Anyone offering financial products for issue or sale needs to comply with financial markets legislation. The Financial Markets Conduct Act 2013 (FMC Act) defines these people as issuers.
Issuers are people who are involved in first making a financial product available. See section 11 of the FMC Act. They include:
People who are the issuer for an offer of finanical products for issue or in any other case the person who has the capacity, or agrees to, transfer the financial products. See section 6 of the FMC Act for more information.
|Product type||Description||Link to the legal definition|
A product where there is a right to be repaid money or paid interest on money.
A share in a company, industrial and provident society or building society.
Managed investment product
An interest in a managed investment scheme that allows investors to participate in, or receive, financial benefits produced principally by the efforts of another person under the scheme. There are two types of managed investment schemes:Managed fundSchemes where either the interests are ordinarily continuously offered and redeemed on a basis calculated wholly or mainly on the value of the scheme property, or where at least 80% of the scheme’s assets are in certain specified liquid assets.Other managed investment schemesExamples of managed investment schemes that are not managed funds could include forestry partnerships and property syndicates.
A product where an agreement is reached under which consideration may be required at a future time, and the value of the agreement or consideration is linked to something else, for example an asset, a rate, an index or a commodity. This covers a wide range of products including:
A regulated offer means an offer of financial products to one or more investors where at least one of those investors requires disclosure, usually a product disclosure statement. See section 41 of the FMC Act .
Note: If a Schedule 1 exclusion applies to all investors, then it isn’t a regulated offer.
Information about ‘regulated offers’ must be disclosed in a product disclosure statement (PDS) and on the Disclose Register. Together, this information must include all material information about the offer of a financial product and be up-to-date, accurate and understandable. The purpose of the information is to assist investors with their investment decisions.
Product disclosure statement (PDS)
The PDS is aimed at prudent but non-expert investors. It is required to be prepared in a clear, concise and effective manner and has a prescribed format and content to make offer information accessible.
A compulsory key information summary (KIS) at the front of the PDS gives investors an overview of key characteristics and the specific risks of the financial product.
A PDS must comply with prescribed length limits. These limits are the maximum allowed – issuers are encouraged to use less where possible. The maximum limits are:
|Product type||Page limit
(printed A4 pages)
|Or, word limit|
|Managed investment scheme:
• managed fund
• other MIS
The disclose register
Material information about a regulated offer not included in a PDS needs to be uploaded to the Disclose Register. It also has online registers for managed investment schemes split into managed funds and other managed investments schemes.
The Disclose Register provides supporting information for investors, and enables advisers and analysts to carry out more in-depth research and analysis. We published guidance on the content and form of the Disclose Register information.
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:
Depending on the exclusion, limited or no disclosure may be required.
There is also a requirement to notify the FMA if you are using the small offers exclusion. Notifications must be made within 1 month of the end of the accounting period in which the offer is made. There is no need to notify us if you intend to raise capital using any of the other exclusions.
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.
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.
Clear, concise and effective offer information helps investors make more informed investment decisions.
We offer a pre-registration review service to help issuers, and their directors, feel more confident their offer documents are likely to satisfy our expectations.
We focus on reviewing new, novel and complex offers
You do not need to talk to us before registering your documents, particularly where there are similar types of offers already in the market that have good ‘precedents’.
However, if you are offering a novel or complex offer, we are happy to talk with you to clarify whether you would benefit from the additional guidance that a pre-registration review provides.
What you can do to help
To speed up our review, we recommend sharing a near complete draft with us sufficiently early in the process, so you are still open to making substantive changes to the content or structure where necessary. Any proposed financial information should also be included.
In most cases, we will only provide feedback on one draft Word version of an offer document, and, should you request it, a design version when close to registration. This is to get a sense of how the information in the Word version will be presented.
We may agree to review a further draft of an offer document on a case-by-case basis. We are happy to discuss our feedback in person with you and your advisers. You should include representatives of the issuer in these discussions (not just the issuer’s professional advisers).
We also encourage you to indicate any exemptions that may be sought early on so we can start our internal review of these exemption applications.
How we provide guidance
Depending on the circumstances and the timetable, we can provide guidance either in writing or verbally (either by phone or in-person) or both.
We expect you and your advisers to take our feedback on board and make changes that reflect this feedback, unless you disagree and say why. At this point, we are happy to have a further discussion.
We aim to review an offer document within 10 working days. However, if you let us know what your timetable is early on, we may be able to accommodate this. We can review a design version of the document more quickly if required (but this may be close to print deadlines and launch dates).
We will let you know the person who is leading your review from the start. We will also let you know about the timing and the extent of our review. It is also helpful for us to know your proposed timetable and who is involved from your end, ie, issuer’s representative, legal advisers, auditor, bankers/lead managers and any other key stakeholders.
To get your pre-registration review underway please contact us (ensure you insert "PDS HELP" in your subject line).
In addition to the obligations for offer information, an issuer has ongoing obligations under the FMC Act. These obligations vary depending upon the type of issuer or offer, but generally include:
Additional obligations of listed issuers
A listed issuer is one who is party to a listing agreement with a licensed market operator for a licensed market. Listed issuers must comply with the listing rules of the relevant licensed market, as set by the licensed market operator. These issuers, and certain persons related to them, also have ongoing disclosure obligations.
Listed issuers are required to disclose information to the market in accordance with any continuous disclosure provisions of the listing rules of the relevant licensed market. The continuous disclosure provisions may vary between different licensed markets.
Directors and senior managers of listed issuers, and persons holding specified amounts of quoted voting products of a listed issuer are required to disclose certain information to the issuer and to the market by the FMC Act. Listed issuers are required to keep registers of that disclosed information.
We have developed an information sheet for brokers, issuers and research providers to encourage wider publication of research on IPOs for retail clients.
It clarifies that under NZ law there are no required black-out periods and that the FMC Act has a more flexible regime for retail advertising. It also provides examples of the typical controls we expect investment banking firms to have in place to manage conflicts of interest.
Good corporate governance and board behaviour supports the principles underpinning the FMC Act.
Information about our expectations for good corporate governance can be found in these publications: