Trading securities and derivatives
We administer the Securities Markets Act 1988, which regulates trading on registered exchanges and authorised futures exchanges.
- Prohibits insider trading and market manipulation on securities and futures exchanges.
- Includes continuous disclosure to require listed issuers to disclose price-sensitive information as it arises.
- Requires directors, officers of listed issuers, and substantial security holders in listed issuers to disclose holdings and trades.
- Enables registration of securities exchanges and oversight by the Financial Markets Authority.
- Enables authorisation of futures exchanges and futures dealers by the Financial Markets Authority.
The Securities Markets Act is enforced by the Financial Markets Authority.
We are currently reviewing the Securities Markets Act as part of the Review of Securities Law. The Financial Markets Conduct Bill will replace the Securities Act 1978, the Securities Markets Act 1988 and related laws.
Regulations and administrative powers
We administer a number of related regulations, and provide advice to the Minister of Commerce on the exercise of their statutory powers under the Securities Markets Act.
The Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003
These regulations were developed in 2003 and 2004 and amended in 2008.
The Securities Markets (Substantial Securities Holders) Regulations 2007
These regulations were developed in 2006 from consultation on the regulations to accompany the Securities Legislation Bill.
They replaced the Securities (Substantial Security Holders) Regulations 1997, which had replaced the Securities (Substantial Security Holders) Regulations 1989.
The Securities Markets (Market Manipulation) Regulations 2007
These regulations provide exemptions from market manipulation for market stabilisation, short selling and crossings. The regulations were developed in 2006 from consultation of the regulations to accompany the Securities Legislation Bill.
The Securities Markets (Insider Trading Exemption—Futures Contracts) Regulations 2010
These regulations exempt certain conduct relating to commodity derivatives to better tailor the insider trading laws to derivatives markets. They were developed in 2010, following a Securities Commission consultation process.
Requiring markets to register under the Securities Market Act 1988
The Securities Markets Act allows the Minister of Commerce to declare that a securities market must cease operating or become registered. Draft guidelines on the use of this power were released in November 2003.
Unlisted was reviewed in respect of a possible use of this power in 2004 and 2005. The Minister decided not to require registration.
Recent reviews and legislative history
The Securities Markets Act has been amended by the Financial Markets (Regulators and KiwiSaver) Bill that also established the Financial Markets Authority.
The resulting Securities Markets Amendment Act 2011 made the following changes.
- There are new powers to exempt securities markets from disclosure.
- Changes to market rules are now approved by the Financial Markets Authority rather than the previous disallowance process through the Minister.
- The Financial Markets Authority can request changes to market rules on certain matters.
- Exchanges now have a number of general obligations, such as to do anything practical and necessary to ensure that each of its registered markets is fair, orderly, and transparent.
- There is now a clearer and more formal process for the Financial Market Authority’s oversight over registered exchanges, including action plans and ministerial directions if exchanges don't meet their obligations.
- Registered exchanges must ensure the Financial Markets Authority has access to real time trading and other information.
- There is a new registration system for overseas exchanges.
- The Securities Markets Act now provides for regulation of unsolicited, off-market offers of securities.
The Securities Markets Act was previously subject to a comprehensive review of securities trading law (2003-8) that culminated in the Securities Markets Amendment Act 2006 (based on the Securities Legislation Bill) and regulations.
The current provisions of the Securities Markets Act governing insider trading and market manipulation, and disclosure by substantial security holders were developed in that review, and were incorporated into the Financial Markets Conduct Bill with relatively little change.
The Review of Securities Trading was preceded by the Securities Markets and Institutions Bill, from which the Securities Amendment Act 2002, the Takeovers Amendment Act 2002 and the Securities Markets Amendment Act 2002 were enacted.
The Securities Markets Amendment Act 2002 implemented the current directors and officers disclosure obligations and the continuous disclosure regime that provides statutory backing for exchange listing rules. It also provided for some Securities Commission (now Financial Markets Authority) oversight over securities exchanges, including a rule approval structure and ownership cap for securities exchanges, and obligations for exchanges to provide information and assistance to the Commission.