Financial Markets Conduct Act
The Financial Markets Conduct Act 2013 (FMC Act) governs how financial products are created, promoted and sold, and the ongoing responsibilities of those who offer, deal and trade them. It aims to facilitate capital market activity, in order to help businesses to fund growth and individuals to reach their financial goals.
The Financial Markets Conduct Bill was introduced into Parliament in October 2011 and passed into law in September 2013. The new law repeals the Securities Act 1978, Securities Markets Act 1988, and incorporates and amends a range of other related investment legislation.
The implementation of the new law has been phased as follows:
- phase 1 on 1 April 2014 comprising general fair dealing obligations, key growth-focussed initiatives including employee share schemes and enabling financial market participants to become licensed, including for crowd-funding;
- phase 2 on 1 December 2014 comprising the new disclosure requirements, go-live of the Disclose Register, licensing obligations and the remainder of the Act.
The Financial Markets Conduct Regulations 2014 have been made and are available on www.legislation.govt.nz. The regulations came into force on 1 December 2014 (together with consequential amendments to other regulations) and contain the supporting detail needed to implement phase 2, including:
- New disclosure requirements (for the new “product disclosure statement” and the Disclose Register)
- Supporting detail for the new governance and licensing obligations in the Act
- Roll over of existing regulations for financial product markets
- Details supporting the 2-year transition regime in the Act.
Market participants have up to 24 months from 1 December 2014 to comply with the new disclosure and governance requirements. For example:
- Continuous issuers – such as managed funds issuers or non-bank deposit takers – have a two year transition period in which they can continue to offer and allot securities under the Securities Act 1978.
- New one-off issues – such as initial public offerings or corporate debt offers – can still be made under the Securities Act 1978 if the prospectus is registered before December 2015 and the allotment completed within the two year transition period.
- But, new KiwiSaver schemes and superannuation schemes must register under the FMC Act and immediately comply with the new regime.
- Existing providers of discretionary investment management services have until December 2015 to be licensed (but must have put in a licensing application or have updated their adviser business statement by 1 June 2015).
- There is transitional relief for licensed derivatives issuers of between 6 and 12 months from new disclosure, financial adviser, and client funds handling requirements (with some additional short-term relief while licence applications received before December 2014 are being processed).
- A prescribed period has been provided to allow old “wholesale offers” exemptions to be relied on for a further six months.
- Unlicensed financial product markets need not be licensed until 1 December 2015.
Further information about FMC Act implementation and transition is provided by the Financial Markets Authority:
Progress to date
Financial Markets Conduct Regulations in force – December 2014
The FMC Regulations were made on 3 November 2014 and came into force on 1 December 2014. The final regulations correct errors and inconsistencies in the unofficial draft of the FMC Regulations released on 26 September 2014, as well as addressing some further policy thinking on other matters.
Decisions on Discretionary Investment Management regulations
In June 2014 the Minister announced further decisions on the regulation of discretionary investment management services (DIMS) under both the Financial Markets Conduct Act 2013 and the Financial Advisers Act 2008.
These decisions included measures to make the regulatory regime more accessible for smaller DIMS providers and transitional arrangements for existing providers.
The Ministry of Business, Innovation and Employment now invites submissions on the Supplementary Financial Markets Conduct Regulations.
On 6 August 2014 the Minister of Commerce announced decisions on regulations to support the Financial Markets Conduct Act.
This is a supplement to the third exposure draft of regulations under the Financial Markets Conduct Act 2013.
On 15 July 2014 NZX was granted a Ministerial exemption from full continuous disclosure requirements under the Securities Markets Act 1988 (SMA) to operate an alternative disclosure regime on a new market targeted at small and medium sized enterprises.
Feedback was sought on fee setting for phase 2.
Feedback is being sought on a third exposure draft regulations for phase 2.
Feedback sought on a second exposure draft regulations for phase 2.
Licence fees for market services providers under the Financial Markets Conduct Act 2013 and increase of some existing Financial Markets Authority Fees
Submissions were invited on the proposed licensing fees of market services providers under the Financial Markets Conduct Act 2013 ("FMC Act") and on increases to some existing Financial Markets Authority ("FMA") fees.
Financial Markets Conduct Regulations – draft regulations and detailed requirements for disclosure documents
The Financial Markets Conduct Act 2013 will be implemented in two phases with phase 1 coming into effect on 1 April 2014 and phase 2 on 1 December 2014. A substantial body of regulations is needed to implement it.
On 27 June 2013 the Minister announced decisions on proposed regulations to support the Financial Markets Conduct Bill.
On 11 December 2012, the Ministry released a discussion paper on the Financial Market Conduct Regulations. Submissions closed 1 March 2013 and have been published.
The Financial Markets Conduct Bill (FMC Bill) was introduced into Parliament on 12 October 2011, and was reported back from select committee on 7 September 2012. A supplementary order paper containing further changes to the Bill was released on 22 April 2013.
An exposure draft of the Financial Markets Conduct Bill was released in August 2011, with a request for submissions on the technical detail prior to the draft Bill being finalised and introduced to Parliament. The Ministry received 73 submissions on the Bill.
On 22 June 2010 the Ministry released a discussion paper on the review of securities law. 98 submissions were received, which formed the basis for ongoing consultation and the development of recommendations to Ministers.