The requirements explained below relate to transitional offers being made under the former Securities Act regime. For information on issuing or offering products under the Financial Markets Conduct Act 2013 (FMC Act) see here.
Issuers offering under the Securities Act regime have a number of other obligations, depending on what kind of business they are (e.g. a trust or a company), and whether their securities are listed on a registered exchange.
Obligations under the Securities Act 1978 and Securities Regulations 2009
Issuers and promoters (including their directors) have initial and ongoing obligations under the Securities Act and the Securities Regulations. Primarily, these obligations relate to the nature and content of the offering documents required when securities are offered to the public.
Issuers also have specific obligations where they intend to offer debt or participatory securities to the public. Prior to offering those securities, the Financial Markets Supervisors Act 2011 requires issuers to appoint a supervisor (for debt securities or participatory securities). Issuers are also required to enter into and register a trust deed or participation deed for those securities.
Even though issuers and promoters may be offering securities under the Securities Act regime rather than the FMC Act, the fair dealing provisions under Part 2 (sections 19-23) of the FMC Act 2013 will still apply to these issuers and promoters.
Obligation to prepare offering documents
Generally, issuers may not allot (or sell) securities to the public unless:
- at the time of subscription or payment there was a registered prospectus for those securities
- the subscriber received an investment statement for those securities before subscribing.
A prospectus contains information about the securities being offered, the terms of the offer, and information about the issuer and any promoters. Prospectuses must be signed by the issuer's directors, and each promoter (including the directors of a promoter, if it is a company). By doing so, the directors and promoters take responsibility for the information in the prospectus.
Information required to be included in a prospectus is mostly set out in the Securities Regulations 2009. The information required will depend on the type of securities being offered, and whether there are any exemptions granted under the Securities Act 1978 which may exempt an issuer, or certain types of issuers, from specific provisions of the Securities Act or regulations, or modify their application.
The investment statement is the primary disclosure document. The purpose of the investment statement is to provide key information to prudent but non-expert investors, and it must contain the answers to certain questions specified by the regulations. We have granted a class exemption relating to the form of an investment statement for initial public offers of equity on the NZX Main Board which will continue to be available during the transition period.
The investment statement is an 'advertisement' for the purposes of the Securities Act and is subject to requirements in the Securities Act and the regulations relating to advertisements for securities.
The Securities Act contains relatively prescriptive requirements relating to advertisements. In general, an issuer is free to advertise its offer as it pleases provided the advertisement does not contain any untrue statement or any information likely to deceive, mislead or confuse about anything material to the offer. However, the Securities Act does not permit pre-prospectus advertising unless the advertisement contains certain information and nothing else - see our Guidance note: Pre-prospectus publicity – some practical guidance for issuers and their advisers. The Securities Act and the regulations regulate the content of advertisements, with the aim of ensuring that information is presented fairly and is truthful.
A certificate must generally be completed by the directors of the issuer for each advertisement when it is distributed. This certificate must state that the directors of the issuer have read, seen or listened to the advertisement, that the advertisement complies with the Securities Act and the regulations, is not likely to deceive, mislead or confuse about anything material to the offer, and is not inconsistent with the investment statement or registered prospectus. See our information sheet: Fair dealing provisions - transitional arrangements for advertising.
Standard of disclosure in offering documents
Issuers and their directors, and promoters are primarily responsible for ensuring offer documents do not contain untrue statements. A statement will be untrue if:
- it is misleading in the form and context in which it is included in the offer document.
- it is misleading because it omits further information material to that statement.
If a prospectus or advertisement contains an untrue statement, issuers and their directors, and promoters can have civil and criminal liability.
The Act prohibits allotment of securities if, at the time of allotment the investment statement or registered prospectus, contains a false or misleading material statement by failing to refer, or give proper emphasis to, adverse circumstances. This applies whether or not those circumstances arose after the date of the prospectus or investment statement.
Ongoing issuer obligations
Once a prospectus (or amendment to a prospectus) is registered issuers must:
- update their website to let the public know the prospectus (or an amendment) has been registered
- provide the Registrar of Financial Service Providers (via the Companies Office) with certain information for the register of securities offers, and notify the Registrar when there is any change to that information.
Issuers also have ongoing procedural obligations. These include:
- maintaining a register of all securities they have issued
- ensuring the register is audited at least once a year by a qualified auditor
- keeping accounting records that explain the transactions of the issuer
- ensuring their financial statements are audited at least once a year by a qualified auditor
- providing certain information (such as annual reports or financial statements) to investors on request.
Additional obligations of listed issuers
Listed issuers (issuers who are party to a listing agreement with a licensed market operator in relation to a licensed market), and certain persons related to those issuers, also have disclosure obligations under the FMC Act. These obligations apply irrespective of whether the original offer has been made under the Securities Act regime or the FMC Act regime.
Issuers have obligations to maintain high standards of corporate governance and board behaviour. Information about our expectations for good corporate governance can be found in these publications:
- Consultation: Corporate Governance in New Zealand – Principles and Guidelines - closes 1 December 2014.
- A Director's Guide