New Zealand securities law requires issuers to make copies of certain material contracts available for public inspection as part of the requirements for an offer of securities to the public. From time to time FMA receives an exemption application from an issuer who seeks to exclude from its material contracts information that it considers to be commercially sensitive.
In considering such applications, FMA needs to determine the appropriate balance between the investors' need to know the sensitive information and the potential competitive harm to the issuer in disclosing that information.
This note sets out current FMA policy in this area.
Requirement to Disclose Material Contracts
The Securities Regulations 2009 require disclosure of material contracts as follows:
- Clause 17 of the First Schedule to the Regulations (and equivalent provisions in other Schedules) requires disclosure in the prospectus of certain prescribed information about the issuing group's material contracts;
- Regulation 18(1)(a) requires a registered prospectus to have attached to it, or be accompanied by, copies of the material contracts (which will then be available for public inspection at the Companies Office); and
- Clause 25(c) of the First Schedule (and equivalent provisions in other Schedules) requires that the prospectus state the times and places where copies of the material contracts may be inspected by any person on payment of any fee.
The starting point for consideration of exemption applications of this nature is that FMA aims for full disclosure, and it will only permit deletion of commercially sensitive information from material contracts in exceptional circumstances. Such exceptional circumstances must be clearly identified in any application for exemption.
No exemption will be granted where exclusion of the information in question means the prospectus will be likely to deceive, mislead or confuse with regard to any particular that is material to the offer, including by failing to refer, or give proper emphasis, to adverse circumstances.
FMA may be willing to grant an exemption that will permit an issuer to exclude commercially sensitive information from the disclosure copies of material contracts, if it is satisfied that disclosure of the information will be seriously detrimental to the issuer, and that detriment outweighs the benefit arising from publication. Each application will be considered on a case by case basis.
FMA is unlikely to grant such an exemption where:
- disclosure of the information is required by any other law or the listing requirements of New Zealand or any other jurisdiction to which the issuer is subject; or
- disclosure of the information would be detrimental to the issuer solely because of a duty of confidence owed to a third party.
Any exemption granted will be in respect of the particular information determined to be sensitive, and to meet the above criteria, rather than being an exemption applying to the whole contract.
Any exemption granted can be expected to be conditional upon the prospectus stating, at the appropriate point in the statutory information section:
- that information has been deleted from the particular contract; and
- the reasons why the information has been deleted; and
- the general nature of the material information that has been deleted.