If you were wondering what to pack for your holiday reading this summer, then look no further. Today, the Ministry of Business Innovation and Employment (MBIE) released its 200 plus page discussion paper on the regulations and registers which are essential to the operation of key aspects of the Financial Markets Conduct Bill (FMC Bill).

There is a tight submission timeline given the amount of detail covered in the discussion paper (and the 346 questions MBIE is seeking responses on). The closing date for submissions is 1 March 2013. A copy of the discussion paper is available here.

Although many will be wary of yet another round of consultation on the changes to New Zealand’s securities laws, it is important for market participants to continue to be engaged in the process. These regulations will form a key component of the new securities regime.

What is covered in the discussion paper?

This consultation is largely directed at generating industry feedback on various policy issues relevant to the regulations which need to be made under the FMC Bill. The outcome of the consultation will assist MBIE to finalise their own policy positions on the regulations for Cabinet approval. Once Cabinet has approved the policy content for the regulations and the FMC Bill is passed into law, MBIE have indicated that they will release an exposure draft of the regulations for further consultation. They also intend to undertake consumer testing on the form of disclosure documents.

This consultation includes discussion on:

Disclosure

  • the form and content of the new Product Disclosure Statements for regulated offers of financial products – with separate discussion on different approaches to be taken for each type of financial product - debt securities, equity securities, managed investment products and derivatives;

  • whether provision should be made for shorter PDS content for some offers of financial products (e.g., offers by listed issuers or offers to existing holders);

  • regulations for ongoing disclosure to keep investors informed after the products are issued;

  • limited disclosure for offers that do not require a PDS;

Registers

  • what the register of offers of financial products made under Part 3 of the FMC Bill and the register of managed investment schemes made under Part 4 of the FMC Bill might look like and how they may function;

Scope, exclusions and offer process

  • the scope of the fair dealing provisions in Part 2 of the FMC Bill (including whether the provisions should cover insurance contracts);

  • possible relief from disclosure-related obligations in Part 3 (e.g., the need to give a PDS before accepting an application for a financial product; and further exclusions for continuous issuers);

  • the boundaries of various exclusions in Schedule 1 that determine whether or not an offer requires disclosure under Part 3 (e.g., whether the product value threshold for a wholesale investor should be increased from $500,000 to either $750,000 or $1,000,000);

  • the role of mutual and unilateral recognition of other disclosure regimes;

  • the application of financial reporting obligations to issuers who make offers under the exclusions in Schedule 1;

  • regulations on matters ancillary to the offer process (e.g., prohibitions on lodging supplementary documents and detailed provisions on refunds in the event of defective disclosure);

Governance of debt securities and managed investment schemes

  • defining particular types of managed investment schemes and their registration requirements (where the FMC Bill does not already do so) to allow for different treatment or different rules for each type;

  • the required content and implied terms for governing documents for debt securities, deposit takers and registered schemes and the regulation of meeting procedures;

  • regulations relating to issuer reporting requirements;

  • various exceptions and permissions, such as exceptions from the obligation to lodge a statement of investment policy and objectives and permitted related party transactions;

Governance requirements for all regulated products

  • regulations for registers of financial products to be kept by all issuers;

Dealing in financial products on markets

  • regulations required to implement the financial product markets (namely, stock exchanges, listed debt markets, futures exchanges and other markets in which financial products are traded) regime in Part 5 of the FMC Bill; and

Licensing

  • the criteria and licence conditions for fund managers, derivatives dealers, providers of discretionary investment management services, independent trustees of restricted schemes and regulated intermediaries (such as person-to-person lending services and crowd-funding platforms) under Part 6 of the FMC Bill.

What's the timeline for the FMC Bill and the FMC regulations?

MBIE are proposing an ambitious timeframe for the finalisation of the FMC Bill and the regulations. At this stage they are working to:

  • complete consultation of the FMC regulations by 1 March 2013;

  • finalise any Supplemental Order Papers on the FMC Bill by the end of March 2013;

  • obtain Cabinet approval of the content of the FMC regulations by May 2013;

  • pass the FMC Bill by the end of May 2013 and bring the initial provisions of the Act into force;

  • release the exposure draft of the FMC regulations for consultation in October 2013;

  • finalise the register of offers of financial products and register of managed investment schemes in October 2013;

  • promulgate the FMC regulations by February 2014;

  • bring the FMC Act and FMC regulations mostly into force by April 2014 with a two-year transition period under which issuers can choose to comply with old law expiring in April 2016.