New class exemptions from the disclosure, governance and reporting requirements of the Financial Markets Conduct Act 2013 (FMCA) have been approved to come into effect before the end of July 2016.
They will apply to issuers from specified jurisdictions making certain offers into New Zealand. Continuing relief will also be provided for overseas issuers of dividend reinvestment plans (DRPs) and rights issues.
New class exemptions
The exemptions, approved by the Financial Markets Authority (FMA), will be available for two categories of offers.
- Incidental offers, which are offers made to existing New Zealand investors by issuers listed in certain recognised jurisdictions (likely to include Australia, the US, Canada (Ontario), the UK, Ireland, France, Germany, the Netherlands, Switzerland, Singapore and South Africa).
- Ancillary offers, which are offers made under the laws of an overseas jurisdiction on certain recognised overseas exchanges (the NYSE, NASDAQ and the LSE), which the overseas issuer wishes to extend to New Zealand investors.
In each case, the issuer will need to comply with certain minimum conditions. The exemptions are intended to preserve the treatment for overseas issuers under the existing Securities Act (Overseas Companies) Exemption Notice 2013 and the Securities Act (Overseas Listed Issuers) Exemption Notice 2002.
The FMA has also approved three other forms of exemptive relief.
- Overseas issuers with a primary listing on a recognised overseas exchange will be able to use their overseas financial statements and auditors as an alternative to the financial statement and audit requirements of the FMCA. This will apply where:
- the financial statement is prepared in accordance with accounting standards that are broadly comparable to the NZ GAAP, and
- the auditor is subject to broadly comparable standards to those that apply in New Zealand, including independent auditor oversight.
- Existing overseas issuers who have already issued securities under the former Securities Act 1978 exemption notices will be exempt from:
- the ongoing disclosure, governance, financial reporting and audit requirements of the FMCA, and
- having to notify all security holders that the requirements of the FMCA will apply after the effective date for the securities.
- Overseas custodians, registered banks and licensed insurers will be able to use assurance and audit reports prepared under the laws of their own jurisdiction (subject to certain conditions). These will:
- exempt overseas custodians which conduct robust assurance engagement in the country where they are based from having to obtain assurance engagement from a New Zealand qualified auditor, and
- allow overseas registered banks and licensed insurers to use Australian auditors to audit their New Zealand business financial statements and remove the New Zealand specific requirements where they are not aligned. This exemption will remedy issues in the Financial Markets Conduct (Overseas Registered Banks and Licensed Insurers) Exemption Notice 2015.
This flexibility for overseas issuers will continue to encourage broader participation within the New Zealand market while maintaining market integrity through access to information and investor protection.
Chapman Tripp comment
The exemptions provided by the FMA are appropriate and ensure that, where the overseas regulation is at least equivalent to that available in New Zealand, issuers will not have to comply with all of the FMCA requirements.
We have raised with the FMA some further areas for improvement in this area. They include:
- difficulties with the requirement on overseas issuers in some situations to prepare New Zealand branch financial statements (where they conduct business in New Zealand)
- problems some New Zealand incorporated companies listed on ASX have, and
- the need to address different foreign law financial statement signature requirements.
We are hopeful that the financial form of exemptive relief will address these issues.
The exemptions will be finalised by the end of July 2016 and will be available on the FMA website or the New Zealand legislation website.
If you are an overseas issuer contemplating an offer in New Zealand, please contact one of our experts for advice on the exemptive relief that may be available.
Our thanks to Brendon Orr for writing this brief counsel. For further information, please contact the lawyers featured.