Phase 1 – from 1 April 2014

With less than a month to go, we now have certainty over the first implementation phase of the Financial Markets Conduct Act 2013 (FMCA). Following the enactment of a raft of legislation last week, the Phase 1 provisions (and the regulations required to give effect to those provisions) will come into force on 1 April. It is reassuring to see that there are no major changes from the Government’s earlier announcements.

As expected, the Government has fast-tracked a number of measures directed at improving access to New Zealand’s capital markets, particularly for smaller fundraising initiatives. This includes the provisions which facilitate equity crowd funding and peer-to-peer lending, which are intended to provide further avenues for early-stage and growth companies to raise capital. Companies will also be able to take advantage of the new “small offers” regime and the reduced disclosure required for offers made under employee share schemes. Listed issuers will be able to conduct rights issues through market announcements (similar to the Australian “cleansing notice” regime) rather than a simplified disclosure prospectus. A summary of Phase 1 is set out in the table below.

We are pleased to see that the Government has decided to delay the introduction of the separate trust account obligations for brokers which, once enacted, would prohibit brokers from placing “buffers” of broker funds in client money trust accounts. This will now come in as part of the second implementation phase.

The key provisions of the FMCA have been reserved for Phase 2, which is expected to be brought into force on 1 December this year. This is when we will see a complete overhaul of the disclosure requirements for offers of securities – including the new look “Product Disclosure Statement” and the online offer registers. There is still a lot of work to be done in this area and we look forward to the next consultation round on the disclosure requirements, which is scheduled to take place during April and May.

Overview of Phase 1

Click here to view the table.

Links to the relevant legislation

To access the legislation relevant to the implementation of Phase 1 of the FMCA click on the links below:

Financial Markets Conduct Act 2013

Financial Markets (Repeals and Amendments) Act 2013

Financial Markets Legislation (Phase 1) Commencement Order 2014

Financial Markets Conduct (Phase 1) Regulations 2014

Financial Advisers (Custodians of FMCA Financial Products) Regulations 2014

Securities Amendment Regulations 2014

Financial Reporting Legislation Commencement Order 2014

Companies Act 1993 Amendment Regulations 2014

Financial Reporting (Amendments to Other Enactments) Act 2013

Also see the Financial Reporting Act 2013 (FRA) for related provisions to the financial reporting regime in Part 7 of the FMCA.

As a result of the changes being made to the financial reporting regime the Financial Markets Authority (Levies) Regulations 2012 are being amended by the Financial Markets Authority (Levies) Amendment Regulations 2014 to take into account new definitions under the FRA and the Financial Reporting (Levies) Regulations 2014 will replace the Financial Reporting Levies Regulations 2012. Both of these regulations come into force on 1 April 2014.