Schedule 1 offers
Schedule 1 of the FMC Act sets out a series of statutory exclusions where lighter compliance paths are appropriate. These include exclusions that are due to the circumstances of the:
- offer - for example, an offer through a licensed crowdfunding platform
- investor - for example, an offer to a wholesale investor
- issuer - for example, an offer by a registered bank.
Depending on the exclusion, limited or no disclosure may be required.
Our Schedule 1 offers table, summarises the circumstances where the disclosure exclusions in Part 1 of Schedule 1 are available and what the associated limited disclosure and other requirements (if any) are for each exclusion.
Offers under Schedule 1, in general, do not trigger the ongoing financial reporting obligations in Part 7 of the FMC Act.
Failure to comply with the Schedule 1 exclusion limited disclosure and other requirements in the FMC Regulations may incur civil and criminal liability consequences. However, your offer won't be invalidated, and the financial products offered won't be invalid, void or voidable.
Peer-to-peer lending service providers obligations
Normally if you want to borrow money direct from the public, the FMC Act requires you to issue a product disclosure statement (PDS).
- You do not need to prepare these documents if you are using a licensed peer-to-peer lending provider. Instead you will provide information about your loan request to your provider so they can present your request for investors to read.
- Licensed providers are not obligated to accept you as a borrower. They will run some checks on you and if you've got a bad credit history they may decide they won't help you find money.
- If you are accepted, you will become a client of the peer-to-peer lending service. The provider will ask you to sign a client agreement that details what you need to do so the provider can monitor and check you.
- The service provider can charge for their services.
More information about Peer-to-peer lending service providers obligations and compliance
Crowd funding issuers obligations
Under exemptions in financial markets law:
- crowd funding issuers don't need to prepare a product disclosure statement.
- your crowd funding service provider may be able to help you make a compliant offer.
- the provider will ask you to sign a client agreement that details what you need to do so the provider can monitor and check you.
- they may charge you for their services.
More information about Crowdfunding obligations and compliance
Small personal offers
There are exclusions under Schedule 1 of the FMC Act that allow some offers to be made without having to provide all the usual documentation required, ie product disclosure statements.
One of those exclusions is for small personal offers of debt and equity - see clause 12 of Schedule 1. It allows you to make small offers over a 12-month period that can, in total, involve up to 20 investors and raise up to $2 million without having to produce full documentation. Any offer that would result in you exceeding either or both those limits requires full documentation under part 3 of the FMC Act.
If, over several 12-month periods, you gain more than 50 shareholders from small offers, you'll become a FMC reporting entity.
There is also a requirement to give written notice to the FMA if you have relied on the small offers exclusion. Notifications must be made within 1 month after the end of the accounting period in which the offer was made. Refer to clause 17 of Schedule 8 to the Financial Market Conduct Regulations 2014 for the notification requirements. There is not a specific prescribed form to be completed. Notifications should be sent to the FMA at [email protected] with a subject line “Notification of small offer”. There is no need to notify us if you intend to raise capital using any of the other exclusions.
Companies that raise capital through a licensed crowdfunding platform, relying on classe 6 of Schedule 1, are not considered FMC reporting entities. This is because the offer is not considered a ‘regulated offer’ under the FMC Act.
Instead, these companies will be subject to the financial reporting requirements under the Companies Act 1993.