623 pages of draft regulations for FMCA – and it's not over yet

There’s a lot to read but not much new in the 623 page draft regulations for phase 2 implementation of the Financial Markets Conduct Act (FMCA) on 1 December this year. 

They extend the unsolicited offer regime to crowd funding and peer-to-peer lending and reflect some further thinking in relation to disclosure, governance and the transitional provisions but the changes are largely technical.

The release is intended to assist planning by business, not to seek further feedback as the consultation is now complete.


The prescribed page lengths and font sizes for Product Disclosure Statements (PDS) are unchanged and the general approach is consistent with the final Cabinet decisions.  However the final detailed disclosure requirements reflect improvements from the most recent consultative round.  For example, more flexibility is provided for equity forecasts and for debt, comparable pricing charts are now optional.

Other changes identified by the Ministry for Business, Innovation and Employment (MBIE) are:

  • the limited disclosure required for same or prior ranking offers of debt securities (refer to regulation 22 of the regulations) 

  • the ability of DIMS providers to omit historic returns or to disclose “model” historic performance of their investment strategies on a go-forward basis (refer to clauses 29 to 36 of Schedule 21 of the regulations), and
  • the introduction of ongoing disclosure requirements for convertible financial products with an investor option to convert.  Disclosure must be kept up-to-date during the conversion period (refer to regulation 54). 


  • The frequency and content of supervisor reporting can be set outside the governing document (refer to regulation 83).
  • Quarterly reporting on related party certificates will be required (refer to regulation 100).

Unsolicited offers

The protections against low ball offers have been extended to crowd funding and peer-to-peer lending (refer to regulations 160 and 184).

A detailed description by Chapman Tripp of the low ball offer regime is available here.

Transitional provisions

The transitional provisions are still being worked through and are subject to further change.  Changes thus far include:
  • provisions to allow old “wholesale offers” exemptions to be relied on for a further six months (refer to clause 16 of Schedule 1 of the regulations), and
  • extension for six months to new futures dealers (not authorised under the Securities Markets Act) of the transitional relief provided to derivatives issuers (refer to clause 17 of Schedule 1 of the regulations).

Timeline from here

The regulations will absorb and replace the Phase 1 regulations, issued on 24 February this year.  They will come into effect on 1 December 2014.  MBIE hopes to have addressed most of the outstanding matters before this date.
However some issues will need to be dealt with outside this deadline.  They include:
  • short-form disclosures for offers of shares or other products that rank equally or in priority to existing quoted financial products (other than the “same class” disclosure requirements)
  • an alternative version of the managed fund PDS which incorporates or allows use of fund updates, and
  • a version of the fund update for non-fund investment options. 
Our thanks to Natan Karon for writing this Brief Counsel.  For further information on the Phase 2 regulations, please contact the lawyers featured. 

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Related topics: Financial services regulation; Financial Markets Authority; Financial Markets Conduct legislation

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