The primary obligations issuers have arise under the:
- Securities Act 1978 and the Securities Regulations 2009
- Securities Markets Act 1988
- Financial Reporting Act 1993.
Issuers have a number of other obligations, depending on what kind of entity they are (e.g. a trust or a company), and whether their securities are listed on a registered exchange. Currently NZX is New Zealand's only 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 Act requires issuers to appoint a trustee (for debt securities) or a statutory supervisor (for participatory securities) and to enter into and register a trust deed or participation deed for those securities.
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 content of the prospectus.
The information required to be included in a prospectus is mostly set out in the regulations. The information required will depend on the type of securities being offered, and whether there are any exemptions which may exempt an issuer, or certain types of issuers, from specific provisions of the 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 the prudent but non-expert investor, and it must contain the answers to certain questions specified by the regulations.
The investment statement is an 'advertisement' for the purposes of the Act and is subject to requirements in the Act and the regulations relating to advertisements for securities.
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. The 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 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.
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 does contain 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 under the Act. These include obligations to:
- maintain a register of all securities they have issued
- ensure the register is audited at least once a year by a qualified auditor
- keep accounting records that explain the transactions of the issuer
- ensure their financial statements are audited at least once a year by a qualified auditor
- provide certain information (such as annual reports or financial statements) to investors on request.
Obligations under the Securities Markets Act 1988
Public issuers (issuers who are party to a listing agreement with a registered exchange) and certain persons related to those issuers also have disclosure obligations under the Securities Markets Act.
Public issuers are required to disclose to the market all material information not generally available to the market, in line with the continuous disclosure regime prescribed by the listing rules of the relevant registered exchange. Find out more about the listing rules of NZX, New Zealand's only registered exchange.
Material information is information about the issuer or their securities that if available to the market could be expected to have a material effect on the price of the issuer's listed securities (essentially, price-sensitive information).
Information is generally available to the market if:
- it has been made known in a manner likely to bring it to the attention of persons who commonly invest in the type of securities the information relates to, and there has been a reasonable period for that information to disseminate
- it is likely that persons who commonly invest in that type of securities can readily obtain the information
- it consists of deductions, conclusions, or inferences made from the kinds of information described above.
The Act requires directors and officers of public issuers, and persons holding specified amounts of listed voting securities, to disclose certain information to the issuer and to the market. Public issuers are also required to keep registers of that disclosed information.
The Financial Markets Authority carried out a review of all directors’ and officers’ relevant interest disclosures and substantial security holder disclosures, made on the NZX Limited Market Announcement Platform, over a five week period. We have now published a report on our findings to inform market participants of our review and highlight areas of concern. Click here to view the report.
Financial Reporting Act 1993
The Financial Reporting Act requires issuers to prepare and register audited financial statements each year.
An issuer's financial statements must comply with generally accepted accounting practice, being financial reporting standards approved by the Accounting Standards Review Board.
In some circumstances (where the issuer owns or controls other companies), the issuer will also need to prepare group or consolidated financial statements, which include financial information about the companies the issuer owns or controls.
Find out more about issuers' financial reporting obligations on the Companies Office website. FMA has provided a short letter outlining their financial report review priorities for 2013. View the letter here.
FMA periodically reviews the standard of issuers' financial reporting disclosures, and publishes reports on its findings. You can read more about these reviews (and the results) here.
Listing Rule obligations
If the issuer is listed on NZX, it needs to comply with NZX's listing rules, which include obligations relating to the activities, market disclosures and governance of the listed issuer.
Below are two publications that may help issues maintain high standards of corporate governance and related market disclosures.
Corporate Governance - Principles and Guidelines (Feb 2004, reprinted Feb 2011).