28 November 2014

Phase two of financial markets law completes long-term overhaul

Media release
MR no. 2014 - 042
28 November 2014

The second phase of New Zealand’s new capital markets and financial services law takes effect from Monday (1 December). Phase two includes licensing provisions that extend to several hundred further businesses, and a major shift in the quality of investor disclosure for financial products.

The chief executive of the Financial Markets Authority (FMA), Rob Everett, said phase two of the Financial Markets Conduct Act 2013 (FMC Act) largely completes the regulatory overhaul that began with the Capital Market Development Taskforce’s final report in 2009.

“New Zealand now has some of the most modern markets regulation in the world,” Mr Everett said.

“The law that takes effect on Monday was the subject of wide consultation. It has broad support among finance professionals, businesses, legal advisers and auditors.

“Firms are adjusting steadily to the new regulation. Indeed, investors and consumers are seeing results already.

“For example, in debt and equity offers, we’ve already seen significant improvements this year in offer documents.

“Boards of issuers have recognised the objectives of the FMC Act and applied the clear, concise and effective principle to their offer documents, even though the new disclosure standards only take effect from 1 December.”

Mr Everett said the FMC Act was part of a comprehensive overhaul of regulation. In addition to the FMC Act’s focus on licensing and conduct, the overhaul also included an expanded prudential role, for the Reserve Bank, covering banks, insurers, and non-bank deposit-takers.

“New Zealand has taken a coherent approach, recognising that regulation works when it’s implemented as a whole. It’s also a coordinated approach that’s designed to provide results without imposing substantial, unnecessary costs.”

Features of phase two of the FMC Act include:

  • Product disclosure statements for financial products – including debt and equity – made concise, and subject to page limits. An online register will include all the material information on offers under the FMC Act. Offers can be made under the Securities Act 1978 during a transition period, but the FMA encourages issuers to shift to the new arrangements at the earliest opportunity.
  • Further professionals come under FMA licensing, including managers of registered schemes (managed investment schemes), derivatives issuers, and independent trustees of restricted schemes. Providers of discretionary investment managements services (DIMS) will also be licensed.

Several hundred organisations and individuals are expected to apply for licences over the next two years, bringing more than 11,000 firms, professionals, registered schemes, and funds under the FMA’s mandate.

Phase one of the FMC Act took effect from 1 April 2014. Phase one included:

  • A fair dealing requirement covering all firms or professionals that are dealing in or supplying financial products or financial services
  • A more proportionate liability regime - relative to that under existing securities laws - applying to directors of firms making offers or providing financial products under the FMC Act
  • More concise and timely financial reporting. About 2,300 firms and schemes are reporting financial information under the FMC Act, and are subject to regulatory oversight by the FMA.

Other initiatives under the FMC Act, or as a result of the FMC Act, this year are:

  • Providers in two new categories - peer-to-peer lending and equity crowd funding - licensed by the FMA. Providers are now offering both services
  • The NZX’s proposed stepping-stone market for emerging firms (‘NXT’), registered as a market
  • Issuers using the exemptions providing streamlined processes for ‘same class’ offers, making it easier to raise further capital.


Shae Skellern
09 300 0465
021 847 192
[email protected]