Draft regulations covering the implementation of phase one of the Financial Markets Conduct Act and the new disclosure requirements have been released by the Ministry of Business Innovation and Employment (MBIE) for consultation.
Submissions close on 5 December 2013.
We comment on the key topic areas below.
Exclusions to apply from 1 April 2014
These have been selected because they are “growth focused” and relatively “stand-alone”.
- Same class listed offers (this exclusion will be particularly useful for seasoned debt capital market issuers and to facilitate greater retail participation in placements and block trades)
- Small personal offers – a $2 million limit each 12 months from 20 investors
- Crowd funding and peer-to-peer lending service providers (with a proposed $15,000 per investor limit in addition to the previously announced caps applying also to small offers –the $2 million limit each 12 months, although contributions from wholesale investors will not count toward the cap)
- Employee share purchase schemes
- Dividend reinvestment plans
Because of the complexity of the disclosure requirements, Cabinet instructed MBIE to undergo a further round of consultation before drafting the detailed PDS content regulations.
MBIE has produced mock key information summaries (KIS) for equity securities, debt securities and other managed investment schemes and has produced a full mock-up PDS for managed funds.
Industry discussion on the new regime is timely, given the Financial Market Authority’s provocative report earlier this week on the first year of implementation of its Guidance Note on effective disclosure.
For equity disclosure, MBIE has floated a possible 80-page limit on document length as a “circuit breaker” to push market participants toward shorter documents. This recognises the considerable adjustment involved.
Feedback is sought on:
- the proposed content for the PDS, offer register and on-going disclosure requirements
- where the appropriate balance sits between flexibility and standardisation and between simplicity and over-simplification
- whether the proposed structure is logical, and
- whether there are any technical issues it needs to be mindful of in the drafting process.
No surprises here. The draft regulations are consistent with the framework set out in the Cabinet Papers (Chapman Tripp commentary available here) and with the approach followed in the trustee licences regime. The emphasis is on providing flexible conditions for different participant categories.
Two other exposure drafts will be released.
- Draft regulations covering phase two of the legislation (the governance regime, financial products markets, DIMS provider and derivatives issuer obligations) and licensing fees. This is due out either late this year or in February 2014.
- Draft disclosure requirements, presumably incorporating the response to submissions made in this round.
The Phase One regulations will be replaced by a full set of regulations in mid-2014.