Yesterday Parliament passed the Financial Markets Conduct Act (FMC Act), a little over three years since the initial discussion document was released on a new securities law framework. The FMC Act represents the most sweeping reform of New Zealand's securities laws in several decades and is a culmination of a considerable law reform initiative by law makers, the officials, market participants, and the legal community.
The Financial Markets Conduct Bill was divided into two separate bills just prior to being passed. In addition to the FMC Act, Parliament has passed the Financial Markets (Repeals and Amendments) Act. This Act contains provisions that were previously in Part 9 and Schedule 4 of the FMC Bill relating to the repeal of, and amendments to, existing securities and financial services legislation.
Parts of both Acts will come into force after the Acts receive Royal assent, mainly to allow for regulations required under the Acts to be progressed. The provisions relating to the new register of securities offers (which has been in place since 1 July this year) will be repealed at that time.
The key provisions of both Acts will not be brought into force until next year. The FMA has indicated that the implementation dates will be in two phases as outlined below:
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There are also transitional periods built into the Acts to allow time to implement various changes. This includes a one year transition period (which will start from December 2014) for issuers to elect to comply with the current securities offering rules, and a two year transition period (also starting from December 2014) for issuers that continuously issue debt securities or managed investment products.
Final amendments to the FMC Bill
Before the FMC Act was passed, Supplementary Order Paper 337 was released with some final substantive and technical changes to the FMC Bill. Key aspects of that SOP are as follows:
Unsubstantiated representations: the provisions regarding making unsubstantiated representations have been amended to provide that they do not apply to representations in product disclosure statements, register entries, and other disclosure documents. A similar change will be made in relation to the corresponding provision that will be inserted into the Fair Trading Act 1986 by the Consumer Law Reform Bill.
One month withdrawal period for applicants: in circumstances where disclosure for an offer is defective, the FMC Act now provides that an offeror may, if permitted by the regulations, give an applicant a period to withdraw their application (as an alternative to requiring the offeror to give the applicant one month to confirm whether he or she still wants to acquire the products). We will wait to see how the regulations prescribe when a withdrawal right will be able to be exercised, and what the period of withdrawal will be. This late change appears to have been made to allow for different regimes and time periods in relation to an ongoing continuous offer and an initial public offering. On recent IPOs, the FMA has granted exemptions from the existing Securities Act to permit a shorter withdrawal period (five working days on the Mighty River Power offer and seven working days on the Z Energy offer). It is hoped that similar time periods will be prescribed in the regulations for IPOs.
Disclosure exclusions: the disclosure rules for sale offers will not apply in respect of financial products that have previously been offered, in prescribed circumstances, under an offer of financial products of the same class as quoted financial products.
Transitional provisions: the existing wholesale investor and eligible person exclusions in the Securities Act 1978 will continue for a transitional period to allow new compliance processes to be put in place.