or on behalf of the person before the person made the representation:

(d)

the nature and source of any information that the person relied on to make the representation:

(e)

the extent to which the person making the representation complied with the requirements of any standards, codes, or practices relating to the grounds on which such a representation may be made, and the nature of those requirements:

(f)

the actual or potential effects of the representation on any person.

(2)

Subsection (1) does not limit sections 499 to 504.

25 Limitation on commencement of proceedings in relation to unsubstantiated representations

Despite anything to the contrary in Part 8, only the FMA may commence a proceeding or make an application under that Part in relation to a contravention of section 23.

26 Section 23 does not apply to representations in PDSs, register entries, or other disclosure documents

Section 23 does not apply to a representation made in a disclosure document or a register entry.

27 Section 23 subject to other enactments

Section 23 does not apply to a representation made by a person in a particular trade, business, industry, profession, occupation, activity of commerce, or undertaking if, when the representation is made,—

(a)

another enactment sets out requirements relating to the grounds on which representations may be made by a person in that trade, business, industry, profession, occupation, activity of commerce, or undertaking (whether more or less onerous than section 23); and

(b)

the person complies with those requirements.

28 Certain conduct does not contravene various provisions

(1)

Conduct that contravenes section 82, 99, 262, 265, 427, 431P, or 431Y or clause 27 of Schedule 1 does not contravene sections 19 to 23.

(2)

For the purpose of this section, conduct must be treated as contravening section 82, 99, 262, 265, 427, 431P, or 431Y or clause 27 of Schedule 1 even if the conduct does not constitute an offence, or does not lead to any liability, because of the availability of a defence.

Compare: Australian Securities and Investments Commission Act 2001 ss 12DA(1A), 12DB(2) (Aust)

Section 28(1): amended, on 15 March 2021, by section 10 of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 28(2): amended, on 15 March 2021, by section 10 of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

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

(1)

Nothing in sections 19 to 23 applies to the publication of any information or matter in a newspaper or magazine, or on a news media or financial market commentary Internet site, by the relevant person, not being—

(a)

the publication of an advertisement; or

(b)

the publication of any information or matter relating to any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services by—

(i)

the relevant person or, if the relevant person is a body corporate, by a related body corporate; or

(ii)

a person who is a party to any agreement with the relevant person relating to the content, nature, or tenor of the information or matter.

(2)

Nothing in sections 19 to 23 applies to the broadcasting or exhibiting of any information or matter by the relevant person, not being—

(a)

the broadcasting or exhibiting of an advertisement; or

(b)

the broadcasting or exhibiting of any information or matter relating to any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services by—

(i)

the relevant person or, if the relevant person is a body corporate, by a related body corporate; or

(ii)

a person who is a party to any agreement with the relevant person relating to the content, nature, or tenor of the information or matter.

(3)

In this section,—

exhibiting means—

(a)

exhibiting by means of an audio or visual service; or

(b)

exhibiting films to the public

newspaper has the same meaning as in section 2 of the Films, Videos, and Publications Classification Act 1993

relevant person means, in relation to—

(a)

a newspaper or magazine, the proprietor of the newspaper or magazine:

(b)

a news media or financial market commentary Internet site, the person that controls the content of the Internet site:

(c)

broadcasting, the broadcaster:

(d)

an audio or visual service, the person that controls the content of the audio or visual service:

(e)

exhibiting films to the public, the person that exhibits the films.

Compare: 1986 No 121 s 15

30 Defence for publisher

In any proceeding against a person (A) for contravention of any of sections 19 to 23 committed by the publication of an advertisement, it is a defence if A proves that—

(a)

A’s business is publishing or arranging for the publication of advertisements; and

(b)

A received the advertisement, or the information contained in the advertisement, as the case may be, in the ordinary course of that business and did not know and had no reason to suspect that the publication of the advertisement or the publication of the advertisement containing that information, as the case may be, would constitute a contravention of the provision.

Compare: 1986 No 121 s 44(4)

31 Licensed market operator does not contravene by notifying disclosures

A licensed market operator does not contravene any of sections 19 to 23 by the notification of any disclosure made to it under subpart 4, 5, or 6 of Part 5 or under an alternative disclosure obligation.

32 Other exceptions

(1)

Sections 19 to 23 do not apply to conduct in relation to a takeover offer for financial products under the Takeovers Code or to conduct under that offer to the extent that the conduct is regulated by the Takeovers Code, the Takeovers Act 1993, or an exemption granted under that Act.

(2)

Sections 19 to 23 do not apply to conduct in relation to the acquisition or redemption by a company of its shares under the Companies Act 1993 to the extent that the conduct is regulated by that Act.

Compare: 1988 No 234 ss 14, 15

33 Territorial scope of sections 19 to 23

(1)

Sections 19 to 23 apply to—

(a)

conduct in New Zealand; and

(b)

conduct outside New Zealand by any person resident, incorporated, registered, or carrying on business in New Zealand to the extent that that conduct relates to dealing in financial products, or the supply of a financial service, that occurs (in part or otherwise) within New Zealand.

(2)

Sections 19 to 23 also apply to a restricted communication that is distributed or to be distributed to a person outside New Zealand by any person resident, incorporated, registered, or having a principal place of business in New Zealand.

(3)

Despite anything to the contrary in Part 8, only the FMA may commence a proceeding or make an application under that Part in relation to conduct to which this Part applies by virtue of subsection (2).

(4)

In this section, registered means registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008.

Compare: 1988 No 234 s 18; 1978 No 103 s 7(3)

Offers in course of unsolicited meetings

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

(1)

A person must not offer financial products for issue or sale to a person who is acting otherwise than in trade (A) in the course of, or because of, an unsolicited meeting with A.

(2)

Subsection (1) does not prohibit an offer of financial products if—

(a)

the offer does not require disclosure under Part 3 because of an exclusion under Part 1 of Schedule 1 (other than an exclusion under clause 12 or 16 of that schedule); or

(b)

the offer is through a financial advice provider that is acting in the ordinary course of business as a financial advice provider; or

(c)

[Repealed]

(d)

the offer is an offer of the financial products of a co-operative where becoming a holder of those products is—

(i)

a necessary incident of doing business with the co-operative; or

(ii)

the means by which a person can access the benefits of membership of the co-operative; or

(e)

the offer is made in the prescribed circumstances.

(3)

This section applies to offers of financial products received by persons in New Zealand, regardless of—

(a)

where any resulting issue or transfer occurs:

(b)

where the issuer or offeror is resident, incorporated, or carries on business.

(4)

In this section,—

meeting includes—

(a)

a telephone call; or

(b)

a meeting held by means of audio, audio and visual, or electronic communication where the participants can simultaneously communicate with each other throughout the meeting

co-operative means—

(a)

a co-operative company; or

(b)

an industrial and provident society; or

(c)

an entity of a prescribed kind.

Compare: Corporations Act 2001 s 736 (Aust)

Section 34(2)(b): replaced, on 15 March 2021, by section 11 of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

Section 34(2)(c): repealed, on 15 March 2021, by section 11 of the Financial Services Legislation Amendment Act 2019 (2019 No 8).

35 Right to withdraw

(1)

If financial products are issued or transferred to a person (A) as a result of an offer that contravenes section 34, A has the right to—

(a)

withdraw from holding the financial products and to have the relevant money repaid (in any case other than a derivative); or

(b)

in the case of a derivative, withdraw from the derivative.

(2)

The right referred to in subsection (1) is exercisable by A giving to the offeror notice of the exercise of the right within 1 month after the date of the issue or transfer.

(3)

Notice under this section may be expressed in any way (including oral or written) that shows the intention of A to withdraw from holding the financial product or from the derivative.

(4)

This section and sections 36 and 37 do not limit any other liability that a person may have for a contravention of section 34.

Compare: Corporations Act 2001 s 738 (Aust)

36 Offeror obligations if notice of withdrawal given

(1)

If a notice is given under section 35 in relation to a financial product other than a derivative,—

(a)

the offeror must ensure that the relevant money is repaid as soon as practicable; and

(b)

if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the relevant money together with interest at a prescribed rate from the date on which the notice was given.

(2)

If a notice is given under section 35 in relation to a derivative,—

(a)

no party to the derivative is obliged or entitled to perform it further; and

(b)

each party to the derivative must, as soon as practicable, repay any money, or return any other property, received by the party under the derivative to the party from whom it was received; and

(c)

if money owed by the offeror is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the date on which the notice was given.

(3)

For the purposes of subsection (2)(b), an amount of money due from one party must be set off against an amount due from the other party.

37 Director not liable if no misconduct or negligence

A director is not liable under section 36(1)(b) or (2)(c) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Civil liability

38 Civil liability for certain contraventions of this Part

(1)

Sections 19 to 23, 34, and 36 are Part 2 fair dealing provisions.

(2)

A contravention of any of sections 19 to 23 may give rise to civil liability (see subpart 3 of Part 8), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.

(3)

A contravention of section 34 or 36 may give rise to civil liability (see subpart 3 of Part 8), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case.

Part 3 Disclosure of offers of financial products

Subpart 1—Application

39 Issue offers that need disclosure

An offer of financial products for issue requires disclosure to an investor under this Part unless an exclusion under Part 1 of Schedule 1 applies.

Compare: Corporations Act 2001 s 706 (Aust)

40 Sale offers that need disclosure

An offer of financial products for sale requires disclosure to an investor under this Part only if disclosure is required under Part 2 of Schedule 1.

Compare: Corporations Act 2001 s 707(1) (Aust)

41 Meaning of regulated offer and of regulated product

(1)

In this Act, regulated offer—

(a)

means an offer of financial products to 1 or more investors where the offer to at least 1 of those investors requires disclosure under this Part (regardless of whether or not an exclusion under Schedule 1 applies to an offer to 1 or more other investors); but

(b)

does not include an offer of financial products to 1 or more investors if—

(i)

the only investors who are able, under the terms of the offer, to acquire the products are investors to whom disclosure under this Part is not required; and

(ii)

all of the investors who acquire the products under the offer are investors to whom disclosure under this Part is not required.

Example

ABC Limited makes an offer of its ordinary shares to 100 investors.

Of those investors, 5 are wholesale investors, 15 are relatives of directors of ABC Limited, and 20 are close business associates of ABC Limited. Exclusions under Schedule 1 apply and accordingly the offers to these investors do not require disclosure under this Part.

However, none of the exclusions in Schedule 1 apply to the remaining 60 investors. The offer to each of these investors requires disclosure. This means that a product disclosure statement must be given to each of the 60 investors under section 50 (subject to section 51).

The offer of ABC Limited’s ordinary shares, as a whole, is a regulated offer because at least some of the offers to investors require disclosure.

Some obligations under this Act apply to the regulated offer as a whole. These obligations apply to all of the investors even if the offers to some of those investors do not require disclosure. For example, all money paid for the shares must be held in trust under section 87 (even if the money is paid by a wholesale investor, a relative, or a close business associate), ongoing disclosure under subpart 4 may be required to be made to a wholesale investor, a relative, or a close business associate, and registers of financial products kept under subpart 4 of Part 4 relate to products held by all product holders.

(2)

In this Act, regulated product means—

(a)

a financial product offered under a regulated offer; or

(b)

a managed investment product in a registered scheme (whether or not there has been a regulated offer).

42 Regulated offers that need to meet additional governance requirements

(1)

A regulated offer of debt securities must meet requirements under subpart 1 of Part 4.

(2)

A regulated offer of managed investment products must meet requirements under subpart 2 of Part 4.

43 Options over financial products

(1)

For the purposes of this Part and Schedule 1,—

(a)

an offer of an option to acquire, by way of issue, a financial product is an offer both of the option and of the underlying financial product; and

(b)

the grant of an option without an offer of the option is an offer of the option; and

(c)

an offer to grant an option is an offer to issue the option.

(2)

See clause 11 of Schedule 1 for an exclusion in relation to options.

Compare: Corporations Act 2001 s 702 (Aust)

44 Treatment of offers of convertible financial products

For the purposes of this Part and Schedule 1, an offer of a financial product that will be converted, or is or may become convertible, into another financial product is an offer both of the financial product that is issued and of the financial product into which it converts.

45 Treatment of offers of renewals and variations

(1)

For the purposes of this Part and Schedule 1, an offer of a renewal or variation of the terms or conditions of a financial product made by the issuer is an offer of the financial product as renewed or varied.

(2)

A change to the terms or conditions of a financial product is not a variation for the purposes of this section if the change is made in accordance with the existing terms or conditions of the financial product (for example, if the issuer exercises a power under the terms or conditions to change an interest rate).

(3)

See clause 24 of Schedule 1 for an exclusion in relation to renewals and variations (but limited disclosure may be required under clause 26 of that schedule).

46 Offers of financial products involving customised terms

(1)

Offers of a type of financial product to 2 or more investors are not prevented from being part of the same regulated offer merely because the product involves terms that are customised for each investor.

(2)

The PDS and register entry for a regulated offer are not required to include specific information about any customised terms that apply to a particular investor.

(3)

Subsection (2) does not prevent the regulations from requiring a PDS or register entry to contain information about the kinds of terms that may be customised for each investor.

Example

A derivatives issuer makes an offer of a particular type of swap agreement to retail investors (where the offer to at least 1 of those investors requires disclosure under this Part).

These derivatives involve some standard or generic terms. They also involve customised terms that are negotiated with each retail investor (for example, terms relating to particular dates or amounts).

The offer of those derivatives to those investors is a regulated offer.

The PDS or register entry relates to the regulated offer as a whole. The PDS and register entry do not include specific information about the customised terms that apply to a particular investor. This does not prevent the regulations requiring the PDS or register entry to contain a description of the kinds of customised terms that may be negotiated (such as a range of dates or amounts).

47 Territorial scope of Part

(1)

This Part applies to offers of financial products in New Zealand, regardless of—

(a)

where any resulting issue or transfer occurs:

(b)

where the issuer or offeror is resident, incorporated, or carries on business.

(2)

For the purposes of subsection (1), financial products are offered in New Zealand if an offer of the financial products is received by a person in New Zealand, unless the offeror demonstrates that it has taken all reasonable steps to ensure that persons in New Zealand (other than persons referred to in subsection (3)) may not accept the offer.

(3)

The persons referred to in this subsection are persons to whom disclosure under this Part is not required because of an exclusion under any of clauses 3 to 5 of Schedule 1.

Compare: 1978 No 103 s 7

Subpart 2—Procedure for making regulated offers

Product disclosure statement must be prepared and lodged

48 PDS must be prepared and lodged

(1)

A person must not make a regulated offer, or distribute an application form for a regulated offer, unless the issuer of the financial products has—

(a)

prepared a product disclosure statement (PDS) for the offer; and

(b)

lodged the PDS with the Registrar; and

(c)

supplied to the Registrar all of the information that the register entry (if any) is required to contain by this Act or the regulations.

(2)

A person who contravenes subsection (1) commits an offence if the person knows that, or is reckless as to whether, the offer is a regulated offer.

(3)

A person who commits an offence under subsection (2) is liable on conviction,—

(a)

in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and

(b)

in any other case, to a fine not exceeding $2.5 million.

Compare: Corporations Act 2001 ss 709(1), 718, 727(1) (Aust)

49 Purpose of PDS

The purpose of a PDS is to provide certain information that is likely to assist a prudent but non-expert person to decide whether or not to acquire the financial products.

Disclosure to investors

50 PDS must be given if offer requires disclosure

(1)

This section applies if an offer of financial products is made to a person (A) to whom disclosure under this Part is required.

(2)

A person must not accept an application, or issue or transfer the financial products to A, if a PDS for the regulated offer was not given to A before the application was made.

(3)

In this section, application means an application for the financial products that is made by A.

(4)

See sections 39 and 40 and Schedule 1, which contain provisions relating to when an offer of financial products to a person requires disclosure under this Part.

51 Certain situations in which section 50 does not need to be complied with

(1)

An offeror does not have to comply with section 50 in respect of an offer of financial products to a person (A)—

(a)

if A has already been given a PDS (for the same or a different offer) that contains all of the information that the PDS referred to in section 50 would be required to contain; or

(b)

if the offeror believes on reasonable grounds that paragraph (a) applies; or

(c)

in any other prescribed circumstances.

(2)

For the purposes of subsection (1)(a), immaterial differences in the information that is contained in the PDS that has been given to A and the PDS referred to in section 50 may be disregarded.

Compare: Corporations Act 2001 s 1012D(1) (Aust)

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

(1)

An offeror must be treated as having complied with section 50 in respect of an offer of financial products to a person (A) if—

(a)

the offeror issues or transfers the financial products to A in response to an application form; and

(b)

the application form identifies the PDS to which it relates; and

(c)

A confirms in the application form that A has received the PDS; and

(d)

the offeror has reasonable grounds to believe that—

(i)

the application form was included in, or accompanied by, the PDS when the form was distributed by or on behalf of the offeror; or

(ii)

the form was copied, or directly derived, by the person making the application from a form referred to in subparagraph (i).

(2)

The identification of the PDS under subsection (1)(b) must be reasonably prominent.

53 Offence to knowingly or recklessly contravene section 50

(1)

A person who contravenes section 50 commits an offence if the person knows that, or is reckless as to whether, the offer of financial products to A requires disclosure under this Part.

(2)

A person who commits an offence under subsection (1) is liable on conviction,—

(a)

in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and

(b)

in any other case, to a fine not exceeding $2.5 million.

54 Right to withdraw

(1)

If a person contravenes section 50 in respect of an offer of financial products to a person (A), A has the right to—

(a)

withdraw from holding the financial products and to have the relevant money repaid (in any case other than a derivative); or

(b)

in the case of a derivative, withdraw from the derivative.

(2)

The right referred to in subsection (1) is exercisable by A giving to the offeror notice of the exercise of the right within the earlier of—

(a)

6 months after A knows, or ought reasonably to know, that section 50 has been contravened; and

(b)

12 months after the financial products are issued or transferred to A.

(3)

Notice under this section may be expressed in any way (including oral or written) that shows the intention of A to withdraw from holding the financial product or from the derivative.

(4)

This section and sections 55 and 56 do not limit any other liability that a person may have for a contravention of section 50.

55 Offeror obligations if notice of withdrawal given

(1)

If a notice is given under section 54 in relation to a financial product other than a derivative,—

(a)

the offeror must ensure that the relevant money is repaid as soon as practicable; and

(b)

(2)

If a notice is given under section 54 in relation to a derivative,—

(a)

no party to the derivative is obliged or entitled to perform it further; and

(b)

each party to the derivative must, as soon as practicable, repay any money, or return any other property, received by the party under the derivative to the party from whom it was received; and

(c)

(3)

For the purposes of subsection (2)(b), an amount of money due from one party must be set off against an amount due from the other party.

56 Director not liable if no misconduct or negligence

A director is not liable under section 55(1)(b) or (2)(c) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Content and presentation of product disclosure statements and register entries

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

(1)

An issuer that prepares, or is required to prepare, a PDS must ensure that, as at the date on which the PDS is lodged with the Registrar,—

(a)

the PDS—

(i)

contains all of the information that it is required to contain by the regulations; and

(ii)

is accompanied by all of the documents that the regulations require it to be accompanied by; and

(iii)

complies with all other requirements of the regulations relating to the content of the PDS; and

(iv)

is dated not later than the date on which it is lodged with the Registrar; and

(v)

if applicable, specifies its expiry date (see section 84) and states that no financial products will be issued or sold on the basis of the PDS in relation to applications received after the expiry date; and

(vi)

complies with section 60 (consent for expert statements or endorsements); and

(b)

the register entry (if any)—

(i)

contains all of the information that it is required to contain by the regulations; and

(ii)

contains all material information relating to the regulated offer that is not contained in the PDS; and

(iii)

complies with all other requirements of the regulations relating to the content of the register entry; and

(iv)

complies with section 60 (consent for expert statements or endorsements).

(2)

Subsection (1)(b)(ii) does not limit subsection (1)(a).

(3)

Subsection (1)(b)(ii) does not apply in the prescribed circumstances (which may include, for example, certain offers to existing product holders or certain situations in which information about an offer is available by means of a continuous disclosure obligation).

58 Register entry not required in prescribed circumstances

A register entry for a regulated offer is not required in the prescribed circumstances.

59 Meaning of material information in this Part

(1)

In this Part, material information, in relation to a regulated offer, means information that—

(a)

a reasonable person would expect to, or to be likely to, influence persons who commonly invest in financial products in deciding whether to acquire the financial products on offer; and

(b)

relates to the particular financial products on offer or the particular issuer, rather than to financial products generally or issuers generally.

(2)

However, material information does not include—

(a)

information about the specific terms of a financial product that have been customised for a particular investor; or

(b)

information about an identifiable investor.

Example

A derivatives issuer makes an offer of a particular type of swap agreement to retail investors.

These derivatives involve some standard or generic terms. They also involve customised terms that are negotiated with the particular retail investor (for example, terms relating to particular dates or amounts).

The material information for the regulated offer as a whole does not include specific information about the customised terms that apply to a particular investor. This does not prevent the regulations requiring the PDS or register entry to contain a description of the kinds of customised terms that may be negotiated.

Compare: Corporations Act 2001 ss 674, 677, 710, 1013E (Aust)

60 Consent of experts and persons who make endorsements

(1)

An issuer that prepares, or is required to prepare, a PDS must ensure that the PDS and the register entry only include an expert statement or endorsement made by a person (A), or a statement said in the PDS or register entry to be based on an expert statement or endorsement made by a person (A), if—

(a)

A has consented in writing to the statement being included in the PDS or register entry in the form and context in which it is included; and

(b)

the PDS or register entry states that A has given the consent; and

(c)

A has not withdrawn the consent before the PDS is lodged with the Registrar.

(2)

Nothing in subsection (1) applies in relation to any statement given by an approved rating agency in connection with a rating given, or to be given, by it.

(3)

In this section and section 83(3),—

approved rating agency means a rating agency nominated or approved under section 80 of the Reserve Bank of New Zealand Act 1989, section 86 of the Non-bank Deposit Takers Act 2013, or section 62 of the Insurance (Prudential Supervision) Act 2010

endorsement means a statement that—

(a)

may reasonably be regarded as encouraging or persuading persons to acquire the financial products on offer; and

(b)

relates to the particular financial products on offer or the particular issuer, rather than to financial products generally or issuers generally

expert—

(a)

means a person who holds himself or herself out to be of a profession or calling that gives authority to a statement made by him or her; but

(b)

does not include a person acting in his or her capacity as a director or senior manager of an entity

expert statement means a statement purporting to be made by an expert.

Compare: Corporations Act 2001 ss 716, 735(1) (Aust)

Section 60(3) approved rating agency: amended, on 1 May 2014, by section 102 of the Non-bank Deposit Takers Act 2013 (2013 No 104).

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

(1)

An issuer that prepares, or is required to prepare, a PDS must ensure that the information in the PDS is worded and presented in a clear, concise, and effective manner.

(2)

This section is not a civil liability provision for the purposes of subpart 3 of Part 8 (but see subpart 1 of Part 8, which allows the FMA to make a stop order if a PDS does not comply with this section).

Compare: Corporations Act 2001 s 715A (Aust)

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

An issuer that prepares, or is required to prepare, a PDS must ensure that the PDS complies with all requirements of the regulations relating to the form and presentation of the PDS.

Other provisions relating to lodging of PDS and other documents

63 Supply of prescribed information

(1)

An issuer that lodges a PDS or other document under this Part must supply the prescribed information to the Registrar when the PDS or document is lodged.

(2)

Information referred to in subsection (1) may include, for example, a copy of the consent of a prescribed person to the lodgement.

(3)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(4)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

64 Registrar must notify FMA of lodgement of PDS

(1)

The Registrar must, immediately after a PDS is lodged, notify the FMA of the lodgement for the purpose of allowing the FMA an opportunity to consider the PDS, any governing document, and whether the offer, or intended offer, of financial products will be made in compliance with this Act.

(2)

The nature and extent of the consideration under subsection (1) (if any) is at the FMA’s discretion.

(3)

Nothing in this section or any other provision of this Act limits the FMA’s power to consider or reconsider at any time any of the matters referred to in subsection (1).

Compare: 1978 No 103 s 43C(1), (3), (4)

65 Waiting period after lodgement before processing applications for financial products

(1)

An offeror must not accept an application for, or issue or transfer, financial products offered under a regulated offer until—

(a)

the period of 5 working days after lodgement of the PDS has ended; or

(b)

if the period is extended under section 66, the period as extended has ended.

(2)

An offeror that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

(4)

This section does not prevent an offeror from receiving applications for financial products or money during the period that applies under this section.

Compare: 1978 No 103 s 43D; Corporations Act 2001 s 727(3) (Aust)

66 FMA may extend period

(1)

The FMA may extend the period under section 65(1)(a) by notice in writing to the offeror.

(2)

The period, as extended, must end no later than 10 working days after lodgement of the PDS with the Registrar.

(3)

The FMA must give a copy of the notice under subsection (1) to the Registrar.

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

If section 65 applies to a PDS that relates to a particular offer of financial products but another lodged PDS that is not or is no longer subject to section 65 also relates to the offer of those products, that section does not prevent an offeror, in accordance with this Act, from accepting applications for, or issuing or transferring, financial products in reliance upon the other PDS.

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

(1)

This section applies if the FMA is satisfied that—

(a)

its consideration as referred to in section 64 is complete; or

(b)

consideration as referred to in section 64 is, in the circumstances, unnecessary.

(2)

The FMA may give notice to the offeror that—

(a)

the period that applies under section 65 ends at a particular time specified by the FMA (being an earlier time than that provided for under that section); or

(b)

section 65 does not apply in respect of the PDS.

(3)

Nothing in this section limits subpart 2 of Part 9 (which allows the FMA to grant exemptions in respect of compliance with section 65).

Compare: 1978 No 103 s 43E

69 Waiting period does not usually apply to continuous issue PDSs

(1)

Section 65 applies to a continuous issue PDS only if it is of a class that is prescribed by the FMA in a notice issued under this section.

(2)

The FMA may issue a notice that prescribes the class or classes of continuous issue PDSs to which section 65 applies.

(3)

The FMA must, before issuing a notice in respect of a class of continuous issue PDSs, be satisfied that it is in the public interest for the FMA to have an opportunity to consider those PDSs before any person accepts applications for, or issues or transfers, financial products offered under those PDSs (for example, where in the circumstances, a particular risk relates to a particular class of offerors or financial products).

(4)

Subpart 5 of Part 9 (general provisions relating to certain FMA instruments) applies to a notice under this section.

Compare: 1978 No 103 s 43EA

70 No guarantee or representation as to compliance

(1)

Nothing done or omitted to be done under this Act or the regulations by the Registrar or the FMA guarantees or represents that—

(a)

a PDS, register entry, or governing document—

(i)

complies with this Act and the regulations:

(ii)

does not contain any material misdescription or material error or any material matter that is not clearly legible:

(iii)

is not false or misleading:

(b)

the FMA has considered a PDS, register entry, or governing document with a view to determining whether it—

(i)

complies with this Act and the regulations:

(ii)

contains any material misdescription or material error or any material matter that is not clearly legible:

(iii)

is false or misleading.

(2)

This section does not limit section 22 of the Financial Markets Authority Act 2011 (which provides protection from liability for the FMA and its members and employees).

Compare: 1978 No 103 s 43M

71 When supplementary document or replacement PDS may be lodged

(1)

An issuer that lodges a PDS with the Registrar may lodge a supplementary document or replacement PDS with the Registrar to—

(a)

correct a false or misleading statement in the PDS; or

(b)

correct an omission from the PDS of information that it is required to contain by this Act or the regulations; or

(c)

correct the PDS because it is not worded and presented in a clear, concise, and effective manner; or

(d)

update, or add to, the information contained in the PDS.

(2)

However, a supplementary document must not be lodged with the Registrar in the prescribed circumstances.

Compare: Corporations Act 2001 s 1014A (Aust)

72 Supplementary document

(1)

If a supplementary document is lodged with the Registrar, the PDS together with the supplementary document is taken to be the PDS for the purposes of the application of this Act or the regulations to events that occur after the lodgement.

(2)

The issuer must ensure that, at the beginning of a supplementary document, there is—

(a)

a statement that it is a supplementary document; and

(b)

an identification of the PDS that it supplements; and

(c)

an identification of all previous supplementary documents lodged with the Registrar in relation to the regulated offer; and

(d)

a statement that it is to be read together with the PDS that it supplements and the previous supplementary documents.

(3)

The supplementary document must be dated with the date on which it is lodged with the Registrar.

Compare: Corporations Act 2001 s 719(2), (4) (Aust)

73 Replacement PDS

(1)

If a replacement PDS is lodged with the Registrar, the PDS is taken to be the replacement PDS for the purposes of the application of this Act or the regulations to events that occur after the lodgement.

(2)

The issuer must ensure that, at the beginning of a replacement PDS, there is—

(a)

a statement that it is a replacement PDS; and

(b)

an identification of the PDS that it replaces.

(3)

The replacement PDS must be dated with the date on which it is lodged with the Registrar.

Compare: Corporations Act 2001 s 719(3), (5) (Aust)

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

(1)

The Registrar must, immediately after a supplementary document or replacement PDS is lodged, notify the FMA of the lodgement for the purpose of allowing the FMA an opportunity to consider the supplementary document or replacement PDS.

(2)

The nature and extent of the consideration (if any) that the FMA gives to a supplementary document or replacement PDS are at the FMA’s discretion.

(3)

Section 65 does not apply to the lodgement of a supplementary document or replacement PDS.

Compare: 1978 No 103 s 43C(1), (3)

75 Publication of lodgement

(1)

If a PDS, supplementary document, or replacement PDS is lodged by an issuer under this Part, the issuer must, as soon as practicable after it receives the certificate of lodgement from the Registrar, ensure that an Internet site maintained by or on behalf of the issuer—

(a)

contains a reasonably prominent statement—

(i)

to the effect that the PDS, supplementary document, or replacement PDS has been lodged; and

(ii)

describing where and how a copy of the PDS, supplementary document, or replacement PDS can be obtained; or

(b)

contains a reasonably prominent link to such a statement.

(2)

The statement or link referred to in subsection (1) may be removed from the Internet site maintained by or on behalf of the issuer on or after the date that the offeror ceases to offer financial products in reliance upon the PDS.

Amending register entry

76 When register entry may be amended

An issuer of financial products offered under a regulated offer may give notice to the Registrar to amend the register entry in order to—

(a)

correct a false or misleading statement in the register entry; or

(b)

correct an omission from the register entry of information it is required to contain by this Act or the regulations; or

(c)

update, or add to, the information contained in the register entry.

Conditions referred to in PDS

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

(1)

This section applies if a PDS states that the financial products will not be issued or transferred unless—

(a)

applications for a minimum number of the financial products are received; or

(b)

a minimum amount is raised.

(2)

The offeror must not issue or transfer any of the financial products under the regulated offer until the condition referred to in subsection (1) is satisfied.

(3)

For the purpose of working out whether a condition referred to in this section or section 79(2)(a) has been satisfied, a person who has agreed to acquire financial products as an underwriter is taken to have applied for those products.

Compare: Corporations Act 2001 s 723(2) (Aust)

78 Issue or transfer void if quotation condition not fulfilled

(1)

This section applies if—

(a)

a PDS states or implies that the financial products are to be quoted on a financial market (whether in New Zealand or elsewhere); and

(b)

the financial products are not admitted to quotation within—

(i)

the period specified in, or determined in accordance with, the PDS; or

(ii)

if there is no such period, 3 months after the date of the PDS.

(2)

An issue or a transfer of financial products under the regulated offer is void.

(3)

The offeror must deal under section 80 with the application for financial products that relates to the issue or transfer referred to in subsection (2).

Compare: Corporations Act 2001 s 723(3) (Aust)

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

79 Application of section 80

(1)

An offeror must, if any of subsections (2) to (5) apply, deal under section 80 with any applications for the financial products offered under the regulated offer that have not resulted in an issue or a transfer of the products.

(2)

This subsection applies if—

(a)

a PDS states that the financial products will not be issued or transferred unless—

(i)

applications for a minimum number of the financial products are received; or

(ii)

a minimum amount is raised; and

(b)

a condition referred to in paragraph (a) is not satisfied within 4 months after the date of the PDS.

(3)

This subsection applies if—

(a)

a PDS states or implies that the financial products are to be quoted on a financial market (whether in New Zealand or elsewhere); and

(b)

the financial products are not admitted to quotation within—

(i)

the period specified in, or determined in accordance with, the PDS; or

(ii)

if there is no such period, 3 months after the date of the PDS.

(4)

This subsection applies if—

(a)

the offeror becomes aware—

(i)

that a statement in the PDS is false or misleading or is likely to mislead; or

(ii)

that there is an omission from the PDS of information that is required to be contained in the PDS by this Act or the regulations; or

(iii)

of a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the PDS if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the PDS; and

(b)

the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.

(5)

This subsection applies if—

(a)

the offeror becomes aware—

(i)

that a statement in the register entry is false or misleading or is likely to mislead; or

(ii)

that there is an omission from the register entry of information that is required to be contained in the register entry by this Act or the regulations; or

(iii)

of a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the register entry if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the register entry; and

(b)

the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.

Compare: Corporations Act 2001 s 724(1) (Aust)

80 Choices open to offeror

(1)

If this section applies, the offeror must do 1 of the following in respect of each applicant:

(a)

ensure that the money received from the applicant in respect of the application for financial products is repaid; or

(b)

in the case of section 78 or 79(2), (3), or (4), give the applicant—

(i)

a supplementary document or replacement PDS that corrects the deficiency or changes the terms of the offer; and

(ii)

1 month to confirm whether or not the applicant still wants to acquire the financial products; or

(c)

in the case of section 79(5),—

(i)

amend the register entry to correct the deficiency; and

(ii)

give notice in the prescribed manner to the applicant that the register entry has been amended; and

(iii)

give the applicant 1 month to confirm whether or not the applicant still wants to acquire the financial products; or

(d)

if permitted by the regulations, in the case of section 79(4) or (5),—

(i)

give the applicant the document or PDS referred to in paragraph (b)(i) or comply with paragraph (c)(i) and (ii) (as the case may be); and

(ii)

give the applicant a prescribed period to withdraw their application and be repaid.

(2)

If an applicant does not confirm that the applicant still wants to acquire the financial products within 1 month after being given the opportunity to do so under subsection (1)(b)(ii) or (c)(iii) or an applicant withdraws an application under subsection (1)(d), the offeror must ensure that the money received from the applicant in respect of the application for financial products is repaid as soon as practicable.

(3)

If the money referred to in subsection (2) is not repaid within 1 month after the offeror is required to ensure that it is repaid under that subsection, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the expiry of the 1-month period referred to in subsection (2) or from the date on which the application is withdrawn (as the case may be).

(4)

An offeror must, when acting under this section (including in respect of a withdrawal under subsection (1)(d)), comply with the prescribed requirements (if any).

Compare: Corporations Act 2001 s 724(2) (Aust)

81 Director not liable if no misconduct or negligence

A director is not liable under section 80(3) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Prohibition of offers where defective disclosure in PDS or register entry

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

(1)

An offeror must not offer, or continue to offer, financial products under a regulated offer if—

(a)

there is—

(i)

a statement in the PDS, any application form that accompanies the PDS, or the register entry that is false or misleading or is likely to mislead; or

(ii)

an omission from the PDS, or the register entry, of information that is required to be contained in the PDS, or the register entry, by this Act or the regulations; or

(iii)

a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the PDS, or the register entry, if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the PDS or the register entry; and

(b)

the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.

(2)

For the purposes of this section, a statement about a future matter (including the doing of, or refusing to do, an act) must be taken to be misleading if the person making the statement does not have reasonable grounds for making it.

(3)

Subsection (2) does not limit the meaning of a reference to a misleading statement.

(4)

See section 510 (offence to knowingly or recklessly contravene this section) and section 496 (which provides that a person may be treated as suffering loss or damage in the case of a contravention of this section).

Compare: Corporations Act 2001 s 728 (Aust)

83 Persons who must inform offeror about disclosure deficiencies

(1)

A person referred to in subsection (2) must, in relation to a regulated offer, notify the offeror in writing as soon as practicable if the person becomes aware at any time before the end of the application period that—

(a)

a material statement in the PDS, or the register entry, is false or misleading or is likely to mislead; or

(b)

there is a material omission from the PDS, or the register entry, of information that is required to be contained in the PDS, or the register entry, by this Act or the regulations; or

(c)

there is a material circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the PDS, or the register entry, if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the PDS or register entry.

(2)

The persons are—

(a)

each director of the offeror:

(b)

each person named in the PDS or register entry with the person’s consent as a proposed director of the offeror:

(c)

the issuer (if the offeror is not the issuer) and each director of the issuer:

(d)

a person referred to in section 60 who has consented as referred to in that section.

(3)

A person referred to in subsection (2)(d) is required to notify the offeror of matters under this section only if the matters relate to the expert statement or endorsement to which the person’s consent relates.

(4)

In subsection (1), application period means the period in which applications for financial products under the PDS may be made.

Compare: Corporations Act 2001 s 730(1) (Aust)

Expiry

84 Expiry

(1)

A PDS must, if required by the regulations, specify its expiry date.

(2)

The expiry date must not be later than the end of the prescribed period (if any).

(3)

The expiry date of a replacement PDS must be the same as that of the original PDS it replaces.

Compare: Corporations Act 2001 s 711(6) (Aust)

85 How offeror must deal with applications on expiry

(1)

If a PDS expires, the offeror must deal with applications for the financial products offered under the regulated offer in accordance with subsections (2) and (3).

(2)

If an application is received on or before the expiry date, the offeror may issue or transfer financial products to the applicant.

(3)

If an application is received after the expiry date, the offeror must do 1 of the following:

(a)

ensure that the money received from the applicant in respect of the application is repaid; or

(b)

give the applicant—

(i)

a new PDS (unless the applicant is not a person to whom disclosure under this Part is required or, under section 51, the offeror does not have to comply with section 50 in respect of the offer to the applicant); and

(ii)

1 month to confirm whether or not the applicant still wants to acquire the financial products.

(4)

If an applicant does not confirm that the applicant still wants to acquire the financial products within 1 month after being given the opportunity to do so under subsection (3), the offeror must ensure that the money received from the applicant in respect of the application for financial products is repaid as soon as practicable.

(5)

If the money referred to in subsection (4) is not repaid within 1 month after the offeror is required to ensure that it is repaid under that subsection, the offeror and the directors of the offeror are jointly and severally liable to repay the money together with interest at a prescribed rate from the expiry of the 1-month period referred to in subsection (4).

(6)

An offeror must, when acting under this section, comply with the prescribed requirements (if any).

Compare: Corporations Act 2001 s 725 (Aust)

86 Director not liable if no misconduct or negligence

A director is not liable under section 85(5) if he or she proves that the default in the repayment of the money was not due to any misconduct or negligence on his or her part.

Money for financial products must be held in trust

87 Money for financial products must be held in trust

(1)

This section applies to money paid to an issuer or offeror of regulated products if the money is paid by a person (A)—

(a)

to acquire the financial products or an increased interest in the financial products; or

(b)

as a further contribution or investment or a further deposit as referred to in section 11(2)(c).

(2)

The issuer or offeror must hold the money in trust for A until—

(a)

the financial products are issued or transferred; or

(b)

the money is otherwise applied for the purpose for which it was paid (for example, to increase the extent of A’s interest in a scheme or A’s deposit or to pay a fee); or

(c)

the money is repaid to A; or

(d)

the money is applied in accordance with A’s express instructions given after the application for financial products was made and the money was paid.

(3)

The issuer or offeror must—

(a)

deal with the money, while it is held in trust, in the prescribed manner (including ensuring that any prescribed requirements relating to the investment of the money are complied with); and

(b)

if the money needs to be repaid, ensure the money is repaid as soon as practicable and, in any event, no later than 1 month after the obligation to repay arises.

(4)

This section does not apply to derivatives (but see section 448, which provides for regulations relating to the holding and application of investor funds and property by derivatives issuers).

Compare: Corporations Act 2001 ss 722, 1017E (Aust)

Offering financial products in entity that does not exist

88 Offering financial products of entity that does not exist

(1)

A person must not offer financial products of an entity that has not been formed or does not exist if the offer would be a regulated offer if the entity did exist.

(2)

Subsection (1) applies even if it is proposed to form or incorporate the entity.

(3)

A person who contravenes this section commits an offence if the person knows that the offer would be a regulated offer if the entity did exist.

(4)

A person who commits an offence under this section is liable on conviction,—

(a)

in the case of an individual, to imprisonment for a term not exceeding 3 years, a fine not exceeding $200,000, or both; and

(b)

in any other case, to a fine not exceeding $600,000.

Compare: Corporations Act 2001 s 726 (Aust)

Subpart 3—Advertising

89 Advertising for regulated offers

(1)

If an offer, or intended offer, of financial products is or will be a regulated offer, a person must not, except in accordance with any of sections 90 to 92, distribute an advertisement of the offer or intended offer.

(2)

Subsection (1) applies only if the advertisement is authorised or instigated by, or on behalf of, the issuer, the offeror, or an associated person of the issuer or offeror.

Compare: Corporations Act 2001 s 734(2), (2A) (Aust)

90 Distribution of PDS or registered documents

A person may distribute either of the following without contravening section 89:

(a)

a PDS that has been lodged with the Registrar:

(b)

a copy of any part of the register entry or of any document that is contained in the register entry.

Compare: Corporations Act 2001 s 734(4) (Aust)

91 Advertising before PDS lodged

(1)

Before the PDS is lodged with the Registrar, an advertisement does not contravene section 89 if it includes, in relation to the offer or intended offer, a statement—

(a)

that no money is currently being sought; and

(b)

that financial products cannot currently be applied for or acquired under the offer or intended offer; and

(c)

that, if the offer is made, the offer will be made in accordance with this Act; and

(d)

if the offeror wishes, that specifies that the offeror is seeking preliminary indications of interest and, in that case, also specifies—

(i)

how indications of interest may be made; and

(ii)

that no indication of interest will involve an obligation or a commitment to acquire the financial products.

(2)

A statement required under subsection (1)(a) to (c) and (d)(ii) must be reasonably prominent.

Compare: 1978 No 103 s 5(2CA); Corporations Act 2001 s 734(5) (Aust)

92 Advertising after PDS lodged

(1)

After the PDS is lodged with the Registrar, an advertisement does not contravene section 89 if it—

(a)

includes a statement that identifies,—

(i)

if the financial products are offered by way of issue, the issuer of the products; and

(ii)

if the financial products are offered pursuant to sale offers to which section 40 applies, the issuer of the products and the offeror of the products; and

(b)

includes a statement that indicates that the PDS for the offer is available and where and how it can be obtained; and

(c)

does not contain any information, sound, image, or other matter that is materially inconsistent with the PDS, or register entry, for the offer to which it relates.

(2)

A statement required under this section must be reasonably prominent.

Compare: Corporations Act 2001 s 734(6) (Aust)

93 Documents to which subpart does not apply

Nothing in this subpart applies to the distribution of any of the following:

(a)

a document that relates to the financial products of a listed issuer and consists solely of—

(i)

a statement or report relating to the affairs of the issuer made to the relevant licensed market operator, by or on behalf of the issuer, for the purposes of compliance with any market rules; or

(ii)

a report of a statement or report referred to in subparagraph (i):

(b)

a document that consists solely of—

(i)

a statement or report made to or for the purposes of a meeting of the issuer’s product holders or any class of those product holders; or

(ii)

a report of the proceedings of such a meeting:

(c)

information that consists solely of information that is required by law to be provided or made available (for example, an annual report of a company) whether directly or as a condition of carrying out any activity or as a condition of an exemption from any enactment.

94 Defence for publishers

In any proceeding against a person (A) for a contravention of section 89 in relation to an advertisement, it is a defence if A proves that—

(a)

A’s business is publishing or arranging for the publication of advertisements; and

(b)

Compare: 1986 No 121 s 44(4)

Subpart 4—Ongoing disclosure and updating of registers

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

95 Duty to notify changes to Registrar

(1)

An issuer of regulated products must notify the Registrar of a prescribed change within the prescribed period.

(2)

In this section,—

prescribed change, in respect of regulated products,—

(a)

means a prescribed change that relates to the issuer, any offeror of those products, the regulated products, or any registered scheme to which those products relate; but

(b)

does not include a change in respect of which the FMA is required to notify the Registrar (for example, an order made under subpart 1 of Part 8)

prescribed period, in respect of a prescribed change, means—

(a)

the period (if any) that is prescribed in respect of the change; or

(b)

5 working days after the issuer becomes aware of the change (if paragraph (a) does not apply).

(3)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(4)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Compare: 1978 No 103 s 43Q

Section 95(1): replaced, on 9 August 2017, by section 49 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Section 95(2): replaced, on 9 August 2017, by section 49 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Disclosure to particular persons

96 Information to be made available to investors, FMA, Registrar, or other prescribed persons

(1)

Every issuer of regulated products must, at the request of a prescribed person or at the prescribed times or on the occurrence of the prescribed events, make available to a prescribed person the information that is required to be made available under this section by the regulations.

(2)

The information must be made available in the prescribed manner.

(3)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(4)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

(5)

To avoid doubt, information may be required to be made available to a person under this section even though Schedule 1 specifies that an offer to the person would not require disclosure under this Part (for example, a wholesale investor who acquires financial products under a regulated offer is not required to be given a PDS for the offer but ongoing disclosure to the investor may be required under the regulations).

Section 96 heading: amended, on 9 August 2017, by section 50 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Public disclosure

97 Information to be made publicly available

(1)

Every issuer of regulated products must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, make publicly available the information that is required to be made publicly available by the regulations.

(2)

An issuer commits an offence and is liable on conviction to a fine not exceeding $50,000 if—

(a)

the regulations made for the purposes of this section require the issuer to make information publicly available by lodging that information with the Registrar; and

(b)

the issuer contravenes this section by failing to lodge that information with the Registrar in accordance with subsection (1).

(3)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Compare: 1978 No 103 s 54C

Section 97(2): inserted, on 9 August 2017, by section 51 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Section 97(3): inserted, on 9 August 2017, by section 51 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

98 Issuer must provide information to Registrar

(1)

An issuer of regulated products must lodge with the Registrar a copy of any information made, or to be made, publicly available under section 97 before the date that is 5 working days after that information is made available under that section.

(2)

Subsection (1) does not apply—

(a)

if the regulations made for the purposes of section 97 require the information to be made publicly available by lodging that information with the Registrar; or

(b)

otherwise in the prescribed circumstances.

(3)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(4)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Defective ongoing disclosure

99 Defective ongoing disclosure

(1)

An issuer must not provide to the Registrar, or make available to any person or the public, any information under any of sections 95 to 98 (the ongoing disclosure) if—

(a)

there is—

(i)

a statement in the ongoing disclosure that is false or misleading or is likely to mislead; or

(ii)

an omission from the ongoing disclosure of information that is required to be contained in the ongoing disclosure by this Act or the regulations; and

(b)

the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.

(2)

(3)

Subsection (2) does not limit the meaning of a reference to a misleading statement.

(4)

This section does not limit sections 95 to 98.

(5)

See section 511 (offence to knowingly or recklessly contravene this section) and section 496 (which provides that a person may be treated as suffering loss or damage in the case of a contravention of this section).

Confirmation

100 Issuer or offeror must provide confirmation

(1)

An issuer or offeror of a regulated product must, in the prescribed circumstances, provide to a product holder either the financial product or confirmation information.

(2)

The financial product or confirmation information must be provided in the prescribed manner.

(3)

Confirmation information provided to a product holder under this section is, in the prescribed circumstances, prima facie evidence of the matters to which it relates.

(4)

In this section, confirmation information means the information relating to the financial product or product holder that is prescribed (which may include, for example, information describing the nature, terms, and conditions of the financial product and the name of the product holder).

(5)

An issuer or offeror that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(6)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Compare: 1978 No 103 s 54(1), (4)

Subpart 5—Civil liability for certain contraventions of this Part

101 Part 3 offer provisions

(1)

All of the provisions specified in subsections (3) and (4) are Part 3 offer provisions.

(2)

A contravention of any of the provisions listed in subsection (3) may give rise to civil liability (see subpart 3 of Part 8), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.

(3)

The provisions are the following:

(a)

section 48 (PDS must be prepared and lodged):

(b)

section 50 (PDS must be given to person to whom disclosure is required):

(c)

section 57 (disclosure of material information and content of PDS and register entry):

(d)

section 60 (consent of experts and persons who make endorsements):

(e)

section 77 (minimum number or amount condition must be fulfilled before issue or transfer):

(f)

section 80 (choices open to offeror if condition in PDS not met or defective disclosure):

(g)

section 82 (false or misleading statements, omissions, and new matters requiring disclosure):

(h)

section 87(2) (money for financial products must be held in trust):

(i)

section 89 (advertising for regulated offers):

(j)

sections 97 and 99 (ongoing disclosure):

(k)

clauses 13 and 17 of Schedule 1 (restrictions on advertising for small offers and small schemes):

(l)

any provision of regulations made for the purposes of clause 26 of Schedule 1 that is prescribed by the regulations to be a Part 3 offer provision and stated to give rise to civil liability under this subsection:

(m)

clause 27 of Schedule 1 (false or misleading statements and omissions).

(4)

A contravention of any of the following may give rise to civil liability (see subpart 3 of Part 8), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case:

(a)

section 55 (offeror obligations if notice of withdrawal is given):

(b)

section 62 (PDS must comply with prescribed requirements relating to form and presentation):

(c)

section 75 (publication of lodgement):

(d)

section 83 (certain persons must inform offeror about disclosure deficiencies):

(e)

section 85 (dealing with applications on expiry):

(f)

section 87(3) (money for financial products must be dealt with in prescribed manner and repaid as soon as practicable if required):

(g)

section 88 (offering financial products in entity that does not exist):

(ga)

(h)

clause 28 of Schedule 1 (certain persons must inform offeror about disclosure deficiencies).

Section 101(3)(l): replaced, on 9 August 2017, by section 52(1) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Section 101(4)(ga): inserted, on 9 August 2017, by section 52(2) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Section 101(4)(h): amended, on 9 August 2017, by section 52(3) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Part 4 Governance of financial products

102 Overview

(1)

This Part provides for the governance of regulated products as follows:

(a)

subpart 1 sets out the need for a trust deed and a supervisor, and other issuer and supervisor obligations, for regulated offers of debt securities:

(b)

subpart 2 sets out the need for a managed investment scheme to be registered for regulated offers of managed investment products, and the need for a governing document and a supervisor, and other issuer, supervisor, and custodian obligations, for registered schemes:

(c)

subpart 3—

(i)

requires persons associated with those debt securities or registered schemes to make protected disclosures; and

(ii)

provides powers of intervention to enable the supervision of those debt securities or registered schemes by the supervisor or the FMA (in addition to the powers in Part 8):

(d)

subpart 4 contains ongoing duties of issuers of all regulated products to maintain registers and keep copies of documents.

(2)

Subsection (1) is only a guide to the general scheme and effect of this Part.

Subpart 1—Governance of debt securities

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

(1)

A person must not make a regulated offer of a debt security unless—

(a)

there is a trust deed for the debt security that—

(i)

complies with sections 104 to 106; and

(ii)

is lodged with the Registrar with a certificate from the issuer and supervisor to the effect that the trust deed complies with those sections on the basis set out in the certificate; and

(b)

there is a licensed supervisor—

(i)

who is designated or appointed as the trustee under the trust deed for the debt security (or under the Financial Markets Supervisors Act 2011); and

(ii)

whose licence covers supervision of the debt security.

(2)

A reference in this subpart to—

(a)

a trust deed is a reference to the trust deed required by subsection (1); and

(b)

a debt security is a reference to a debt security offered under a regulated offer.

(3)

The issuer of the debt security must ensure that there continues to be a trust deed and licensed supervisor as required by subsection (1) until the debt security is cancelled, redeemed, or forfeited, or all of the obligations owing under the debt security have been discharged.

Compare: 1978 No 103 s 33(2)

Governing document requirements

104 Contents of trust deed for debt securities

(1)

A trust deed for a debt security must provide that the following are held in trust by the supervisor for the benefit of the holders of the debt security:

(a)

the right to enforce the issuer’s duty to repay, or to pay interest, under the terms of the debt security; and

(b)

any charge or security for repayment; and

(c)

the right to enforce any other duties that the issuer, any guarantor, and any other person have under—

(i)

the terms of the debt security; or

(ii)

the provisions of the trust deed or this Act in relation to the debt security.

(2)

Subsection (1) does not prevent a holder of a debt security from enforcing the issuer’s duty to repay, or to pay interest, or any other duties that the issuer, any guarantor, or any other person owes to the holder.

(3)

The trust deed is treated as containing any provision that is implied into it by or under this Act.

(4)

The trust deed must also provide adequately for all of the matters required to be contained in it by section 105 and the regulations.

(5)

The trust deed must provide for the contents required by this section in accordance with the frameworks and methodologies specified in notices issued by the FMA under subpart 4 of Part 9 (if any).

Compare: Corporations Act 2001 s 283AB (Aust)

105 Limits on permitted exemptions and indemnities

(1)

If a supervisor of a debt security has any rights to be indemnified in relation to the performance of the supervisor’s licensee obligations (as defined in section 4 of the Financial Markets Supervisors Act 2011), those rights—

(a)

must be set out in the trust deed for the debt security; and

(b)

are available only in relation to the proper performance of the duties under sections 112(1) and 113.

(2)

No other agreement has any effect to the extent that it purports to confer a right of a kind set out in subsection (1).

Compare: Corporations Act 2001 s 283DB (Aust); 1978 No 103 s 62

106 Trust deed must be legally enforceable

A trust deed for a debt security must be contained in 1 or more documents that are legally enforceable as between the supervisor, the issuer of the debt security, and the product holders.

107 Effect of trust deed

A trust deed for a debt security has no effect to the extent that it contravenes, or is inconsistent with, this Act, the regulations, or any term implied into it by this Act or the regulations.

108 Changes to trust deed

(1)

An amendment to or a replacement of a trust deed for a debt security has no effect unless made—

(a)

with the consent of the supervisor of the debt security under this section; or

(b)

under section 109; or

(c)

under section 22(7) or 37(6) of the Financial Markets Supervisors Act 2011 or any other power to amend or replace the trust deed under an enactment.

(2)

The supervisor must not consent to an amendment to, or a replacement of, the trust deed under this section unless—

(a)

either—

(i)

the amendment or replacement is approved by, or is contingent on approval by, the holders of the debt security; or

(ii)

the supervisor is satisfied that the amendment or replacement does not have a material adverse effect on the holders of the debt security; and

(b)

the supervisor certifies to that effect and certifies, or obtains a certificate from a lawyer, that the trust deed, as amended or replaced, will comply with sections 104 to 106 on the basis set out in the certificate.

(3)

The approval of the holders of the debt security for the purposes of subsection (2)(a) must be the approval of a special resolution of—

(a)

the holders of the debt security; or

(b)

each class of holders of the debt security that is or may be adversely affected by the amendment or replacement.

(4)

Subsection (2) is subject to section 112(2)(b).

109 Power to make FMA-approved changes to trust deeds

(1)

An issuer may amend or replace a trust deed for a debt security with the FMA’s consent if the FMA is satisfied that it is necessary to enable the trust deed to comply with this subpart or any enactment or rule of law.

(2)

Subsection (1) applies despite anything to the contrary in the trust deed or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the trust deed.

(3)

The FMA’s discretion to set preconditions for requests to it includes (without limitation) a discretion to set preconditions that satisfy the FMA that it is appropriate for the amendment or replacement to be made under this section rather than by means of another power or process.

(4)

An amendment or a replacement made under this section must be treated for all purposes as if it were authorised by, and made in accordance with, the trust deed.

110 Lodging of changes to trust deed

(1)

Within 5 working days after an amendment to or a replacement of a trust deed for a debt security, the issuer must ensure that notice of the amendment or replacement, and a copy of the certificate for the amendment or replacement (if any), is lodged with the Registrar.

(2)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Application of Trusts Act 2019

Heading: inserted, on 30 January 2021, by section 166 of the Trusts Act 2019 (2019 No 38).

110A Application of Trusts Act 2019

(1)

This section applies to a trust constituted (or to be constituted) under a trust deed for a debt security if the trust deed—

(a)

has been lodged under section 103; or

(b)

has been or will be entered into with the intention that the deed will be lodged under section 103.

(2)

The following provisions of the Trusts Act 2019 do not apply to a trust referred to in subsection (1):

(a)

section 25 (duty to act honestly and in good faith):

(b)

section 29 (general duty of care):

(c)

section 39 (adviser must alert settlor to modification or exclusion of default duty):

(d)

sections 40 to 42 (exemption and indemnity clauses):

(e)

section 43 (adviser must alert settlor to liability exclusion or indemnity clause):

(f)

section 44 (court consideration of gross negligence):

(g)

sections 45 to 48 (documents to be kept by trustees):

(h)

sections 49 to 55 (giving information to beneficiaries):

(i)

section 56 (general powers of trustee):

(j)

sections 67 to 73 (exercise or performance of trustee powers and functions by others):

(k)

sections 74 to 76 (special trust advisers):

(l)

sections 81(2) and (3) and 82 to 85 (trustees’ indemnities):

(m)

sections 92 to 115 (appointment and discharge of trustees):

(n)

sections 121 to 123 (termination and variation of trusts):

(o)

sections 142 to 148 (alternative dispute resolution):

(p)

sections 153 to 158 (investigation of condition and accounts of certain trust property).

Section 110A: inserted, on 30 January 2021, by section 166 of the Trusts Act 2019 (2019 No 38).

Role of supervisor

111 Functions of supervisor

(1)

The supervisor of a debt security is responsible for the following functions:

(a)

acting on behalf of the holders of the debt security in relation to—

(i)

the issuer of the debt security; and

(ii)

any matter connected with the trust deed for the debt security or the terms of the regulated offer; and

(iii)

any contravention or alleged contravention of the issuer obligations; and

(b)

supervising the issuer’s performance—

(i)

of its issuer obligations; and

(ii)

in order to ascertain whether the assets of the issuer and of each guarantor that are or may be available, whether by way of security or otherwise, are sufficient or likely to be sufficient to discharge the amounts of the debt securities as they become due; and

(c)

performing or exercising any other functions, duties, and powers conferred or imposed on the supervisor by or under this Act, the Financial Markets Supervisors Act 2011, or the governing document.

(2)

The supervisor must not delegate any of its functions under subsection (1) (except as expressly permitted by this Act or as permitted by, and then subject to, conditions imposed under the Financial Markets Supervisors Act 2011).

112 General duties applying in exercise of supervisor’s functions

(1)

The supervisor of a debt security must—

(a)

act honestly and in good faith in acting as a supervisor; and

(b)

in exercising its powers and performing its duties as a supervisor, act in the best interests of the holders of the debt security; and

(c)

exercise reasonable diligence in carrying out its functions as a supervisor.

(2)

The supervisor of a debt security must also—

(a)

do all the things it has the power to do to cause any contravention referred to in section 111(1)(a)(iii) to be remedied (unless it is satisfied that the contravention will not have a material adverse effect on holders of the debt security); and

(b)

act in accordance with any direction given by a special resolution of the holders of the debt security that is not inconsistent with any enactment, rule of law, or the trust deed in relation to—

(i)

seeking a remedy to a contravention referred to in section 111(1)(a)(iii); and

(ii)

any other matter connected with the supervisor’s functions.

(3)

The supervisor is not liable for anything done, or omitted to be done, in good faith in giving effect to a direction to it by holders of the debt security.

(4)

The duty in subsection (2)(b) is subject to any order of the court made under section 210.

Compare: SR 2009/230 Schedule 15 cl 1

Section 112(1)(a): amended, on 30 January 2021, by section 167 of the Trusts Act 2019 (2019 No 38).

113 Duty of supervisor to comply with professional standard of care

The supervisor of a debt security must, in exercising its powers and performing its duties as a supervisor, exercise the care, diligence, and skill that a prudent person engaged in the business of acting as a licensed supervisor would exercise in the same circumstances.

114 Duty of issuer to provide reports to supervisor

The issuer of a debt security must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, prepare and provide to the supervisor reports that contain the information that is required to be provided by the regulations.

Compare: SR 2009/230 Schedule 15 cl 4

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

(1)

If requested by the supervisor of a debt security (or a person authorised by the supervisor to exercise its powers under this section), the issuer must—

(a)

make available to the supervisor (or other authorised person) all documents and records relating to the issuer; and

(b)

provide the supervisor (or other authorised person) with any other reports or information required by the supervisor (or other authorised person).

(2)

Reports or information required under subsection (1) may—

(a)

be about any matter relevant to the performance of the supervisor’s functions; and

(b)

include forward-looking reports.

(3)

The reports or information must be provided within the time and in the manner (which must be reasonable in the circumstances) specified by the supervisor.

Compare: SR 2009/230 Schedule 15 cls 2(3), 3A

116 Issuer must report contravention or possible contravention of issuer obligations

If an issuer of a debt security has reasonable grounds to believe that it has contravened, may have contravened, or is likely to contravene any of its issuer obligations in a material respect, the issuer must, as soon as practicable,—

(a)

report the contravention or possible contravention to the supervisor; and

(b)

advise the supervisor of the steps (if any) that the issuer has taken or intends to take in light of the contravention or possible contravention and the date by which the steps were taken or are to be taken.

117 Restriction on use of reports on contraventions

A report provided by an issuer under section 116 is not admissible as evidence in a criminal proceeding against the issuer, except in a criminal proceeding that concerns the falsity of the report.

118 Duty of issuer to report serious financial problems

(1)

This section applies if an issuer of a debt security becomes aware of information on the basis of which it could reasonably form the opinion that the issuer is, or is likely to become, insolvent.

(2)

The issuer must, as soon as practicable,—

(a)

disclose to the supervisor all information relevant to that matter that is in the possession or under the control of the issuer and that was obtained in the course of, or in connection with, the performance of its functions as issuer; and

(b)

advise the supervisor of the steps (if any) that the issuer intends to take in respect of that matter and the date by which the steps are to be taken.

Compare: 2011 No 10 s 47

119 Power of supervisor to engage expert

(1)

The supervisor of a debt security is entitled, in the performance of the supervisor’s functions, to engage an expert (for example, an auditor, investigating accountant, valuer, or actuary) if the supervisor considers, on reasonable grounds, that it requires the assistance of the expert to—

(a)

determine the financial position of the issuer; or

(b)

review the business, operation, or management systems, or the governance, of the issuer.

(2)

If the supervisor engages an expert under this section,—

(a)

the issuer must provide reasonable assistance to the expert to allow the expert to provide the assistance under subsection (1); and

(b)

the fees and expenses of the expert, which must be reasonable in the circumstances, must be paid by the issuer.

Compare: SR 2009/230 Schedule 15 cl 3C

Meetings of product holders

120 Meetings of product holders

(1)

A meeting of a class of holders of a debt security must be called by the issuer on the written request of—

(a)

the supervisor; or

(b)

holders of the debt securities that have a combined nominal value of no less than 5% of the nominal value of the debt securities on issue in that class; or

(c)

in the case of an issuer that is a credit union, no less than 5% of the number of members of the credit union who hold debt securities on issue in that class; or

(d)

a person who is authorised by the trust deed or by the regulations to call the meeting.

(2)

Other requirements for meetings, proceedings at meetings, and provision for resolutions in lieu of meetings are governed by the regulations (if any) and the trust deed (if there are no regulations or to the extent that the trust deed is not inconsistent with the regulations).

Compare: SR 2009/230 Schedule 15 cl 3(1)

121 Supervisor’s attendance at meetings of product holders and power to appoint chair

The issuer of a debt security must ensure that the supervisor—

(a)

is permitted to attend any meeting of holders of the debt security; and

(b)

receives the notices and communications that any holder of the debt security is entitled to receive in relation to a meeting of those holders; and

(c)

may be heard at any meeting of holders of the debt security on any part of the business of the meeting that concerns the supervisor’s functions or the holders for whom the supervisor is acting; and

(d)

may appoint the chairperson of any meeting of holders of the debt security.

Compare: SR 2009/230 Schedule 15 cl 3(3)

Change of supervisor

122 Change of supervisor

(1)

The supervisor of a debt security ceases to hold that appointment (subject to subsection (2)) if the supervisor—

(a)

is removed by the FMA or the issuer under Part 2 of the Financial Markets Supervisors Act 2011; or

(b)

is removed by a special resolution of the holders of the debt security; or

(c)

is removed or resigns in accordance with the trust deed.

(2)

However, a supervisor may not—

(a)

be removed or resign under subsection (1)(b) or (c) unless—

(i)

all functions and duties of the position have been performed; or

(ii)

another licensed supervisor has been appointed, and accepted the appointment, in its place; or

(iii)

the court consents:

(b)

(despite anything in the trust deed) be removed by an issuer of the debt security under subsection (1)(c) without the FMA’s consent.

Compare: 1978 No 103 s 48

123 Lodging of notice of change of supervisor

(1)

Within 5 working days after a change to the supervisor of a debt security under section 122, the issuer must ensure that notice of the change is lodged with the Registrar.

(2)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Subpart 2—Governance of managed investment products

124 Overview

(1)

This subpart—

(a)

sets out when managed investment schemes need to be registered; and

(b)

requires registered schemes, irrespective of legal form, to meet key common governance and reporting requirements; and

(c)

provides for the manager and independent supervisor of a registered scheme to owe statutory duties of care to investors; and

(d)

provides for the custodianship of scheme property of a registered scheme to be independent from the manager.

(2)

This section is only a guide to the general scheme and effect of this subpart.

Need to register

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

(1)

A person must not make a regulated offer of a managed investment product, or accept further contributions if there has been a regulated offer of a managed investment product, unless the managed investment scheme is registered.

(2)

However, a managed investment scheme may be registered even if there is no regulated offer of a managed investment product in the scheme but, in this case,—

(a)

the managed investment products in the scheme are regulated products under section 41; and

(b)

this Act applies accordingly (for example, in addition to this subpart, see section 87 (money for financial products must be held in trust) and subpart 4 of Part 3 (ongoing disclosure)).

(3)

A scheme that is approved as a Schedule 3 scheme under Schedule 3 may not be registered under this subpart.

Compare: 1960 No 99 s 8; 1978 No 103 s 33(3)

Registration

126 Application for registration

(1)

A person may apply to the Registrar for registration of a managed investment scheme.

(2)

The application must—

(a)

be made in the prescribed manner; and

(b)

be accompanied by the written consent to the registration of the manager and supervisor of the scheme; and

(c)

contain a copy of the governing document for the scheme; and

(d)

contain a certificate from the manager and supervisor of the scheme to the effect that the scheme complies with the registration requirements for schemes that apply to it under section 127(1)(b) to (f) on the basis set out in the certificate; and

(e)

if the application is for registration as a particular type of scheme under sections 128 to 132,—

(i)

state that fact; and

(ii)

comply with any additional prescribed requirements for applications for that type of registration; and

(iii)

contain a certificate from the FMA that it is satisfied that the scheme complies with any additional registration requirements for that type of scheme that apply to it under those sections.

(3)

The Registrar must register a managed investment scheme if satisfied that the application meets the requirements of this section and section 127(1)(a) (subject to clause 7 of Schedule 2).

127 Initial and ongoing registration requirements for all managed investment schemes

(1)

Every registered scheme must meet the following registration requirements:

(a)

it must not have a name that, in the opinion of the Registrar, is misleading or offensive or the use of which would contravene an enactment; and

(b)

its governing document must comply with sections 135 to 137; and

(c)

it must have a licensed manager designated or appointed under the governing document (or this Act) whose licence covers management of the scheme; and

(d)

it must have a licensed supervisor designated or appointed under the governing document (or the Financial Markets Supervisors Act 2011) whose licence covers supervision of the scheme; and

(e)

the manager and the supervisor of the scheme must not be the same or associated persons; and

(f)

the scheme property must be held by the supervisor or another person who meets the custodianship requirements in section 156 (to the extent that it is not held directly by scheme participants).

(2)

However, subsection (1)(c) to (e) do not apply to a restricted scheme (and any reference in this Act to a supervisor in relation to a registered scheme does not apply in relation to a restricted scheme (unless the context otherwise requires)).

Compare: 1960 No 99 s 3(1), (4); 2006 No 40 ss 116F, 116G

128 Additional initial and ongoing registration requirements for KiwiSaver schemes

(1)

Every KiwiSaver scheme must meet the following registration requirements in addition to those in section 127:

(a)

it must be a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law; and

(b)

its purpose must be to provide retirement benefits directly to individuals; and

(c)

it must, accordingly, restrict redemptions, withdrawals, and the provision of benefits in respect of a member’s accumulation (including in the way the trust deed is applied) to those permitted under the KiwiSaver scheme rules under the KiwiSaver Act 2006; and

(d)

it must admit as members (both in its conditions of entry of scheme participants and in the way those conditions are applied on entry) only persons who meet the New Zealand criteria set out in subsection (2) or (3); and

(e)

it must be a scheme under which contributions are allocated to scheme participants on an individual basis; and

(f)

the benefits provided by the scheme must be fully funded as they accrue; and

(g)

its manager must have at least 1 director who is a New Zealand resident for tax purposes; and

(h)

its manager must be a party to a scheme provider agreement with the Commissioner of Inland Revenue (if required by regulations made under the KiwiSaver Act 2006); and

(i)

the FMA must be satisfied that the fees charged in accordance with any information provided in the application will comply with clause 2 of the KiwiSaver scheme rules under the KiwiSaver Act 2006.

(2)

The New Zealand criteria are that the person, at the time of becoming a scheme participant,—

(a)

is, or normally is, living in New Zealand, or is an employee of the State services (within the meaning of the Public Service Act 2020) who is—

(i)

serving outside New Zealand; and

(ii)

employed on New Zealand terms and conditions; and

(iii)

serving in a jurisdiction where offers of superannuation scheme membership are lawful; and

(b)

is a New Zealand citizen or is entitled, in terms of the Immigration Act 2009, to be in New Zealand indefinitely.

(3)

A person also meets the New Zealand criteria if the person—

(a)

is, immediately before becoming a participant of the KiwiSaver scheme (scheme A), a member of another KiwiSaver scheme (scheme B); and

(b)

is transferring the member’s entitlements from scheme B to scheme A.

(4)

If the KiwiSaver scheme is a restricted scheme,—

(a)

subsection (1)(g) does not apply; but

(b)

at least 1 of the trustees or 1 of the directors of the corporate trustee of the scheme must be a New Zealand resident for tax purposes.

Compare: 2006 No 40 s 116

Section 128(2)(a): amended, on 7 August 2020, by section 135 of the Public Service Act 2020 (2020 No 40).

129 Additional initial and ongoing registration requirements for superannuation schemes

(1)

Every superannuation scheme must meet the following registration requirements in addition to those in section 127:

(a)

it must be a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law; and

(b)

its purpose must be to provide retirement benefits directly or indirectly to individuals; and

(c)

it must, accordingly, restrict redemptions, withdrawals, and the provision of benefits (including in the way that the trust deed is applied) to those permitted under the superannuation scheme rules set out in the regulations; and

(d)

it must admit as members (both in its conditions of entry of scheme participants and in the way those conditions are applied on entry) only either or both of the following:

(i)

individuals:

(ii)

persons who are the trustees or managers of a retirement scheme; and

(e)

it must be—

(i)

a defined benefit scheme; or

(ii)

a scheme under which contributions are allocated to scheme participants on an individual basis and the benefits provided by the scheme must be fully funded as they accrue; and

(f)

it must meet any additional requirements of the superannuation scheme rules that apply to it under the regulations; and

(g)

it must not be registered as a KiwiSaver scheme.

(2)

However, a superannuation scheme may meet the requirements in subsection (1)(b) to (f) in respect of a section of the scheme only, and, in that case, the scheme is a superannuation scheme in respect of that section of the scheme.

(3)

Subsection (1)(b), (c), and (f) do not apply to a scheme, or a section of a scheme, that is closed to new members at the time of its registration (a legacy scheme), and instead it must meet the following registration requirements:

(a)

its principal purpose must be to provide retirement benefits directly or indirectly to individuals; and

(b)

the scheme or section must continue to be closed to new members.

Compare: 1989 No 10 ss 2A, 3(1)

130 Additional initial and ongoing registration requirements for workplace savings schemes

(1)

Every workplace savings scheme must meet the following registration requirements in addition to those in section 127:

(a)

it must be a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law; and

(b)

its purposes must be to provide—

(i)

retirement benefits directly or indirectly to individuals; and

(ii)

benefits to eligible individuals on ceasing employment or engagement with 1 or more persons specified in the trust deed or in an industry specified in the trust deed (whether immediately on ceasing that employment or engagement, or subsequently); and

(c)

it may allow redemptions, withdrawals, and benefits for other purposes (including in the way the trust deed is applied) only if—

(i)

they are in accordance with other limited circumstances defined in the trust deed (for example, financial hardship or early partial withdrawal criteria, or insurance benefits to members (including in the event of a death or disability of a member)); and

(ii)

they are incidental or secondary to the purposes of the scheme; and

(d)

it must admit as members (both in its conditions of entry of scheme participants and in the way those conditions are applied on entry) only either or both of the following:

(i)

eligible individuals:

(ii)

persons who are the trustees or managers of a retirement scheme; and

(e)

it must be—

(i)

a defined benefit scheme; or

(ii)

a scheme under which contributions are allocated to scheme participants on an individual basis and the benefits provided by the scheme must be fully funded as they accrue; and

(f)

it must meet any additional prescribed registration requirements for workplace savings schemes that apply to it; and

(g)

it must not be registered as a KiwiSaver scheme.

(2)

In this section, eligible individual, in relation to a person or industry specified in the trust deed, means—

(a)

an employee or director of that person; and

(b)

an individual who provides personal services (other than as an employee) principally to that person; and

(c)

an individual who is employed or engaged in that industry.

(3)

However, a workplace savings scheme may meet the requirements in subsection (1)(b) to (f) in respect of a section of the scheme only, and, in that case, the scheme is a workplace savings scheme in respect of that section of the scheme.

131 Additional ongoing registration requirements for restricted schemes

(1)

Every restricted scheme registered under clause 22 of Schedule 4 must meet the following registration requirements in addition to those in section 127:

(a)

it must be—

(i)

a KiwiSaver scheme; or

(ii)

a superannuation scheme or workplace savings scheme or both (in respect of all sections of the scheme); and

(b)

it must—

(i)

admit as members (both in its conditions of entry of scheme participants and in the way in which those conditions are applied on entry) only 1 or more of the classes of persons referred to in subsection (2); or

(ii)

be closed to new members; and

(c)

the conditions of entry of scheme participants, or the way in which those conditions have been applied on entry, must not have been changed without the FMA’s consent since the date of the scheme’s registration under clause 22 of Schedule 4 in a way that expands, or is likely to expand, the classes of people who may become scheme participants; and

(d)

its trustees must—

(i)

include at least 1 licensed independent trustee whose licence covers the scheme and who is independent under subsection (3); or

(ii)

consist only of a sole corporate trustee that has at least 1 director who is a licensed independent trustee whose licence covers the scheme and who is independent under subsection (3); and

(e)

the trustees of the scheme must be designated or appointed to manage the scheme under the governing document (or this Act).

(2)

The classes of persons for the purpose of subsection (1)(b)(i) are—

(a)

persons who are employed by a particular employer:

(b)

persons who are employed by a related body corporate of a particular employer:

(c)

persons who belong to a particular profession, calling, trade, occupation, or industry:

(d)

persons who belong to a particular association, society, or other entity with a definable community of interest:

(e)

persons who are immediate family members of, or wholly or partially financially dependent on, a person in 1 or more of the classes of persons described in paragraphs (a) to (d).

(3)

In this section,—

immediate family member, in relation to a person, means the person’s spouse, civil union partner, de facto partner, parent, child, step-parent, or stepchild

independent means a person that—

(a)

is not a related body corporate of any other trustee of the restricted scheme; and

(b)

is not an employer that provides access to the scheme for its employees, or an administration manager or an investment manager of the restricted scheme (or a related body corporate of any of them); and

(c)

is not a director of, shareholder in, or an employee of any person referred to in paragraph (a) or (b); and

(d)

is not a current scheme participant; and

(e)

is not a representative in any capacity of an organisation (such as a trade union) that represents the interests of 1 or more scheme participants; and

(f)

is not a representative in any capacity of an organisation that represents the interests of 1 or more employer contributors to the scheme; and

(g)

is not a corporate trustee if none of its directors are independent under this definition.

Compare: 2006 No 40 s 116A

Section 131(1)(a)(ii): amended, on 9 August 2017, by section 53 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

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

A scheme of a particular type of registered scheme specified in the regulations must meet the prescribed registration requirements for that type of scheme (if any) that apply to it in addition to those in section 127.

133 Manager must ensure that ongoing registration requirements are complied with

The manager of a registered scheme must ensure that, until all of the managed investment products in the scheme are cancelled, redeemed, or forfeited, or all of the obligations owing under those products have been discharged, the scheme—

(a)

continues to comply with the registration requirements that apply to the scheme under section 127; and

(b)

if it is registered as a particular type of scheme under sections 128 to 132, continues to comply with the additional registration requirements for that type of scheme that apply to it under those sections.

134 Changes to registration as particular type of registered scheme

(1)

The FMA may direct the removal of the registration of a registered scheme as a particular type of scheme—

(a)

if the FMA is satisfied that the scheme does not meet the registration requirements for that type of scheme that apply to it under sections 128 to 132; or

(b)

on the written request of the manager of the scheme, if the supervisor certifies or, if there is no supervisor, the manager certifies that—

(i)

the removal has been approved by a special resolution of the scheme participants (subject to any restrictions in the governing document); or

(ii)

there is no material adverse effect on scheme participants from the removal.

(2)

The FMA must not direct removal under subsection (1)(a) unless—

(a)

the FMA gives the manager of the scheme no less than 10 working days’ written notice of the following matters before it exercises the power:

(i)

that the FMA may direct removal; and

(ii)

the reasons why it may exercise that power; and

(b)

the FMA gives the manager or the manager’s representative an opportunity to make written submissions on the matter within that notice period.

(3)

The FMA may direct that a registered scheme be registered as a particular type of scheme on the written request of the manager of the scheme if the FMA is satisfied that the scheme meets the registration requirements for that type of scheme that apply to it under sections 128 to 132.

(4)

A direction under subsection (1)(a) in relation to the removal of a registration as a restricted scheme must not take effect before the expiry of 6 months after the direction is made (unless the manager consents to an earlier date).

(5)

If the FMA makes a direction under this section,—

(a)

the FMA must notify the manager and the supervisor of the registered scheme of the direction; and

(b)

as soon as practicable after being notified of the direction, the manager must notify the scheme participants of the direction.

Compare: 2006 No 40 s 168A

Section 134(1)(b): amended, on 9 August 2017, by section 54 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Governing document requirements

135 Contents of governing document for registered scheme

(1)

The governing document for a registered scheme must provide adequately for all of the following matters under the scheme:

(a)

whether or not managed investment products are transferable or redeemable and the rules applying to acquiring or disposing of the managed investment products and, if they are redeemable,—

(i)

the manner in which, and the conditions on which, interests are to be redeemed; and

(ii)

the method of calculating the price at which interests are to be redeemed; and

(b)

the rules applying to becoming a scheme participant or withdrawing from participation in the scheme (if there are any rules); and

(c)

the contributions payable, or the manner of calculating the contributions payable, and the rules applying to changing the contributions payable or the manner of their calculation; and

(d)

the methodology, or the rules applying to determining the methodology, and other rules applying to valuations of assets of the scheme and pricing of interests in the scheme; and

(e)

the rules applying to the determination and payment of benefits to scheme participants; and

(f)

the fees and expenses that can be paid out of scheme property to any manager, investment manager, administration manager, supervisor, or custodian, or the basis on which those fees and expenses are to be determined, and any rights of any of those persons to be indemnified out of scheme property (and any other matters required by section 136); and

(g)

the appointment and removal of the supervisor (unless none is required under this Part); and

(h)

the appointment and removal of the manager; and

(i)

the winding up of the scheme; and

(j)

any matters required to be contained in it by the regulations; and

(k)

any other matters (other than the matters contained in the statement of investment policy and objectives) that materially affect—

(i)

the management and operation of the scheme by the manager:

(ii)

the rights and duties of scheme participants in the scheme:

(iii)

the powers, rights, and duties of the manager and the supervisor of the scheme.

(2)

The governing document is treated as containing any provision that is implied into it by or under this Act or the KiwiSaver Act 2006.

(3)

The governing document must provide for the contents of the document that are required by this section in accordance with the frameworks and methodologies specified in notices issued by the FMA under subpart 4 of Part 9 (if any).

Compare: 1989 No 10 s 7; 2006 No 40 s 119

136 Limits on permitted exemptions and indemnities

(1)

If a manager or supervisor of a registered scheme has any rights to be indemnified for liabilities or expenses incurred in relation to the performance of the manager’s issuer obligations or the supervisor’s licensee obligations (as defined in section 4 of the Financial Markets Supervisors Act 2011), those rights—

(a)

must be set out in the scheme’s governing document; and

(b)

must be available only in relation to the proper performance of the duties under sections 143(1) and 144 or sections 153(1) and 154.

(2)

If an investment manager of a registered scheme has any rights to be indemnified for liabilities or expenses incurred in relation to the performance of the investment manager’s contracted functions, those rights—

(a)

must be set out—

(i)

in the scheme’s governing document; or

(ii)

in the contract between the investment manager and the manager, provided that the scheme’s governing document contains a power that permits such an indemnity; and

(b)

must be available only in relation to the proper performance of the duty under section 144.

(3)

No other agreement has any effect to the extent that it purports to confer a right of a kind referred to in subsection (1) or (2).

Compare: 1960 No 99 s 24(2); 1978 No 103 s 62; 2006 No 40 s 116J(1); Corporations Act 2001 s 601GA(2) (Aust)

137 Governing document must be legally enforceable

A governing document for a registered scheme must be contained in 1 or more documents that are legally enforceable as between the supervisor, the manager, and the scheme participants.

Compare: Corporations Act 2001 s 601GB (Aust)

138 Effect of governing document

A governing document for a registered scheme has no effect to the extent that it contravenes, or is inconsistent with, this Act, the regulations, or any term implied into it by this Act or the regulations.

139 Changes to governing document

(1)

An amendment to or a replacement of a governing document has no effect unless made—

(a)

under this section with the consent of the supervisor or, if there is no supervisor, the FMA; or

(b)

under section 140 or 187(3); or

(c)

under section 22(7) or 37(6) of the Financial Markets Supervisors Act 2011 or any other power to amend or replace the governing document under an enactment.

(2)

The supervisor or the FMA must not consent to an amendment to, or a replacement of, the governing document under this section unless—

(a)

either—

(i)

the amendment or replacement is approved by, or contingent on approval by, the scheme participants; or

(ii)

the supervisor or the FMA is satisfied that the amendment or replacement does not have a material adverse effect on the scheme participants; and

(b)

in the case of the supervisor, the supervisor certifies to that effect and certifies, or obtains a certificate from a lawyer, that the governing document, as amended or replaced, will comply with sections 135 to 137 on the basis set out in the certificate.

(3)

The approval of scheme participants for the purposes of subsection (2)(a) must consist of,—

(a)

in the case of an amendment to or a replacement of a governing document of a defined benefit scheme or a superannuation scheme or workplace savings scheme that is registered under clause 22 of Schedule 4 that reduces, postpones, or otherwise adversely affects the benefits, whether vested, contingent, or discretionary, that may in due course flow from, or are attributable to, membership of the scheme up to the date the amendment or replacement is made, the written consent of all scheme participants who would be adversely affected by the amendment or replacement; or

(b)

in any other case, a special resolution of the scheme participants or each class of scheme participants that is or may be adversely affected by the amendment or replacement.

(4)

Subsection (2) is subject to section 153(2)(b).

Compare: 1989 No 10 ss 9, 12; 2006 No 40 ss 119A, 129, 129A

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

(1)

A manager of a registered scheme may amend or replace the governing document—

(a)

with the FMA’s consent if the FMA is satisfied that the amendment or replacement is necessary to enable the governing document to comply with sections 135 to 137 or any enactment or rule of law; or

(b)

with the court’s consent, in the case of a defined benefit scheme or a superannuation scheme or workplace savings scheme that is registered under clause 22 of Schedule 4, if—

(i)

the amendment or replacement would otherwise require the consent of all the scheme participants who would be adversely affected by it; and

(ii)

the court considers that it is in the interests of the scheme participants.

(2)

Subsection (1) applies despite anything to the contrary in the governing document or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the governing document.

(3)

(4)

An amendment or a replacement made under this section must be treated for all purposes as if it were authorised by, and made in accordance with, the governing document.

141 Lodging of changes to governing document

(1)

Within 5 working days after an amendment to or a replacement of a governing document, the manager of a registered scheme must ensure that notice of the amendment or replacement, and a copy of the certificate for the amendment or replacement (if any), is lodged with the Registrar.

(2)

A manager that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Role of manager

142 Management and administration functions of manager

(1)

The manager of a registered scheme is responsible for performing the following functions:

(a)

offering the managed investment products; and

(b)

issuing the managed investment products; and

(c)

managing the scheme property and investments; and

(d)

administering the scheme.

(2)

In the case of a restricted scheme, the trustees of the scheme acting together as the manager of the scheme have responsibility for those functions and the duties of the manager under this Act (and each trustee is jointly and severally liable with the other trustees for the performance of those functions and duties) unless this Act or the regulations otherwise provide.

Compare: 1960 No 99 s 3(2)(a) and (b); 2006 No 40 s 116B(1)

143 General duties applying in exercise of manager’s functions

(1)

A manager of a registered scheme must—

(a)

act honestly and in good faith in acting as a manager; and

(b)

in exercising any powers or performing any duties as a manager,—

(i)

act in the best interests of the scheme participants; and

(ii)

treat the scheme participants equitably; and

(c)

not make use of information acquired through being the manager in order to—

(i)

gain an improper advantage for itself or any other person; or

(ii)

cause detriment to the scheme participants.

(2)

The manager must also carry out the functions of a manager in accordance with the governing document, the statement of investment policy and objectives, and all other issuer obligations.

(3)

If the registered scheme is established under a trust deed, the manager has the same duties and liability in the performance of its functions as manager as it would if it performed those functions as a trustee (except to the extent that those duties are altered by or are inconsistent with this Act).

Compare: 1960 No 99 ss 3(2)(c), 12(1)(c), 24(1); SR 2009/230 Schedule 17 cl 3(1); Corporations Act 2001 s 601FC (Aust)

Section 143(1)(a): amended, on 30 January 2021, by section 168 of the Trusts Act 2019 (2019 No 38).

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

(1)

A professional manager of a registered scheme must, in exercising any powers, or performing any duties, exercise the care, diligence, and skill that a prudent person engaged in that profession would exercise in the same circumstances.

(2)

In this section, a professional manager is—

(a)

a manager of a registered scheme (other than a restricted scheme):

(b)

an investment manager of a registered scheme:

(c)

a licensed independent trustee of a restricted scheme:

(d)

any other trustee of a restricted scheme whose profession or business is or includes acting as a trustee or investing money on behalf of others.

(3)

A trustee of a restricted scheme who is not a professional manager must, in exercising any powers or performing any duties, exercise the care, diligence, and skill that a prudent person of business would exercise in the same circumstances.

Compare: 1960 No 99 ss 3(2)(c), 24(1); 2006 No 40 s 117; SR 2009/230 Schedule 17 cl 3(3)

145 Duties of directors and senior managers of manager

A director or senior manager of a manager of a registered scheme—

(a)

must not make use of information acquired through being the director or senior manager of the manager in order to—

(i)

gain an improper advantage for himself or herself or any other person; or

(ii)

cause detriment to the scheme participants; and

(b)

must not make improper use of the position as a director or senior manager of the manager to gain, directly or indirectly, an advantage for himself or herself or any other person or to cause detriment to the scheme participants.

Compare: Corporations Act 2001 s 601FE (Aust); 1960 No 99 s 26

146 Contracting out of management functions

(1)

A manager may, unless prohibited by the governing document, contract out to 1 or more persons (whether or not the person or persons hold a market services licence under this Act covering management of the scheme) some or all of its functions as a manager.

(2)

However,—

(a)

the manager must take all reasonable steps to—

(i)

ensure that those functions are performed in the same manner, and are subject to the same duties and restrictions, as if the manager were performing them directly; and

(ii)

monitor the performance of those functions; and

(b)

the contracting out does not affect the liability of the manager for the performance of those functions.

147 Duty of manager to provide reports to supervisor or FMA

The manager of a registered scheme must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, prepare and provide to the supervisor (or, if there is no supervisor, the FMA) reports that contain the information that is required to be provided by the regulations.

Section 147: amended, on 9 August 2017, by section 55 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

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

(1)

If requested by the supervisor of a registered scheme (or a person authorised by the supervisor to exercise its powers under this section), the manager must—

(a)

make available to the supervisor (or other authorised person) all documents and records relating to the manager and the scheme (including those held by an investment manager or administration manager); and

(b)

provide the supervisor (or other authorised person) with any other reports or information required by the supervisor (or other authorised person).

(2)

Reports or information required under subsection (1) may—

(a)

be about any matter relevant to the performance of the supervisor’s functions; and

(b)

include forward-looking reports.

(3)

The reports or information must be provided within the time and in the manner (which must be reasonable in the circumstances) specified by the supervisor.

Compare: 1960 No 99 s 12(1)(b); SR 2009/230 Schedule 17 cl 2

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

If a manager of a registered scheme has reasonable grounds to believe that it has contravened, may have contravened, or is likely to contravene any of its issuer obligations in a material respect, the manager must, as soon as practicable,—

(a)

report the contravention or possible contravention to the supervisor (or, if there is no supervisor, the FMA); and

(b)

advise the supervisor (or, if there is no supervisor, the FMA) of the steps (if any) that the manager has taken or intends to take in light of the contravention or possible contravention and the date by which the steps were taken or are to be taken.

Section 149(a): amended, on 9 August 2017, by section 56 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Section 149(b): amended, on 9 August 2017, by section 56 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

150 Restriction on use of reports on contraventions

A report provided by a manager under section 149 is not admissible as evidence in a criminal proceeding against the manager, except in a criminal proceeding that concerns the falsity of the report.

151 Duty of manager to report serious financial problems

(1)

This section applies if a manager of a registered scheme becomes aware of information on the basis of which it could reasonably form the opinion that—

(a)

the manager is, or is likely to become, insolvent; or

(b)

the registered scheme is, or is likely to become, insolvent.

(2)

The manager must, as soon as practicable,—

(a)

disclose to the supervisor (or, if there is no supervisor, to the FMA) all information relevant to that matter that is in the possession or under the control of the manager (including information held by an investment manager or administration manager) and that was obtained in the course of, or in connection with, the performance of its functions as manager; and

(b)

advise the supervisor (or the FMA, as the case may be) of the steps (if any) that the manager intends to take in respect of that matter and the date by which the steps are to be taken.

Compare: 2011 No 10 s 47

Role of supervisor

152 Functions of supervisor

(1)

The supervisor of a registered scheme is responsible for the following functions:

(a)

acting on behalf of the scheme participants in relation to—

(i)

the manager; and

(ii)

any matter connected to the governing document or the terms of any regulated offer; and

(iii)

any contravention or alleged contravention of the issuer obligations; and

(iv)

any contravention or alleged contravention of this Act by any other person in connection with the registered scheme; and

(b)

supervising—

(i)

the performance by the manager of its functions and its issuer obligations; and

(ii)

the financial position of the manager and the scheme in respect of the managed investment product to ascertain that it is adequate; and

(c)

holding the scheme property, or ensuring that the scheme property is held, in accordance with sections 156 to 158; and

(d)

performing or exercising any other functions, powers, and duties conferred or imposed on the supervisor by or under this Act, the Financial Markets Supervisors Act 2011, and the governing document.

(2)

The supervisor must not delegate its functions under subsection (1) (except as expressly permitted by section 156 in relation to its function under subsection (1)(c) and otherwise by this Act or as permitted by, and then subject to, conditions imposed under the Financial Markets Supervisors Act 2011).

Compare: 2006 No 40 s 116D(3), (4)

153 General duties applying in exercise of supervisor’s functions

(1)

The supervisor of a registered scheme must—

(a)

act honestly and in good faith in acting as a supervisor; and

(b)

in exercising its powers and performing its duties as a supervisor, act in the best interests of the scheme participants; and

(c)

exercise reasonable diligence in carrying out its functions as a supervisor.

(2)

The supervisor of a registered scheme must also—

(a)

do all the things it has the power to do to cause any contravention referred to in section 152(1)(a) to be remedied (unless it is satisfied that the contravention will not have a material adverse effect on scheme participants); and

(b)

act in accordance with any direction given by a special resolution of the scheme participants that is not inconsistent with any enactment, rule of law, or the governing document in relation to—

(i)

seeking a remedy to a contravention referred to in section 152(1)(a); and

(ii)

any other matter connected with the supervisor’s functions.

(3)

The supervisor is not liable for anything done, or omitted to be done, in good faith in giving effect to a direction to it by scheme participants.

(4)

If the registered scheme is established under a trust deed,—

(a)

the supervisor is the trustee of the trust; and

(b)

the supervisor has the same duties and liability in the performance of its functions as supervisor as it would if it performed those functions as a trustee (except to the extent that those duties are altered by or are inconsistent with this Act).

(5)

The duty in subsection (2)(b) is subject to any order of the court made under section 210.

Compare: 1960 No 99 s 18(2)–(4); SR 2009/230 Schedule 17 cl 1

Section 153(1)(a): amended, on 30 January 2021, by section 169 of the Trusts Act 2019 (2019 No 38).

154 Duty of supervisor to comply with professional standard of care

The supervisor of a registered scheme must, in exercising its powers and performing its duties as a supervisor, exercise the care, diligence, and skill that a prudent person engaged in the business of acting as a licensed supervisor would exercise in the same circumstances.

155 Power of supervisor to engage expert

(1)

The supervisor of a registered scheme is entitled, in the performance of the supervisor’s functions, to engage an expert (for example, an auditor, investigating accountant, valuer, or actuary) if the supervisor considers, on reasonable grounds, that it requires the assistance of the expert to—

(a)

determine the financial position of the manager or the scheme; or

(b)

review the business, operation, or management systems, or the governance, of the manager or the scheme.

(2)

If the supervisor engages an expert under this section,—

(a)

the manager must provide reasonable assistance to the expert to allow the expert to provide the assistance under subsection (1); and

(b)

the manager must pay the fees and expenses of the expert, which must be reasonable in the circumstances; and

(c)

the manager is entitled to be indemnified for those fees and expenses out of scheme property, subject to any limits referred to in section 136.

Compare: SR 2009/230 Schedule 15 cl 11

Application of Trusts Act 2019

Heading: inserted, on 30 January 2021, by section 170 of the Trusts Act 2019 (2019 No 38).

155A Application of Trusts Act 2019

(1)

This section applies to a managed investment scheme constituted (or to be constituted) as 1 or more trusts or as including 1 or more trusts (or both) if the scheme—

(a)

has been registered under this subpart; or

(b)

has been or will be constituted as 1 or more trusts or as including 1 or more trusts (or both) with the intention that the scheme will be registered under this subpart.

(2)

The following provisions of the Trusts Act 2019 do not apply to any relevant trust:

(a)

section 25 (duty to act honestly and in good faith):

(b)

section 29 (general duty of care):

(c)

section 30 (duty to invest prudently):

(d)

section 35 (duty of impartiality):

(e)

section 38 (duty to act unanimously):

(f)

section 39 (adviser must alert settlor to modification or exclusion of default duty):

(g)

sections 40 to 42 (exemption and indemnity clauses):

(h)

section 43 (adviser must alert settlor to liability exclusion or indemnity clause):

(i)

section 44 (court consideration of gross negligence):

(j)

sections 45 to 48 (documents to be kept by trustees):

(k)

sections 49 to 55 (giving information to beneficiaries):

(l)

section 56 (general powers of trustee):

(m)

sections 60 and 61 (power to determine treatment of returns and accounts):

(n)

sections 67 to 73 (exercise or performance of trustee powers and functions by others):

(o)

sections 74 to 76 (special trust advisers):

(p)

sections 81(2) and (3) and 82 to 85 (trustees’ indemnities):

(q)

sections 92 to 115 (appointment and discharge of trustees):

(r)

sections 121 to 123 (termination and variation of trusts):

(s)

sections 142 to 148 (alternative dispute resolution):

(t)

sections 153 to 158 (investigation of condition and accounts of certain trust property).

(3)

In this section, relevant trust means a trust referred to in subsection (1) if a trust deed for the trust has been or will be lodged with the Registrar by the manager of the scheme.

(4)

Despite section 16(1) of the Trusts Act 2019, the trusts of a managed investment scheme may continue indefinitely.

Section 155A: inserted, on 30 January 2021, by section 170 of the Trusts Act 2019 (2019 No 38).

Custodianship of scheme property

156 Requirement to have supervisor or other independent person as custodian

(1)

The supervisor of a registered scheme (A) must hold the scheme property or, if authorised by the governing document, contract the holding of the scheme property to another person (B) who meets the external custodianship requirements.

(2)

If there is no supervisor for the scheme (for example, in the case of a restricted scheme), the scheme property must be held in 1 of the following ways:

(a)

in the case of a restricted scheme, by a body corporate that is either a corporate trustee of the restricted scheme or has, as its directors, only persons who are trustees of the restricted scheme; or

(b)

by a person (B) who meets the external custodianship requirements and to whom the manager of the scheme (A), if authorised by the governing document, has contracted the holding of the scheme property.

(3)

B may, if authorised in writing by A, in turn contract the holding of the scheme property to another person who meets the external custodianship requirements.

(4)

To meet the external custodianship requirements, a person must—

(a)

be a body corporate that A or (if B contracted the custodian) B believes, on reasonable grounds, to be appropriate to hold, and safeguard, the scheme property; and

(b)

not be the same person as, or be associated with, the manager or, in the case of a restricted scheme, any of the trustees (other than by virtue of the custodianship).

(5)

If a person contracts the holding of the scheme property to another person (the nominee) under this section, the person contracting out that function—

(a)

must take all reasonable steps to—

(i)

ensure that the function is performed by the nominee in the same manner and subject to the same duties and restrictions as if that person were performing it directly; and

(ii)

monitor the performance of that function; and

(b)

is jointly and severally liable with the nominee (and any other person who has contracted out the function) for the performance of that function in accordance with paragraph (a).

(6)

This section does not apply to the extent that scheme property is held directly by the scheme participants.

Compare: 1960 No 99 ss 3(3), 6–6C; 2006 No 40 ss 116G, 116H, 116I

157 Custodian holds scheme property on trust

(1)

The custodian for a registered scheme holds the scheme property on trust for the scheme.

(2)

The custodian for a registered scheme must ensure that the scheme property is held separate from property held by any of the following persons on their own account:

(a)

the custodian:

(b)

any related party of the scheme.

(3)

The custodian must also comply with any other prescribed duties and other requirements in relation to the scheme property.

(4)

Scheme property—

(a)

is not available for the payment of the debts of the custodian or any other creditor of the custodian; and

(b)

is not liable to be attached or taken in execution under the order or process of any court at the instance of the custodian or any other creditor of the custodian.

(5)

Nothing in this section takes away or affects any lawful lien or claim that a custodian who holds scheme property has against the scheme property.

158 Custodian must keep records of scheme property

(1)

The custodian for a registered scheme must keep, or ensure that there are kept, records that—

(a)

identify the scheme property; and

(b)

show when the scheme property was received; and

(c)

if the scheme property has been disposed of, show when the scheme property was disposed of and to whom.

(2)

The custodian for a registered scheme must also keep all other prescribed records.

(3)

The custodian for a registered scheme must—

(a)

keep the records required by this section, or ensure that they are kept, in a manner that enables those records to be conveniently inspected by the manager and the supervisor and conveniently and properly audited or reviewed; and

(b)

comply with the prescribed requirements (if any) relating to those records and their audit, review, or inspection.

159 Custodian must report on scheme property

(1)

A custodian for a registered scheme must, in the prescribed circumstances, provide confirmation information to the manager or other prescribed persons in respect of the scheme property held by the custodian.

(2)

The confirmation information must be provided in the prescribed manner.

(3)

In this section, confirmation information means the information relating to the scheme property, or transactions relating to it, that is prescribed.

160 Duty of supervisor to refuse to act on wrongful directions

(1)

The supervisor of a registered scheme must refuse, and must direct any other custodian to refuse, to act on a direction of the manager that relates to the acquisition or disposal of scheme property if the supervisor considers that the proposed acquisition or disposal would be—

(a)

in breach of the scheme’s governing document, any rule of law, or any enactment; or

(b)

manifestly not in the interests of the scheme participants.

(2)

A custodian of a registered scheme must comply with any direction given to it by a supervisor under this section.

(3)

If the supervisor refuses, or directs any other custodian to refuse, to act on a direction of the manager, the supervisor must notify the manager and the FMA in writing of that fact and the supervisor’s reasons for the refusal or direction.

(4)

A supervisor of a registered scheme, and any other custodian of the scheme, is not liable to the scheme participants or the manager for refusing, or directing any other custodian to refuse, to act on a direction of the manager in accordance with this section.

Compare: 1960 No 99 s 12(1)(c)

Meetings of scheme participants

161 Meetings of scheme participants

(1)

A meeting of a class of scheme participants must be called by the manager of the registered scheme on the written request of—

(a)

the supervisor; or

(b)

scheme participants holding managed investment products that have a combined value of no less than 5% of the value of the managed investment products on issue in that class; or

(c)

in the case of a superannuation scheme, a KiwiSaver scheme, a workplace savings scheme, or any other prescribed scheme, no less than 5% of the number of scheme participants who hold managed investment products in that class; or

(d)

a person who is authorised by the governing document or by the regulations to call the meeting.

(2)

Other requirements for meetings, proceedings at meetings, and provision for resolutions in lieu of meetings are governed by the regulations (if any) and the governing document (if there are no regulations or to the extent that the governing document is not inconsistent with any regulations).

Compare: 1960 No 99 ss 12(1)(d), 18(1)

162 Supervisor’s attendance at meetings of scheme participants and power to appoint chair

The manager of a registered scheme must ensure that the supervisor—

(a)

is permitted to attend any meeting of scheme participants; and

(b)

receives the notices and communications that any scheme participant is entitled to receive in relation to a meeting of those participants; and

(c)

may be heard at any meeting of scheme participants on any part of the business of the meeting that concerns the supervisor’s functions or the scheme participants for whom the supervisor is acting; and

(d)

may appoint the chairperson of any meeting of scheme participants.

Compare: 1960 No 99 s 18(1); SR 2009/230 Schedule 17 cl 2(1), (2)

163 Manager and associated persons cannot vote if interested in resolution

(1)

The manager of a registered scheme and its associated persons are not entitled to, and must not, vote their interest on a resolution of scheme participants if they have an interest in the resolution or matter other than as a scheme participant.

(2)

However,—

(a)

if the managed investment products in the registered scheme are quoted, subsection (1) does not prevent the manager and its associated persons from voting their interest on resolutions to remove the manager and appoint a new manager:

(b)

the manager or its associated persons may vote as proxies if the proxy appointment specifies the way they are to vote on the resolution and they vote that way:

(c)

subsection (1) does not apply in the prescribed circumstances.

(3)

An exercise of a voting right in contravention of subsection (1) is of no effect and must be disregarded in counting the votes concerned.

(4)

However, subsections (1) and (3) do not invalidate a resolution if the votes concerned were counted in good faith and without knowledge that the voting rights were exercised in contravention of subsection (1).

Compare: Corporations Act 2001 ss 253A(2), 253E (Aust)

Management of scheme

164 Requirement for statement of investment policy and objectives

(1)

A manager of a registered scheme must ensure that there is a statement of investment policy and objectives that provides adequately for the investment policy and objectives of the scheme and for the following matters:

(a)

the nature or type of investments that may be made, and any limits on those; and

(b)

any limits on the proportion of each type of asset invested in; and

(c)

the methodology used for developing and amending the investment strategy and for measuring performance against the investment objectives of the scheme.

(2)

However, if there are no limits on a matter referred to in subsection (1)(a) or (b), the statement of investment policy and objectives must clearly disclose that fact.

(3)

The statement must provide for the matters set out in this section in accordance with the frameworks and methodologies specified in notices issued by the FMA under subpart 4 of Part 9 that apply to it (if any).

165 Changes to statement of investment policy and objectives

(1)

The manager of a registered scheme may amend or replace a statement of investment policy and objectives only after giving prior written notice to the supervisor.

(2)

This section does not apply if the scheme does not have a supervisor.

Section 165(2): amended, on 9 August 2017, by section 57 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

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

(1)

The manager of a registered scheme must, except in the prescribed circumstances,—

(a)

lodge the statement of investment policy and objectives with the Registrar before a regulated offer of managed investment products is made or, if no regulated offer is made, before any managed investment product is issued; and

(b)

lodge any change to the statement of investment policy and objectives with the Registrar within 5 working days after the change takes effect.

(2)

A manager that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

167 Action that must be taken on limit breaks

(1)

This section applies to a registered scheme if, under the scheme’s statement of investment policy and objectives, there is a material breach of any limits on either of the following (a limit break):

(a)

the nature or type of investments that may be made; or

(b)

the proportion of each type of assets that may be invested in.

(2)

If this section applies, the manager of the registered scheme must report the limit break to the supervisor or to the FMA (if there is no supervisor) in the prescribed circumstances and in the prescribed manner.

(3)

Whether or not a limit break is material must be determined in accordance with the frameworks and methodologies specified in notices issued by the FMA under subpart 4 of Part 9 (if any).

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

(1)

This section applies to a registered scheme if—

(a)

the managed investment products under the scheme are transferable or redeemable; and

(b)

the manager (or any person to whom the manager has contracted some or all of its functions as a manager)—

(i)

makes or includes an error in the calculation of the price at which the managed investment products are issued or redeemed; or

(ii)

fails to comply with the methodology for pricing the managed investment products as set out in the governing document or notices issued by the FMA under subpart 4 of Part 9; and

(c)

the pricing error or non-compliance is material.

(2)

If this section applies, the manager must ensure that—

(a)

the pricing error or non-compliance is corrected; and

(b)

the pricing error or non-compliance is reported to the supervisor (or to the FMA if there is no supervisor) in the prescribed manner; and

(c)

the prescribed steps are taken (which may include steps to remedy the pricing error or non-compliance and to inform current or former scheme participants).

(3)

Whether or not a pricing error or non-compliance is material must be determined in accordance with the frameworks and methodologies specified in notices issued by the FMA under subpart 4 of Part 9 (if any).

Section 168(1)(b)(i): amended, on 9 August 2017, by section 58 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

169 Actuarial examination of defined benefit scheme or life benefit scheme

(1)

This section applies to a registered scheme that—

(a)

is a defined benefit scheme; or

(b)

provides benefits that provide for the payment of money on the happening of a contingency dependent on the termination or continuance of human life, and the risks associated with those benefits are not fully insured with a life insurer within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2010 (a life benefit scheme).

(2)

The manager of a defined benefit scheme or a life benefit scheme must ensure that a suitably qualified actuary examines the financial position of the scheme as at dates that are no more than 3 years apart.

(3)

The manager must ensure that—

(a)

the report of the actuary is received no later than 7 months after the date as at which the financial position of the scheme was examined; and

(b)

the manager gives a copy of the report, as soon as practicable, to the supervisor (or, if there is no supervisor, to the FMA); and

(c)

if there is a supervisor, the manager also gives a copy of the report to the FMA within 20 working days after its receipt by the supervisor.

(4)

A manager that contravenes subsection (3)(b) or (c) commits an offence and is liable on conviction to a fine not exceeding $50,000.

(5)

The offence in subsection (4) is an infringement offence (see subpart 5 of Part 8).

Compare: 1989 No 10 s 15

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

The manager of a registered scheme to which section HM 48 of the Income Tax Act 2007 applies may adjust the financial benefits of scheme participants in the way required by that section.

Compare: 1960 No 99 ss 12A, 22

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

(1)

Neither the manager nor the supervisor of a registered scheme may permit any part of the scheme property of a KiwiSaver scheme, superannuation scheme, or workplace savings scheme to revert to a contributor who is not a scheme participant under the governing document without the prior written consent of the FMA.

(2)

The FMA must not give consent to the reversion of any assets of the scheme to a person under this section unless satisfied that—

(a)

sufficient assets will remain to support the interests of all of the scheme participants; and

(b)

the reversion is fair and equitable to the scheme participants, taking into account the manner in which the scheme acquired those assets.

Compare: 1989 No 10 s 10; 2006 No 40 ss 129B, 130

Related party transactions

172 Definition of related party benefit

(1)

A related party benefit, in relation to a registered scheme, is a benefit—

(a)

that either is given out of scheme property or creates an exposure to loss for scheme property; and

(b)

that is given to, or received by, a related party of the scheme; but

(c)

does not include fees or expenses that are paid or reimbursed to the manager in accordance with this Act or the governing document of the scheme.

(2)

A related party of the scheme is—

(a)

any of the following persons (a scheme-connected person):

(i)

the manager of the scheme or any trustee of a restricted scheme; and

(ii)

any investment manager, administration manager, or other person to whom the manager has contracted out some or all of its functions as a manager; and

(iii)

for a restricted scheme that is identified on the register of managed investment schemes as an employer-related scheme, any contributor to the scheme who is not a scheme participant (other than the Crown); or

(b)

an associated person of a scheme-connected person.

(3)

A person is also a related party of the scheme at a particular time if—

(a)

the person was a related party of the scheme under subsection (2) at any time within the previous 6 months; or

(b)

the person believes or has reasonable grounds to believe that the person is likely to become a related party of the scheme under subsection (2) at any time within the next 12 months.

Compare: Corporations Act 2001 ss 601LA–601LE (Aust)

173 General prohibition on transactions giving related party benefits

(1)

A manager of a registered scheme (and any investment manager, administration manager, or other person to whom the manager has contracted out some or all of its functions as a manager) must not enter into a transaction that provides for a related party benefit to be given.

(2)

However, subsection (1) does not apply to a transaction or series of transactions if the manager notifies the supervisor of the transaction or transactions, including the related party benefits given under the transaction or transactions, and the key terms of the transaction or transactions and either—

(a)

the manager obtains the supervisor’s consent to the transaction or transactions; or

(b)

section 174 applies to the transaction or transactions or all related party benefits to be given and the manager certifies to that effect.

(3)

The supervisor must not consent to a transaction or transactions under this section unless 1 of the following applies and the supervisor certifies to that effect:

(a)

the supervisor considers that the transaction or transactions are in the best interests of the scheme participants; or

(b)

the transaction or transactions are approved by, or contingent on approval by, a special resolution of the class of scheme participants affected, or potentially affected, by the transaction or transactions.

(4)

However, if the registered scheme does not have a supervisor, subsection (1) does not apply to a transaction or series of transactions if 1 of the following applies and the manager certifies to that effect:

(a)

the transaction or transactions are in the best interests of the scheme participants; or

(b)

section 174 applies to the transaction or transactions or all related party benefits to be given; or

(c)

(5)

The manager may not certify under subsection (4) unless the licensed independent trustee has consented to the certification.

(6)

However, a failure to comply with this section does not affect the validity of any transaction (subject to any court order under Part 8).

(7)

See also section 126 of the KiwiSaver Act 2006 for an additional prohibition on loans and financial assistance to members of KiwiSaver schemes that have fewer than 20 members.

Compare: Corporations Act 2001 ss 601LA–601LE (Aust)

Section 173(4): amended, on 9 August 2017, by section 59 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

174 Certain related party benefits permitted

This section applies to—

Arm’s-length terms

(a)

a benefit that is given on terms that—

(i)

would be reasonable in the circumstances if the parties were connected or related only by the transaction in question, each acting independently, and each acting in its own best interests; or

(ii)

are less favourable to the related party than the terms referred to in subparagraph (i):

Investments in other registered schemes

(b)

an acquisition or a disposal of a managed investment product in another registered scheme or of a prescribed interest in a prescribed overseas scheme:

Certain registered bank investments

(c)

investments made in the ordinary course of business in products referred to in clause 21(a) to (c) of Schedule 1:

Other prescribed benefits or transactions

(d)

a prescribed benefit or transaction.

Compare: Corporations Act 2001 ss 601LA–601LE (Aust)

175 Requirements for certificates as to related party benefits

(1)

A certificate under section 173 is effective only if the certificate—

(a)

states the specific grounds on which it is given under section 173 and (if relevant) section 174, and the basis for relying on those grounds; and

(b)

complies with the prescribed requirements (if any) as to its form, content, or the manner in which it is given.

(2)

Nothing in section 173 requires a new certificate if there is an existing certificate that applies (whether specifically or in general terms) to the transaction or transactions.

176 Additional restrictions on acquisitions by restricted schemes of in-house assets

(1)

A manager of a restricted scheme (or any person to whom the manager has contracted some or all of its functions as a manager) must not acquire any new in-house asset if, as a result of the acquisition, the restricted scheme would have, or increase, an in-house assets ratio of 5% or more in relation to any related party or scheme participant (A).

(2)

The in-house assets ratio of a scheme, in relation to A, must be calculated as the ratio, expressed as a percentage, of paragraph (a) to paragraph (b):

(a)

the sum of the net asset values of—

(i)

the in-house assets of A; and

(ii)

the in-house assets of any other related parties of the scheme, or scheme participants, that are associated with A; and

(b)

the net asset value of the scheme property.

(3)

In this section,—

acquire includes to make a loan or an investment, or enter into a lease or lease arrangement, if the resulting loan, investment, or asset subject to the lease or lease arrangement would be an in-house asset

in-house asset—

(a)

means, in relation to a related party or scheme participant (A), an asset of the scheme that is a loan to, or an investment in, A (or an associate of A) or an asset of the scheme that is subject to a lease or lease arrangement with A (or an associate of A); but

(b)

excludes investments referred to in section 174(b) or (c)

investment means the application of assets in any way, or a contract entered into, for the purpose of gaining interest, income, profit, or gain

lease arrangement means, in relation to an asset, an agreement in the nature of a lease under which a person is to use, or control the use of, the asset (whether or not the agreement is enforceable)

loan includes the provision of credit or any other form of financial accommodation (whether or not enforceable).

(4)

The in-house assets ratio of a scheme must be calculated under this section in accordance with the frameworks and methodologies specified in notices issued by the FMA under subpart 4 of Part 9 (if any).

(5)

This section does not apply in the prescribed circumstances.

Compare: Superannuation Industry (Supervision) Act 1993 s 83 (Aust)

177 General duties not affected

The fact that a transaction is consented to, approved by scheme participants, or otherwise permitted under sections 172 to 176 does not affect the manager’s or supervisor’s obligations to comply with its duties under this Act and otherwise in connection with the transaction.

Compare: Corporations Act 2001 s 230 (Aust)

Scheme participant transfer rules for KiwiSaver, superannuation, and workplace savings schemes

178 Application of scheme participant transfer rules

(1)

Sections 179 to 182 apply to both of the following types of transfer (a transfer):

(a)

the transfer of a scheme participant from one KiwiSaver scheme or superannuation scheme or workplace savings scheme to another KiwiSaver scheme or superannuation scheme or workplace savings scheme:

(b)

the transfer of a scheme participant from one section of a KiwiSaver scheme to another section of the same scheme:

(c)

the transfer of a scheme participant from one section of a superannuation scheme or workplace savings scheme to another section of the same scheme (but only if the scheme is registered as a superannuation scheme or workplace savings scheme in respect of both sections).

(2)

In sections 179 to 182,—

(a)

a person proposed to be transferred is a proposed transferee:

(b)

the scheme, or section of the scheme, from which the person is proposed to be transferred is the old scheme:

(c)

the scheme, or section of the scheme, into which the person is proposed to be transferred is the new scheme.

(3)

Sections 179 to 182 do not apply to transfers to which subpart 3 of Part 2 of the KiwiSaver Act 2006, or any other power to transfer scheme participants under an enactment, applies.

Compare: 1989 No 10 s 9B; 2006 No 40 ss 119B, 119D(6)

Section 178(1)(c): amended, on 9 August 2017, by section 60 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

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

(1)

No scheme participant may be transferred from one registered scheme to another registered scheme, or to another section of the same scheme, except in accordance with this section.

(2)

A scheme participant may be transferred—

(a)

with the scheme participant’s written consent (which must be obtained in accordance with section 180, if that section applies), if authorised by a governing document; or

(b)

in accordance with the FMA’s consent under section 181 (despite anything to the contrary in the governing document); or

(c)

in accordance with regulations made under section 230 of the KiwiSaver Act 2006 (despite anything to the contrary in the governing document), if the old scheme is a default KiwiSaver scheme that is subject to a terminating event under section 138 of the KiwiSaver Act 2006.

(3)

However, the FMA may permit a transfer to occur under subsection (2)(a) without the scheme participant’s consent if the FMA is satisfied that—

(a)

the manager of the old scheme has taken all reasonable steps to contact all of the relevant scheme participants, but has not been able to do so; and

(b)

the proposed action is not unreasonable in relation to the best interests of any of those scheme participants who have not been contacted.

(4)

No scheme participant may be transferred from a KiwiSaver scheme into another scheme that is not a KiwiSaver scheme under this section.

Compare: 1989 No 10 ss 9B, 9BAA(1), 9BA; 2006 No 40 ss 119C, 119G(1), 119I

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

(1)

This section applies to a transfer (whether at the same time or over an extended period) of all, or a substantial number, of the scheme participants from an old scheme to a new scheme.

(2)

The manager of the old scheme and the manager of the new scheme must each consult their own scheme’s supervisor about the proposed transfer and give notice of the proposed transfer in accordance with this section.

(3)

The notice must—

(a)

be given to the FMA and every scheme participant of the old scheme and the new scheme, other than scheme participants who, in the opinion of the FMA, are not likely to be affected by the proposed transfer; and

(b)

set out—

(i)

the proposal and its implications for the proposed transferees; and

(ii)

the date of the proposed transfer; and

(iii)

the date on which the proposed transferees’ written consent must be received by the manager or the trustees; and

(iv)

the fact that the notice has also been sent to the FMA; and

(c)

be given at least 1 month before the date on which, under the notice, the proposed transferees’ written consent must be received by the manager or the trustees.

(4)

Giving notice under this section does not derogate from the need to comply with any other requirement of the KiwiSaver Act 2006 (in relation to a KiwiSaver scheme).

Compare: 1989 No 10 s 9B; 2006 No 40 s 119D

181 Transfer with FMA consent

(1)

The FMA may consent to a transfer if the FMA is satisfied that—

(a)

the terms and conditions of the new scheme are no less favourable to the proposed transferees than the terms and conditions of the old scheme; and

(b)

the transfer is otherwise reasonable in all the circumstances (including having regard to the value of the assets transferred from the old scheme to the new scheme); and

(c)

the person applying for the transfer is the manager of the old or new scheme, a relevant employer, or another person who the FMA considers has an appropriate interest in the transfer; and

(d)

the applicant has given notice to every proposed transferee that—

(i)

the applicant has applied for the FMA’s consent to transfer the person without the person’s written consent; and

(ii)

the person may make submissions to the FMA about the transfer.

(2)

The FMA must have regard to any submissions received by proposed transferees before deciding whether or not to give its consent.

(3)

The FMA may give its consent subject to any terms and conditions that the FMA sets out in the written notice of consent.

(4)

The transfer must be carried out in accordance with those terms and conditions.

Compare: 1989 No 10 s 9BAA; 2006 No 40 ss 119G, 119H

182 Transfers from KiwiSaver scheme

(1)

This section applies to an old scheme if it was a KiwiSaver scheme.

(2)

The provider of the old scheme must give the following information to the provider of the new scheme in respect of a scheme participant (A) who transfers under sections 179 to 181:

(a)

A’s name, address, and date of birth; and

(b)

A’s tax file number; and

(c)

the date on which A first became a member of a KiwiSaver scheme and (if known and different) the date on which A first contributed to a KiwiSaver scheme; and

(d)

(if known) the aggregate amounts of each of—

(i)

A’s contributions to the old scheme; and

(ii)

the Crown contribution to the old scheme in respect of A; and

(iii)

any employer contributions to the old scheme in respect of A; and

(e)

the name, address, and tax file number of both the provider and the old scheme; and

(f)

any other information that the Commissioner of Inland Revenue requires the provider of the old scheme to give to the provider of the new scheme.

(3)

In this section, provider has the meaning set out in section 5 of the KiwiSaver Act 2006.

Compare: 2006 No 40 s 119F

Provisions as to deferred benefits for superannuation schemes and workplace savings schemes

183 Deferred benefits

(1)

A scheme participant in respect of a superannuation scheme or workplace savings scheme who continues to be employed by an employer after the participant’s expected age or date of retirement (as defined in the governing document of the scheme) may elect to defer the receipt of any benefit that the participant is eligible to receive under the scheme until the date on which the participant ceases to be employed by that employer.

(2)

Subsection (1) applies despite anything to the contrary contained in the governing document of the scheme.

(3)

Nothing in subsection (1) or in the Human Rights Act 1993 has the effect of requiring either an employer or a scheme participant to continue to contribute, or to cease to contribute, to the scheme after the participant’s expected age or date of retirement, as defined in the governing document of the scheme.

(4)

If a scheme participant has the right, under subsection (1), to elect to defer receipt of any benefit that the participant is eligible to receive under the scheme, the manager must inform the participant in writing of that right.

Compare: 1989 No 10 s 9C

Change of manager

184 Application of sections 185 to 192

Sections 185 to 192 apply to—

(a)

the manager of a registered scheme (other than a restricted scheme); or

(b)

each of the trustees of a restricted scheme (including, to avoid doubt, the independent trustee).

185 Removal of manager of registered scheme

(1)

A manager of a registered scheme ceases to hold that office if—

(a)

the manager is removed by written direction of the supervisor after the supervisor certifies that it is in the best interests of scheme participants that the manager be removed; or

(b)

the manager is removed by a special resolution of the scheme participants; or

(c)

in the case of an independent trustee of a restricted scheme,—

(i)

the trustee’s licence expires or is cancelled under Part 6; or

(ii)

the trustee is removed by the FMA if it is satisfied that the trustee no longer meets the requirements in section 131(1)(d); or

(d)

the manager is substituted by the court under section 209; or

(e)

the manager is otherwise removed or resigns in accordance with the governing document.

(2)

Subsection (1)(a) and (b) do not apply to a restricted scheme.

(3)

However, a licensed independent trustee may not—

(a)

be removed or resign under subsection (1)(e) unless—

(i)

all functions and duties of the position have been performed; or

(ii)

another licensed independent trustee has been appointed, and accepted the appointment, in its place; or

(iii)

the court consents:

(b)

(despite anything in the governing document) be removed under subsection (1)(e) without the FMA’s consent.

(4)

If a manager ceases to hold office under subsection (1), the manager and any delegate of the manager must immediately desist from all activities relating to the registered scheme unless the supervisor agrees to the contrary.

Compare: 1960 No 99 s 19

186 Supervisor or FMA may make temporary appointment

(1)

This section applies if a registered scheme does not, for any reason, have a manager or (in the case of a restricted scheme) a licensed independent trustee.

(2)

The supervisor or the FMA must appoint a person (the temporary manager) to fill the vacancy in the office until a substitute appointment may be made under the governing document.

(3)

That person must be,—

(a)

if the appointment is by the supervisor, a person who meets the requirements in section 127(1)(c) and (e):

(b)

if the appointment is by the FMA, a person whom the FMA considers appropriate (but who need not be a person who meets the requirements in section 127(1)(c) and (e) or (in the case of an independent trustee) section 131(1)(d)).

(4)

However, the FMA may act under this section only if—

(a)

it is satisfied that the supervisor has had a reasonable opportunity to act under this section but has not done so; or

(b)

it is satisfied that it is necessary as a matter of urgency for the FMA to do so and it is not reasonably practicable to wait for the supervisor to do so; or

(c)

the supervisor requests the FMA to act; or

(d)

there is no supervisor.

(5)

If the FMA appoints a person who does not meet the requirements of section 127(1)(c) and (e) or 131(1)(d), that person does not contravene section 388, and the scheme does not fail to meet those registration requirements, as a result of that appointment.

Compare: 1960 No 99 s 23

187 Term, powers, and duties of temporary manager

(1)

A temporary manager may hold the appointment until a substitute manager is appointed—

(a)

under the governing document; or

(b)

otherwise under this Act.

(2)

The temporary manager has all of the powers and duties of the manager of the registered scheme and (if applicable) of the independent trustee that are conferred or imposed by the governing document or by law.

(3)

However, the FMA may, in the prescribed manner (if any), amend a governing document, in so far as it applies to a temporary manager appointed by the FMA, if—

(a)

the supervisor consents; and

(b)

the FMA is satisfied that the change will have no material adverse effect on the interests of scheme participants.

(4)

An amendment made under this section must be treated for all purposes as if it were made in accordance with the governing document.

(5)

Section 141 (lodging of changes to governing document) applies to an amendment to the governing document under this section.

188 FMA’s costs must be reimbursed from scheme

(1)

The FMA’s costs and expenses incurred in connection with the holding of the appointment by a temporary manager appointed by the FMA must be reimbursed out of scheme property of the registered scheme.

(2)

An amount payable under subsection (1) is recoverable by the FMA in any court of competent jurisdiction as a debt due to the FMA.

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

(1)

The supervisor of a registered scheme or the FMA (if there is no supervisor) must take all reasonable steps to secure, in accordance with the governing document, the appointment of a person as a permanent manager in place of the temporary manager (other than a temporary independent trustee).

(2)

The trustees of a restricted scheme must take all reasonable steps to secure, in accordance with the governing document, the appointment of a person as a permanent licensed independent trustee in place of the temporary independent trustee.

(3)

The temporary manager may be appointed to hold the office as a permanent manager, but in this case—

(a)

if the person was appointed by the FMA, the person ceases to be appointed by the FMA for the purposes of sections 186 to 188; and

(b)

must meet the requirements in section 127(1)(c) and (e) or 131(1)(d) (if applicable).

(4)

The supervisor or trustees must, when acting under this section, comply with the prescribed requirements (if any).

190 Former manager must hand over records and give reasonable assistance

(1)

If the person who holds an appointment as a manager of a registered scheme changes, the person who previously held the appointment (the former manager) must,—

(a)

as soon as practicable, give the person that currently holds the appointment (the current manager) all of the information held or controlled by the former manager that is reasonably necessary to allow the current manager to hold the office; and

(b)

give the current manager all reasonable assistance to facilitate the change.

(2)

The former manager may withhold information, or retain a copy of information,—

(a)

with the FMA’s written consent; or

(b)

otherwise in the prescribed circumstances.

(3)

If a temporary manager has been appointed to an office, for the purposes of this section, former manager includes the person who held the office immediately before the temporary manager and current manager includes the person who held the office immediately after the temporary manager.

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

(1)

If the manager of a registered scheme changes, the rights, obligations, and liabilities of the former manager in relation to the scheme become the rights, obligations, and liabilities of the new manager.

(2)

Despite subsection (1), the following rights, obligations, and liabilities remain rights, obligations, and liabilities of the former manager:

(a)

any right of the former manager to be paid fees for the performance of its functions, or to be indemnified for liabilities or expenses it incurred, before it ceased to be the manager of the scheme; and

(b)

any right, obligation, or liability that the former manager had as a scheme participant; and

(c)

any liability for which the former manager could not have been indemnified out of the scheme property if it had remained the scheme’s manager.

(3)

This section is subject to any order of the court under section 209.

192 Lodging of notice of changes to manager

(1)

Within 5 working days after a change to the manager of a registered scheme, the new manager must ensure that notice of the change is lodged with the Registrar.

(2)

A manager that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Change of supervisor

193 Change of supervisor

(1)

The supervisor of a registered scheme ceases to hold that appointment (subject to subsection (2)) if the supervisor—

(a)

is removed by the FMA if it is satisfied that the manager and the supervisor no longer meet the requirements in section 127(1)(e) (registration requirements); or

(b)

is removed by the FMA or the issuer under Part 2 of the Financial Markets Supervisors Act 2011; or

(c)

is removed by a special resolution of the scheme participants; or

(d)

is removed or resigns in accordance with the governing document.

(2)

However, a supervisor may not—

(a)

be removed or resign under subsection (1)(c) or (d) unless—

(i)

all functions and duties of the position have been performed; or

(ii)

another licensed supervisor has been appointed, and accepted the appointment, in its place; or

(iii)

the court consents:

(b)

(despite anything in the governing document) be removed by the manager under subsection (1)(d) without the FMA’s consent.

Compare: 1960 No 99 s 10; 1978 No 103 s 48; 2006 No 40 s 116E(2)

194 Lodging of notice of change of supervisor

(1)

Within 5 working days after a change of supervisor of a registered scheme, the manager must ensure that notice of the change is lodged with the Registrar.

(2)

A manager that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Cancellation of registration

195 Cancellation of registration

(1)

The FMA may direct that the registration of a registered scheme be cancelled—

(a)

if satisfied on reasonable grounds that the scheme does not meet the registration requirements under section 127; or

(b)

if the FMA has reasonable cause to believe that the scheme has no scheme participants; or

(c)

on the written request of the manager of the scheme (subject to subsection (4)), if the supervisor certifies or, if there is no supervisor, the manager certifies that—

(i)

the cancellation has been approved by a special resolution of the scheme participants (subject to any restriction in the governing document); or

(ii)

there is no material adverse effect on the scheme participants from the cancellation; or

(d)

if the scheme has been wound up or dissolved or has otherwise ceased to exist.

(2)

The FMA must not direct cancellation under subsection (1)(a) or (b) unless—

(a)

the FMA gives the manager of the scheme no less than 20 working days’ written notice of the following matters before it exercises the power:

(i)

that the FMA may direct cancellation; and

(ii)

the reasons why it may exercise that power; and

(b)

the FMA gives the manager or the manager’s representative an opportunity to make written submissions on the matter within that notice period.

(3)

If the FMA makes a direction under this section,—

(a)

the FMA must notify the manager and the supervisor of the registered scheme of the direction; and

(b)

as soon as practicable after being notified of the direction, the manager must notify the scheme participants of the direction.

(4)

The FMA may, instead of cancelling a scheme’s registration on the request of the manager under this section, exercise its rights to apply for an order winding up the scheme under section 211 (power to order winding up).

Compare: 1989 No 10 s 19; 2006 No 40 s 168

Section 195(1)(c): amended, on 9 August 2017, by section 61 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

196 Registrar must remove scheme from register on cancellation of registration

(1)

On the cancellation of the registration of a scheme under section 195, the Registrar must remove it from the register of managed investment schemes.

(2)

The cancellation must be treated as taking effect on the date on which the scheme is removed from the register.

(3)

The Registrar must give notice of the cancellation of registration, as soon as practicable after the registration of the scheme is cancelled, to—

(a)

the manager of the scheme; and

(b)

the supervisor of the scheme; and

(c)

the Commissioner of Inland Revenue (in the case of a KiwiSaver scheme).

Compare: 2006 No 40 s 170

Subpart 3—Intervention in debt securities offered under regulated offer or registered schemes

Provisions assisting supervisor or FMA to intervene

197 Application

This subpart applies in relation to debt securities offered under a regulated offer and registered schemes.

198 Duty of auditor to report to supervisor or FMA

(1)

This section applies to the auditor of an issuer of a debt security or a registered scheme.

(2)

If the auditor provides the issuer, any of the issuer’s members or shareholders, or any of the holders of the debt security or managed investment product with any document required by an Act or a trust deed relating to the financial product or scheme, the auditor must, as soon as practicable, send a copy to the supervisor of the debt security or registered scheme or, if there is no supervisor, to the FMA.

(3)

If, in the performance of the auditor’s duties, the auditor becomes aware of a matter that, in the auditor’s opinion, is relevant to the exercise or performance of the powers or duties of the supervisor of the debt security or registered scheme, the auditor must, within 7 working days of becoming aware of the matter, send—

(a)

a written report on the matter to the issuer; and

(b)

a copy of the report to the supervisor or, if there is no supervisor, to the FMA.

(4)

The auditor must, from time to time, at the request of the supervisor, provide the supervisor with any information relating to the issuer or registered scheme—

(a)

that the supervisor requests; and

(b)

that is within the auditor’s knowledge; and

(c)

that is, in the auditor’s opinion, relevant to the exercise or performance of the powers or duties of the supervisor.

(5)

Section 214 (protected disclosure) applies to a disclosure in good faith under this section.

Compare: 1978 No 103 s 50

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

(1)

This section applies to an auditor of an issuer of a debt security and to an investment manager, an administration manager, a custodian, an auditor, or an actuary of a registered scheme.

(2)

A person to whom this section applies must take the steps set out in section 200 if the person has reasonable grounds to believe that any of the following has arisen in relation to a relevant financial product (a serious problem):

(a)

the issuer of the relevant financial product has contravened, may have contravened, or is likely to contravene an issuer obligation in a material respect; or

(b)

the issuer or scheme is, or is likely to become, insolvent; or

(c)

the financial position of the scheme or issuer or the security of benefits or the management of the scheme or issuer is otherwise inadequate; or

(d)

the manager of the scheme has contravened, may have contravened, or is likely to contravene any of the manager’s market services licensee obligations in a material respect; or

(e)

the supervisor of the scheme has contravened, may have contravened, or is likely to contravene any of the supervisor’s licensee obligations (as defined in section 4 of the Financial Markets Supervisors Act 2011) in a material respect; or

(f)

the custodian of the scheme has contravened, may have contravened, or is likely to contravene any of the custodian’s obligations in a material respect.

Compare: 2006 No 40 s 191

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

(1)

If section 199 applies, the person to whom that section applies must, as soon as practicable,—

(a)

report the serious problem to the supervisor or, if subsection (2) applies, to the FMA; and

(b)

disclose to the supervisor or the FMA (as applicable under paragraph (a)) all information relevant to the serious problem that is in the possession or control of the relevant person and was obtained in the course of, or in connection with, the performance of functions of that relevant person.

(2)

A serious problem must be reported to the FMA instead of the supervisor if—

(a)

there is no supervisor; or

(b)

the serious problem concerns a contravention or likely contravention of an obligation by the supervisor; or

(c)

the contravention relates to the custodian and the custodian is a related body corporate of the supervisor.

(3)

Section 214 (protected disclosure) applies to a disclosure in good faith under this section.

(4)

To avoid doubt, section 199 and this section do not require a relevant person to carry out functions additional to those functions that the person would ordinarily carry out in the course of holding the person’s office (other than as expressly required by subsection (1)).

Compare: 2006 No 40 s 191(2), (4)

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

(1)

Section 214 (protected disclosure) applies to a disclosure that is supporting information volunteered by a person under this section.

(2)

A person volunteers supporting information under this section if the person—

(a)

is an employee of a person in respect of whom a protected disclosure is made by another person under this Act; and

(b)

provides information, in support of that other protected disclosure, to—

(i)

the supervisor or the FMA (whichever receives the other protected disclosure); or

(ii)

the person who made the disclosure; and

(c)

makes the disclosure in good faith; and

(d)

wishes to provide the supporting information so that a serious problem can be investigated.

(3)

However, an employee does not volunteer supporting information under this section if the employee provides the supporting information only after being—

(a)

required to do so under any enactment, rule of law, or agreement for the purposes of the investigation; or

(b)

approached during the course of the investigation by, or on behalf of, the FMA or any other person investigating the matter.

202 FMA may require supervisor to attest as to issuer’s compliance with issuer obligations

(1)

The FMA may require a supervisor of a debt security or registered scheme to attest to the FMA, at a time and in a manner specified by the FMA, as to whether the supervisor is satisfied that the issuer has not contravened an issuer obligation in a material respect.

(2)

If the FMA requires a supervisor to attest to the FMA under this section, the supervisor must—

(a)

provide that attestation; or

(b)

if unable to attest to the FMA as required, report the reason, including the details of any contravention or possible contravention and, if applicable, the report under section 203.

(3)

Section 214 (protected disclosure) applies to a report made in good faith under this section.

Compare: 2011 No 10 s 45

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

(1)

If a supervisor of a debt security or registered scheme has reasonable grounds to believe that the issuer has contravened, may have contravened, or is likely to contravene an issuer obligation in a material respect, the supervisor must, as soon as practicable,—

(a)

report the contravention or possible contravention to the FMA; and

(b)

advise the FMA of the steps (if any) that the supervisor intends to take in respect of the contravention or possible contravention and the date by which the steps are to be taken.

(2)

Section 214 (protected disclosure) applies to a report made in good faith under this section.

Compare: 2011 No 10 s 46

204 Duty of supervisor to report serious financial problems to FMA

(1)

This section applies if a supervisor of a debt security or registered scheme becomes aware, in the course of or in connection with the performance of its functions as supervisor, of information on the basis of which it could reasonably form the opinion that—

(a)

the issuer is, or is likely to become, insolvent; or

(b)

in the case of a registered scheme, the scheme is, or is likely to become, insolvent.

(2)

The supervisor must, as soon as practicable,—

(a)

disclose to the FMA all information relevant to that matter that is in the possession or under the control of the supervisor and that was obtained in the course of, or in connection with, the performance of its functions as supervisor; and

(b)

advise the FMA of the steps (if any) that the supervisor intends to take in respect of that matter and the date by which the steps are to be taken.

(3)

Section 214 (protected disclosure) applies to a report made in good faith under this section.

Compare: 2011 No 10 s 47

205 FMA’s powers of direction

(1)

The FMA may exercise a power under subsection (2) if it is satisfied that—

(a)

there is a significant risk that the interests of holders of a debt security or scheme participants in a registered scheme will be materially prejudiced; and

(b)

1 of the following applies:

(i)

the supervisor of the debt security or registered scheme is aware of that risk and has had a reasonable opportunity to take action to eliminate or reduce the risk but has not done so; or

(ii)

action is urgently required to eliminate or reduce the risk and it is not reasonably practicable to wait for the supervisor to do so; or

(iii)

there is no supervisor.

(2)

The FMA may, by written notice to the supervisor and otherwise in the prescribed manner, give a direction to the supervisor.

(3)

If there is no supervisor, the FMA may, by written notice to the issuer and otherwise in the prescribed manner, give a direction to the issuer.

Compare: 2011 No 10 s 49(1), (2)

206 FMA’s directions to supervisor (or issuer)

(1)

If the notice under section 205 gives a direction to the supervisor (or, if there is no supervisor, the issuer), the notice must specify—

(a)

the step or steps that the supervisor (or issuer) must take in relation to the issuer, the registered scheme (if any), or the financial products; and

(b)

the date by which each step will be taken.

(2)

The supervisor or the issuer (as the case may be) must comply with the direction (see subpart 3 of Part 8, which provides for civil remedies for a contravention of this provision).

(3)

A supervisor or issuer (as the case may be) that refuses or fails, without reasonable excuse, to comply with the direction commits an offence and is liable on conviction to a fine not exceeding $300,000.

Compare: 2011 No 10 s 49(3)–(5)

Powers to obtain court orders to intervene

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

(1)

A supervisor of a debt security or a registered scheme, or the FMA, may apply for an order under section 208 if it is satisfied that—

(a)

the issuer and any guarantor of the financial products are unlikely to be able to pay all money owing in respect of the financial products when it becomes due; or

(b)

the issuer is insolvent; or

(c)

in the case of a registered scheme, the scheme is insolvent; or

(d)

the financial position of the scheme or issuer or the security of benefits or the management of the scheme or issuer is otherwise inadequate; or

(e)

in the case of a registered scheme, the scheme does not meet the registration requirements, or the requirements for registration as a particular type of scheme, that apply to it under sections 127 to 132; or

(f)

there is a significant risk that the interests of product holders will be materially prejudiced for any other reason; or

(g)

the provisions of a governing document are no longer adequate to give proper protection to product holders.

(2)

However, the FMA may apply for the order only if it is satisfied that—

(a)

the supervisor has had a reasonable opportunity to apply for the order but has not done so; or

(b)

it is necessary as a matter of urgency for the FMA to do so and it is not reasonably practicable to wait for the supervisor to do so; or

(c)

there is no supervisor.

Compare: 1960 No 99 s 19A; 1978 No 103 s 49; 2006 No 40 s 116K(1), (2); 2011 No 10 s 50(1)–(3)

208 Court orders to remedy problems

(1)

The court may, on the application by a supervisor or the FMA under section 207 and after giving the issuer and any other person as the court thinks fit the opportunity to be heard, make 1 or more of the orders listed in subsection (2).

(2)

The order or orders may—

(a)

amend the provisions of the governing document:

(b)

impose restrictions on the activities of the issuer (including restrictions on advertising) that the court thinks are necessary to protect the interests of product holders:

(c)

direct that no offers, issues, sales, or transfers of debt securities or managed investment products specified in the order be made while the order is in force:

(d)

direct that an issuer must not accept further contributions or deposits in respect of debt securities or managed investment products specified in the order while the order is in force:

(e)

direct the issuer or the supervisor to convene a meeting of product holders for the purpose of—

(i)

having placed before the product holders by the issuer or the supervisor the information or proposal that the court, the supervisor, or the FMA thinks necessary or appropriate relating to the product holders’ interests; and

(ii)

obtaining the opinions or directions of product holders:

(f)

give directions in relation to the conduct of any meeting convened in accordance with paragraph (e):

(g)

stay any civil actions or civil proceedings before the court by or against the supervisor, the issuer, or any guarantor of the financial products:

(h)

restrain the payment of money by the custodian, the issuer, or any guarantor of the financial products to product holders or a class of product holders or restrain the transfer of scheme property by the custodian:

(i)

appoint a receiver or manager of the property that constitutes the security (if any) for the financial products (with any powers that the court orders):

(j)

remove a receiver or manager of the property that constitutes the security (if any) for the financial products:

(k)

give any other directions that the court considers necessary to protect the interests of product holders, any guarantor of the financial products, or the public.

(3)

The court may vary or cancel an order made under this section.

(4)

In exercising its powers under this section, the court must have regard to the interests of all creditors of the issuer (in the case of a debt security) and all creditors in respect of the registered scheme (in the case of a managed investment product).

Compare: 1960 No 99 s 19A; 1978 No 103 s 49; 2006 No 40 s 116K(3)–(6); 2011 No 10 s 50(4)–(7)

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

(1)

The court may, on the application of the supervisor of a registered scheme, the FMA, a scheme participant in a registered scheme, or (in the case of an order under paragraph (b)) a manager of a registered scheme, make an order to—

(a)

appoint a new manager of a registered scheme (with any powers that the court orders) if there is no manager or in substitution for an existing manager:

(b)

confer an additional power on the manager of a registered scheme (either generally or specifically) to facilitate a transaction or type of transaction that the court considers to be in the interests of the scheme participants, and provide for the exercise of that additional power:

(c)

direct that section 191 not apply in whole or in part and also, if an agreement has been entered into between a manager of a registered scheme that has been removed and any other person,—

(i)

vary the agreement or any collateral agreement as specified in the order and, if the court thinks fit, declare the agreement to have had effect as so varied on and after a date before the order was made, as specified in the order; or

(ii)

cancel the agreement and, if the court thinks fit, declare the cancellation to have had effect on and after a date before the order was made, as specified in the order:

(d)

amend the governing document to provide for a new or temporary appointment of a manager of a registered scheme (whether the appointment is by a court order or under the governing document or this Act) or otherwise in connection with another order made under this section:

(e)

cancel in whole or in part any liability of the scheme to make any payment or transfer any property to a manager of a registered scheme that has been removed.

(2)

The court may under this section (without limiting subsection (1)) appoint a new manager in substitution for a manager who—

(a)

has been held by the court to have contravened any issuer obligation; or

(b)

is insolvent.

(3)

A manager appointed by the court under this section has all of the powers and duties of the manager of the registered scheme that are conferred or imposed by the governing document or by law.

Compare: 1960 No 99 s 22

210 Power of court to direct supervisor

(1)

The court may, on an application made under subsection (2), make an order directing a supervisor of a debt security under a regulated offer or of a registered scheme not to comply with a special resolution of product holders if the court is satisfied that compliance would be objectionable (for example, because it would be oppressive to the minority).

(2)

The supervisor, the FMA, or a product holder may apply for an order under this section within 20 working days after the special resolution (or, with leave of the court, within any longer period).

211 Court power to order winding up of scheme

(1)

The court may, on the application of the FMA or a supervisor of the registered scheme, direct that a registered scheme must be wound up if it is satisfied that—

(a)

the manager or the scheme is insolvent; or

(b)

the manager has persistently or seriously failed to comply with this Act or any other financial markets legislation; or

(c)

no permanent manager is appointed under the governing document or this Act; or

(d)

no supervisor is appointed under the governing document or the Financial Markets Supervisors Act 2011 (if required under this Part); or

(e)

the scheme does not meet the registration requirements that apply to it under sections 127 to 132; or

(f)

it is just and equitable that the scheme be wound up.

(2)

However, the FMA may apply for an order to wind up a scheme only if it is satisfied that—

(a)

the supervisor has had a reasonable opportunity to do so but has not done so; or

(b)

it is necessary as a matter of urgency for the FMA to do so rather than wait for the supervisor to do so; or

(c)

there is no supervisor.

(3)

The court may give any other directions that it thinks fit for the purpose of facilitating the winding up (and, if there is any conflict between those directions and the provisions of the governing document, those directions prevail).

212 Initial steps in winding up of registered scheme

(1)

If a registered scheme is to be wound up, the supervisor or (if there is no supervisor) the manager must, within 10 working days after a winding-up resolution or an order by the court that the scheme be wound up is made,—

(a)

give a copy of any order or resolution to the FMA; and

(b)

in the case of a KiwiSaver scheme or a complying superannuation fund,—

(i)

give a copy of any order or resolution to the Commissioner of Inland Revenue; and

(ii)

give notice to the Commissioner of Inland Revenue of the name, tax file number, and address of each member of the registered scheme.

(2)

See sections 50 to 52 of the KiwiSaver Act 2006 (which set out the effect of notice to the Commissioner of Inland Revenue in relation to members of a KiwiSaver scheme) and subpart 3 of Part 2 of that Act (which relates to the transfer of members’ interests to another KiwiSaver scheme).

(3)

A supervisor or manager that contravenes subsection (1) commits an offence and is liable on conviction to a fine not exceeding $50,000.

(4)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Compare: 2006 No 40 s 173

Section 212(1): amended, on 9 August 2017, by section 62(1) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Section 212(3): amended, on 9 August 2017, by section 62(2) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

213 Winding-up report

(1)

The person who was the supervisor of the relevant registered scheme or, if there was no supervisor, the person who was the manager of the relevant registered scheme immediately before the scheme was wound up—

(a)

must, within 4 months after the date on which the winding up takes effect, ensure that final financial statements of the scheme, showing the financial position of the scheme as at the date on which the winding up takes effect, are prepared in accordance with generally accepted accounting practice and audited; and

(b)

must, within 20 working days after the final financial statements have been audited, ensure that—

(i)

a copy of those financial statements is sent to the FMA and to every person who was a scheme participant immediately before it was wound up; and

(ii)

the FMA and the scheme participants are advised in writing as to the manner in which the remaining assets (if any) of the scheme are to be distributed; and

(c)

may make a partial distribution of assets of the scheme at any time before a copy of the final financial statements is sent to the FMA under paragraph (b) (unless prohibited by the governing document); and

(d)

must inform the FMA of the date on which the distribution of the assets is completed.

(2)

The FMA may, by giving notice to the relevant person, extend the time period within which a person must comply with any of the requirements set out in this section.

(3)

A person that contravenes—

(a)

subsection (1)(a) commits an offence:

(b)

subsection (1)(b) commits an offence:

(c)

subsection (1)(d) commits an offence.

(4)

A person that commits an offence under subsection (3) is liable on conviction to a fine not exceeding $50,000.

(5)

Each offence in subsection (3) is an infringement offence (see subpart 5 of Part 8).

Compare: 1989 No 10 s 21(1), (1A); 2006 No 40 ss 174, 175

Section 213(1): amended, on 9 August 2017, by section 63 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Miscellaneous

214 Protection for persons in respect of disclosure under this subpart or subpart 4

(1)

No civil, criminal, or disciplinary proceedings may be brought against a person by reason of the person having made a protected disclosure.

(2)

No person may terminate the appointment of a person by reason of the person having made a protected disclosure.

(3)

No tribunal, body, or authority that has jurisdiction in respect of the professional conduct of a person may make an order against, or do any act in relation to, the person by reason of the person having made a protected disclosure.

(4)

In this Act, protected disclosure means a disclosure of information to which this section applies under this subpart or subpart 4.

Compare: 1978 No 103 s 50C; 2006 No 40 s 192; 2011 No 10 s 48

Subpart 4—Registers and keeping copies of documents

Registers

215 Issuers must keep registers of regulated products

(1)

Every issuer of regulated products must ensure that there is kept, in the manner specified in section 216,—

(a)

a register of those regulated products and of all financial products that are of the same class as those regulated products of which it is the issuer; and

(b)

a register of other financial products of which it is the issuer that is required to be kept by the regulations.

(2)

However, subsection (1) does not apply—

(a)

to derivatives (unless those derivatives are of a prescribed type); or

(b)

to prescribed financial products; or

(c)

otherwise in the prescribed circumstances.

(3)

If subsection (1) does not apply to derivatives of a particular type, the issuer must comply with the requirements prescribed for the purposes of this subsection (if any).

(4)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(5)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Compare: 1978 No 103 s 51(1)

216 Manner of keeping registers

(1)

A register kept under this subpart must be kept in New Zealand.

(2)

A register kept under this subpart may—

(a)

be an electronic register; or

(b)

be kept in any other reasonable manner that the issuer thinks fit.

217 Contents of registers

(1)

Every issuer of regulated products must ensure that every register kept by, or on behalf of, the issuer under this subpart contains, in respect of every financial product entered in the register,—

(a)

the name and address of the holder; and

(b)

the date on which the product was issued or transferred to the holder, as the case may be; and

(c)

the nature of the product; and

(d)

the amount of the product (if any); and

(e)

the due date of the product (if any); and

(f)

all other prescribed particulars (if any).

(1A)

However, a register is not required to contain the information specified in a paragraph in subsection (1) if the circumstances prescribed in respect of that paragraph apply.

(2)

No notice of any trust, expressed, implied, or constructive, may be entered on a register kept under this subpart (except in the prescribed circumstances).

(3)

Every register kept under this subpart is prima facie evidence of the matters required by this Act to be entered in it.

(4)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(5)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Compare: 1978 No 103 s 51(2)–(5)

Section 217(1A): inserted, on 9 August 2017, by section 64 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

218 Audit or review of registers

(1)

Every issuer of regulated products must ensure that registers kept by, or on behalf of, the issuer under this subpart are audited or reviewed in accordance with the prescribed requirements by a qualified auditor.

(2)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Compare: 1978 No 103 s 51(6)

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

(1)

If the auditor referred to in section 218 considers at any time that this subpart is not being complied with, the auditor must, as soon as practicable,—

(a)

advise the issuer and the FMA; and

(b)

advise,—

(i)

in the case of equity securities, the security holders at their next meeting if the non-compliance is material:

(ii)

in the case of debt securities or managed investment products, the supervisor.

(2)

Section 214 (protected disclosure) applies to a disclosure made in good faith under this section.

Compare: 1978 No 103 s 51(8)

220 Issuer must notify Registrar of registers

(1)

Every issuer of regulated products must send a notice to the Registrar of the place where its registers under this subpart are kept and of any change in that place.

(2)

The notice must be sent within 10 working days after the register being established or after the change in place (as the case may be).

(3)

This section does not apply to an issuer that is a company if the registers of the company are kept at its registered office.

(4)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(5)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Compare: 1978 No 103 s 51(9), (10)

221 Public inspection of register

(1)

Every issuer of regulated products must ensure that every register kept by, or on behalf of, the issuer under this subpart is available for inspection in the manner referred to in section 222.

(2)

Subsection (1) does not apply—

(a)

to a register of managed investment products in respect of a superannuation scheme, workplace savings scheme, or KiwiSaver scheme:

(b)

to a register of derivatives:

(c)

in the prescribed circumstances.

(3)

However,—

(a)

a register of managed investment products in respect of a superannuation scheme, workplace savings scheme, or KiwiSaver scheme must be available for inspection by the supervisor in the manner referred to in section 222 if the supervisor serves written notice on the issuer of intention to inspect:

(b)

the part of a register of managed investment products in respect of a superannuation scheme, workplace savings scheme, or KiwiSaver scheme that concerns financial products of a particular scheme participant must be available for inspection by the scheme participant in the manner referred to in section 222 if the scheme participant serves written notice on the issuer of intention to inspect:

(c)

the part of a register of derivatives that concerns derivatives entered into by a particular person must be available for inspection by the person in the manner referred to in section 222 if the person serves written notice on the issuer of intention to inspect.

(4)

An issuer that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(5)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Compare: 1978 No 103 s 52

222 Manner of inspection

For the purposes of section 221, a register kept under this subpart must—

(a)

be available for inspection, by a person who serves on the issuer written notice of intention to inspect, at the place at which the register is kept between the hours of 9 am and 5 pm on each working day during the inspection period; and

(b)

otherwise be available for inspection in the prescribed manner (if any).

Compare: 1993 No 105 s 217

223 Copies of documents

(1)

A person may require a copy of, or an extract from, a register that is available for inspection by the person under section 221 to be sent to the person—

(a)

within 5 working days after the person has made a written request for the copy or extract to the issuer; and

(b)

if the person has paid the prescribed fee (if any).

(2)

The issuer must comply with the request (subject to section 224).

(3)

An issuer that contravenes subsection (2) commits an offence and is liable on conviction to a fine not exceeding $50,000.

(4)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Compare: 1993 No 105 s 218

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

(1)

A person who makes a request under section 223(1) (other than a request for information about that person) must include in the request a statement of the person’s reasons for the request (including the purpose for which the person intends to use the copy of, or extract from, the register), and the issuer may, if it thinks fit, provide a copy of that statement to the FMA.

(2)

If the issuer provides a copy of the statement to the FMA before the expiry of the 5-working-day period referred to in section 223(1)(a),—

(a)

the period within which the request may be complied with is 10 working days after the person made the request (rather than 5 working days); and

(b)

the issuer does not have to comply with the request at all if the FMA, within that 10-working-day period, gives written notice to the issuer that it is not required to comply.

225 Restriction on use of information in registers

(1)

A person must not—

(a)

use information about a person obtained from a register kept under this subpart to contact or send material to that person; or

(b)

disclose information of that kind knowing that the information is likely to be used to contact or send material to the person.

Example

An example of using information to send material to a person is putting a person’s name and address on a mailing list for advertising material.

(2)

Subsection (1) does not apply if the use or disclosure of the information is—

(a)

relevant to the holding of the interests recorded in the register or the exercise of the rights attaching to those interests; or

(b)

approved by the issuer that keeps the register.

(3)

A person must not—

(a)

use information obtained from a register kept under this subpart—

(i)

for any prescribed purpose; or

(ii)

in the case of a request under section 223(1), for any purpose other than the purpose disclosed in the statement under section 224(1); or

(b)

disclose information of that kind knowing that the information is likely to be used for any such purpose.

(4)

Subsection (3)(a)(ii) does not apply to a person who makes a request under section 223(1) for information about that person.

Compare: Corporations Act 2001 s 177 (Aust)

226 Certain provisions prevail over Companies Act 1993

If a provision of sections 221 to 225 is inconsistent with a provision in the Companies Act 1993, the provision of sections 221 to 225 prevails.

Copies of documents to be retained

227 Copies of documents must be retained for 7 years

(1)

The issuer of a regulated product, the offeror under a regulated offer, or the manager of a registered scheme must, in respect of each document required by or for the purposes of this Act in respect of the regulated product, regulated offer, or registered scheme,—

(a)

keep a copy of the document for a period of at least 7 years after the date on which the document comes into the possession of the issuer, offeror, or manager; and

(b)

comply with the prescribed requirements relating to where the copy is kept, inspection of the copy, and making copies of the document available on payment of a reasonable printing and administration fee set by the issuer, offeror, or manager.

(2)

Subsection (1) applies only if the document is given, made, or provided by or to the issuer, offeror, or manager.

(3)

A person that contravenes this section commits an offence and is liable on conviction to a fine not exceeding $50,000.

(4)

The offence in this section is an infringement offence (see subpart 5 of Part 8).

Subpart 5—Civil liability for certain contraventions of this Part

228 Part 4 governance provisions

(1)

All of the provisions specified in subsections (3) and (4) are Part 4 governance provisions.

(2)

(3)

The provisions are the following:

(a)

section 103 (need for governing document and supervisor for regulated offer of debt security):

(b)

section 125 (need to register managed investment scheme for regulated offer of managed investment product):

(c)

sections 156 to 158 (requirements relating to custodianship of scheme property):

(d)

section 185(4) (manager and delegate must desist from all activities relating to scheme on removal).

(4)

(a)

section 108(2) (changes to trust deed):

(b)

sections 112 and 113 (duties applying to supervisor of debt security):

(c)

sections 114 to 118 and 119(2) (duties on issuer to provide various reports, information, and assistance):

(d)

sections 120, 121, 161, and 162 (meetings of product holders):

(e)

section 133 (manager must ensure that ongoing registration requirements are complied with):

(f)

section 134(5)(b) (manager must notify scheme participants of direction):

(g)

section 139(2) (changes to governing document):

(h)

sections 143 to 146 (duties applying to manager, investment manager, and directors and senior managers of manager):

(i)

sections 147 to 151 and 155(2) (duties on issuer to provide various reports, information, and assistance):

(j)

sections 153 and 154 (duties applying to supervisor of registered scheme):

(k)

section 159 (custodian must report on scheme property):

(l)

section 160 (duty of supervisor to refuse to act on wrongful directions):

(m)

section 163(1) (manager and associated persons cannot vote if interested in resolution):

(n)

sections 164 and 165 (requirements relating to statement of investment policy and objectives):

(o)

sections 167 to 169 (actions that must be taken on limit breaks, pricing errors, and other non-compliances, and requirements for actuarial examinations):

(p)

section 171 (limits on reversion of scheme property in certain schemes to non-scheme participant contributor):

(q)

section 173 (general prohibition on related party transactions):

(r)

section 176 (additional restrictions on acquisitions by restricted schemes of in-house assets):

(s)

sections 179, 180, 181(4), and 182 (scheme participant transfer rules):

(t)

section 190 (former manager must hand over records and give reasonable assistance):

(u)

section 195(3)(b) (manager must notify scheme participants of direction):

(v)

sections 198 to 200, and 202 to 204 (duties to report problems):

(w)

section 206(2) (FMA’s directions to supervisor):

(wa)

section 219 (auditor must advise if auditor considers that subpart is not being complied with):

(x)

section 225 (restriction on use of information in registers).

Section 228(4)(wa): inserted, on 9 August 2017, by section 65 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Part 5 Dealing in financial products on markets

Subpart 1—Purposes, overview, and interpretation

229 Additional purposes of Part

(1)

This Part has the following purposes for financial product markets (in addition to those set out in sections 3 and 4):

(a)

to promote fair, orderly, and transparent financial product markets:

(b)

to encourage a diversity of financial product markets to take account of the differing needs and objectives of issuers and investors.

(2)

This section does not limit section 3 or 4.

230 Overview

(1)

In this Part,—

(a)

this subpart contains the additional purposes of this Part and interpretation provisions:

(b)

subpart 2 prohibits insider trading on licensed markets:

(c)

subpart 3 prohibits market manipulation on licensed markets:

(d)

subpart 4 requires listed issuers to comply with the continuous disclosure provisions of listing rules of a licensed market:

(e)

subpart 5 requires substantial product holders in listed issuers to disclose their interests:

(f)

subpart 6 requires directors and senior managers of a listed issuer to disclose their interests and dealings in quoted financial products of, or connected to, the listed issuer:

(g)

subpart 7 provides for the licensing of financial product markets, the approval of market rules of licensed markets, the ability to impose a control limit on licensed market operators, and the ability to make regulations modifying this subpart for particular markets:

(h)

subpart 8 contains requirements applying in the operation of a licensed market:

(i)

subpart 9 provides for the transfer of transferable financial products:

(j)

subpart 10 regulates the making of unsolicited offers to purchase financial products off-market.

(2)

Provisions of this Part may be disapplied or modified in relation to a licensed market (and any issuers listed on that licensed market) under regulations made under section 351.

(3)

This section is a guide only to the general scheme and effect of this Part.

Material information and generally available to the market

231 Meaning of material information

(1)

In this Part, material information, in relation to a listed issuer, is information that—

(a)

a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of quoted financial products of the listed issuer; and

(b)

relates to particular financial products, a particular listed issuer, or particular listed issuers, rather than to financial products generally or listed issuers generally.

(2)

In this Part, material information, in relation to quoted derivatives, the underlying of quoted derivatives, or the issuer of a financial product underlying quoted derivatives, is information that—

(a)

a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of the derivatives; and

(b)

relates to particular derivatives, a particular underlying, or a particular issuer of a financial product underlying quoted derivatives, rather than to derivatives generally or underlyings generally or issuers generally.

Compare: 1988 No 234 ss 3, 3A

232 Meaning of generally available to the market

(1)

In this Part, information is generally available to the market—

(a)

if—

(i)

it is information that has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in relevant financial products; and

(ii)

since it was made known, a reasonable period for it to be disseminated among those persons has expired; or

(b)

if it is likely that persons who commonly invest in relevant financial products can readily obtain the information (whether by observation, use of expertise, purchase from other persons, or any other means); or

(c)

if it is information that consists of deductions, conclusions, or inferences made or drawn from either or both of the kinds of information referred to in paragraphs (a) and (b).

(2)

In this section, relevant financial products means financial products of a kind the price of which might reasonably be expected to be affected by the information.

(3)

Information that is notified in accordance with a continuous disclosure obligation is generally available to the market under subsection (1)(a) immediately on it being made available to participants in a licensed market (without limiting how quickly the reasonable period of dissemination in subsection (1)(a)(ii) may be satisfied in other cases).

Compare: 1988 No 234 s 4

Certain derivatives treated as being quoted financial products of listed issuer

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

(1)

If the underlying of a derivative is a quoted financial product of a listed issuer, the derivative must, for the purposes of this subpart and subpart 2, be treated as being a quoted financial product of the listed issuer (whether the derivative is quoted or not).

(2)

Subsection (1) does not apply in relation to subpart 5.

(3)

See also section 275 (which treats a person as holding financial products where the person has a relevant interest in certain derivatives) and section 298 (which relates to the disclosure of relevant interests and dealings in relevant interests by directors and senior managers).

Insider conduct

234 Meaning of information insider, inside information, and adviser

(1)

In this Part, a person is an information insider of a listed issuer if that person—

(a)

has material information relating to the listed issuer that is not generally available to the market; and

(b)

knows or ought reasonably to know that the information is material information; and

(c)

knows or ought reasonably to know that the information is not generally available to the market.

(2)

A listed issuer may be an information insider of itself.

(3)

In this Part, a person is an information insider in relation to quoted derivatives if that person—

(a)

has material information relating to any of the following that is not generally available to the market:

(i)

the derivatives:

(ii)

the underlying:

(iii)

the issuer of a financial product underlying the derivatives; and

(b)

knows or ought reasonably to know that the information is material information; and

(c)

knows or ought reasonably to know that the information is not generally available to the market.

(4)

In this Part, inside information means—

(a)

the information in respect of which a person is an information insider of the listed issuer in question; or

(b)

in the case of quoted derivatives, the information in respect of which a person is an information insider in relation to the derivatives in question.

(5)

In this Part, adviser means an adviser acting in a professional capacity (for example, a lawyer, an accountant, or a financial adviser).

Compare: 1988 No 234 ss 8A, 8B, 11E

Relevant interests

235 Relevant interests in financial products (basic rule)

(1)

In this Act, a person has a relevant interest in a financial product if the person—

(a)

is a registered holder of the product; or

(b)

is a beneficial owner of the product; or

(c)

has the power to exercise, or to control the exercise of, a right to vote attached to the product; or

(d)

has the power to acquire or dispose of, or to control the acquisition or disposal of, the product.

(2)

Subsection (1) applies regardless of whether the power or control is express or implied, direct or indirect, legally enforceable or not, related to a particular financial product or not, exercisable presently or in the future, or exercisable alone or jointly with another person or persons (but a power to cast merely 1 of many votes is not, in itself, a joint power of this kind).

(3)

Subsection (1) applies regardless of whether or not the power or control is or can be made subject to restraint or restriction or is exercisable only on the fulfilment of a condition.

(4)

If 2 or more persons can jointly exercise a power, each of those persons is taken to have the power.

Compare: 1988 No 234 s 5

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

(1)

A person has a power or control referred to in section 235 if the power or control is, or may at any time be, exercised under, by virtue of, by means of, or as a result of a revocation or breach of, a trust or an agreement (or any combination of them).

(2)

Subsection (1) applies regardless of whether or not the trust or agreement is legally enforceable or whether or not the person is a party to it.

Compare: 1988 No 234 s 5A

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

A person (A) has a relevant interest in a financial product that another person (B) has if—

(a)

B or B’s directors are accustomed or under an obligation (whether legally enforceable or not) to act in accordance with A’s directions, instructions, or wishes in relation to a power or control referred to in section 235; or

(b)

A has the power to exercise, or control the exercise of, the right to vote attached to 20% or more of the voting products of B; or

(c)

A has the power to acquire or dispose of, or to control the acquisition or disposal of, 20% or more of the voting products of B; or

(d)

A and B are related bodies corporate; or

(e)

A and B have an agreement to act in concert in relation to a power or control referred to in section 235.

Compare: 1988 No 234 s 5B(1)

238 Situations not giving rise to relevant interests

(1)

A person (A) does not have a relevant interest in a financial product under sections 235 to 237 merely because—

(a)

the ordinary business of A consists of, or includes, the lending of money or the provision of financial services, or both, and A has the relevant interest only as security given for the purposes of a transaction entered into in the ordinary course of the business of A; or

(b)

A is authorised to undertake trading activities on a licensed market and A acts for another person to acquire or dispose of the product on behalf of that person in the ordinary course of A’s business of carrying out those trading activities; or

(c)

A has been authorised by resolution of the directors of a body corporate to act as its representative at a particular meeting of product holders, or a class of product holders, of a listed issuer, and a copy of the resolution is deposited with the listed issuer before the meeting; or

(d)

A is appointed as a proxy to vote at a particular meeting of product holders, or of a class of product holders, of the listed issuer and the instrument of A’s appointment is deposited with the listed issuer before the meeting; or

(e)

A is a bare trustee of a trust to which the product is subject; or

(f)

A is a director of a body corporate and the body corporate has a relevant interest in the product; or

(g)

A is a product holder of a body corporate and the body corporate’s constitution gives the product holder pre-emptive rights on the transfer of the product, if all product holders of the products have pre-emptive rights on the same terms; or

(h)

A is an operator of a designated settlement system (as defined in section 156M(1) of the Reserve Bank of New Zealand Act 1989) and is acting in the ordinary course of that business.

(2)

Subsection (1)(a) to (h) do not apply to a person if the person is currently declared by the FMA, by notice under section 562(1)(i), to be a person that is not exempt under any of those paragraphs.

(3)

For the purposes of subsection (1)(e), a trustee may be a bare trustee even if he or she is entitled as a trustee to be remunerated out of the income or property of the trust.

Compare: 1988 No 234 s 6

Territorial scope

239 Territorial scope

(1)

Subparts 2 to 6 apply to conduct in relation to quoted financial products or listed issuers regardless of whether the conduct is in New Zealand or outside New Zealand.

(2)

See sections 310 and 313 (which require a licence to operate a financial product market in New Zealand).

Subpart 2—Insider trading

Insider conduct prohibited

240 Prohibition on insider conduct

(1)

A person must not do any of the things set out in any of sections 241(1), 242(1), and 243(1) if the person is an information insider of the listed issuer.

(2)

A person must not do any of the things set out in any of sections 241(2), 242(2), and 243(2) if the person is an information insider in relation to quoted derivatives.

Compare: 1988 No 234 s 8

241 Information insider must not trade

(1)

An information insider of a listed issuer must not trade quoted financial products of the listed issuer.

(2)

An information insider in relation to quoted derivatives must not trade the derivatives.

(3)

In this subpart and subpart 3, trade—

(a)

means acquire or dispose of; but

(b)

does not include acquire, or dispose of, by inheritance or gift.

Compare: 1988 No 234 s 8C

242 Information insider must not disclose inside information

(1)

An information insider (A) of a listed issuer must not directly or indirectly disclose inside information to another person (B) if A knows or ought reasonably to know or believes that B will, or is likely to,—

(a)

trade quoted financial products of the listed issuer; or

(b)

advise or encourage another person (C) to trade or hold those products.

(2)

An information insider (A) in relation to quoted derivatives must not directly or indirectly disclose inside information to another person (B) if A knows or ought reasonably to know or believes that B will, or is likely to,—

(a)

trade the derivatives; or

(b)

advise or encourage another person (C) to trade or hold those derivatives.

Compare: 1988 No 234 s 8D

243 Information insider must not advise or encourage trading

(1)

An information insider (A) of a listed issuer must not—

(a)

advise or encourage another person (B) to trade or hold quoted financial products of the listed issuer:

(b)

advise or encourage B to advise or encourage another person (C) to trade or hold those financial products.

(2)

An information insider (A) in relation to quoted derivatives must not—

(a)

advise or encourage another person (B) to trade or hold the derivatives:

(b)

advise or encourage B to advise or encourage another person (C) to trade or hold those derivatives.

Compare: 1988 No 234 s 8E

244 Criminal liability for insider conduct

(1)

A person who contravenes any of sections 241 to 243 commits an offence if the person knows—

(a)

that the information is material information; and

(b)

that the information is not generally available to the market; and

(c)

in the case of a contravention of section 242, of any of the matters set out in section 242(1)(a) or (b) or (2)(a) or (b).

(2)

A person who commits an offence under subsection (1) is liable on conviction,—

(a)

in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and

(b)

in any other case, to a fine not exceeding $2.5 million.

Compare: 1988 No 234 s 8F

When prohibition on insider conduct does not apply

245 Exception for trading required by enactment or rule of law

Section 241 does not apply to trading in financial products that is required by an enactment or any rule of law.

Compare: 1988 No 234 s 9

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

Section 242 does not apply to disclosure that is required by—

(a)

an enactment or any rule of law; or

(b)

the FMA when exercising a power under this Act or any other enactment.

Compare: 1988 No 234 s 9A

247 Exception for disclosure in connection with preparing PDS or limited disclosure document

Section 242 does not apply to disclosure that is necessary, in connection with an offer of financial products for sale, in order to assist in the preparation of a PDS, a register entry, or a limited disclosure document for that offer.

Section 247 heading: amended, on 9 August 2017, by section 66(1) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

Section 247: amended, on 9 August 2017, by section 66(2) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).

248 Exceptions in respect of underwriting agreements

(1)

Section 241 does not apply to the acquisition of the financial products of a listed issuer under an underwriting or a sub-underwriting agreement.

(2)

Section 242 does not apply if the inside information is disclosed to a person for the sole purpose of negotiating an underwriting or a sub-underwriting agreement with that person in respect of the financial products in question.

(3)

Section 243 does not apply if the advice or encouragement is given for the sole purpose of persuading the person to whom it is given to enter into an underwriting or a sub-underwriting agreement in respect of the financial products in question.

Compare: 1988 No 234 s 9B

249 Exceptions in case of knowledge of person’s own intentions or activities

(1)

A person (A) does not contravene section 241(1) merely because A trades the financial products with the knowledge that A proposes to enter into, or has previously entered into, 1 or more transactions or agreements in relation to the financial products or the listed issuer or the listed issuer’s business activities.

(2)

A person (B) does not contravene section 243(1) merely because B advises or encourages another person (A) to trade or hold financial products when B has knowledge, acquired in the course of acting as A’s adviser, that A proposes to enter into, or has previously entered into, 1 or more transactions or agreements in relation to the financial products or the listed issuer or the listed issuer’s business activities.

Compare: 1988 No 234 s 9C

250 Exceptions in case of knowledge in relation to derivatives

(1)

A person (A) does not contravene section 241(2) merely because A trades in derivatives with knowledge of A’s own past, current, or proposed—

(a)

transactions or agreements concerning those or any other derivatives; or

(b)

business activities, transactions, or agreements concerning the underlying.

(2)

If a person (B) advises or encourages another person (A) to trade or hold derivatives, B does not contravene section 243(2) merely because B has knowledge, acquired in the course of acting as A’s adviser, of A’s past, current, or proposed—

(a)

transactions or agreements concerning derivatives; or

(b)

business activities, transactions, or agreements concerning the underlying.

Compare: SR 2010/354 r 3

251 Exception for agent executing trading instruction only

Section 241 does not apply in the case of a person (A) if,—

(a)

in trading the financial products, A was acting on behalf of another person (B); and

(b)

A traded the financial products on B’s specific instruction; and

(c)

before trading, A did not disclose inside information to B; and

(d)

A did not advise or encourage B to instruct A to trade.

Compare: 1988 No 234 s 9D

252 Exceptions from section 241 for takeovers

(1)

Section 241 does not apply to—

(a)

trading that results from a takeover offer under the Takeovers Code; or

(b)

entering into an agreement to acquire or dispose of financial products at a fixed price under a future takeover offer that complies with the Takeovers Code; or

(c)

the acquisition or disposal of financial products in performance of an agreement to acquire or dispose of those financial products at a fixed price under a future takeover offer that complies with the Takeovers Code.

(2)

For the purposes of this section and section 253, if an exemption has been granted under section 45 of the Takeovers Act 1993 in relation to a takeover offer and the offer is made in accordance with the terms and conditions of the exemption and the applicable provisions of the Takeovers Code from which there is no exemption, the offer must be taken to—

(a)

be a takeover offer under the Takeovers Code; and

(b)

comply with the Takeovers Code.

Compare: 1988 No 234 s 9E(1)

253 Exceptions from sections 242 and 243 for takeovers

(1)

Section 242 does not apply to the following conduct:

(a)

disclosure of inside information to a prospective offeror or its advisers under a prospective takeover offer under the Takeovers Code:

(b)

disclosure of inside information to encourage competing bona fide offers to be made in competition with a takeover offer under the Takeovers Code:

(c)

disclosure of inside information by a prospective offeror or its advisers under a prospective takeover offer under the Takeovers Code for the purpose of forming a consortium to make a takeover offer:

(d)

disclosure of inside information to an independent adviser to enable that adviser to make a report required by the Takeovers Code.

(2)

A person’s reliance on subsection (1)(a) to (c) is subject to the conditions that—

(a)

the recipient of the information is bound by an obligation of confidentiality in respect of the information; and

(b)

the purpose of the conduct is to enable or encourage the recipient to make a takeover offer or to participate in a takeover offer.

(3)

Section 243 does not apply to advice or encouragement given—

(a)

by the directors of a company that is the target company under a takeover offer under the Takeovers Code, to the extent that the advice or encouragement is given to the company’s shareholders and relates to those shareholders trading or holding their financial products; or

(b)

by a prospective offeror under a prospective takeover offer under the Takeovers Code for the purpose of forming a consortium to make a takeover offer.

(4)

A person (A) does not contravene section 242 or 243 merely because A, in relation to a takeover offer or prospective takeover offer under the Takeovers Code, discloses inside information to another person (B) or advises B to trade or hold financial products of the listed issuer when A has that inside information, or is an information insider, only through acting as B’s adviser in relation to the takeover offer or prospective takeover offer.

Compare: 1988 No 234 s 9E(2)–(5)

254 Exceptions for schemes of arrangement approved under Companies Act 1993

(1)

Section 241 does not apply to trading that results from an arrangement approved under Part 15 of the Companies Act 1993.

(2)

Section 243 does not apply to advice or encouragement by the directors of a company that is the subject of an arrangement approved, or a proposed arrangement to be approved, under Part 15 of the Companies Act 1993, to the extent that the advice or encouragement is given to the company’s shareholders and relates to those shareholders trading or holding their shares.

255 Exception for redemption of managed investment products

Section 241 does not apply to the redemption of managed investment products in a managed investment scheme if the redemption price is calculated by reference to the underlying value of the assets of the scheme.

Compare: 1988 No 234 s 9F

256 Exception for Reserve Bank

Section 241 does not apply to trading by the Reserve Bank in financial products issued by the Reserve Bank or by the Crown.

Compare: 1988 No 234 s 9G

Defences

257 Absence of knowledge of trading

In any proceeding against a person (A) for contravention of section 241, it is a defence if A did not know, and could not reasonably be expected to know, that A traded the financial products.

Compare: 1988 No 234 s 10

258 Inside information obtained by independent research and analysis

(1)

In any proceeding against a person (A) for contravention of section 241 or 242, it is a defence if the inside information was obtained by research and analysis and was not obtained directly or indirectly from the listed issuer concerned.

(2)

In any proceeding against a person (A) for contravention of section 243, it is a defence if A encouraged or advised on the basis of inside information that was obtained by research and analysis and that was not obtained directly or indirectly from the listed issuer concerned.

(3)

In subsections (1) and (2), research means planned investigation undertaken to gain new knowledge and understanding.

Compare: 1988 No 234 s 10A

259 Equal information

(1)

In any proceeding against a person (A) for contravention of section 241, it is a defence if the opposite party to the transaction knew, or ought reasonably to have known, the same inside information as A before the transaction took place.

(2)

In any proceeding against a person (A) for contravention of section 242, it is a defence if the person to whom the information is disclosed knew, or ought reasonably to have known, the same inside information as A before it was disclosed.

(3)

In any proceeding against a person (A) for contravening section 242 or 243 by disclosing inside information to another person (B) or by advising or encouraging B to trade or hold quoted financial products, it is a defence if A has that inside information, or is an information insider, only through acting as B’s adviser in relation to trading or holding those financial products.

Compare: 1988 No 234 s 10B

260 Options and trading plans

(1)

In any proceeding against a person (A) for contravention of section 241, it is a defence if—

(a)

A traded the financial products under a fixed trading plan or under options with a fixed exercise price; and

(b)

A entered into the trading plan, or acquired the options, as the case may be,—

(i)

before A obtained the inside information; and

(ii)

without any intent to evade section 241.

(2)

A fixed trading plan is a trading plan—

(a)

that—

(i)

is fixed for a period of time; and

(ii)

gives the investor no right to withdraw before the end of that period; and

(iii)

is not subject to any influence by the investor as to trading decisions after the plan has begun; or

(b)

that is an employee share purchase scheme that comes within paragraph (a) except that the plan may be earlier terminated, and the investor may withdraw, on the termination of the investor’s employment or appointment.

Compare: 1988 No 234 s 10C

261 Chinese wall defence

(1)

In any proceeding against a person (A) for contravention of section 241 or 243, it is a defence if—

(a)

A had in place arrangements that could reasonably be expected to ensure that no individual who took part in the decision to trade the financial products or to advise or encourage (as the case may be) received, or had access to, the inside information or was influenced, in relation to that decision, by an individual who had the information; and

(b)

no individual who took part in that decision received, or had access to, the inside information or was influenced, in relation to that decision, by an individual who had the information; and

(c)

every individual who had the information and every individual who took part in that decision acted in accordance with the arrangements referred to in paragraph (a).

(2)

In any proceeding against a person (A) for disclosing information to another person (B) in contravention of section 242, it is a defence if A believed on reasonable grounds that B had in place arrangements that could reasonably be expected to ensure that no individual who would take part in the decision to trade the financial products or to advise or encourage (as the case may be) would receive, or have access to, the inside information or would be influenced, in relation to that decision, by an individual who had the information.

Subpart 3—Market manipulation

262 False or misleading statement or information

A person must not make a statement or disseminate information if—

(a)

a material aspect of the statement or information is false or the statement or information is materially misleading; and

(b)

the person knows or ought reasonably to know that a material aspect of the statement or information is false or that the statement or information is materially misleading; and

(c)

the statement or information is likely to—

(i)

induce a person to trade in quoted financial products; or

(ii)

have the effect of increasing, reducing, maintaining, or stabilising the price for trading in those financial products; or

(iii)

induce a person to exercise a voting right attached to a quoted financial product in a particular way, or to abstain from exercising such a

List of access keys

Financial Markets Conduct Act 2013

Financial Markets Conduct Act 2013

Note

Contents

1 Title

2 Commencement

Part 1 Preliminary provisions

Purposes

3 Main purposes

(a)

(b)

4 Additional purposes

(a)

(b)

(c)

(d)

Overview

5 Overview

(a)

(b)

(i)

(ii)

(c)

(i)

(ii)

(iii)

(d)

(i)

(ii)

(iii)

(iv)

(v)

(e)

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(f)

(i)

(ii)

(iia)

(iib)

(iii)

(iv)

(g)

(h)

(i)

(ii)

(iii)

(iv)

(i)

(i)

(ii)

Interpretation

6 Interpretation

(a)

(b)

(c)

(d)

(a)

(b)

(a)

(b)

(a)

(b)

(a)

(b)

(a)

(b)

(a)

(b)

(a)

(i)

(ii)

(iii)

(iv)

(v)