Scope of AML/CFT Act for issuers and participants in issues

​Issuers and participants in securities issues can be more certain of how the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 will affect them following the release last week of guidance from the Financial Markets Authority (FMA). 

A copy of the FMA’s Guideline is available here

How the Act applies to issuers and participants in issues

A person has obligations under the Act if they are a “reporting entity”, which includes a “financial institution”.  The Act lists a range of financial activities which, if provided in the ordinary course of business, will mean a person is a “financial institution”.  One such activity is “participating in securities issues and the provision of financial services related to those issues”. 

The key points the FMA has made in its Guideline are that:

  • a person who only issues securities, does not provide "financial services" (as defined in section 5 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008) related to the issue, and undertakes no other activities that fall within the definition of “financial institution” in the Act, will not be a reporting entity 
  • an issuer will be a reporting entity if it also provides financial services in relation to the issue, and
  • a person who participates in the issue but is not an issuer will be a reporting entity if it also provides financial services in relation to the issue. 

The Guideline includes the following table of persons that the FMA considers would be “participating” in an issue in relation to different types of securities offers.

Type of security​Participating financial service providers​
​Equity security ​Underwriter Institutional financial advisers Financial adviser Broker Issuers whose on-going business involves supplying financial services to the issue
​​Debt security ​​Licensed trustee Underwriter Institutional financial advisers Financial adviser Broker Issuers whose on-going business involves supplying financial services to the issue
​​Interest in an Unit Trust ​Trustee of the Unit Trust Manager of the Unit Trust Financial adviser
​Interest in a KiwiSaver scheme ​​KiwiSaver trustee Manager of the scheme Financial adviser
​Interest in a contributory mortgage ​Contributory mortgage broker Financial adviser
​Participatory securities e.g. bloodstock schemes ​Licensed statutory supervisor Manager whose ordinary course of business involves providing financial services in relation to securities issued under the scheme Financial adviser
​Interest in registered superannuation scheme ​Trustee of the scheme Manager of the scheme Financial adviser
​Life insurance policy ​​Financial adviser Broker


The Guideline is useful in that it clarifies the FMA’s intended approach to one category of the definition of “financial institution”.  Issuers may still, however, be caught under other categories of the definition (for example, the Guideline makes it clear that managers of collective investment schemes who issue securities will likely be caught under the category of “investing, administering, or managing funds or money on behalf of other persons”).

Territorial scope of Act

The Act does not define its territorial scope, and the Guideline has not formally clarified this.  So, there is still some uncertainty as to how the Act applies to overseas persons. 

However, the FMA has stated in the Guideline that it considers a business to be participating in securities issues in the ordinary course of business if it is registered under the Financial Service Providers (Registration and Dispute Resolution) Act.  That Act applies only to persons who are ordinarily resident in New Zealand or have a place of business in New Zealand, and to certain licensed financial service providers (e.g. AFAs, QFEs, registered banks, trustees and statutory supervisors).

This may be indicative of the approach the AML/CFT supervisors intend to take to interpreting the territorial scope of the legislation generally.  Formal guidance from the supervisors on the Act’s territorial scope would still be helpful. 

The Act comes into effect fully on 30 June 2013. 

If you would like to discuss how the new Guideline or the Act might affect your business, please contact one of the lawyers featured.

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Related topics: Financial services regulation; Anti money laundering

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