Issuers offering under the FMC Act regime have a number of 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.
Offers disclosure requirements
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.
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:
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 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.
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 firstname.lastname@example.org 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.
Making research and other information available to retail investors
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.
Ongoing register and record-keeping duties
These obligations vary depending upon the type of issuer or offer, but generally include:
maintaining a register of regulated financial products they have issued
ensuring the register is audited or reviewed by a qualified auditor
keeping accounting records to support the preparation of compliant financial statements
ensuring their financial statements are audited at least once a year by a licensed auditor or registered audit firm
providing certain information (such as annual reports or financial statements) to investors on request.
Financial reporting obligations
As an FMC reporting entity, you must do all of the following:
keep proper accounting records to help you prepare compliant financial statements — records must be kept in English and a copy must be kept in NZ
prepare financial statements for your group's operations — those financial statements must comply with generally accepted accounting practice in NZ
have your financial statements audited by a licensed auditor or registered audit firm
lodge your financial statements and the auditor’s report on them with the Companies Office within 4 months after your balance date.
If you are an FMC reporting entity at any point during an accounting period, you are required to comply with these requirements for the full accounting period.
Maintain high standards of corporate governance and board behaviour
This handbook assists directors, executives and advisers of non-listed and public-sector companies, and other entities, to apply corporate governance principles to their particular entity. The principles do not impose any new legal obligations, and reporting against them is voluntary. However, the principles do set out standards for corporate governance that we believe directors and executives should apply, and report on, to their investors, shareholders and stakeholders.
Reporting duties under Part 4 FMC Act
Information sheet: Reporting duties under Part 4 FMC Act
Provide prescribed reports to supervisor – to be prescribed by Regulations (section 114).
Provide requested information and reports to supervisor (section 115).
Report contravention or possible contravention of issuer obligations to supervisor (section 116).
Report serious financial problems to supervisor (section 118).
Duty of NBDT to provide reports to supervisor (FMC Regulations).
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.
Debt issuer relationships and accountabilities
The FMC Act encourages and expects increased supervisor interaction. The FMC Act supports this through the accountability and reporting framework it establishes. On an ongoing basis, your supervisor has a requirement to engage and monitor you more actively. You also have obligations to engage and interact effectively and collaboratively with your supervisor. We expect you to work effectively with your supervisor to ensure governing documents are effective and fit for purpose.
Your supervisor is your ‘front line’ compliance supervision relationship. This means you will first need to address issues raised by your supervisor directly with them, not with FMA. Your supervisor may seek our involvement if necessary or desirable. We will have an increased focus on working with and through your supervisor in the first instance wherever appropriate, rather than directly with you. In some circumstances, it may be appropriate for us to engage directly with you and in those cases, we will keep your supervisor informed.
Peer-to-peer lending borrowers 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.
Crowdfunding issuers obligations
Under exemptions in financial markets law:
crowdfunding issuers don't need to prepare a product disclosure statement.
your crowdfunding 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.
Fair dealing obligations
The FMC Act sets out minimum compliance standards of behaviour for people operating in the financial markets.
misleading or deceptive conduct
false or misleading representations
offers of financial products in the course of unsolicited meetings.
Please contact us Reporting misconduct, making a complaint, or giving us a ‘tip-off’.
You must provide a written risk assessment of the money laundering and financing of terrorism activity you could expect in the course of running your business.
You are required to implement an anti-money laundering and countering financing of terrorism programme that includes procedures to detect, deter, manage and mitigate money laundering and the financing of terrorism.
You are required to appoint a compliance officer to administer and maintain your programme.
You are required to perform due diligence processes on your customers. This includes customer identification and verification of identity.
You are required to report suspicious transactions.