Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698754341220.pdf (New Zealand)
Financial Markets Conduct Bill Government Bill Explanatory note • • General policy statement The purpose of this Bill is to provide an enduring financial market conduct regulatory regime that promotes confident and informed par- ticipation in New Zealand’s financial markets.
The regime provided by the Bill does this by— • ensuring that investors are provided with understandable and accurate information to guide their decision making: ensuring that governance arrangements in respect of financial products available to the public are robust: minimising unnecessary compliance costs for those raising capital: promoting innovation and effective competition.

• The Bill replaces financial market conduct regulation contained in a number of statutes, allowing for a more coherent regime.
The changes are expected to lead to— • better information for investors in a form that more readily promotes comparison of different product offerings: reduced costs for those raising capital by removing unneces- sary processes such as director certification of advertisements: • 342—1 2 • • Financial Markets Conduct Bill Explanatory note more robust safeguards for investors when others invest money on their behalf (for example, for managed investment schemes and discretionary investment management services): more opportunities for securities exchanges to develop mar- kets suitable for smaller companies.
It is intended that the Bill will be divided by the select committee or at the committee of the whole House stage into separate Bills as follows: • Parts 1 to 8 and Schedules 1 to 3 will become the Financial Markets Conduct Bill: Part 9 and Schedule 4 will become the Financial Markets (Re- peals and Transitional Provisions) Bill.
• Financial products covered by the Bill (Parts 1 and 8) The definitions of financial products that are covered by the Bill have been updated and are intended to provide for treatment based on their underlying substance, while providing a degree of certainty around the treatment of common products.

The Bill defines four types of financial product: debt, equity, managed investment products, and derivatives.
Where the definitions do not result in appropriate out- comes, it is possible for the Financial Markets Authority to designate products into the appropriate category.

Products within a broad def- inition of security that would not otherwise be a financial product will be able to be designated by the Financial Markets Authority to be a financial product of a particular type.

Financial products are not explicitly carved out from the Gambling Act 2003.
The Bill takes this approach on the basis that legitimate financial markets transactions, whether for hedging or for investment purposes, are not gambling within the meaning of the Gambling Act 2003 and are not gaming or wagering contracts under the common law.

Misleading and deceptive conduct (Part 2) General prohibitions on misleading and deceptive conduct, adapted from the Fair Trading Act 1986, are incorporated and apply to fi- nancial markets.
It is intended that conduct regulated by this Bill would normally be dealt with under this Bill by the Financial Mar- Explanatory note Financial Markets Conduct Bill 3 kets Authority, rather than by the Commerce Commission under the Fair Trading Act 1986.

Disclosure and exclusions (Part 3 and Schedule 1) The Bill regulates the offer of financial products for issue (and some offers for sale).
Exclusions from disclosure requirements apply for investors who are considered to be capable of accessing the informa- tion they need (for example, due to their size and experience or their relationship with the issuer) and also for small offers of debt and equity (for example, through angel networks) and under employee share purchase schemes.
A key change from existing legislation is that there are more bright- line safe harbours for these exclusions and investors will be able to self-certify that they meet these thresholds.

In addition, investors who consider that they have the knowledge and experience to assess offers will be able to certify to that and have a professional adviser confirm the certification.

Issuers will be able to rely on these certifi- cates unless they knew or had reasonable grounds to believe that they are incorrect.
Disclosure will be required for offers where no exclusion applies.

The Bill provides for a short product disclosure statement (PDS), which will contain key information for retail investors, alongside in- formation provided on an Internet-based register of offers of financial products.

This will replace the current regime of investment state- ments and prospectuses.
The current disclosure documents are gen- erally seen as overly long and as not providing information in a form that is easy for investors to understand or use to compare products.

The content of PDSs will be prescribed in regulations and is intended to be tailored for different products and designed to enhance com- parability of similar offerings.

The PDS will be aimed at prudent, non-expert investors and required to be worded in a clear, concise, and effective manner.
All other material information will be required to be lodged on the register of offers of financial products, where it will be available for interested investors and analysts.

This register will be designed to aid comparability of offers by investors and also to allow for cost-effective updating of information by issuers.
While offers subject to exclusions will not have to meet the main gov- ernance and disclosure requirements in the Bill, there is provision for 4 Financial Markets Conduct Bill Explanatory note more limited disclosure or other obligations to be prescribed in some circumstances.

This is intended, for example, to allow term sheets to be prescribed for small offers, to ensure that investors receive some basic information, while not imposing the full compliance costs of PDS and register disclosure.
Currently, failure to provide an investor with the required disclosure documents can result in the entire offer being void.

Under this Bill, investors who did not receive disclosure will be entitled to a refund of their subscription and compensation, but the offer to others will not be impacted further.

Governance of financial products and services (Part 4) The Bill makes wide-ranging changes to the governance of financial products and services.
In addition to general registration require- ments, the Bill sets out additional requirements for specific types of managed investment schemes, including KiwiSaver and superannu- ation schemes.

KiwiSaver scheme requirements largely carry over existing requirements.

Superannuation schemes will be required to be for the purpose of retirement, with any other benefits paid or early withdrawal provi- sions being ancillary to that purpose.
In addition, schemes will need to limit new members to those with a specified link to New Zealand (for example, employed by a New Zealand employer or residency) or meet prescribed requirements that would include lock-in and transfer requirements.

Managers of managed investment schemes will now have to be li- censed by the Financial Markets Authority and comply with general duties, including acting in the best interests of scheme participants.

Supervisors of schemes will also have to meet statutory duties.
The Bill also regulates related party transactions in relation to man- aged investment schemes, generally requiring these to be in the best interests of investors, made on arm’s length terms or in certain regu- lated products.

Restricted schemes, which include employer super- annuation schemes, will have a 5% limit on related party transactions, except for investments in registered schemes or some bank products.
The intent of this limitation is to ensure that if an employee’s em- ployer fails and they lose their job, there is a reduced likelihood of Explanatory note Financial Markets Conduct Bill 5 the employee also losing a significant portion of the value of their superannuation scheme.

Financial product markets and licensed services (Parts 5 and 6) Financial product markets and activity on them will be regulated by the Bill.
While the existing requirements for financial product mar- kets will be continued for large markets, provision has been made for “stepping stone markets” under which disclosure requirements and conduct rules can be adapted to the particular market, issuers, and investors involved.

The ability to tailor these requirements may also be beneficial for markets on which only certain types of products are traded, such as exchange-traded funds.
The Bill requires those operating financial product markets to be li- censed unless exempt (either via regulations or if the market does not meet certain size thresholds).

Licensed markets must have their rules approved by the Financial Markets Authority.
Where unsolicited offers to purchase financial markets products are made off-market, the Bill provides for regulations to be made speci- fying disclosure to ensure that offerees are informed as to the value of their holdings and any warnings that have been issued by the Fi- nancial Markets Authority.
A range of financial market participants are required to be licensed to provide products or services and the Bill contains a licensing frame- work, which will apply (with appropriately tailored criteria) to man- agers of managed investment schemes, providers of discretionary in- vestment management services, derivatives issuers, and independent trustees of restricted managed investment schemes.

Detailed licens- ing criteria for the providers of these services and products will be set out in regulations.
Recognising the fact that many financial entities will be licensed in respect of multiple activities, the Financial Mar- kets Authority is required to take account of whether entities seeking licenses are already Qualifying Financial Entities or registered banks (which provides a degree of assurance about the entity’s suitability for a further license).

This should help reduce compliance costs for those entities.
6 Financial Markets Conduct Bill Explanatory note Enforcement and liability (Part 7) The Bill makes changes to the liability regime for contraventions of the law.

The regime is designed to promote compliance with the law and deter conduct that undermines the objectives of the Bill.

It is also designed to promote informed participation in the market by in- vestors through the provision of swift and effective compensation for those suffering harm and through the visible punishment of wrong- doers.
The current liability regime is complex, with liability provi- sions found in different statutes.

This Bill simplifies this regime by including all relevant liability provisions to the extent possible, and by providing an escalating hierarchy of liability.

The Financial Markets Authority will have the power to make orders to prohibit further action in respect of offers of financial products that are likely to deceive, mislead, or confuse, and other contraven- tions of the Bill.
The Bill introduces an infringement notice regime, which will provide an effective remedy for minor compliance-type contraventions.

The Bill places an increased emphasis on civil li- ability for contraventions of the regime, including the ability of the Financial Markets Authority to take civil pecuniary penalty proceed- ings in a wide variety of circumstances.
Serious criminal offences that include the possibility of imprisonment are targeted at egregious violations of the law, such as where the conduct in question involved knowledge or recklessness.

The Bill modifies the current regime in respect of compensation where there is defective disclosure.

The Securities Act 1978 makes it difficult for an investor to obtain compensation due to the need for each investor to prove actual reliance on the misstatement that caused the loss.
The Bill provides that where there is defective disclosure, the investor must be treated as suffering loss unless the decline in value of the investment is shown to have been caused by a matter other than the defect.

Transitional provisions (Part 9) As this is a comprehensive reform, transitional provisions are partic- ularly important.

These are set out in Part 9, while Part 8 includes powers to make regulations for the purpose of ensuring an orderly implementation of this Act.
Explanatory note Financial Markets Conduct Bill 7 Under the Bill, issuers will be able to choose to register prospectuses for new offers under the current law during the first year after com- mencement, but all offers and existing products must transition to the new regime within 2 years of commencement.

The Bill includes provisions to facilitate changes to existing governing documents in order to comply with the new regime.
It is intended that changes to schemes to comply with the new regime will not give rise to tax li- ability.

Existing registered exchanges and authorised futures exchanges will be treated as holding a financial product market licence in respect of each of their current markets, and a process is set out to enable currently unlicensed markets to seek a licence under the transitional provisions.
In respect of licensed services, it is intended that the requirement to be licensed will only apply once existing providers have had the opportunity to obtain a licence.

Regulatory impact statement The Ministry of Economic Development produced regulatory impact statements in February and May 2011 to help inform the main policy decisions taken by the Government relating to the contents of this Bill.
A copy of these regulatory impact statements can be found at— http://www.med.govt.nz/templates/MultipageDocument- • TOC____45789.aspx http://www.med.govt.nz/templates/MultipageDocument- TOC____45999.aspx http://www.treasury.govt.nz/publications/informationre- leases/ris • • Clause by clause analysis Clause 1 is the Title clause.

Clause 2 is the commencement clause.

Most of the provisions come into force on a date appointed by Order in Council.
The reason for the deferred commencement is that regulations need to be made to give effect to some parts of the Bill (for example, to prescribe re- quirements for the new product disclosure statements).

The whole Bill must come into force no later than 1 April 2015.

8 Financial Markets Conduct Bill Explanatory note The regulation-making powers in the Bill come into force on the day after the date on which the Bill receives the Royal assent.
Part 1 Preliminary provisions Part 1— • specifies the purposes of the Bill.

The main purposes are con- sistent with the main objective of the Financial Markets Au- thority (the FMA) (to promote and facilitate the development of fair, efficient, and transparent financial markets) and the key FMA function of promoting the confident and informed par- ticipation of businesses, investors, and consumers in the finan- cial markets.
The Bill has the following additional purposes: to provide for timely, accurate, and understandable in- • formation to be provided to persons to assist those per- sons to make decisions relating to financial products or services: to ensure that appropriate governance arrangements apply to financial products and market services that allow for effective monitoring and reduce governance risks: to avoid unnecessary compliance costs: to promote innovation and flexibility in the financial markets: • • • • • • defines various terms used in the Bill, including financial product (debt securities, equity securities, managed invest- ment products, and derivatives): provides that the Bill binds the Crown: provides for the Bill to have effect despite anything to the con- trary in any other enactment or in any agreement, deed, appli- cation, product disclosure statement (PDS) or other disclosure document, or advertisement.
Explanatory note Financial Markets Conduct Bill 9 Part 2 Misleading or deceptive conduct or false or misleading representations Part 2 provides for various prohibitions against misleading or decep- tive conduct, and false or misleading representations, in connection with dealings in financial products and the supply of financial ser- vices.

In summary,— • clause 16 prohibits a person, in trade, from engaging in con- duct that is misleading or deceptive or likely to mislead or de- ceive.
While a contravention of this provision may give rise to compensation or another civil remedy order under Part 7, it does not give rise to a pecuniary penalty: clauses 17 and 18 prohibit a person, in trade, from engaging in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of finan- cial products or services: clause 19 prohibits a person, in trade, from making various false or misleading representations in connection with the offer or supply of financial products or services: clause 20 provides that conduct under certain provisions of the Bill and the Financial Advisers Act 2008 does not contravene this Part (for example, clause 65, which relates to statements in the PDS or the register entry that are misleading or deceptive).
Instead, these provisions are enforced by means of offences and particular civil remedy provisions: clauses 21 and 22 provide some protection to publishers of newspapers or magazines, broadcasters, and other persons who publish information: clause 23 provides a defence where the contravention was due to reasonable reliance on information that has been supplied by another person: clause 24 provides that a licensed market operator does not contravene the Part by the notification of disclosures made to it: clause 25 provides for exceptions in relation to takeover offers and the acquisition or redemption by a company of its shares under the Companies Act 1993.
• • • • • • • 10 Financial Markets Conduct Bill Explanatory note A contravention of clauses 17 to 19 may give rise to a pecuniary penalty, compensation, or another civil remedy order under Part 7.

Under clause 26, this Part applies to conduct in New Zealand and certain conduct outside New Zealand to the extent that the conduct relates to dealings in financial products, or the provision of a financial service, that occur within New Zealand.
The provisions in this Part are based on equivalent provisions in the Fair Trading Act 1986, but have been customised for the financial markets context.

The Fair Trading Act 1986 is amended by subpart 2 of Part 9 to provide that conduct that contravenes Part 2 of this Bill does not contravene any of sections 9 to 13 of that Act.

Part 3 Disclosure of offers of financial products Part 3 and the associated Schedule 1 replace Part 2 of the Securities Act 1978.
Subpart 1—Application This subpart— • provides that an offer of financial products for issue requires disclosure to an investor under this Part unless an exclusion under Part 1 of Schedule 1 applies.

Schedule 1 contains, for example, exclusions for— • offers to wholesale investors.
The definition of whole- sale investor includes investment businesses, persons that meet certain investment activity criteria, large in- vestors (in terms of net assets and turnover), govern- ment agencies, investors who certify that they have pre- vious experience in acquiring or disposing of financial products that allows them to assess the merits of the offer and certain other matters, and persons that have invested or will invest at least $500,000: close business associates of the offeror.
This includes directors and senior managers of the offeror or a related body corporate, persons who hold 5% or more of the voting products of the offeror or 20% or more of the • Explanatory note Financial Markets Conduct Bill 11 voting products of a related body corporate, and certain relatives of close business associates.
It also includes persons who have a close professional or business rela- tionship with the offeror, or a director or senior manager of the offeror, that allows them to obtain the information that will enable them to assess the merits of the offer and the adequacy of any information provided: relatives of the offeror or of a director of the offeror: offers through certain persons holding a licence under Part 6.
This includes offers through intermediaries that hold a market services licence under the Bill (for ex- ample, peer-to-peer lending service providers).

It also includes providers of a discretionary investment man- agement service that hold such a licence: offers under employee share purchase schemes or divi- dend reinvestment plans: offers for no consideration: small offers.

This involves specified offers involving a limit of 20 investors and $2 million being raised in any 12-month period.
A specified offer is one that may only be accepted by a person who is likely to be interested in the offer or a person with annual gross income of at least $200,000: certain offers of derivatives: offers of category 2 products (as defined in the Finan- cial Advisers Act 2008) or debt securities by registered banks: offers by the Crown or local authorities: offers of interests in retirement villages: offers of renewals or variations: offers of interests in contributory mortgages that are of- fered by solicitors: • • • • • • • • • • • • provides that an offer of financial products for sale requires disclosure to an investor under this Part only if disclosure is required under Part 2 of Schedule 1.
The requirements are generally aimed at preventing avoidance of the main rules of disclosure for offers of financial products for issue.
The main 12 Financial Markets Conduct Bill Explanatory note situations in which such an offer requires disclosure are as follows: • where the financial products are issued with a view to the original subscriber dealing with products and the offer is made within 12 months after the issue: where the issuer advises, encourages, or knowingly as- sists the offeror (or is the offeror): where the offeror controls the issuer and the financial products are not quoted: where a person who controls the issuer sells the finan- cial products with a view to the purchaser dealing with the products: • • • • • • • defines the key term regulated offer.
A regulated offer is ba- sically an offer of financial products to 1 or more investors where the offer to at least 1 of those investors requires disclos- ure under Part 3.

Even if disclosure does not need to be given to a particular investor to whom an exclusion applies (for ex- ample, a wholesale investor), other provisions and protections apply to all investors under the regulated offer as a whole.
For example, subscriptions from all investors must be held on trust and any supervisor acts on behalf of all of the investors: provides that a regulated offer of debt securities or managed in- vestment products must comply with the governance require- ments under Part 4: provides for the treatment of options, convertible financial products, and renewals and variations of the terms and con- ditions of financial products: provides for this Part to apply to offers of financial products in New Zealand, regardless of where any resulting issue or transfer occurs or where the issuer or offeror is resident, in- corporated, or carries on business.
Schedule 1, in addition to providing for exclusions and situations in which sale offers require disclosure,— • provides for regulations to prescribe limited disclosure re- quirements and conditions that may apply in relation to certain exclusions.

The exclusions in the schedule are provided be- cause it is considered that PDS disclosure under Part 3 and the full governance requirements under Part 4 are not necessary.
Explanatory note Financial Markets Conduct Bill 13 • However, some short-form disclosure and other requirements may be needed to ensure, for example, that investors receive information to assist them to make a decision: provides for regulations to prescribe circumstances in which the exclusions do not apply (in order, for example, to prevent an exclusion from causing significant detriment to retail in- vestors).
Subpart 2—Procedure for making offers This subpart— • requires a PDS to be prepared for regulated offers.

The pur- pose of the PDS is to provide key information to investors to help them make investment decisions.

Other information re- lating to the regulated offer must be contained in a register entry for the offer (the register entry) on the register of of- fers of financial products.
Requirements relating to the form and content of PDSs and register entries will be prescribed in regulations and will be customised for different situations (for example, different kinds of financial products): provides for the lodgement of the PDS with the Registrar of Financial Service Providers (the Registrar): provides for an offence of knowingly or recklessly contraven- ing the requirement to prepare and lodge a PDS.
The offence has a maximum penalty of (in the case of an individual) im- prisonment for a term not exceeding 5 years or a fine not ex- ceeding $500,000 and (in any other case) a fine not exceeding $2.5 million.

A contravention may also give rise to a pecu- niary penalty or compensation.
It is noted that the concept of a void allotment (see section 37 of the Securities Act 1978) does not appear: provides that if an offer to a particular investor requires dis- closure, the investor must generally be given a PDS before an application is made to acquire the financial products.

The Part provides for exceptions to this rule.
This requirement must be treated as being satisfied if the financial products are issued or transferred in response to an application form and there are reasonable grounds to believe that the application form was included in, or accompanied by, the PDS when the form was • • • 14 Financial Markets Conduct Bill Explanatory note • • • • • • distributed or the form was copied, or directly derived, from such a form: provides for an offence of knowingly or recklessly contraven- ing the requirement to give a PDS.
The offence has a maximum penalty of (in the case of an individual) imprisonment for a term not exceeding 5 years or a fine not exceeding $500,000 and (in any other case) a fine not exceeding $2.5 million.

A contravention may also give rise to a pecuniary penalty, com- pensation, and a right to withdraw from holding the financial products and to get a refund of the subscriptions: requires all material information to be contained in either the PDS or the register entry.
The term material information means information that a reasonable person would expect to, or to be likely to, influence persons who commonly invest in financial products in deciding whether to acquire the financial products on offer and relates to the particular financial prod- ucts or issuer, rather than to financial products or issuers gen- erally: requires an issuer to obtain the consent of persons to whom expert statements or endorsements in the PDS or register entry are attributed: requires a PDS to be worded and presented in a clear, concise, and effective manner.
While a contravention of this require- ment does not give rise to a civil remedy under Part 7, the FMA may make a stop order under Part 7 to, for example, prevent offers being made under the PDS or to prevent the PDS from being distributed.
Other requirements relating to the form and presentation of PDSs will be prescribed in regu- lations: requires issuers to supply prescribed information and docu- ments to the Registrar when the PDS is lodged: provides for an initial opportunity for the FMA to consider a PDS, any governing document, and an offer for compliance with the Bill.

The nature and extent of the consideration (if any) are at the FMA’s discretion.
To provide a period during which this initial consideration may take place, this Part pro- vides that accepting applications for, or issuing or transferring, financial products is prohibited for between 5 to 10 working Explanatory note Financial Markets Conduct Bill 15 • • • • • • • days after lodgement.

The FMA can remove this restriction if its consideration is complete.
This waiting period does not usually apply to continuous issue PDSs (unless the PDS is of a class prescribed by the FMA in a notice under clause 53): provides that nothing done or omitted to be done by the Regis- trar or the FMA gives a guarantee or representation as to com- pliance with the Bill: provides for the lodgement of supplementary documents or a replacement PDS, for example, to correct misleading or de- ceptive statements or to update information in the PDS: requires the issuer to publish on its Internet site a statement relating to the lodgement of a PDS, supplementary document, or replacement PDS: provides for amendments to the register entry: provides that if the PDS refers to a condition relating to minimum subscriptions, the condition must be fulfilled before a person issues or transfers the financial products under the offer: provides that if the PDS states or implies that the financial products will be quoted on a financial product market, an issue or a transfer of the financial products will be void if the con- dition is not fulfilled: provides restrictions where conditions specified in the PDS are not satisfied or disclosure under the PDS or register entry is de- fective in some way (for example, where the PDS is mislead- ing or deceptive, prescribed information has been omitted, or a circumstance has arisen since the PDS was lodged that would have been required to be disclosed in the PDS if it had arisen before lodgement).
These restrictions are as follows: • if applications have been received and have not yet re- sulted in an issue or transfer of the financial products, the offeror must either repay the subscriptions, or cor- rect the deficiency and give investors 1 month to con- firm whether they still want to acquire the products.
A failure to comply may give rise to a civil remedy: the offeror must not offer or continue to offer the finan- cial products under the regulated offer (to any person whether or not the person requires disclosure under this • 16 Financial Markets Conduct Bill Explanatory note Part).

A breach of this offer prohibition may result in an offence under clause 488, a pecuniary penalty, or a claim for compensation from a person who has suffered loss or damage.
This offence has a maximum penalty (in the case of an individual) of imprisonment for a term not exceeding 10 years or a fine not exceeding $1 mil- lion or (in any other case) a fine not exceeding $5 mil- lion.

Unlike similar strict liability offences in the Se- curities Act 1978, this offence requires knowledge or recklessness.

In addition, there is more emphasis on is- suer liability.
A director may, however, be liable if the director also contravenes clause 65 in terms of clause 447 and may also be liable to pay a pecuniary penalty or compensation (see subpart 3 of Part 7): requires certain persons involved in the offer to notify the of- feror of disclosure deficiencies (for example, directors or pro- posed directors of the offeror or a person who has consented as referred to in clause 44): requires a PDS to have an expiry date only if required by the regulations.
Regulations may also prescribe the maximum period for which a PDS may be current.
If a PDS has an ex- piry date, the Part provides for how an offeror must deal with applications on the expiry: requires money for financial products to be held in trust and for the issuer to deal with the money while it is held in trust in the prescribed manner: prohibits offers of financial products in entities that do not exist: prohibits offers of financial products in the course of unso- licited meetings with persons who are acting otherwise than in trade.
This does not prevent offers to wholesale investors, offers of quoted financial products being made by persons per- mitted to give financial advice in respect of those products, or offers by authorised financial advisers to their clients.

• • • • • Explanatory note Financial Markets Conduct Bill 17 Subpart 3—Advertising and publicity This subpart regulates advertising and publicity in connection with offers of financial products.
In summary, the subpart— • provides that, if an offer is or will be a regulated offer, a per- son must not, except in accordance with the subpart, advertise the offer or publish a statement that contains or refers to the offer or is reasonably likely to induce persons to apply for the financial products: allows, before the PDS is lodged, an advertisement or a pub- lication to be distributed if it includes certain statements (for example, that no money is currently being sought and that ap- plications for the financial products are currently not being ac- cepted): allows, after the PDS is lodged, an advertisement or a pub- lication to be distributed if it includes certain statements (for example, that the PDS is available and where and how it can be obtained).
The advertisement or publication must not contain any information that is inconsistent with the PDS, or register entry, for the offer to which it relates: allows various other advertisements or publications to be dis- tributed (for example, annual reports or other documents or information required by law): provides a defence to a person who published an advertisement or statement in the ordinary course of its publishing business if the person did not know and had no reason to believe that the publication would amount to a contravention of the subpart.
• • • • Subpart 4—Ongoing disclosure and updating of registers This subpart provides for 3 forms of ongoing disclosure by issuers.

The matters relating to this ongoing disclosure will be prescribed in the regulations and will be customised for different situations (for ex- ample, different kinds of financial products).
In addition, the FMA may specify frameworks or methodologies under subpart 4 of Part 8 relating to the manner in which documents, information, or other matters that are to be made available under this subpart are to be pre- sented, calculated, or prepared (to ensure consistency and compara- 18 Financial Markets Conduct Bill Explanatory note bility of the information prepared by different issuers).
The 3 forms of ongoing disclosure are as follows: • a duty to notify the Registrar of relevant changes so as to keep the register of offers of financial products and the register of managed investment schemes up to date: a duty to disclose information to particular investors (on re- quest or in the prescribed circumstances): a duty to make information publicly available in the prescribed circumstances.
• • Subpart 5—Civil liability for certain contraventions of this Part This subpart specifies the provisions of this Part that may give rise to a pecuniary penalty, compensation, or another civil remedy under Part 7 in the event of a contravention.
Part 4 Governance of financial products Subpart 1—Application and overview This subpart provides that this Part applies to financial products of- fered under a regulated offer and to managed investment products in a registered scheme (whether or not there has been a regulated offer).

Subpart 2—Governance of offers of debt securities This subpart requires there to be a trust deed for regulated offers of debt securities and a licensed supervisor who is the trustee under that trust deed.
In summary,— • trust deeds must comply with certain contents requirements.
A trust deed must provide that various things are held in trust by the supervisor for the benefit of the holders of the debt security (including the right to enforce the issuer’s duty to repay and the right to enforce any other duties that the issuer, any guarantor, and any other person have under the terms of the debt security or the provisions of the trust deed or the Bill): Explanatory note Financial Markets Conduct Bill 19 • • • • • • • • a trust deed is treated as containing any provision that is im- plied into it by the Bill or the regulations.
A trust deed must also provide adequately for all of the matters required to be contained in it by the regulations: there are limits on a supervisor’s right to be exempted from liability for, or indemnified in relation to, the performance of its obligations: trust deeds must be legally enforceable as between the super- visor, the issuer, and the product holders: trust deeds may be amended or replaced only with the consent of the supervisor of the debt security.
However, an issuer may amend or replace a trust deed with the FMA’s consent if the FMA is satisfied that the amendment or replacement is neces- sary to enable the trust deed to comply with this subpart or any other enactment: changes to a trust deed must be lodged with the Registrar: the supervisor of a debt security is responsible for the follow- ing functions: • to act on behalf of the holders of the debt security in re- lation to the issuer, any matter connected with the trust deed or the terms of the regulated offer, and any contra- vention of the issuer obligations: to supervise the issuer’s performance of its issuer obli- gations and to ascertain whether the assets of the is- suer and of each guarantor are sufficient to discharge the amounts of the debt securities as they become due; and to perform or exercise any other functions, duties, and powers conferred or imposed on the supervisor by or under this Bill, the Financial Markets Supervisors Act 2011, or the governing document: • • the supervisor must act honestly, act in the best interests of the debt security holders, exercise reasonable diligence, do all the things it has the power to do to cause any contravention to be remedied, and act in accordance with any direction given by a special resolution of the debt security holders: the supervisor must comply with a professional standard of care: 20 Financial Markets Conduct Bill Explanatory note • • • • the issuer must provide regular reports, and requested informa- tion and reports, to the supervisor.
It must also report contra- ventions or possible contraventions of its issuer obligations and serious financial problems: the supervisor may engage experts: meetings of holders of the debt securities may be called and held (for example, on the request of the supervisor or holders of the debt securities whose combined value is no less than 5% of the value of the debt securities on issue): the supervisor ceases to hold that appointment if the super- visor is removed by the FMA under the Financial Markets Supervisors Act 2011, is removed by a special resolution of the holders of the debt security, or is removed or resigns in ac- cordance with the trust deed.
Subpart 3—Registration of managed investment scheme This subpart requires, for regulated offers of managed investment products, the managed investment scheme to be registered.

The in- tention is for this subpart to provide a common set of governance requirements for all managed investment schemes, irrespective of their legal form.
The current law regulating the management of these schemes is in the Securities Act 1978, the Unit Trusts Act 1960, the Superannuation Schemes Act 1989, and Part 4 of the KiwiSaver Act 2006 (which will largely be consequentially repealed).

This sub- part accordingly provides for the registration of managed investment schemes as follows: • schemes must meet specified registration requirements.
All schemes must have a separate and independent licensed man- ager and licensed supervisor (except in the case of a restricted scheme), and a governing document and name that comply with this subpart.

Most schemes must also have an inde- pendent custodian (who must be the supervisor or another ap- pointed nominee): a scheme may also, if it meets the relevant additional eligi- bility criteria, register as a particular type of scheme.
The 3 main types of schemes in respect of which the subpart prescribes special rules are KiwiSaver schemes, superannu- • Explanatory note Financial Markets Conduct Bill 21 ation schemes, and restricted schemes (which may be either KiwiSaver schemes or superannuation schemes).

Other types may be prescribed by regulations.
Locked-in superannuation schemes are a sub-type of superannuation scheme: the contents of governing documents and how governing documents may be amended are regulated: there is a statutory right for meetings of scheme participants to be called and held: the role of the manager is set out, including the manager’s duties owed to scheme participants and specific obligations that apply in managing the scheme (for example, to have a registered statement of investment policy and objectives): the functions, powers, and duties of the supervisor and the duties of the issuer in relation to reporting to the supervisor are set out: related party transactions are generally prohibited except with supervisor consent or if they come within certain exceptions (for example, arm’s length transactions or investments in other schemes): requirements are prescribed as to the custody of the scheme property, including as to who may be a custodian and for the scheme property to be held on trust for scheme participants: changes to the manager are provided for, including how the manager may be removed and provision for temporary man- ager appointments and transfers of responsibilities in this case: changes to the supervisor are provided for: how a scheme’s registration may be cancelled is provided for.
• • • • • • • • • Subpart 4—Intervention in debt securities or registered schemes This subpart contains specific provisions facilitating and enabling interventions in relation to regulated offers of debt securities or regis- tered schemes.
Many of these duties apply currently and are being consolidated in this Bill as follows: • duties for the auditor, actuary, investment manager, adminis- tration manager, and custodian to report on breaches by issuers are set out: 22 Financial Markets Conduct Bill Explanatory note • • • • • specific reporting duties for supervisors are set out (for ex- ample, the supervisor must report material breaches of issuer obligations or serious financial problems to the FMA): certain protections are provided in relation to those disclos- ures: the FMA may give a direction to the supervisor to take certain specified steps.
The FMA may exercise this power if— • there is a significant risk that the interests of financial product holders will be materially prejudiced; and either the supervisor is aware of that risk and has had a reasonable opportunity to take action to eliminate or reduce the risk but has not done so or urgent action is required: • the supervisor or, in certain circumstances, the FMA is able to apply to the High Court for certain orders to remedy problems.
For example, an order may be applied for if the issuer and any guarantor are unlikely to be able to pay all money owing in respect of the financial product when it becomes due, or the issuer (or registered scheme) is insolvent, or registration requirements are no longer satisfied.
The types of orders that may be made include orders to— • • • amend the provisions of the governing document: impose restrictions on the activities of the issuer: direct that no offers, issues, sales, or transfers of finan- cial products be made: direct that an issuer must not accept further contribu- tions or deposits: direct the issuer or the supervisor to convene a meeting of product holders: stay any civil actions or proceedings: restrain the payment of money or the transfer of scheme property: appoint a receiver or manager: • the High Court may appoint a new manager of a registered scheme, confer additional powers on a manager, and other- wise deal with changes in managers.
The court may replace • • • • Explanatory note Financial Markets Conduct Bill 23 • a manager if the original manager has contravened an issuer obligation or is insolvent: the High Court may order the winding up of a registered scheme if the manager is insolvent, the manager has persist- ently or seriously failed to comply with this Bill or any other financial markets legislation, no permanent manager has been appointed, no supervisor has been appointed, or it is just and equitable that the scheme be wound up.
Subpart 5—Registers that must be kept by issuers of all regulated products This subpart— • requires an issuer of regulated products to ensure that there is kept in New Zealand a register of those regulated products and of all financial products that are of the same class as those regu- lated products of which it is the issuer.

The regulations may also require an issuer to ensure that there is kept a register of other financial products of which it is the issuer.
Regulations may prescribe financial products or circumstances to which this obligation does not apply and alternative record keeping requirements for derivatives: provides for the contents, audit, and inspection of those regis- ters: provides for how copies of, or extracts from, those registers may be obtained.

A new provision has been included that re- quires a person who makes a request for a copy to include in the request a statement of the person’s reasons for the re- quest.
The issuer can provide a copy of the reasons to the FMA, which may give notice to the issuer that it is not required to comply with the request.
To reinforce this new provision, clause 210 contains restrictions on the use of information from registers (including allowing regulations to prescribe purposes for which information may not be used): requires an issuer of a regulated product to send to the product holder either the product or a confirmation document within 1 month or other prescribed period after the issue, or receipt by or on behalf of the issuer of a duly effected transfer, of the product.
A number of exemptions from the equivalent require- • • • 24 Financial Markets Conduct Bill Explanatory note ment under the Securities Act 1978 have been granted under that Act.

Some of these exemptions have been incorporated into clause 212.

In lieu of this requirement, alternative on- going disclosure requirements may be prescribed under sub- part 4 of Part 3.
Subpart 6—Accounting records, copies of documents, and audit of financial statements This subpart— • • • • • requires issuers of regulated products to keep proper account- ing records: specifies requirements relating to where those records are kept, for the records to be in English or easily accessible and con- vertible into written form in English, the period for keeping the records, and inspection of the records: requires an offeror or a manager of a scheme to keep a copy of documents given or provided under the Bill for a period of at least 7 years after the date on which the document came into the possession of the offeror or manager: requires an issuer of regulated products that are equity secur- ities, debt securities, or derivatives to ensure that its financial statements are audited by a qualified auditor: requires an issuer of regulated products that are managed in- vestment products to ensure that both its financial statements and the financial statements for the scheme to which the prod- ucts relate are audited by a qualified auditor.
Subpart 7—Civil liability for certain contraventions of this Part This subpart specifies the provisions of this Part that may give rise to a pecuniary penalty, compensation, or another civil remedy under Part 7 in the event of a contravention.

Explanatory note Financial Markets Conduct Bill 25 Part 5 Dealing in financial products on markets Part 5 replaces various parts of the Securities Markets Act 1988 and the Securities Transfer Act 1991.
Subpart 1—Purposes, overview, and interpretation This subpart— • specifies purposes of the Part (in addition to the purposes of the Bill).
These additional purposes are— • to promote fair, orderly, and transparent financial prod- uct markets: to encourage a diversity of financial product markets to take account of the differing needs and objectives of issuers and investors: • • • defines key terms used in the Part, including material infor- mation, generally available to the market, information insider, inside information, and relevant interest: provides that if the underlying of a derivative is a quoted fi- nancial product of a listed issuer, the derivative must, for the purposes of the insider trading provisions, be treated as being a quoted financial product of the listed issuer.
Disclosure in respect of such a derivative is also required under subpart 6.
Subpart 2—Insider trading This subpart prohibits insider trading by providing that an informa- tion insider of a listed issuer or in relation to quoted derivatives may not do certain things, including— • trading in the quoted financial products of the issuer or in the quoted derivatives: disclosing inside information to another person (B) if the infor- mation insider knows or ought reasonably to know or believes that B will, or is likely to, trade quoted financial products of the issuer or the derivatives or that B will, or is likely to, ad- vise or encourage another person to trade or hold the products or derivatives.
Section 8D(b) of the Securities Markets Act 1988 has not been carried forward.

This paragraph prohibited • 26 Financial Markets Conduct Bill Explanatory note • • • • the disclosure of inside information to an existing securities holder where that holder will, or is likely to, continue to hold the securities: advising or encouraging trading in or holding the quoted fi- nancial products of the issuer or the quoted derivatives.
Clause 238 provides that a contravention is an offence if the person has knowledge of certain matters (including that the information is material information and it is not generally available to the market).

The offence has a maximum penalty of (in the case of an individual) imprisonment for a term not exceeding 5 years or a fine not exceeding $500,000 and (in any other case) a fine not exceeding $2.5 million.
Clauses 239 to 250 specify various exceptions to the insider conduct prohibitions, including— • where trading or disclosure is required by an enactment or rule of law: in respect of underwriting agreements: in the case of knowledge of the information insider’s own in- tentions or activities: in the case of derivatives, where the information insider trades in the derivatives with knowledge of his, her, or its own past, current, or proposed transactions or agreements concerning those or any other derivatives or business activities, transac- tions, or agreements concerning the underlying.
This new ex- ception comes from the Securities Markets (Insider Trading Exemption—Futures Contracts) Regulations 2010: for agents executing trading instructions: in relation to takeovers.
• • Clauses 251 to 255 provide various defences for insider conduct pro- ceedings, including where— • • there is an absence of knowledge of trading: the inside information is obtained by independent research and analysis: the 2 parties to the transaction knew, or ought reasonably to have known, the same inside information: the trading is under a fixed trading plan or under options with a fixed exercise price: • • Explanatory note Financial Markets Conduct Bill 27 • arrangements existed to ensure that no individual who took part in the decision to trade the financial products or disclose the inside information or advise or encourage (as the case may be) received, or had access to, the inside information or was influenced, in relation to that decision, by an individual who had the information.
• Subpart 3—Market manipulation This subpart prohibits market manipulation.

This prohibition takes the following 3 forms: • prohibiting a person from engaging in conduct that is mislead- ing or deceptive or likely to mislead or deceive in relation to any dealings in quoted financial products.
This new provision applies whether or not the dealings are in trade: prohibiting a person from making a materially false or mis- leading statement that is likely to induce a person to trade in quoted financial products or have the effect of increasing, re- ducing, maintaining, or stabilising the price for trading in those financial products or to induce a person to exercise a voting right in a particular way.
A contravention with knowledge is an offence: prohibiting a person from creating a false or misleading ap- pearance with respect to the extent of active trading in quoted financial products or with respect to the supply of, demand for, price for trading in, or value of those financial products.

A contravention with knowledge is an offence.


Under clause 262, a person may be treated as contravening the prohibition if the person is a party to trading in quoted financial products from which no change in beneficial ownership results.

The 2 offences mentioned above have a maximum penalty of (in the case of an individual) imprisonment for a term not exceeding 5 years or a fine not exceeding $500,000 and (in any other case) a fine not exceeding $2.5 million.
Clauses 258, 261, and 263 specify various exceptions and defences in relation to this subpart.

• 28 Financial Markets Conduct Bill Explanatory note Subpart 4—Continuous disclosure This subpart provides for listed issuers to comply with the continu- ous disclosure provisions of the listing rules of the relevant licensed market.
Continuous disclosure provisions are provisions that require a listed issuer to notify information about events or matters as they arise for the purpose of making the information available to partici- pants in the licensed market.

Section 19C of the Securities Markets Act 1988 (which relates to disclosure in accordance with continuous disclosure regulations) has been omitted from this Bill.
Subpart 5—Disclosure of interests of substantial product holders in listed issuers This subpart relates to the disclosure of interests of substantial prod- uct holders in listed issuers.

The purpose of the subpart is to promote an informed market, and to deter insider conduct, market manipula- tion, and secret dealings in potential takeover bids.
In summary, the subpart— • relates to a substantial holding (meaning that a person has a relevant interest in quoted voting products that comprise 5% or more of a class of quoted voting products of the listed issuer): requires a person to disclose that the person has begun to have a substantial holding: requires a substantial product holder to disclose a subsequent movement of 1% or more in the substantial holding: requires a substantial product holder to disclose a subsequent change in nature of a relevant interest in the substantial hold- ing: requires a person to disclose that the person has ceased to have a substantial holding: specifies what disclosure is required and the form and method of disclosure: provides various exceptions to these provisions (for example, corporate trustees and nominee companies): empowers the FMA to require persons to disclose to the mar- ket relevant interests, and powers to get relevant interests, in financial products: • • • • • • • Explanatory note Financial Markets Conduct Bill 29 • • empowers a listed issuer to require registered holders of quoted voting products to disclose relevant interests to it and other persons who have relevant interests to disclose information to it: provides for listed issuers to maintain registers of disclosures of substantial holdings and to publish information on substan- tial holdings.
Subpart 6—Disclosure of relevant interests in quoted financial products by directors and senior managers of listed issuers This subpart relates to the disclosure of relevant interests in quoted financial products by directors and senior managers of listed issuers.

The purpose of this subpart is to promote good corporate governance and to deter, and assist in the monitoring of, insider conduct and mar- ket manipulation.
The equivalent subpart in the Securities Markets Act 1988 relates to officers rather than senior managers.

An officer was a person who was concerned or took part in the management of the public issuer’s business (but the definition was narrowed by regulations).
In con- trast, a senior manager is defined in clause 6 as a person who is not a director but who occupies a position that allows the person to exer- cise significant influence over the management or administration of the issuer (for example, a chief executive or a chief financial officer).

This is consistent with a definition in the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
In summary, the subpart— • requires directors and senior managers of listed issuers to dis- close relevant interests, and dealings in relevant interests, in quoted financial products.
In addition, a new provision has been added to require disclosure of relevant interests, and deal- ings in relevant interests, in relation to quoted derivatives and derivatives referred to in clause 228: specifies what disclosure is required and the form and method of disclosure: provides various exceptions to these provisions (for example, where the same disclosure is made under subpart 5 or in rela- tion to an overseas listed issuer where an overseas exchange • • 30 • Financial Markets Conduct Bill Explanatory note has primary jurisdiction for the listing requirements of the is- suer): provides for listed issuers to maintain interests registers.
Subpart 7—Licensing of markets for trading financial products This subpart— • prohibits certain unlicensed financial product markets being operated in New Zealand: provides for licensing of those markets: provides for the making of regulations that may adjust the li- censing provisions applying to licensed markets, and the in- sider trading, market manipulation, or disclosure duties apply- ing to issuers and other persons transacting in those markets.
Subpart 8—Operation of licensed markets This subpart continues, in relation to licensed market operators, pro- visions of the Securities Markets Act 1988 that require registered ex- changes to share information with the FMA and that confer powers of intervention on the FMA.
These provisions include— • requirements for a licensed market operator to notify the FMA whenever the operator takes disciplinary action against a mar- ket participant or when the operator knows or suspects that a person is contravening the market rules, this Bill, or the Takeovers Act 1993: the FMA or the Takeovers Panel may obtain relevant infor- mation from a licensed market operator and be given access to the operator’s facilities; the FMA may carry out real-time surveillance of the operation of the licensed market: material information given by a licensed market operator to market participants must also be given to the FMA: the FMA may (subject to procedural safeguards) give direc- tions to a licensed market operator, including— • directions to suspend trading of quoted financial prod- ucts or a class of quoted financial products: directions to suspend participation by a participant or class of participants in the licensed market.
• • • • • • Explanatory note Financial Markets Conduct Bill 31 Subpart 9—Transfer of transferable financial products This subpart replaces the Securities Transfer Act 1991 (the 1991 Act).

The subpart does not apply to interests in superannuation schemes or KiwiSaver schemes or derivatives.

The subpart allows regulations to prescribe other financial products that the subpart does not apply to.

In summary, the subpart— • provides for the transfer of financial products using certain transfers.
Unlike in the 1991 Act, the form of the transfers is not prescribed in the Bill.

Instead, the transfers may be in a form prescribed in regulations or may be required to just con- tain prescribed information (rather than being in a particular prescribed form): provides for the transfer of financial products by electronic means.
• If financial products have been transferred in accordance with this subpart, no person may refuse to register the transfer on the ground that the financial products have been so transferred or that the finan- cial products have not been transferred by other means.

Subpart 10—Unsolicited offers to purchase financial products This subpart regulates the making of unsolicited offers to purchase financial products.
An unsolicited offer is basically an offer to ac- quire a financial product by a person (A) to another person (B) where the offer is unsolicited by B, the offer is not made on a licensed mar- ket, and the offer is within the class or classes of offers to which the regulations apply.

The subpart allows regulations to be made for various purposes with the overall objective of preventing unfair practices in the making of unsolicited offers.
These purposes include— • ensuring offerees are fully informed of various matters (in- cluding the current market price of a quoted financial product or a fair estimate of the value of a non-quoted financial prod- uct, and FMA warnings): 32 • • • Financial Markets Conduct Bill Explanatory note ensuring that notice of an unsolicited offer to product holders is given to the relevant issuer and the FMA: ensuring that no agreement to transfer may bind offerees for a minimum period for the purpose of enabling offerees to con- sider, and reconsider, any decision to accept an offer: setting out any other rules applying to unsolicited offers.
Subpart 11—Civil liability for certain contraventions of this Part This subpart specifies the provisions of this Part that may give rise to a pecuniary penalty, compensation, or another civil remedy under Part 7 in the event of a contravention.

Part 6 Licensing and other regulation of market services This Part provides for the licensing of market services and regulates the provision of market services by licensees and other persons.
Subpart 1—Key provisions This subpart— • specifies when a provider of market services must be licensed.
This includes (subject to some exceptions) when the provider is— • acting as a manager of a registered scheme (other than a restricted scheme): acting as an independent trustee of a restricted scheme: acting as a provider of a discretionary investment man- agement service: acting as a derivatives issuer in respect of a regulated offer of derivatives: • • • • specifies that a person may hold a market services licence to act as a provider of intermediary services that are prescribed in the regulations (for example, a person-to-person lending inter- mediary).
Clause 6 of Schedule 1 contains an exclusion for Explanatory note Financial Markets Conduct Bill 33 offers of financial products through such licensed intermedi- aries: prohibits holding out in relation to market services licences.

• In relation to discretionary investment management services,— • discretionary investment management services under the Bill have the same definition as that currently in the Financial Ad- visers Act 2008 (the FAA).
In essence, this service is the busi- ness of managing a person’s investments under an investment authority.
It differs from a managed investment scheme in that each investor individually holds the underlying financial prod- uct, rather than an interest in a scheme that invests in those products: this Bill will apply to persons who carry on this business unless those persons are financial advisers providing discretionary investment management services under the FAA or are ex- empted under that Act (see also the amendments proposed to the FAA in connection with this service).
The FMA will also have the power to require persons currently licensed under the FAA or that are exempt under that Act to be licensed under this Bill.
This subpart— • Subpart 2—Issue of licences, conditions, and duration specifies principles that the FMA must be guided by in exer- cising a power under this subpart (including that exercising the power must be necessary or desirable in order to promote the purposes of the Bill and, in exercising the power, the FMA should not unnecessarily restrict the licensing of persons): provides for the issue of licences by the FMA.
The FMA must issue a licence that covers a market service or a class of market service if the FMA is satisfied of various matters, including that— • the applicant is a fit and proper person to hold the li- cence; and the eligibility criteria (if any) prescribed in the regula- tions are satisfied; and • • • 34 Financial Markets Conduct Bill Explanatory note • • • • the applicant’s directors, senior managers, and proposed directors and senior managers satisfy the requirements that are prescribed by the regulations; and the applicant is capable of effectively performing that service; and there is no reason to believe that the applicant will not comply with the market services licensee obligations: the applicant is registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 or complies with registration requirements: provides that, before a licence is issued, the FMA must have regard to the prescribed matters and consult all prescribed per- sons or classes of prescribed persons (if any): allows licences to cover more than 1 type of market service: allows licences to authorise subsidiaries of the licensee to pro- vide the market service covered by the licence if the FMA is satisfied that the subsidiary meets the eligibility criteria and other requirements prescribed by the regulations: requires the FMA to send various licence details to the Regis- trar.
The FMA may also publicly notify any details about a licence as it thinks fit: provides for conditions of licences, including— • a condition that the licensee may provide only the mar- ket services to which the licence relates; and the conditions imposed by the FMA.
These conditions may impose limits or restrictions on the services that are covered by the licence, impose conditions relating to the licensing requirements, or deal with prescribed matters; and the conditions imposed by regulations (if any): • provides for variations of conditions of licences: provides for the consequences of contravening conditions (in- cluding allowing the FMA to exercise a power under subpart 3 and civil remedies under subpart 3 of Part 7): provides for the expiry or cancellation of licences.
• • • • • • • • • Explanatory note Financial Markets Conduct Bill 35 Subpart 3—Monitoring and enforcement of licences This subpart— • • requires licensees to deliver regular reports to the FMA: requires a licensee to ensure that there are in place effect- ive methods for monitoring the licensee’s compliance with its market services licensee obligations and for identifying mater- ial changes in circumstances: requires a licensee to report to the FMA (and in some cases a supervisor) if it believes that it has contravened, may have contravened, or is likely to contravene a market services licensee obligation in a material respect or that a material change of circumstances has occurred, may have occurred, or is likely to occur or that false or misleading information has been provided: gives the FMA certain powers in the case of a breach of a mar- ket services licence obligation, a material change of circum- stances, or the provision of false or misleading information.
These powers include— • • censuring the licensee: requiring the licensee to submit an action plan to the FMA.

The action plan must specify, for example, the steps that the licensee proposes to take to remedy or avoid a contravention or to mitigate or avoid the adverse effects of a material change of circumstances: giving a direction to the licensee (for example, to rem- edy or avoid a contravention or to mitigate or avoid the adverse effects of a material change of circumstances).
A failure to comply with a direction is an offence with a maximum penalty of a fine not exceeding $300,000: cancelling the licence if the licensee does not meet the licensing requirements: • • provides for the procedure for exercising these powers (includ- ing giving the licensee or its representative an opportunity to make written submissions on the matter).
• • • 36 Financial Markets Conduct Bill Explanatory note Subpart 4—Disclosure obligations for licensees providing market services to retail investors This subpart requires service disclosure statements to be provided to retail investors by licensed providers of discretionary investment management services and (if regulations apply) licensed providers of prescribed intermediary services.
The purpose of a disclosure statement is to provide information that is likely to assist a retail investor to decide whether to proceed, or continue to proceed, with the market service by the licensee or to change any instruction in relation to the provision of that service.
Subpart 5—Requirement for licensees to provide service under client agreements This subpart requires licensed providers of discretionary investment management services, licensed derivatives issuers, and licensed providers of prescribed intermediary services to provide those ser- vices to retail investors under a client agreement.

Regulations may be made requiring client agreements to deal with certain matters or implying terms into those client agreements.
Subpart 6—Provision of discretionary investment management services This subpart provides additional conduct obligations to apply to the providers of discretionary investment management services who are licensed under the Bill (and to custodians under those services).
The additional conduct obligations imposed in this Bill include a profes- sional standard of care, duties of a fiduciary nature, requirements for an agreed investment mandate that makes it clear what are the limits (and reporting on limit breaks), prohibitions on certain related party transactions, and requirements for investor money to be held in trust and for the investor property of retail investors to be held by custo- dians.
Such custodians have all the obligations imposed on a broker by the Financial Advisers Act 2008.

Explanatory note Financial Markets Conduct Bill 37 Subpart 7—Holding and application of investor funds and property by derivatives issuers This subpart provides for regulations that may apply to a derivatives issuer whether or not it is licensed and whether or not it makes any regulated offer.
The regulations may, for example, regulate the receipt of money and property from investors by derivatives issuers and the application of that money and property and prescribe requirements relating to the deposit of that money and property in separate investors’ funds accounts or safe custody.

Subpart 8—Miscellaneous provisions This subpart specifies the provisions of this Part that may give rise to a pecuniary penalty, compensation, or another civil remedy under Part 7 in the event of a contravention.
Part 7 Enforcement and liability Clause 447 defines the term contravene.

This is an important term as many provisions in the Bill impose criminal or civil consequences for contraventions.

The term has an extended meaning that includes attempts to contravene, aiding, abetting, counselling, or procuring any other person to contravene, or being in any way, directly or indi- rectly, knowingly concerned in, or a party to, the contravention.
Subpart 1—FMA’s enforcement powers This subpart— • provides for the FMA to make stop orders.

A stop order may prohibit offers, issues, sales, or transfers of financial products, prohibit the supply of market services, prohibit the accept- ance of contributions or deposits, or prohibit the distribution of PDSs or certain communications (for example, advertise- ments).
A stop order can be made if, for example,— • a PDS is likely to deceive, mislead, or confuse with respect to a material matter; or 38 Financial Markets Conduct Bill Explanatory note • • • • • disclosure does not comply with the Bill or the regula- tions; or a PDS is not worded and presented in a clear, concise, and effective manner; or the requirement to have a governing document and supervisor has been contravened in respect of an offer of debt securities; or the requirement scheme has been contravened; or a restricted communication relating to an offer of finan- cial products (such as an advertisement) is likely to de- ceive, mislead, or confuse with regard to any particular that is material to the offer or is inconsistent with any PDS referred to in it: to register a managed investment allows the FMA to make an interim stop order while it con- siders exercising its powers.
An interim stop order may be in force for between 15 and 30 working days: provides for the FMA to make direction orders.

These orders can be made if the FMA is satisfied that, by engaging in any conduct, a person has contravened, or would contravene, vari- ous substantive obligations of the Bill.
A direction order may direct a person to comply with certain requirements of the Bill and require a person to take reasonable steps to comply with those requirements and to avoid or mitigate any actual or po- tential adverse effects of a contravention: provides for the FMA to make an unsolicited offer order if the FMA is satisfied that a person has acted, is acting, or intends to act in contravention of an unsolicited offer provision pre- scribed by the regulations: specifies the process to be followed by the FMA before it makes an order.
Generally speaking, the FMA must give 5 working days’ notice to the person to whom the order is pro- posed to be directed and give the person or the person’s rep- resentative an opportunity to make written submissions and to be heard on the matter within that notice period.
The FMA may shorten the time period in the case of urgency: the FMA must, as soon as is reasonably practicable, give writ- ten notice to the person to whom the order is directed of the • • • • • Explanatory note Financial Markets Conduct Bill 39 • terms and conditions of the order, the reasons for the order, and any other information the FMA thinks relevant in the cir- cumstances: a contravention of an FMA order may give rise to a civil rem- edy under subpart 3.
In addition, a person who refuses or fails, without reasonable excuse, to comply with an order commits an offence.

This has a maximum penalty of a fine not exceed- ing $300,000.

Subpart 2—High Court’s enforcement powers This subpart provides for the High Court to— • grant an injunction to restrain a person from engaging in con- duct that contravenes a provision of the Bill or the regulations; and make any order that the FMA may make under this Part.
Subpart 3—Civil remedies This subpart allows the High Court to give certain civil remedies in the case of contraventions of various substantive provisions of the Bill and contraventions of the FMA’s orders.

The civil remedies in- clude— • a declaration of contravention.

The Bill now allows any per- son (not just the FMA) to make an application for a declar- ation.
The purpose of a declaration is to enable an applicant for a compensatory order or other civil remedy order to rely on the declaration in the proceedings for that order: a civil pecuniary penalty order.

An order may be applied for by the FMA or, with the FMA’s consent, the Commerce Com- mission (in relation to a contravention of Part 2).

There are 2 tiers of pecuniary penalty.


The first tier provides for a penalty not exceeding the greatest of the consideration for the rele- vant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.
The first tier is for more serious contraventions (for example, failing to prepare, lodge, or give a PDS, failing to have a trust deed or supervisor for debt se- • • 40 Financial Markets Conduct Bill Explanatory note • • curities, failing to register a managed investment scheme, or failing to comply with custodianship requirements).

The sec- ond tier provides for a penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case.
The sec- ond tier is for less serious contraventions: a compensatory order.

The High Court has a broad discretion to make any order it thinks just to compensate an aggrieved person for loss or damage or to prevent or reduce loss or dam- age.
In particular, this order may require a person to pay to an aggrieved person the amount of loss or damage suffered by the person: a broad range of other civil remedies, including varying or can- celling agreements, restraining the exercise of rights attaching to financial products, restraining the issue or transfer of finan- cial products, and directing the disposal of financial products.
It is noted that under this Bill serious criminal offences have been re- served for egregious violations of the Bill while other violations are primarily dealt with through a civil pecuniary penalty and compensa- tion regime under this subpart.

In this context, the level of pecuniary penalties needs to be set at a sufficiently high level to deter non-com- pliance, encourage voluntary compliance, and punish non-compli- ance.
In determining an appropriate pecuniary penalty, the High Court must have regard to all relevant matters, including— • • • the purposes of the Bill: the nature and extent of the contravention: the nature and extent of any loss or damage suffered by any person, or gains made or losses avoided by the person in contravention: the circumstances in which the contravention took place: whether or not the person in contravention has previously been found to have engaged in similar conduct: the relationship of the parties.
• The Bill contains special provisions relating to contraventions in- volving defective disclosure in a PDS or register entry, defective on- going disclosure, or other defective disclosure under the Bill.

These provisions apply, for example, if a person continues to offer financial products under a regulated offer where a statement in the PDS is mis- • • Explanatory note Financial Markets Conduct Bill 41 • leading or deceptive or the PDS omits information that it is required to contain.
These special provisions include— • allowing compensation and pecuniary penalties to be obtained from a director of the offeror at the time of the contravention even if the director did not commit the contravention.

How- ever, in this context a director has a defence if the director took reasonable precautions and exercised due diligence to avoid the contravention.
In addition, the circumstances connected with the director’s appointment must be taken into account when a pecuniary penalty is imposed: a provision that provides that a person must be treated as having suffered loss or damage if the person acquires financial products after the contravention and the financial products have declined in value.

This does not apply if it is proved that the decline in value was caused by a matter other than the relevant disclosure defect.
The provision is intended to reduce the difficulties that investors face in proving that they have suffered loss or damage because of a contravention.

Clause 486 provides a general defence for a person who has taken reasonable precautions and exercised due diligence to avoid a contra- vention.

The usual rules of court and rules of evidence and procedure for civil proceedings apply to proceedings under this subpart (including the standard of proof).
Subpart 4—Offences of knowingly or recklessly contravening disclosure provisions Clause 488 contains an offence for a contravention of clause 65.

Clause 65 prohibits further offers where there is defective disclos- ure in the PDS or register entry and the defect is materially adverse from the point of view of an investor.

The offence applies if the per- son who contravenes the clause knows about, or is reckless as to, the defect.
This has a maximum penalty of (in the case of an individual) imprisonment for a term not exceeding 10 years or a fine not exceed- ing $1 million or (in any other case) a fine not exceeding $5 million.

Clause 489 contains an offence for a contravention of clause 83 (de- fective ongoing disclosure), clause 425 (defective market services 42 Financial Markets Conduct Bill Explanatory note disclosure), or clause 27 of Schedule 1 (defective disclosure relating to an exclusion).
The offence applies if the person who contravenes the relevant provision knows about, or is reckless as to, the defect.

Subpart 5—Infringement offences This subpart provides for infringement offences.

The infringement offences are for relatively less serious contraventions of the Bill.

If these offences are proceeded with by the issue of an infringement notice, the infringement fee is set by regulations (but must not ex- ceed $20,000).
If these offences are proceeded with summarily, the maximum fine is $50,000.

A conviction may not be entered for these contraventions.

Subpart 6—Banning orders This subpart provides for the High Court to make banning orders.
A banning order may be made against a person (A) in various circum- stances, including if a pecuniary penalty order is made against A, A is convicted of an offence under the financial markets legislation, A has persistently contravened that legislation, or A has been convicted of a crime involving dishonesty.

A banning order may prohibit or restrict a person (without the leave of the court) from being a director or promoter of, or in any way being concerned or taking part in the management of, an entity.
In addition, the power to ban a person from providing financial adviser services or broking services has been carried over from section 137D of the Financial Advisers Act 2008.

Previously these bans (under the Securities Act 1978, the Securities Markets Act 1988, and the Financial Advisers Act 2008) were for up to 10 years.

Now the bans can be permanent or for a period specified by the court.
Section 383 of the Companies Act 1993 and section 44G of the Takeovers Act 1993 (which also relate to management bans) have been consequentially amended for consistency.

In addition, the period for which the Registrar or the FMA may prohibit a person from managing a company under section 385 of the Companies Act 1993 has been extended from 5 years to 10 years.
Explanatory note Financial Markets Conduct Bill 43 Subpart 7—Orders to protect interests of aggrieved persons in case of financial markets investigations or proceedings This subpart provides for the High Court to make certain orders to protect the interests of aggrieved persons in the case of financial markets investigations, criminal or civil proceedings involving the contravention of financial markets legislation, or civil proceedings involving the offer, issue, transfer, supply, or use of financial prod- ucts or financial services.
The orders may be made in relation to the money, financial products, or other property of the person that is the subject of the investigation or the criminal or civil proceedings (or an associated person).
These orders include an order to— • prohibit the relevant person from transferring, charging, or otherwise dealing with the money, financial products, or other property: prohibit a person who is indebted to the relevant person from making a payment in discharge of the debt to the relevant per- son: prohibit a person who holds property on behalf of the relevant person from transferring, or otherwise parting with possession of, the property: prohibit the taking or sending out of New Zealand of the rele- vant person’s money.
• • • Subpart 8—Indemnities or insurance for directors, employees, and auditors of issuers and offerors This subpart carries over sections 61 to 61C of the Securities Act 1978.
It provides that generally an issuer or offeror must not indem- nify, or effect insurance for, a director, employee, or auditor of the issuer or offeror in respect of— • liability for any negligence, default, breach of duty, or breach of trust in his or her capacity as a director, employee, or audi- tor; or costs incurred by that director, employee, or auditor in defend- ing or settling any claim or proceeding relating to that liability.
• 44 Financial Markets Conduct Bill Explanatory note The provisions have been amended to— • limit the restriction to liability for negligence, default, breach of duty, or breach of trust in connection with conduct regulated by the financial markets legislation: extend the restriction to associated persons of the issuer or offeror (to prevent avoidance).
• The subpart provides for situations in which such indemnities or in- surance are permitted (including an indemnity for costs incurred in defending or settling a proceeding if judgment is given in the person’s favour or if he or she is acquitted or the proceeding is discontinued, and insurance for liability other than criminal liability).

Subpart 9—Appeals Clause 507 provides for appeals to the High Court against certain FMA licensing decisions under Part 6.
Clause 508 provides for appeals to the High Court on a question of law against certain other decisions of the FMA (for example, in re- lation to the registration of schemes, directions to supervisors or li- censed market operators, and the exercise of the FMA’s enforcement powers).

These appeal rights on a question of law only are, in some cases, more limited that the appeal rights that currently apply, for ex- ample in relation to registration decisions.
Subpart 10—Miscellaneous This subpart provides for various miscellaneous matters, including the jurisdiction of the High Court and general provisions relating to the court’s orders and persons entitled to appear before the court.
In addition,— • clause 514 specifies when the state of mind of directors, em- ployees, or agents may be attributed to the body corporate or another principal: clause 515 specifies when the conduct of directors, employees, or agents may be attributed to the body corporate or another principal.

• Explanatory note Financial Markets Conduct Bill 45 Part 8 Regulations and exemptions Subpart 1—Regulations This subpart provides for regulations to be made for the purposes of the Bill.
Different matters may be prescribed in respect of different kinds or classes of financial products, services, persons, or other cir- cumstances.
The regulations may, for example,— • prescribe the information that must or must not be contained in PDSs and register entries: prohibit or restricting the use in PDSs or register entries of prescribed words: prescribe requirements relating to the layout or method of presentation of PDSs (including length): provide for matters referred to in clause 26 of Schedule 1 (in- cluding limited disclosure and conditions in relation to exclu- sions): prescribe circumstances in which disclosure does not need to be given to an investor: prescribe requirements with which an offeror must comply when giving choices to investors under clause 64 or when holding subscriptions in trust under clause 69: prescribe matters relating to the expiry date of a PDS: prescribe the manner of making documents, information, or other matters available under ongoing disclosure obligations: prescribe matters relating to reports to supervisors: prescribe registration requirements for particular types of managed investment schemes: prescribe the matters that must be contained in a trust deed for a debt security and provisions to be implied in a governing document: prescribe matters relating to meetings of product holders: prescribe records that must be kept by a custodian for a regis- tered scheme: • • • • • • • • • • • • 46 Financial Markets Conduct Bill Explanatory note • • • • • • prescribe matters relating to the management of registered schemes (including matters relating to the reporting of limit breaks and pricing errors): provide for exemptions from insider conduct or market manip- ulation rules: prescribe matters relating to substantial holding disclosure and directors’ and senior managers’ disclosure obligations under Part 5: prescribe eligibility criteria for market services licences and matters relating to conditions of those licences: providing for matters relating to certain definitions (including exempting or excluding matters from being a dealing in finan- cial products, financial services, or securities for the purposes of the Bill): prescribe matters relating to procedures, requirements, and other matters for registers kept under the Bill.
One regulation-making power of note is in clause 517(1)(b).

This al- lows regulations to amend certain dollar amounts specified in Sched- ule 1.

These dollar amounts relate to, for example, whether a person has net assets, income, or turnover over a certain threshold so as to qualify as a wholesale investor.
This power can only be used to in- crease those amounts (for example, to ensure the amounts remain relevant despite movements upwards in the Consumers Price Index (All Groups) published by Statistics New Zealand).

Similar powers already exist in sections 3(9) and 5(2CG) of the Securities Act 1978.

The power does not extend to the small offer exclusion in clause 12 of Schedule 1 (which can be amended only by an Act).

Another important regulation-making power is in clause 521.
These allow regulations to prescribe transitional and savings matters.

This Bill is a complex reform involving the consolidation of a number of statutes.

In these circumstances, such a regulation-making power may be needed to supplement or modify the express transitional pro- visions in the Bill.

This power is subject to limits.


For example, the Minister must be satisfied that the regulations are necessary or de- sirable for the orderly implementation of the Bill and are consistent with the purposes of the Bill.

It is noted that a similar power ap- pears in section 70(1)(j) of the Securities Act 1978.
The transitional provisions are subject to a sunset clause providing for the repeal or Explanatory note Financial Markets Conduct Bill 47 revocation of the provisions on the date that is 5 years after com- mencement.
Clause 523 contains extra procedural requirements relating to regu- lations made under various provisions that allow regulations to— • prescribe circumstances in which certain requirements of the Bill do not apply: • provide exemptions from certain requirements of Part 5: specify matters for the purposes of certain definitions.
• The clause requires the Minister, before making a recommendation relating to these regulations, to have regard to the purposes of the Bill and, in relation to exclusions or exemptions, to be satisfied that the exclusion or exemption is not broader than is reasonably necessary.

Subpart 2—Exemptions This subpart provides for the FMA to grant exemptions from the sub- stantive parts of the Bill (Parts 2 to 6), various transitional provisions, and the regulations.
The FMA can exercise the power only if— • the exemption is necessary or desirable in order to promote the purposes of the Bill (see clauses 3 and 4); and the exemption is not broader than is reasonably necessary.

• An exemption may be granted on terms and conditions.

A new provision (clause 530) specifies that an exemption may con- tinue in force for not more than 5 years.

See subpart 5, which contains general provisions relating to the FMA’s instruments.
These include requirements relating to dis- allowance, publication, and the need for the FMA to provide a statement of reasons as to why an exemption is appropriate.

Subpart 3—FMA’s designation power This subpart provides the FMA with a power to designate financial products and offers and to make certain other declarations.

Under this subpart, the FMA may— • declare that a security that would not otherwise be a financial product is a financial product of a particular kind.
A security (as defined in clause 6) may be an arrangement or a facility 48 Financial Markets Conduct Bill Explanatory note that has, or is intended to have, the effect of a person making an investment or managing a financial risk.
The FMA can, in effect, “call in” such an arrangement or facility as a type of financial product that is regulated by the Bill: declare that a financial product of a particular kind is to be- come a financial product of a different kind or is no longer to be considered to be a financial product.
For example, the FMA may decide that the economic substance of a particular type of share is such that it should be treated as being a debt security rather than an equity security: declare that an offer that would not otherwise require disclos- ure does require disclosure.
For example, despite the fact that an exclusion under Schedule 1 would otherwise apply, the FMA may decide that disclosure under the Bill is justified be- cause an offer involves significant risks for investors: declare that exemptions from certain obligations do not apply (this power is similar to the power under section 48C of the Securities Markets Act 1988).
• • • This subpart, accordingly, gives the regime some flexibility to deal with complex financial instruments and arrangements to ensure that the purposes of the Bill are not frustrated (having regard to economic substance as opposed to legal form).

The FMA can exercise the power in this subpart only if the designa- tion is necessary or desirable in order to promote the purposes of the Bill (after having regard to such matters as the economic substance of a particular security).
See clauses 3 and 4 for the purposes of the Bill.

The FMA must consult interested persons before it makes a declaration.

The subpart allows the FMA to make interim orders pending the ex- ercise of powers.

These orders may prohibit offers, issues, sales, or transfers of securities specified in the order while the interim order is in force.

See subpart 5, which contains general provisions relating to the FMA’s instruments.
These include requirements relating to dis- allowance, publication, and the need for the FMA to provide a statement of reasons as to why a declaration is appropriate.

Explanatory note Financial Markets Conduct Bill 49 Subpart 4—Frameworks or methodologies This subpart provides for the FMA to issue frameworks and method- ologies relating to various technical matters.
For example, the frame- works and methodologies may relate to— • how disclosure information that is to be made publicly avail- able is to be presented, calculated, or prepared.

This will help to ensure consistency in how this information is presented, cal- culated, or prepared in order to promote comparability: how amounts of assets, income, or turnover are to be calcu- lated or determined for the purposes of the wholesale investor exclusion in Schedule 1.
• See subpart 5, which contains general provisions relating to the FMA’s instruments.

These include requirements relating to disallow- ance, publication, and the need for the FMA to provide a statement of reasons as to why a framework or methodology is appropriate.
Subpart 5—General provisions relating to certain FMA instruments This subpart contains general provisions relating to notices and other instruments issued by the FMA, including exemptions under subpart 2, declarations under subpart 3, and framework and methodology instruments under subpart 4.

All of these instruments are disallowable under the Regulations (Dis- allowance) Act 1989.
Instruments that are of general application and apply to a class of persons or transactions are also regulations for the purposes of the Acts and Regulations Publication Act 1989.

Alternative publication requirements will apply to other instruments (such as individual ex- emptions).

These alternative publication requirements include pub- lication on the FMA’s Internet site and making copies available for purchase.
This will ensure that the individual exemptions and other instruments are readily available to all persons that are affected by them.

The alternative publication requirements are more appropri- ate than publication in the Statutory Regulations series because the individual exemptions and other instruments are administrative and technical in character (rather than legislative) and are not of general application or interest to the public.
50 Financial Markets Conduct Bill Explanatory note Subpart 6—Recognition and application regimes This subpart contains provisions to enable recognition and applica- tion regimes to be implemented.

This will allow offers of financial products to be made in New Zealand in accordance with the laws of designated countries and will extend the territorial scope of this Bill so that offers of financial products may be made in designated countries in accordance with New Zealand law.
The recognition and application regimes are to be implemented by means of regulations made under this subpart.

This subpart and subpart 7 broadly carry over Part 5 of the Securities Act 1978.

For an example of the regulations that may be made under this subpart, see the Securities (Mutual Recognition of Securities Of- ferings—Australia) Regulations 2008.
Those regulations implement an agreement between the New Zealand and Australian Governments for the mutual recognition of securities offerings in New Zealand and Australia.

Subpart 7—Enforcement of overseas pecuniary penalties under application regime This subpart allows regulations to be made relating to the enforce- ment of overseas pecuniary penalties under an application regime for a country designated in the regulations.
An overseas judgment that is registered in accordance with this subpart and the regulations has the same force and effect, and may give rise to the same proceedings by way of enforcement, as if the judgment had been given by the High Court.
Part 9 Repeals, amendments, and transitional provisions Subpart 1—Repeals and revocations This subpart repeals the Securities Act 1978, the Securities Mar- kets Act 1988, the Securities Transfer Act 1991, the Superannuation Schemes Act 1989, and the Unit Trusts Act 1960.

It also revokes various regulations made under those Acts.
Explanatory note Financial Markets Conduct Bill 51 Subpart 2—Amendments to Fair Trading Act 1986 This subpart amends the Fair Trading Act 1986 to provide that con- duct that contravenes Part 2 of the Bill does not contravene any of sections 9 to 13 of the Fair Trading Act 1986.
Subpart 3—Amendments to Financial Advisers Act 2008 This subpart amends the Financial Advisers Act 2008. mary,— • In sum- the definition of call credit union share has been amended in line with the definition of FSCU share in the Financial Advis- ers (Definitions, Voluntary Authorisation, Prescribed Entities, and Exemptions) Regulations 2011: the definition of wholesale client in section 5C(1) has been aligned with the definition of wholesale investor in the Bill: the exemption in section 14(1)(n) has been repealed without replacement.
This related to a person providing a service in the course of carrying on a business of dealing in futures contracts: section 38 has been substituted.

Currently this section pro- vides that a financial adviser must not recommend the acquisi- tion of securities if the offer for subscription was or is illegal.

The new section 38 refers to offers that contravene the finan- cial markets legislation.
A similar change has been made to section 77O (which relates to brokers): subject to one significant exception, discretionary investment management services will continue to be able to be provided by authorised financial advisers, QFE advisers, and registered persons to the extent currently permitted by the Financial Advisers Act 2008.
However, class discretionary investment management services (ie, services that are not personalised for particular clients) that involve or could involve category 1 products may not be provided under the Financial Advis- ers Act 2008.
Class discretionary investment management services covering category 1 products may only be provided by a person licensed under Part 6 of the Bill whose licence covers the provision of discretionary investment management services: • • • • 52 • • • Financial Markets Conduct Bill Explanatory note discretionary investment management investment service fa- cilities are included in the definitions of category 1 product and category 2 product; if they cover or could cover category 1 products, they are themselves category 1 products; if they are restricted to category 2 products, they are themselves cat- egory 2 products: new conduct obligations are imposed on financial advisers who provide discretionary investment management services; these include a requirement that the service must be provided to a retail client under an investment mandate, which must pro- vide for the limits of the investment authority or state that the authority is unlimited; the financial adviser must act in the best interest of the client or, in the case of a class service, in the best interests of the clients and treat them equitably; where the service is provided to a retail client, the financial adviser must exercise the care, diligence, and skill that a prudent per- son engaged in that profession would exercise in the same cir- cumstances, and the financial adviser must also ensure that the money or the property of the client is held by a broker who is subject to Part 3: various other consequential changes have been made.
Subpart 4—Amendments to Financial Markets Authority Act 2011 This subpart amends the Financial Markets Authority Act 2011.

In summary,— • the FMA’s function under section 9(1)(a) to promote the con- fident and informed participation of businesses, investors, and consumers in the financial markets has been extended to allow the FMA to state whether or not, or in what circumstances, it intends to take or not take action over a particular state of af- fairs or particular conduct.
This may take the form of a “no action letter”: section 46 has been amended to provide that an undertaking may be given in connection with such a statement and new section 46A permits undertakings to include requirements as to compensation or payments in lieu of a pecuniary penalty: • Explanatory note Financial Markets Conduct Bill 53 • • • new section 48A gives the FMA a power to appear and be heard in any proceedings under, or in respect of, the financial markets legislation: this Bill and the Financial Markets Authority Act 2011 itself have been listed as financial markets legislation (being a term that is used in connection with the performance or exercise of various functions, powers, and duties): various other consequential changes have been made.
Subpart 5—Amendments to KiwiSaver Act 2006 This subpart amends the KiwiSaver Act 2006.

Most of the amend- ments result from the fact that KiwiSaver schemes will be governed by the rules in the Bill, rather than by the governance rules in Part 4 of the KiwiSaver Act 2006.

The KiwiSaver Act 2006 has been sig- nificantly restructured as a consequence.
Subpart 6—Amendments to Securities Trustees and Statutory Supervisors Act 2011 This subpart amends the Securities Trustees and Statutory Super- visors Act 2011.
In summary,— • this Act is to be renamed the Financial Markets Supervisors Act 2011 (the 2011 Act) to reflect changes in terminology in this Bill (in particular, the generic use of the term “supervisor” to cover trustees and other persons acting in a supervisory cap- acity): terms have been updated and have been made consistent be- tween this Bill and the 2011 Act where appropriate.
For ex- ample, the term governing document in the 2011 Act will have the same meaning as in the Bill (but will continue to cover a deed of supervision under the Retirement Villages Act 2003): the licensing provisions in Part 2 of the 2011 Act are largely unchanged in substance.
However, these provisions have been updated to refer to supervisors of debt securities or registered schemes (instead of trustees of debt securities, statutory supervisors of participatory securities, trustees of unit trusts, or KiwiSaver trustees): • • 54 • • • • Financial Markets Conduct Bill Explanatory note section 22 is amended to give the FMA wider powers to ap- point a temporary supervisor if there is a vacancy for any rea- son: the liability regime has been aligned with this Bill.
Rather than enforcing the key requirements by means of offences, a contravention may result in a pecuniary penalty.

See, for ex- ample, section 8, which currently provides for a maximum fine of $300,000.

A contravention of the requirement to be licensed may now involve a pecuniary penalty of up to $600,000.
In addition, the penalty for failing to comply with the FMA’s di- rection under section 36 has been increased from $200,000 to $300,000 for consistency with the penalty levels in this Bill and the Financial Markets Authority Act 2011: Part 3 of the 2011 Act is now covered by subpart 4 of Part 4 of the Bill and accordingly is repealed: various other consequential changes have been made.

Subpart 7—Amendments to other enactments This subpart provides for consequential amendments to other enact- ments.
One change of note is to section 8A of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (the FSP Act).

Sec- tion 8A provides that the FSP Act applies to a person who has a place of business in New Zealand.

The amendment extends the provision to provide that the FSP Act also applies to a person who is, or is re- quired to be, registered under the FSP Act under any other enactment.
This change is needed because under this Bill a licensed market op- erator is required to be registered under the FSP Act even if it does not have a place of business in New Zealand (see clause 314(c)).

For consistency, the change applies in relation to other enactments that require registration under the FSP Act (in particular, the Financial Advisers Act 2008).
Explanatory note Financial Markets Conduct Bill 55 Subpart 8—Transitional provisions for offers of financial products This subpart provides for the Securities Act 1978, the Securities Regulations 2009, and associated exemptions (the former enact- ments) to continue to apply for a transitional period.
In summary,— if securities are offered in a prospectus that is registered under • the Securities Act 1978 before commencement, the former en- actments continue to apply to the offer: a prospectus may be registered in accordance with the former enactments on or before the date that is 12 months after com- mencement (the 12-month date) and the former enactments may continue to apply to that offer: if, under the former enactments, no registered prospectus is required for an offer of securities, the former enactments may apply to any offer of those securities that is made before the close of the 12-month date.
• • However, no offer or allotment of securities may be made under the former enactments after the date that is 2 years after the commence- ment.

Subpart 9—Transitional provisions relating to securities offered under Securities Act 1978 This subpart applies to a security offered under the Securities Act 1978 (including under subpart 8).

However, it does not apply if the security has been cancelled, redeemed, or forfeited, or all of the obli- gations owing under the security have been discharged.
In summary,— • various former enactments continue to apply to the security and any scheme until a certain effective date.

The effective date is 2 years after commencement or an earlier date chosen by the issuer.
The former enactments include the Securities Act 1978 and any particular enactments relating to a scheme (such as the KiwiSaver Act 2006, the Superannuation Schemes Act 1989, or the Unit Trusts Act 1960): 56 Financial Markets Conduct Bill Explanatory note • • • • • • • superannuation schemes and KiwiSaver schemes remain registered until the effective date.
Unit trusts remain subject to the Unit Trusts Act 1960 until the effective date: on and after the effective date, the ongoing requirements of this Bill apply.

If the security is not a financial product, it ceases to be regulated at this point: issuers of debt securities must lodge trust deeds and supply information to the Registrar and the FMA: if the security relates to a managed investment scheme, the scheme is automatically registered as a registered scheme.
However, copies of a complying governing document must be lodged and information must be supplied to the Registrar and the FMA: powers to amend governing documents with the FMA’s con- sent are conferred where this is necessary or desirable to en- sure, or in connection with ensuring, that the governing docu- ment complies with the requirements of the Bill: if, before commencement, an enactment that is amended by this Bill applied, or had an effect, in connection with a se- curity or scheme to which this subpart applies, the enactment continues to apply or have the effect in connection with the security or scheme as if this Bill had not been enacted until the effective date.
This provision also applies to securities that continue to be offered under the Securities Act 1978 under sub- part 8: issuers of securities must send notification of various matters to security holders.
Subpart 10—Other transitional provisions This subpart contains other transitional provisions, including— • providing for the Unit Trusts Act 1960 and the Superannuation Schemes Act 1989 (as the case may be) to continue to apply to the trust or scheme for the 2-year transition period, if offers to the public have not been made: providing for enactments amended by the Bill to continue to apply to certain trusts and schemes for the 2-year transitional period: • Explanatory note Financial Markets Conduct Bill 57 • • • • • • providing for a miscellaneous collection of transitional ar- rangements for managed investment schemes.
These include matters such as a 3-year holiday from the 5% related-party asset cap for restricted schemes and the removal of any re- maining superannuation trustees for trusts other than restricted schemes (to the extent that these trustees have not become the manager or supervisor of the scheme): providing for every exchange that, before commencement, is a registered exchange or an authorised futures exchange to be deemed to hold a financial product market licence for the op- eration of its existing market.
Market rules in force for mar- kets of existing exchanges will continue in force.

The FMA is authorised to determine, in consultation with each existing exchange, applicable conditions for the exchange.

Unlicensed operators that, immediately before commencement, lawfully operate a securities market may be granted a financial prod- uct market licence without prior reporting by the FMA.
The Minister, and not the FMA, may approve market rules for the markets operated by those previously unlicensed operators: providing for persons who are authorised or approved to carry on the business of dealing in futures contracts under section 38 of the Securities Markets Act 1988 to be treated as holding a licence issued under subpart 2 of Part 6: providing for enactments repealed by the Bill to continue to be treated as financial markets legislation under the Financial Markets Authority Act 2011: providing for management banning orders under the Secur- ities Act 1978 and the Securities Markets Act 1988 to continue be relevant in terms of enactments that previously referred to those orders: providing for the approval of electronic transfer systems under the Securities Transfer Act 1991 to continue.
Hon Simon Power Financial Markets Conduct Bill Government Bill Contents Title Commencement Part 1 Preliminary provisions Purposes Main purposes Additional purposes Overview Overview Interpretation Interpretation Meaning of financial product Definitions relating to kinds of financial products Definitions of financial benefit and of managed investment scheme Definitions of issued and issuer Meaning of associated person and related body corporate Miscellaneous interpretation provisions relating to statements and information Status of examples Act binds the Crown Act binds the Crown 342—1 Page 36 36 36 36 37 39 57 57 60 62 63 64 65 65 1 Financial Markets Conduct Bill General application provision 15 Application of Act Part 2 Misleading or deceptive conduct or false or misleading representations Misleading or deceptive conduct generally Misleading conduct in relation to financial products Misleading conduct in relation to financial services False or misleading representations Certain conduct does not contravene this Part Limited application of Part in relation to newspapers, magazines, broadcasting, etc Defence for publisher Defence for reasonable reliance on information supplied by another person Licensed market operator does not contravene by notifying disclosures Other exceptions Territorial scope of Part Part 3 Disclosure of offers of financial products Subpart 1—Application Issue offers that need disclosure Sale offers that need disclosure Meaning of regulated offer and of regulated product Regulated offers that need to meet additional governance requirements Options over financial products Treatment of offers of convertible financial products Treatment of offers of renewals and variations Territorial scope of Part Subpart 2—Procedure for making regulated offers Product disclosure statement must be prepared and lodged PDS must be prepared and lodged Purpose of PDS Disclosure to investors PDS must be given if offer requires disclosure Certain situations in which section 37 does not
 need to be complied with Financial Markets Conduct Bill PDS treated as having been given if application form used was included in, or accompanied by, PDS Offence to knowingly or recklessly contravene section 37 Right to withdraw and have money returned Content and presentation of product disclosure statements Disclosure of material information and content of PDS and register entry Meaning of material information in this Part Consent of experts and persons who make endorsements PDS must be worded and presented in clear, concise, and effective manner PDS must comply with prescribed requirements relating to form and presentation Other provisions relating to lodging of PDS and other documents Supply of prescribed information and documents Registrar must notify FMA of lodgement of PDS Waiting period after lodgement before processing applications for financial products FMA may extend period Waiting period restriction does not prevent offeror from acting under another PDS FMA may remove restrictions if its consideration complete or consideration or further consideration unnecessary Waiting period does not usually apply to continuous issue PDSs No guarantee or representation as to compliance When supplementary document or replacement PDS may be lodged Supplementary document Replacement PDS Registrar must notify FMA of lodgement of supplementary document or replacement PDS Publication of lodgement Amending register entry When register entry may be amended Conditions referred to in PDS Minimum subscription condition must be fulfilled before issue or transfer Issue or transfer void if quotation condition not fulfilled Financial Markets Conduct Bill Dealing with applications where condition
 referred to in PDS is not met or disclosure is defective Application of section 64 Choices open to offeror Prohibition of offers where defective disclosure in PDS or register entry Misleading or deceptive statements, omissions, and new matters requiring disclosure Persons who must inform offeror about disclosure deficiencies Expiry Expiry How offeror must deal with applications on expiry Money for financial products must be held in trust Money for financial products must be held in trust Other prohibitions and restrictions Offering financial products in entity that does not exist Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade Right to withdraw and have money returned Subpart 3—Advertising and publicity Advertising or publicity for regulated offers Inducements to apply Distribution of PDS or registered documents Advertising and publicity before PDS lodged Advertising and publicity after PDS lodged General exceptions Defence for publishers Subpart 4—Ongoing disclosure and updating of registers Duty to update register of offers of financial products and register of managed investment schemes Duty to notify relevant matters and provide certain documents and information to Registrar Disclosure to particular persons Information to be made available to investors or other prescribed persons Financial Markets Conduct Bill Public disclosure Information to be made publicly available Defective ongoing disclosure Defective ongoing disclosure 82 83 Subpart 5—Civil liability for certain contraventions of this Part 84 Part 3 offer provisions Part 4 Governance of financial products Subpart 1—Application and overview Part applies to all regulated products Regulated offers of debt securities need governing document and supervisor Regulated offers of managed investment products need to be in registered scheme All
 regulated products have other accountability requirements under this Part Subpart 2—Governance of offers of debt securities Need for governing document and supervisor for regulated offer of debt security Governing document requirements Contents of trust deed for debt securities Limits on permitted exemptions and indemnities Trust deed must be legally enforceable Effect of trust deed Changes to trust deed Power to make FMA-approved changes to trust deeds Lodging of changes to trust deed Role of supervisor Functions of supervisor General duties applying in exercise of supervisor’s functions Duty of supervisor to comply with professional standard of care Duty of issuer to provide regular reports to supervisor Duty of issuer to provide requested information and reports to supervisor Financial Markets Conduct Bill 102 103 104 105 Issuer must report contravention or possible contravention of issuer obligations Restriction on section 102 Duty of issuer to report serious financial problems Power of supervisor to engage expert Meetings of product holders 106 Meetings of product holders 107 Power of supervisor to attend meetings and appoint chair 108 109 110 111 Change of supervisor Supervisor ceasing to hold appointment Lodging of notice of change of supervisor Subpart 3—Registration of managed investment schemes Overview Need to register Need to register managed investment scheme for regulated offer of managed investment product Registration 114 116 115 112 113 Application for registration Initial and ongoing registration requirements for all managed investment schemes Additional initial and ongoing registration requirements for KiwiSaver schemes Additional initial and ongoing registration requirements for superannuation schemes Extent to which superannuation scheme may provide non-retirement benefits Additional ongoing registration requirements
 for restricted schemes Additional initial and ongoing registration requirements for locked-in superannuation schemes Additional prescribed registration requirements for other particular prescribed types of schemes 120 Manager must ensure that ongoing registration 118 117 119 requirements are complied with Changes to registration as particular type of registered scheme Governing document requirements Contents of governing document for registered scheme Limits on permitted exemptions and indemnities 121 122 123 6 109 109 109 110 110 111 111 111 112 112 113 114 114 116 117 118 120 120 120 120 121 123 Financial Markets Conduct Bill 124 125 126 127 128 Governing document must be legally enforceable Effect of governing document Changes to governing document Power to make FMA and court-approved changes to governing documents Lodging of changes to governing document Role of manager 129 Management and administration functions of manager 130 General duties applying in exercise of manager’s functions Duty of manager and investment manager to comply with relevant professional standard of care Duties of directors and senior managers of manager Contracting out of management functions Duty of manager to provide regular reports to supervisor or FMA Duty of manager to provide requested information and reports to supervisor Duty of manager to report contravention or possible contravention of issuer obligations Restriction on section 136 Duty of manager to report serious financial problems Role of supervisor Functions of supervisor General duties applying in exercise of supervisor’s functions Duty of supervisor to comply with professional standard of care Power of supervisor to engage expert Custodianship of scheme property Requirement to have supervisor or other independent person as custodian Custodian holds scheme property on trust Custodian must keep records of scheme property Duty of supervisor to refuse to act on wrongful directions 131 132 133 134 135 136 137 138 139 140 141 142
 143 144 145 146 Meetings of scheme participants 147 Meetings of scheme participants Power of supervisor to attend meetings and appoint chair 148 149 Manager and associated persons cannot vote if interested in resolution Financial Markets Conduct Bill Management of scheme Requirement for statement of investment policy and objectives Changes to statement of investment policy and objectives Lodging of statement of investment policy and objectives and changes to statement Action that must be taken on limit breaks Action that must be taken on pricing errors and failure to comply with pricing methodologies Actuarial examination of defined benefit scheme or life benefit scheme Power of manager to adjust financial benefits to comply with portfolio investment entity rules Limits on reversion of scheme property in certain schemes to non-scheme participant contributor Related party transactions Definition of related party benefit General prohibition on transactions giving related party benefits Certain related party benefits permitted Additional restrictions on related party transactions of restricted schemes Scheme participant transfer rules for KiwiSaver and superannuation schemes 162 Application of scheme participant transfer rules 163 Methods of transfer of scheme participants to another scheme or another section of scheme Transfer of substantial numbers of scheme participants with scheme participant consent Transfer with FMA consent Transfers from KiwiSaver scheme 164 165 166 Provisions as to deferred benefits for superannuation schemes 167 Deferred benefits Change of manager Application of sections 169 to 176 Removal of manager of registered scheme Supervisor or FMA may make temporary appointment Term, powers, and duties of temporary manager FMA’s costs must be reimbursed from scheme 168 169 170 171 172 8 137 137 137
 138 138 139 140 140 140 141 142 143 143 144 144 145 146 147 147 148 148 149 149 Financial Markets Conduct Bill 173 174 175 176 177 178 Supervisor or FMA must take reasonable steps to arrange for new appointment Former manager must hand over records and give reasonable assistance Statutory novation of rights, obligations, and liabilities of former manager Lodging of notice of changes to manager Change of supervisor Change of supervisor Lodging of notice of change of supervisor Change of independent trustee 179 Change of independent trustee Cancellation of registration 180 181 Cancellation of registration Registrar must remove scheme from register on cancellation of registration Subpart 4—Intervention in debt securities or registered schemes Provisions assisting supervisor or FMA to intervene 182 183 Duty of auditor to report to supervisor Duty of auditor, investment manager, administration manager, custodian, or actuary to report serious problems 184 What person must do if duty to report serious problem applies Protections extend to volunteers of supporting information for other protected disclosures FMA may require supervisor to attest as to issuer’s compliance with issuer obligations Duty of supervisor to report contravention or possible contravention of issuer obligations to FMA Duty of supervisor to report serious financial problems to FMA FMA’s powers of direction FMA’s directions to supervisor (or issuer) Powers to obtain court orders to intervene Power of supervisor or FMA to apply for order to remedy problems Court orders to remedy problems 185 186 187 188 189 190 191 192 150 150 151 151 151 152 152 153 153 154 155 156 156 157 157 158 158 159 160 160 9 Financial Markets Conduct Bill 193 Power of court to appoint new manager, provide for manager powers, and deal with changes of managers Power of court to direct supervisor Court power to order winding up of scheme Initial steps in winding up of registered scheme 194 195 196 197 Winding up report Miscellaneous
 198 199 Offence of false or misleading statements Protection for relevant person in respect of disclosure under this subpart Subpart 5—Registers that must be kept by issuers of all regulated products Issuers must keep registers of regulated products 200 201 Manner of keeping registers Contents of registers 202 Audit of registers 203 Auditor must advise if auditor considers that subpart is not 204 being complied with Issuer must notify Registrar of registers Public inspection of register 205 206 207 Manner of inspection Copies of documents 208 Reasons for request must be given and FMA may 209 authorise non-compliance Restriction on use of information in registers Issuer to send confirmation of financial products Requirement for confirmation document does not apply in certain circumstances Certain provisions prevail over Companies Act 1993 210 211 212 213 Subpart 6—Accounting records, copies of documents, and audit of financial statements Accounting records 214 215 216 217 218 Issuer must keep proper accounting records Place where accounting records to be kept Accounting records to be in English Period for which accounting records to be kept Inspection of accounting records Copies of documents to be retained 219 Copies of documents must be retained for 7 years 10 162 163 163 164 164 165 166 166 167 167 168 168 169 169 170 170 171 171 172 172 173 173 174 174 175 175 176 Financial Markets Conduct Bill Audit requirement Financial statements to be audited 220 221 Meaning of qualified auditor 222 Application of other Acts not affected Miscellaneous Subpart 7—Civil liability for certain contraventions of this Part 223 Part 4 governance provisions Part 5 Dealing in financial products on markets Subpart 1—Purposes, overview, and interpretation 224 225 Additional purposes of Part Overview Material information and generally available to the market 226 Meaning of material information 227 Meaning of generally available to the market Certain derivatives treated as being quoted
 financial products of listed issuer 228 Certain derivatives treated as being quoted financial products of listed issuer 176 176 177 177 179 180 181 181 182 Insider conduct 229 Meaning of information insider, inside information, and 183 adviser Relevant interests Relevant interests in financial products (basic rule) Extension of basic rule to powers or controls exercisable through trust, agreement, etc Extension of basic rule to interests held by other persons under control or acting jointly Situations not giving rise to relevant interests Subpart 2—Insider trading Insider conduct prohibited Prohibition of insider conduct Information insider must not trade Information insider must not disclose inside information Information insider must not advise or encourage trading 230 231 232 233 234 235 236 237 184 184 185 185 186 186 187 187 11 Financial Markets Conduct Bill 238 Criminal liability for insider conduct When prohibition on insider conduct does not apply Exception for trading required by enactment or rule of law Exception for disclosure required by enactment or rule of law or by FMA Exception for disclosure in connection with preparing PDS or disclosure document Exceptions in respect of underwriting agreements Exception in case of knowledge of person’s own intentions or activities Exception in case of knowledge in relation to derivatives Exception for agent executing trading instruction only Exceptions from section 235 for takeovers Exceptions from sections 236 and 237 for takeovers Exception for schemes of arrangement approved under Companies Act 1993 Exception for redemption of managed investment products Exception for Reserve Bank Defences Absence of knowledge of trading Inside information obtained by independent research and analysis Equal information Options and trading plans Chinese wall defence 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 Subpart 3—Market manipulation 256 Misleading or deceptive conduct generally in dealings in quoted
 financial products False or misleading statement or information Exception for takeovers Criminal liability for false or misleading statement or information False or misleading appearance of trading Exception for short selling and crossings Persons treated as contravening false or misleading appearance of trading prohibition Defence Criminal liability for false or misleading appearance of trading Financial Markets Conduct Bill Subpart 4—Continuous disclosure 265 Listed issuers must disclose in accordance with listing rules if continuous disclosure listing rules apply 266 What are continuous disclosure provisions 267 No contravention of continuous disclosure provisions by person who takes reasonable steps to ensure listed issuer complies Subpart 5—Disclosure of interests of substantial product holders in listed issuers Purpose of subpart 268 269 Meaning of substantial product holder, substantial holding, and percentage Persons must disclose if begin to have substantial holding Substantial product holders must disclose if subsequent movement of 1% or more in holdings Substantial product holders must disclose if subsequent changes in nature of relevant interests Persons must disclose if cease to have substantial holding 273 274 What disclosure required 275 276 277 Form and method of disclosure Listed issuer must give acknowledgement of disclosure How to ascertain total financial products in class for purposes of disclosure Exemption for persons with interest in other substantial product holders who comply Exemption for corporate trustees and nominee companies Conditions of exemption for corporate trustees and nominee companies Exemption for persons under control or acting jointly with corporate trustees and nominee companies Extended time for disclosure for trustees, executors, and administrators FMA may require persons to
 disclose to market relevant interests and powers to get relevant interests Listed issuer may require registered holder to disclose relevant interests to it Listed issuer may require person who has relevant interest to disclose information to it Form and method of notice requiring disclosure Financial Markets Conduct Bill 287 288 289 290 291 292 293 294 295 296 Register and publication of substantial holdings Listed issuers must maintain register of disclosures of substantial holdings Public inspection of register Copies of documents Offences relating to substantial holdings register Listed issuers must publish information on substantial holdings No liability for publication of substantial holdings Notice under this subpart not to affect incorporation of listed issuer or constitute notice of trust Subpart 6—Disclosure of relevant interests in quoted financial products by directors and senior managers of listed issuers Purpose of subpart Directors and senior managers of listed issuers must disclose relevant interests and dealings in relevant interests Disclosure of relevant interests and dealings in relevant interests in relation to specified derivatives 297 What disclosure required 298 299 Form and method of disclosure Disclosure obligation applies for 6 months after ceasing to hold office Exemption for directors or senior managers who disclose substantial holdings Exemption for overseas listed issuers Listed issuer must keep interests register Public inspection of interests register Copies of documents Offences relating to interests register Subpart 7—Licensing of markets for trading financial products Principles guiding exercise of powers under this subpart Need for financial product market licence 300 301 302 303 304 305 306 307 What is a financial product market 308 309 310 Need for financial product market licence Prohibitions
 on holding out Exemptions 14 207 207 207 208 208 209 209 209 210 211 211 211 212 212 212 213 214 214 214 215 215 216 216 217 Financial Markets Conduct Bill 311 When financial product market taken to be operated in 217 New Zealand General obligations of licensed market operator 312 General obligations in respect of licensed markets Issue of licence Application for licence 313 314 When licence may be issued 315 When licence may be issued for overseas-regulated 316 317 318 319 320 market Conditions of licence Procedural requirements Licence may cover more than 1 financial product market Licence may cover subsidiaries FMA must maintain list of licensed markets on Internet site Changes to licences Variation of conditions 321 322 Minister may suspend or cancel licence 323 Procedure for varying of conditions or suspension or cancellation of licence Effect of suspension Variation or revocation of suspension Approval of contractual market rules Licensed markets must be operated under market rules that comply with this subpart Required matters for market rules 327 328 When market rules have effect 329 Approval process for proposed market rules and rule changes Approval of proposed market rules and changes Notice of decision on rules Power of FMA to request changes to market rules on certain matters Overseas-regulated markets must give notice of market rules and rule changes to FMA 334 Market rules must be available for public inspection 335 Application of Acts relating to regulations to contractual market rules Financial Markets Conduct Bill 336 337 338 Monitoring of licensed market obligations Licensed market operator must give report on compliance with licensed market obligations to FMA FMA to carry out licensed market obligations reviews FMA must make written report on licensed market obligations review FMA may require licensed market operator
 to submit action plan on failure to meet licensed market obligations Approval, amendment, or rejection of action plan 340 341 Minister may give licensed market obligations direction 339 to licensed market operator 342 Minister may vary, suspend, or cancel licence 343 344 345 346 347 348 349 350 351 Control limits on licensed market operators Power to impose control limits on licensed market operators Control limit not to be exceeded Effect of exceeding control limit Application for approval to exceed control limit Revocation or amendment of approval Other provisions relating to licensing of financial product markets FMA may give advice to Minister Delegation of Minister’s licensing functions and powers to FMA Regulations modifying subpart for licensed markets Subpart 8—Operation of licensed markets Licensed market operator must notify FMA of disciplinary actions and suspected contraventions 355 352 When notification required 353 354 Details and method of notification Licensed market operator must ensure FMA has access to real-time trading and other information Licensed market operator must give FMA material information given to market participants 356 Waiver of notification and disclosure obligations 357 Licensed market operator must give FMA or Takeovers Panel other information and assistance on request Power to disclose further information Licensed market operator must give notice and have regard to submissions on continuous disclosure determinations 358 359 16 230 230 231 232 232 233 234 234 235 235 236 237 237 237 238 239 240 240 240 241 241 241 242 242 Financial Markets Conduct Bill 360 361 362 363 364 365 366 367 368 369 370 Limited notice and submissions for urgent determinations FMA may give directions to licensed market operators Grounds for continuous disclosure direction Grounds for other directions Notice, opportunity for licensed market operator to act, and submissions before FMA gives directions Limited notice and submissions for urgent continuous
 disclosure directions Notice and opportunity to be heard and represented after FMA gives direction Effect of directions to licensed market operator Provisions as to directions Contracting out of or modification of continuous disclosure process requirements Offence for failing to comply with direction Subpart 9—Transfer of transferable financial products 371 Financial products to which this subpart applies Transfer of specified financial products using transfers in prescribed form or containing prescribed information Transfer of specified financial products by transfer Transfer of specified financial products by products transfer and brokers transfer Products transfer does not need to be witnessed Transfers to be instruments of transfer for purposes of other enactments and instruments Transfer of specified financial products by electronic means Approval of electronic transfer system Specified financial products may be transferred under approved system 372 373 374 375 376 377 378 Minor technical modifications to system 379 380 381 Registration may not be refused Registration may not be refused on ground that financial products have been transferred under this subpart Effect of this Act on other enactments Subpart 10—Unsolicited offers to purchase financial products off-market Definitions relating to unsolicited offer regulations and related provisions 243 243 243 244 244 245 246 246 246 247 247 247 248 248 249 249 250 250 251 251 251 251 17 Financial Markets Conduct Bill 382 383 384 Regulations concerning unsolicited offers Specific provisions for regulations concerning unsolicited offers Protection from liability in connection with unsolicited offer provisions Subpart 11—Civil liability for certain contraventions of this Part 385 Part 5 market provisions Part 6 Licensing and other regulation of market services 386 Overview Subpart 1—Key provisions 387 When provider of market services must be licensed 388 When providers of other market services may be licensed 389
 Meaning of licensed market services Prohibitions on holding out 390 Subpart 2—Issue of licences, conditions, and duration 391 Principles guiding the exercise of FMA powers Issue of licences FMA may issue licence 392 393 Application for licence 394 When licence must be issued 395 396 397 398 399 Procedural requirements Notice of decision Licence must be issued for particular market services Licence may cover subsidiaries FMA must send licence details to Registrar Conditions of licence Conditions of licence 400 401 When FMA may impose permitted conditions Licensee may apply for variation of conditions 402 Procedure for variation of conditions 403 Consequences of contravening conditions 404 Expiry or cancellation of licences Duration of licence 405 406 When FMA may cancel licence 407 Effect of expiry or cancellation of licence on appointments 18 252 253 254 255 256 257 258 258 258 258 259 259 259 260 261 261 261 262 262 262 263 263 264 264 264 264 Financial Markets Conduct Bill Subpart 3—Monitoring and enforcement of licences 408 Meaning of material change of circumstances 409 410 411 412 413 414 415 416 417 Reports Licensee must deliver regular reports to FMA Licensee must report certain matters Restriction on section 410 FMA’s powers in case of contravention of market services licensee obligation, material change, etc FMA’s powers in case of contravention of market services licensee obligation, material change, etc Procedure for exercising powers Notice requirements Action plan Action plan Approval, amendment, or rejection of action plan Consequences of failure to submit action plan, rejection of action plan, or failure to comply with action plan 418 419 Directions Consequences of failure to comply with directions Directions Subpart 4—Disclosure obligations for licensees providing market services to retail investors 420 421 Application of subpart Licensee must make disclosure before providing service to retail investor Timing and method of disclosure Purpose of
 disclosure statement Disclosure statement 422 423 424 425 Misleading or deceptive statements and omissions 426 Further prescribed information to be made available Subpart 5—Requirement for licensees to provide service under client agreements 427 428 Application of subpart Requirement to have client agreement Subpart 6—Provision of discretionary investment management services 429 Application of subpart 265 265 265 266 266 267 267 267 268 268 269 269 270 270 270 271 271 271 272 272 273 273 19 Financial Markets Conduct Bill 430 Meaning of provider of discretionary investment management service and related terms 431 432 433 434 435 436 437 438 439 Duties of DIMS licensee DIMS licensee’s duties Duties of directors and senior managers of DIMS licensee Duty of DIMS licensee to comply with professional standard of care Limits on permitted exemptions and indemnities Requirement for agreed investment mandate with retail investor Action that must be taken on limit breaks Related party transactions Definition of related party benefits General prohibition on transactions giving related party benefits Certain related party benefits permitted DIMS licensees must hold investor money in trust 273 274 275 275 276 276 277 277 277 278 440 Money paid by, or on account of, investors must be held 278 in trust Custodial service performed as part of discretionary investment management service Application of sections 442 and 443 Requirements for custodian Certain broker obligations of Financial Advisers Act 2008 apply under this Act Subpart 7—Holding and application of investor funds and property by derivatives issuers Application of regulations made under this subpart Regulations regulating holding and application of investor funds and property by derivatives issuers 441 442 443 444 445 Subpart 8—Miscellaneous provisions Civil liability 446 Part 6 licence provisions Part 7 Enforcement, liability, and appeals 447 Meaning of contravene 279 279 280 280 280 281 282 20 Financial Markets Conduct Bill
 Subpart 1—FMA’s enforcement powers Stop orders 448 When FMA may make stop orders 449 450 Meaning of restricted communication 451 Terms of stop order FMA may make interim stop order pending exercise of powers Persons to whom stop orders and interim stop orders may apply 452 Direction orders 453 When FMA may make direction orders 454 Terms of direction orders Unsolicited offer orders 455 When FMA may make unsolicited offer orders 456 Terms of unsolicited offer orders 457 458 459 460 461 Process for FMA’s orders FMA must follow steps before making orders FMA may shorten steps for specified orders FMA must give notice after making orders General provisions General provisions on FMA’s orders Consequences of failing to comply with FMA’s orders Subpart 2—High Court’s enforcement powers Injunctions Court may grant injunctions 462 463 When court may grant injunctions and interim injunctions Undertaking as to damages not required by FMA 464 Court may make FMA orders under this Part 465 Court may make FMA orders under this Part Subpart 3—Civil remedies Overview of civil remedies Overview of civil remedies 466 467 What are civil remedy provisions Declarations of contravention and pecuniary penalty orders 468 When court may make declarations of contravention 469 Purpose and effect of declarations of contravention 283 284 285 285 286 287 287 288 288 289 289 290 290 291 291 291 292 292 292 293 293 293 21 Financial Markets Conduct Bill 470 What declarations of contravention must state 471 When court may make pecuniary penalty orders 472 Directors treated as having contravened in case of defective disclosure and may be ordered to pay pecuniary penalty 473 Maximum amount of pecuniary penalty 474 Guidance for court on how to determine gains made or losses avoided for purposes of maximum amount Considerations for court in determining pecuniary penalty Court must order that recovery from pecuniary penalty be applied to FMA’s or Commerce Commission’s actual costs 475 476 Compensatory
 orders 477 When court may make compensatory orders 478 479 480 Terms of compensatory orders Director has due diligence defence Person treated as suffering loss or damage in case of defective disclosure Other civil remedy orders 481 When court may make other civil remedy orders 482 Terms of other civil remedy orders Interrelationship of civil remedies 483 More than 1 civil remedy order may be made for same conduct Only 1 pecuniary penalty order may be made for same conduct No pecuniary penalty and fine for same conduct Due diligence defence Defence for persons other than primary person in contravention General Rules of civil procedure and civil standard of proof apply to civil remedies Subpart 4—Offences of knowingly or recklessly contravening disclosure provisions Offence of knowingly or recklessly contravening prohibition on offers where defective disclosure in PDS or register entry 484 485 486 487 488 22 294 294 294 295 296 297 297 298 298 299 299 300 300 302 302 302 302 303 303 Financial Markets Conduct Bill 489 490 491 492 493 Offence of knowingly or recklessly contravening other provisions relating to defective disclosure Subpart 5—Infringement offences Infringement offences Infringement notices Procedural requirements for infringement notices Payment of infringement fee Subpart 6—Banning orders 494 When court may make banning orders 495 496 497 498 Terms of banning orders Offence of contravening banning order Only 1 banning order may be made for same conduct General provisions for banning orders Subpart 7—Orders to protect interests of aggrieved persons in case of financial markets investigations or proceedings 499 When court may make order to protect interests of aggrieved persons 500 What orders may be made 501 502 Interim orders Relationship with other law Subpart 8—Indemnities or insurance for directors, employees, and auditors of issuers and offerors General prohibition on indemnities or insurance for directors, employees, and auditors of issuer or
 offeror Permitted indemnities for certain costs of directors, employees, and auditors of issuers or offerors Permitted insurance for certain liability of directors and employees of issuer or offeror Interpretation for this subpart Subpart 9—Appeals Appeals against market services licence decisions Appeals against other decisions of FMA on questions of law only Subpart 10—Miscellaneous Time for laying information for summary offences Jurisdiction of courts in New Zealand Orders to secure compliance General provisions as to court’s orders Financial Markets Conduct Bill 513 514 515 516 Persons entitled to appear before court State of mind of directors, employees, or agents attributed to body corporate or other principal Conduct of directors, employees, or agents attributed to body corporate or other principal Saving of liability under general law Part 8 Regulations and exemptions Subpart 1—Regulations 517 519 518 520 521 522 523 Regulations for purposes of Part 3 (disclosure of offers of financial products) Regulations for purposes of Part 4 (governance of financial products) Regulations for purposes of Part 5 (dealing in financial products on markets) Regulations for purposes of Part 6 (market services) Transitionals, savings, and orderly implementation of Act Other regulations Procedural requirements for regulations relating to exemptions, exclusions, and definitions 524 Miscellaneous provisions relating to exemptions 525 Miscellaneous provisions relating to fees and charges 526 Regulations or exemptions may require compliance with generally accepted accounting practice, financial reporting standards, or FMA frameworks or methodologies 527 Miscellaneous provisions relating to regulations Subpart 2—Exemptions FMA may grant exemptions Restriction on FMA’s exemption power Exemption in force for not more than 5 years Breach of
 exemption conditions Exemptions in respect of specified overseas jurisdictions Subpart 3—FMA’s designation power FMA may designate financial products and offers Procedural requirements Transitional matters FMA may make interim orders pending exercise of powers Period in which interim order is in force Financial Markets Conduct Bill Subpart 4—Frameworks or methodologies 538 539 FMA may specify frameworks or methodologies Consultation Subpart 5—General provisions relating to certain FMA instruments Application of subpart Status and publication of instruments Variation and revocation Subpart 6—Recognition and application regimes Purpose of this subpart Definition of country in this subpart Exemption from Parts 3 and 4 and regulations for New Zealand offers under recognition regime Exemption from Parts 3 and 4 and regulations for New Zealand offers under recognition regime Power to exempt from Parts 3 and 4 and regulations under recognition regime 540 541 542 543 544 545 546 547 Matters that must be stated in regulations implementing 548 549 550 recognition regime Offence for breach of regulations implementing recognition regime Extension of Parts 3 and 4 and regulations to overseas offers under application regime Extension of Parts 3 and 4 and regulations to overseas offers under application regime Power to extend Parts 3 and 4 and regulations under application regime 551 Matters that must be stated in regulations implementing application regime Subpart 7—Enforcement of overseas pecuniary penalties under application regime 552 553 554 555 556 557 Purpose of this subpart Enforcement of overseas pecuniary penalties under application regime Power to enforce overseas penalties under application regime Interpretation Registration of judgment Effect of registration 341 342 342 342 343 343 344 344 345 345 346 347 347 347 348 348 349 349
 349 349 25 Financial Markets Conduct Bill 558 559 560 561 562 563 564 565 566 567 Enforceability of registered judgment Stay may be granted Costs Interest Rules of private international law not to apply Other regulations for registration of judgments under application regime Part 9 Repeals, amendments, and transitional provisions Subpart 1—Repeals and revocations Repeals Revocations Subpart 2—Amendments to Fair Trading Act 1986 Principal Act amended New section 5A substituted 5A Contraventions of financial markets misleading or deceptive conduct or false representation provisions do not contravene sections 9 to 13 Subpart 3—Amendments to Financial Advisers Act 2008 Principal Act amended Interpretation 568 569 570 Who are wholesale clients 571 When person provides discretionary investment management service Other exemptions 572 573 When financial adviser service is personalised service or class service 350 350 350 351 351 351 352 352 353 353 353 353 353 356 356 357 357 574 Who is permitted to provide personalised service to retail 358 clients 575 Who is permitted to provide class service to retail clients Financial adviser must make disclosure before providing 576 personalised service to retail client 577 What financial adviser must disclose 578 QFE must make disclosure before personalised service provided to retail client No compliance with disclosure obligation if disclosure out of date New section 29A inserted 579 580 26 359 359 360 360 361 361 Financial Markets Conduct Bill 29A Further prescribed information to be made available to clients of discretionary investment management service 581 What is conduct obligation and when does it apply 582 New sections 36A to 36D inserted 36A Requirement to have agreed investment mandate with retail client Duties on financial adviser providing discretionary investment management service Duty to comply with professional standard of care in providing discretionary investment management service Custodial duties under
 discretionary investment management service 36B 36C 36D 583 New section 38 substituted 38 Authorised financial adviser must not recommend acquisition of FMCA financial products if offer contravenes financial markets legislation Other exemptions 584 585 What is conduct obligation and when does it apply 586 587 Restriction on use of term sharebroker New section 77O substituted 77O Broker must not receive client money if offer contravenes financial markets legislation 588 589 590 591 592 Offence of recommending offer of securities when subscription illegal Offences of receiving client money if offer for subscription illegal Heading to subpart 4 of Part 4 amended Sections 137C to 137J and heading repealed Pecuniary order for contravening wholesale certification requirement 593 When FMA may make temporary banning orders for financial adviser services or broking services General regulations 594 Subpart 4—Financial Markets Authority Act 2011 595 596 597 598 599 Principal Act amended Interpretation FMA’s functions FMA may exercise person’s right of action FMA may accept undertakings 361 361 361 362 362 363 363 363 363 364 364 364 364 364 365 365 365 365 365 366 366 366 366 367 368 368 27 Financial Markets Conduct Bill 600 New section 46A inserted 46A Undertaking may include requirements as to compensation or penalties 601 New heading and section 48A inserted Power to appear and be heard and adduce evidence 48A FMA may appear and be heard and adduce evidence 602 603 FMA may require its warning to be disclosed Schedule 1 amended Subpart 5—Amendments to KiwiSaver Act 2006 Principal Act amended 604 Purpose 605 606 Interpretation 607 Meaning of provider 608 609 Outline Outline of how people become members of overall KiwiSaver scheme Extension of opt-out period Sections 24 to 32 and heading repealed Employer must also supply investment statement for employer’s chosen KiwiSaver scheme (if any) Effect of employer choice of KiwiSaver scheme Commissioner provisionally allocates certain
 people to default KiwiSaver schemes and sends investment statement New section 52 substituted 52 Notification of transfers and requirement to transfer funds and information Compulsory employer contribution amount: general rule Sections 101H to 101K and heading repealed Part 4 substituted Effect of completion of allocation Part 4 Additional Governance Provisions 115 Overview of Part Financial Markets Conduct Bill Subpart 1—Implied terms and other regulation of schemes KiwiSaver scheme rules KiwiSaver scheme rules are implied in trust deeds establishing KiwiSaver scheme Provisions about unreasonable fees that apply to both KiwiSaver schemes and complying superannuation funds Duty to give notice to FMA about fee increases Exercise of functions by FMA about unreasonable fees Powers of High Court in relation to unreasonable fees Other implied terms Terms relating to backdated validation implied into trust deeds of KiwiSaver schemes Terms relating to members’ tax credits implied into trust deeds of KiwiSaver schemes and complying superannuation funds Terms relating to compulsory employer contributions implied into trust deeds of KiwiSaver schemes and complying superannuation funds Terms relating to lump sum payments by complying superannuation funds 116 117 118 119 120 121 122 123 Other regulation of schemes Requirement for annual return 124 125 Unclaimed money held in KiwiSaver scheme 126 Member’s interest in KiwiSaver scheme not 127 128 129 130 assignable Application of Financial Transactions Reporting Act 1996 to default allocation of members to KiwiSaver schemes Product disclosure statements must contain responsible investment statement Interface with securities law Application of Financial Markets Conduct Act 2011 Certain sections of Financial Markets Conduct Act 2011 modified in relation to KiwiSaver scheme 378 378 379 380 380 380
 381 381 382 383 383 384 384 385 386 29 Financial Markets Conduct Bill Subpart 2—Default KiwiSaver schemes Appointment of default providers Provisions of instrument of appointment to prevail over provisions of trust deed Effect of appointment under section 131 Appointment must be notified Power of High Court to act in respect of terms and conditions of appointment as default KiwiSaver scheme and regulations relating to default KiwiSaver schemes Revocations, etc, of instruments of appointment Duration of obligations as default provider after terminating event Subpart 3—Complying superannuation funds Outline of subpart Failure to pay: provider notice Failure to pay: FMA’s duties Failure to pay: Commissioner Recovered amounts Reduction of scheme insurance upon transfer out of complying superannuation fund Revocation of approval of complying superannuation funds Subpart 4—Exempt employers Effect of being exempt employer and outline of subpart Eligibility to continue to be exempt employer How 4% minimum amount may be calculated for exempt employer defined contribution schemes Exempt employers who provide access to more than 1 scheme Exempt employers who have schemes established under master trusts Employers may apply to succeed to former employer’s exempt employer status How applications to succeed to former employer’s exempt employer status must be dealt with Revocation of exempt employer approval FMA must give notice to Commissioner of exempt employers Register of exempt employers Financial Markets Conduct Bill 155 156 157 158 159 160 161 Subpart 5—Miscellaneous Right of appeal against certain decisions of FMA Sharing of information and documents with Commissioner for purpose of administering KiwiSaver schemes Conditions that may be imposed on providing information, documents, or
 evidence to Commissioner Annual report by FMA Offence to supply false or misleading information, etc No Crown guarantee of KiwiSaver schemes or products Factual description of, or transmission of information about, KiwiSaver scheme not financial adviser service Sections 205 to 206 repealed Sections 209 and 210 and heading repealed Duty of Commissioner under section 50 modified in certain cases in which section 210 applies Section 220 substituted 220 Special rules about giving of product disclosure statements Regulations Administration of Act Section 225 repealed Status of Crown contribution and fee subsidy for tax purposes Section 228 substituted 228 Regulations relating to default KiwiSaver providers Sections 231 to 237 repealed Amendments to Schedule 1 (KiwiSaver scheme rules) 1 Further amendments to Schedule 1 (KiwiSaver scheme rules) Schedules 2 and 3 repealed Application Subpart 6—Amendments to Securities Trustees and Statutory Supervisors Act 2011 Principal Act amended Name of principal Act changed New section 3 substituted Financial Markets Conduct Bill Purpose Prohibition on holding out Supervisor must be licensed FMA may license supervisors 3 Interpretation Heading to Part 2 Heading to subpart 1 of Part 2 New section 6 substituted 6 New section 8 substituted 8 Requirement to be licensed: exception for certain FMA appointees New section 10 substituted 10 FMA may impose conditions on licence Information to be stated in licence FMA must send licence and details to licensee and others Decision on application for, or to vary, licence Application to cancel licence Notice, consultation, and submissions concerning decision under section 16(1) Appeal to High Court against FMA’s decision on application Effect of expiry of licence Licensee must apply for new licence or notify issuer or operator
 before licence expires Rejection of application for new licence: FMA may replace existing appointee Expiry of licence: issuer or operator may replace existing appointee or FMA appointee Expiry of licence: existing appointee must provide documents FMA may vary licence because of material change of circumstances, etc FMA’s powers if action plan not submitted, etc Removal notice Removal notice: FMA may give direction to existing appointee Removal notice: FMA may replace existing appointee Replacement notice: affected person may replace existing appointee or FMA appointee Notice requiring documents: existing appointee, etc, must provide documents New section 41 substituted Financial Markets Conduct Bill 663 664 665 666 Pecuniary penalty orders 41 Compensation orders Part 3 repealed FMA may vary or cancel direction New section 52 substituted 52 Protection for supervisor who complies with FMA’s direction Transitional provisions 667 668 FMA may vary licences under Financial Markets Supervisors Act 2011 Appeal against licence decision Subpart 7—Amendments to other enactments 669 Amendments to other enactments Subpart 8—Transitional provisions for offers of financial products Act applies to offer unless former enactments continue to apply Former enactments continue to apply if prospectus registered before commencement Issuer may elect to comply with former enactments instead of this Act if prospectus registered within 12 months of commencement Former enactments apply if no prospectus is required unless issuer elects otherwise Transitional provisions that apply after 12-month date in respect of registered prospectuses This Act and 1978 Act are (on transitional basis) alternative means of compliance All offers and allotments under old law must
 cease All offers and allotments under old law must cease within 2 years of commencement FMA may continue to perform and exercise functions, duties, and powers Subpart does not prevent PDS from being lodged Transitional and application provisions subject to exemption Subpart 9—Transitional provisions relating to securities offered under Securities Act 1978 Subpart applies to securities offered under Securities Act Financial Markets Conduct Bill 682 683 684 685 686 687 Interpretation in this subpart Former enactments continue to apply until effective date KiwiSaver schemes, superannuation schemes, and unit trusts continue under former enactments until effective date Transition period Ongoing requirements of this Act apply on and after effective date Issuer of debt security must lodge trust deed and supply information 688 Managed investment scheme treated as being registered and issuer must supply information Type of registration Registrar to amend register Restriction on making regulated offers and accepting contributions if requirements have not been complied with Issuer may amend or replace governing document with FMA’s consent Conversion of governing documents to separate governing documents Amalgamation of schemes Amended enactments continue to apply or have effect in connection with securities Issuer must send notification to security holders PDS treated as having been given FMA may continue to perform and exercise functions, duties, and powers Transitional and application provisions subject to exemption Subpart 10—Other transitional provisions Unit trusts and superannuation schemes in relation to which offers to the public have not been made Unit trusts in relation to which offers to public have not been made Superannuation schemes in relation to which offers to public have not been made Amended enactments continue to apply or
 have effect in connection with schemes Amended enactments continue to apply or have effect in connection with schemes Financial Markets Conduct Bill Extra transitional provisions relating to managed investment schemes Remaining trustees (if any) cease to hold office Restricted schemes have 3 years to comply with related party asset cap rule Savings related to Superannuation Schemes Act 1976 Repealed enactments continue to be financial markets legislation Repealed enactments continue to be financial markets legislation Licensing of financial product markets Transition process for existing financial product markets Market services licences Authorised dealers treated as holding market services licence FMA may exercise powers in respect of licences 703 704 705 706 707 708 709 Approval of electronic transfer systems continues 710 Approval of electronic transfer systems continues 711 712 713 References to banning orders under this Act include references to banning orders under former enactments References to banning orders under this Act include references to banning orders under former enactments Financial Reporting Act 1993 Issuers continue to be issuers under Financial Reporting Act 1993 External Reporting Board must review tiers of financial reporting Schedule 1 Provisions relating to when disclosure is required and exclusions Schedule 2 Registers Schedule 3 Schedule 3 schemes 445 445 445 446 446 448 449 449 449 450 450 452 484 492 35 cl 1 Financial Markets Conduct Bill Schedule 4 Consequential amendments 495 The Parliament of New Zealand enacts as follows: Title This Act is the Financial Markets Conduct Act 2011.
Commencement Section 350, subpart 10 of Part 5, subpart 7 of Part 6, and Part 8 come into force on the day after the date on which 5 this Act receives the Royal assent.

The rest of this Act comes into force on a date appointed by the Governor-General by Order in Council; and 1 or more orders may be made bringing different provisions into force on dif- ferent dates.

To the extent that it is not previously brought into force under subsection (1) or (2), the rest of this Act comes into force on 1 April 2015.
10 Part 1 Preliminary provisions Purposes 15 Main purposes The main purposes of this Act are to— (a) promote the confident and informed participation of businesses, investors, and consumers in the financial 20 markets; and promote and facilitate the development of fair, efficient, and transparent financial markets.
(b) Additional purposes This Act has the following additional purposes: (a) to provide for timely, accurate, and understandable in- formation to be provided to persons to assist those per- 25 1 2 (1) (2) (3) 3 4 36 Financial Markets Conduct Bill Part 1 cl 5 sons to make decisions relating to financial products or the provision of financial services: to ensure that appropriate governance arrangements apply to financial products and market services that allow for effective monitoring and reduce governance 5 risks: to avoid unnecessary compliance costs: to promote innovation and flexibility in the financial markets.
(b) (c) (d) Overview 10 5 (1) Overview In this Act,— (a) (b) (c) (d) this Part deals with preliminary matters, including spe- cifying the purposes of this Act and interpretation: Part 2 prohibits misleading or deceptive conduct, and 15 false or misleading representations, in connection with financial products and financial services: Part 3 provides for— (i) disclosure to investors in relation to certain offers of financial products (Schedule 1 contains pro- 20 visions relating to when disclosure is required, including exclusions): advertisements and other publicity for those of- fers: ongoing disclosure to investors: (ii) 25 (iii) Part 4 provides for— (i) the governance of debt securities (including the need for a trust deed and a supervisor): the registration of managed investment schemes: the powers of intervention to enable the supervi- 30 sion of debt securities and managed investment schemes by a licensed supervisor or the FMA: ongoing duties of issuers of all regulated prod- ucts (for example, to maintain registers of regulated products and keep proper accounting 35 records): duties of persons associated with regulated prod- ucts to make protected disclosures: (ii) (iii) (iv) (v) 37 Part 1 cl 5 Financial Markets Conduct Bill (e) (f) (g) (ii) (iii) Part 5 provides for matters relating to dealing in finan- cial products on markets, including— (i) prohibiting insider trading and market manipula- tion: providing for continuous disclosure by listed is- 5 suers: providing for the disclosure of interests of sub- stantial product holders in listed issuers and the disclosure of relevant interests by directors and senior managers of listed issuers: providing for the licensing of markets for trading financial products: providing for the transfer of financial products: the making of regulations setting rules for unso- licited offers to purchase financial products: Part 6 regulates certain financial market services, in- cluding— (i) (v) (vi) (iv) 10 15 the licensing of certain financial market service providers (for
 example, managers of registered schemes, certain issuers of derivatives, and 20 providers of intermediary services): providing for disclosure obligations and obliga- tions in respect of client agreements in connec- tion with some of those financial market services: imposing other conduct obligations on licensees 25 providing discretionary investment management services and on their custodians: providing for the making of regulations regulat- ing the holding and application of investor funds and property by issuers of derivatives: 30 (ii) (iii) (iv) Part 7 provides for enforcement and liability matters and for appeals, including— (i) providing the FMA and the High Court with cer- tain powers to avoid, remedy, or mitigate any ac- tual or likely adverse effects of contraventions of 35 this Act or the regulations: the imposition of civil remedies (including pecu- niary penalty orders and compensation orders): offences: (ii) (iii) 38 (h) (i) Financial Markets Conduct Bill Part 1 cl 6 (iv) providing for appeals against the FMA’s deci- sions: Part 8 provides for regulations and exemptions, includ- ing powers to prescribe matters relating to the form and content of product disclosure statements, and powers 5 for the FMA to designate financial products and offers, and to grant exemptions, where this is necessary or de- sirable in order to promote the main purposes of this Act specified in section 3 or any of the additional purposes of this Act specified in section 4: Part 9 provides for— (i) the repeal of the Securities Act 1978, the Secur- ities Markets Act 1988, and certain other enact- ments, and for consequential amendments: transitional provisions: various miscellaneous matters.
(ii) (iii) (2) This section is only a guide to the general scheme and effect of this Act.
Interpretation 6 (1) (b) (c) Interpretation In this Act, unless the context otherwise requires,— acquire— (a) includes obtain by buying, subscribing, or taking an as- signment or transfer of; and includes agree to acquire; and in relation to a derivative, includes entering into the legal relationship that constitutes the derivative administration manager, in relation to a registered scheme, means a person to whom a manager of the scheme has con- tracted some or all of the administration of the scheme advertisement,— (a) in relation to an offer, or intended offer, of financial products, means any form of communication made to the public or a section of the public for the purpose of promoting the offer or intended offer: in relation to the supply of financial services, means any form of communication made to the public or a section (b) 39 10 15 20 25 30 35 Part 1 cl 6 Financial Markets Conduct Bill of the public for the purpose of promoting the supply of the services 15 agreement includes any contract, arrangement, or understand- ing alternative disclosure obligation means any provision of 5 regulations made under section 350 that is stated by those regulations to be an alternative disclosure obligation associated person or associated has the meaning set out in section 11(1) audio or visual service means an audio or visual service pro- 10 vided to users of the service by means of telecommunications authorised financial adviser has the same meaning as in sec- tion 5 of the Financial Advisers Act 2008 becomes subject to an insolvency event has the meaning set out in subsection (4) building society has the same meaning as in section 2(1) of the Building Societies Act 1965 trade, or undertaking, business includes any profession, whether or not carried on with the intention of making a pecuniary profit broadcaster has the same meaning as in section 2(1) of the Broadcasting Act 1989 broadcasting has the same meaning as in section 2(1) of the Broadcasting Act 1989 category 2 product has the same meaning as in section 5 of
 25 the Financial Advisers Act 2008 chartered accountant has the meaning set out in section 19 of the New Zealand Institute of Chartered Accountants Act 1996 civil remedy order has the meaning set out in section 466 civil remedy provision has the meaning set out in section 30 467 company means a company, or an overseas company, within the meaning of section 2(1) of the Companies Act 1993 complying superannuation fund means a superannuation scheme that is identified as a complying superannuation fund 35 on the register of managed investment schemes 20 40 Financial Markets Conduct Bill Part 1 cl 6 conduct in relation to a takeover offer— (a) means conduct following the public announcement by a person of an intention to make an offer (being an offer that is regulated by the Takeovers Code), whether or not the offer has already begun and whether or not the offer 5 proceeds; and includes conduct incidental or preliminary to a takeover that is regulated by the Takeovers Code (b) constitution means,— (a) in the case of a company within the meaning of the 10 Companies Act 1993, the constitution of the company; and in the case of any other entity, the documents or instru- ments constituting or defining the constitution of the en- tity 15 (b) continuous disclosure exemption means an exemption or a waiver of a continuous disclosure provision or provisions of the listing rules of the licensed market continuous disclosure obligation means an obligation under section 265 and any listing rules with which that section re- 20 quires compliance continuous disclosure provisions has the meaning set out in section 266 continuous issue PDS means a PDS that— (a) relates to financial products that the issuer, in the ordin- 25 ary course of its business, continuously offers for issue; and is not the first PDS to be lodged with the Registrar in respect of that class of financial products (b) continuous issuer means an issuer that in the ordinary course 30 of its business continuously
 offers financial products for issue contravene has the meaning set out in section 447 controlling owner, in relation to any person, has the meaning set out in section 4 of the Financial Service Providers (Regis- tration and Dispute Resolution) Act 2008 (applied to that per- 35 son as if it were a financial service provider even if it is not) convertible note has the same meaning as in section YA 1 of the Income Tax Act 2007 41 Part 1 cl 6 Financial Markets Conduct Bill co-operative company means a company registered as a co-operative company under the Co-operative Companies Act 1996 court means, in relation to any matter, the court before which the matter is to be determined (see section 510, which con- 5 fers exclusive jurisdiction on the High Court in proceedings other than proceedings for offences) credit union has the same meaning as in section 2 of the Friendly Societies and Credit Unions Act 1982 custodian means,— (a) in relation to a registered scheme, the supervisor of the scheme (if the supervisor holds some or all of the scheme property) or other person to whom the super- visor or manager of the scheme has contracted the hold- ing of some or all of the scheme property: in relation to a discretionary investment management service provided by a DIMS licensee, the person hold- ing investor property on behalf of a retail investor under that service (whether or not appointed by that client) (b) dealing in financial products— (a) means any of the following: (i) (ii) (iii) (iv) acquiring or disposing of financial products; or offering financial products for issue or sale and issuing and transferring financial products; or underwriting financial products; or anything that is preparatory to, or related to, any dealings in financial products (for example, giv- ing financial advice), unless an exception applies to those dealings under this Act; but does not include dealings excluded by the regulations (b) debt security has the meaning set out in section 8 defined
 benefit scheme means a scheme that operates on the principle of unallocated funding, and includes a scheme under which contributions are not allocated on a defined basis to in- dividual members derivative has the meaning set out in section 8 derivatives issuer means a person that is in the business of entering into derivatives 42 10 15 20 25 30 35 Financial Markets Conduct Bill Part 1 cl 6 (b) (c) (d) DIMS licensee means a person that is licensed under Part 6 and whose licence covers acting as a provider of a discre- tionary investment management service direction order means an order under section 453 director means,— (a) in relation to a company, any person occupying the pos- ition of a director of the company by whatever name called: in relation to a partnership (other than a limited partner- ship), any partner: in relation to a limited partnership, any general partner: in relation to a body corporate or unincorporate, other than a company, partnership, or limited partnership, any person occupying a position in the body that is compar- able with that of a director of a company: in relation to any other person, that person (c) (e) disclosure document means any of the following: (a) (b) a PDS: a disclosure document under clause 26 of Schedule 1: documents, information, or other matters made avail- able under subpart 4 of Part 3: a disclosure statement under subpart 4 of Part 6 (d) discretionary investment management service has the meaning set out in section 430 dispose of— (a) includes dispose of by issuing, selling, transferring, withdrawing from, or terminating; and includes agreeing to dispose of; and in relation to a derivative, includes discharging obliga- 30 tions under the derivative (b) (c) distribute includes— (a) make available, publish, and circulate; and (b) communicate by letter, newspaper, an Internet site, broadcasting, an audio or visual service, sound record- 35 ing, television, film, video, or any form of electronic or other means of
 communication 43 Part 1 cl 6 Financial Markets Conduct Bill document has the same meaning as in section 4(1) of the Evi- dence Act 2006 employee share purchase scheme means a scheme estab- lished by an entity under which employees or directors of the entity or of any of its subsidiaries (or other eligible persons re- 5 ferred to in clause 8 of Schedule 1) may acquire specified financial products (as defined in that clause) that are issued by the entity engaging in conduct means doing or refusing to do an act, and includes— (a) (b) making it known that an act will or will not be done entity means any of the following: (a) (b) (c) a company or other body corporate: a corporation sole: in the case of a trust that has— (i) only 1 trustee, the trustee acting in his, her, or its capacity as trustee: omitting to do an act; or (ii) more than 1 trustee, the trustees acting jointly in their capacity as trustees: an unincorporated body (including a partnership) (d) equity security has the meaning set out in section 8 exhibiting films to the public means to exhibit to the public films within the meaning of section 2 of the Films, Videos, and Publications Classification Act 1993 financial markets— (a) means the financial markets in New Zealand; and (b) includes— (i) (ii) markets in New Zealand for the provision of fi- nancial services; and the capital markets in New Zealand financial markets legislation means the Acts listed in Sched- ule 1 of the Financial Markets Authority Act 2011 and the en- actments made under those Acts financial markets participant has the same meaning as in 35 section 4 of the Financial Markets Authority Act 2011 financial product has the meaning set out in section 7 30 10 15 20 25 44 Financial Markets Conduct Bill Part 1 cl 6 financial product market has the meaning set out in section 307 financial product market licence means a licence issued under subpart 7 of Part 5 financial service— (a) has the same meaning as in section 5 of the Finan- cial Service
 Providers (Registration and Dispute Reso- lution) Act 2008; but does not include any class or classes of services de- clared by the regulations not to be financial services for 10 the purposes of this Act (b) 5 FMA means the Financial Markets Authority established by Part 2 of the Financial Markets Authority Act 2011 generally available to the market has the meaning set out in section 227 give, in relation to a document, information, or other matter, includes give by electronic or other means that enable the re- cipient to readily store the matter in a permanent and legible form governing document— (a) means (in the case of a debt security) a trust deed: (b) means (in the case of a managed investment scheme) the 1 or more deeds, agreements, or instruments that con- stitute or govern the scheme (for example, a partnership agreement or a trust deed): includes (in each case)— (i) (c) 15 20 25 (ii) any amendments to a document referred to in paragraph (a) or (b): any document that, under the terms of a docu- ment referred to in paragraph (a) or (b), forms 30 part of or determines the meaning of any term of that document in the business of, in relation to any service or other activity, means carrying on a business of that type (whether or not the business is the person’s only business or the person’s principal 35 business) independent trustee, in relation to a restricted scheme, means the trustee, or director of a sole corporate trustee, who is the 45 Part 1 cl 6 Financial Markets Conduct Bill licensed independent trustee for the purposes of the restricted scheme industrial and provident society means a society registered under the Industrial and Provident Societies Act 1908 information insider has the meaning set out in section 229 5 infringement fee, in relation to an infringement offence, means the amount prescribed by the regulations as the in- fringement fee for the offence infringement offence means an offence under section 47, 49, 71, 80, 81, 96, 109, 128, 152, 155,
or 696 infringement notice means a notice issued under section 491 Inland Revenue Acts means the Acts listed in the schedule of 15 the Tax Administration Act 1994 inside information has the meaning set out in section 229 insolvent means that,— (a) 20 (ii) in relation to an issuer of a debt security or a managed investment product,— (i) the issuer is unable to pay the issuer’s debts as they become due in the normal course of busi- ness; or the value of the issuer’s assets is less than the value of the issuer’s liabilities, including contin- 25 gent liabilities (and for this purpose section 4(4) of the Companies Act 1993 applies in respect of the issuer as if it were a company even if it is not): in relation to a registered scheme that is a defined benefit scheme, the value of the assets in the scheme is less than 30 the value of the vested benefits (not counting contingent or discretionary benefits) that may in due course flow from, or are attributable to, membership of the scheme: in relation to any other registered scheme,— (i) the funds in the scheme are not sufficient to en- 35 able debts in respect of the scheme to be paid as they become due in the normal course of busi- ness; or (b) (c) 46 Financial Markets Conduct Bill Part 1 cl 6 (ii) the value of the assets in the scheme is less than the value of the liabilities in respect of the scheme, including contingent liabilities (and for this purpose section 4(4) of the Companies Act 1993 applies in respect of the scheme as if it 5 were a company) 10 inspection period means the period commencing on the third working day after the day on which notice of intention to in- spect is served on the issuer by the person concerned and end- ing with the eighth working day after the day of service investment authority has the meaning set out in section 430 in relation to a registered investment manager means, scheme, a person to
 whom a manager of the scheme has con- tracted the investment of some or all of the scheme property investment mandate has the meaning set out in section 430 15 investor includes— (a) a person to whom an offer of financial products is made; and a person who acquires, or may acquire, a financial prod- uct (b) 20 25 (b) (c) (d) issued and issuer have the meanings set out in section 10 issuer obligation means an obligation imposed on the issuer of a financial product by or under any of the following: (a) a governing document that relates to the financial prod- uct: the terms of any regulated offer of the financial product: a court order relating to the financial product: this Act (including, in relation to a managed investment product, all obligations as manager): the KiwiSaver Act 2006: (e) (f) Part 5D of the Reserve Bank of New Zealand Act 1989 KiwiSaver scheme means a scheme that is registered on the register of managed investment schemes as a KiwiSaver scheme licence means a licence under this Act or, in relation to a 35 supervisor, the Financial Markets Supervisors Act 2011, and licensed means having a licence under this Act or, in relation to a supervisor, the Financial Markets Supervisors Act 2011 30 47 Part 1 cl 6 Financial Markets Conduct Bill licensed market means a financial product market that is li- censed under Part 5 licensed market obligation means an obligation imposed on a licensed market operator in respect of a licensed market by or under any of the following: (a) (b) a condition of the licence: section 312 (general obligations in respect of licensed markets): section 332 (power to request changes to market rules): sections 336, 339, 340, and 341 (monitoring obli- gations) (c) (d) licensed market operator means— (a) a person that is authorised to operate a licensed market under a financial product market licence: any subsidiary of that person that is authorised, and is operating the market, under the licence (b) licensed market services has the
 meaning set out in section 389 listed issuer means— (a) a person that is a party to a listing agreement with a li- censed market operator in relation to a licensed market (and includes a licensed market operator that has finan- cial products quoted on its own licensed market): a person to which paragraph (a) previously applied, in 25 respect of any action or event or circumstance to which this Act applied at that time (b) local authority— (a) (b) has the meaning set out in section 5(1) of the Local Government Act 2002; and includes New Zealand Local Government Funding Agency Limited while it is a council-controlled organ- isation within the meaning of section 6(1) of the Local Government Act 2002 locked-in superannuation scheme means a scheme that is 35 registered on the register of managed investment schemes as a superannuation scheme and that is identified as a locked-in scheme on that register 48 5 10 15 20 30 Financial Markets Conduct Bill Part 1 cl 6 managed investment product has the meaning set out in sec- tion 8 managed investment scheme has the meaning set out in sec- tion 9 manager means,— (a) 5 in relation to a registered scheme (other than a restricted scheme), the person designated or appointed as the man- ager of the scheme: in relation to a restricted scheme, the persons desig- nated or appointed as trustees of the scheme or, if only 10 1 person is designated or appointed as a trustee of the scheme, that person: in relation to a managed investment scheme if there is no person to whom paragraph (a) or (b) applies, a person occupying the position of, and carrying out any 15 of the functions of, the manager set out in section 129 (whether or not the scheme is registered) (b) (c) (d) (b) (c) market service means any of the following: (a) acting as a manager of a registered scheme (other than a restricted scheme): acting as an independent trustee of a restricted scheme: acting as a provider of a discretionary investment man- agement service: acting as a
 derivatives issuer in respect of a regulated offer of derivatives: acting as a provider of prescribed intermediary services (e) market services licence means a licence issued under Part 6 market services licensee obligation means an obligation im- posed on a licensee by or under any of the following: (a) (b) (c) a condition of the licence: this Act: the terms of the offer of a financial product or the pro- vision of a market service: a court order made in connection with the offer of a financial product or the provision of a market service: in the case of a manager or an independent trustee of a registered scheme,— (i) (ii) a governing document: the KiwiSaver Act 2006 (d) (e) 20 25 30 35 49 Part 1 cl 6 Financial Markets Conduct Bill Minister means the Minister of the Crown who, under the au- thority of any warrant or with the authority of the Prime Min- ister, is for the time being responsible for the administration of this Act money includes money’s worth (except in the definition of 5 debt security) non-quoted financial products means financial products that are not quoted offer includes— (a) (b) offeror means,— (a) inviting applications for the issue of financial products: 10 inviting applications to purchase financial products in relation to an offer of financial products for issue, the issuer; or in any other case, the person who has the capacity, or 15 who agrees, to transfer the financial products if the offer is accepted (b) Part 2 misleading or deceptive conduct provision means any of sections 16 to 19 Part 3 offer provision means any of the provisions specified 20 in section 84(3) or (4) and any regulations with which those provisions require compliance Part 4 governance provision means any of the provisions specified in section 223(3) or (4) and any regulations with which those provisions require compliance Part 5 market provision means— (a) 25 any of the provisions specified in section 385(3) or (4); and any regulations with which the provisions referred
 to in paragraph (a) require compliance; and any listing rules with which section 265 requires com- pliance; and any provision of regulations made under section 350 that is stated by those regulations to be a Part 5 market provision 30 35 (b) (c) (d) Part 6 licence provision means— (a) any of the provisions specified in section 446(3) or (4); and 50 Financial Markets Conduct Bill Part 1 cl 6 (b) any condition imposed on a market services licence by the regulations that is stated by those regulations to be a Part 6 licence provision participant means, in relation to a licensed market, a person authorised by the licensed market operator to participate in that 5 market person includes any entity prescribed intermediary services means services of a kind that are prescribed for the purposes of this definition and in- volve a person acting as an intermediary in relation to a par- 10 ticular kind of financial product or financial service product disclosure statement or PDS, in relation to a regu- lated offer, means a product disclosure statement for the offer product holder, in relation to a financial product, means,— (a) in the case of a financial product to which section 200 15 does not apply, the holder of the financial product; or in the case of any other financial product, the person who is registered as the holder of the product in a regis- ter kept under subpart 5 of Part 4 (b) provider of a discretionary investment management ser- 20 vice has the meaning set out in section 430 QFE or qualifying financial entity has the same meaning as in section 5 of the Financial Advisers Act 2008 qualified auditor has the meaning set out in section 221 quoted, in relation to— (a) 25 financial products of a listed issuer, means financial products of the issuer that are approved for trading on a licensed market (and, to avoid doubt, financial prod- ucts do not cease to be quoted merely because trading in those products is suspended): derivatives, means derivatives that are approved
 for trading on a licensed market (and, to avoid doubt, derivatives do not cease to be quoted merely because trading in those products is suspended) (b) redeemable has the meaning set out in subsection (5) register entry, in relation to a regulated offer, means the entry for the offer in the register of offers of financial products 51 30 35 Part 1 cl 6 Financial Markets Conduct Bill register of managed investment schemes means the register of managed investment schemes kept under Schedule 2 register of offers of financial products means the register of offers of financial products kept under Schedule 2 registered bank has the same meaning as in section 2(1) of 5 the Reserve Bank of New Zealand Act 1989 registered scheme means a managed investment scheme that is registered on the register of managed investment schemes Registrar means the Registrar of Financial Service Providers appointed under section 35 of the Financial Service Providers 10 (Registration and Dispute Resolution) Act 2008 regulated offer has the meaning set out in section 29 regulated product has the meaning set out in section 29 regulations means regulations made under this Act related body corporate has the meaning set out in section 15 11(2) related party benefit,— (a) in relation to a registered scheme, has the meaning set out in section 158: in relation to a DIMS licensee, has the meaning set out 20 in section 437 (b) relative has the meaning set out in clause 5(2) of Schedule 1 relevant event means an event that results in a person having to disclose matters under sections 270 to 273 relevant money, in relation to financial products, means the money paid— (a) (b) (c) to acquire the financial products; or on account of those financial products; or as a further contribution or a further deposit as referred 30 to in section 10(2)(c) 25 reporting period has the meaning set out in section 336 Reserve Bank means the Reserve Bank of New Zealand restricted communication has the meaning set out in
 section 450 restricted scheme means a scheme that is registered on the register of managed investment schemes as a KiwiSaver 35 52 Financial Markets Conduct Bill Part 1 cl 6 scheme or a superannuation scheme and that is identified as a restricted scheme on that register retail investor has the meaning set out in clause 34 of Schedule 1 retirement scheme has the meaning set out in section 111(4) 5 same class, in relation to financial products, has the meaning set out in subsection (3) Schedule 3 scheme means a scheme that, under Schedule 3, is approved as a Schedule 3 scheme scheme property or property of the scheme, in relation to a 10 registered scheme, means the property to which the registered scheme relates, including— (a) (b) money borrowed or raised for the purposes of the contributions of money to the scheme; and (c) (d) scheme; and financial products or other property acquired, directly or indirectly, with, or with the proceeds of, contributions or money referred to in paragraph (a) or (b); and income and property derived, directly or indirectly, from contributions, money, or property referred to in 20 paragraphs (a) to (c) 15 security— (a) means an arrangement or a facility that has, or is in- tended to have, the effect of a person making an invest- ment or managing a financial risk; and includes— (i) (ii) (b) a financial product; and any interest or right to participate in any capital, assets, earnings, royalties, or other property of any person; and any interest in, or right to be paid, money that is, or is to be, deposited with, lent to, or otherwise owing by, any person (whether or not the interest or right is secured by a charge over any property); and any renewal or variation of the terms or condi- tions of any existing security; but (iii) (iv) 25 30 35 53 Part 1 cl 6 Financial Markets Conduct Bill (c) does not include any interest or right that is declared by regulations not to be a security for the purposes of this Act 10 (b) senior manager, in relation
 to a person (A), means a person who is not a director but occupies a position that allows that 5 person to exercise significant influence over the management or administration of A (for example, a chief executive or a chief financial officer) solicitor has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006 special resolution, in relation to— (a) holders of a financial product issued by a credit union, means a resolution approved by no less than 75% of the number of members of the credit union who are entitled to vote on a special resolution and voting (in person, by 15 proxy, or by electronic vote): holders of debt securities in any other case, means a resolution approved by product holders holding no less than 75% of the nominal value of the debt securities held by those persons who are entitled to vote on a spe- 20 cial resolution and voting (in person, by proxy, or by electronic vote): holders of managed investment products in any other case, means a resolution approved by product holders holding no less than 75% of the value of the managed 25 investment products held by those persons who are en- titled to vote on a special resolution and voting (in per- son, by proxy, or by electronic vote) stop order means an order under section 448 subscribe includes purchase and contribute to, whether by 30 way of cash or otherwise subsidiary has the meaning set out in section 5 of the Com- panies Act 1993 superannuation scheme means a scheme that is registered on the register of managed investment schemes as a superannu- 35 ation scheme (c) 54 Financial Markets Conduct Bill Part 1 cl 6 supervisor means a person designated or appointed as a super- visor in relation to a debt security or managed investment scheme for the purposes of any financial markets legislation Takeovers Code means the Takeovers Code in force under the Takeovers Act 1993 trading day means, in relation to a licensed market, a day on which the market is open for the trading of
 financial products transacting shareholder, in relation to a co-operative com- pany,— (a) has the same meaning as in section 4 of the Co-operative 10 Companies Act 1996; and includes a supplying shareholder within the meaning of section 34 of that Act (b) 5 underlying, in relation to a derivative, means the underlying asset, rate, index, commodity, or other thing referred to in 15 paragraph (a)(iii) of the definition of derivative in section 8 in respect of that derivative unsolicited offer has the meaning set out in section 381(1) unsolicited offer order means an order under section 455 unsolicited offer provision means any provision of any regu- 20 lations made under section 382 that is stated by those regu- lations to be an unsolicited offer provision voting product, in relation to an entity,— (a) means a financial product of the entity that confers a (b) (c) right to vote at meetings of members or shareholders 25 (whether or not there is any restriction or limitation on the number of votes that may be cast by or on behalf of the holder of the product); and includes a financial product that is convertible into a financial product of the kind referred to in paragraph 30 (a); but does not include a financial product that confers only a right to vote that, under the conditions attached to the product, is exercisable only in 1 or more of the follow- ing circumstances: (i) during a period in which a dividend (or part of a dividend) in respect of the product is in arrears: on a proposal to reduce the capital of the entity: (ii) 35 55 Part 1 cl 6 Financial Markets Conduct Bill (vi) (iii) (iv) (v) on a proposal that affects rights attached to the product: on a proposal to put the entity into liquidation: on a proposal for the disposal of the whole or a material part of the property, business, and under- 5 taking of the entity: during the liquidation of the entity.
Terms defined in other provisions of this Act have the mean- ings given unless the context otherwise requires.

In this Act, financial products are of the same class if those 10 financial products have attached to them identical rights, priv- ileges, limitations, and conditions (including, in the case of debt securities, the same redemption date).
In this Act, a person becomes subject to an insolvency event on the date on which, and (if specified) the time at which,— 15 a liquidator is appointed in respect of a liquidation under (a) Part 16 of the Companies Act 1993 or under any other Act; or an administrator is appointed in respect of a voluntary administration under Part 15A of the Companies Act 20 1993; or a receiver is appointed in relation to the whole, or sub- stantially the whole, of the assets and undertaking of the person; or a liquidator is appointed in respect of a liquidation of an 25 overseas company under section 342 of the Companies Act 1993; or a statutory manager is appointed in respect of a statutory management under Part 3 of the Corporations (Investi- gation and Management) Act 1989 or any other enact- 30 ment; or a person is appointed in respect of, or another event occurs that indicates the start of, a process in New Zealand or in any other country in which the company or other body corporate was incorporated, created, or 35 established that is similar to any of those set out in paragraphs (a) to (e).
(b) (d) (c) (e) (f) In this Act, a share in an entity or a managed investment prod- uct in a scheme is redeemable if— (2) (3) (4) (5) 56 Financial Markets Conduct Bill Part 1 cl 8 (a) (b) the constitution of the entity, the governing documents of the scheme, or the terms of issue of the share or prod- uct make provision for the redemption of the share or product by the entity or the manager of the scheme— at the option of the entity or manager; or (i) at the option of the holder of the share or product; (ii) or on a date specified in those documents or in those terms; and (iii) that redemption is for a consideration that is— (i) (ii) (iii) specified; or to be calculated by reference to a formula; or required to be fixed by a suitably qualified person who is not associated with or interested in the entity or manager of the scheme.
a debt security; or an equity security; or a managed investment product; or a derivative.

Meaning of financial product In this Act, financial product means— (a) (b) (c) (d) If an interest or a right is declared by regulations not to be a security for the purposes of this Act, the interest or right is not a financial product for the purposes of this Act.
Definitions relating to kinds of financial products In this Act, subject to subsection (2)(a) and (b),— debt security— (a) means a right to be repaid money or paid interest on money that is, or is to be, deposited with, lent to, or otherwise owing by, any person; and includes— (i) (b) (ii) (iii) a security commonly referred to in the financial markets as a debenture, bond, or note; and a convertible note; and a redeemable share in an entity that would other- 35 wise be an equity security (except a share re- deemable only at the option of the entity); but 57 7 (1) (2) 8 (1) Part 1 cl 8 Financial Markets Conduct Bill (c) does not include— (i) derivative— (a) means an agreement in relation to which the following conditions are satisfied: (i) (ii) (iii) (ii) (iii) a share in a co-operative company that is issued or transferred to a transacting shareholder and that is, or may become, subject to the right of a transacting shareholder to surrender the share 5 under section 20 of the Co-operative Companies Act 1996; or a derivative of the kind referred to in paragraph (b) of the definition of that term in this section; or a unit, proportionate interest, or membership in- terest in a registered scheme 10 15 under the agreement, a party to the agreement must, or may be required to, provide at some future time consideration of a particular kind or kinds to another person; and that future time is not less than the time, pre- 20 scribed for the purposes of this subparagraph, after the time at which the agreement is entered into; and the amount of the consideration, or the value of the agreement, is ultimately determined, derived 25 from, or varies by reference to (wholly or in part) the value or amount of something else (of any na- ture whatsoever and whether or not deliverable), including, for example, 1 or more of the follow- ing: (A) (B) an asset: a rate (including an interest rate or ex- change rate): an index: a commodity; and (C) (D) 35 30 (b) includes a transaction that is recurrently entered into in
 the financial markets and is commonly referred to in those markets as— (i) a futures contract or forward; or 58 (c) (d) Financial Markets Conduct Bill Part 1 cl 8 (ii) (iii) (iv) (ii) (ii) (iii) an option (other than an option to acquire by way of issue an equity security, a debt security, or a managed investment product); or a swap agreement; or a contract for difference, margin contract, or 5 rolling spot contract; or a cap, collar, floor, or spread; but (v) does not include— (i) an agreement for the future provision of services; or a debt security, an equity security, or a managed investment product; and 10 does not include an agreement in relation to which all of the following subparagraphs are satisfied: (i) a party has, or may have, an obligation to buy, 15 and another party has, or may have, an obligation to sell, property (other than financial products or New Zealand or foreign currency) at a price and on a date in the future; and the agreement does not permit the seller’s obli- 20 gations to be wholly settled by cash, or by set-off between the parties, rather than by delivery of the property; and neither usual market practice nor the rules of a market permit the seller’s obligations to be closed 25 out by the matching up of the agreement with another agreement of the same kind under which the seller has offsetting obligations to buy equity security— (a) means— (i) (ii) (iii) does not include a debt security a share in a company; and a share in an industrial and provident society; and a share in a building society; but (b) managed investment product— (a) means a right to participate in, or receive, financial benefits from a managed investment scheme, whether is actual, prospective, or contingent and the right whether it is enforceable or not; but 30 35 59 Part 1 cl 9 Financial Markets Conduct Bill (b) does not include— (i) (ii) an equity security; or a debt security.
(2) A financial product of a particular kind defined in subsection includes— (i) a security declared to be a financial product of that kind under subpart 3 of Part 8; or a right attaching to, or a legal or an equitable interest in, a financial product of that kind; or an option to acquire, by way of issue, a financial product of that kind; but (ii) (iii) 5 10 (1)— (a) (b) does not include— (i) (ii) a security that is declared under subpart 3 of Part 8 to be a financial product of a different 15 kind: a security that is declared under subpart 3 of Part 8 not to be a financial product.
Paragraph (d) of the definition of derivative in subsection (1) applies only to the extent that the agreement deals with the 20 purchase and sale referred to in that paragraph.
(3) (4) An agreement under which one party has an obligation to buy, and the other has an obligation to sell, property is not a deriva- tive merely because the agreement provides for the consider- ation to be varied by reference to a general inflation index (for 25 example, the Consumers Price Index (All Groups) published by Statistics New Zealand).

Subsection (4) is subject to subsection (2)(a).
(5) Definitions of financial benefit and of managed investment scheme In this Act,— financial benefit means capital, earnings, or other financial returns managed investment scheme means a scheme to which both of the following apply: (a) the purpose or effect of the scheme is to enable persons taking part in the scheme (scheme participants) to con- 30 35 9 (1) 60 Financial Markets Conduct Bill Part 1 cl 9 tribute money to the scheme as consideration to acquire rights to financial benefits produced principally by the efforts of another person under the scheme; and the scheme participants do not have day-to-day control over the operation of the scheme (whether or not they 5 have the right to be consulted or to give directions).
(b) (2) However, a managed investment scheme does not include— (a) (b) (c) (d) Scheme only involves management of direct interests in underlying property a scheme under which the scheme participant takes part 10 in the scheme only by holding 1 or more interests in property if— (i) it is an interest in separately identifiable or trace- able property; and the scheme participant either holds both the legal 15 and beneficial interest in the property or the legal interest in the property is held on a bare trust for the scheme participant; and the value of the interest is not substantially de- pendent on contributions being made by other 20 scheme participants or the use of other scheme participants’ contributions: (ii) (iii) Discretionary investment management services a discretionary investment management service pro- vided by a DIMS licensee or another person permitted 25 to provide that service under sections 17 to 20 of the Financial Advisers Act 2008: Insurance contracts a scheme that would be a managed investment scheme only because it involves pure risk contracts of insur- 30 ance: a scheme that would be a managed investment scheme only because it involves life insurance policies (within the meaning of section 2(1) of the Securities Act 1978) that were issued before this section comes into force.
35 (3) In subsection (2), pure risk contract of insurance means a contract of insurance— 61 Part 1 cl 10 Financial Markets Conduct Bill (a) (b) for the payment of money on the happening of a contin- gency, other than a contingency dependent on the con- tinuance of human life; and that does not, and never will, have a value on its can- cellation or surrender that is greater than the value of an 5 unexpired premium relating to a period after the date of cancellation or surrender.
10 (1) Definitions of issued and issuer In this Act,— (a) (b) a financial product is issued to a person when it is first 10 issued, granted, or otherwise made available to a person (subject to subsection (2)): issuer means, in relation to— (i) a debt security, the person that is liable to repay money or pay interest or other returns under the 15 security (other than as a guarantor): an equity security, the company, industrial and provident society, building society, or other en- tity to which the security relates: a managed investment product, the manager of 20 the managed investment scheme to which the product relates: a derivative, the derivatives issuer that entered into the derivative.
(ii) (iii) (iv) (2) Despite subsection (1)(a),— 25 (a) (b) (c) a managed investment product that is an interest in a superannuation scheme, KiwiSaver scheme, or other prescribed scheme is issued to a person when the person becomes a member of the scheme: a derivative is issued to a person when the person enters 30 into the legal relationship that constitutes the derivative: none of the following are taken to give rise to the issue of a financial product to a person (A): (i) A making a further contribution to, or invest- ment in, a superannuation scheme, a KiwiSaver 35 scheme, or other prescribed scheme of which A is already a scheme participant: 62 Financial Markets Conduct Bill Part 1 cl 11 (ii) an employer of A or any other person making, for the benefit of A, a further contribution to, or investment in, a superannuation scheme, a KiwiSaver scheme, or other prescribed scheme of which A is already a scheme participant: (iii) A making a further deposit into a prescribed de- 5 posit product: (iv) A engaging in conduct specified in regulations made for the purposes of this subparagraph in relation to a financial product already held by A.
10 (4) (3) Despite subsection (1)(b), if a debt security is offered for the purposes of a managed investment scheme, the manager of the scheme is the issuer for the purposes of this Act.

In this Act, a person ceases to be an issuer in relation to finan- cial products when those products are cancelled, redeemed, or 15 forfeited, or all of the obligations owing under those products have been discharged.
If the terms of a financial product require or allow the person acquiring the product to pay separate amounts of money at dif- ferent times, each of those payments must, for the purposes of 20 this Act, be treated as payment for the same financial product as each of those other payments.
(5) 11 Meaning of associated person and related body corporate In this Act, a person (A) is associated with, or an associated (1) person of, another person (B) if— (a) A is a body corporate and B has the power, directly or indirectly, to exercise, or control the exercise of, the rights to vote attaching to 25% or more of the voting products of the body corporate (or vice versa): (b) A and B are relatives or related bodies corporate: (c) A and B are partners to whom the Partnership Act 1908 applies: 25 30 (d) A is a director or senior manager of B (or vice versa): (e) (f) A and B are acting jointly or in concert: A acts, or is accustomed to act, in accordance with the 35 wishes of B (or vice versa): (g) A is able, directly or indirectly, to exert a substantial de- gree of influence over the activities of B (or vice versa): 63 Part 1 cl 12 Financial Markets Conduct Bill (h) A and B are bodies corporate that consist substantially of the same members or shareholders or that are under the control of the same persons: there is another person with which A and B are both associated.
(i) 5 (2) In this Act, a body corporate (A) is a related body corporate of another body corporate (B) if— (a) B is A’s holding company or subsidiary within the meaning of section 5 of the Companies Act 1993; or (b) more than half of A’s voting products (other than vot- 10 ing products that carry no right to participate beyond a specified amount in a distribution of either profits or capital) are held by B and bodies corporate that are re- lated to B (whether directly or indirectly, but other than in a fiduciary capacity), or vice versa; or 15 (c) more than half of the voting products (other than vot- ing products that carry no right to participate beyond a specified amount in a distribution of either profits or capital) of each of A and B are held by members of the other (whether directly or indirectly, but other than in a 20 fiduciary capacity); or the businesses of A and B have been so carried on that the separate business of each body corporate, or a sub- stantial part of that business, is not readily identifiable; or there is another body corporate to which A and B are both related.
(d) (e) 25 12 Miscellaneous interpretation provisions relating to statements and information In this Act, a reference to a statement or other information that 30 is false, misleading, deceptive, or confusing includes a refer- ence to a statement or information that is false, misleading, deceptive, or confusing (as the case may be) by reason of— (a) the form or context in which the statement or informa- tion is made, published, or provided; or the omission of any other information that is material in the form and context in which it is made, published, or provided.
(b) 35 (1) 64 Financial Markets Conduct Bill Part 1 cl 14 (2) (3) (4) For the purpose of considering whether a PDS, a register entry, or any other document or communication provided under this Act is false, misleading, deceptive, or confusing, a statement or other information must be treated as being included in the PDS, register entry, or other document or communication if 5 it— (a) is contained in the PDS, register entry, or document or communication (as the case may be); or appears on the face of the PDS, register entry, or docu- ment or communication (as the case may be); or is contained in any financial statements, report, or other document that accompanies, or is incorporated by ref- erence or referred to in, or distributed with, the PDS, register entry, or document or communication (as the case may be).
10 15 (b) (c) For the purposes of this section, if a PDS, a register entry, or any other document or communication specifically identifies a particular page or section of an Internet site, only that page or section is incorporated by reference or referred to in the PDS, register entry, or other document or communication (except in 20 the prescribed circumstances).
If this Act or the regulations require information or any other matter to be contained or included in a PDS, register entry, or document or communication, the information or other matter may be incorporated by reference only if this is authorised by 25 the regulations.

Status of examples 13 (1) An example used in this Act is only illustrative of the provi- (2) sions to which it relates.

It does not limit those provisions.


If an example and a provision to which it relates are inconsist- 30 ent, the provision prevails.

Act binds the Crown 14 Act binds the Crown This Act binds the Crown.

65 Part 1 cl 15 Financial Markets Conduct Bill General application provision 15 (1) Application of Act The provisions of this Act have effect despite anything to the contrary in any other enactment or in any agreement, deed, application, disclosure document, or advertisement.
5 (2) A provision of an agreement or a deed is void if it provides that a party to the agreement or deed is— (a) required or bound to waive compliance with any re- quirement of this Act or the regulations; or taken to have notice of any agreement, document, or 10 matter not specifically referred to in the relevant dis- closure document (if any).

(b) (3) Nothing in this section or in any other provision of this Act or the regulations limits the Illegal Contracts Act 1970.
Part 2 Misleading or deceptive conduct or false or misleading representations 16 Misleading or deceptive conduct generally (1) A person must not, in trade, engage in conduct that is mislead- 15 ing or deceptive or likely to mislead or deceive in relation to— 20 (a) (b) any dealing in financial products; or the supply or possible supply of a financial service or the promotion by any means of the supply or use of financial services.
(2) In this Part, trade means any trade, business, industry, profes- 25 sion, occupation, activity of commerce, or undertaking.

Compare: 1986 No 121 s 9; 1988 No 234 s 13 17 Misleading conduct in relation to financial products A person must not, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability 30 for a purpose, or quantity of financial products.
Compare: 1986 No 121 s 10 66 Financial Markets Conduct Bill Part 2 cl 20 18 Misleading conduct in relation to financial services A person must not, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of financial services.
Compare: 1986 No 121 s 11 5 19 (c) (b) False or misleading representations A person must not, in trade, in connection with any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services, make a false or misleading representation— 10 that the products or services are of a particular kind, (a) standard, quality, quantity, value, grade, or composi- tion, or have had a particular history; or that the products or services are offered, issued, trans- ferred, or supplied by a particular person, by a person 15 who has particular characteristics, or by a person who is of a particular kind; or that a particular person has agreed to acquire the prod- ucts or services; or that the products or services have any sponsorship, ap- 20 proval, endorsement, performance characteristics, ac- cessories, uses, or benefits; or that a person has any sponsorship, approval, endorse- ment, or affiliation; or with respect to the price of the products or services; or concerning the need for the products or services; or concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right, or remedy, includ- ing (to avoid doubt) in relation to any guarantee, right, or remedy available under the Consumer Guarantees 30 Act 1993.
Compare: 1986 No 121 s 13 (f) (g) (h) (d) (e) 25 20 (1) Certain conduct does not contravene this Part Conduct that contravenes— (a) section 65, 83, or 425 or clause 27 of Schedule 1 35 does not contravene this Part: 67 Part 2 cl 21 Financial Markets Conduct Bill (2) (b) section 27, 28, 34, 35, 47, 48, 77G, 77H, 77L, or 77M of the Financial Advisers Act 2008 does not contravene this Part.
For the purpose of this section, conduct must be treated as contravening a provision referred to in subsection (1) even 5 if the conduct does not constitute an offence, or does not lead to any liability, because of the availability of a defence.
Compare: Australian Securities and Investments Commission Act 2001 ss 12DA(1A), 12DB(2) (Aust) 21 Limited application of Part in relation to newspapers, magazines, broadcasting, etc (1) Nothing in this Part applies to the publication of any informa- tion or matter in a newspaper or magazine, or on a news media or financial market commentary Internet site, by the relevant person, not being— (a) (b) 10 15 the publication of an advertisement; or the publication of any information or matter relating to any dealing in financial products, the supply or possible supply of financial services, or the promotion by any means of the supply or use of financial services by— 20 the relevant person or, if the relevant person is a (i) body corporate, by a related body corporate; or a person who is a party to any agreement with the relevant person relating to the content, nature, or tenor of the information or matter.
(ii) 25 (2) Nothing in this Part applies to the broadcasting or exhibiting of any information or matter by the relevant person, not being— (a) (b) the broadcasting or exhibiting of an advertisement; or the broadcasting or exhibiting of any information or matter relating to any dealing in financial products, the 30 supply or possible supply of financial services, or the promotion by any means of the supply or use of finan- cial services by— (i) the relevant person or, if the relevant person is a body corporate, by a related body corporate; or a person who is a party to any agreement with the relevant person relating to the content, nature, or tenor of the information or matter.
35 (ii) 68 (3) Financial Markets Conduct Bill Part 2 cl 23 (b) In this section,— exhibiting means— exhibiting by means of an audio or visual service; or (a) exhibiting films to the public (b) relevant person means, in relation to— (a) a newspaper or magazine, the proprietor of the news- paper or magazine: a news media or financial market commentary Internet site, the person that controls the content of the Internet site: broadcasting, the broadcaster: an audio or visual service, the person that controls the content of the audio or visual service: exhibiting films to the public, the person that exhibits the films.
Compare: 1986 No 121 s 15 (c) (d) (e) 22 Defence for publisher In any proceeding against a person (A) for contravention of a provision of this Part committed by the publication of an advertisement, it is a defence if— (a) A’s business is publishing or arranging for the publica- tion of advertisements; and 5 10 15 20 (b) A received the advertisement, or the information con- tained in the advertisement, as the case may be, in the ordinary course of that business and did not know and 25 had no reason to suspect that the publication of the ad- vertisement or the publication of the advertisement con- taining that information, as the case may be, would con- stitute a contravention of the provision.
Compare: 1986 No 121 s 44(4) 30 23 (1) Defence for reasonable reliance on information supplied by another person In any proceeding against a person (A) for contravention of a provision of this Part, it is a defence if the contravention was due to reasonable reliance on information supplied by another 35 person.

69 Part 2 cl 24 Financial Markets Conduct Bill (2) In this section, another person does not include a director, employee, or agent of A.
(3) A is not, without the leave of the court, entitled to rely on the defence provided by this section that the contravention was due to reasonable reliance on information supplied by another 5 person unless A has, not later than 7 working days before the date on which the hearing of the proceeding commences, served on the other party to the proceeding a notice in writing identifying that person.
Compare: 1986 No 121 s 44(1)(b), (2), (3) 10 Licensed market operator does not contravene by notifying disclosures A licensed market operator does not contravene any provision of this Part by the notification of any disclosure made to it under subpart 4, 5, or 6 of Part 5 or under an alternative 15 disclosure obligation.
Other exceptions This Part does not apply to conduct in relation to a takeover offer for financial products under the Takeovers Code or to conduct under that offer to the extent that the conduct is regu- 20 lated by the Code, the Takeovers Act 1993, or an exemption granted under that Act.

This Part does not apply to conduct in relation to the acquisi- tion or redemption by a company of its shares under the Com- panies Act 1993 to the extent that the conduct is regulated by 25 that Act.
Compare: 1988 No 234 ss 14, 15 Territorial scope of Part This Part applies to— (a) (b) conduct in New Zealand; and conduct outside New Zealand by any person resident, incorporated, registered, or carrying on business in New Zealand to the extent that that conduct relates to dealing in financial products, or the supply of a financial service, that occurs (in part or otherwise) within New Zealand.
30 35 Compare: 1988 No 234 s 18 24 25 (1) (2) 26 70 Financial Markets Conduct Bill Part 3 cl 29 Part 3 Disclosure of offers of financial products Subpart 1—Application Issue offers that need disclosure An offer of financial products for issue requires disclosure to 5 an investor under this Part unless an exclusion under Part 1 of Schedule 1 applies.
Compare: Corporations Act 2001 s 706 (Aust) Sale offers that need disclosure An offer of financial products for sale requires disclosure to 10 an investor under this Part only if disclosure is required under Part 2 of Schedule 1.
Compare: Corporations Act 2001 s 707(1) (Aust) 27 28 29 Meaning of regulated offer and of regulated product (1) In this Act, regulated offer— (a) means an offer of financial products to 1 or more in- vestors where the offer to at least 1 of those investors re- quires disclosure under this Part (regardless of whether or not an exclusion under Schedule 1 applies to an offer to 1 or more other investors); but does not include an offer of financial products to 1 or more investors if— (i) (b) 15 20 the only investors in New Zealand who are able, under the terms of the offer, to acquire the prod- ucts are investors to whom disclosure under this 25 Part is not required; and all of the investors who acquire the products under the offer are investors to whom disclosure under this Part is not required.
(ii) Example ABC Limited makes an offer of its ordinary shares to 100 in- vestors.

Of those investors, 5 are wholesale investors, 15 are relatives of directors of ABC Limited, and 20 are close business associates of ABC Limited.

Exclusions under Schedule 1 apply and ac- 35 30 71 Part 3 cl 30 Financial Markets Conduct Bill Example—continued cordingly the offers to these investors do not require disclosure under this Part.

However, none of the exclusions in Schedule 1 apply to the remaining 60 investors.
The offer to each of these investors re- quires disclosure.

This means that a product disclosure state- 5 ment must be given to each of the 60 investors under section 37 (subject to section 38).

The offer of ABC Limited’s ordinary shares, as a whole, is a regu- lated offer because at least some of the offers to investors require disclosure.

Some obligations under this Act apply to the regulated offer as a whole.
These obligations apply to all of the investors even if the offers to some of those investors do not require disclosure.

For example, all subscriptions for the shares must be held in trust under section 69 (even if the subscription is paid by a whole- 15 sale investor, a relative, or a close business associate) and regis- ters of financial products kept under subpart 5 of Part 4 relate to products held by all product holders.
10 (2) In this Act, regulated product means— (a) (b) a financial product offered under a regulated offer; or a managed investment product in a registered scheme (whether or not there has been a regulated offer).

20 30 Regulated offers that need to meet additional governance requirements (1) A regulated offer of debt securities must meet the governing 25 document and supervisor requirements under subpart 2 of Part 4.
(2) A regulated offer of managed investment products must meet the registration requirements under subpart 3 of Part 4.

Options over financial products For the purposes of this Part and Schedule 1,— (a) an offer of an option over financial products is an offer both of the option and of the underlying financial prod- ucts; and the grant of an option without an offer of the option is 35 an offer of the option; and an offer to grant an option is an offer to issue the option.
(b) (c) 30 31 (1) 72 (2) 32 33 (1) Financial Markets Conduct Bill Part 3 cl 34 See clause 11 of Schedule 1 for an exclusion in relation to options.
Compare: Corporations Act 2001 s 702 (Aust) Treatment of offers of convertible financial products For the purposes of this Part and Schedule 1, an offer of a 5 financial product of an issuer that will be converted, or is or may become convertible, into another financial product of the issuer is an offer both of the financial product that is issued and of the financial product into which it converts.
Treatment of offers of renewals and variations For the purposes of this Part and Schedule 1, an offer of a renewal or variation of the terms or conditions of a financial product made by the issuer is an offer of the financial product as renewed or varied.
10 (2) A change to the terms or conditions of a financial product is 15 not a variation for the purposes of this section if the change is made in accordance with the existing terms or conditions of the financial product (for example, if the issuer exercises a power under the terms or conditions to change an interest rate).

See clause 23 of Schedule 1 for an exclusion in relation 20 to renewals and variations (but limited disclosure may be re- quired under clause 26 of that schedule).
(3) 34 (1) (2) Territorial scope of Part This Part applies to offers of financial products in New Zealand, regardless of— (a) (b) where the issuer or offeror is resident, incorporated, or where any resulting issue or transfer occurs: 25 carries on business.
For the purposes of this Part, financial products are offered in New Zealand if an offer of the financial products is received 30 by a person in New Zealand, unless the offeror demonstrates that it took all reasonable steps to ensure that persons in New Zealand (other than persons referred to in subsection (3)) may not accept the offer.
73 Part 3 cl 35 Financial Markets Conduct Bill (3) (4) The persons referred to in this subsection are persons to whom disclosure under this Part is not required because of an exclu- sion under any of clauses 3 to 5 of Schedule 1.

The territorial scope of this Part may be further extended under subpart 6 of Part 8.
Compare: 1978 No 103 s 7 Subpart 2—Procedure for making regulated offers Product disclosure statement must be prepared and lodged 5 10 PDS must be prepared and lodged 35 (1) A person must not make a regulated offer, or distribute an ap- plication form for a regulated offer, unless the issuer of the financial products has— (a) prepared a product disclosure statement (PDS) for the 15 offer; and lodged the PDS with the Registrar; and supplied to the Registrar all of the information and documents that the register entry is required to contain.
(b) (c) (2) A person who contravenes subsection (1) commits an of- 20 fence if the person knows that, or is reckless as to whether, the offer is a regulated offer.

(3) A person who commits an offence under subsection (2) is liable on conviction on indictment,— (a) in the case of an individual, to imprisonment for a term 25 not exceeding 5 years, a fine not exceeding $500,000, or both; and in any other case, to a fine not exceeding $2.5 million.
(b) Compare: Corporations Act 2001 ss 709(1), 718, 727(1) (Aust) Purpose of PDS The purpose of a PDS is to provide certain information that is likely to assist a prudent but non-expert person to decide whether or not to acquire the financial products.
30 36 74 Financial Markets Conduct Bill Part 3 cl 39 Disclosure to investors 37 (1) (2) (3) (4) PDS must be given if offer requires disclosure This section applies if an offer of financial products is made to a person to whom disclosure under this Part is required (A).

The offeror must not accept an application, or issue or transfer 5 the financial products to A, if a PDS for the regulated offer was not given to A before the application was made.
In this section, application means an application for the finan- cial products that is made by, or on behalf of, A.

See sections 27 and 28 and Schedule 1, which contain 10 provisions relating to when an offer of financial products to a person requires disclosure under this Part.
38 Certain situations in which section 37 does not need to be complied with (1) An offeror does not have to comply with section 37 in respect 15 (2) 39 (b) of an offer of financial products to a person (A)— (a) if A has already been given a PDS (for the same or a different offer) that contains all of the information that the PDS referred to in section 37 would be required to contain; or if the offeror believes on reasonable grounds that para- graph (a) applies; or in any other prescribed circumstances.
(c) For the purposes of subsection (1)(a), minor differences in the information that is contained in the PDS that has been 25 given to A and the PDS referred to in section 37 may be dis- regarded.
Compare: Corporations Act 2001 s 1012D(1) (Aust) 20 PDS treated as having been given if application form used was included in, or accompanied by, PDS An offeror must be treated as having complied with section 37 in respect of an offer of financial products to a person (A) if the offeror— (a) issues or transfers the financial products to A in re- sponse to an application form; and has reasonable grounds to believe that— (b) 30 35 75 Part 3 cl 40 Financial Markets Conduct Bill (i) (ii) the application form was included in, or ac- companied by, the PDS when the form was distributed by or on behalf of the offeror; or the form was copied, or directly derived, by the person making the application from a form re- 5 ferred to in subparagraph (i).
Offence to knowingly or recklessly contravene section 37 40 (1) A person who contravenes section 37 commits an offence if the person knows that, or is reckless as to whether, the offer of financial products to A requires disclosure under this Part.
(2) A person who commits an offence under subsection (1) is liable on conviction on indictment,— (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and in any other case, to a fine not exceeding $2.5 million.
(b) 10 15 Right to withdraw and have money returned If an offeror contravenes section 37 in respect of an offer of financial products to a person (A), A has the right to withdraw from holding the financial products and to have the relevant 20 money repaid.
The right referred to in subsection (1) is exercisable by A giving to the offeror written notice of the exercise of the right within the earlier of— (a) 6 months after A knows, or ought reasonably to know, 25 that section 37 has been contravened; or 12 months after the financial products are issued or transferred to A.
(b) (b) If a notice is given under subsection (2),— (a) the offeror must ensure that the relevant money is repaid 30 as soon as practicable; and if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the rele- vant money together with interest at a prescribed rate 35 from the date on which the notice was given.
41 (1) (2) (3) 76 Financial Markets Conduct Bill Part 3 cl 42 (4) This section does not limit any other liability that a person may have for a contravention of section 37.
Content and presentation of product disclosure statements 42 Disclosure of material information and content of PDS and register entry 5 (1) An issuer that prepares, or is required to prepare, a PDS must ensure that, as at the date on which the PDS is lodged with the Registrar,— (a) 10 the PDS— (i) contains all of the information that it is required to contain by the regulations; and is accompanied by all of the documents that the regulations require it to be accompanied by; and complies with all other requirements of the regu- 15 lations relating to the content of the PDS; and is dated not later than the date on which it is lodged with the Registrar; and if applicable, specifies its expiry date (see sec- tion 67) and states that no financial products will 20 be issued or sold on the basis of the PDS after the expiry date; and complies with section 44 (consent for expert statements or endorsements); and (ii) (iii) (iv) (v) (vi) 25 (b) the register entry (if any)— (i) (ii) contains all of the information and documents that it is required to contain by the regulations; and contains all material information relating to the regulated offer that is not contained in the PDS; 30 and complies with all other requirements of the regu- lations relating to the content of the register en- try; and complies with section 44 (consent for expert 35 statements or endorsements).
Subsection (1)(b)(ii) does not limit subsection (1)(a).

(iii) (iv) (2) 77 Part 3 cl 43 Financial Markets Conduct Bill (3) Subsection (1)(b)(ii) does not apply in the prescribed cir- cumstances (which may include, for example, certain offers to existing product holders or certain situations in which in- formation about an offer is available by means of a continuous disclosure obligation).
5 43 Meaning of material information in this Part In this Part, material information, in relation to a regulated offer, means information that— (a) a reasonable person would expect to, or to be likely to, influence persons who commonly invest in financial 10 products in deciding whether to acquire the financial products on offer; and relates to the particular financial products on offer or the particular issuer, rather than to financial products generally or issuers generally.
15 (b) Compare: Corporations Act 2001 ss 674, 677, 710, 1013E (Aust) Consent of experts and persons who make endorsements 44 (1) An issuer that prepares, or is required to prepare, a PDS must ensure that the PDS and the register entry include an expert statement or endorsement made by a person (A), or a state- 20 ment said in the PDS or register entry to be based on an expert statement or endorsement made by a person (A), only if— (a) 25 (c) (b) A has consented to the statement being included in the PDS or register entry in the form and context in which it is included; and the PDS or register entry states that A has given the consent; and A has not withdrawn the consent before the PDS is lodged with the Registrar.
In this section and section 66(3),— endorsement means a statement that— (a) may reasonably be regarded as encouraging or persuad- ing persons to acquire the financial products on offer; and relates to the particular financial products on offer or 35 the particular issuer, rather than to financial products generally or issuers generally (b) 30 (2) 78 Financial Markets Conduct Bill Part 3 cl 47 expert— (a) means a person who holds himself or herself out to be of a profession or calling that gives authority to a statement made by him or her; but does not include a person acting in his or her capacity 5 as a director or senior manager of an entity (b) expert statement means a statement purporting to be made by an expert.
Compare: Corporations Act 2001 ss 716, 735(1) (Aust) 45 PDS must be worded and presented in clear, concise, and effective manner 10 (2) (1) An issuer that prepares, or is required to prepare, a PDS must ensure that the information in the PDS is worded and presented in a clear, concise, and effective manner.
This section is not a civil remedy provision for the purposes 15 of subpart 3 of Part 7 (but see subpart 1 of Part 7, which allows the FMA to make a stop order if a PDS does not comply with this section).
Compare: Corporations Act 2001 s 715A (Aust) 46 PDS must comply with prescribed requirements relating to form and presentation An issuer that prepares, or is required to prepare, a PDS must ensure that the PDS complies with all requirements of the regulations relating to the form and presentation of the state- ment.
20 25 Other provisions relating to lodging of PDS and other documents 47 Supply of prescribed information and documents (1) An issuer that lodges a PDS or other document under this Part must supply the prescribed information and documents to the 30 Registrar when the PDS or document is lodged.

(2) A document referred to in subsection (1) may include, for example, a copy of the consent of a prescribed person to the lodgement.
79 Part 3 cl 48 Financial Markets Conduct Bill (3) An issuer who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
(4) 5 48 (1) (2) Registrar must notify FMA of lodgement of PDS The Registrar must, immediately after a PDS is lodged, no- tify the FMA of the lodgement for the purpose of allowing the FMA an opportunity to consider the PDS, any governing document, and whether the offer, or intended offer, of finan- 10 cial products will be made in compliance with this Act.

The nature and extent of the consideration under subsection (1) (if any) is at the FMA’s discretion.
(3) Nothing in this section or any other provision of this Act limits the FMA’s power to consider or reconsider at any time any of 15 the matters referred to in subsection (1).
Compare: 1978 No 103 s 43C(1), (3), (4) 49 Waiting period after lodgement before processing applications for financial products (1) An offeror must not accept an application for, or issue or trans- 20 fer, financial products offered under a regulated offer until— the period of 5 working days after lodgement of the PDS (a) has ended; or if the period is extended under section 50, the period as extended has ended.
(b) 25 (3) (2) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).

This section does not prevent an offeror from receiving appli- cations for financial products or money during the period that applies under this section.
Compare: 1978 No 103 s 43D; Corporations Act 2001 s 727(3) (Aust) (4) 30 80 Financial Markets Conduct Bill Part 3 cl 52 50 (1) (2) (3) FMA may extend period The FMA may extend the period under section 49(1)(a) by notice in writing to the offeror.

The period, as extended, must end no later than 10 working days after lodgement of the PDS with the Registrar.

The FMA must give a copy of the notice under subsection (1) to the Registrar.
5 51 Waiting period restriction does not prevent offeror from acting under another PDS If section 49 applies to a PDS that relates to a particular offer 10 of financial products but another lodged PDS that is not or is no longer subject to section 49 also relates to the offer of those products, that section does not prevent a person, in accordance with this Act, from accepting applications for, or issuing or transferring, financial products in reliance upon the other PDS.
15 52 (1) (2) FMA may remove restrictions if its consideration complete or consideration or further consideration unnecessary This section applies if the FMA is satisfied that— (a) its consideration as referred to in section 48 is com- 20 plete; or consideration as referred to in section 48 is, in the circumstances, unnecessary.
(b) The FMA may give notice to the offeror that— (a) the period that applies under section 49 ends at a par- 25 ticular time specified by the FMA (being an earlier time than that provided for under that section); or section 49 does not apply in respect of the PDS.

(b) (3) Nothing in this section limits subpart 2 of Part 8 (which allows the FMA to grant exemptions in respect of compliance 30 with section 49).
Compare: 1978 No 103 s 43E 81 Part 3 cl 53 Financial Markets Conduct Bill 53 Waiting period does not usually apply to continuous issue (1) (2) (3) (4) 5 PDSs Section 49 applies to a continuous issue PDS only if it is of a class that is prescribed by the FMA in a notice issued under this section.

The FMA may issue a notice that prescribes the class or classes of continuous issue PDSs to which section 49 applies.
The FMA must, before issuing a notice in respect of a class of continuous issue PDSs, be satisfied that it is in the pub- lic interest for the FMA to have an opportunity to consider 10 those statements before any person accepts applications for, or issues or transfers, financial products offered under those statements (for example, where in the circumstances, a par- ticular risk relates to a particular class of offerors or financial products).
Subpart 5 of Part 8 (general provisions relating to certain FMA instruments) applies to a notice under this section.
Compare: 1978 No 103 s 43EA 15 No guarantee or representation as to compliance 54 (1) Nothing done or omitted to be done under this Act or the regu- 20 lations by the Registrar or the FMA guarantees or represents that— (a) (b) a PDS, register entry, or governing document— (i) (ii) complies with this Act and the regulations: does not contain any material misdescription or 25 material error or any material matter that is not clearly legible: is not misleading or deceptive: (iii) the FMA has considered a PDS, register entry, or gov- erning document with a view to determining whether 30 it— (i) (ii) complies with this Act and the regulations: contains any material misdescription or material error or any material matter that is not clearly legible: is misleading or deceptive.
35 (iii) 82 Financial Markets Conduct Bill Part 3 cl 56 (2) This section does not limit section 22 of the Financial Markets Authority Act 2011 (which provides protection from liability for the FMA and its members and employees).
Compare: 1978 No 103 s 43M 55 When supplementary document or replacement PDS may 5 be lodged (1) An issuer that lodges a PDS with the Registrar may lodge a supplementary document or replacement PDS with the Regis- trar to— (a) correct a misleading or deceptive statement in the PDS; 10 or correct an omission from the PDS of information it is required to contain by this Act or the regulations; or correct the PDS because is not worded and presented in a clear, concise, and effective manner; or update, or add to, the information contained in the PDS.
(2) However, a supplementary document must not be lodged with (b) (d) (c) 15 the Registrar in the prescribed circumstances.

Compare: Corporations Act 2001 s 1014A (Aust) 56 (1) (2) 20 Supplementary document If a supplementary document is lodged with the Registrar, the PDS together with the supplementary document is taken to be the PDS for the purposes of the application of this Act or the regulations to events that occur after the lodgement.
The issuer must ensure that, at the beginning of a supplemen- 25 tary document, there is— (a) (b) (c) a statement that it is a supplementary document; and an identification of the PDS that it supplements; and an identification of all previous supplementary docu- ments lodged with the Registrar in relation to the regu- 30 lated offer; and a statement that it is to be read together with the PDS that it supplements and the previous supplementary documents.
(d) (3) The supplementary document must be dated with the date on 35 which it is lodged with the Registrar.

Compare: Corporations Act 2001 s 719(2), (4) (Aust) 83 Part 3 cl 57 Financial Markets Conduct Bill Replacement PDS If a replacement PDS is lodged with the Registrar, the PDS is taken to be the replacement PDS for the purposes of the application of this Act to events that occur after the lodgement.
The issuer must ensure that, at the beginning of a replacement 5 PDS, there is— (a) (b) The replacement PDS must be dated with the date on which it is lodged with the Registrar.

Compare: Corporations Act 2001 s 719(3), (5) (Aust) a statement that it is a replacement PDS; and an identification of the PDS that it replaces.
10 Registrar must notify FMA of lodgement of supplementary document or replacement PDS The Registrar must, immediately after a supplementary docu- ment or replacement PDS is lodged, notify the FMA of the 15 lodgement for the purpose of allowing the FMA an opportun- ity to consider the supplementary document or replacement PDS.

The nature and extent of the consideration (if any) that the FMA gives to a supplementary document or replacement PDS 20 are at the FMA’s discretion.
Section 49 does not apply to the lodgement of a supplemen- tary document or replacement PDS.
Compare: 1978 No 103 s 43C(1), (3) Publication of lodgement If a PDS, supplementary document, or replacement PDS is lodged by an issuer under this Part, the issuer must, as soon as practicable after it receives the certificate of lodgement from the Registrar, ensure that an Internet site maintained by or on behalf of the issuer— (a) contains a reasonably prominent statement— (i) 25 30 to the effect that the PDS, supplementary docu- ment, or replacement PDS has been lodged; and describing where and how a copy of the PDS, supplementary document, or replacement PDS 35 can be obtained; or (ii) 57 (1) (2) (3) 58 (1) (2) (3) 59 (1) 84 Financial Markets Conduct Bill Part 3 cl 61 (b) contains a reasonably prominent link to such a state- ment.
(2) The statement or link referred to in subsection (1) may be removed from the Internet site maintained by or on behalf of the issuer on or after the date that the offeror ceases to offer 5 financial products in reliance upon the PDS.
Amending register entry 60 When register entry may be amended An issuer of financial products offered under a regulated offer may give notice to the Registrar to amend the register entry in 10 order to— (a) correct a misleading or deceptive statement in the regis- ter entry; or correct an omission from the register entry of informa- tion it is required to contain by this Act or the regula- 15 tions; or update, or add to, the information contained in the regis- ter entry.
(b) (c) Conditions referred to in PDS 61 Minimum subscription condition must be fulfilled before 20 (1) (2) (3) issue or transfer This section applies if a PDS states that the financial products will not be issued or transferred unless— (a) applications for a minimum number of the financial products are received; or a minimum amount is raised.

(b) The offeror must not issue or transfer any of the financial prod- ucts under the regulated offer until the condition referred to in subsection (1) is satisfied.
For the purpose of working out whether a condition referred to 30 in this section or section 63(2)(a) has been satisfied, a person who has agreed to take financial products as an underwriter is taken to have applied for those products.
Compare: Corporations Act 2001 s 723(2) (Aust) 25 85 Part 3 cl 62 Financial Markets Conduct Bill 62 (1) Issue or transfer void if quotation condition not fulfilled This section applies if— (a) a PDS states or implies that the financial products are to be quoted on a financial market (whether in New Zealand or elsewhere); and the financial products are not admitted to quotation within— (i) (b) the period specified in, or determined in accord- ance with, the PDS; or if there is no such period, 3 months after the date 10 of the PDS.
(ii) 5 (2) An issue or a transfer of financial products under the regulated (3) offer is void.

The offeror must deal under section 64 with the application for financial products that relates to the issue or transfer re- 15 ferred to in subsection (2).
Compare: Corporations Act 2001 s 723(3) (Aust) Dealing with applications where condition referred to in PDS is not met or disclosure is defective Application of section 64 63 (1) An offeror must, if any of subsections (2) to (5) apply, deal under section 64 with any applications for the financial prod- ucts offered under the regulated offer that have not resulted in an issue or a transfer of the products.
This subsection applies if— (a) (2) a PDS states that the financial products will not be is- sued or transferred unless— (i) applications for a minimum number of the finan- cial products are received; or a minimum amount is raised; and (ii) the condition referred to in paragraph (a) is not satis- fied within 4 months after the date of the PDS.
(b) 20 25 30 This subsection applies if— (a) a PDS states or implies that the financial products are 35 to be quoted on a financial market (whether in New Zealand or elsewhere); and (3) 86 (4) (5) Financial Markets Conduct Bill Part 3 cl 63 (b) the financial products are not admitted to quotation within— (i) the period specified in, or determined in accord- ance with, the PDS; or if there is no such period, 3 months after the date 5 of the PDS.
(ii) This subsection applies if— (a) the issuer or offeror (or both) becomes aware— (i) (ii) (iii) 10 that a statement in the PDS is misleading or de- ceptive or is likely to mislead or deceive; or that there is an omission from the PDS of infor- mation required to be contained in the PDS by this Act or the regulations; or of a circumstance that has arisen since the PDS was lodged with the Registrar that would have 15 been required by this Act or the regulations to be disclosed or otherwise contained in the PDS if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise contained in the PDS; and 20 (b) the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.
This subsection applies if— (a) (ii) (iii) the issuer or offeror (or both) becomes aware— (i) that a statement in the register entry is misleading 25 or deceptive or is likely to mislead or deceive; or that there is an omission from the register entry of information required to be contained in the register entry by this Act or the regulations; or of a circumstance that has arisen since the PDS 30 was lodged with the Registrar that would have been required by this Act or the regulations to be disclosed or otherwise contained in the register entry if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or other- 35 wise contained in the register entry; and the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.
(b) Compare: Corporations Act 2001 s 724(1) (Aust) 87 Part 3 cl 64 Financial Markets Conduct Bill 64 (1) Choices open to offeror If this section applies, the offeror must do 1 of the following in respect of each applicant: (a) (b) (c) ensure that the money received from the applicant in re- spect of the application for financial products is repaid; 5 or in the case of section 62 or 63(2), (3), or (4), give the applicant— (i) a supplementary document or replacement PDS that corrects the deficiency or changes the terms 10 of offer; and 1 month to confirm whether or not the applicant still wants to acquire the financial products; or (ii) in the case of section 63(5),— (i) (ii) (iii) amend the register entry to correct the deficiency; 15 and give notice in the prescribed manner to the ap- plicant that the register entry has been amended; and give the applicant 1 month to confirm whether or 20 not the applicant still wants to acquire the finan- cial products.
(2) (3) If an applicant does not confirm that the applicant still wants to acquire the financial products within 1 month after being given the opportunity to do so under subsection (1)(b)(ii) or 25 (c)(iii), the offeror must ensure that the money received from the applicant in respect of the application for financial products is repaid as soon as practicable.
If the money referred to in subsection (2) is not repaid within 1 month after the offeror is required to ensure that it is repaid 30 under that subsection, the offeror and the directors of the of- feror are jointly and severally liable to repay the money to- gether with interest at a prescribed rate from the expiry of the 1-month period referred to in subsection (2).

(4) An offeror must, when acting under this section, comply with 35 the prescribed requirements (if any).
Compare: Corporations Act 2001 s 724(2) (Aust) 88 Financial Markets Conduct Bill Part 3 cl 65 Prohibition of offers where defective disclosure in PDS or register entry 65 Misleading or deceptive statements, omissions, and new matters requiring disclosure (1) An offeror must not offer, or continue to offer, financial prod- 5 ucts under a regulated offer if— (a) there is— (i) (ii) (iii) a statement in the PDS, any application form that accompanies the PDS, or the register entry that is misleading or deceptive or is likely to mislead or 10 deceive; or an omission from the PDS, or the register entry, of information that is required to be contained in the PDS, or the register entry, by this Act or the regulations; or a circumstance that has arisen since the PDS was lodged with the Registrar that would have been required by this Act or the regulations to be dis- closed or otherwise contained in the PDS, or the register entry, if it had arisen before the PDS was 20 lodged, and the circumstance is not so disclosed or otherwise contained in the PDS or the register entry; and 15 (2) (3) (4) (b) the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.
25 For the purposes of this section, a statement about a future matter (including the doing of, or refusing to do, an act) must be taken to be misleading if the person making the statement does not have reasonable grounds for making it.

Subsection (2) does not limit the meaning of a reference to a 30 misleading statement.
See section 488 (offence to knowingly or recklessly contra- vene this section) and section 480 (which provides that a per- son may be treated as suffering loss or damage in the case of a contravention of this section).
Compare: Corporations Act 2001 s 728 (Aust) 35 89 Part 3 cl 66 Financial Markets Conduct Bill 66 Persons who must inform offeror about disclosure deficiencies (1) A person referred to in subsection (2) must, in relation to a regulated offer, notify the offeror in writing as soon as practic- able if the person becomes aware during the application period 5 that— (a) a material statement in the PDS, or the register entry, is misleading or deceptive or is likely to mislead or de- ceive; or there is a material omission from the PDS, or the regis- 10 ter entry, of information that is required to be contained in the PDS, or the register entry, by this Act or the regu- lations; or there is a material circumstance that has arisen since the PDS was lodged with the Registrar that would have 15 been required by this Act or the regulations to be dis- closed or otherwise contained in the PDS, or the regis- ter entry, if it had arisen before the PDS was lodged, and the circumstance is not so disclosed or otherwise con- tained in the PDS or register entry.
20 each director of the offeror: each person named in the PDS or register entry with the person’s consent as a proposed director of the offeror: the issuer (if the offeror is not the issuer): a person referred to in section 44 who has consented as referred to in that section.
25 (b) (c) (c) (d) (2) The persons are— (a) (b) (3) A person referred to in subsection (2)(d) is required to no- tify the offeror of matters under this section only if the matters relate to the expert statement or endorsement to which the per- 30 son’s consent relates.

In subsection (1), application period means the period in which applications for financial products under the PDS may be made.
Compare: Corporations Act 2001 s 730(1) (Aust) (4) 35 90 Financial Markets Conduct Bill Part 3 cl 68 Expiry Expiry 67 (1) A PDS must, if required by the regulations, specify its expiry (2) (3) 68 (1) (2) (3) (4) (5) date.

The expiry date must not be later than the end of the prescribed 5 period (if any).

The expiry date of a replacement PDS must be the same as that of the original PDS it replaces.
Compare: Corporations Act 2001 s 711(6) (Aust) 10 How offeror must deal with applications on expiry If a PDS expires, the offeror must deal with applications for the financial products offered under the regulated offer in ac- cordance with subsections (2) and (3).

If an application is received on or before the expiry date, the offeror may issue or transfer financial products to the appli- 15 cant.
If an application is received after the expiry date, the offeror must do 1 of the following: (a) ensure that the money received from the applicant in respect of the application is repaid; or give the applicant— (i) (b) 20 a new PDS (unless the applicant is not a person to whom disclosure under this Part is required); and 1 month to confirm whether or not the applicant 25 still wants to acquire the financial products.
(ii) If an applicant does not confirm that the applicant still wants to acquire the financial products within 1 month after being given the opportunity to do so under subsection (3), the of- feror must ensure that the money received from the applicant 30 in respect of the application for financial products is repaid as soon as practicable.
If the money referred to in subsection (4) is not repaid within 1 month after the offeror is required to ensure that it is repaid under that subsection, the offeror and the directors of the of- 35 feror are jointly and severally liable to repay the money to- 91 Part 3 cl 69 Financial Markets Conduct Bill gether with interest at a prescribed rate from the expiry of the 1-month period referred to in subsection (4).
(6) An offeror must, when acting under this section, comply with the prescribed requirements (if any).
Compare: Corporations Act 2001 s 725 (Aust) Money for financial products must be held in trust 69 Money for financial products must be held in trust (1) This section applies to money paid to an issuer or offeror of regulated products if the money is paid by a person (A)— (a) (b) (c) to acquire the financial products; or on account of those financial products; or as a further contribution or a further deposit as referred to in section 10(2)(c).
5 10 (2) (3) The issuer or offeror must hold the money in trust for A until— 15 (a) (b) the financial products are issued or transferred; or the money is otherwise applied for the purpose for which it was paid (for example, to increase the extent of A’s interest in a scheme or A’s deposit or to pay a fee, collateral, or margin); or the money is repaid to A; or the money is applied in accordance with A’s express in- structions given after the application for financial prod- ucts was made and the money was paid.
(c) (d) The issuer or offeror must— (a) deal with the money, while it is held in trust, in the prescribed manner; and if the money needs to be repaid, ensure the money is repaid as soon as practicable.
Compare: Corporations Act 2001 ss 722, 1017E (Aust) (b) Other prohibitions and restrictions Offering financial products in entity that does not exist 70 (1) A person must not offer financial products of an entity that has not been formed or does not exist if the offer would be a regulated offer if the entity did exist.

92 20 25 30 35 Financial Markets Conduct Bill Part 3 cl 71 (2) Subsection (1) applies even if it is proposed to form or in- corporate the entity.
(3) A person who contravenes this section commits an offence if the person knows that the offer would be a regulated offer if the entity did exist.

5 (4) A person who commits an offence under this section is liable on conviction on indictment,— (a) in the case of an individual, to imprisonment for a term not exceeding 3 years, a fine not exceeding $200,000, or both; and in any other case, to a fine not exceeding $600,000.
10 (b) Compare: Corporations Act 2001 s 726 (Aust) 71 Prohibition of offers in course of unsolicited meetings with persons acting otherwise than in trade (2) (1) A person must not offer financial products for issue or sale 15 in the course of, or because of, an unsolicited meeting with a person who is acting otherwise than in trade.
In this section,— meeting includes— (a) (b) a telephone call; or a meeting held by means of audio, audio and visual, or electronic communication where the participants can simultaneously communicate with each other through- out the meeting 20 (3) trade means any trade, business, industry, profession, occu- 25 pation, activity of commerce, or undertaking.
Subsection (1) does not prohibit an offer of financial prod- ucts if— (a) the offer does not require disclosure under this Part be- cause of an exclusion under Schedule 1 (other than an 30 exclusion under clause 12 or 16 of that schedule); or the offer is an offer of quoted financial products made through a person who, under the Financial Advisers Act 2008, is permitted to give financial advice in respect of those products (including as a result of an exemption by 35 or under that Act); or (b) 93 Part 3 cl 72 Financial Markets Conduct Bill (c) (d) the offer is through an authorised financial adviser or a QFE adviser to a client, or former client, of the financial adviser or the business on whose behalf the financial adviser acts; or the offer is an offer of the financial products of a co-op- 5 erative where becoming a holder of those products is— a necessary incident of doing business with the (i) co-operative; or the means by which a person can access the bene- fits of membership of the co-operative; or (ii) 10 (4) the offer is made in the prescribed circumstances.
(e) In this section, co-operative means— (a) (b) (c) a co-operative company; or an industrial and provident society; or an entity of a prescribed kind.

(5) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: Corporations Act 2001 s 736 (Aust) (6) 15 20 Right to withdraw and have money returned If financial products are issued or transferred to a person (A) as a result of an offer that contravenes section 71, A has the right to withdraw from holding the products and to have the 25 relevant money repaid.

The right referred to in subsection (1) is exercisable by A giving to the offeror written notice of the exercise of the right within 1 month after the date of the issue or transfer.
If a notice is given under subsection (2),— (a) the offeror must ensure that the relevant money is repaid as soon as practicable; and if the relevant money is not repaid within 1 month after the notice is given, the offeror and the directors of the offeror are jointly and severally liable to repay the rele- 35 vant money together with interest at a prescribed rate from the date on which the notice was given.
(b) 30 72 (1) (2) (3) 94 (4) 73 (1) (2) (3) 74 Financial Markets Conduct Bill Part 3 cl 74 This section does not limit any other liability that a person may have for a contravention of section 71.
Compare: Corporations Act 2001 s 738 (Aust) Subpart 3—Advertising and publicity Advertising or publicity for regulated offers If an offer, or intended offer, of financial products is or will be a regulated offer, a person must not, except in accordance with any of sections 75 to 78,— (a) (b) advertise the offer or intended offer; or publish a statement that— (i) contains or refers to the offer or intended offer; or is reasonably likely to induce persons to apply for the financial products.
(ii) 5 10 Subsection (1) applies only if the advertisement or publica- 15 tion referred to in subsection (1)(a) or (b) is authorised or instigated by, or on behalf of, the issuer, the offeror, or an as- sociated person of the issuer or offeror.

Subsection (1)(b) does not apply to statements published after the end of the period during which applications for fi- 20 nancial products under the offer may be made.
Compare: Corporations Act 2001 s 734(2), (2A) (Aust) Inducements to apply In deciding whether a statement is reasonably likely to induce persons to apply for financial products, the following must be 25 taken into account: (a) whether the statement is advertising of an issuer’s or of- feror’s goods or services and is directed at maintaining its existing customers, or attracting new customers, for those goods or services: (b) whether the statement is likely to encourage the making of investment decisions on the basis of the statement rather than on the basis of information contained in a PDS.
Compare: Corporations Act 2001 s 734(3) (Aust) 95 30 35 Part 3 cl 75 Financial Markets Conduct Bill 75 76 (1) Distribution of PDS or registered documents A person may distribute— (a) (b) a PDS that has been lodged with the Registrar; or a copy of any part of the register entry or of any docu- ment that is contained on the register.
5 Compare: Corporations Act 2001 s 734(4) (Aust) Advertising and publicity before PDS lodged Before the PDS is lodged with the Registrar, an advertisement or a publication may be distributed if it includes, in relation to the offer or intended offer referred to in section 73, a state- 10 ment— (a) (b) that no money is currently being sought; and that applications for the financial products are currently not being accepted; and that, if the offer is made, the offer will be made in ac- 15 cordance with this Act; and if the offeror wishes, that specifies that the offeror is seeking preliminary indications of interest and, in that case, also specifies— (i) (ii) how indications of interest may be made; and that no indication of interest will involve an obli- gation or a commitment of any kind.
(c) (d) 20 (2) A statement required under subsection (1)(a) to (c) and (d)(ii) must be reasonably prominent.
Compare: 1978 No 103 s 5(2CA); Corporations Act 2001 s 734(5) (Aust) 25 Advertising and publicity after PDS lodged 77 (1) After the PDS is lodged with the Registrar, an advertisement or a publication may be distributed if it— (a) includes a statement that identifies,— (i) if the financial products are offered by way of 30 issue, the issuer of the products; and if the financial products are offered pursuant to sale offers to which section 28 applies, the is- suer of the products and the offeror of the prod- ucts; and 35 (ii) 96 Financial Markets Conduct Bill Part 3 cl 79 (b) includes a statement that indicates that the PDS for the offer is available and where and how it can be obtained; and does not contain any information, sound, image, or other matter that is materially inconsistent with the 5 PDS, or register entry, for the offer to which it relates.
(2) A statement required under this section must be reasonably (c) prominent.
Compare: Corporations Act 2001 s 734(6) 78 79 General exceptions An advertisement or a publication may be distributed if it— (a) 10 relates to an offer of the financial products of a listed issuer and consists of a notice or report by the issuer, or by 1 of its directors or employees, about the issuer’s affairs to the relevant licensed market operator; or consists solely of a notice or report of a meeting, or a statement made at a meeting, of the issuer’s product holders or any class of those product holders; or consists solely of a document or information that is re- quired by law to be provided or made available (for ex- 20 ample, an annual report of a company), whether directly or as a condition of carrying out any activity or as a con- dition of an exemption from any enactment.
15 (b) (c) Compare: Corporations Act 2001 s 734(7) (Aust) Defence for publishers In any proceeding against a person (A) for a contravention of section 73 in relation to an advertisement or a statement, it is a defence if— (a) A’s business is publishing or arranging for the publica- tion of advertisements or statements; and 25 30 (b) A received the advertisement or statement, or the in- formation contained in the advertisement or statement, as the case may be, in the ordinary course of that busi- ness and did not know and had no reason to suspect that the publication of the advertisement or statement or the 35 publication of the advertisement or statement contain- 97 Part 3 cl 80 Financial Markets Conduct Bill ing that information, as the case may be, would consti- tute a contravention of section 73.
Compare: 1986 No 121 s 44(4) Subpart 4—Ongoing disclosure and updating of registers Duty to update register of offers of financial products and register of managed investment schemes 80 Duty to notify relevant matters and provide certain documents and information to Registrar (1) An issuer of regulated products must— 5 10 (a) (b) notify the Registrar of a prescribed change within 5 working days of becoming aware of the change; and provide to the Registrar a copy of any documents, in- formation, and other matters made, or to be made, pub- 15 licly available under section 82 before the date that is 5 working days after that material is made available under that section.
(2) In this section, prescribed change, in respect of regulated products,— (a) means a prescribed change that relates to the issuer, any offeror of those products, the regulated products, or any registered scheme to which those products relate; but does not include a change in respect of which the FMA is required to notify the Registrar (for example, an order 25 made under subpart 1 of Part 7).
(b) 20 (3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- 30 part 5 of Part 7).
Compare: 1978 No 103 s 43Q (4) 98 Financial Markets Conduct Bill Part 3 cl 83 Disclosure to particular persons 81 (1) (2) Information to be made available to investors or other prescribed persons Every issuer of regulated products must, at the request of a prescribed person or at the prescribed times or on the occur- 5 rence of the prescribed events, make available to a prescribed person the documents, information, and other matters that are required to be made available under this section by the regu- lations.
The documents, information, and other matters must be made 10 available in the prescribed manner.

(3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- 15 part 5 of Part 7).
(4) Public disclosure 82 Information to be made publicly available Every issuer of regulated products must, at the prescribed times or on the occurrence of the prescribed events and other- 20 wise in the prescribed manner, make publicly available the documents, information, and other matters that are required to be made publicly available by the regulations.
Compare: 1978 No 103 s 54C Defective ongoing disclosure Defective ongoing disclosure 83 (1) An issuer must not provide information to the Registrar, or make available documents, information, and other matters, under this subpart (the ongoing disclosure) if— (a) there is— (i) (ii) a statement in the ongoing disclosure that is mis- leading or deceptive or is likely to mislead or de- ceive; or an omission from the ongoing disclosure of in- formation that is required to be contained in the 35 25 30 99 Part 3 cl 84 Financial Markets Conduct Bill ongoing disclosure by this Act or the regulations; and (b) the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.
(2) (3) (4) (5) For the purposes of this section, a statement about a future 5 matter (including the doing of, or refusing to do, an act) must be taken to be misleading if the person making the statement does not have reasonable grounds for making it.

Subsection (2) does not limit the meaning of a reference to a misleading statement.

This section does not limit sections 80 to 82.


See section 489 (offence to knowingly or recklessly contra- vene this section) and section 480 (which provides that a per- son may be treated as suffering loss or damage in the case of a contravention of this section).

10 15 Subpart 5—Civil liability for certain contraventions of this Part Part 3 offer provisions 84 (1) All of the provisions specified in subsections (3) and (4) are Part 3 offer provisions.
20 (3) (2) A contravention of any of the provisions listed in subsection (3) may give rise to a civil remedy (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case 25 of an individual or $5 million in any other case.
The provisions are the following: (a) (b) section 35 (PDS must be prepared and lodged): section 37 (PDS must be given to person to whom disclosure is required): section 42 (disclosure of material information and content of PDS and register entry): section 44 (consent of person to whom statement at- tributed): section 46 (PDS must comply with prescribed require- 35 ments relating to form and presentation): section 49 (waiting period restriction): 30 (c) (d) (e) (f) 100 Financial Markets Conduct Bill Part 3 cl 84 (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) section 61 (minimum subscription condition must be fulfilled before issue or transfer): section 64 (choices open to offeror if condition in PDS not met or defective disclosure): section 65 (misleading or deceptive statements, omis- 5 sions, and new matters requiring disclosure): section 69(2) (money for financial products must be held in trust): section 73 (advertising or publicity for regulated of- fers): section 80 (duty to notify relevant matters and provide certain documents and information to Registrar): sections 82 and 83 (ongoing disclosure): clauses 13 and 17 of Schedule 1 (restrictions on advertising for small offers and small schemes): clause 26 of Schedule 1 (offeror must comply with disclosure and other requirements): clause 27 of Schedule 1 (misleading or deceptive statements and omissions).
10 15 (4) A contravention of any of the following may give rise to a 20 civil remedy (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case: (a) (b) section 59 (publication of lodgement): section 66 (certain persons must inform offeror about 25 disclosure deficiencies): section 68 (dealing with applications on expiry): section 69(3) (money for financial products must be dealt with in prescribed manner and repaid as soon as practicable if required): section 70 (offering financial products in entity that does not exist): section 71 (prohibition of offers in course of unso- licited meetings): section 72 (right to withdraw and have money re- 35 turned).
30 (c) (d) (e) (f) (g) 101 Part 4 cl 85 Financial Markets Conduct Bill 5 10 Part 4 Governance of financial products Subpart 1—Application and overview Part applies to all regulated products This Part applies to— (a) financial products offered under a regulated offer; and (b) managed investment products in a registered scheme (whether or not there has been a regulated offer).
Regulated offers of debt securities need governing document and supervisor In this Part,— (a) subpart 2 contains requirements for a governing docu- ment, supervisor, and other related issuer and supervisor obligations for a regulated offer of debt securities; and subpart 4 provides for interventions in regulated offers 15 of debt securities (in addition to the powers in Part 7).

This section is only a guide to the general scheme and effect of subparts 2 and 4.
(b) Regulated offers of managed investment products need to be in registered scheme In this Part,— (a) subpart 3 contains the requirement that the managed investment scheme be registered for a regulated offer of managed investment products, and regulates registered schemes; and subpart 4 provides for interventions in registered schemes (in addition to the powers in Part 7).

This section is only a guide to the general scheme and effect of subparts 3 and 4.
(b) 20 25 All regulated products have other accountability requirements under this Part In this Part, the following subparts relate to all regulated prod- ucts: (a) subpart 5 contains requirements for the issuer to keep registers of the regulated products; and 30 35 85 86 (1) (2) 87 (1) (2) 88 (1) 102 Financial Markets Conduct Bill Part 4 cl 90 (b) subpart 6 contains accounting and other record-keep- ing and auditing requirements for the issuer.
(2) This section is only a guide to the general scheme and effect of subparts 5 and 6.
Subpart 2—Governance of offers of debt securities Need for governing document and supervisor for regulated offer of debt security 89 (1) A person must not make a regulated offer of a debt security unless— (a) (b) there is a trust deed for the debt security that complies with sections 90 to 92 and that is lodged with the Registrar at or before the time that the PDS is lodged; and there is a licensed supervisor— (i) who is designated or appointed as the trustee under the trust deed for the debt security (or under the Financial Markets Supervisors Act 2011); and 5 10 15 (ii) whose licence covers supervision of the debt se- 20 curity.
(2) A reference in this subpart to a trust deed is a reference to the (3) trust deed required by subsection (1).

The issuer of a debt security offered under a regulated offer must ensure that there continues to be a trust deed and licensed 25 supervisor as required by subsection (1) until the debt secur- ity is cancelled, redeemed, or forfeited, or all of the obligations owing under the debt security have been discharged.
Compare: 1978 No 103 s 33(2) Governing document requirements Contents of trust deed for debt securities 90 (1) A trust deed for a debt security must provide that the following are held in trust by the supervisor for the benefit of the holders of the debt security: (a) (b) the right to enforce the issuer’s duty to repay; and any charge or security for repayment; and 30 35 103 Part 4 cl 91 Financial Markets Conduct Bill (2) (3) (4) (5) 91 (1) (c) the right to enforce any other duties that the issuer, any guarantor, and any other person have under— the terms of the debt security; or (i) the provisions of the trust deed or this Act in (ii) relation to the debt security.
5 Subsection (1) does not prevent a holder of a debt security from enforcing the issuer’s duty to repay or any other duties that the issuer, any guarantor, or any other person owes to the holder.

The trust deed is treated as containing any provision that is 10 implied into it by or under this Act.

The trust deed must also provide adequately for all of the mat- ters required to be contained in it by section 91 and the regu- lations.
The trust deed must provide for the contents required by this 15 section in accordance with the frameworks or methodologies specified in a notice issued by the FMA under subpart 4 of Part 8.
Compare: Corporations Act 2001 s 283AB (Aust) Limits on permitted exemptions and indemnities If a supervisor of a debt security has any rights to be exempted from liability for, or indemnified in relation to, the perform- ance of the supervisor’s licensee obligations (as defined in sec- tion 4 of the Financial Markets Supervisors Act 2011), those rights— (a) must be set out in the trust deed for the debt security; (b) and are available only in relation to the proper performance of the duties under sections 98 and 99.
20 25 (2) No other agreement has any effect to the extent that it purports 30 to confer a right of a kind set out in subsection (1).

Compare: Corporations Act 2001 s 283DB (Aust); 1978 No 103 s 62 Trust deed must be legally enforceable A trust deed for a debt security must be contained in 1 or more documents that are legally enforceable as between the super- 35 visor, the issuer of the debt security, and the product holders.
92 104 Financial Markets Conduct Bill Part 4 cl 94 93 Effect of trust deed A trust deed for a debt security has no effect to the extent that it contravenes, or is inconsistent with, this Act, the regulations, or any term implied into it by this Act or the regulations.
Changes to trust deed 94 (1) An amendment or replacement of a trust deed for a debt secur- 5 ity has no effect unless made either— (a) with the consent of the supervisor of the debt security under this section; or under section 95; or under section 22(7) or 37(6) of the Financial Markets Supervisors Act 2011.
(b) (c) (2) The supervisor must not consent to an amendment to, or re- placement of, the trust deed under this section unless— (a) 10 15 either— (i) (ii) the amendment or replacement is approved by, or is contingent on approval by, the holders of the debt security; or the supervisor is satisfied that the amendment or replacement does not have a material adverse ef- 20 fect on the holders of the debt security; and the supervisor certifies to that effect and certifies, or obtains a certificate from a solicitor, that the trust deed, as amended or replaced, will comply with sections 90 to 92 on the basis set out in the certificate.
25 (b) (3) The approval of the holders of the debt security for the pur- poses of subsection (2)(a) must be the approval of a special resolution of— (a) (b) the holders of the debt security; or the class of holders of the debt security that is or may be 30 adversely affected by the amendment or replacement.

(4) (5) Subsection (2) is subject to section 98(1)(e).

This section does not limit section 157ZD of the Reserve Bank of New Zealand Act 1989.
105 Part 4 cl 95 Financial Markets Conduct Bill Power to make FMA-approved changes to trust deeds 95 (1) An issuer may amend or replace a trust deed for a debt secur- ity with the FMA’s consent if the FMA is satisfied that it is necessary to enable the trust deed to comply with this subpart or any enactment or rule of law.
Subsection (1) applies despite anything to the contrary in the trust deed or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the trust deed.

(2) 5 (3) An amendment or replacement made under this section must 10 be treated for all purposes as if it were made in accordance with the trust deed.
Lodging of changes to trust deed 96 (1) Within 5 working days of the amendment to or replacement of a trust deed for a debt security, the issuer must ensure that 15 notice of the amendment or replacement, and a copy of the certificate for the amendment or replacement (if any), is lodged with the Registrar.

(2) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding 20 $50,000.
The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Role of supervisor Functions of supervisor The supervisor of a debt security is responsible for the follow- ing functions: (a) acting on behalf of the holders of the debt security in relation to— (i) (ii) the issuer of the debt security; and any matter connected with the trust deed for the debt security or the terms of the regulated offer; and any contravention or alleged contravention of the issuer obligations; and (iii) (b) supervising the issuer’s performance— 25 30 35 (3) 97 (1) 106 (2) 98 (1) Financial Markets Conduct Bill Part 4 cl 98 (i) (ii) of its issuer obligations; and in order to ascertain whether the assets of the is- suer and of each guarantor that are or may be available, whether by way of security or other- wise, are sufficient or likely to be sufficient to 5 discharge the amounts of the debt securities as they become due; and (c) performing or exercising any other functions, duties, and powers conferred or imposed on the supervisor by or under this Act, the Financial Markets Supervisors Act 10 2011, or the governing document.
The supervisor must not delegate any of its functions under subsection (1) (except as expressly permitted by this Act).
General duties applying in exercise of supervisor’s functions The supervisor of a debt security must— (a) (b) 15 20 act honestly in acting as a supervisor; and in exercising its powers and performing its duties as a supervisor, act in the best interests of the holders of the debt security; and exercise reasonable diligence in carrying out its func- tions as a supervisor; and do all the things it has the power to do to cause any contravention referred to in section 97(1)(a)(iii) to be remedied (unless it is satisfied that the contravention 25 will not materially prejudice the security of the debt security or the interests of holders of the debt security); and act in accordance with any direction given by a special resolution of the holders of the debt security that is not 30 inconsistent with any enactment or the trust deed in re- lation to— (i) seeking a remedy to a contravention referred to in section 97(1)(a)(iii); and any other matter connected with the supervisor’s 35 functions.
(ii) (c) (d) (e) 107 Part 4 cl 99 Financial Markets Conduct Bill (2) (3) 99 The supervisor is not liable for anything done, or omitted to be done, in giving effect to a direction to it by holders of the debt security.

The duty in subsection (1)(e) is subject to any order of the court made under section 194.
Compare: SR 2009/230 Schedule 15 cl 1 5 Duty of supervisor to comply with professional standard of care The supervisor of a debt security must, in exercising its powers and performing its duties as a supervisor, exercise the care, 10 diligence, and skill that a prudent person engaged in the busi- ness of acting as a licensed supervisor would exercise in the same circumstances.
100 Duty of issuer to provide regular reports to supervisor The issuer of a debt security must, at the prescribed times or 15 on the occurrence of the prescribed events and otherwise in the prescribed manner, prepare and provide to the supervisor reports that contain the documents, information, or other mat- ters that are required to be provided by the regulations.
Compare: SR 2009/230 Schedule 15 cl 4 20 101 Duty of issuer to provide requested information and reports to supervisor If requested by the supervisor of a debt security (or a person authorised by the supervisor to exercise its powers under this section), the issuer must— (a) make available to the supervisor (or other authorised person) all documents and records relating to the issuer; and provide the supervisor (or other authorised person) with any other reports or information required by the super- 30 visor (or other authorised person).
(b) 25 Reports or information required under subsection (1) may— be about any matter relevant to the performance of the (a) supervisor’s functions; and include forward-looking reports.

(b) 35 (1) (2) 108 (3) 102 Financial Markets Conduct Bill Part 4 cl 104 The reports or information must be provided within the time and in the manner (which must be reasonable in the circum- stances) specified by the supervisor.
Compare: SR 2009/230 Schedule 15 cls 2(2), 5(3) Issuer must report contravention or possible contravention of issuer obligations If an issuer of a debt security has reasonable grounds to believe that it has contravened, may have contravened, or is likely to contravene any of its issuer obligations in a material respect, the issuer must, as soon as practicable,— (a) report the contravention or possible contravention to the supervisor; and advise the supervisor of the steps (if any) that the issuer has taken or intends to take in light of the contraven- tion or possible contravention and the date by which the 15 steps were taken or are to be taken.
5 10 (b) 103 Restriction on section 102 An issuer is not required to provide, under section 102, in- formation that would, if so provided, be likely to incriminate the issuer under New Zealand law for an offence punishable 20 by a fine or imprisonment.
(2) 104 Duty of issuer to report serious financial problems (1) This section applies if an issuer of a debt security becomes aware of information on the basis of which it could reasonably form the opinion that the issuer is, or it is likely that the issuer 25 will become, insolvent.
The issuer must, as soon as practicable,— (a) disclose to the supervisor all information relevant to that matter that is in the possession or under the control of the issuer and that was obtained in the course of, or 30 in connection with, the performance of its functions as issuer; and advise the supervisor of the steps (if any) that the issuer intends to take in respect of that matter and the date by which the steps are to be taken.
(b) 35 Compare: 2011 No 10 s 47 109 Part 4 cl 105 Financial Markets Conduct Bill 105 Power of supervisor to engage expert (1) The supervisor of a debt security is entitled, in the perform- ance of the supervisor’s functions, to engage an expert (for example, an auditor, investigating accountant, valuer, or actu- ary) if the supervisor considers, on reasonable grounds, that it 5 requires the assistance of the expert to— (a) (b) determine the financial position of the issuer; or review the business, operation, or management sys- tems, or the governance, of the issuer.
(2) If the supervisor engages an expert under this section,— (a) the issuer must provide reasonable assistance to the ex- pert to allow the expert to provide the assistance under subsection (1); and the fees and expenses of the expert, which must be rea- sonable in the circumstances, must be paid by the issuer.
15 (b) 10 Compare: SR 2009/230 Schedule 15 cl 11 Meetings of product holders 106 Meetings of product holders (1) A meeting of a class of holders of debt securities must be called 20 by the issuer on the written request of— (a) (b) the supervisor; or holders of the debt securities that value together no less than 5% of the nominal value of the debt securities on issue in that class; or in the case of an issuer that is a credit union, no less than 25 5% of the number of members of the credit union who hold debt securities on issue in that class; or a person who is authorised by the trust deed or by the regulations to call the meeting.
(c) (d) The proceedings at the meeting are governed by the regula- 30 tions (if any) and the trust deed (if there are no regulations or to the extent that the trust deed is not inconsistent with the regulations).
Compare: 2009/230 Schedule 15 cl 3(1) (2) 110 5 10 15 20 Financial Markets Conduct Bill Part 4 cl 109 107 Power of supervisor to attend meetings and appoint chair The supervisor of a debt security is entitled to receive all no- (1) tices of, and other communications relating to, any meeting of the holders of the debt securities that any holder is entitled to receive.
The supervisor of a debt security (or any person appointed by the supervisor to exercise its powers under this section) is entitled to— (a) (2) attend a meeting of the holders of the debt securities; and be heard at a meeting of the holders of the debt securities on any part of the business of the meeting that concerns the supervisor’s functions or the holders for whom the supervisor is acting; and appoint the chairperson of the meeting.
(b) (c) Compare: SR 2009/230 Schedule 15 cl 3(3) Change of supervisor 108 Supervisor ceasing to hold appointment (1) The supervisor of a debt security ceases to hold that appoint- ment (subject to subsection (2)) if the supervisor— (a) is removed by the FMA under the Financial Markets Supervisors Act 2011; or is removed by a special resolution of the holders of the debt security; or is removed or resigns in accordance with the trust deed.
25 (b) (c) (2) No issuer of a debt security may remove a supervisor without the FMA’s consent (even if permitted to do so by the trust deed).

109 Lodging of notice of change of supervisor (1) Within 5 working days of a change to the supervisor of a debt 30 security under section 108, the issuer must ensure that notice of the change is lodged with the Registrar.

(2) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.
35 111 Part 4 cl 110 Financial Markets Conduct Bill (3) The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Subpart 3—Registration of managed investment schemes 5 110 Overview (1) This subpart— (a) (b) requires registered schemes, irrespective of legal form, to meet key common governance and reporting require- ments; and provides for the manager and independent supervisor 10 of a registered scheme to owe statutory duties of care to investors; and provides for the custodianship of scheme property of a registered scheme to be independent from the manager.
This section is only a guide to the general scheme and effect 15 of this subpart.

(c) (2) Need to register 111 Need to register managed investment scheme for regulated offer of managed investment product (1) A person must not make a regulated offer of a managed invest- 20 ment product, or accept further contributions if there has been a regulated offer of a managed investment product, unless the managed investment scheme is registered.
(2) However, a managed investment scheme may be registered even if there is no regulated offer of a managed investment 25 product in the scheme but, in this case, the managed invest- ment products in the scheme are regulated products and the following sections apply: (a) section 69 (money for financial products must be held in trust): sections 80, 81, 82, and 83 (ongoing disclosure re- quirements): subpart 5 (registers that must be kept by issuers of all regulated products): subpart 6 (accounting records and audit of financial 35 statements).
30 (b) (c) (d) 112 Financial Markets Conduct Bill Part 4 cl 112 (4) (3) A scheme that is approved as a Schedule 3 scheme under Schedule 3 may not be registered under this subpart.

For the purposes of any enactment (unless the enactment pro- vides otherwise), a reference to a retirement scheme means any of the following schemes: (a) a registered scheme that is a KiwiSaver scheme or a superannuation scheme: a Schedule 3 scheme: a fund or scheme constituted under the Government Superannuation Fund Act 1956.
Compare: 1960 No 99 s 8; 1978 No 103 s 33(3) (b) (c) Registration 112 Application for registration (1) A person may apply to the Registrar for registration of a man- 5 10 15 (2) aged investment scheme.
The application must— (a) (b) (c) (d) (e) (f) be made in the prescribed manner; and contain the prescribed information; and be accompanied by the written consent to the registra- tion of the licensed manager and licensed supervisor of 20 the scheme (or the proposed licensed manager and li- censed supervisor); and contain a copy of the governing document for the scheme; and contain a certificate from the licensed manager and li- 25 censed supervisor (or proposed licensed manager and licensed supervisor) of the scheme to the effect that the scheme complies with the registration requirements for all schemes under section 113; and if the application is for registration as a particular type 30 of scheme under sections 114 to 119,— (i) (ii) state that fact; and comply with any additional prescribed require- ments for applications for that type of registra- tion; and contain a certificate from the FMA that it is satis- fied that the scheme complies with any additional (iii) 35 113 Part 4 cl 113 Financial Markets Conduct Bill (3) 113 (1) registration requirements for that type of scheme under those sections.
The Registrar must register a managed investment scheme if satisfied that the application meets the requirements of this section (subject to clause 7 of Schedule 2).
5 Initial and ongoing registration requirements for all managed investment schemes Every registered scheme must meet the following registration requirements: (a) (b) (c) (d) (e) (f) it must not have a name that, in the opinion of the 10 Registrar, is misleading or offensive or the use of which would contravene an enactment; and its governing document must comply with sections 122 to 124; and it must have a licensed manager designated or appointed 15 under the governing document (or this Act) whose li- cence covers management of the scheme; and it must have a licensed supervisor designated or ap- pointed under the governing document (or the Financial Markets Supervisors Act 2011) whose licence covers 20 supervision of the scheme; and the manager and the supervisor of the scheme must not be the same or associated persons; and the scheme property must be held by the supervisor or another person who meets the custodianship require- 25 ments in section 143 (to the extent that it is not held directly by the scheme participants).
(2) However, subsection (1)(c) to (e) do not apply to a restricted scheme.
Compare: 1960 No 99 s 3(1), (4); 2006 No 40 ss 116F, 116G 30 114 Additional initial and ongoing registration requirements for KiwiSaver schemes Every KiwiSaver scheme must meet the following registration requirements in addition to those in section 113: (a) it must be a trust established and governed by a trust 35 deed that is interpreted and administered in accordance with New Zealand law; and (1) 114 Financial Markets Conduct Bill Part 4 cl 114 (b) (c) (d) (e) (f) (g) (h) its purpose must be to provide retirement benefits di- rectly to individuals; and it must admit as members (both in its conditions of entry of scheme participants and in the way those conditions are applied) only persons who meet the New Zealand 5 criteria set out in subsection (2) or (3); and it must restrict redemptions or withdrawals (under the trust deed and in the way the trust deed is applied) to those permitted under the KiwiSaver scheme rules under the KiwiSaver Act 2006; and it must be a scheme under which contributions are allo- cated to scheme participants on an individual basis; and the benefits provided by the scheme must be fully funded as they accrue; and its manager must have at least 1 director who is a New 15 Zealand resident; and the FMA must be satisfied that the fees charged in ac- cordance with any information provided in the applica- tion will comply with clause 2 of the KiwiSaver scheme rules under the KiwiSaver Act 2006.
20 10 (2) The New Zealand criteria are that the person, at the time of becoming a participant,— (a) is, or normally is, living in New Zealand, or is an em- ployee of the State services (within the meaning of the State Sector Act 1988) who is— (i) (ii) serving outside New Zealand; and employed on New Zealand terms and conditions; and serving in a jurisdiction where offers of super- annuation scheme membership are lawful; and (iii) 25 30 (b) is a New Zealand citizen or is entitled, in terms of the Immigration Act 2009, to be in New Zealand indefin- itely.
(3) A person also meets the New Zealand criteria if the person— (a) (b) is, immediately before becoming a participant of the 35 KiwiSaver scheme (scheme A), a member of another KiwiSaver scheme (scheme B); and is transferring the member’s entitlements from scheme B to scheme A.
115 Part 4 cl 115 Financial Markets Conduct Bill (4) If the KiwiSaver scheme is a restricted scheme,— subsection (1)(g) does not apply; but (a) at least 1 of the trustees or 1 of the directors of the cor- (b) porate trustee of the scheme must be a New Zealand resident.
Compare: 2006 No 40 s 116 115 Additional initial and ongoing registration requirements (1) for superannuation schemes Every superannuation scheme must meet the following regis- tration requirements in addition to those in section 113: (a) (b) (c) (d) (e) (f) it must be a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law; and its purpose must be to provide retirement benefits di- rectly or indirectly to individuals; and it must admit as members (both in its conditions of entry of scheme participants and in the way those conditions are applied) only either or both of— (i) persons who meet the New Zealand criteria set out in subsection (2); or persons who are the trustees or managers of a retirement scheme; and (ii) it must restrict redemptions or withdrawals (under the trust deed and in the way that the trust deed is applied) to redemptions or withdrawals for retirement purposes; 25 and it must not be registered as a KiwiSaver scheme; and it must be either— (i) (ii) a defined benefit scheme; or a scheme under which contributions are allocated 30 to scheme participants on an individual basis and the benefits provided by the scheme must be fully funded as they accrue.
5 10 15 20 (2) The New Zealand criteria for the purpose of subsection (1)(c)(i) are that the person, at the time of becoming a partici- 35 pant, must meet at least 1 of the following criteria: 116 (a) (b) Financial Markets Conduct Bill Part 4 cl 116 New Zealand citizen or permanent resident the person is a New Zealand citizen or is entitled, in terms of the Immigration Act 2009, to be in New Zealand indefinitely; or Transferring member the person— (i) is, immediately before becoming a participant of the superannuation scheme (scheme A), a mem- ber of another superannuation scheme (scheme B); and is transferring the member’s entitlements from scheme B to scheme A; or (ii) 5 10 (c) Person living in New Zealand employed by New Zealand resident employer the person is, or normally is, living in New Zealand 15 and is employed on terms and conditions that are gov- erned by New Zealand law by an employer that is a New Zealand resident (as determined in accordance with sec- tions YD 1 and YD 2 of the Income Tax Act 2007).
Subsection (1)(c) does not apply to a locked-in superannu- 20 ation scheme.
Compare: 1989 No 10 ss 2A, 3(1) (3) 116 Extent to which superannuation scheme may provide non-retirement benefits (1) Nothing in section 115(1)(b) or (d) prevents any of the fol- 25 lowing if it is merely ancillary to the purpose of providing re- tirement benefits to individuals: (a) the provision by a scheme of insurance benefits to mem- bers (for example, in the event of the death or disability of a member): redemptions or withdrawals in limited circumstances that are defined in the trust deed of the scheme (for example, financial hardship, ceasing employment, or changing employment): redemptions or withdrawals in accordance with limited 35 early partial withdrawal criteria that are defined in the trust deed of the scheme.
30 (b) (c) 117 Part 4 cl 117 Financial Markets Conduct Bill (2) For the purposes of subsection (1), something is ancillary to the purpose of providing retirement benefits to individuals if it is— (a) ancillary, secondary, subordinate, or incidental to the purpose of providing retirement benefits to individuals; 5 and not an independent purpose of the scheme.
(b) Compare: 2005 No 39 s 5(4) 117 Additional ongoing registration requirements for restricted schemes Every restricted scheme registered under section 688(1)(a) must meet the following registration requirements in addition to those in section 113: (a) it must be a KiwiSaver scheme or a superannuation scheme; and it must either— (i) 10 15 admit as members (both in its conditions of entry of scheme participants and in the way in which those conditions are applied) only 1 or more of the classes of persons referred to in subsection 20 (2); or be closed to new members; and (ii) the conditions of entry of scheme participants, or the way in which those conditions have been applied, must not have been changed without the FMA’s consent 25 since the date of the scheme’s registration under sec- tion 688(1)(a) in a way that expands, or is likely to expand, the classes of people who may become scheme participants; and its trustees must either— (i) include at least 1 licensed independent trustee whose licence covers the scheme and who is in- dependent under subsection (3); or consist only of a sole corporate trustee that has at least 1 director who is a licensed independent 35 trustee whose licence covers the scheme and who is independent under subsection (3); and (ii) 30 (b) (c) (d) (1) 118 (2) (3) Financial Markets Conduct Bill Part 4 cl 117 (e) the trustees of the scheme must be designated or ap- pointed to manage the scheme under the governing document (or this Act).
5 The classes of persons for the purpose of subsection (1)(b)(i) are— (a) (b) persons who are employed by a particular employer: persons who are employed by a related body corporate of a particular employer: persons who belong to a particular profession, calling, trade, occupation, or industry: persons who belong to a particular association, society, or other entity with a definable community of interest: persons who are immediate family members of, or wholly or partially financially dependent on, a person in 1 or more of the classes of persons described in 15 paragraphs (a) to (d).
(c) (d) (e) 10 In this section,— immediate family member, in relation to a person, means the person’s spouse, civil union partner, de facto partner, parent, child, step-parent, or stepchild independent means a person that— (a) 20 is not a related body corporate of any other trustee of the restricted scheme; and is not an employer that provides access to the scheme for its employees, an administration manager, or an in- 25 vestment manager of the restricted scheme (or a related body corporate of any of them); and is not a director of, shareholder in, or an employee of any person referred to in paragraph (a) or (b); and is not a current scheme participant; and is not a representative in any capacity of an organisation (such as a trade union) that represents the interests of 1 or more scheme participants; and is not a representative in any capacity of an organisa- tion that represents the interests of 1 or more employer 35 contributors to the scheme; and is not a corporate trustee if none of its directors are in- dependent under this definition.
30 (b) (c) (d) (e) (f) (g) Compare: 2006 No 40 s 116A 119 Part 4 cl 118 Financial Markets Conduct Bill 118 Additional initial and ongoing registration requirements for locked-in superannuation schemes Every locked-in superannuation scheme must meet the pre- scribed registration requirements in addition to those in sec- tions 113 and 115.
Compare: 2006 No 40 s 116 5 119 Additional prescribed registration requirements for other particular prescribed types of schemes A scheme of a particular type of registered scheme specified in the regulations must meet the prescribed registration require- 10 ments for that type of scheme (if any) in addition to those in section 113.
120 Manager must ensure that ongoing registration requirements are complied with The manager of a registered scheme must ensure that, until all 15 of the managed investment products in the scheme are can- celled, redeemed, or forfeited, or all of the obligations owing under those products have been discharged, the scheme— (a) continues to comply with the registration requirements for all schemes under section 113; and if it is registered as a particular type of scheme under sections 114 to 119, continues to comply with the additional registration requirements for that type of scheme under those sections.
(b) 20 121 Changes to registration as particular type of registered 25 scheme The FMA may direct the removal of the registration of a regis- tered scheme as a particular type of scheme— (a) if the FMA is satisfied that the scheme does not meet the registration requirements for that type of scheme under 30 sections 114 to 119; or on the written request of the manager of the scheme, if the supervisor certifies that— (i) the removal has been approved by a special reso- lution of the scheme participants; or 35 (b) (1) 120 (2) (3) Financial Markets Conduct Bill Part 4 cl 122 (ii) there is no material adverse effect on scheme par- ticipants from the removal.
The FMA must not direct removal under subsection (1) un- less— (a) the FMA gives the manager of the scheme no less than 5 10 working days’ written notice of the following mat- ters before it exercises the power: that the FMA may direct removal; and (i) (ii) the reasons why it may exercise that power; and the FMA gives the manager or the manager’s represen- 10 tative an opportunity to make written submissions on the matter within that notice period.
(b) The FMA may direct that a registered scheme be registered as a particular type of scheme on the written request of the manager of the scheme if the FMA is satisfied that the scheme 15 meets the registration requirements for that type of scheme under sections 114 to 119.
(4) A direction under subsection (1)(a) in relation to the removal of a registration as a restricted scheme must not take effect be- fore the expiry of 6 months after the direction is made (unless 20 the manager consents to an earlier date).

The manager of a registered scheme must, as soon as practic- able after being notified of a direction under this section, notify the scheme participants of the direction.
Compare: 2006 No 40 s 168A (5) 25 Governing document requirements 122 Contents of governing document for registered scheme (1) The governing document for a registered scheme must provide adequately for all of the following matters under the scheme: (a) whether or not managed investment products are trans- 30 ferable or redeemable and the rules applying to acquir- ing or disposing of the managed investment products and, if they are redeemable,— (i) the manner in which, and the conditions on which, interests are to be redeemed; and the method of calculating the minimum price at which interests are to be redeemed; and (ii) 35 121 Part 4 cl 122 Financial Markets Conduct Bill (b) (c) (d) (e) (f) (g) (h) (i) (j) 5 the rules applying to becoming a scheme participant or withdrawing from participation in the scheme (if there are any rules); and the contributions payable and the rules applying to changing the contributions payable; and the methodology and other rules applying to valuations of assets of the scheme and pricing of interests in the scheme; and the rules applying to the determination and payment of financial benefits to scheme participants; and the fees and expenses that can be paid out of scheme property to any manager, investment manager, adminis- tration manager, supervisor, or custodian (for example, by setting out the basis on which those fees and ex- penses are to be determined), and any rights of any of 15 those persons to be indemnified out of scheme property (and any other matters required by section 123); and the appointment and removal of the supervisor (unless none is required under this Part); and the appointment and removal of the manager; and the winding up of the scheme; and any other matters (other than the matters contained in the statement of investment policy and objectives) that materially affect— (i) 20 10 (ii) (iii) the management and operation of the scheme by 25 the manager: the rights and duties of scheme participants in the scheme: the powers, rights, and duties of the manager and the
 supervisor (if any) of the scheme.
The governing document is treated as containing any provision that is implied into it by or under this Act or the KiwiSaver Act 2006.

The governing document must provide for the contents of the document that are required by this section in accordance with 35 the frameworks or methodologies specified in a notice issued by the FMA under subpart 4 of Part 8.
Compare: 1989 No 10 s 7; 2006 No 40 s 119 30 (2) (3) 122 Financial Markets Conduct Bill Part 4 cl 124 123 Limits on permitted exemptions and indemnities (1) If a manager or supervisor of a registered scheme has any rights to be exempted from liability for, or to be indemnified out of scheme property for, liabilities or expenses incurred in relation to, the performance of the manager’s issuer obliga- 5 tions or the supervisor’s licensee obligations (as defined in sec- tion 4 of the Financial Markets Supervisors Act 2011), those rights— (a) must be set out in the scheme’s governing document; (2) and 10 (b) must be available only in relation to the proper perform- ance of the duties under sections 130 and 131 or sec- tions 140 and 141.
If an investment manager of a registered scheme has any rights to be exempted from liability for, or to be indemnified out of 15 scheme property for liabilities or expenses incurred in relation to, the performance of the investment manager’s contracted functions, those rights— (a) must be set out either— (i) (ii) in the scheme’s governing document; or in the contract between the investment manager and the manager, provided that the scheme’s gov- erning document contains a power that permits such an indemnity; and 20 (b) must be available only in relation to the proper perform- 25 ance of the duties under sections 130 and 131.
(3) No other agreement has any effect to the extent that it purports to confer a right of a kind referred to in subsection (1) or (2).

Compare: Corporations Act 2001 s 601GA(2) (Aust); 1960 No 99 s 24(2); 1978 No 103 s 62; 2006 No 40 s 116J(1) 124 Governing document must be legally enforceable A governing document for a registered scheme must be con- tained in 1 or more documents that are legally enforceable as between the supervisor, the manager, and the scheme partici- pants.
Compare: Corporations Act 2001 s 601GB (Aust) 30 35 123 Part 4 cl 125 Financial Markets Conduct Bill 125 Effect of governing document A governing document for a registered scheme has no effect to the extent that it contravenes, or is inconsistent with, this Act, the regulations, or any term implied into it by this Act or the regulations.
5 126 Changes to governing document (1) An amendment to or replacement of a governing document has no effect unless made either— (a) under this section with the consent of the supervisor or, if there is no supervisor, the FMA; or under section 127 or 171(3); or under section 22(7) or 37(6) of the Financial Markets Supervisors Act 2011.
10 (b) (c) The supervisor or the FMA must not consent to an amendment to, or replacement of, the governing document under this sec- 15 tion unless— (a) either— (i) (ii) the amendment or replacement is approved by, or contingent on approval by, the scheme partici- pants; or the supervisor or the FMA is satisfied that the amendment or replacement does not have a ma- terial adverse effect on the scheme participants; and 20 (b) in the case of the supervisor, the supervisor certifies to 25 that effect and certifies, or obtains a certificate from a solicitor, that the governing document, as amended or replaced, will comply with sections 122 to 124 on the basis set out in the certificate.
The approval of scheme participants for the purposes of sub- 30 section (2)(a) must consist of,— (a) in the case an amendment or replacement of a govern- ing document of a defined benefit scheme that reduces, postpones, or otherwise adversely affects the benefits, whether vested, contingent, or discretionary, that may in 35 due course flow from, or are attributable to, membership of the scheme up to the date the amendment or replace- ment is made, the written consent of all scheme partici- (2) (3) 124 Financial Markets Conduct Bill Part 4 cl 128 (b) pants who would be adversely affected by the amend- ment or replacement; or in any other case, a special resolution of the scheme participants or the class of scheme participants that is or may be adversely affected by the amendment or re- 5 placement.
(4) Subsection (2) is subject to section 140(1)(e).
Compare: 1989 No 10 ss 9, 12; 2006 No 40 ss 119A, 129, 129A 127 Power to make FMA and court-approved changes to governing documents 10 (1) A manager of a registered scheme may amend or replace the governing document— (a) with the FMA’s consent if the FMA is satisfied that the amendment or replacement is necessary to enable the governing document to comply with sections 122 to 15 124 or any enactment or rule of law; or (b) with the court’s consent, in the case of a defined benefit scheme, if— (i) the amendment or replacement would otherwise require the consent of all the scheme participants 20 who would be adversely affected by it; and the court considers that it is in the interests of the scheme participants.
(ii) (2) Subsection (1) applies despite anything to the contrary in the governing document or in any enactment, rule of law, or agree- 25 ment, including anything relating to the consent of any person to the making of amendments to the governing document.

(3) An amendment or replacement made under this section must be treated for all purposes as if it were made in accordance with the governing document.
30 128 Lodging of changes to governing document (1) Within 5 working days of the amendment to or replacement of a governing document, the manager of a registered scheme must ensure that notice of the amendment or replacement, and a copy of the certificate for the amendment or replacement (if 35 any), is lodged with the Registrar.

125 Part 4 cl 129 Financial Markets Conduct Bill (2) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.
The offence in this section is an infringement offence (see sub- part 5 of Part 7).

(3) Role of manager 129 Management and administration functions of manager The manager of a registered scheme is responsible for per- forming the following functions: offering the managed investment products; and (a) (b) issuing the managed investment products; and (c) managing the scheme property and investments; and (d) Compare: 1960 No 99 s 3(2)(a) and (b); 2006 No 40 s 116B(1) administering the scheme.
5 10 130 General duties applying in exercise of manager’s functions 15 (1) A manager of a registered scheme must— (a) (b) (c) (d) act honestly in acting as a manager; and carry out the functions of a manager in accordance with the governing document, the statement of investment policy and objectives, and all other issuer obligations; 20 and in exercising any powers or performing any duties as a manager,— (i) act in the best interests of the scheme partici- pants; and (ii) treat the scheme participants equitably; and not make use of information acquired through being the manager in order to— (i) gain an improper advantage for itself or any other person; or cause detriment to the scheme participants.
25 30 (ii) (2) If the registered scheme is established under a trust deed, the manager has the same duties and liability in the performance of its functions as manager as it would if it performed those 126 Financial Markets Conduct Bill Part 4 cl 132 functions as a trustee (except to the extent that those duties are altered by or are inconsistent with this Act).
Compare: Corporations Act 2001 s 601FC (Aust); 1960 No 99 ss 3(2)(c), 12(1)(c), 24(1); SR 2009/230 Schedule 17 cl 3(1) 131 Duty of manager and investment manager to comply with 5 relevant professional standard of care (1) A professional manager of a registered scheme must, in exer- cising any powers, or performing any duties, exercise the care, diligence, and skill that a prudent person engaged in that pro- fession would exercise in the same circumstances.
In this section, a professional manager is— (a) (2) (b) (c) (d) a manager of a registered scheme (other than a restricted scheme): an investment manager of a registered scheme: a licensed independent trustee of a restricted scheme: any other trustee of a restricted scheme whose profes- sion is acting as a trustee or investing money on behalf of others.
10 15 (3) A trustee of a restricted scheme who is not a professional man- ager must, in exercising any powers or performing any duties, 20 exercise the care, diligence, and skill that a prudent person of business would exercise in the same circumstances.
Compare: 1960 No 99 ss 3(2)(c), 24(1); 2006 No 40 s 117; SR 2009/230 Sched- ule 17 cl 3(3) 132 Duties of directors and senior managers of manager 25 A director or senior manager of a manager of a registered scheme must— (a) not make use of information acquired through being the director or senior manager of the manager in order to— (i) gain an improper advantage for himself or herself 30 or any other person; or cause detriment to the scheme participants; and (ii) not make improper use of the position as a director or senior manager of the manager to gain, directly or indi- rectly, an advantage for himself or herself or any other 35 person or to cause detriment to the scheme participants.
(b) Compare: Corporations Act 2001 s 601FE (Aust); 1960 No 99 s 26 127 Part 4 cl 133 Financial Markets Conduct Bill 133 Contracting out of management functions (1) A manager may, unless prohibited by the governing document, contract out to 1 or more persons (whether or not the person or persons hold a market services licence under this Act covering management of the scheme) some or all of its functions as a 5 manager.
(2) However,— (a) (b) the manager must take all reasonable steps to— (i) ensure that those functions are performed in the same manner, and are subject to the same duties 10 and restrictions, as if the manager were perform- ing them directly; and (ii) monitor the performance of those functions; and the contracting out does not affect the liability of the manager for the performance of those functions.
15 134 Duty of manager to provide regular reports to supervisor or FMA The manager of a registered scheme must, at the prescribed times or on the occurrence of the prescribed events and other- wise in the prescribed manner, prepare and provide to the 20 supervisor (or, in the case of a restricted scheme, the FMA) reports that contain the documents, information, or other mat- ters that are required to be provided by the regulations.
135 Duty of manager to provide requested information and (1) reports to supervisor If requested by the supervisor of a registered scheme (or a per- son authorised by the supervisor to exercise its powers under this section), the issuer must— (a) make available to the supervisor (or other authorised 25 person) all documents and records relating to the issuer 30 and the scheme (including those held by an investment manager or administration manager); and provide the supervisor (or other authorised person) with any other reports or information required by the super- visor (or other authorised person).
35 (b) (2) Reports or information required under subsection (1) may— 128 Financial Markets Conduct Bill Part 4 cl 138 (3) (a) be about any matter relevant to the performance of the supervisor’s functions; and include forward-looking reports.

(b) The reports or information must be provided within the time and manner (which must be reasonable in the circumstances) 5 specified by the supervisor.
Compare: 1960 No 99 s 12(1)(b); SR 2009/230 Schedule 17 cl 2 136 Duty of manager to report contravention or possible contravention of issuer obligations If a manager of a registered scheme has reasonable grounds to 10 believe that it has contravened, may have contravened, or is likely to contravene any of its issuer obligations in a material respect, the manager must, as soon as practicable,— (a) report the contravention or possible contravention to the supervisor (or, in the case of a restricted scheme, the 15 FMA); and advise the supervisor (or, in the case of a restricted scheme, the FMA) of the steps (if any) that the man- ager has taken or intends to take in light of the contra- vention or possible contravention and the date by which 20 the steps were taken or are to be taken.
(b) 137 Restriction on section 136 A manager is not required to provide, under section 136, information that would, if so provided, be likely to incriminate the manager under New Zealand law for an offence punishable 25 by a fine or imprisonment.
138 Duty of manager to report serious financial problems (1) This section applies if a manager of a registered scheme be- comes aware of information on the basis of which it could rea- sonably form the opinion that— (a) the manager is, or it is likely that the manager will be- come, insolvent; or the registered scheme is, or it is likely that the registered scheme will become, insolvent.
The manager must, as soon as practicable,— (b) (2) 30 35 129 Part 4 cl 139 Financial Markets Conduct Bill (a) disclose to the supervisor (or, if there is no supervisor, to the FMA) all information relevant to that matter that is in the possession or under the control of the manager and that was obtained in the course of, or in connection with, the performance of its functions as manager; and advise the supervisor (or the FMA, as the case may be) of the steps (if any) that the manager intends to take in respect of that matter and the date by which the steps are to be taken.
Compare: 2011 No 10 s 47 (b) 5 10 Role of supervisor 139 Functions of supervisor (1) The supervisor of a registered scheme is responsible for the following functions: (a) acting on behalf of the scheme participants in relation 15 to— (i) (ii) the manager; and any matter connected to the governing document or the terms of the regulated offer; and any contravention or alleged contravention of the 20 issuer obligations; and any contravention or alleged contravention of this Act by any other person in connection with the registered scheme, the governing document, or the terms of the regulated offer; and (iii) (iv) 25 supervising— (i) (ii) the performance by the manager of its functions and its issuer obligations; and the financial position of the manager and the scheme in respect of the managed investment 30 product to ascertain that it is adequate; and holding the scheme property, or ensuring that the scheme property is held, in accordance with sections 143 to 145; and performing or exercising any other functions, powers, 35 and duties conferred or imposed on the supervisor by or under this Act, the Financial Markets Supervisors Act 2011, and the governing document.
(b) (c) (d) 130 Financial Markets Conduct Bill Part 4 cl 140 (2) The supervisor must not delegate its functions under subsec- tion (1) (except as expressly permitted by section 143 in re- lation to its function under subsection (1)(c) and otherwise by this Act).
Compare: 2006 No 40 s 116D(3), (4) 5 140 General duties applying in exercise of supervisor’s (1) (2) (3) functions The supervisor of a registered scheme must— (a) (b) act honestly in acting as a supervisor; and in exercising its powers and performing its duties as a 10 supervisor, act in the best interests of the scheme par- ticipants; and exercise reasonable diligence in carrying out its func- tions as a supervisor; and do all the things it has the power to do to cause any 15 contravention referred to in section 139(1)(a) to be remedied (unless it is satisfied that the contravention will not materially prejudice the security of the man- aged investment product or the interests of scheme par- ticipants); and act in accordance with any direction given by a special resolution of the scheme participants that is not incon- sistent with any enactment, rule of law, or the governing document in relation to— (i) seeking a remedy to a contravention referred to 25 in section 139(1)(a); and any other matter connected with its functions.
(ii) 20 (c) (d) (e) The supervisor is not liable for anything done, or omitted to be done, in giving effect to a direction to it by scheme partici- pants.
If the registered scheme is established under a trust deed,— (a) (b) the supervisor is the trustee of the trust; and the supervisor has the same duties and liability in the performance of its functions as supervisor as it would if it performed those functions as a trustee (except to the 35 extent that those duties are altered by or are inconsistent with this Act).
30 131 Part 4 cl 141 Financial Markets Conduct Bill (4) The duty in subsection (1)(e) is subject to any order of the court made under section 194.
Compare: 1960 No 99 s 18(2)–(4); SR 2009/230 Schedule 17 cl 1 141 Duty of supervisor to comply with professional standard of care The supervisor of a registered scheme must, in exercising its powers and performing its duties as a supervisor, exercise the care, diligence, and skill that a prudent person engaged in the business of acting as a licensed supervisor would exercise in the same circumstances.
5 10 142 Power of supervisor to engage expert (1) The supervisor of a registered scheme is entitled, in the per- formance of the supervisor’s functions, to engage an expert (for example, an auditor, investigating accountant, valuer, or actuary) if the supervisor considers, on reasonable grounds, 15 that it requires the assistance of the expert to— (a) determine the financial position of the manager or the scheme; or review the business, operation, or management sys- tems, or the governance, of the manager or the scheme.
20 (b) If the supervisor engages an expert under this section,— (a) the manager must provide reasonable assistance to the expert to allow the expert to provide the assistance under subsection (1); and the manager must pay the fees and expenses of the ex- 25 pert, which must be reasonable in the circumstances; and the manager is entitled to be indemnified for those fees and expenses out of scheme property, subject to any limits referred to in section 123.
30 (b) (c) Compare: SR 2009/230 Schedule 15 cl 11 (2) 132 Financial Markets Conduct Bill Part 4 cl 143 Custodianship of scheme property 143 Requirement to have supervisor or other independent (1) (2) (3) (4) (5) person as custodian The supervisor of a registered scheme (A) must hold the scheme property or, if authorised by the governing document, 5 contract the holding of the scheme property to another person (B) who meets the external custodianship requirements.
If there is no supervisor for the scheme (for example, in the case of a restricted scheme), the scheme property must be held in 1 or more of the following ways: (a) in the case of a restricted scheme that has a sole corpo- rate trustee with no function other than to be the man- ager of the scheme, by that corporate trustee; or by being invested in other registered schemes; or by a person (B) who meets the external custodianship 15 requirements and to whom the manager of the scheme (A), if authorised by the governing document, has con- tracted the holding of the scheme property.
(b) (c) 10 B may, if authorised in writing by A, in turn contract the hold- ing of the scheme property to another person who meets the 20 external custodianship requirements.
To meet the external custodianship requirements, a person must— (a) be a body corporate that A or (if B contracted the cus- todian) B believes, on reasonable grounds, to be appro- 25 priate to hold, and safeguard, the scheme property; and not be the same person as, or be associated with, the manager (other than in respect of the custodianship re- quirements).
(b) If a person contracts the holding of the scheme property to 30 another person (the nominee) under this section, the person contracting out that function— (a) must take all reasonable steps to— (i) ensure that the function is performed by the nom- inee in the same manner and subject to the same 35 duties and restrictions as if that person were per- forming it directly; and (ii) monitor the performance of that function; and 133 Part 4 cl 144 Financial Markets Conduct Bill (b) is jointly and severally liable with the nominee (and any other person who has contracted out the function) for the performance of that function in accordance with paragraph (a).
(6) This section does not apply to the extent that scheme property 5 is held directly by the scheme participants.

Compare: 1960 No 99 ss 3(3), 6–6C; 2006 No 40 ss 116G, 116H, 116I (2) (3) 144 Custodian holds scheme property on trust (1) The custodian for a registered scheme (whether the supervisor or another nominee under section 143) holds the scheme 10 property on trust for the scheme.
The custodian for a registered scheme must ensure that the scheme property is held separate from property held by any of the following persons on their own account: (a) (b) the custodian: any related party of the scheme (within the meaning of section 158).
15 Scheme property— (a) (b) is not available for the payment of the debts of the cus- todian or any other creditor of the custodian; and is not liable to be attached or taken in execution under the order or process of any court at the instance of the custodian or any other creditor of the custodian.

20 (4) Nothing in this section takes away or affects any lawful lien or claim that a custodian who holds scheme property has against 25 the scheme property.
145 Custodian must keep records of scheme property (1) The custodian for a registered scheme must keep, or ensure that there are kept, records that— (a) (b) identify the scheme property; and show the date when the scheme property was received; and if the scheme property has been disposed of, show where the scheme property was disposed of and to whom.

(c) 134 30 35 Financial Markets Conduct Bill Part 4 cl 147 (2) (3) The custodian for a registered scheme must also keep all other prescribed records.
The custodian for a registered scheme must keep the records required by this section, or ensure that they are kept, in a man- ner that enables those records to be conveniently inspected by 5 the manager and the supervisor and conveniently and properly audited.
146 Duty of supervisor to refuse to act on wrongful directions The supervisor of a registered scheme must refuse, and must (1) direct any other custodian to refuse, to act on a direction of the 10 manager that relates to the acquisition or disposal of scheme property if the supervisor considers that the proposed acquisi- tion or disposal would be— (a) in breach of the scheme’s governing document or any enactment; or 15 (b) manifestly not in the interests of the scheme partici- pants.
(2) If the supervisor refuses, or directs any other custodian to refuse, to act on a direction of the manager, the supervisor must notify the manager and the FMA in writing of that fact and the 20 supervisor’s reasons for the refusal or direction.
(3) A supervisor of a registered scheme, and any other custo- dian of the scheme, is not liable to the scheme participants or the manager for refusing, or directing any other custodian to refuse, to act on a direction of the manager in accordance with 25 this section.
Compare: 1960 No 99 s 12(1)(c) Meetings of scheme participants 147 Meetings of scheme participants (1) A meeting of a class of scheme participants must be called by 30 the manager of the registered scheme on the written request of— (a) (b) the supervisor; or scheme participants holding managed investment prod- ucts that value together no less than 5% of the value of 35 135 Part 4 cl 148 Financial Markets Conduct Bill the managed investment products on issue in that class; or a person who is authorised by the governing document or by the regulations to call the meeting.
(c) (2) The proceedings at the meeting are governed by the regula- 5 tions (if any) and the governing document (if there are no regu- lations or to the extent that the governing document is not in- consistent with any regulations).
Compare: 1960 No 99 ss 12(1)(d), 18(1) (2) 148 Power of supervisor to attend meetings and appoint chair 10 The supervisor of a registered scheme is entitled to receive all (1) notices of, and other communications relating to, any meeting of the scheme participants that any scheme participant is en- titled to receive.
The supervisor of a registered scheme (or any person author- 15 ised by the supervisor to exercise its powers under this section) is entitled to— (a) (b) attend a meeting of the scheme participants; and be heard at a meeting of the scheme participants on any part of the business of the meeting that concerns the 20 supervisor’s duties or the scheme participants for whom the supervisor is acting; and appoint the chairperson of the meeting.
(c) Compare: 1960 No 99 s 18(1); SR 2009/137 Schedule 16 cl 2(1), 2(2) 149 Manager and associated persons cannot vote if interested 25 (1) in resolution The manager of a registered scheme and its associated per- sons are not entitled to vote their interest on a resolution at a meeting of scheme participants if they have an interest in the resolution or matter other than as a scheme participant.
(2) However,— (a) if the managed investment products in the registered scheme are quoted, the manager and its associated per- sons are entitled to vote their interest on resolutions to remove the manager and appoint a new manager: 30 35 136 Financial Markets Conduct Bill Part 4 cl 152 (b) the manager or its associated persons may vote as prox- ies if the proxy appointment specifies the way they are to vote on the resolution and they vote that way.
Compare: Corporations Act 2001 ss 253A(2), 253E (Aust) Management of scheme 5 150 Requirement for statement of investment policy and objectives (1) A manager of a registered scheme must ensure that there is a statement of investment policy and objectives that covers the investment policy and objectives of the scheme and provides 10 adequately for the following matters: (a) the nature or type of investments that may be made, and any limits on those; and any limits on the proportion of each type of asset in- vested in; and the methodology used for developing and amending the investment strategy and for measuring performance against that investment strategy.
15 (b) (c) (2) However, if there are no limits provided for under subsection (3) (1)(a) or (b), the statement of investment policy and objectives 20 must state that fact.

The statement must provide for the matters set out in this sec- tion in accordance with the frameworks or methodologies spe- cified in a notice issued by the FMA under subpart 4 of Part 8 that apply to it.
25 151 Changes to statement of investment policy and objectives The manager of a registered scheme may amend or replace a (1) statement of investment policy and objectives only after giving prior written notice to the supervisor.

This section does not apply to a restricted scheme.
(2) 152 Lodging of statement of investment policy and objectives (1) and changes to statement The manager of a registered scheme must lodge the statement of investment policy and objectives, and any changes to it, with the Registrar, except in the prescribed circumstances.

30 35 137 Part 4 cl 153 Financial Markets Conduct Bill (2) The manager must lodge any change to the statement of in- vestment policy and objectives within 5 working days of the change taking effect.
(3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding 5 $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
(4) 153 Action that must be taken on limit breaks (1) This section applies to a registered scheme if, under the 10 scheme’s statement of investment policy and objectives, there is a material breach of any limits on either of the following (a limit break): (a) (b) the nature or type of investments that may be made; or the proportion of each type of assets that may be in- 15 vested in.
(2) If this section applies, the manager of the registered scheme must report the limit break to the supervisor or to the FMA (if there is no supervisor) in the prescribed circumstances and in the prescribed manner.

(3) Whether or not a limit break is material must be determined in accordance with the frameworks or methodologies specified in a notice issued by the FMA under subpart 4 of Part 8.
154 Action that must be taken on pricing errors and failure 20 25 (b) to comply with pricing methodologies This section applies to a registered scheme if— (a) the managed investment products under the scheme are transferable or redeemable; and either— (i) an error occurs in calculating the price at which 30 the managed investment products are transferred or redeemed; or there is a failure to comply with the methodology for pricing the managed investment products as set out in the governing document or any notice 35 issued by the FMA under subpart 4 of Part 8.
(ii) (1) 138 Financial Markets Conduct Bill Part 4 cl 155 (2) If this section applies, the manager must, if the pricing error or non-compliance is material,— (a) (b) correct the pricing error or non-compliance; and report the pricing error or non-compliance to the super- visor (or to the FMA if there is no supervisor); and take the prescribed steps to remedy the pricing error or non-compliance.
(c) 5 (3) Whether or not a pricing error or non-compliance is mater- ial must be determined in accordance with the frameworks or methodologies specified in a notice issued by the FMA under 10 subpart 4 of Part 8.
155 Actuarial examination of defined benefit scheme or life (1) (2) (3) benefit scheme This section applies to a registered scheme that— (a) (b) is a defined benefit scheme; or provides benefits that provide for the payment of money on the happening of a contingency dependent on the termination or continuance of human life, and the risks associated with those benefits are not fully insured with a company engaged in the business of life insurance (a 20 life benefit scheme).
15 The manager of a defined benefit scheme or a life benefit scheme must ensure that a suitably qualified actuary examines the financial position of the scheme as at dates that are no more than 3 years apart.
The manager must ensure that— (a) 25 the report of the actuary is received no later than 7 months after the date as at which the financial position of the scheme was examined; and the manager gives a copy of the report, as soon as prac- 30 ticable, to the supervisor (or if there is no supervisor, to the FMA); and the manager gives a copy of the report to the FMA within 20 working days after its receipt by the super- visor (if any).
35 (b) (c) (4) A person who contravenes subsection (3)(b) or (c) commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

139 Part 4 cl 156 Financial Markets Conduct Bill (5) The offence in subsection (4) is an infringement offence (see subpart 5 of Part 7).
Compare: 1989 No 10 s 15 156 Power of manager to adjust financial benefits to comply with portfolio investment entity rules The manager of a registered scheme to which section HM 48 of the Income Tax Act 2007 applies may adjust the financial benefits of scheme participants in the way required by that section.
Compare: 1960 No 99 ss 12A, 22 5 10 157 Limits on reversion of scheme property in certain schemes to non-scheme participant contributor (2) (1) No part of the scheme property of a KiwiSaver scheme or superannuation scheme may revert to a contributor who is not a scheme participant under the governing document without 15 the prior written consent of the FMA.
The FMA must not give consent to the reversion of any assets of the scheme to a person under this section unless satisfied that— (a) sufficient assets will remain to support the interests of 20 all of the scheme participants; and the reversion is fair and equitable to the scheme par- ticipants, taking into account the manner in which the scheme acquired those assets.
Compare: 1989 No 10 s 10; 2006 No 40 ss 129B, 130 (b) 25 Related party transactions 158 Definition of related party benefit (1) A related party benefit, in relation to a registered scheme, is a benefit— (a) that is either given out of scheme property or creates an 30 exposure to loss for scheme property; and that is given to, or received by, a related party of the scheme; but (b) 140 Financial Markets Conduct Bill Part 4 cl 159 (c) does not include fees or expenses that are paid or reim- bursed to the manager in accordance with this Act or the governing document of the scheme.
(2) A related party of the scheme is— (a) any of the following persons (a scheme-connected per- 5 son): (i) (ii) the manager of the scheme; and any investment manager, administration man- ager, or other person to whom the manager has contracted out some or all of its functions as a 10 manager; and for a restricted scheme, any contributor to the scheme who is not a scheme participant (other than the Crown); or (iii) an associated person of a scheme-connected person.
(b) Compare: Corporations Act 2001 ss 601LA–601LE (Aust) 15 159 General prohibition on transactions giving related party benefits (1) A manager of a registered scheme (and any investment man- ager, administration manager, or other person to whom the 20 manager has contracted out some or all of its functions as a manager) must not enter into a transaction that provides for a related party benefit to be given.
(2) However, subsection (1) does not apply to a transaction or series of transactions if the manager notifies the supervisor 25 of the transaction or transactions, including the related party benefits given under the transaction or transactions, and the key terms of the transaction or transactions and either— (a) the manager obtains the supervisor’s consent to the transaction or transactions; or section 160 applies to the transaction or transactions or all related party benefits to be given.
(b) (3) The supervisor must not consent to a transaction or transac- tions under this section unless— (a) either— (i) the supervisor considers that the transaction or transactions are in the best interests of the scheme participants; or 141 30 35 Part 4 cl 160 Financial Markets Conduct Bill (ii) the transaction is approved by, or contingent on approval by, a special resolution of the class of scheme participants affected, or potentially af- fected, by the transaction; and the supervisor certifies to that effect.
5 (b) (4) However, in the case of a restricted scheme, subsection (1) does not apply to a transaction or series of transactions if the manager certifies that— (a) (b) (c) the transaction or transactions are in the best interests of the scheme participants; or section 160 applies to the transaction or transactions or all related party benefits to be given; or the transaction is approved by, or contingent on ap- proval by, a special resolution of the class of scheme participants affected, or potentially affected, by the 15 transaction.
10 (5) The manager may not certify under subsection (4) unless the licensed independent trustee has consented to the certification.

(6) However, a failure to comply with this section does not affect the validity of any transaction (subject to any court order under 20 Part 7).
Compare: Corporations Act 2001 ss 601LA–601LE (Aust) 160 Certain related party benefits permitted This section applies to— 25 (a) Arm’s-length terms a benefit that is given on terms that— (i) would be reasonable in the circumstances if the parties were connected or related only by the transaction in question, each acting independ- ently, and each acting in its own best interests; 30 or are less favourable to the related party than the terms referred to in subparagraph (i): (ii) (b) Investments in other registered schemes an acquisition or a disposal of a managed investment 35 product in another registered scheme or a benefit or transaction in respect of a prescribed overseas scheme: 142 Financial Markets Conduct Bill Part 4 cl 162 (c) Certain registered bank investments investments in category 2 products issued by a regis- tered bank or products prescribed for the purposes of clause 20(c) of Schedule 1: Other prescribed benefits or transactions (d) a prescribed benefit or transaction.
Compare: Corporations Act 2001 ss 601LA–601LE (Aust) 5 161 Additional restrictions on related party transactions of (1) restricted schemes The manager of a restricted scheme must ensure that the re- 10 stricted scheme does not have more than 5% of the scheme property in investments related to or managed by a related party of the scheme (as defined in section 158) or a scheme participant.
(2) However, the following investments do not count for the pur- 15 pose of calculating the 5% limit: (a) (b) Compare: 2006 No 40 s 117A investments referred to in section 160(b) or (c); and other prescribed benefits or transactions.
Scheme participant transfer rules for KiwiSaver and superannuation schemes 20 162 Application of scheme participant transfer rules (1) Sections 163 to 166 apply to both of the following types of transfer (a transfer): (a) the transfer of a scheme participant from one Kiwi- 25 Saver scheme or superannuation scheme to another KiwiSaver scheme or superannuation scheme: the transfer of a scheme participant from one section of a KiwiSaver scheme or superannuation scheme to another section of the same scheme.
30 (2) In sections 163 to 166,— (a) a person proposed to be transferred is a proposed trans- feree: the scheme, or section of the scheme, from which the person is proposed to be transferred is the old scheme: 35 (b) (b) 143 5 10 15 20 Part 4 cl 163 Financial Markets Conduct Bill (3) (c) the scheme, or section of the scheme, into which the person is proposed to be transferred is the new scheme.

Sections 163 to 166 do not apply to transfers to which sub- part 3 of Part 2 of the KiwiSaver Act 2006 applies.
Compare: 1989 No 10 s 9B; 2006 No 40 ss 119B, 119D(6) 163 Methods of transfer of scheme participants to another scheme or another section of scheme (1) No scheme participant may be transferred from one registered scheme to another registered scheme, or to another section of the same scheme, except in accordance with this section.
(2) A scheme participant may be transferred, if authorised by a governing document,— (a) with the scheme participant’s written consent (which must be obtained in accordance with section 164, if that section applies); or in accordance with the FMA’s consent under section 165.
(3) However, the FMA may permit a transfer to occur under sub- section (2)(a) without the scheme participant’s consent if the FMA is satisfied that— (a) the manager of the old scheme has taken all reasonable steps to contact all of the relevant scheme participants, but has not been able to do so; and the proposed action is not unreasonable in relation to the best interests of any of those scheme participants who 25 have not been contacted.
(4) No scheme participant may be transferred from a KiwiSaver scheme into another scheme that is not a KiwiSaver scheme under this section.

Compare: 1989 No 10 ss 9B, 9BAA(1); 9BA, 2006 No 40 ss 119C, 119G(1), 30 119I 164 Transfer of substantial numbers of scheme participants with scheme participant consent This section applies to a transfer (whether at the same time or over an extended period) of all, or a substantial number, of the 35 scheme participants from an old scheme to a new scheme.
(1) 144 (b) (b) Financial Markets Conduct Bill Part 4 cl 165 (2) (3) The manager of the old scheme and the manager of the new scheme must each consult their own scheme’s supervisor (if any) about the proposed transfer and give notice of the pro- posed transfer in accordance with this section.
The notice must— (a) be given to the FMA and every scheme participant of the old scheme and the new scheme, other than scheme participants who, in the opinion of the FMA, are not likely to be affected by the proposed transfer; and set out— (i) (b) 5 10 the proposal and its implications for the proposed transferees; and the date of the proposed transfer; and the date on which the proposed transferees’ writ- ten consent must be received by the manager or 15 the trustees; and the fact that the notice has also been sent to the FMA; and (ii) (iii) (iv) (c) be given at least 1 month before the date on which, under the notice, the proposed transferees’ written con- 20 sent must be received by the manager or the trustees.
(4) Giving notice under this section does not derogate from the need to comply with any other requirement of the KiwiSaver Act 2006 (in relation to a KiwiSaver scheme).
Compare: 1989 No 10 s 9B; 2006 No 40 s 119D 25 165 Transfer with FMA consent (1) The FMA may consent to a transfer if the FMA is satisfied that— (a) the terms and conditions of the new scheme are no less favourable to the proposed transferees than the terms 30 and conditions of the old scheme; and the transfer is otherwise reasonable in all the circum- stances (including having regard to the value of the assets transferred from the old scheme to the new scheme); and the person applying for the transfer is the manager of the old or new scheme, a relevant employer, or another 35 (b) (c) 145 Part 4 cl 166 Financial Markets Conduct Bill (d) person who the FMA considers has an appropriate in- terest in the transfer; and the applicant has given notice to every proposed trans- feree that— (i) the applicant has applied for the FMA’s consent 5 to transfer the person without the person’s written consent; and the person may make submissions to the FMA about the transfer.
(ii) (2) (3) (4) The FMA must have regard to any submissions received by 10 proposed transferees before deciding whether or not to give its consent.

The FMA may give its consent subject to any terms and con- ditions that the FMA sets out in the written notice of consent.

The transfer must be carried out in accordance with those 15 terms and conditions.
Compare: 1989 No 10 s 9BAA; 2006 No 40 ss 119G, 119H 166 Transfers from KiwiSaver scheme (1) 20 25 This section applies to an old scheme if it was a KiwiSaver scheme.
The provider of the old scheme must give the following in- formation to the provider of the new scheme in respect of a scheme participant (A) who transfers under sections 163 to 165: (a) (b) A’s tax file number; and (c) A’s name, address, and date of birth; and the date on which A first became a member of a Kiwi- Saver scheme; and if A is an employee,— (i) (d) (ii) the name and address of each of A’s employers; 30 and the rate at which A intends each of those employ- ers to make deductions of contributions from his or her salary or wages; and (e) the name, address, and tax file number of both the 35 provider and the old scheme; and (2) 146 Financial Markets Conduct Bill Part 4 cl 168 (f) any other information that the Commissioner of Inland Revenue requires the provider of the old scheme to give to the provider of the new scheme.
(3) In this section, provider has the meaning set out in section 5 of the KiwiSaver Act 2006.
Compare: 2006 No 40 s 119F 5 Provisions as to deferred benefits for superannuation schemes 167 Deferred benefits (1) A scheme participant in respect of a superannuation scheme 10 who continues to be employed by an employer after the par- ticipant’s expected age or date of retirement (as defined in the governing document of the scheme) may elect to defer the re- ceipt of any benefit that the participant is eligible to receive under the scheme until the date on which the participant ceases 15 to be employed by that employer.
Subsection (1) applies despite anything to the contrary con- tained in the governing document of the scheme.

(2) (3) Nothing in subsection (1) or in the Human Rights Act 1993 (4) has the effect of requiring either an employer or a scheme par- 20 ticipant to continue to contribute, or to cease to contribute, to the scheme after the participant’s expected age or date of re- tirement, as defined in the governing document of the scheme.
If a scheme participant has the right, under subsection (1), to elect to defer receipt of any benefit that the participant is 25 eligible to receive under the scheme, the manager must inform the participant in writing of that right.

Compare: 1989 No 10 s 9C Change of manager 168 Application of sections 169 to 176 30 Sections 169 to 176 apply to— (a) the manager of a registered scheme (other than a re- stricted scheme); or each of the trustees of a restricted scheme.
(b) 147 Part 4 cl 169 Financial Markets Conduct Bill 169 Removal of manager of registered scheme (1) A manager of a registered scheme ceases to hold that office if removed— (a) by written direction of the supervisor after the super- visor certifies that it is in the best interests of scheme 5 participants that the manager be removed; or by a special resolution of the scheme participants; or (b) by the court under section 193; or (c) (d) otherwise in accordance with the governing document.
Subsection (1)(a) and (b) does not apply to a restricted 10 scheme.

If a manager ceases to hold office under subsection (1), the manager and any delegate of the manager must immediately desist from all activities relating to the registered scheme un- less the supervisor agrees to the contrary.

Compare: 1960 No 99 s 19 15 (2) (3) (2) (3) 170 Supervisor or FMA may make temporary appointment (1) This section applies if a registered scheme does not, for any reason, have a manager.
The supervisor or the FMA must appoint a person (the tem- 20 porary manager) to fill the vacancy in the manager’s office until a substitute appointment may be made under the govern- ing document.

That person must be,— (a) if the appointment is by the supervisor, a person who 25 meets the requirements in section 113(1)(c) and (e): if the appointment is by the FMA, a person whom the FMA considers appropriate (but who need not be a per- son who meets the requirements in section 113(1)(c) and (e)).
(b) 30 (4) However, the FMA may act under this section only if— (a) (b) it is satisfied that the supervisor has had a reasonable opportunity to act under this section but has not done so; or it is satisfied that it is necessary as a matter of urgency 35 for the FMA to do so and it is not reasonably practicable to wait for the supervisor to do so; or 148 Financial Markets Conduct Bill Part 4 cl 172 (5) the supervisor requests the FMA to act; or there is no supervisor.
(c) (d) If the FMA appoints a person who does not meet the require- ments of section 113(1)(c) and (e), that person does not contravene section 387, and the scheme does not fail to meet 5 those registration requirements, as a result of that appointment.

Compare: 1960 No 99 s 23 171 Term, powers, and duties of temporary manager (1) A temporary manager may hold the appointment until a sub- under the governing document; or otherwise under this Act.
stitute manager is appointed— (a) (b) The temporary manager has all of the powers and duties of the manager of the registered scheme that are conferred or im- posed by the governing document or by law.

10 15 (2) (3) However, the FMA may, in the prescribed manner, amend a governing document, in so far as it applies to an FMA ap- pointee, if— (a) (b) the supervisor (if any) consents; and the FMA is satisfied that the change will have no mater- 20 ial adverse effect on the interests of scheme participants.
(4) An amendment made under this section must be treated for all purposes as if it were made in accordance with the governing document.

Section 128 (lodging of changes to governing document) ap- 25 plies to an amendment to the governing document under this section.

(5) 172 FMA’s costs must be reimbursed from scheme (1) The FMA’s costs and expenses incurred in connection with the FMA appointee holding the appointment must be reimbursed 30 from the registered scheme.
(2) An amount payable under subsection (1) is recoverable by the FMA in any court of competent jurisdiction as a debt due to the FMA.
149 Part 4 cl 173 Financial Markets Conduct Bill 173 Supervisor or FMA must take reasonable steps to arrange (1) (2) for new appointment The supervisor of a registered scheme or the FMA (if there is no supervisor) must, in the prescribed manner (if any), take all reasonable steps to secure, in accordance with the governing 5 document, the appointment of a person as a permanent man- ager in place of the temporary manager.
The temporary manager may be appointed to continue to hold the office as a permanent manager, but in this case— (a) if the person was an FMA appointee, the person ceases 10 to be an FMA appointee; and (b) must meet the requirements in section 113(1)(c) and (e).
174 Former manager must hand over records and give 15 reasonable assistance If the person who holds an appointment as a manager of a registered scheme changes, the person who previously held the appointment (the former manager) must,— (a) as soon as is reasonably practicable, give the person that currently holds the appointment (the current manager) 20 all of the information or documents held or controlled by the former manager that are reasonably necessary to allow the current manager to hold the office; and give the current manager all reasonable assistance to facilitate the change.
25 (b) with the FMA’s written consent; or otherwise in the prescribed circumstances.

The former manager may withhold the information or docu- ments, or retain a copy of the information or documents,— (a) (b) If a temporary manager has been appointed to an office, for the 30 purposes of this section, former manager includes the person who held the office immediately before the temporary manager and current manager includes the person who held the office immediately after the temporary manager.
(1) (2) (3) 150 Financial Markets Conduct Bill Part 4 cl 177 175 Statutory novation of rights, obligations, and liabilities of (1) former manager If the manager of a registered scheme changes, the rights, obli- gations, and liabilities of the former manager in relation to the scheme become the rights, obligations, and liabilities of the 5 new manager.
(2) Despite subsection (1), the following rights, obligations, and liabilities remain rights, obligations, and liabilities of the for- mer manager: (a) any right of the former manager to be paid fees for the 10 performance of its functions, or to be indemnified for expenses it incurred, before it ceased to be the manager of the scheme; and any right, obligation, or liability that the former man- ager had as a scheme participant; and any liability for which the former manager could not have been indemnified out of the scheme property if it had remained the scheme’s manager.
15 (b) (c) (3) This section is subject to any order of the court under section 193.

20 176 Lodging of notice of changes to manager (1) Within 5 working days of a change to the manager of a regis- tered scheme, the new manager must ensure that notice of the change is lodged with the Registrar.

(2) A person who contravenes this section commits an offence 25 and is liable on summary conviction to a fine not exceeding $50,000.
The offence in this section is an infringement offence (see sub- part 5 of Part 7).
(3) Change of supervisor 30 177 Change of supervisor (1) The supervisor of a registered scheme ceases to hold that ap- pointment (subject to subsection (2)) if the supervisor— (a) is removed by the FMA if it is satisfied that the manager and the supervisor no longer meet the requirements in 35 section 113(1)(e) (registration requirements); or 151 Part 4 cl 178 Financial Markets Conduct Bill (b) (c) (d) is removed by the FMA under the Financial Markets Supervisors Act 2011; or is removed by a special resolution of the scheme par- ticipants; or is removed or resigns in accordance with the governing 5 document.
(2) No manager of a registered scheme may remove a supervisor under subsection (1)(d) without the FMA’s consent (even if permitted to do so by the governing document).

Compare: 2006 No 40 s 116E(2) 10 178 Lodging of notice of change of supervisor (1) Within 5 working days of a change of supervisor of a registered scheme, the manager must ensure that notice of the change is lodged with the Registrar.
(2) A person who contravenes this section commits an offence 15 and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
(3) Change of independent trustee 179 Change of independent trustee (1) A trustee who is a licensed independent trustee ceases to hold that appointment (subject to subsection (2)) if— (a) the trustees’s licence expires or is cancelled under Part 6; or the trustee is removed by the FMA under the Financial Markets Supervisors Act 2011; or the trustee is removed or resigns in accordance with the trust deed.
(b) (c) 20 25 (2) No licensed independent trustee may be removed or resign in 30 accordance with the trust deed without the FMA’s consent.
152 Financial Markets Conduct Bill Part 4 cl 181 Cancellation of registration 180 Cancellation of registration (1) The FMA may direct that the registration of a registered scheme be cancelled— (a) (b) (c) on giving 20 working days’ notice to the manager of 5 the scheme, if satisfied on reasonable grounds that the scheme does not meet the registration requirements under section 113; or on giving 20 working days’ notice to the manager of the scheme, if the FMA has reasonable cause to believe that 10 the scheme has no scheme participants; or on the written request of the manager of the scheme (subject to subsection (3)), if the supervisor certifies, or the trustees of a restricted scheme certify, that— (i) the removal has been approved by a special reso- 15 lution of the scheme participants; or there is no material adverse effect on scheme par- ticipants from the removal; or (ii) (2) (3) (d) if the scheme has been wound up or dissolved or has otherwise ceased to exist.
20 The manager of a registered scheme must, as soon as practic- able after being notified of a direction under this section, notify the scheme participants in writing of the direction.

The FMA may, instead of removing a scheme’s registration on the request of the manager under this section, exercise its rights 25 to apply for an order winding up the scheme under section 195 (power to order winding up).
Compare: 1989 No 10 s 19; 2006 No 40 s 168 181 Registrar must remove scheme from register on cancellation of registration (1) On the cancellation of the registration of a scheme under sec- tion 180, the Registrar must remove it from the register of managed investment schemes.

The cancellation must be treated as taking effect on the date on which the scheme is removed from the register.
(2) 30 35 153 Part 4 cl 182 Financial Markets Conduct Bill (3) The Registrar must give notice of the cancellation of registra- tion, as soon as practicable after the registration of the scheme is cancelled, to— (a) (b) the manager of the scheme; and the Commissioner of Inland Revenue (in the case of a 5 KiwiSaver scheme).
Compare: 2006 No 40 s 170 Subpart 4—Intervention in debt securities or registered schemes Provisions assisting supervisor or FMA to intervene 10 182 Duty of auditor to report to supervisor (1) This section applies to the auditor of an issuer of debt securities under a regulated offer or a registered scheme.
If the auditor provides the issuer, any of the issuer’s members 15 or shareholders, or any of the holders of the debt securities or managed investment products with any report, financial state- ment, certificate, or other document required by an Act or a trust deed relating to the financial products or scheme, the auditor must, as soon as practicable, send a copy to the super- 20 visor of the debt securities or registered scheme.
If, in the performance of the auditor’s duties, the auditor be- comes aware of a matter that, in the auditor’s opinion, is rele- vant to the exercise or performance of the powers or duties of the supervisor of the debt securities or registered scheme, the 25 auditor must, within 7 working days of becoming aware of the matter, send— (a) (b) The auditor must, from time to time, at the request of the super- 30 visor, provide the supervisor with any information relating to the issuer or registered scheme— (a) (b) (c) that the supervisor requests; and that is within the auditor’s knowledge; and that is, in the auditor’s opinion, relevant to the exercise 35 or performance of the powers or duties of the supervisor.
a written report on the matter to the issuer; and a copy of the report to the supervisor.

(2) (3) (4) 154 Financial Markets Conduct Bill Part 4 cl 183 (5) (6) Section 199 (protected disclosure) applies to a disclosure in good faith under this section.

This section does not limit the duties or liability of an issuer or a supervisor.
Compare: 1978 No 103 s 50 183 Duty of auditor, investment manager, administration (1) manager, custodian, or actuary to report serious problems This section applies to an auditor of an issuer and to an in- vestment manager, an administration manager, a custodian, an auditor, or an actuary of a registered scheme.
5 10 (2) A person to whom this section applies must take the steps set out in section 184 if the person has reasonable grounds to believe that any of the following has arisen in relation to a relevant financial product (a serious problem): (a) the issuer of the relevant financial product has contra- 15 vened, may have contravened, or is likely to contravene an issuer obligation in a material respect; or the issuer or scheme is, or it is likely that the issuer or scheme will become, insolvent; or the financial position of the scheme or issuer or the se- 20 curity of benefits or the management of the scheme or issuer is otherwise inadequate; or the manager of the scheme has contravened, may have contravened, or is likely to contravene any of the man- ager’s market services licensee obligations in a material 25 respect; or the supervisor of the scheme has contravened, may have contravened, or is likely to contravene any of the super- visor’s licensee obligations (as defined in section 4 of the Financial Markets Supervisors Act 2011) in a ma- 30 terial respect; or the custodian of the scheme has contravened, may have contravened, or is likely to contravene any of the custo- dian’s obligations in a material respect.
(b) (c) (d) (e) (f) Compare: 2006 No 40 s 191 35 155 Part 4 cl 184 Financial Markets Conduct Bill 184 What person must do if duty to report serious problem (1) (b) applies If section 183 applies, the person to whom that section ap- plies must, as soon as practicable,— (a) report a serious problem to the supervisor or, if subsec- 5 tion (2) applies, to the FMA; and disclose to the supervisor or the FMA (as applicable under paragraph (a)) all information relevant to the serious problem that is in the possession or control of the relevant person and was obtained in the course of, 10 or in connection with, the performance of functions of that relevant person.
(2) A serious problem must be reported to the FMA instead of the supervisor if— (a) (b) (c) there is no supervisor; or the serious problem concerns a contravention or likely contravention of an obligation by the supervisor; or the contravention relates to the custodian and the custo- dian is a related party of the supervisor.

15 (3) (4) Section 199 (protected disclosure) applies to a disclosure in 20 good faith under this section.
To avoid doubt, section 183 and this section do not require a relevant person to carry out functions additional to those func- tions that the person would ordinarily carry out in the course of holding the person’s office (other than as expressly required 25 by subsection (1)).
Compare: 2006 No 40 s 191(2), (4) 185 Protections extend to volunteers of supporting information for other protected disclosures This section applies to an employee of the person in respect of 30 whom any other protected disclosure is made under this Act (A).
(1) (2) A disclosure of information under this section qualifies for protection under this subpart if the employee— (a) provides information, in support of another protected 35 disclosure made by another person, to— (i) the supervisor or the FMA (whichever receives the other protected disclosure); or 156 Financial Markets Conduct Bill Part 4 cl 187 (ii) the person who made the disclosure; and (b) makes the disclosure in good faith; and (c) wishes to provide the supporting information so that a serious problem can be investigated.
(3) However, an employee does not volunteer supporting infor- 5 mation if the employee provides the supporting information only after being— (a) required to do so under any enactment, rule of law, or agreement for the purposes of the investigation; or approached during the course of the investigation by, or 10 on behalf of, the FMA or any other person investigating the matter.

(b) (4) Section 199 (protected disclosure) applies to a disclosure that qualifies for protection under subsection (2).
186 FMA may require supervisor to attest as to issuer’s 15 (1) (2) compliance with issuer obligations The FMA may require a supervisor of a debt security or regis- tered scheme to attest to the FMA, at a time and in a manner specified by the FMA, as to whether the supervisor is satisfied that the issuer has not contravened an issuer obligation in a 20 material respect.
If the FMA requires a supervisor to attest to the FMA under this section, the supervisor must either— provide that attestation; or (a) if unable to attest to the FMA as required, report the rea- 25 (b) son, including the details of any contravention or pos- sible contravention and, if applicable, the report under section 187.

(3) Section 199 (protected disclosure) applies to a report under this section.
Compare: 2011 No 10 s 45 30 187 Duty of supervisor to report contravention or possible (1) contravention of issuer obligations to FMA If a supervisor of a debt security or registered scheme has rea- sonable grounds to believe that an issuer has contravened, may 35 have contravened, or is likely to contravene an issuer obliga- 157 Part 4 cl 188 Financial Markets Conduct Bill tion in a material respect, the supervisor must, as soon as prac- ticable,— (a) report the contravention or possible contravention to the FMA; and advise the FMA of the steps (if any) that the supervisor 5 intends to take in respect of the contravention or pos- sible contravention and the date by which the steps are to be taken.
(b) (2) Section 199 (protected disclosure) applies to a report under this section.
Compare: 2011 No 10 s 46 10 188 Duty of supervisor to report serious financial problems to (1) (2) FMA This section applies if a supervisor of a debt security or regis- tered scheme becomes aware, in the course of or in connection 15 with the performance of its functions as supervisor, of infor- mation on the basis of which it could reasonably form the opin- ion that— (a) the issuer is, or it is likely that the issuer will become, insolvent; or in the case of a registered scheme, the scheme is, or it is likely that the scheme will become, insolvent.
(b) 20 The supervisor must, as soon as practicable,— (a) disclose to the FMA all information relevant to that mat- ter that is in the possession or under the control of the 25 supervisor and that was obtained in the course of, or in connection with, the performance of its functions as supervisor; and advise the FMA of the steps (if any) that the supervisor intends to take in respect of that matter and the date by 30 which the steps are to be taken.
(b) (3) Section 199 (protected disclosure) applies to a report under this section.
Compare: 2011 No 10 s 47 189 FMA’s powers of direction (1) The FMA may exercise a power under subsection (2) if it is satisfied that— 35 158 Financial Markets Conduct Bill Part 4 cl 190 (a) (b) there is a significant risk that the interests of holders of a debt security or managed investment product will be materially prejudiced; and either— (i) the supervisor of the debt securities or registered 5 scheme is aware of that risk and has had a rea- sonable opportunity to take action to eliminate or reduce the risk but has not done so; or action is urgently required to eliminate or reduce the risk and it is not reasonably practicable to 10 wait for the supervisor to do so; or there is no supervisor.
(ii) (iii) 15 20 (2) (3) The FMA may, by written notice to the supervisor and other- wise in the prescribed manner, give a direction to the super- visor.

If there is no supervisor, the FMA may, by written notice to the issuer and otherwise in the prescribed manner, give a direction to the issuer.
Compare: 2011 No 10 s 49(1), (2) 190 FMA’s directions to supervisor (or issuer) (1) If the notice under section 189 gives a direction to the super- visor (or, if there is no supervisor, the issuer), the notice must specify— (a) the step or steps that the supervisor (or issuer) must take in relation to the issuer, the registered scheme (if any), 25 or the financial products; and the date by which each step will be taken.
(2) (b) The supervisor or the issuer (as the case may be) must comply with the direction (see subpart 3 of Part 7, which provides for civil remedies for a contravention of this provision).

(3) A supervisor or issuer (as the case may be) who refuses or fails, without reasonable excuse, to comply with the direction commits an offence and is liable on summary conviction to a fine not exceeding $300,000.
Compare: 2011 No 10 s 49(3)–(5) 30 35 159 Part 4 cl 191 Financial Markets Conduct Bill Powers to obtain court orders to intervene 191 Power of supervisor or FMA to apply for order to remedy problems (1) A supervisor of a debt security or a registered scheme, or the FMA, may apply for an order under section 192 if it is sat- 5 isfied that— (a) 10 the issuer and any guarantor of the financial products are unlikely to be able to pay all money owing in respect of the financial products when it becomes due; or the issuer is insolvent; or in the case of a registered scheme, the scheme is insol- vent; or the financial position of the scheme or issuer or the se- curity of benefits or the management of the scheme or issuer is otherwise inadequate; or in the case of a registered scheme, the scheme does not meet the registration requirements, or the requirements for registration as a particular type of scheme, under sections 113 to 119; or there is a significant risk that the interests of product 20 holders will be materially prejudiced for any other rea- son; or the provisions of a governing document are no longer adequate to give proper protection to product holders.
15 (b) (c) (d) (e) (f) (g) (2) However, the FMA may apply for the order only if it is satis- 25 fied that— (a) (b) the supervisor has had a reasonable opportunity to apply for the order but has not done so; or it is necessary as a matter of urgency for the FMA to do so and it is not reasonably practicable to wait for the 30 supervisor to do so; or there is no supervisor.
(c) Compare: 1960 No 99 s 19A; 1978 No 103 s 49; 2006 No 40 s 116K(1), (2); 2011 No 10 s 50(1)–(3) 192 Court orders to remedy problems (1) The court may, on the application by a supervisor or the FMA and after giving the issuer and any other person as the court 35 160 Financial Markets Conduct Bill Part 4 cl 192 thinks fit the opportunity to be heard, make 1 or more of the orders listed in subsection (2).
The orders may— (a) (b) amend the provisions of the governing document: impose restrictions on the activities of the issuer (in- 5 cluding restrictions on advertising) that the court thinks are necessary to protect the interests of product holders: direct that no offers, issues, sales, or transfers of debt securities or managed investment products specified in the order be made while the order is in force: direct that an issuer must not accept further contribu- tions or deposits in respect of debt securities or man- aged investment products specified in the order while the order is in force: direct the issuer or the supervisor to convene a meeting 15 of product holders for the purpose of— (i) having placed before the product holders by the supervisor the information or proposal that the court, the supervisor, or the FMA thinks neces- sary or appropriate relating to their interests; and 20 obtaining the opinions or directions of product holders: (ii) 10 (c) (d) (e) (f) (g) (h) give directions in relation to the conduct of any meeting convened in accordance with paragraph (e): stay any civil actions or civil proceedings before the 25 court by or against the supervisor, the issuer, or any guarantor of the financial products: restrain the payment of money by the custodian, the is- suer, or any guarantor of the financial products to prod- uct holders or a class of product holders or restrain the 30 transfer of scheme property by the custodian: appoint a receiver or manager of the property that con- stitutes the security (if any) for the financial products (with any powers that the court orders): give any other directions that the court considers ne- 35 cessary to protect the interests of product holders, any guarantor of the financial products, or the public.
The court may vary or cancel an order made under this section.

(i) (j) 161 (2) (3) Part 4 cl 193 Financial Markets Conduct Bill (4) In exercising its powers under this section, the court must have regard to the interests of all creditors of the issuer (in the case of a debt security) and all creditors in respect of the registered scheme (in the case of a managed investment product).
Compare: 1960 No 99 s 19A; 1978 No 103 s 49; 2006 No 40 s 116K(3)–(6); 5 2011 No 10 s 50(4)–(7) 193 Power of court to appoint new manager, provide for manager powers, and deal with changes of managers The court may, on the application of the supervisor, the FMA, or a scheme participant, make an order to— (a) (1) 10 appoint a new manager of a registered scheme (with any powers that the court orders) if there is no manager or in substitution for an existing manager: confer an additional power on the manager of a regis- tered scheme (either generally or specifically) to facili- 15 tate a transaction or type of transaction that the court considers to be in the interests of the scheme partici- pants, and provide for the exercise of that additional power: direct that section 175 not apply in whole or in part 20 and also, if an agreement has been entered into between a manager of a registered scheme that has been removed and any other person,— (i) vary the agreement or any collateral agreement as specified in the order and, if the court thinks 25 fit, declare the agreement to have had effect as so varied on and after a date before the order was made, as specified in the order; or cancel the agreement and, if the court thinks fit, declare the cancellation to have had effect on and 30 after a date before the order was made, as speci- fied in the order: (ii) amend the governing document to provide for a new or temporary appointment of a manager of a registered scheme (whether the appointment is by a court order or 35 under the governing document or this Act) or otherwise in connection with another order made under this sec- tion.
(b) (c) (d) 162 Financial Markets Conduct Bill Part 4 cl 195 (2) The court may under this section (without limiting subsec- tion (1)) appoint a new manager in substitution for a manager who— (a) has been held by the court to have contravened any is- suer obligation; or is insolvent.

(b) (3) A manager appointed by the court under this section has all of the powers and duties of the manager of the registered scheme that are conferred or imposed by the governing document or by law.
Compare: 1960 No 99 s 22 5 10 194 Power of court to direct supervisor The court may, on the application of the supervisor, the FMA, or a product holder, make an order directing the supervisor (or, if there is no supervisor, the FMA) not to comply with 15 a special resolution of product holders if the court is satisfied that compliance would be objectionable (for example, because it would be oppressive to the minority).
195 Court power to order winding up of scheme (1) The court may, on the application of the FMA or a supervisor, 20 direct that a registered scheme must be wound up if it is satis- fied that— (a) (b) the manager or the scheme is insolvent; or the manager has persistently or seriously failed to com- ply with this Act or any other financial markets legisla- 25 tion; or no permanent manager is appointed under the govern- ing document or this Act; or no supervisor is appointed under the governing docu- ment or the Financial Markets Supervisors Act 2011 (if 30 required under this Part); or the scheme does not meet the registration requirements in sections 113 to 119; or it is just and equitable that the scheme be wound up.
(c) (d) (e) (f) (2) However, the FMA may apply for an order to wind up a 35 scheme only if it is satisfied that— 163 Part 4 cl 196 Financial Markets Conduct Bill (3) 196 (1) (a) (b) the supervisor has had a reasonable opportunity to do so but has not done so; or it is necessary as a matter of urgency for the FMA to do so rather than wait for the supervisor to do so; or there is no supervisor.
(c) The court may give any other directions that it thinks fit for the purpose of facilitating the winding up (and, if there is any con- flict between those directions and the provisions of the govern- ing document, those directions prevail).
5 10 Initial steps in winding up of registered scheme If a registered scheme is to be wound up, the supervisor or (in the case of a restricted scheme) the trustees must, within 10 working days after a winding-up resolution or an order by the court that the scheme be wound up is made,— (a) (b) give a copy of any order or resolution to the FMA; and 15 in the case of a KiwiSaver scheme or a complying super- annuation fund,— (i) give a copy of any order or resolution to the Com- missioner of Inland Revenue; and give notice to the Commissioner of Inland Rev- 20 enue of the name, tax file number, and address of each member of the registered scheme.
(ii) (2) See sections 50 to 52 of the KiwiSaver Act 2006 (which set out the effect of notice to the Commissioner of Inland Revenue in relation to members of a KiwiSaver scheme) and subpart 3 of 25 Part 2 of the KiwiSaver Act 2006 (which relates to the transfer of members’ interests to another KiwiSaver scheme).

(3) A person who contravenes subsection (1) commits an of- fence and is liable on summary conviction to a fine not ex- ceeding $50,000.
The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: 2006 No 40 s 173 (4) 30 197 Winding up report (1) The person who was the supervisor of the relevant registered 35 scheme or, in the case of a restricted scheme, the persons who 164 Financial Markets Conduct Bill Part 4 cl 198 were the trustees immediately before the scheme was wound up— (a) must, within 4 months of the date on which the wind- ing up takes effect, ensure that final financial statements of the scheme, showing the financial position of the 5 scheme as at the date on which the winding up takes ef- fect, are prepared in accordance with generally accepted accounting practice and audited; and (b) must, within 20 working days after the final financial statements have been audited, ensure that— (i) 10 a copy of those financial statements is sent to the FMA and to every person who was a scheme participant immediately before it was wound up; and the FMA and the scheme participants are advised 15 in writing as to the manner in which the remain- ing assets (if any) of the scheme are to be dis- tributed; and (ii) (c) must inform the FMA of the date on which the distribu- tion of the assets is completed.
20 (2) The FMA may, by giving notice to the relevant person, extend the time period within which a person must comply with any of the requirements set out in this section.

(3) A person who contravenes this section commits an offence (4) and is liable on summary conviction to a fine not exceeding 25 $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: 1989 No 10 s 21(1), (1A); 2006 No 40 ss 174, 175 Miscellaneous 198 Offence of false or misleading statements (1) Every person commits an offence who, in relation to a docu- ment or information required to be supplied to a supervisor or, in the absence of a supervisor, to the FMA by or under this Act,— 30 35 165 Part 4 cl 199 Financial Markets Conduct Bill (a) makes, or authorises the making of, a statement in it that is false or misleading in a material particular knowing it to be false or misleading; or omits, or authorises the omission from it of, any matter knowing that the omission makes the document false or 5 misleading in a material particular.
(b) (2) Every person who commits an offence under subsection (1) is liable on conviction on indictment,— (a) in the case of an individual, to imprisonment for a term not exceeding 3 years or a fine not exceeding $200,000, 10 or both; and in any other case, to a fine not exceeding $600,000.
(b) 199 Protection for relevant person in respect of disclosure under this subpart (1) No civil, criminal, or disciplinary proceedings may be brought 15 against a relevant person by reason of the person having made a protected disclosure.

(2) No person may terminate the appointment of a relevant per- son by reason of the relevant person having made a protected disclosure.
(3) No tribunal, body, or authority that has jurisdiction in respect of the professional conduct of a relevant person may make an order against, or do any act in relation to, the relevant person by reason of the relevant person having made a protected dis- closure.

In this section, protected disclosure means a disclosure of information to which this section applies under this subpart.
Compare: 1978 No 103 s 50C; 2006 No 40 s 192; 2011 No 10 s 48 (4) Subpart 5—Registers that must be kept by issuers of all regulated products Issuers must keep registers of regulated products Every issuer of regulated products must ensure that there is kept, in the manner specified in section 201,— (a) a register of those regulated products and of all financial products that are of the same class as those regulated 35 products of which it is the issuer; and 20 25 30 200 (1) 166 Financial Markets Conduct Bill Part 4 cl 202 (b) a register of other financial products of which it is the issuer that is required to be kept by the regulations.
(2) However, subsection (1) does not apply— (a) to derivatives (unless those derivatives are of a pre- scribed type); or to prescribed financial products; or otherwise in the prescribed circumstances.

(b) (c) If this section does not apply to derivatives of a particular type, the issuer must comply with the requirements prescribed for the purposes of this subsection (if any).
(3) (4) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).

Compare: 1978 No 103 s 51(1) (5) 201 Manner of keeping registers (1) A register kept under this subpart must be kept in New Zealand.

(2) A register kept under this subpart may be— an electronic register; or kept in any other reasonable manner that the issuer thinks fit.
(a) (b) 5 10 15 20 202 Contents of registers (1) Every issuer of regulated products must ensure that every 25 register kept by, or on behalf of, the issuer under this subpart contains, in respect of every financial product entered in the register,— (a) (b) the name and address of the holder; and the date on which the product was issued or transferred 30 to the holder, as the case may be; and the nature of the product; and the amount of the product (if any); and the due date of the product (if any); and all other prescribed particulars (if any).
(c) (d) (e) (f) 35 167 Part 4 cl 203 Financial Markets Conduct Bill (2) No notice of any trust, expressed, implied, or constructive, may be entered on a register kept under this subpart.

Every register kept under this subpart is prima facie evidence of the matters required by this Act to be entered in it.

(3) (4) A person who contravenes this section commits an offence 5 (5) and is liable on summary conviction to a fine not exceeding $50,000.
The offence in this section is an infringement offence (see sub- part 5 of Part 7).

Compare: 1978 No 103 s 51(2)–(5) 203 Audit of registers (1) Every issuer of regulated products must ensure that every register kept by, or on behalf of, the issuer under this subpart is audited by a qualified auditor annually within 5 months after the balance date of the issuer.

In this section, balance date has the same meaning as in sec- tion 7 of the Financial Reporting Act 1993.
(2) (3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: 1978 No 103 s 51(6) (4) 204 Auditor must advise if auditor considers that subpart is not being complied with If the auditor referred to in section 203 considers at any time that this subpart is not being complied with, the auditor must, as soon as practicable,— (a) (b) advise the issuer and the FMA; and advise,— (i) in the case of equity securities, the security hold- ers at their next meeting if the non-compliance is material: in the case of debt securities or managed invest- ment products, the supervisor.
(ii) Compare: 1978 No 103 s 51(8) 168 10 15 20 25 30 35 Financial Markets Conduct Bill Part 4 cl 206 (2) 205 (1) Issuer must notify Registrar of registers Every issuer of regulated products must send a notice to the Registrar of the place where its registers under this subpart are kept and of any change in that place.

The notice must be sent within 10 working days of the register 5 being established or of the change in place (as the case may be).
This section does not apply to an issuer that is a company if the registers of the company are kept at its registered office.

(4) A person who contravenes this section commits an offence 10 and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: 1978 No 103 s 51(9), (10) (3) (5) 15 206 Public inspection of register (1) (2) Every issuer of regulated products must ensure that every register kept by, or on behalf of, the issuer under this subpart is available for inspection in the manner referred to in section 207.

Subsection (1) does not apply— (a) to a register of managed investment products in respect of a superannuation scheme or KiwiSaver scheme: to a register of derivatives: in the prescribed circumstances.
(b) (c) 20 25 (3) However,— (a) (b) a register of managed investment products in respect of a superannuation scheme or KiwiSaver scheme must be available for inspection in the manner referred to in section 207 by the supervisor if the supervisor serves 30 on the issuer written notice of intention to inspect: the part of a register of derivatives that concerns deriva- tives entered into by a particular person must be avail- able for inspection in the manner referred to in section 207 by the person if the person serves written notice on 35 the issuer of intention to inspect.
169 Part 4 cl 207 Financial Markets Conduct Bill (4) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: 1978 No 103 s 52 (5) 5 207 Manner of inspection For the purposes of section 206, a register kept under this subpart must— (a) be available for inspection, by a person who serves on 10 the issuer written notice of intention to inspect, at the place at which the register is kept between the hours of 9 am and 5 pm on each working day during the inspec- tion period; and otherwise be available for inspection in the prescribed 15 manner (if any).
Compare: 1993 No 105 s 217 (b) 208 Copies of documents (1) A person may require a copy of, or an extract from, a register that is available for inspection by the person under section 20 206 to be sent to the person— (a) within 5 working days after the person has made a writ- ten request for the copy or extract to the issuer; and if the person has paid the prescribed fee (if any).

(b) The issuer must comply with the request (subject to section 25 209).
(2) (3) A person who contravenes subsection (2) commits an of- fence and is liable on summary conviction to a fine not ex- ceeding $50,000.

The offence in this section is an infringement offence (see sub- 30 part 5 of Part 7).
Compare: 1993 No 105 s 218 (4) 170 Financial Markets Conduct Bill Part 4 cl 210 209 Reasons for request must be given and FMA may authorise non-compliance (1) A person who makes a request under section 208(1) must in- clude in the request a statement of the person’s reasons for the request (including the intended use of the copy of, or extract 5 from, the register), and the issuer may, if it thinks fit, provide a copy of that statement to the FMA.
If the issuer provides a copy of the statement to the FMA be- fore the expiry of the 5-working-day period referred to in sec- tion 208(1)(a),— (a) (2) 10 the period within which the request may be complied with is 10 working days after the person made the re- quest (rather than 5 working days); and the issuer does not have to comply with the request at all if the FMA, within that 10-working-day period, gives 15 written notice to the issuer that it is not required to com- ply.
(b) 210 Restriction on use of information in registers (1) A person must not— (a) (b) use information about a person obtained from a register 20 kept under this subpart to contact or send material to that person; or disclose information of that kind knowing that the infor- mation is likely to be used to contact or send material to the person.

25 Example An example of using information to send material to a person is putting a person’s name and address on a mailing list for adver- tising material.
(2) Subsection (1) does not apply if the use or disclosure of the 30 information is— (a) relevant to the holding of the interests recorded in the register or the exercise of the rights attaching to those interests; or approved by the issuer that keeps the register.
(b) 35 (3) A person must not— 171 Part 4 cl 211 Financial Markets Conduct Bill 211 (1) (2) (a) (b) use information obtained from a register kept under this subpart for any prescribed purpose; or disclose information of that kind knowing that the in- formation is likely to be used for any such purpose.
Compare: Corporations Act 2001 s 177 (Aust) Issuer to send confirmation of financial products Every issuer of a regulated product must send to the product holder either the product or a confirmation document within the specified period after— (a) (b) the issue of the product; or the receipt by or on behalf of the issuer of a duly effected transfer of the product.
5 10 In this section,— confirmation document means a document that properly de- scribes the nature, terms, and conditions of the financial prod- 15 uct and the name of the product holder specified period means— (a) (b) the period of 1 month; or if the regulations have prescribed a different period to apply in particular circumstances, that period.

(3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.
The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: 1978 No 103 s 54(1), (4) (4) 212 Requirement for confirmation document does not apply in certain circumstances Section 211 does not apply— (a) in respect of any of the following: (i) financial products that are approved for transfer under, or in accordance with the rules of, a system that does not require a certificate for the transfer of the products: (1) 172 20 25 30 Financial Markets Conduct Bill Part 4 cl 214 (ii) (iii) (iv) debt securities or managed investment products of a kind that are continuously offered by a con- tinuous issuer for issue: equity securities or debt securities issued by a co-operative company to persons who are, or im- 5 mediately after issue will be, transacting share- holders of the co-operative company: equity securities issued by a building society or an industrial and provident society; or (2) otherwise in the prescribed circumstances.
(b) In this section, system means the following: (a) (b) a system approved under section 376: a designated settlement system (as defined in section 156M(1) of the Reserve Bank of New Zealand Act 1989).

10 15 Compare: 1978 No 103 s 54(3), (4) 213 Certain provisions prevail over Companies Act 1993 If a provision of sections 206 to 212 is inconsistent with a provision in the Companies Act 1993, the provision of sec- tions 206 to 212 prevails.
20 Subpart 6—Accounting records, copies of documents, and audit of financial statements Accounting records 214 (1) Issuer must keep proper accounting records Every issuer of regulated products must ensure that there are 25 kept at all times accounting records that— (a) correctly record and explain the transactions,— (i) in the case of an issuer of equity securities, debt securities, or derivatives, of the issuer; and in the case of an issuer of managed investment 30 products, of the issuer and of the registered scheme; and (ii) (b) will at any time enable the financial position of the is- suer and of any such scheme to be determined with rea- sonable accuracy; and 35 173 Part 4 cl 215 Financial Markets Conduct Bill (c) will enable the issuer to ensure that the financial state- ments of the issuer and of any such scheme comply with the Financial Reporting Act 1993 and any prescribed re- quirements; and (d) will enable the financial statements of the issuer and of 5 any such scheme to be readily and properly audited.
(2) In this subpart, financial statements means the financial state- ments and any group financial statements that are required to be prepared for the purposes of the Financial Reporting Act 1993, this Act, or the regulations.

Compare: 1978 No 103 s 53 215 Place where accounting records to be kept (1) Accounting records required to be kept by this subpart must (2) be kept— at the registered office of the issuer (if any); or (a) (b) at another place that the directors of the issuer think fit.
The accounting records may be kept at a place outside New Zealand only if there are sent to, and kept at a place in, New Zealand documents in respect of the business dealt with in those accounting records that— (a) disclose with reasonable accuracy the financial position of the business at intervals not exceeding 6 months; and (b) will enable the preparation in accordance with the Fi- 10 15 20 nancial Reporting Act 1993 of— (i) the financial statements of the issuer and any 25 registered scheme referred to in section 214; and any other document annexed to any of those statements that gives information that is required by any enactment.
30 (ii) Compare: 1978 No 103 s 53A 216 Accounting records to be in English (1) Accounting records required to be kept by this subpart and the documents in respect of the business dealt with in those accounting records referred to in section 215 must be kept— 35 (a) in written form and in English; or 174 Financial Markets Conduct Bill Part 4 cl 218 (b) in a form or manner in which they are easily accessible and convertible into written form in English.
(2) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: 1978 No 103 s 53B (3) 5 217 Period for which accounting records to be kept (1) Accounting records kept under this subpart, or copies of them, 10 must be retained by the issuer for a period of at least 7 years after the later of— (a) (b) the date the records are made; and the date of completion of the transaction to which the records relate.

15 (2) Nothing in this section limits any other requirement under an enactment to keep accounting records for a particular time.
Compare: 1978 No 103 s 53C 218 (1) Inspection of accounting records Every issuer must make the accounting records required to 20 be kept under this subpart and the documents in respect of the business dealt with in those accounting records referred to in section 215 available, in written form in English at all reasonable times for inspection without charge, to— (a) (b) the directors of the issuer; and the supervisor in respect of the financial products (if any); and any other persons authorised or permitted to inspect the accounting records of the issuer or scheme.
(c) 25 (2) A person who contravenes this section commits an offence 30 and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: 1978 No 103 s 53D (3) 35 175 Part 4 cl 219 Financial Markets Conduct Bill Copies of documents to be retained 219 Copies of documents must be retained for 7 years (1) If this Act or the regulations provide for a certificate, notice, consent, confirmation, or other document to be given, made, or provided in respect of a regulated offer or a registered scheme, 5 the offeror or manager of the scheme must— (a) keep a copy of the document for a period of at least 7 years after the date on which the document came into the possession of the offeror or manager; and comply with the prescribed requirements relating to 10 where the copy is kept, inspection of the copy, and making copies of the document available.
(b) (2) Subsection (1) applies only if the document is given, made, or provided by or to the offeror or manager.

(3) A person who contravenes this section commits an offence 15 and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
(4) Audit requirement 20 220 Financial statements to be audited (1) Every issuer of regulated products that are equity securities, debt securities, or derivatives must ensure that its financial statements are audited by a qualified auditor.

Every issuer of regulated products that are managed invest- 25 ment products must ensure that its financial statements and the financial statements for the scheme to which the products re- late are audited by a qualified auditor.
This section applies only to financial statements prepared for the purposes of the Financial Reporting Act 1993.
Compare: 1978 No 103 s 53E 30 (2) (3) 221 Meaning of qualified auditor (1) For the purposes of this Act, qualified auditor means— (a) (b) a licensed auditor; or a registered audit firm; or 35 176 Financial Markets Conduct Bill Part 4 cl 223 (2) (3) (c) in the case of an issuer that is a public entity under the Public Audit Act 2001, the Auditor-General or any other person who may act as the auditor under that Act.
In this section, licensed auditor and registered audit firm have the same meanings as in section 6(1) of the Auditor Regu- 5 lation Act 2011.

The appointment of a registered audit firm by the firm name to be the qualified auditor for the purposes of this Act is deemed to be the appointment of all the partners in the firm, from time to time, who are licensed auditors.
10 (4) None of the following persons is qualified for appointment as the qualified auditor of an issuer of financial products: (a) the issuer, or a director, an officer, or an employee of the issuer: a person who is a partner, or in the employment, of a 15 person specified in paragraph (a): a body corporate.
(b) (c) (5) A person is not qualified for appointment as the qualified audi- tor of an issuer of financial products if the person is, by virtue of subsection (4), disqualified for appointment as auditor of 20 a person that is the issuer’s subsidiary or holding company or a subsidiary of the issuer’s holding company, or would be so disqualified if that person were a company.
Compare: 1978 No 103 s 2C Miscellaneous 222 Application of other Acts not affected Nothing in this subpart limits the Companies Act 1993, the Financial Reporting Act 1993, or any other enactment.

Compare: 1978 No 103 s 53F Subpart 7—Civil liability for certain contraventions of this Part 223 Part 4 governance provisions (1) All of the provisions specified in subsections (3) and (4) are Part 4 governance provisions.
25 30 177 Part 4 cl 223 Financial Markets Conduct Bill (2) A contravention of any of the provisions listed in subsection (3) may give rise to a civil remedy (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case 5 of an individual or $5 million in any other case.
The provisions are the following: (a) (3) section 89 (need for governing document and super- visor for regulated offer of debt security): section 111 (need to register managed investment 10 scheme for regulated offer of managed investment product): sections 143 to 145 (requirements relating to custo- dianship of scheme property): section 169(3) (manager and delegate must desist 15 from all activities relating to scheme on removal): section 214 (issuer must keep proper accounting records): section 220 (financial statements to be audited).
(b) (c) (d) (e) (f) (4) A contravention of any of the following may give rise to a 20 civil remedy (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or $600,000 in any other case: (a) (b) section 94(2) (changes to trust deed): sections 98 and 99 (duties applying to supervisor of 25 debt security): sections 100 to 104 and 105(2) (duties on issuer to provide various reports, information, and assistance): sections 106 and 147 (meetings of product holders): section 120 (manager must ensure that ongoing regis- 30 tration requirements are complied with): section 121(5) (manager must notify scheme partici- pants of direction): sections 122 to 124 (contents of governing document for registered scheme): section 126(2) (changes to governing document): sections 130 to 133 (duties applying to manager, in- vestment manager, and directors and senior managers of manager): 35 (c) (d) (e) (f) (g) (h) (i) 178 Financial Markets Conduct Bill Part 5 cl 224 (j) (k) (l) (m) (n) (o) (p) (q) (r) (s) (t) (u) (v) (w) (x) sections 134 to 138 and 142(2) (duties on issuer to provide various reports, information, and assistance): sections 140 and 141 (duties applying to supervisor of registered scheme): section 146 (duty on supervisor to refuse to act on 5 wrongful directions): sections 150 and 151 (requirements relating to state- ment of investment policy and objectives): sections 153 to 155 (actions that must be taken on limit breaks, pricing errors, and other non-compliances, 10 and requirements for actuarial examinations): section 157 (limits on reversion of scheme property in certain schemes to non-scheme participant contributor): section 159 (general prohibition on related party trans- actions): section 161 (additional restrictions on transactions of restricted schemes): sections 163, 164, 165(4), and 166 (scheme partici- pants transfer rules): section 174 (former manager must hand over records 20 and give reasonable assistance): section 180(2) (manager must notify scheme
 partici- pants of direction): sections 182 to 184, and 186 to 188 (duties to report problems): section 190(2) (FMA’s directions to supervisor): section 210 (restriction on use of information in regis- ters): sections 215 and 217 (place where, and period for which, accounting records to be kept).
15 30 25 Part 5 Dealing in financial products on markets Subpart 1—Purposes, overview, and interpretation 224 Additional purposes of Part (1) This Part has the following purposes for financial product mar- kets (in addition to those set out in sections 3 and 4): 35 179 Part 5 cl 225 Financial Markets Conduct Bill (a) (b) to promote fair, orderly, and transparent financial prod- uct markets: to encourage a diversity of financial product markets to take account of the differing needs and objectives of issuers and investors.
5 (2) This section does not limit section 3 or 4.
225 Overview (1) In this Part,— (a) 10 this subpart contains the additional purposes of this Part and interpretation provisions: subpart 2 prohibits insider trading on licensed mar- kets: subpart 3 prohibits market manipulation on licensed markets (including a general prohibition on false and misleading conduct in relation to any dealing in quoted 15 financial products): subpart 4 requires listed issuers to comply with the continuous disclosure provisions of listing rules of a licensed market: subpart 5 requires substantial product holders in listed 20 issuers to disclose their interests: subpart 6 requires directors and senior managers of listed issuers to disclose their interests and dealings in quoted financial products of or connected to the listed issuer: subpart 7 provides for the licensing of financial prod- uct markets, the approval of market rules of licensed markets, the ability to impose a control limit on licensed market operators, and the ability to make regulations modifying this subpart for particular markets: subpart 8 contains requirements applying in the oper- ation of a licensed market: subpart 9 provides for the transfer of transferable fi- nancial products: subpart 10 regulates the making of unsolicited offers 35 to purchase financial products off-market.
30 25 (b) (c) (d) (e) (f) (g) (h) (i) (j) 180 Financial Markets Conduct Bill Part 5 cl 227 (2) (3) Provisions of this Part may be disapplied or modified in rela- tion to a licensed market (and any issuers listed on that licensed market) under regulations made under section 350.

This section is a guide only to the general scheme and effect of this Part.
Material information and generally available to the market 226 Meaning of material information (1) In this Part, material information, in relation to a listed issuer, is information that— (a) a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of quoted financial products of the listed issuer; and relates to particular financial products, a particular listed 15 issuer, or particular listed issuers, rather than to financial products generally or listed issuers generally.
(b) (2) in relation to quoted the underlying of quoted derivatives, or the In this Part, material information, derivatives, issuer of a financial product underlying quoted derivatives, is 20 information that— (a) a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of the derivatives; and relates to the particular derivatives, rather than to 25 derivatives generally.
(b) Compare: 1988 No 234 ss 3, 3A 227 Meaning of generally available to the market (1) In this Part, information is generally available to the mar- ket— (a) if— (i) it is information that has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in relevant financial products; and 181 5 10 30 35 Part 5 cl 228 Financial Markets Conduct Bill (b) (c) (ii) since it was made known, a reasonable period for it to be disseminated among those persons has expired; or if it is likely that persons who commonly invest in rele- vant financial products can readily obtain the informa- 5 tion (whether by observation, use of expertise, purchase from other persons, or any other means); or if it is information that consists of deductions, conclu- sions, or inferences made or drawn from either or both of the kinds of information referred to in paragraphs 10 (a) and (b).
(2) (3) In this section, relevant financial products means financial products of a kind the price of which might reasonably be ex- pected to be affected by the information.
Information that is notified in accordance with a continuous 15 disclosure obligation is generally available to the market under subsection (1)(a) immediately on it being made avail- able to participants in a licensed market (without limiting how quickly the reasonable period of dissemination in subsection (1)(a)(ii) may be satisfied in other cases).
Compare: 1988 No 234 s 4 20 Certain derivatives treated as being quoted financial products of listed issuer 228 Certain derivatives treated as being quoted financial products of listed issuer If the underlying of a derivative is a quoted financial product of a listed issuer, the derivative must, for the purposes of this subpart and subpart 2, be treated as being a quoted financial product of the listed issuer (whether the derivative is quoted or not).
See also section 296 (which relates to the disclosure of rele- vant interests and dealings in relevant interests by directors and senior managers).
25 30 (1) (2) 182 Financial Markets Conduct Bill Part 5 cl 229 229 Meaning of information insider, inside information, and Insider conduct (1) adviser In this Part, a person is an information insider of a listed issuer if that person— (a) has material information relating to the listed issuer that is not generally available to the market; and knows or ought reasonably to know that the information is material information; and knows or ought reasonably to know that the information 10 is not generally available to the market.
(b) (c) 5 (2) A listed issuer may be an information insider of itself.
(3) In this Part, a person is an information insider in relation to quoted derivatives if that person— (a) has material information relating to any of the following 15 that is not generally available to the market: (i) (ii) (iii) the derivatives: the underlying: the issuer of a financial product underlying the derivatives; and (4) (5) (b) (c) knows or ought reasonably to know that the information is material information; and knows or ought reasonably to know that the information is not generally available to the market.
In this Part, inside information means— (a) the information in respect of which a person is an infor- mation insider of the listed issuer in question; or in the case of quoted derivatives, the information in re- spect of which a person is an information insider in re- lation to the derivatives in question.

(b) In this Part, adviser means an adviser acting in a professional capacity (for example, a lawyer, an accountant, or a financial adviser).
Compare: 1988 No 234 ss 8A, 8B, 11E 183 20 25 30 Part 5 cl 230 Financial Markets Conduct Bill Relevant interests 230 Relevant interests in financial products (basic rule) (1) In this Part, a person has a relevant interest in a financial product if the person— (a) (b) (c) is a registered holder of the product; or is a beneficial owner of the product; or has the power to exercise, or to control the exercise of, a right to vote attached to the product; or has the power to acquire or dispose of, or to control the acquisition or disposal of, the product.
(d) 5 10 (2) (3) (4) Subsection (1) applies regardless of whether the power or control is express or implied, direct or indirect, legally en- forceable or not, related to a particular financial product or not, exercisable presently or in the future, or exercisable alone or jointly with another person or persons (but a power to cast 15 merely 1 of many votes is not, in itself, a joint power of this kind).
Subsection (1) applies regardless of whether or not the power or control is or can be made subject to restraint or restriction or is exercisable only on the fulfilment of a condition.

If 2 or more persons can jointly exercise a power, each of those persons is taken to have the power.
Compare: 1988 No 234 s 5 20 231 Extension of basic rule to powers or controls exercisable through trust, agreement, etc 25 (1) A person has a power or control referred to in section 230 if the power or control is, or may at any time be, exercised under, by virtue of, by means of, or as a result of a revocation or breach of, a trust or agreement (or any combination of them).
Subsection (1) applies regardless of whether or not the trust 30 or agreement is legally enforceable or whether or not the per- son is a party to it.
Compare: 1988 No 234 s 5A (2) 184 Financial Markets Conduct Bill Part 5 cl 233 232 Extension of basic rule to interests held by other persons under control or acting jointly A person (A) has a relevant interest in a financial product that another person (B) has if— (a) B or B’s directors are accustomed or under an obligation 5 (whether legally enforceable or not) to act in accordance with A’s directions, instructions, or wishes in relation to a power or control referred to in section 230; or (b) A has the power to exercise, or control the exercise of, (c) the right to vote attached to 20% or more of the voting 10 products of B; or A has the power to acquire or dispose of, or to control the acquisition or disposal of, 20% or more of the voting products of B; or (d) A and B are related bodies corporate; or (e) A and B have an agreement to act in concert in relation to a power or control referred to in section 230.
15 Compare: 1988 No 234 s 5B(1) 233 Situations not giving rise to relevant interests (1) A person (A) does not have a relevant interest in a financial 20 product under sections 230 to 232 merely because— (a) the ordinary business of A consists of, or includes, the lending of money or the provision of financial services, or both, and A has the relevant interest only as security given for the purposes of a transaction entered into in 25 the ordinary course of the business of A; or (b) A is authorised to undertake trading activities on a li- censed market and A acts for another person to acquire or dispose of those products on behalf of that person in the ordinary course of A’s business of carrying out those 30 trading activities; or A has been authorised by resolution of the directors of a body corporate to act as its representative at a particular meeting of members, or class of members, of a listed issuer, and a copy of the resolution is deposited with 35 the listed issuer before the meeting; or (c) (d) A is appointed as a proxy to vote at a particular meeting of members, or of a class of members, of the listed issuer 185 Part 5 cl 234 Financial Markets Conduct Bill and the instrument of A’s appointment is deposited with the listed issuer before the meeting; or A is a bare trustee of a trust to which the products are subject; or A is a director of a body corporate and the body corpo- 5 rate has a relevant interest in the products; or (e) (f) (g) A is a member of a body corporate and the body corpo- rate’s constitution gives the member pre-emptive rights on the transfer of the products, if all members have pre-emptive rights on the same terms; or (h) A is an operator of a designated settlement system (as defined in section 156M(1) of the Reserve Bank of New Zealand Act 1989) and is acting in the ordinary course of that business.
10 Subsection (1)(a) to (h) do not apply to a person if the person 15 is currently declared by the FMA, by notice under section 533(1)(f), to be a person that is not exempt under any of those paragraphs.

For the purposes of subsection (1)(e), a trustee may be a bare trustee even if he or she is entitled as a trustee to be remuner- 20 ated out of the income or property of the trust.
Compare: 1988 No 234 s 6 (2) (3) Subpart 2—Insider trading Insider conduct prohibited 234 Prohibition of insider conduct (1) A person must not do any of the things set out in any of sec- tions 235(1), 236(1), and 237(1) if the person is an infor- mation insider of the listed issuer.

25 (2) A person must not do any of the things set out in any of sec- tions 235(2), 236(2), and 237(2) if the person is an infor- 30 mation insider in relation to quoted derivatives.
Compare: 1988 No 234 s 8 Information insider must not trade 235 (1) An information insider of a listed issuer must not trade quoted financial products of the listed issuer.

35 186 Financial Markets Conduct Bill Part 5 cl 237 (2) An information insider in relation to quoted derivatives must (3) not trade the derivatives.

In this subpart, trade— (a) means acquire or dispose of; but (b) does not include acquire, or dispose of, by inheritance 5 or gift.
Compare: 1988 No 234 s 8C Information insider must not disclose inside information 236 (1) An information insider (A) of a listed issuer must not directly or indirectly disclose inside information to another person (B) 10 if A knows or ought reasonably to know or believes that B will, or is likely to,— (a) (b) trade quoted financial products of the listed issuer; or advise or encourage another person (C) to trade or hold those products.
(2) An information insider (A) in relation to quoted derivatives must not directly or indirectly disclose inside information to another person (B) if A knows or ought reasonably to know or believes that B will, or is likely to,— trade the derivatives; or (a) advise or encourage another person (C) to trade or hold (b) those derivatives.
Compare: 1988 No 234 s 8D 15 20 Information insider must not advise or encourage trading 237 (1) An information insider (A) of a listed issuer must not— 25 (a) (b) advise or encourage another person (B) to trade or hold quoted financial products of the listed issuer: advise or encourage B to advise or encourage another person (C) to trade or hold those financial products.
(2) An information insider (A) in relation to quoted derivatives 30 must not— (a) (b) advise or encourage another person (B) to trade or hold the derivatives: advise or encourage B to advise or encourage another person (C) to trade or hold those derivatives.
35 Compare: 1988 No 234 s 8E 187 Part 5 cl 238 Financial Markets Conduct Bill 238 Criminal liability for insider conduct (1) A person who contravenes any of sections 235 to 237 com- mits an offence if the person knows— (a) (b) that the information is material information; and that the information is not generally available to the 5 market; and in the case of a contravention of section 236, of any of the matters set out in section 236(1)(a) or (b) or (2)(a) or (b).
(c) (2) A person who commits an offence under subsection (1) is 10 liable on conviction on indictment,— (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and in any other case, to a fine not exceeding $2.5 million.
(b) Compare: 1988 No 234 s 8F When prohibition on insider conduct does not apply 239 Exception for trading required by enactment or rule of law Section 235 does not apply to trading in financial products that is required by an enactment or any rule of law.
Compare: 1988 No 234 s 9 240 Exception for disclosure required by enactment or rule of law or by FMA Section 236 does not apply to disclosure that is required by— (a) (b) an enactment or any rule of law; or the FMA when exercising a power under this Act or any other enactment.
Compare: 1988 No 234 s 9A 15 20 25 30 241 Exception for disclosure in connection with preparing PDS or disclosure document Section 236 does not apply to disclosure that is necessary, in connection with an offer of financial products for sale, in order to assist in the preparation of a PDS, a register entry, or 35 188 Financial Markets Conduct Bill Part 5 cl 244 a disclosure document under clause 26 of Schedule 1 for that offer.
242 Exceptions in respect of underwriting agreements (1) Section 235 does not apply to the acquisition of the finan- cial products of a listed issuer under an underwriting or a 5 sub-underwriting agreement.

Section 236 does not apply if the inside information is dis- closed to a person for the sole purpose of negotiating an under- writing or a sub-underwriting agreement with that person in respect of the financial products in question.
Section 237 does not apply if the advice or encouragement is given for the sole purpose of persuading the person to whom it is given to enter into an underwriting or a sub-underwriting agreement in respect of the financial products in question.
Compare: 1988 No 234 s 9B 10 15 (2) (3) 243 Exception in case of knowledge of person’s own intentions or activities (1) A person (A) does not contravene section 235(1) merely be- cause A trades the financial products with the knowledge that A proposes to enter into, or has previously entered into, 1 or 20 more transactions or agreements in relation to the financial products or the listed issuer or the listed issuer’s business ac- tivities.
(2) A person (B) does not contravene section 237(1) merely be- cause B advises or encourages another person (A) to trade or 25 hold financial products when B has knowledge acquired in the course of acting as A’s adviser that A proposes to enter into, or has previously entered into, 1 or more transactions or agree- ments in relation to the financial products or the listed issuer or the listed issuer’s business activities.
Compare: 1988 No 234 s 9C 30 244 Exception in case of knowledge in relation to derivatives (1) A person (A) does not contravene section 235(2) merely be- cause A trades in derivatives with knowledge of A’s own past, current, or proposed— 35 189 Part 5 cl 245 Financial Markets Conduct Bill (a) (b) transactions or agreements concerning those or any other derivatives; or business activities, transactions, or agreements con- cerning the underlying.
(2) If a person (B) advises or encourages another person (A) to 5 trade or hold derivatives, B does not contravene section 237(2) merely because B has knowledge, acquired in the course of acting as A’s adviser, of A’s past, current, or pro- posed— (a) (b) transactions or agreements concerning derivatives; or business activities, transactions, or agreements con- cerning the underlying.
10 Compare: SR 2010/354 r 3 245 Exception for agent executing trading instruction only Section 235 does not apply in the case of a person (A) if,— 15 in trading the financial products, A was acting on behalf (a) of another person (B); and (b) A traded the financial products on B’s specific instruc- (c) tion; and before trading, A did not disclose inside information to 20 B; and (d) A did not advise or encourage B to instruct A to trade.
Compare: 1988 No 234 s 9D 246 Exceptions from section 235 for takeovers (1) Section 235 does not apply to— (a) 25 trading that results from a takeover offer under the Takeovers Code; or trading in compliance with regulations made under sec- tion 519(1)(a); or entering into an agreement to acquire or dispose of fi- 30 nancial products at a fixed price under a future takeover offer that complies with the Takeovers Code; or the acquisition or disposal of financial products in performance of an agreement to acquire or dispose of those financial products at a fixed price under a future 35 takeover offer that complies with the Takeovers Code.
(b) (c) (d) 190 Financial Markets Conduct Bill Part 5 cl 247 (2) For the purposes of this section and section 247, if an exemp- tion has been granted under section 45 of the Takeovers Act 1993 in relation to a takeover offer and the offer is made in ac- cordance with the terms and conditions of the exemption and the applicable provisions of the Takeovers Code from which 5 there is no exemption, the offer must be taken to— (a) (b) Compare: 1988 No 234 s 9E(1) be a takeover offer under the Takeovers Code; and comply with the Takeovers Code.
247 Exceptions from sections 236 and 237 for takeovers Section 236 does not apply to the following conduct: (1) (a) 10 disclosure of inside information to a prospective offeror or its advisers under a prospective takeover offer under the Takeovers Code: disclosure of inside information to encourage compet- 15 ing bona fide offers to be made in competition with a takeover offer under the Takeovers Code: disclosure of inside information by a prospective offeror or its advisers under a prospective takeover offer under the Takeovers Code for the purpose of forming a con- 20 sortium to make a takeover offer: disclosure of inside information to an independent ad- viser to enable that adviser to make a report required by the Takeovers Code.
(b) (c) (d) (2) (3) Reliance of a person on subsection (1)(a) to (c) is subject to 25 the conditions that— (a) the recipient of the information is bound by a confiden- tiality agreement in respect of the information; and the purpose of the conduct is to enable or encourage the recipient to make a takeover offer or to participate in a 30 takeover offer.
(b) Section 237 does not apply to advice or encouragement— (a) by the directors of a company that is the target company under a takeover offer under the Takeovers Code, to the extent that the advice or encouragement is given 35 to the company’s shareholders and relates to trading or holding their financial products; or 191 Part 5 cl 248 Financial Markets Conduct Bill (b) by a prospective offeror under a prospective takeover offer under the Takeovers Code for the purpose of form- ing a consortium to make a takeover offer.
(4) A person (A) does not contravene section 236 or 237 merely because A, in relation to a takeover offer or prospect- 5 ive takeover offer under the Takeovers Code, discloses inside information to another person (B) or advises B to trade or hold financial products of the listed issuer when A has that inside information, or is an information insider, only through acting as B’s adviser in relation to the takeover offer or prospective 10 takeover offer.
Compare: 1988 No 234 s 9E(2)–(5) 248 Exception for schemes of arrangement approved under Companies Act 1993 Section 235 does not apply to trading that results from an 15 arrangement approved under Part 15 of the Companies Act 1993.

249 Exception for redemption of managed investment products Section 235 does not apply to the redemption of managed 20 investment products in a managed investment scheme if the redemption price is calculated by reference to the underlying value of the assets of the scheme.
Compare: 1988 No 234 s 9F 250 Exception for Reserve Bank Section 235 does not apply to trading by the Reserve Bank in financial products issued by the Reserve Bank or by the Crown.

Compare: 1988 No 234 s 9G Defences 251 Absence of knowledge of trading In any proceeding against a person (A) for contravention of section 235, it is a defence if A did not know, and could not 25 30 192 Financial Markets Conduct Bill Part 5 cl 253 reasonably be expected to know, that A traded the financial products.
Compare: 1988 No 234 s 10 252 (1) (2) (3) 5 Inside information obtained by independent research and analysis In any proceeding against a person (A) for contravention of section 235 or 236, it is a defence if the inside information was obtained by research and analysis, and was not obtained directly or indirectly from the listed issuer concerned.
In any proceeding against a person (A) for contravention of 10 section 237, it is a defence if A encouraged or advised on the basis of inside information that was obtained by research and analysis and was not obtained directly or indirectly from the listed issuer concerned.

In subsections (1) and (2), research means planned investi- 15 gation undertaken to gain new knowledge and understanding.
Compare: 1988 No 234 s 10A 253 Equal information (1) (2) (3) In any proceeding against a person (A) for contravention of section 235, it is a defence if the opposite party to the trans- 20 action knew, or ought reasonably to have known, the same in- side information as A.
In any proceeding against a person (A) for contravention of section 236, it is a defence if the person to whom the infor- mation is disclosed knew, or ought reasonably to have known, 25 the same inside information as A before it was disclosed.
In any proceeding against a person (A) for contravening sec- tion 236 or 237 by disclosing inside information to another person (B) or by advising or encouraging B to trade or hold quoted financial products, it is a defence if A has that inside 30 information, or is an information insider, only through acting as B’s adviser in relation to trading or holding those financial products.
Compare: 1988 No 234 s 10B 193 Part 5 cl 254 Financial Markets Conduct Bill 254 Options and trading plans (1) In any proceeding against a person (A) for contravention of section 235, it is a defence if— (a) A traded the financial products under a fixed trading plan or under options with a fixed exercise price; and (b) A entered into the trading plan, or acquired the options, as the case may be,— (i) (ii) without any intent to evade section 235. before A obtained the inside information; and (2) A fixed trading plan is a trading plan— 5 10 (a) (b) that— (i) (ii) (iii) is fixed for a period of time; and gives the investor no right to withdraw before the end of that period; and is not subject to any influence by the investor as 15 to trading decisions after the plan has begun; or that is an employee share purchase scheme that comes within paragraph (a) except that the plan may be ear- lier terminated, and the investor may withdraw, on the termination of the investor’s employment or appoint- 20 ment.
Compare: 1988 No 234 s 10C 255 Chinese wall defence (1) In any proceeding against a person (A) for contravention of any of sections 235 to 237, it is a defence if— (a) 25 arrangements existed that could reasonably be expected to ensure that no individual who took part in the active decision received, or had access to, the inside informa- tion or was influenced, in relation to that decision, by an individual who had the information; and no individual who took part in the active decision re- ceived, or had access to, the inside information or was influenced, in relation to that decision, by an individual who had the information; and every individual who had the information and every in- 35 dividual who took part in the active decision acted in accordance with the arrangements referred to in para- graph (a).
30 (b) (c) 194 Financial Markets Conduct Bill Part 5 cl 257 (2) In subsection (1), active decision means the decision to trade the financial products or disclose the inside information or ad- vise or encourage, as the case may be.
Compare: 1988 No 234 s 10D Subpart 3—Market manipulation 256 Misleading or deceptive conduct generally in dealings in 5 quoted financial products (1) A person must not engage in conduct that is misleading or deceptive or likely to mislead or deceive in relation to any dealings in quoted financial products.

Subsection (1) applies regardless of whether or not the deal- ings are in trade.
Compare: 1986 No 121 s 9; 1988 No 234 s 13 (2) 10 257 False or misleading statement or information A person must not make a statement or disseminate informa- 15 tion if— (a) (b) (c) a material aspect of the statement or information is false or the statement or information is materially mislead- ing; and the person knows or ought reasonably to know that a 20 material aspect of the statement or information is false or that the statement or information is materially mis- leading; and the statement or information is likely to— (i) induce a person to trade in quoted financial prod- 25 ucts; or have the effect of increasing, reducing, maintain- ing, or stabilising the price for trading in those fi- nancial products; or induce a person to exercise a voting right attached 30 to a quoted financial product in a particular way, or to abstain from exercising such a right.
(ii) (iii) Compare: 1988 No 234 s 11 195 Part 5 cl 258 Financial Markets Conduct Bill 258 Exception for takeovers Sections 256 and 257 do not apply to conduct in relation to a takeover offer for financial products under the Takeovers Code or to conduct under that offer to the extent that the conduct is regulated by the Takeovers Code or the Takeovers Act 1993.
Compare: 1988 No 234 s 14 5 259 Criminal liability for false or misleading statement or information (1) A person who contravenes section 257 commits an offence if the person knows that the statement or information is false 10 in a material aspect or is materially misleading.
(2) A person who commits an offence under subsection (1) is liable on conviction on indictment,— (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, 15 or both; and in any other case, to a fine not exceeding $2.5 million.
(b) Compare: 1988 No 234 s 11A 260 False or misleading appearance of trading A person must not do, or omit to do, anything if— (a) the act or omission will have, or is likely to have, the effect of creating, or causing the creation of, a false or misleading appearance— (i) with respect to the extent of active trading in quoted financial products; or 20 25 (ii) with respect to the supply of, demand for, price for trading in, or value of those financial prod- ucts; and (b) the person knows or ought reasonably to know that the person’s act or omission will, or is likely to have, that 30 effect.
Compare: 1988 No 234 s 11B 261 Exception for short selling and crossings (1) Short selling and crossings under the business rules of a li- censed market do not contravene section 256, 257, or 260 35 merely by reason of being short selling or crossings.
196 Financial Markets Conduct Bill Part 5 cl 262 (2) In this section,— crossing, in relation to a transaction in financial products, means a transaction where a person acts as— (a) buyer and seller for that transaction in an agency cap- acity; or buyer or seller on one side of that transaction in an agency capacity and as a principal on the other side (b) 5 short selling means a sale of any financial product where, at the time of the sale,— (a) the seller does not have a presently exercisable and un- 10 conditional right to vest the financial product in the buyer except where the buyer has a conditional agree- ment to acquire that right before the date required to settle the sale; or the financial product being sold has been borrowed and 15 the seller has a presently exercisable and unconditional right to vest the product in the buyer.
(b) Compare: SR 2007/373 rr 19, 20 262 Persons treated as contravening false or misleading appearance of trading prohibition (1) A person (A) must be treated as contravening section 260 if A is directly or indirectly a party to trading in the quoted financial products of a listed issuer from which no change in beneficial ownership results.
Subsection (1) does not apply if,— (a) in trading the financial products, A was acting on behalf of another person; and (2) (b) A did not know, and ought not reasonably to have known, when trading the financial products that no change in beneficial ownership would result.
(3) A person (A) must be treated as contravening section 260 20 25 30 if— (a) (b) A has made an offer to trade the financial products of a listed issuer; and either A or, to A’s knowledge, an associated person of 35 A has made or proposes to make an opposite offer (the opposite offer) to trade financial products of the listed issuer; and 197 Part 5 cl 263 Financial Markets Conduct Bill (c) the opposite offer substantially matches A’s offer as to the number and price of the financial products.
(4) This section is subject to section 263.

Compare: 1988 No 234 s 11C(1), (2), (4) 263 Defence In any proceeding against a person (A) for contravention of section 260 it is a defence if the trading in the financial prod- ucts occurred, or the offer to trade was made, in conformity with accepted market practices and for a proper purpose.

Example The trustees of the ABC Family Trust hold financial products on trust.

New trustees have been appointed to replace the original trustees.
The financial products are transferred to the new trustees in connection with the appointment.

No change in the beneficial ownership results (see section 262(1)).

However, there is no contravention of section 260 because the transfer was in conformity with accepted market practices and for a proper purpose.
Compare: 1988 No 234 s 11C(3), (4) 5 10 15 20 264 Criminal liability for false or misleading appearance of trading (1) A person who contravenes section 260 commits an offence if the person knows that the act or omission will have, or is likely to have, the effect of creating, or causing the creation 25 of, a false or misleading appearance— (a) with respect to the extent of active trading in the finan- cial products of a listed issuer; or (b) with respect to the supply of, demand for, price for trad- ing in, or value of those products.
(2) A person who commits an offence under subsection (1) is liable on conviction on indictment,— (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, or both; and in any other case, to a fine not exceeding $2.5 million.
(b) Compare: 1988 No 234 s 11D 30 35 198 Financial Markets Conduct Bill Part 5 cl 267 Subpart 4—Continuous disclosure 265 Listed issuers must disclose in accordance with listing rules if continuous disclosure listing rules apply (1) A listed issuer must notify information in accordance with the continuous disclosure provisions of the listing rules for the 5 licensed market if— (a) the listed issuer is a party to a listing agreement with the licensed market operator; and the listed issuer has information that those continuous disclosure provisions require it to notify; and the information is material information that is not gen- erally available to the market.
(b) (c) 10 (2) Subsection (1) does not affect or limit the situations in which action can be taken (other than under this Act) for a failure to comply with provisions of the listing rules for a licensed 15 market.
Compare: 1988 No 234 s 19B 266 What are continuous disclosure provisions For the purposes of this Act, continuous disclosure provi- sions means provisions for the purposes of this subpart that 20 require a listed issuer that is a party to a listing agreement with a licensed market operator to notify information about events or matters as they arise for the purpose of that information be- ing made available to participants in the licensed market.
Compare: 1988 No 234 s 19D 25 267 No contravention of continuous disclosure provisions by person who takes reasonable steps to ensure listed issuer complies A person (A) does not, in relation to the contravention by a listed issuer of a continuous disclosure obligation or a term or 30 condition of a continuous disclosure exemption, contravene that obligation or term or condition if— (a) A took all steps (if any) that were reasonable in the circumstances to ensure that the listed issuer complied with the obligation or term or condition; and 35 199 Part 5 cl 268 Financial Markets Conduct Bill (b) after doing so, A believed on reasonable grounds that the listed issuer was complying with the obligation or term or condition.
Compare: 1988 No 234 s 19PA Subpart 5—Disclosure of interests of substantial product holders in listed issuers 5 268 Purpose of subpart (1) The purpose of this subpart is to promote an informed market, and to deter insider conduct, market manipulation, and secret dealings in potential takeover bids, by ensuring that partici- 10 pants in financial product markets have access to information concerning the identity and trading activities of persons who are, or may at any time be, entitled to control or influence the exercise of significant voting rights in a listed issuer.
This section does not limit any of section 3, 4, or 224.

15 (2) 269 Meaning of substantial product holder, substantial holding, and percentage (1) A person is a substantial product holder in a listed issuer for the purposes of this Act if that person has a substantial holding in that listed issuer.
20 (2) A person has a substantial holding in a listed issuer for the purposes of this Act if the person has a relevant interest in quoted voting products that comprise 5% or more of a class of quoted voting products of the listed issuer.

(3) A person has a separate substantial holding for the purposes 25 of this Act for each class in respect of which the person has a substantial holding under subsection (2).
The percentage of financial products that a person has in a class, for the purposes of this subpart, is calculated as follows: (4) ( number held total ) × 100 where— number held is the number of financial products, in that class, in which the person has a relevant interest 30 200 Financial Markets Conduct Bill Part 5 cl 272 total is the total number of financial products in that class.
Compare: 1988 No 234 s 21 270 Persons must disclose if begin to have substantial holding (1) A person who begins to have a substantial holding (or another (2) substantial holding for another class) in a listed issuer must 5 disclose that fact in accordance with sections 274 and 275.

The disclosure must be given as soon as the person knows, or ought reasonably to know, that the person has the substantial holding.
Compare: 1988 No 234 s 22 10 271 Substantial product holders must disclose if subsequent movement of 1% or more in holdings (1) A substantial product holder in a listed issuer must disclose, in accordance with sections 274 and 275, any movement of 1% or more in the substantial holding.
There is a movement of 1% or more in a substantial holding if— (a) (2) 15 there is a change in the number of financial products held by the substantial product holder (where number held has the same meaning as in section 269(4)); and 20 the percentage worked out using the formula in section 269(4) increases or decreases by 1 or more percentage points from the percentage last disclosed under this sub- part (or subpart 3 of Part 2 of the Securities Markets Act 1988) in relation to the substantial holding.
25 (b) (3) The disclosure must be given as soon as the person knows, or ought reasonably to know, that that movement has occurred.

Compare: 1988 No 234 s 23 272 Substantial product holders must disclose if subsequent changes in nature of relevant interests 30 (1) A substantial product holder in a listed issuer must disclose, in accordance with sections 274 and 275, any change in the nature of any relevant interest in the substantial holding.
201 Part 5 cl 273 Financial Markets Conduct Bill (2) The disclosure must be given as soon as the person knows, or ought reasonably to know, of the change.

Compare: 1988 No 234 s 24 273 Persons must disclose if cease to have substantial holding (1) A person who ceases to have a substantial holding (or any 5 (2) of the person’s substantial holdings) in a listed issuer must disclose that fact in accordance with sections 274 and 275.
The disclosure must be given as soon as the person knows, or ought to know, that the person has ceased to have a substantial holding.

Compare: 1988 No 234 s 25 274 What disclosure required (1) A person must disclose the matters required to be disclosed under any of sections 270 to 273 or section 283, to— (a) (b) the listed issuer; and every operator of a licensed market by which the finan- cial products of the listed issuer are quoted.
The person must also disclose, in the prescribed manner, any further matters relating to those matters, the relevant event, or the substantial holding that are required by the regulations.

The disclosure must also be accompanied by, or have annexed, any prescribed information or documents.

Compare: 1988 No 234 s 26 (2) (3) 10 15 20 275 Form and method of disclosure A person must give the disclosure in the prescribed manner.
Compare: 1988 No 234 s 27 25 276 Listed issuer must give acknowledgement of disclosure Every listed issuer must, at the request of a person by whom disclosure is given to it under this subpart, give to the person an acknowledgement of the disclosure in the prescribed manner.
30 Compare: 1988 No 234 s 28 202 Financial Markets Conduct Bill Part 5 cl 279 277 How to ascertain total financial products in class for (1) purposes of disclosure For the purposes of this subpart, a person may assume that the total number of financial products of a listed issuer in a class most recently published by the following methods is correct: in a document published by a listed issuer and dis- (a) tributed to the holders of that class of products; or on an Internet site maintained by the relevant licensed market operator.
(b) 5 (2) Subsection (1) does not apply if that person knows that num- 10 ber is not correct.
Compare: 1988 No 234 s 29 278 Exemption for persons with interest in other substantial product holders who comply A person (A) need not comply with any of sections 270 to 15 273 in relation to a substantial holding in a listed issuer if— another person (B) is required to comply, and does com- (a) ply, with that section in relation to the same listed issuer; and (b) A has that substantial holding merely for 1 or more of 20 the following reasons: (i) A has a power to exercise, or control the exercise of, the right to vote attached to 20% or more of the voting products of B (see section 232(b)): (ii) A has a power to acquire or dispose of, or control 25 the acquisition or disposition of, 20% or more of the voting products of B (see section 232(c)): (iii) A and B are related bodies corporate (see sec- tion 232(d)).
Compare: 1988 No 234 s 30 30 279 Exemption for corporate trustees and nominee companies (1) A person (A) need not comply with any of sections 270 to 273 in relation to 1 or more substantial holdings in 1 or more listed issuers if— (a) A has that substantial holding merely because A acts 35 for another person in the ordinary course of business as a corporate trustee or a nominee company; and 203 Part 5 cl 280 Financial Markets Conduct Bill (b) A has opted in to this exemption by written notice to the FMA (and not withdrawn the notice by further written notice to the FMA).
(2) Subsection (1) does not apply if A is currently declared by the FMA, by notice under section 533(1)(f), to be a person 5 that is not exempt under this section.
Compare: 1988 No 234 s 31 280 Conditions of exemption for corporate trustees and nominee companies (1) A person (A) to whom section 279(1) applies must— 10 (a) (b) (c) keep under continuing review the transactions of all per- sons for whom A holds, in A’s name, quoted voting products; and inform the listed issuer of the financial products and the operator of the licensed market by which those products 15 are quoted if section 270 or 273 applies to any of those persons; and inform that operator if A exercises, or proposes to exer- cise, in A’s own right any voting rights in respect of 5% or more of a class of quoted voting products of a listed 20 issuer.
(2) (3) Every person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- 25 part 5 of Part 7).
Compare: 1988 No 234 s 32 281 Exemption for persons under control or acting jointly with corporate trustees and nominee companies (1) A person (A) need not comply with any of sections 270 to 30 273 in relation to 1 or more substantial holdings in 1 or more listed issuers if A has the substantial holding merely because A has, under section 232, the relevant interests in financial products that a corporate trustee or a nominee company that is exempt in relation to that substantial holding under section 35 279 has.
204 Financial Markets Conduct Bill Part 5 cl 283 (2) Subsection (1) does not apply if A is currently declared by the FMA, by notice under section 533(1)(f), to be a person that is not exempt under this section.
Compare: 1988 No 234 s 32A 282 Extended time for disclosure for trustees, executors, and 5 administrators If a person is required to comply with section 270, 271, or 273 merely because the person is the trustee of a testamentary trust or the executor or administrator of the estate of a deceased person,— (a) the time limit for disclosure in that section does not apply; and the disclosure must instead be given before the expiry of 14 days after the grant of administration under the Administration Act 1969.
(b) 10 15 Compare: 1988 No 234 s 33 283 FMA may require persons to disclose to market relevant (1) (2) (3) (4) interests and powers to get relevant interests The FMA may, by written notice given after having regard to the purpose of this subpart in section 268(1), require a person 20 to disclose all (or any class of)— (a) relevant interests that the person has in financial prod- ucts of a listed issuer; or powers that the person has or may at any time have to acquire a relevant interest in financial products of a 25 listed issuer.
(b) Subsection (1) applies regardless of whether the financial products referred to in subsection (1)(a) and (b) are voting products or not, are quoted or non-quoted, or are issued or yet to be issued.

The person must disclose the information required under sub- section (1) in accordance with sections 274 and 275 as soon as the person receives the notice.
Sections 230 to 233 apply in determining whether or not a person has a power referred to in subsection (1)(b) (and 35 for this purpose every reference in those sections to a relevant 30 205 Part 5 cl 284 Financial Markets Conduct Bill interest must be read as including a reference to a power to acquire a relevant interest).
Compare: 1988 No 234 s 34 284 Listed issuer may require registered holder to disclose relevant interests to it 5 (1) A listed issuer may, by written notice, require a person who is registered as the holder of quoted voting products in the listed issuer to disclose— (a) (b) the name and address of every person who has a relevant interest in those financial products and the nature of that 10 interest; and to the extent that that registered holder is unable to sup- ply any of that information in relation to a person having a relevant interest in those financial products, other par- ticulars that will, or are likely to, assist in identifying 15 that person and the nature of the interest.
(2) The registered holder must disclose the information required under subsection (1) in writing to the listed issuer as soon as practicable after the holder receives the notice.
Compare: 1988 No 234 s 35 20 285 Listed issuer may require person who has relevant interest to disclose information to it (1) A listed issuer may, by written notice, require a person who the listed issuer believes has, or may have, a relevant interest in quoted voting products in the listed issuer to disclose the in- 25 formation the listed issuer specifies for the purpose of assisting the listed issuer to ascertain who is, or may be, a substantial product holder in the listed issuer.
The relevant interest holder must disclose the information re- quired under subsection (1) in writing to the listed issuer as 30 soon as practicable after the holder receives the notice.

Compare: 1988 No 234 s 35A (2) 286 Form and method of notice requiring disclosure The notice requiring disclosure under section 283, 284, or 285 must be given in the prescribed manner (if any).
Compare: 1988 No 234 s 35B 35 206 Financial Markets Conduct Bill Part 5 cl 289 Register and publication of substantial holdings 287 Listed issuers must maintain register of disclosures of substantial holdings (1) A listed issuer must keep a register for the disclosures given (2) (3) (4) (5) to it under this subpart (and must include a disclosure in the 5 register on receiving it).

Subsection (1) does not apply to disclosures made under section 284 or 285 that do not reveal a substantial holding.
The register must be kept at— (a) (b) the registered office of the listed issuer; or any other place in New Zealand of which notice is given in accordance with subsection (4).

10 If the register is not kept at the listed issuer’s registered office, or the place at which it is kept is changed, the listed issuer must give written notice to the Registrar of Companies of the place 15 at which it is kept within 10 working days after it is first kept elsewhere or is moved.
This section and section 288 do not limit the Companies Act 1993 or any other enactment.
Compare: 1988 No 234 s 35C 20 288 Public inspection of register A listed issuer must ensure that a register kept by it under sec- tion 287 is— (a) available for inspection, by a person who serves on the listed issuer a written notice of an intention to inspect, 25 at the place at which the register is kept between the hours of 9 am and 5 pm on each working day during the inspection period; and otherwise available for inspection in the prescribed manner (if any).
30 (b) 289 Copies of documents A person may require a copy of, or an extract from, a register required under section 287 to be sent to the person— (a) within 5 working days after the person has made a re- quest in writing for the copy or extract; and if the person has paid a prescribed fee.
(b) 35 207 (2) (3) (1) (2) Part 5 cl 290 Financial Markets Conduct Bill 290 Offences relating to substantial holdings register (1) Every person who contravenes section 287 or 288 commits an offence and is liable on summary conviction to a fine not exceeding $50,000.
If a listed issuer fails to provide a copy of, or an extract from, a 5 register kept under section 287 in accordance with a request under section 289, the issuer commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offences in this section are infringement offences (see subpart 5 of Part 7).
Compare: 1988 No 234 s 35E 10 291 Listed issuers must publish information on substantial holdings Every listed issuer must, in accordance with this section, send out a notice stating— (a) 15 the names of all persons who, according to the register kept under section 287, are substantial product holders in the listed issuer at the record date; and the number and class of quoted voting products of the listed issuer that, according to the register, form part of 20 each substantial holding in the listed issuer at the record date; and the total number in each of those classes at the record date.
(b) (c) The notice must be sent,— (a) for listed issuers that are companies (other than overseas companies within the meaning of the Companies Act 1993), to each shareholder with or in— (i) the annual report sent under section 209 of the Companies Act 1993; or the notice sent under that section; and (ii) for every other listed issuer, to every holder of its quoted voting products not later than 30 June in each year.
(b) 25 30 (3) The record date is a date stated in the notice that is not earlier than 3 months before the notice is sent.

35 208 Financial Markets Conduct Bill Part 5 cl 294 (4) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: 1988 No 234 ss 35F, 35H (5) 5 292 No liability for publication of substantial holdings No listed issuer is liable for any false or misleading informa- tion published under section 291 if the information was de- rived by the issuer under this subpart and the issuer did not 10 know that the information was false or misleading.
Compare: 1988 No 234 s 35I 293 Notice under this subpart not to affect incorporation of listed issuer or constitute notice of trust (1) Nothing in, or done under, this subpart— 15 (a) (b) affects the incorporation of a listed issuer; or limits section 92, 93, or 94 of the Companies Act 1993.

(2) A listed issuer is not, because of anything done for the pur- poses of this subpart, affected with notice of, or put on inquiry as to, the rights of any person in relation to any financial prod- 20 ucts.
Compare: 1988 No 234 s 35J Subpart 6—Disclosure of relevant interests in quoted financial products by directors and senior managers of listed issuers 25 294 Purpose of subpart (1) The purpose of this subpart is to promote good corporate gov- ernance, and to deter and assist in the monitoring of insider conduct and market manipulation, by— (a) ensuring that information about directors’ and senior 30 managers’ trading activities in listed issuers is available to participants in financial product markets; and enabling the dates of trades to be checked against the dates at which material information became generally available to the market.
35 (b) 209 Part 5 cl 295 Financial Markets Conduct Bill (2) This section does not limit any of section 3, 4, or 224.
295 Directors and senior managers of listed issuers must disclose relevant interests and dealings in relevant interests (1) A director or senior manager of a listed issuer who has a rele- 5 vant interest in a quoted financial product of the listed issuer or a related body corporate must disclose that fact, in accord- ance with sections 297 and 298, within 5 trading days of this section becoming applicable as a result of— (a) (b) the listing of the listed issuer; or the person’s appointment as a director or senior man- ager.
10 (2) A director or senior manager of a listed issuer who acquires or disposes of a relevant interest in a quoted financial product of the listed issuer or a related body corporate must disclose that 15 fact, in accordance with sections 297 and 298, within,— (a) in the case of an acquisition under an employee share purchase scheme, a dividend reinvestment plan, or a share top-up plan, 20 working days of the acquisition; or in any other case, 5 trading days of the acquisition or disposal.
20 (b) 25 This section does not apply to specified derivatives.

This section is subject to sections 297 to 301.
In this section,— dividend reinvestment plan means a plan of the kind referred to in clause 10 of Schedule 1 share top-up plan means a plan established by an issuer under which previously issued shares of the issuer are offered, whether by the issuer or another person, only to some or all 30 existing holders of the same class of shares, and those shares are sold in consideration for a direction made to the issuer to apply amounts that are payable to each existing holder from dividends declared by the issuer to the purchase of the shares.
Compare: 1988 No 234 s 19T 35 (3) (4) (5) 210 Financial Markets Conduct Bill Part 5 cl 298 296 Disclosure of relevant interests and dealings in relevant interests in relation to specified derivatives (1) A director or senior manager of a listed issuer who has a rele- vant interest in a specified derivative must disclose that fact, in accordance with sections 297 and 298, within 5 trading 5 days of this section becoming applicable as a result of— (a) (b) the listing of the listed issuer; or the person’s appointment as a director or senior man- ager.
(2) A director or senior manager of a listed issuer who acquires 10 or disposes of a relevant interest in a specified derivative must disclose that fact, in accordance with sections 297 and 298, within 5 trading days of the acquisition or disposal.
In this subpart, specified derivative, in relation to a director or senior manager of a listed issuer, means— (a) (3) 15 a quoted derivative where the underlying is a financial product of the listed issuer or a related body corporate; or a derivative that is treated as being a quoted financial product of the listed issuer under section 228.

20 (b) (4) This section is subject to sections 297 to 301.
297 What disclosure required (1) The director or senior manager must disclose the relevant in- terest, acquisition, or disposal— (a) to the licensed market operator with which the listed 25 issuer is a party to a listing agreement; and in the interests register of the listed issuer kept under this subpart.

(b) (2) The director or senior manager must also disclose, in the pre- scribed manner, any further matters relating to the relevant in- 30 terest, acquisition, or disposal required by the regulations.
Compare: 1988 No 234 s 19U 298 Form and method of disclosure The director or senior manager must disclose the relevant in- terest, acquisition, or disposal in the prescribed manner.
Compare: 1988 No 234 s 19V 35 211 Part 5 cl 299 Financial Markets Conduct Bill 299 Disclosure obligation applies for 6 months after ceasing to hold office A person is treated as being a director or senior manager for the purposes of this subpart for 6 months after that person ceases to be a director or senior manager, and must continue to comply 5 with this subpart for that period.
Compare: 1988 No 234 s 19W 300 Exemption for directors or senior managers who disclose substantial holdings A director or senior manager who has, or who acquires or dis- 10 poses of, a relevant interest in a quoted financial product does not have to disclose that fact under section 295 if— (a) the director or senior manager must make a disclosure under section 270, 271, or 273 in relation to a sub- stantial holding in the listed issuer of the financial prod- 15 uct to which the relevant interest relates or related; and the disclosure under that section concerns the same rele- vant interest; and the director or senior manager discloses in accordance with that section; and it is stated in the disclosure made in accordance with that section that the director or senior manager is a dir- ector or senior manager of the listed issuer.
20 (b) (c) (d) Compare: SR 2003/382 r 21 301 Exemption for overseas listed issuers (1) A director or senior manager of an overseas listed issuer who has, or who acquires or disposes of, a relevant interest in a quoted financial product of that overseas listed issuer does not have to disclose that fact under section 295.
25 (2) A director or senior manager of an overseas listed issuer who 30 has, or who acquires or disposes of, a relevant interest in a specified derivative does not have to disclose that fact under section 296 if the underlying is a financial product of the overseas listed issuer.
(3) A director or senior manager of an overseas listed issuer who 35 has, or who acquires or disposes of, a relevant interest in a quoted financial product of a related body corporate of that 212 Financial Markets Conduct Bill Part 5 cl 302 overseas listed issuer does not have to disclose that fact under section 295 unless— (a) the director or senior manager is also a director or senior manager of the related body corporate; and the related body corporate is a listed issuer, but not an 5 overseas listed issuer.
(b) (4) A director or senior manager of an overseas listed issuer who has, or who acquires or disposes of, a relevant interest in a specified derivative does not have to disclose that fact under section 296 if the underlying is a financial product of a re- 10 lated body corporate of the overseas listed issuer unless— (a) the director or senior manager is also a director or senior manager of the related body corporate; and the related body corporate is a listed issuer, but not an overseas listed issuer.
(b) 15 (5) In this section, overseas listed issuer means a listed issuer— whose financial products are also quoted with a secur- (a) ities exchange that— (i) (ii) is not a licensed market; and has primary jurisdiction for the listing require- 20 ments for the listed issuer and the quotation of its financial products; and (b) in relation to which no licensed market (other than a market licensed under section 315) has primary juris- diction for the listing requirements for the listed issuer 25 and the quotation of its financial products.
Compare: SR 2004/105 cl 12 302 Listed issuer must keep interests register (1) A listed issuer must keep an interests register for disclosures (2) (3) made to it under this subpart.

The interests register must be kept at— (a) (b) the registered office of the listed issuer; or any other place in New Zealand of which notice is given in accordance with subsection (3).
30 If the interests register is not kept at the listed issuer’s regis- 35 tered office, or the place at which it is kept is changed, the listed issuer must give written notice to the FMA of the place 213 Part 5 cl 303 Financial Markets Conduct Bill (4) (5) at which it is kept within 10 working days after it is first kept elsewhere or is moved.

The interests register may be the same interests register as that kept under section 189(1)(c) of the Companies Act 1993.
This section and sections 303 and 304 do not limit the Com- 5 panies Act 1993.
Compare: 1988 No 234 s 19Z 303 Public inspection of interests register An interests register must— (a) be available for inspection, by a person who serves on 10 the listed issuer a written notice of an intention to in- spect, at the place at which the register is kept between the hours of 9 am and 5 pm on each working day during the inspection period; and otherwise be available for inspection in the prescribed 15 manner (if any).
(b) 304 Copies of documents A person may require a copy of, or an extract from, an interests register to be sent to the person— (a) within 5 working days after the person has made a re- 20 quest in writing for the copy or extract; and if the person has paid a prescribed fee.

(b) 305 Offences relating to interests register (1) A person who contravenes section 302(1) to (3) commits an offence and is liable on summary conviction to a fine not 25 exceeding $50,000.
If a listed issuer fails to provide a copy of, or an extract from, an interests register in accordance with a request under sec- tion 304, the issuer commits an offence and is liable on sum- mary conviction to a fine not exceeding $50,000.

The offences in this section are infringement offences (see subpart 5 of Part 7).
Compare: 1988 No 234 s 19ZF 30 (2) (3) 214 Financial Markets Conduct Bill Part 5 cl 307 Subpart 7—Licensing of markets for trading financial products 306 Principles guiding exercise of powers under this subpart (1) The Minister and the FMA must have regard to the following matters in the exercise of powers under this subpart: (a) the purposes of this Part (in addition to the main and additional purposes of this Act set out in sections 3 and 4): the following matters (if relevant): (i) (b) 5 the nature of the activities conducted, or pro- 10 posed to be conducted, on the market; and the size, or proposed size, of the market; and the nature of the financial products dealt with, or proposed to be dealt with, on the market; and the persons who participate in, or are likely to 15 participate in, the market (either directly or by using the services of participants); and the technology used, or proposed to be used, in the operation of the market: (ii) (iii) (iv) (v) (c) in relation to an application for a licence under section 20 315, or another power under this subpart relating to a market licensed under that section, the matters set out in that section.
(2) (3) The Minister or the FMA must, in applying subsection (1), determine the weight to be given to each of the purposes and 25 other matters referred to in that subsection or section 315.

Subsection (1) does not limit the matters to which the Min- ister or the FMA may have regard.
Need for financial product market licence 307 What is a financial product market (1) For the purposes of this Act, a financial product market is a facility by means of which— (a) offers to acquire or dispose of financial products are made or accepted; or offers or invitations are made to acquire or dispose of 35 financial products that are intended to result or may rea- sonably be expected to result, directly or indirectly, in— (b) 30 215 Part 5 cl 308 Financial Markets Conduct Bill (i) (ii) the making of offers to acquire or dispose of fi- nancial products; or the acceptance of offers of that kind.
(2) However, subsection (1) does not apply to the extent that the 5 facility constitutes— (a) a person making or accepting offers or invitations to acquire or dispose of financial products on the person’s own behalf or on behalf of 1 party to the transaction only (for example, a continuous issuer of financial products): an issuer matching persons who wish to acquire finan- 10 cial products of that issuer with persons who wish to dispose of financial products of that issuer (whether at a specified price or otherwise): a service that is covered by a market services licence: any other conduct of a kind prescribed by the regula- 15 tions.
(b) (c) (d) (3) Subsection (2)(a) does not apply if the conduct of a person is declared by the FMA, by notice under section 533(1)(f), to be conduct that is not exempt under that paragraph.
Compare: Corporations Act 2001 s 767A (Aust) 308 Need for financial product market licence A person must not operate, or hold out that the person operates, a financial product market in New Zealand, unless— (a) the person has a licence to operate that market under this Part; or the market is exempt from this subpart under section 310.
(b) Compare: Corporations Act 2001 s 791A (Aust) 309 Prohibitions on holding out A person must not, if it is not the case, hold out that— (a) (b) the person has a financial product market licence; or the operation of a financial product market in New Zealand is authorised by a financial product market licence; or a financial product market is exempt from this Part; or the person is a participant in a licensed market.
(c) (d) Compare: Corporations Act 2001 s 791B (Aust) 216 20 25 30 35 Financial Markets Conduct Bill Part 5 cl 311 310 Exemptions A financial product market is exempt from this subpart if— (a) either of the following is satisfied in relation to the market (assessed in accordance with the frameworks or methodologies specified in a notice issued by the FMA 5 under subpart 4 of Part 8): (i) the transactions on the market in the most re- cently completed financial year for the market operator did not exceed 100 transactions; or the aggregate value of the financial products ac- 10 quired under those transactions was a value of less than $2 million; or it is a prescribed wholesale market; or it is a prescribed exempt market.
(ii) (b) (c) 311 When financial product market taken to be operated in 15 (1) (2) (3) New Zealand For the purposes of this subpart, a financial product market is taken to be operated in New Zealand if— (a) it is operated by an entity that is incorporated or regis- tered in New Zealand or by an individual who is ordin- 20 arily resident in New Zealand; or all, or a significant part of, the facility for the financial product market is located in New Zealand; or the financial product market is promoted to investors in New Zealand by or on behalf of the operator of that 25 market or by or on behalf of an associated person of that operator.
(b) (c) For the purposes of subsection (1)(c), a financial product market is not promoted to investors in New Zealand merely because it is accessible by those investors.

Subsection (1) does not limit the circumstances in which a financial product market is operated in New Zealand for the purposes of this subpart.
Compare: Corporations Act 2001 s 791D (Aust) 30 217 Part 5 cl 312 Financial Markets Conduct Bill General obligations of licensed market operator 312 General obligations in respect of licensed markets A licensed market operator must,— (a) to the extent that is reasonably practicable, do all things necessary to ensure that each of its licensed markets is 5 a fair, orderly, and transparent market; and have adequate arrangements for operating its licensed markets, including arrangements— (i) (b) (ii) (iii) (iv) for notifying disclosures made to it under sub- parts 4, 5, and 6 and under an alternative dis- 10 closure obligation; and for handling conflicts between the commercial interests of the licensed market operator and the need for the licensed market operator to ensure that the markets operate in the way referred to in 15 paragraph (a); and for monitoring the conduct of participants on or in relation to the markets; and for enforcing compliance with the relevant mar- ket rules (for example, by having a sufficiently 20 independent adjudicative body to adjudicate on contraventions of market rules that are referred to it); and (c) (d) have sufficient resources (including financial, techno- logical, and human resources) to operate its licensed 25 markets properly; and have adequate arrangements for ensuring that the cri- teria specified in section 314(c) or 315(1)(d), as the case may be, continue to be met.
Compare: 1988 No 234 s 36Y; Corporations Act 2001 s 792A (Aust) 30 Issue of licence 313 Application for licence (1) A person may apply for a licence to operate a financial product market in the manner that is specified by the FMA.

The applicant must provide to the FMA or the Minister the 35 information that is required by the FMA or the Minister to (2) 218 Financial Markets Conduct Bill Part 5 cl 315 assist in determining the application (for example, the draft market rules).
The FMA must, within a reasonable time, give the application to the Minister with advice about the application.
(3) 314 When licence may be issued 5 The Minister, after receiving an application under section 313, may issue a financial product market licence, by writ- ten notice to the applicant, if the Minister is satisfied that— (a) the applicant is capable of operating a financial product market in accordance with the general obligations under 10 section 312 (having regard to the proposed conditions of the licence); and there is no reason to believe that the applicant will not comply with the licensed market operator obligations that will apply if the licence is granted; and the applicant is a body corporate and is registered under the Financial Service Providers (Registration and Dis- pute Resolution) Act 2008.
Compare: Corporations Act 2001 s 795B(1) (Aust) (b) (c) 15 315 When licence may be issued for overseas-regulated 20 (1) market If an applicant is authorised to operate a financial product mar- ket in an overseas jurisdiction in which its principal place of business is located, the Minister, after receiving an application under section 313, may issue a licence authorising the appli- 25 cant to operate the same market in New Zealand, by written notice to the applicant, if the Minister is satisfied that— (a) there is no reason to believe that the applicant will not comply with the licensed market operator obligations that will apply if the licence is granted; and the operation of the market in that jurisdiction is sub- ject to requirements and supervision that are sufficiently equivalent, in relation to the degree of investor protec- tion and market integrity they achieve, to the require- ments and supervision to which financial product mar- 35 kets are subject under this Act in relation to those mat- ters; and 30 (b) 219 Part 5 cl 316 Financial Markets Conduct Bill (c) (d) the applicant undertakes to co-operate with the FMA by sharing information and in other appropriate ways; and no director, senior manager, or controlling owner of the applicant— (i) would be disqualified under section 14(2) of the 5 Financial Service Providers (Registration and Dispute Resolution) Act 2008 (if the applicant were a provider to which that Act applied); or has been disqualified from managing a body cor- porate under the laws of any other jurisdiction.
(ii) 10 (2) In considering an application for a licence under this section or exercising another power under this subpart in relation to a market licensed under this section, the Minister must have regard to the following matters (in addition to the matters in section 306): (a) the criteria that the licensed market operator or appli- cant satisfied to obtain an authorisation to operate the same market in the overseas jurisdiction in which its principal place of business is located; and the obligations the licensed market operator or applicant 20 must continue to satisfy to keep the authorisation; and the level of supervision to which the operation of the market in that jurisdiction is subject; and (b) (c) 15 (d) whether adequate arrangements exist for co-operation between the FMA and the authority that is responsible 25 for that supervision.
(3) Nothing in this section prevents the Minister from issuing a licence under section 314 to an applicant that is authorised to operate a financial product market in an overseas jurisdiction.
Compare: Corporations Act 2001 s 795B(2) (Aust) 30 316 Conditions of licence (1) A financial product market licence is subject to the following conditions: (a) a condition that the licensed market operator may, under the licence, operate only the financial product market 35 covered by the licence (as described in the licence); and a condition that specifies the clearing and settlement ar- rangements that must be followed or type of settlement (b) 220 10 15 Financial Markets Conduct Bill Part 5 cl 318 arrangements that may be used for the financial product markets covered by the licence; and a condition that specifies the arrangements for enforcing breaches of the market rules; and any other conditions imposed by the Minister under 5 subsection (2) or section 321.
(c) (d) (2) (3) Those conditions must be imposed by the Minister on issue (and may be varied only under section 321).

The licensed market operator must comply with the conditions of the licence.
Compare: Corporations Act 2001 s 796A (Aust) 317 Procedural requirements (1) The Minister must not refuse to issue a licence, or include con- ditions that are materially more restrictive than those requested in the application, unless— (a) the Minister gives the applicant no less than 10 working days’ written notice of the following matters before he or she exercises the power: (i) that the Minister may refuse to issue the licence or may include conditions that are materially 20 more restrictive than those requested in the ap- plication; and (ii) the reasons why he or she may do so; and the Minister gives the applicant or the applicant’s rep- resentative an opportunity to make written submissions 25 on the matter within that notice period.
(b) (2) The FMA must give written notice of the Minister’s decision under section 314 or 315 to— the applicant; and (a) every other prescribed person.

(b) 30 318 Licence may cover more than 1 financial product market The same financial product market licence may cover 2 or (1) more financial product markets.
In that case,— (2) 221 Part 5 cl 319 Financial Markets Conduct Bill (a) (b) (c) a reference in this Act to the financial product market to which a licence covers is taken instead to be a reference to each of those financial product markets severally; and the decision to add another financial product market to a licence must be made on the same basis as a decision 5 to issue a licence; and a financial product market licence may be varied, sus- pended, or cancelled in respect of 1 of those markets only, as if each of those markets were separately li- censed.
10 319 Licence may cover subsidiaries (1) A financial product market licence may authorise subsidiaries of the licensed market operator to operate the financial product market covered by the licence.

In that case, a reference to the licensed market operator in this 15 Act is a reference to the licensed market operator and any sub- sidiary of it that is operating the market under the licence.
(2) 320 FMA must maintain list of licensed markets on Internet site The FMA must maintain a list of licensed markets on its Inter- 20 net site.
The list must include, for each licensed market,— (a) (b) (c) (d) (e) the financial product market that the licence covers; and the name of the licensed market operator; and when the licence was issued; and the conditions of the licence; and a reference to the market rules for the financial product market that have been approved under this subpart (but the list need not incorporate them); and if it is a market to which regulations apply under sec- 30 tion 350, which regulations apply to it; and if the licence is issued under section 315, that it is an overseas-regulated market for the purposes of this Act: the subsidiaries authorised to operate the financial prod- uct market (if any); and if the licence has been suspended or cancelled, that fact and the date on which that action took effect.
(f) (g) (h) (i) 35 25 (1) (2) 222 5 10 Financial Markets Conduct Bill Part 5 cl 322 (3) The FMA must update the list if it becomes aware that there is a change, or error, in the information on the list (for example, the approval of the market rules or a change in the name of the licensed market operator).
Changes to licences 321 Variation of conditions (1) (2) The Minister may, on his or her own initiative under subsec- tion (2) or on the application of a licensed market operator, vary the conditions of the licence at any time after the licence is issued by written notice to the licensed market operator.
The Minister may vary the conditions of the licence on his or her own initiative only— (a) in 1 of the following circumstances: (i) if there is a significant change in market circum- stances that the Minister is satisfied makes it ne- 15 cessary to vary the conditions, having regard to the licensed market operator obligations and the matters referred to in section 306; or in accordance with section 342; and (ii) after following the procedure set out in section 323(1).
20 (b) (3) A licensed market operator may apply, in the manner that is specified by the FMA, for the Minister to vary the conditions of the licence.

(4) A licensed market operator must provide to the FMA or the (5) Minister the information that is required by the FMA or the 25 Minister to assist it in determining the application.

For the purposes of this subpart, vary, in relation to the condi- tions of a licence, includes to vary, revoke, add to, or substitute any of those conditions.
322 Minister may suspend or cancel licence The Minister may, by written notice to the licensed market operator, suspend (for a specified period or until a specified condition is met) or cancel a licence— (a) if the licensed market operator, by written notice, re- quests the Minister to do so; or 30 35 223 Part 5 cl 323 Financial Markets Conduct Bill (b) (c) (d) (e) if the Minister is satisfied, on reasonable grounds, that the licensed market operator has ceased to carry on the business of operating the financial product market; or if the licensed market operator has become subject to an insolvency event; or in accordance with section 342; or in the case of a licence issued under section 315 (over- seas-regulated markets), if— (i) 5 (ii) the licensed market operator ceases to be author- ised to operate a financial product market in the 10 overseas jurisdiction in which the licensed mar- ket operator’s principal place of business is lo- cated; or there is a change to the regulatory regime apply- ing in relation to the market to which the licence 15 relates in the jurisdiction in which the licensed market operator’s principal place of business is located and, because of that change, the Minis- ter is not satisfied as to the matters in section 315(1)(b).
Compare: Corporations Act 2001 s 797B (Aust) 20 323 Procedure for varying of conditions or suspension or cancellation of licence The Minister must not vary the conditions of a licence on his or her own initiative under section 321(1), refuse an applica- 25 tion for a variation under section 321, or suspend or cancel a licence under section 322 unless— (a) the Minister gives the licensed market operator no less than 10 working days’ written notice of the following matters before he or she exercises the power: (i) (ii) that the Minister may exercise the power; and the reasons why he or she may exercise the power; and 30 (b) the Minister gives the licensed market operator or the li- censed market operator’s representative an opportunity 35 to make written submissions on the matter within that notice period.
(1) 224 Financial Markets Conduct Bill Part 5 cl 327 (2) The FMA must give written notice of the Minister’s decision under section 321 or 322 to— (a) (b) the licensed market operator; and every other prescribed person.

324 Effect of suspension (1) A person whose financial product market licence is suspended is taken not to hold that licence while it is suspended.
(2) However, the Minister may specify in the written notice to the licensed market operator that subsection (1) does not apply for specified purposes.

Compare: Corporations Act 2001 s 797D (Aust) 325 Variation or revocation of suspension The Minister may at any time vary or revoke a suspension of a financial product market licence by giving written notice to the licensed market operator.
Compare: Corporations Act 2001 s 797E (Aust) 5 10 15 Approval of contractual market rules 326 Licensed markets must be operated under market rules that comply with this subpart (1) A licensed market operator must not operate a licensed market 20 except in accordance with market rules for that market that— include the required matters set out in section 327; and (a) have effect under section 328.
(b) This section and sections 327 to 331 do not apply to a licensed market that is licensed under section 315 (over- 25 seas-regulated markets).

Compare: 1988 No 234 s 36G (2) 327 Required matters for market rules (1) Market rules for a financial product market for trading equity securities, debt securities, or managed investment products 30 must include listing rules and business rules (by whatever name called and however they are imposed).
(2) Market rules for a financial product market for trading deriva- tives must include business rules.
225 Part 5 cl 328 Financial Markets Conduct Bill (3) (4) Listing rules must include rules that— (a) (b) (c) (d) (b) relate to the approval of persons for the purpose of en- abling financial products issued by those persons to be traded on the market; and require those persons to be party to a listing agreement 5 with the licensed market operator and that relate to the entry into, and revocation of, listing agreements; and relate to the governance of those persons; and relate to the conduct or activities of those persons in relation to that market or to financial products traded 10 on that market; and relate to the monitoring and enforcement of those rules.
(e) Business rules must include rules that— (a) relate to the authorisation of persons to undertake trad- ing activities on, or otherwise participate in, the market; 15 and relate to the conduct or activities of those persons in relation to the market; and govern the conduct of business on the market; and relate to the monitoring and enforcement of those rules.
20 (c) (d) Compare: 1988 No 234 s 36H 328 When market rules have effect A market rule, or change to a market rule, for a licensed market has no effect, either in contract or for the purposes of section 326, until it has been approved under section 330.
25 329 Approval process for proposed market rules and rule (1) changes If a person applies for the approval of any proposed market rules or proposed rule change by the FMA, the FMA must, within the approval period,— (a) (b) (c) approve the market rules or rule change; or extend the approval period; or decline to approve the market rules or rule change.

(2) An application under this section must be made in the manner specified by the FMA.
30 35 226 Financial Markets Conduct Bill Part 5 cl 330 10 15 (3) (4) The approval period is 40 working days, or (if extended under subsection (1)(b)) 60 working days, after the FMA receives the application.
If, during the approval period, the applicant revises and re- submits the proposed market rules or rule change, then this 5 does not result in the commencement of a new approval period under this section if the revision— (a) (b) is made in response to comments by the FMA; or consists of immaterial changes (for example, graphical changes).
typo- Compare: 1988 No 234 s 36K 330 Approval of proposed market rules and changes (1) The FMA must approve the proposed market rules or rule change provided to it under section 329 unless the FMA is satisfied that— (a) (b) 20 (ii) it is not in the public interest to do so after having had regard to— (i) the purposes of this Part (and the main and addi- tional purposes of the Act stated in sections 3 and 4); and the consistency of the rules or the rule change with the obligations under section 312; or (if subpart 4 would apply to the rules once approved) the rules, or the rules as changed, for the financial prod- uct market will not provide appropriate continuous dis- 25 closure by listed issuers of material information that is not generally available to the market, after having re- gard to— (i) the purposes of this Part (and the main and addi- tional purposes of the Act stated in sections 3 30 and 4); and any other matters that the FMA considers rele- vant.
(ii) (2) The FMA must, in considering whether to approve proposed market rules for a new market, take into account any previ- 35 ously approved market rules that the applicant proposes to also apply to the relevant market.

Compare: 1988 No 234 s 36L 227 Part 5 cl 331 Financial Markets Conduct Bill 331 Notice of decision on rules (1) 5 the applicant for approval; and every other prescribed person.
The FMA must give written notice of its decision under sec- tion 330 to— (a) (b) If the FMA extends the approval period under section 329 or declines to approve the rules, the written notice under sub- section (1) must include a statement of the FMA’s reasons for exercising the power.
If the FMA approves the proposed market rules or rule change, 10 the FMA must also publish a notice in the Gazette, and on an Internet site maintained by or on behalf of the FMA, identify- ing the market rules approved under section 330 (but need not incorporate them).

The notice in the Gazette is a regulation for the purposes of the 15 Regulations (Disallowance) Act 1989 (but not for the purposes of the Acts and Regulations Publication Act 1989).
(2) (3) (4) 332 Power of FMA to request changes to market rules on certain matters The FMA may, if it considers it necessary or desirable to pro- 20 mote any of the purposes of this Part or the meeting of any of the licensed market obligations, request a licensed market op- erator to prepare a draft change to the market rules for any of its licensed markets on a specified matter.
The FMA may make a request under subsection (1) by writ- 25 ten notice to the licensed market operator and only— (a) after carrying out a review under section 337(1) or (2); or if it believes on reasonable grounds that it is urgent to do so at any other time.
(b) 30 The licensed market operator must, as soon as practicable but, in any case, before the expiry of 60 working days after re- ceiving the written notice (or any further time allowed by the FMA), do either or both of the following things: (a) provide a proposed change to the FMA under section 35 330 that addresses the requested matter: provide the FMA with a written report that— (b) (1) (2) (3) 228 Financial Markets Conduct Bill Part 5 cl 334 (i) (ii) (iii) (iv) identifies any requested matter or matters that have not been addressed by a proposed change; and explains why the licensed market operator has not done so; and suggests alternative ways (if any) by which the matter or matters are being or may be dealt with; and sets out if, when, and how the licensed market operator proposes to provide for the matter or 10 matters (if at all).
5 (4) This section does not allow the FMA to request a draft market rule or change on a matter that is not within the matters set out in section 327.
Compare: 1988 No 234 s 36M 15 333 Overseas-regulated markets must give notice of market rules and rule changes to FMA A licensed market operator of a market licensed under section 315 must— (a) provide the market rules of the licensed market to the 20 FMA at the time of the application under section 313; and as soon as practicable after any changes are made to those rules, provide the rule change to the FMA together with the date of the change and an explanation of its 25 purpose.
(b) Compare: Corporations Act 2001 s 793D (Aust) 334 Market rules must be available for public inspection (1) A licensed market operator must ensure that a copy of the mar- ket rules for each of its licensed markets is— (a) available for public inspection, free of charge and dur- ing normal office hours, at the head office of that li- censed market operator; and published on an Internet site maintained by, or on behalf of, the licensed market operator at all reasonable times.
35 (b) 30 229 Part 5 cl 335 Financial Markets Conduct Bill (2) A licensed market operator that fails to comply with subsec- tion (1) commits an offence and is liable on summary convic- tion to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
Compare: 1988 No 234 s 36Q (3) 5 335 Application of Acts relating to regulations to contractual market rules To avoid doubt, market rules are not regulations for the pur- poses of the Regulations (Disallowance) Act 1989 and the 10 Acts and Regulations Publication Act 1989 or for any other purpose.
Compare: 1988 No 234 s 36R Monitoring of licensed market obligations 336 Licensed market operator must give report on compliance 15 with licensed market obligations to FMA (2) (1) A licensed market operator must, within 3 months after the end of its reporting period, give a report to the FMA and the Min- ister on the extent to which it has complied with its licensed market obligations in the preceding reporting period.
The report must contain, or be accompanied by, the informa- tion (if any) in relation to the licensed market operator’s per- formance against its licensed market obligations specified by the FMA before the commencement of the relevant reporting period.

The reporting period for the purposes of this subpart is the financial year of the licensed market operator or any longer reporting period set in the conditions of the licence.
Compare: 1988 No 234 s 36YA (3) 337 FMA to carry out licensed market obligations reviews (1) The FMA may, at any time, carry out a review of how well a licensed market operator is meeting any or all of its licensed market obligations.

The FMA must carry out a review of how well a licensed mar- ket operator is meeting all of its licensed market obligations at 35 20 25 30 (2) 230 Financial Markets Conduct Bill Part 5 cl 338 least once in respect of each reporting period of the licensed market operator.
The FMA— (a) may, in carrying out the review, take into account the (3) most recent report and other information provided 5 under section 336 and any other information it con- siders appropriate; and (b) must, after carrying out the review, provide a draft writ- ten report on its review to the licensed market operator and take into account any submissions made by the li- 10 censed market operator within the reasonable period for submissions specified by the FMA.
The FMA must not carry out a review of a designated settle- ment system (within the meaning of section 156M(1) of the Reserve Bank of New Zealand Act 1989) of a licensed market 15 operator under this section (but nothing in this subsection pre- vents a review under that Act being carried out in conjunction with a review under this section).
Compare: 1988 No 234 s 36YB (4) 338 FMA must make written report on licensed market 20 (1) obligations review The FMA must give a written report on a review under sec- tion 337 to the Minister and the licensed market operator— as soon as practicable after carrying out the review; and (a) in any case, within 3 months after the licensed market 25 (b) operator has provided its report to the FMA under sec- tion 336.
(2) The FMA must also publish the written report on the review on an Internet site maintained by or on behalf of the FMA.

(3) However, the FMA may, in publishing the written report of 30 its review, omit from the published report any information for which it considers there would be a good reason for withhold- ing under the Official Information Act 1982 if a request for that information were made under that Act.
Compare: 1988 No 234 s 36YC 35 231 Part 5 cl 339 Financial Markets Conduct Bill 339 FMA may require licensed market operator to submit (1) (2) (3) action plan on failure to meet licensed market obligations If the FMA considers, after carrying out a review under sec- tion 337(1) or (2), that a licensed market operator has failed or is failing to meet any 1 or more of its licensed market obli- 5 gations, it may, by written notice, require the licensed market operator to submit an action plan to the FMA.
The notice must— (a) (b) set out the details of the failure; and specify the date by which the action plan must be sub- 10 mitted to the FMA.
The licensed market operator must, as soon as practicable but in any case before the date specified by the FMA, do either or both of the following things: (a) provide an action plan that addresses the failure and 15 specifies— (i) the actions that the licensed market operator pro- poses to take to remedy the failure or to avoid any further failure; and (ii) the timetable for taking those actions: provide the FMA with a written report that— (i) identifies any matter that has not been addressed by an action plan; and explains why the licensed market operator does not consider that matter to be a failure or gives 25 any other reasons why the licensed market oper- ator has not provided an action plan on the matter.
(ii) 20 (b) Compare: 1988 No 234 s 36YD 340 Approval, amendment, or rejection of action plan (1) If a licensed market operator submits an action plan, the FMA 30 may— (a) (b) approve the action plan; or require the licensed market operator to amend the action plan and resubmit it to the FMA by a specified date for approval or rejection; or reject the action plan.
35 (c) 232 Financial Markets Conduct Bill Part 5 cl 341 (2) If the FMA requires the licensed market operator to amend an action plan provided to the FMA, the licensed market operator must do either or both of the following things: (a) provide an amended action plan that addresses the mat- ter required to be amended: provide the FMA with a written report that— (i) (b) 5 (ii) identifies any matter that has not been addressed by an amendment to the action plan first pro- vided; and explains why the licensed market operator does 10 not consider that the matter needs amending or gives any other reasons why the licensed mar- ket operator has not provided an amendment ad- dressing the matter.
(3) If the FMA approves the action plan (whether as first provided 15 or after amendment), the licensed market operator must com- ply with the action plan.

(4) An action plan that has been approved by the FMA may be varied at any time by agreement between the licensed market operator and the FMA.
Compare: 1988 No 234 s 36YE 20 341 Minister may give licensed market obligations direction (1) to licensed market operator The Minister may, after having regard to any advice of the FMA, give a written direction to a licensed market operator 25 if— (a) the Minister considers that the licensed market operator has failed or is failing to meet any 1 or more of its li- censed market obligations; and any of the following has occurred: (i) (b) the licensed market operator has not provided an action plan when required under section 339; or the licensed market operator has not provided an amended action plan when required under sec- tion 340; or the FMA has rejected a licensed market oper- ator’s action plan; or (ii) (iii) 30 35 233 Part 5 cl 342 Financial Markets Conduct Bill (iv) the licensed market operator has not complied with an approved action plan.
(2) (3) The direction may specify— (a) the actions that the licensed market operator must take to remedy any failure or to avoid any further failure to 5 meet any 1 or more of its licensed market obligations; and the timetable for taking those actions.

(b) The licensed market operator must comply with the direction.
Compare: 1988 No 234 s 36YF 10 342 Minister may vary, suspend, or cancel licence (1) If the Minister could give a direction under section 341, the Minister may also, by written notice to the licensed market operator, vary the conditions of the licence (following the pro- cedure set out in section 323).
If the Minister could give a direction under section 341 and the Minister is satisfied that the licensed market operator does not meet the requirements referred to in section 314 or 315, the Minister may also, by written notice to the licensed market operator, suspend or cancel the licence (following the proced- 20 ure set out in section 323).
15 (2) Control limits on licensed market operators 343 Power to impose control limits on licensed market (1) operators The Governor-General may, by Order in Council made on the 25 recommendation of the Minister, make regulations imposing, altering, or revoking a control limit (which is the highest per- centage of voting rights in the body corporate that may be held or controlled by any person) for a body corporate that— is, or may be, a licensed market operator; or (a) is a holding company of a body corporate referred to in (b) paragraph (a).
30 (2) A control limit does not apply to a body corporate before its licence, or its subsidiary’s licence, as a licensed market oper- ator takes effect.

35 234 (3) (4) Financial Markets Conduct Bill Part 5 cl 345 The Minister must not make a recommendation for the pur- poses of subsection (1) unless he or she has consulted the body corporate and is satisfied that it is in the public interest to make the recommendation.
For the purposes of this section and the rest of this subpart,— 5 control, in relation to a voting right, means having, directly or indirectly, effective control of the voting right voting right means a currently exercisable right to cast a vote at meetings of members or shareholders of a body corporate, not being a right to vote that is exercisable only in 1 or more 10 of the following circumstances: (a) during a period in which a payment or distribution (or part of a payment or distribution) in respect of the finan- cial product that confers the voting right is in arrears or some other default exists: on a proposal that affects rights attached to the financial product that confers the voting right: during the liquidation of the body corporate: in respect of a special, immaterial, or remote matter that is inconsequential to control of the body corporate.
15 20 (b) (c) (d) Compare: 1988 No 234 s 36S (2) 344 Control limit not to be exceeded (1) No person may hold or control voting rights in a body corpo- rate that exceed any control limit for that body corporate that applies under regulations made under section 343, except in 25 accordance with an approval under section 346.

For the purposes of this section, voting rights held or con- trolled by an associated person of a person must be treated as voting rights held or controlled by that person.
Subsection (1) does not apply to any voting rights in a body 30 corporate held or controlled by a person to the extent that those rights were held or controlled by that person before the control limit was imposed or decreased, as the case may be.
Compare: 1988 No 234 s 36T (3) 345 Effect of exceeding control limit (1) Every person who contravenes section 344— 35 235 Part 5 cl 346 Financial Markets Conduct Bill (a) must take the steps that are necessary to ensure that the person is no longer in contravention of that section at the end of 60 working days after the date of first contra- vention; and (b) must not exercise or control the exercise of any vot- 5 ing rights that exceed the control limit while he or she contravenes that section.
(2) An exercise of voting rights by or under the control of a person in contravention of subsection (1)(b) is of no effect, and must be disregarded by the person responsible for counting the votes 10 concerned.

Compare: 1988 No 234 s 36U 346 Application for approval to exceed control limit (1) A person may apply to the FMA for approval for any person or (2) (3) (4) class of persons to exceed a control limit for a body corporate 15 that applies under regulations made under section 343.
The FMA must, within a reasonable time, give the application to the Minister with advice about the application.

The Governor-General may, by Order in Council made on the recommendation of the Minister, approve an application under 20 subsection (1) and specify the terms and conditions (if any) applying to the approval.
The Minister may not make a recommendation for the pur- poses of subsection (3) unless,— (a) (b) if the body corporate is not the applicant or 1 of the 25 applicants for the approval, he or she has consulted the body corporate on the application at least 20 working days before making the recommendation; and he or she is satisfied that it is in the public interest to make the recommendation.
(5) An approval granted under subsection (3)— (a) may have retrospective effect; but (b) is of no effect if any term or condition of the approval has not been complied with.

30 236 Financial Markets Conduct Bill Part 5 cl 349 (6) An approval granted under subsection (3) is for the purposes of the control limit only, and not for the purposes of any other enactment.
Compare: 1988 No 234 s 36V 347 Revocation or amendment of approval (1) The Governor-General may, by Order in Council made on the recommendation of the Minister,— (a) (b) revoke an approval granted under section 346; or vary, revoke, or suspend any term or condition of such an approval.
5 10 (2) The Minister may not make a recommendation for the pur- poses of subsection (1) unless— (a) he or she has consulted the person to whom the approval was granted and the body corporate concerned; and he or she is satisfied that it is in the public interest to 15 make the recommendation.
(b) Compare: 1988 No 234 s 36W Other provisions relating to licensing of financial product markets 20 348 FMA may give advice to Minister (1) The FMA may give advice to the Minister in relation to any matter in respect of which the Minister has a discretion under this subpart or any other matter concerning financial product markets.
If the Minister has delegated a function or power to the FMA 25 under this subpart, any obligation under this subpart for the FMA to give advice to the Minister, or for the Minister to have regard to the advice of the FMA, in connection with that matter does not apply.
(2) 349 Delegation of Minister’s licensing functions and powers to 30 (1) FMA The Minister may, either generally or particularly, delegate to the FMA all or any of the Minister’s functions or powers under this subpart in connection with the licensing of financial product markets.

35 237 Part 5 cl 350 Financial Markets Conduct Bill (2) A delegation under this section must be in writing.
(3) (4) (5) (6) The FMA must not delegate any functions or powers delegated to it under this section except in accordance with the terms of the delegation.

The power of the Minister to delegate under this section— (a) is subject to any prohibitions, restrictions, or conditions contained in any other Act in relation to the delegation of the Minister’s functions or powers; but does not limit any power of delegation conferred on the Minister by any other Act.
(b) The FMA may perform or exercise any functions or powers delegated to it under this section in the same manner and with the same effect as if they had been conferred on the FMA di- rectly (subject to any restrictions or conditions imposed under the delegation).

If the FMA purports to act under a delegation under this sec- tion, the FMA must, in the absence of proof to the contrary, be presumed to be acting in accordance with the terms of the delegation.
5 10 15 (7) No delegation affects or prevents the performance or exercise 20 of any function or power by the Minister or affects the respon- sibility of the Minister for the actions of a person acting under the delegation.
350 Regulations modifying subpart for licensed markets (1) The Governor-General may, on the recommendation of the 25 Minister in accordance with subsection (3), make regula- tions for any 1 or more of the following purposes: (a) providing that any 1 or more of the provisions in sub- parts 2 to 8 of this Part (including any definitions in this Act as they apply in the relevant provisions, but ex- 30 cluding the obligations in section 312) do not apply in respect of a licensed market or class of licensed markets (and accordingly do not apply in relation to any issuers listed or financial products quoted on those markets): providing for replacement or modified provisions to 35 apply in respect of the licensed market or class of licensed markets (for example, instead of having con- (b) 238 Financial Markets Conduct Bill Part 5 cl 351 tinuous disclosure provisions in the listing rules and requiring listed issuers to comply with those provisions, having periodic or event-based disclosure or some other way of dealing with any information assymmetries in the market): stating which provisions of the regulations are Part 5 market provisions for the purposes of this Act (see Part 7, in which Part 5 market provisions are specified to be civil remedy provisions), including which provisions are alternative disclosure obligations for the purposes of 10 section 312: providing that a financial product market must not be treated as a licensed market for the purposes of any other specified enactment.
5 (c) (d) (3) (2) Any regulations made under subsection (1) must specify 15 the licensed market or class of licensed market to which they apply.
The Minister must, in relation to a recommendation under this section,— (a) (b) have regard to the matters set out in section 306; and be satisfied, in relation to any recommendation relat- ing to subsection (1)(a) or (1)(d), that the extent to which the regulations disapply any enactment to a li- censed market is not broader than is reasonably neces- sary to address the matters that gave rise to the regula- 25 tions.
20 Subpart 8—Operation of licensed markets 351 Licensed market operator must notify FMA of disciplinary actions and suspected contraventions (1) A licensed market operator must notify the FMA, in accord- 30 (b) ance with sections 352 and 353, if— (a) the operator takes any disciplinary action against a par- ticipant in the licensed market: the operator knows or suspects that a person has com- mitted, is committing, or is likely to commit a signifi- 35 cant contravention of— (i) the market rules; or 239 Part 5 cl 352 Financial Markets Conduct Bill (ii) this Act, the Takeovers Act 1993, or any enact- ment made under either of those Acts.
(2) The FMA must notify the licensed market operator of its de- cision to take, or not to take, any action in relation to a notifi- cation under subsection (1)(b)(ii).

Compare: 1988 No 234 s 36ZD 5 352 When notification required The licensed market operator must give the notice under sec- tion 351 immediately after taking the disciplinary action or knowing or suspecting the person has committed, is commit- 10 ting, or is likely to commit a significant contravention.
Compare: 1988 No 234 s 36ZE 353 Details and method of notification (1) The notice under section 351 must include— (a) (b) the person’s name and contact details; and if it relates to a disciplinary action, the grounds for, na- ture of, and reasons for the action taken; and if it relates to a known or suspected contravention, the facts supporting the licensed market operator’s view and the obligation to which the known or suspected 20 contravention relates; and any other information required by the regulations or by the FMA under section 357.
(c) (d) 15 (2) The licensed market operator must give the notice in the form and by the method required by the regulations (if any).

Compare: 1988 No 234 s 36ZF 25 354 Licensed market operator must ensure FMA has access to real-time trading and other information (1) A licensed market operator must, if requested by the FMA, give to the FMA the information that is necessary to enable 30 the FMA to carry out real-time surveillance of the operation of the licensed market.
The FMA must pay all reasonable costs of the licensed market operator in providing the information under this section.
Compare: 1988 No 234 s 36ZFA 35 (2) 240 Financial Markets Conduct Bill Part 5 cl 357 355 Licensed market operator must give FMA material (1) (2) (3) information given to market participants If a licensed market operator makes material information available to participants, or any class of participants, in a licensed market, the licensed market operator must also give 5 that information to the FMA in accordance with this section.
The licensed market operator must give that information to the FMA immediately after giving it to the participants.

The licensed market operator must give that information to the FMA in the same form and by the same method as it gives that 10 information to the participants.
Compare: 1988 No 234 ss 36ZG, 36ZH, 36ZI 356 Waiver of notification and disclosure obligations (1) Sections 351 to 355 do not apply to the extent that the FMA— (a) waives its entitlement to any notice or information or class or classes of notices or information; or agrees with the licensed market operator a different time, form, or method of notification or disclosure.

(b) 15 (2) A waiver or an agreement under this section must be in writing.
20 Compare: 1988 No 234 s 36ZJ 357 Licensed market operator must give FMA or Takeovers Panel other information and assistance on request (1) A licensed market operator must give to the FMA or the Takeovers Panel (or any person authorised by the FMA or 25 the Takeovers Panel) information, assistance, and access to the licensed market operator’s facilities if the FMA or the Takeovers Panel reasonably requests it in order to carry out its functions.
The FMA or the Takeovers Panel must require that informa- 30 tion, assistance, or access by notice in writing to the licensed market operator.

Compare: 1988 No 234 s 36ZK (2) 241 Part 5 cl 358 Financial Markets Conduct Bill 358 Power to disclose further information (1) A licensed market operator may provide to the FMA any infor- mation that the licensed market operator considers may assist the FMA in the performance of the FMA’s functions.
(2) A licensed market operator may provide to the Takeovers 5 Panel any information that the licensed market operator con- siders may assist the Takeovers Panel in the performance of its functions.
Compare: 1988 No 234 s 36ZL 359 Licensed market operator must give notice and 10 (1) (2) have regard to submissions on continuous disclosure determinations This section and section 360 apply to a determination by a licensed market operator if— (a) the determination exempts from, waives, or determines 15 the meaning of a continuous disclosure provision of its listing rules for a licensed market (or varies or revokes a determination of that kind); and that continuous disclosure provision relates to material information that is not generally available to the market.
20 (b) The licensed market operator must— (a) give the FMA no less than 2 trading days’ written notice before making the determination of— the proposed terms of the determination; and (i) the reasons for the proposed determination; and (ii) have regard to any written submissions made to it by the FMA within that notice period; and (b) (c) must, as soon as is reasonably practicable after making the determination, give written notice to the FMA of— (i) (ii) the terms of the determination; and the reasons for the determination.
(3) A failure to comply with this section or section 360 does not affect the validity of a determination.
Compare: 1988 No 234 s 36ZM 242 25 30 10 15 20 Financial Markets Conduct Bill Part 5 cl 362 360 Limited notice and submissions for urgent determinations If a licensed market operator thinks it is necessary or desirable in the public interest for a determination to be made more ur- gently than section 359(2) permits,— (a) it may give less than 2 trading days’ notice before it 5 makes the determination, and the notice and submis- sions may be oral rather than written; but it must include in that notice the reasons for acting ur- gently and must otherwise comply with that subsection.
(b) Compare: 1988 No 234 s 36ZN 361 FMA may give directions to licensed market operators (1) The FMA may give a direction under subsection (2) in ac- cordance with sections 362 to 366 in relation to a licensed market.
The FMA may, for up to 15 trading days,— (a) direct a licensed market operator to suspend trading of quoted financial products or a class of quoted financial products; or give the licensed market operator any other direction in relation to that trading; or direct a licensed market operator to suspend participa- tion by a participant or class of participants in the li- censed market.
(b) (c) For the avoidance of doubt, the FMA may not use its power to direct the licensed market operator to amend the market rules 25 or to direct the licensed market operator on the making of a determination on the market rules.

The direction is subject to appeal only in accordance with sec- tion 508.

Compare: 1988 No 234 s 36ZO 30 (2) (3) (4) 362 Grounds for continuous disclosure direction (1) A direction on the grounds in this section is a continuous dis- closure direction.
(2) A direction may be given under section 361 in accordance with sections 364 to 366 if the FMA— 35 243 Part 5 cl 363 Financial Markets Conduct Bill (a) (b) has regard to the purpose of this Part (and the main and additional purposes of the Act stated in sections 3 and 4) and any other matters it considers relevant; and is satisfied that 1 of the following grounds applies: (i) (ii) (iii) a listed issuer has contravened a continuous dis- 5 closure obligation or a term or condition of a con- tinuous disclosure exemption; or a determination by a licensed market operator to which section 359 applies does not achieve appropriate continuous disclosure by a listed is- 10 suer of material information that is not generally available to the market; or the licensed market operator’s administration of the continuous disclosure provisions of its list- ing rules does not achieve appropriate continuous 15 disclosure by a listed issuer of material informa- tion that is not generally available to the market; and (c) is also satisfied that the direction is necessary or desir- able to protect people who are trading the quoted finan- 20 cial products or the class of quoted financial products and that there is no more appropriate course of action to address the situation.
Compare: 1988 No 234 s 36ZP 363 Grounds for other directions 25 A direction may also be given under section 361 in accord- ance with sections 364 to 366 if the FMA is satisfied that— the direction is necessary or desirable to protect people (a) who are trading the quoted financial products, or the class of quoted financial products, of 1 or more listed 30 issuers; but it is not a matter relating to continuous disclosure.
(b) Compare: 1988 No 234 s 36ZQ 364 Notice, opportunity for licensed market operator to act, and submissions before FMA gives directions (1) A direction may be given under section 361 only if— 35 244 Financial Markets Conduct Bill Part 5 cl 365 (a) (b) the FMA has given written notice to the licensed market operator and listed issuer or issuers concerned of— (i) its opinion that the requirements of section 362 or 363 are satisfied; and the proposed terms of the direction; and the reasons for its opinion; and (ii) (iii) after receiving the FMA’s notice, the licensed market operator does not take, within the reasonable period stated in the notice,— (i) 5 in the case of a proposed direction to suspend 10 trading of the quoted financial products, action to prevent that trading; or in any other case, any other action that, in the FMA’s view, is adequate to address the situation raised in the notice; and 15 (ii) (c) (d) the FMA has had regard to any written submissions made to it by the licensed market operator and the listed issuer or issuers concerned within that notice period; and the FMA still considers that it is appropriate to give the 20 direction to the licensed market operator.
(2) A reasonable period in subsection (1)(b) is, in the case of a continuous disclosure direction, 2 trading days (or any longer time the FMA wishes to allow) and, in the case of any other direction, any longer time that is reasonable in the circum- 25 stances.
Compare: 1988 No 234 s 36ZR 365 Limited notice and submissions for urgent continuous disclosure directions If the FMA thinks it is necessary or desirable in the public 30 interest for a continuous disclosure direction to be made more urgently than section 364 permits,— (a) it may give less than 2 trading days’ notice before it gives the direction, and the notice and submissions may be oral rather than written; but it must include in that notice the reasons for acting ur- gently and must otherwise comply with that section.
(b) 35 Compare: 1988 No 234 s 36ZS 245 Part 5 cl 366 Financial Markets Conduct Bill 366 Notice and opportunity to be heard and represented after FMA gives direction If a direction is given under section 361, the FMA— (a) must, as soon as is reasonably practicable, give written notice to the licensed market operator and listed issuer 5 or issuers (if any) concerned of— (i) its opinion that the requirements of section 362 or 363 are satisfied; and the terms of the direction; and the reasons for its opinion; and (ii) (iii) 10 (b) must, after the direction is given, give each of those persons or the person’s representative an opportunity to make written submissions and to be heard on the matter; and (c) may also give notice to any other person of the matters 15 in paragraph (a).
Compare: 1988 No 234 s 36ZT 367 Effect of directions to licensed market operator (1) A direction under section 361 has effect for the period speci- (2) fied in it (which may be a period of up to 15 working days) and, 20 during that period, the licensed market operator must comply with the direction and must not allow any trading that is con- trary to the direction to take place.
If the FMA considers that the direction should have effect for a period longer than 15 working days, it may apply to the court 25 for, and the court may make, an order that the licensed market operator comply with the direction for the period that the court thinks fit.

Compare: 1988 No 234 s 36ZU 368 Provisions as to directions (1) The FMA may vary a direction under section 361 in the same way as it may make that direction.
The FMA may revoke a direction under section 361 by giv- ing written notice to the licensed market operator.

Compare: 1988 No 234 s 36ZV (2) 246 30 35 Financial Markets Conduct Bill Part 5 cl 371 369 Contracting out of or modification of continuous (1) (2) disclosure process requirements The FMA and a licensed market operator may, by agreement in writing, contract out of, or modify, any of the requirements of sections 359, 360, and 364 to 366.
For that purpose, the licensed market operator may agree to waive or modify obligations under those sections that are owed to listed issuers listed on the relevant licensed market.

Compare: 1988 No 234 s 36ZW 370 Offence for failing to comply with direction A licensed market operator that refuses or fails, without rea- sonable excuse, to comply with a direction under section 361 commits an offence and is liable on summary conviction to a fine not exceeding $300,000.
Compare: 1988 No 234 s 36ZX Subpart 9—Transfer of transferable financial products 371 Financial products to which this subpart applies This subpart applies to financial products if— (1) (a) (b) the financial products are transferable; and the names of the holders of the products are entered in a register kept under this Act or otherwise kept in New Zealand.
(2) However, this subpart does not apply to— 5 10 15 20 (a) interests in a superannuation scheme or KiwiSaver 25 scheme: derivatives: financial products of a prescribed kind.

(b) (c) In this subpart, specified financial product means a financial product to which this subpart applies.
30 (3) 247 Part 5 cl 372 Financial Markets Conduct Bill Transfer of specified financial products using transfers in prescribed form or containing prescribed information 372 Transfer of specified financial products by transfer (1) Specified financial products disposed of in an authorised trans- 5 action may be transferred by means of a products transfer that— (a) either— (i) is in the form prescribed for the purposes of this section; or contains the prescribed information; and (ii) is duly completed; and is executed, in New Zealand, by the transferor (whether or not it is also executed by the transferee).
10 (3) (2) However, subsection (1) does not apply if the specified fi- 15 nancial products impose a liability to the issuer on the trans- feree.
In this subpart, authorised transaction means an acquisition or disposal of financial products in which each of the parties is, or is acting through the agency of, any of the following persons 20 (who are acting in the ordinary course of business): (a) a person authorised to undertake trading activities on a licensed market: a solicitor in practice on his or her own account: a chartered accountant: a trustee corporation (as defined in section 2 of the Trustee Act 1956): a registered bank: a person prescribed for the purposes of this definition.
(e) (f) Compare: 1991 No 119 s 3 (b) (c) (b) (c) (d) 373 Transfer of specified financial products by products transfer and brokers transfer Specified financial products sold in a licensed market transac- tion may be transferred by means of— a products transfer that— (a) (i) either is in the form prescribed for the purposes of this paragraph or contains the prescribed infor- mation; and (1) 248 25 30 35 Financial Markets Conduct Bill Part 5 cl 375 (ii) (iii) (iv) is duly completed; and is executed, in New Zealand, by the transferor (whether or not it is also executed by the trans- feree); and specifies financial products that include the finan- 5 cial products sold; and (b) a brokers transfer that— (i) 10 (ii) (iii) either is in the form prescribed for the purposes of this paragraph or contains the prescribed infor- mation; and is duly completed; and specifies the financial products sold.
Subsection (1) applies whether or not the specified financial products impose a liability to the issuer on the transferee.

In this subpart, licensed market transaction means a sale and 15 purchase of financial products in which each of the parties is, or is acting through the agency of, a person authorised to undertake trading activities on a licensed market who is acting in the ordinary course of that business.
Compare: 1991 No 119 s 4 20 (2) (3) (2) 374 Products transfer does not need to be witnessed (1) The execution of a products transfer for the purposes of sec- tion 372 or 373(1)(a) does not need to be witnessed.

Subsection (1) does not affect any enactment, rule of law, constitution, deed, or agreement regulating the execution of 25 documents by companies or other bodies corporate or by any particular company or body corporate.
Compare: 1991 No 119 s 5 375 Transfers to be instruments of transfer for purposes of other enactments and instruments For the purposes of any enactment, constitution, or agreement that relates to the transfer of financial products or to instru- ments of transfer of financial products,— (a) a products transfer to which section 372 applies must be treated as being an instrument of transfer of the fi- 35 nancial products specified in the products transfer: 30 249 Part 5 cl 376 Financial Markets Conduct Bill (b) a products transfer to which section 373 applies and a brokers transfer together must be treated as being an instrument of transfer of the financial products specified in both transfers.
Compare: 1991 No 119 s 6(1) 5 Transfer of specified financial products by electronic means 376 Approval of electronic transfer system (1) The Governor-General may, on the advice of the Minister given in accordance with a recommendation of the FMA, by 10 Order in Council, approve a system or systems that is or that are wholly or partly electronic for the transfer of specified financial products.
(2) A system of transfer may be approved under this section by reference to the name of the system or any name by which it 15 is commonly known.

(3) A system of transfer may be approved under this section whether or not it also involves the use of a procedure or part of a procedure for the transfer of financial products that is authorised under this Act or otherwise.
The FMA must not make a recommendation under subsec- tion (1) unless the FMA has consulted the persons or repre- sentatives of the persons that the FMA considers will be sub- stantially affected by the Order in Council.

(4) 20 (5) A failure to comply with subsection (4) does not affect the 25 validity of an Order in Council made under this section.
Compare: 1991 No 119 s 7(1)–(3), (6)–(8) 377 Specified financial products may be transferred under approved system Specified financial products disposed of, whether in an author- 30 ised transaction or licensed market transaction or otherwise, may be transferred in accordance with a system of transfer that is approved under section 376.

Subsection (1) applies whether or not the specified financial products impose a liability to the issuer on the transferee.
Compare: 1991 No 119 s 7(5) 35 (1) (2) 250 Financial Markets Conduct Bill Part 5 cl 381 378 Minor technical modifications to system Modifications of a minor technical nature may, from time to time, be made to a system of transfer approved by an Order in Council made under section 376 and, in any such case, the system incorporating those modifications must be treated as 5 having been approved by the order.
Compare: 1991 No 119 s 7(4) Registration may not be refused (1) 379 Registration may not be refused on ground that financial products have been transferred under this subpart If financial products have been transferred in accordance with section 372, 373, or 377, no person may refuse to regis- ter the transfer on the ground that the financial products have been so transferred or that the financial products have not been transferred by other means.
10 15 (2) Nothing in this section affects any right a person has to refuse to register a transfer of securities on any other ground.

Compare: 1991 No 119 s 8 380 Effect of this Act on other enactments (1) This subpart has effect despite anything to the contrary in any 20 enactment, rule of law, constitution, deed, or agreement (but subject to any order made under this Act).

(2) Nothing in this subpart affects the validity of any means of (3) transferring financial products other than under this subpart.
Sections 35, 39(1), and 84 of the Companies Act 1993 must 25 be read subject to the provisions of this subpart.
Compare: 1991 No 119 s 9 Subpart 10—Unsolicited offers to purchase financial products off-market 381 Definitions relating to unsolicited offer regulations and 30 (1) related provisions For the purposes of this Act, an unsolicited offer means an offer to which all of the following apply: (a) the offer is to acquire a financial product, to acquire a power to dispose of a financial product, or to acquire an- 35 251 Part 5 cl 382 Financial Markets Conduct Bill (b) (c) (d) (e) other interest in or right attaching to a financial product, made by a person (A) to another person (B) (whether the acquisition is by A or an associated person of A): the offer is unsolicited by B: the offer is not made on a licensed market: the offer is within the class or classes of unsolicited offers to which the regulations apply: the offer is not a takeover offer for a financial product under the Takeovers Code nor an acquisition or a re- demption by a company of its shares under the Com- 10 panies Act 1993.
5 (2) For the purposes of this subpart, and any regulations made under this subpart, an offer made by A includes an invitation or a proposal for A (or an associated person of A) to make an offer.

Compare: 1988 No 234 s 48DA 15 382 Regulations concerning unsolicited offers (1) The Governor-General may, on the recommendation of the Minister in accordance with subsection (3), make regula- tions setting out the rules applying to unsolicited offers for any 20 or all of the purposes set out in subsection (2).
The purposes are— (a) (ii) ensuring offerees are fully informed of— (i) the current market price of a quoted financial product or, for a non-quoted financial product, a 25 fair estimate of the value of the non-quoted fi- nancial product and the basis for making that es- timate; and the material terms of the offer and their effect; and any warnings issued by the FMA (if ordered by the FMA to be contained in or to accompany offer documents); and (iv) their rights and remedies under the regulations: ensuring that notice of an unsolicited offer to product 35 holders is given to the relevant listed issuer or issuer and the FMA: (iii) 30 (b) (2) 252 Financial Markets Conduct Bill Part 5 cl 383 (c) ensuring that no agreement to transfer may bind offer- ees for a minimum period, for the purpose of enabling offerees to consider, and reconsider, any decision to ac- cept an offer: requiring a minimum or maximum offer period, or both: 5 (d) (e) setting out any other rules applying to unsolicited offers.
In formulating recommendations to make regulations under this section, the Minister must— (a) have regard to the objective of preventing unfair prac- tices in the making of unsolicited offers; and consult with the FMA.
10 (b) Compare: 1988 No 234 s 48DB (3) 383 Specific provisions for regulations concerning unsolicited offers The regulations made under section 382 may, without limit- 15 ing that section,— (a) (b) (c) (d) (e) (f) (g) 20 define the class or classes of unsolicited offers and fi- nancial products to which the regulations apply: define or clarify the meaning of unsolicited for the pur- poses of this subpart: prescribe requirements in relation to unsolicited offers and the making of those offers, including requirements as to the form and content of those offers, variations of those offers, the updating and resending of offer docu- ments or other corrective statements, and the implica- 25 tion of terms into the offer or any resulting agreement: prescribe the information, statements, certificates, or other documents that must be supplied to offerees, the relevant listed issuer or issuer, and the FMA: provide for any duties or functions of the FMA in con- 30 nection with the rules applying to unsolicited offers: state which obligations are unsolicited offer provisions for the purposes of this Act: provide for the exercise of a right to withdraw a noti- fication of a decision to accept an unsolicited offer, a 35 right to refuse to complete a transfer, or any other right or remedy of offerees, and any consequences and obli- gations that apply in those cases: 253 Part 5 cl 384 Financial Markets Conduct Bill (h) (i) provide for any powers of, and requirements on, listed issuers, issuers, or their agents in connection with trans- fers under an unsolicited offer and provide for protec- tions from liability for those persons, persons adminis- tering a register of financial products, and other persons 5 for the purposes of section 384: provide for the regulations to— (i) (ii) extend to or apply in respect of any conduct of an associated person of an offeror and any conduct that, in substance or effect, constitutes an unso- 10 licited offer: prohibit contracting out of the regulations and in- clude any other provision or
 provisions designed to prevent avoidance of the regulations (for ex- ample, prohibiting persons from inviting others 15 to make an offer to sell a financial product in cir- cumstances in which, if the invitation were an offer to acquire the financial product, it would be an unsolicited offer to which the regulations ap- plied): 20 provide for transitional matters.
(j) Compare: 1988 No 234 s 48DC 384 Protection from liability in connection with unsolicited (1) offer provisions This section applies to any person who— (a) is stated by regulations made under section 382 to be a protected person for the purposes of this section; and is not in contravention of an unsolicited offer provision or exemption.
(b) 25 (2) A person to whom this section applies is not liable for any act 30 done or omitted to be done by that person in good faith if the act or omission is— (a) required by an unsolicited offer order made by the FMA; or required by an order made by the court under Part 7 in 35 connection with a contravention of an unsolicited offer provision or exemption; or (b) 254 Financial Markets Conduct Bill Part 5 cl 385 (c) stated by regulations made under section 382 to be a protected act or omission for the purposes of this sec- tion.
Compare: 1988 No 234 s 47AA Subpart 11—Civil liability for certain contraventions of this Part 5 385 Part 5 market provisions (1) All of the provisions specified in subsections (3) and (4) are Part 5 market provisions.
(3) (2) A contravention of any of the provisions listed in subsection 10 (3) may give rise to a civil remedy (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.
The provisions are the following: (a) (b) (c) (d) sections 235 to 237 (insider conduct prohibited): sections 256, 257, and 260 (market manipulation): section 265 (continuous disclosure): section 308 (need for financial product market li- 20 cence): section 309 (prohibition on holding out).
(4) A contravention of any of the following may give rise to a civil remedy (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or 25 $600,000 in any other case: (a) (e) 15 sections 270 to 273 and sections 283 to 285 (sub- stantial holding disclosure obligations): sections 295 and 296 (directors’ and senior man- agers’ disclosure obligations): section 326 (licensed markets must be operated under market rules that comply with subpart): section 333 (overseas-regulated markets must give notice of market rules and rule changes to FMA): section 341 (Minister may give licensed market obli- 35 gations direction to licensed market operator): section 345(1)(a) (effect of exceeding control limit): 30 (b) (c) (d) (e) (f) 255 Part 6 cl 386 Financial Markets Conduct Bill (g) (h) sections 351, 354, 355, 357, 359, and 367 (require- ments applying in operation of licensed market): unsolicited offer provisions imposed under section 382.
Part 6 Licensing and other regulation of market services 5 386 Overview (1) This Part provides for the licensing of market services and regulates the provision of market services by licensees and 10 other persons as follows: (a) subpart 1 determines which market service providers must be licensed, and which other providers of market services may be licensed: the issue of those licences, their conditions, and their 15 expiry or cancellation are dealt with in subpart 2: subpart 3 provides for the monitoring and enforcement of those licences: subpart 4 requires licensees to give disclosure about certain market services when provided to retail in- 20 vestors: subpart 5 contains requirements for licensees to pro- vide certain market services to retail investors under client agreements: subpart 6 regulates the provision of discretionary in- 25 vestment management services by a licensee under its licence and the provision of custodial services under that service by a custodian: subpart 7 provides for the making of regulations on the holding and application of investors’ funds and property 30 by derivatives issuers (whether or not they are licensed or are making regulated offers of derivatives): subpart 8 identifies the civil remedy provisions under this Part.
(b) (c) (d) (e) (f) (g) (h) (2) This section is a guide only to the general scheme and effect 35 of this Part.
256 Financial Markets Conduct Bill Part 6 cl 387 Subpart 1—Key provisions 387 When provider of market services must be licensed (1) A person must not provide any of the following market ser- vices without holding a market services licence that covers that service: (a) acting as a manager of a registered scheme (other than a restricted scheme): acting as an independent trustee of a restricted scheme: acting as a provider of a discretionary investment man- agement service (see subpart 6): acting as a derivatives issuer in respect of a regulated offer of derivatives.
(b) (c) (d) 5 10 (2) (3) Subsection (1) does not apply to the extent that the person— acts as the operator of a designated settlement system (a) (within the meaning of Part 5C of the Reserve Bank of 15 New Zealand Act 1989): carries out activities that are covered by a financial product market licence: carries out activities as a participant in a licensed mar- ket, or in another prescribed overseas market, in the pre- 20 scribed circumstances.
(b) (c) Subsection (1)(c) does not apply (unless a declaration ap- plies under subpart 3 of Part 8) to the extent that— (a) the person is permitted to provide the discretionary in- vestment management service by sections 17 to 20 of 25 the Financial Advisers Act 2008; or the discretionary investment management service would not be a financial adviser service for the pur- poses of the Financial Advisers Act 2008 as a result of an exemption under section 13, 14, or 148 of that Act 30 or the regulations applying under that Act.
(b) Example An authorised financial adviser may provide a personalised ser- vice that is a discretionary investment management service under section 18 of the Financial Advisers Act 2008 and need not be a 35 DIMS licensee.
A registered person (whether an entity or an individual) may pro- vide a discretionary investment management service of any type 257 Part 6 cl 388 Financial Markets Conduct Bill Example—continued to a wholesale client under section 20 of the Financial Advisers Act 2008 and need not be a DIMS licensee.
A lawyer providing a discretionary investment management ser- vice in the ordinary course of a business of that kind is not, under section 14 of the Financial Advisers Act 2008, providing a finan- 5 cial adviser service for the purposes of that Act.

That exemption applies to the prohibition in this section also.
388 When providers of other market services may be licensed In addition, a person may hold a market services licence to (1) act as a provider of prescribed intermediary services (for ex- 10 ample, a person-to-person lending intermediary if prescribed by regulations).

See clause 6 of Schedule 1 for exclusions for offers through licensed intermediaries.
(2) 389 Meaning of licensed market services In this Act, licensed market services are those market ser- vices— (a) (b) that are required to be licensed under this Part; or for which a person holds a licence under this Part (whether or not required to do so).

15 20 390 Prohibitions on holding out (1) A person must not hold out that the person holds a market services licence if that is not the case.
(2) A person must not hold out that the person holds a market services licence that covers a service if that is not the case.
25 Subpart 2—Issue of licences, conditions, and duration 391 Principles guiding the exercise of FMA powers In exercising a power under this subpart, the FMA must be guided by the following principles: (a) exercising the power must be necessary or desirable in order to promote the main purposes of this Act as spe- 30 258 Financial Markets Conduct Bill Part 6 cl 394 cified in section 3 or the additional purposes specified in section 4; and in exercising the power, the FMA should not unneces- sarily restrict the licensing of persons.
(b) Issue of licences 392 FMA may issue licence The FMA may issue a licence in accordance with this subpart.

393 Application for licence (1) A person may apply for a licence in the manner that is specified (2) by the FMA.

The application may be for a licence to cover 1 or more market services (or 1 or more classes of services, if the FMA speci- fies, on its Internet site, classes into which a market service is divided).
5 10 (3) An applicant must provide to the FMA the information that is 15 required by the FMA to assist it in determining the application.
394 When licence must be issued The FMA must, after receiving an application under section 393, issue a licence that covers a market service or the class of market service to which the application relates if the FMA 20 is satisfied that— (a) the applicant is a fit and proper person to hold the li- cence; and the eligibility criteria (if any) that are prescribed by the regulations for licences for that service are satisfied in 25 respect of the application; and the applicant’s directors, senior managers, and proposed directors and senior managers satisfy the requirements that are prescribed by the regulations for licences for that service (if any); and the applicant is capable of effectively performing that service (having regard to the proposed conditions of li- cence); and 30 (b) (c) (d) 259 Part 6 cl 395 Financial Markets Conduct Bill (e) (f) (g) there is no reason to believe that the applicant will not comply with the market services licensee obligations; and the applicant— is (i) Providers (Registration and Dispute Resolution) Act 2008; or complies with section 13(a) and (b) of that Act; and registered under (ii) the Financial Service 5 in the case of an applicant for a licence to act as a man- 10 ager of a registered scheme or to be a DIMS licensee, the applicant or any subsidiary under section 398 does not have in its constitution any provision under which directors of the applicant or subsidiary (as the case may be) may, when exercising powers or performing duties 15 as a director, act otherwise than in the best interests of the applicant or subsidiary.
395 Procedural requirements (1) The FMA must, before making a decision under section 394,— (a) (b) have regard to the prescribed matters; and have regard to whether the applicant is a QFE or a mem- ber of a QFE group or is a registered bank; and consult with all prescribed persons or classes of pre- scribed persons (if any).
(c) 20 25 The FMA must not refuse to issue a licence, or include limits or restrictions under section 401(3)(a) that are materially more restrictive than those requested in the application, unless— (a) the FMA gives the applicant no less than 10 working days’ written notice of the following matters before it 30 exercises the power: (i) that the FMA may refuse to issue the licence or impose the limits or restrictions; and (ii) the reasons why it may exercise that power; and the FMA gives the applicant or the applicant’s repre- 35 sentative an opportunity to make written submissions on the matter within that notice period.
(b) (2) 260 Financial Markets Conduct Bill Part 6 cl 398 (3) In this section, member of a QFE group has the same mean- ing as in section 5 of the Financial Advisers Act 2008.

(2) (2) (3) 396 Notice of decision (1) the applicant; and every other prescribed person.
The FMA must give written notice of its decision under sec- tion 394 to— (a) (b) If the FMA refuses to issue a licence or includes limits or re- strictions under section 401(3)(a) that are materially more restrictive than those requested in the application, the written 10 notice under subsection (1) must include a statement of the FMA’s reasons for exercising the power.
5 397 Licence must be issued for particular market services (1) If the FMA decides to issue a licence, it must ensure that it specifies the particular market services, or class of market ser- 15 vices, that it covers.

The same licence may cover more than 1 type of market ser- vices.
In that case,— (a) a reference in this Act to the market services that a li- 20 cence covers is taken instead to be a reference to each of those market services severally; and the decision to add another market service or class of market services to a licence must be made on the same basis as a decision to issue a licence; and a licence may be varied or cancelled in respect of 1 of those market services or classes only, as if each were separately licensed.
25 (b) (c) 398 Licence may cover subsidiaries (1) A licence may authorise 1 or more subsidiaries of the licensee 30 to provide a market service covered by the licence if the FMA is satisfied that the subsidiary meets the eligibility criteria and other requirements prescribed by the regulations for the pur- poses of this section.
261 Part 6 cl 399 Financial Markets Conduct Bill (2) In that case, a reference to the licensee in this Act is a reference to the licensee and any subsidiary providing the market service under the licence.

399 FMA must send licence details to Registrar (1) (c) The FMA must send the details specified in subsection (2) 5 to the Registrar.
The details, for each licence, are— the name of the licensee; and (a) the market services or class of market services covered (b) by the licence; and the conditions of the licence imposed by the FMA (in- cluding whether an associated custodian is permitted for the purposes of a discretionary investment management service); and the subsidiaries authorised to provide the market ser- 15 vices (if any); and any other prescribed information.
(e) The FMA may publicly notify any details about a licence as it thinks fit.

(d) 10 Conditions of licence 400 Conditions of licence (1) The licence is subject to— (a) (b) a condition that the licensee may, under the licence, pro- vide only the market services or class of market services to which the licence relates; and the conditions imposed by the FMA under section 401; and the conditions imposed by regulations (if any).
(c) The condition in subsection (1)(a) is subject to the limits and restrictions imposed under section 401(3)(a).

The licensee must comply with the conditions imposed on the licensee’s licence.
20 25 30 (2) (3) (2) (3) 401 When FMA may impose permitted conditions (1) The FMA may, by written notice to the applicant or licensee,— 262 Financial Markets Conduct Bill Part 6 cl 403 (a) (b) impose conditions on a licence when the licence is is- sued; and vary, revoke, add to, or substitute any conditions of li- cence imposed under this section at any time after the licence is issued.
5 (2) A condition referred to in subsection (1) may only be of a prescribed kind or relate to a prescribed matter (except as set out in subsection (3)).
(3) A condition referred to in subsection (1) may— (a) (b) (c) impose limits or restrictions on the services that are 10 covered by the licence (for example, by reference to particular financial products, issuers, or investors, or classes of financial products, issuers, or investors, or by reference to any other matters): impose conditions relating to the requirements referred 15 to in section 394 or 398 (for example, to ensure that those requirements continue to be satisfied and to re- quire verification that those requirements continue to be satisfied): specify the date of expiry of the licence (the expiry 20 date).
402 Licensee may apply for variation of conditions (1) A licensee may apply, in the manner that is specified by the FMA, for the FMA to exercise a power under section 401(1)(b) (for example, to vary a condition that imposes 25 restrictions on the services that can be provided under the licence).

(2) A licensee must provide to the FMA the information that is required by the FMA to assist it in determining the application.
403 Procedure for variation of conditions 30 The FMA must not exercise a power under section 401(1)(b) (except on an application under section 402), or refuse an application for a variation under section 402, unless— (a) the FMA gives the licensee no less than 10 working days’ written notice of the following matters before it 35 exercises the power: (i) that the FMA may exercise the power; and 263 Part 6 cl 404 Financial Markets Conduct Bill (b) the reasons why it may exercise the power; and (ii) the FMA gives the licensee or the licensee’s representa- tive an opportunity to make written submissions on the matter within that notice period.
404 Consequences of contravening conditions (1) If a licensee contravenes a condition of its licence, the FMA may exercise a power under subpart 3 (for example, it may require the licensee to submit an action plan).

Subsection (1) does not limit subpart 3 of Part 7 (which provides for civil remedies that may be imposed in relation to 10 a contravention of a condition imposed by regulations).
(2) 5 Expiry or cancellation of licences 405 Duration of licence (1) A licence continues in force until the close of its expiry date (2) unless sooner cancelled.

If a licensee applies for a new licence no later than 2 months before the expiry date of an existing licence that the new li- cence is intended to supersede, and the application is not dis- posed of before the expiry date, the existing licence continues in force until the application is disposed of.
15 20 406 When FMA may cancel licence The FMA may cancel a licence— (a) if the licensee, by written notice, requests the FMA to do so; or if the FMA is satisfied that the licensee has died, is in- 25 capacitated, has ceased to exist, or has become subject to an insolvency event; or in accordance with subpart 3.
(b) (c) 407 Effect of expiry or cancellation of licence on appointments The expiry or cancellation of the licence of a person does not, 30 of itself, terminate an appointment held by the person (but, if the person continues to hold the appointment and does not obtain a licence that covers the appointment, the person may contravene section 387).
264 Financial Markets Conduct Bill Part 6 cl 410 Subpart 3—Monitoring and enforcement of licences 408 Meaning of material change of circumstances In this subpart, material change of circumstances, in relation to a licensee, means— (a) a change that adversely affects the licensee’s capacity to perform the market services covered by the licence in an effective manner; or a change that means that the requirements referred to in section 394 or 398 are not satisfied.
(b) 5 10 Reports 409 Licensee must deliver regular reports to FMA Every licensee must, at the prescribed times or on the occur- rence of the prescribed events and otherwise in the prescribed manner, send to the FMA reports that contain the prescribed 15 documents, information, and other matters.
410 Licensee must report certain matters (1) Every licensee must ensure that there are in place effective methods for— (a) monitoring the licensee’s compliance with its market 20 (2) (3) services licensee obligations; and (b) identifying material changes in circumstances.
Subsection (3) applies if a licensee believes that— (a) the licensee has contravened, may have contravened, or is likely to contravene a market services licensee obli- 25 gation in a material respect; or a material change of circumstances has occurred, may have occurred, or is likely to occur in relation to the licensee; or the information provided under section 393 or 402 is 30 false or misleading in a material particular.
(b) (c) The licensee must, as soon as practicable after the licensee forms the belief referred to in subsection (2), send a report containing details of the belief, the licensee’s grounds for the belief, and all other prescribed information— (a) to the FMA; or 35 265 Part 6 cl 411 Financial Markets Conduct Bill (b) if the licensee is a manager of a registered scheme (other than a restricted scheme),— (i) to the FMA and the supervisor, if the report is of a contravention or possible contravention of a market services licensee obligation imposed by a 5 condition of the licence; or to the supervisor, if the report is of a contraven- tion or possible contravention of any other mar- ket services licensee obligation.
(ii) 411 Restriction on section 410 A licensee is not required to provide, under section 410, in- formation that would, if so provided, be likely to incriminate the licensee under New Zealand law for an offence punishable by a fine or imprisonment.
FMA’s powers in case of contravention of market services licensee obligation, material change, etc 412 FMA’s powers in case of contravention of market services 10 15 licensee obligation, material change, etc The FMA may exercise a power under subsection (2) if it is 20 satisfied that— (a) a licensee has materially contravened a market services licensee obligation; or a material change of circumstances has occurred in re- lation to a licensee; or the information provided under section 393 or 402 by a licensee is false or misleading in a material particular; or a licensee is likely to materially contravene a market services licensee obligation or a material change of cir- 30 cumstances is likely to occur in relation to a licensee.
25 (b) (c) (d) The FMA may, by written notice to the licensee and otherwise in the prescribed manner, do 1 or more of the following: (a) (b) censure the licensee: require the licensee to submit an action plan to the FMA 35 within the time and in the manner specified by the FMA: give a direction to the licensee.
(c) (1) (2) 266 Financial Markets Conduct Bill Part 6 cl 415 (3) The FMA may also, by written notice to the licensee and other- wise in the prescribed manner, cancel the licence of the li- censee if it is satisfied that— (a) (b) subsection (1)(a), (b), or (c) applies; and the licensee does not meet the requirements referred to 5 in section 394 or 398.

(4) Section 401 also provides for the FMA to vary, revoke, add to, or substitute any conditions of a licence.
413 Procedure for exercising powers (1) The FMA must not exercise a power under section 412 un- 10 less— (a) the FMA gives the licensee no less than 10 working days’ written notice of the following matters before it exercises the power: that the FMA may exercise the power; and (i) (ii) the reasons why it may exercise the power; and the FMA gives the licensee or the licensee’s representa- tive an opportunity to make written submissions on the matter within that notice period.
15 (b) (2) The FMA must, before exercising a power under section 20 412(3), consider whether, in the circumstances, it would be more appropriate to exercise a power under section 412(2).

414 Notice requirements (1) The notice under section 412(2) or (3) must— (a) (b) state the FMA’s reasons for giving the notice; and in the case of section 412(3), specify the date on which the cancellation takes effect.

(2) The FMA must give a copy of the notice to every prescribed person.
415 Action plan Action plan If the notice under section 412 requires the licensee to submit an action plan to the FMA, the licensee must, as soon as prac- ticable but in any case within the time specified by the FMA 267 25 30 Part 6 cl 416 Financial Markets Conduct Bill and otherwise in the manner specified by the FMA, submit to the FMA an action plan that specifies— (a) the actions, as the case may be, that the licensee pro- poses to take to— (i) remedy or avoid the contravention or likely 5 contravention of the market services licensee obligation; or avoid any further contravention of the market ser- vices licensee obligation; or (ii) (iii) mitigate or avoid any adverse effects or changes 10 arising, or likely to arise, from the material change of circumstances; or correct the false or misleading information or mitigate the adverse consequences of providing the false or misleading information (or both); and 15 (iv) (b) the date by which each step will be taken.
416 Approval, amendment, or rejection of action plan If a licensee submits an action plan, the FMA may— (1) (a) (b) approve the action plan; or require the licensee to amend the action plan and resub- 20 mit it to the FMA by a specified date for approval or rejection; or reject the action plan.
(c) If the FMA requires the licensee to amend an action plan pro- vided to the FMA, the licensee must, within the time specified 25 by the FMA, provide an amended action plan that addresses the matter required to be amended.

If the FMA approves the action plan (whether as first provided or after amendment), the licensee must comply with the action plan.

(2) (3) 30 (4) An action plan that has been approved by the FMA may be varied at any time by agreement between the licensee and the FMA.
417 Consequences of failure to submit action plan, rejection of action plan, or failure to comply with action plan The FMA may exercise a power under section 412(2)(a) or (c) or (3) if— (1) 35 268 Financial Markets Conduct Bill Part 6 cl 419 (a) (b) (c) a licensee fails to submit an action plan or amended action plan within the time and in the manner specified by the FMA; or the FMA rejects an action plan; or the FMA is satisfied that an action plan has not been 5 complied with.
(2) A contravention of section 415 or 416 may also give rise to a civil remedy (see subpart 3 of Part 7).
418 Directions (1) Directions 10 If the notice under section 412 gives a direction to the li- censee, the notice must specify— (a) the actions, as the case may be, that the licensee must take to— (i) remedy or avoid the contravention or likely 15 contravention of the market services licensee obligation; or avoid any further contravention of the market ser- vices licensee obligation; or (ii) (iii) mitigate or avoid any adverse effects or changes 20 arising, or likely to arise, from the material change of circumstances; or correct the false or misleading information or mitigate the adverse consequences of providing the false or misleading information (or both); and 25 (iv) the date by which each step must be taken.
(b) The licensee must comply with the direction.

(2) 419 Consequences of failure to comply with directions (1) A licensee that refuses or fails, without reasonable excuse, to comply with a direction under section 412(2)(c) commits 30 an offence and is liable on summary conviction to a fine not exceeding $300,000.

If the FMA is satisfied that a direction under section 412(2)(c) has not been complied with, the FMA may exercise a power under section 412(2)(a) or (3).
35 (2) 269 Part 6 cl 420 Financial Markets Conduct Bill (3) A contravention of section 418 may also give rise to a civil remedy (see subpart 3 of Part 7).
Subpart 4—Disclosure obligations for licensees providing market services to retail investors 5 420 Application of subpart This subpart applies to a licensee who, under the licence,— (a) acts as a provider of a discretionary investment man- agement service: acts as a provider of prescribed intermediary services 10 (but only if the regulations state that this subpart ap- plies).
(b) 421 Licensee must make disclosure before providing service to retail investor A licensee who provides a market service to a retail investor 15 must ensure that a disclosure statement relating to the service is given to the retail investor, in accordance with this Act and the regulations.
422 Timing and method of disclosure (1) The disclosure statement must be provided— (a) in the case of a discretionary investment management service, before the investment authority is granted; or in the case of a prescribed intermediary service, at the prescribed time.
(b) 20 (2) However, if it is not practicable to comply with subsection 25 (1) by reason of any prescribed circumstance, the licensee must— (a) give the minimum prescribed disclosure in accordance with the regulations; and give the disclosure statement required by this subpart to 30 the retail investor as soon as practicable afterwards.
(b) The disclosure statement must be provided to the retail in- vestor personally or delivered or sent to the retail investor’s last known address or an address (including an electronic ad- dress) specified by the investor for that purpose.
35 (3) 270 Financial Markets Conduct Bill Part 6 cl 425 423 Purpose of disclosure statement The purpose of a disclosure under this subpart is to provide certain information that is likely to assist a retail investor to decide— (a) whether or not to proceed, or continue to proceed, with 5 the market service by the licensee in question; or to change any instruction in relation to the provision of that market service by the licensee.
(b) 424 Disclosure statement (1) Disclosure under this subpart must be made by 1 or more 10 disclosure statements in accordance with the regulations (and may be combined with other disclosure statements under this Act, the Financial Advisers Act 2008, or the Reserve Bank of New Zealand Act 1989 except in the prescribed circum- stances).
15 (2) A disclosure statement must— (e) (c) (d) (a) (b) be in writing; and state the date as at which the disclosure statement is prepared; and state the name and contact details of the licensee; and contain all of the information that it is required to con- tain by the regulations; and be accompanied by all the documents that the regula- tions require it to be accompanied by; and comply with all other requirements of the regulations 25 relating to the content of the disclosure statement.
The disclosure statement must comply with all requirements of the regulations relating to the form and presentation of the statement.
20 (f) (3) 425 Misleading or deceptive statements and omissions (1) A person must not provide a disclosure statement to a person, or continue to provide a market service to which this subpart applies (until subsection (5) applies), if— (a) 30 there is— (i) a statement in the disclosure statement that is 35 misleading or deceptive or is likely to mislead or deceive; or 271 Part 6 cl 426 Financial Markets Conduct Bill (ii) an omission from the disclosure statement of in- formation that is required to be contained in the disclosure statement by the regulations; and the statement or omission is materially adverse from the point of view of the retail investor.
5 (b) For the purposes of this section, a statement about a future matter (including the doing of, or refusing to do, an act) must be taken to be misleading if the person making the statement does not have reasonable grounds for making it.

Subsection (2) does not limit the meaning of a reference to a 10 misleading statement.

This section does not limit sections 421 to 424.


If subsection (1) applies, a person may provide a market service to a retail investor after providing the investor with a new disclosure statement that complies with this section.
15 (2) (3) (4) (5) 426 Further prescribed information to be made available (1) A licensee who provides a market service to a retail investor must,— (a) (b) at the request of the investor or at the prescribed times or on the occurrence of the prescribed events, make 20 available to the investor the documents, information, and other matters that are required to be made available under this section by the regulations; and at the prescribed times or on the occurrence of the pre- scribed events, make publicly available the documents, 25 information, and other matters that are required to be made publicly available by the regulations.
(2) The documents, information, and other matters must be made available in the prescribed manner.
Subpart 5—Requirement for licensees to provide service under client agreements 427 Application of subpart This subpart applies to a licensee who, under the licence,— (a) acts as a provider of a discretionary investment man- agement service: acts as a derivatives issuer: (b) 272 30 35 Financial Markets Conduct Bill Part 6 cl 430 (c) acts as a provider of prescribed intermediary services (but only if the regulations state that this subpart ap- plies).
428 Requirement to have client agreement (1) A licensee must provide the market service to a retail investor 5 (2) (3) (4) (5) under a client agreement.

The client agreement must provide adequately for the matters prescribed by regulations.

The client agreement is treated as containing any provision that is implied into it by or under this Act.

The client agreement must be in writing and be contained in 1 or more documents that are legally enforceable as between the retail investor and the licensee.
The client agreement has no effect to the extent that it contra- venes, or is inconsistent with, this Act or any term implied into 15 it by or under this Act.
10 Subpart 6—Provision of discretionary investment management services 429 Application of subpart This subpart applies to— (a) (b) a licensee who, under the licence, acts as a provider of a discretionary investment management service: a person who acts as a custodian of investor property on behalf of a retail investor under a discretionary invest- ment management service provided by a licensee.
20 25 430 Meaning of provider of discretionary investment (1) (2) management service and related terms In this Act, a person acts as a provider of a discretionary in- vestment management service if the person is in the business of providing a discretionary investment management service 30 in relation to financial products within the meaning of this Act.
For the purposes of this Act,— class DIMS means a discretionary investment management service that is not a personalised DIMS 273 Part 6 cl 431 Financial Markets Conduct Bill discretionary investment management service has the meaning set out in section 12 of the Financial Advisers Act 2008 investment authority means the authority given by an in- vestor to a DIMS licensee to decide which financial products 5 to acquire or dispose of on behalf of the investor, irrespective of whether the investor has the right to be consulted on, or to countermand, the licensee’s decisions investment mandate means the scope of an investment au- thority investor property means a financial product held on behalf of a retail investor, or money or property held for or received from, or on account of, a retail investor in relation to acquiring, holding, or disposing of a financial product personalised DIMS means a discretionary investment man- 15 agement service under which any of the following applies: (a) 10 the investment mandate has been tailored to take ac- count of the particular financial situation or goals (or any 1 or more of them) of a named investor or an investor that is otherwise readily identifiable by the 20 provider of the service (rather than merely taking into account the fact that the client comes within a class of persons having predefined characteristics): the person or persons who exercise the investment au- thority in fact take into account that particular financial 25 situation or those goals in doing so: an investor would, in the circumstances in which the service is provided, reasonably expect that the invest- ment mandate has been tailored, or the investment au- thority will be exercised, in that way.
30 (b) (c) Duties of DIMS licensee 431 DIMS licensee’s duties A DIMS licensee must— (a) act honestly in providing a discretionary investment management service; and 35 274 Financial Markets Conduct Bill Part 6 cl 433 (b) (c) (d) provide the service in accordance with the client agree- ment and the investment mandate and any subsequent instructions given by the retail investor; and in exercising any powers or performing any duties as a DIMS licensee,— (i) act in the best interests of the investors using the service and treat those investors equitably (if it is a class DIMS); and act in the best interests of the particular investor using the service (if it is a personalised DIMS); 10 and (ii) 5 not make use of information acquired through being the DIMS licensee in order to— (i) gain an improper advantage for itself or any other person; or cause detriment to the investors using the service.
(ii) 15 432 Duties of directors and senior managers of DIMS licensee A director or senior manager of a DIMS licensee must— (a) not make use of information acquired through being the director or senior manager of the DIMS licensee in 20 order to— (i) gain an improper advantage for itself or any other person; or cause detriment to the investors using the service; and (ii) (b) not make improper use of the position as a director or senior manager of the DIMS licensee to gain, directly or indirectly, an advantage for himself or herself or any other person or to cause detriment to the investors using the service.
Compare: Corporations Act 2001 s 601FE (Aust) 25 30 433 Duty of DIMS licensee to comply with professional standard of care A DIMS licensee must, in exercising any power of investment or performing any duties in that capacity, exercise the care, 35 diligence, and skill that a prudent person engaged in that pro- fession would exercise in the same circumstances.
275 Part 6 cl 434 Financial Markets Conduct Bill 434 Limits on permitted exemptions and indemnities (1) If a DIMS licensee has any rights to be paid fees or to be reim- bursed for expenses by a retail investor for, or to be exempted from or indemnified by a retail investor for liabilities incurred in relation to, the performance of the DIMS licensee’s services, 5 those rights— (a) must be set out in the client agreement; and (b) must be available only in relation to the proper perform- ance of the duties under sections 431 and 433.
(2) No other agreement has any effect to the extent that it purports 10 to confer a right of a kind set out in subsection (1).

Compare: Corporations Act 2001 s 601GA(2) (Aust) 435 Requirement for agreed investment mandate with retail investor (2) (1) A DIMS licensee must provide a discretionary investment 15 management service to a retail investor under an investment mandate that is agreed in writing with the investor.
The DIMS licensee must ensure that the investment mandate provides adequately for the scope of the investment authority, including the following matters (unless subsection (3) ap- 20 plies): (a) the nature or type of investments that may be made, and any limits on those; and any limits on the proportion of each type of asset in- vested in; and the methodology used for developing and amending the investment strategy and for measuring performance against that investment strategy.
25 (b) (c) (3) However, if there are no limits on the investment authority, the investment mandate must state that the investment authority is 30 unlimited.

The investment mandate must provide for the matters set out in this section in accordance with the frameworks or method- ologies specified in a notice issued by the FMA under subpart 4 of Part 8 (if any) that apply to it.
35 (4) 276 Financial Markets Conduct Bill Part 6 cl 438 436 Action that must be taken on limit breaks (1) This section applies to a DIMS licensee if there is a material breach of any limits under an investment mandate agreed with a retail investor on either of the following (a limit break): the nature or type of investments that may be made: (a) the proportion of each type of assets that may be in- (b) vested in.
5 (2) If this section applies, the DIMS licensee must report the limit break to the FMA in the prescribed circumstances and in the prescribed manner.
10 Related party transactions 437 Definition of related party benefits In sections 438 and 439, a related party benefit, in relation to a DIMS licensee, is a benefit that— (a) is either given out of investor property or creates an 15 exposure to loss for investor property; and is given to, or received by, the DIMS licensee or an associated person of the DIMS licensee; but does not include fees or expenses that are paid to the DIMS licensee in accordance with the client agreement.
20 (b) (c) 438 General prohibition on transactions giving related party benefits (1) A DIMS licensee (or any person acting on behalf of the DIMS licensee) must not enter into a transaction that provides for a related party benefit to be given.
(2) However, subsection (1) does not apply to a transaction or series of transactions if the DIMS licensee certifies that— (a) the transaction or transactions are,— (i) in the case of a class DIMS, in the best interests of the investors using the service; or in the case of a personalised DIMS, in the best interests of the particular investor affected; or (ii) (b) section 439 applies to the transaction or transactions or all related party benefits to be given.
277 25 30 Part 6 cl 439 Financial Markets Conduct Bill (3) A failure to comply with this section does not affect the val- idity of any transaction (subject to any court order under Part 7).
439 Certain related party benefits permitted This section applies to— 5 (a) (b) (c) Arm’s-length terms a benefit that is given on terms that— (i) would be reasonable in the circumstances if the parties were connected or related only by the transaction in question, each acting independ- 10 ently, and each acting in its own best interests; or are less favourable to the related party than the terms referred to in subparagraph (i): (ii) Transactions in registered schemes an acquisition or a disposal of a managed investment product in a registered scheme or a benefit or transaction in respect of a prescribed overseas scheme: 15 Certain registered bank investments investments in category 2 products issued by a regis- 20 tered bank or products prescribed for the purposes of clause 20(c) of Schedule 1: Other prescribed benefits or transactions a prescribed benefit or transaction.
(d) DIMS licensees must hold investor money in trust 25 440 Money paid by, or on account of, investors must be held in trust This section applies to money paid to a DIMS licensee if the money is paid by, or on account of, an investor in relation to 30 acquiring, holding, or disposing of a financial product.
The DIMS licensee must hold the money in trust for the in- vestor until— (a) the financial products are acquired; or (1) (2) 278 Financial Markets Conduct Bill Part 6 cl 442 (b) (c) (d) the money is otherwise applied for the purpose for which it was paid; or the money is paid or repaid to the investor; or the money is applied in accordance with the investor’s express instructions given after the money was paid.
The DIMS licensee must— (a) deal with the money, while it is held in trust, in the prescribed manner; and if the money needs to be repaid, ensure that the money is repaid as soon as practicable.
Compare: Corporations Act 2001 ss 722, 1017E (Aust) (b) 5 10 (3) Custodial service performed as part of discretionary investment management service 441 Application of sections 442 and 443 (1) Sections 442 and 443 apply to investor property only if 15 the financial products constituting investor property are held on behalf of a retail investor under a discretionary investment management service provided by a DIMS licensee.

In this subpart, the person holding the investor property is a custodian.
20 (2) 442 Requirements for custodian (1) A DIMS licensee must ensure that the investor property is held by a person who meets the custodianship requirements set out in subsection (2).
(2) A custodian of the investor property— 25 (a) must be a body corporate (other than the DIMS li- censee) that the DIMS licensee believes, on reasonable grounds, to be appropriate to hold, and safeguard, the investor property; and (b) may be an associated person of the DIMS licensee 30 (other than in respect of the custodianship require- ments) only if— (i) that is permitted by conditions imposed under section 400; and those conditions are observed.
(ii) 35 279 Part 6 cl 443 Financial Markets Conduct Bill (3) The DIMS licensee is jointly and severally liable with any cus- todian for ensuring that investor property covered by an invest- ment authority is held in accordance with this subpart.
443 Certain broker obligations of Financial Advisers Act 2008 apply under this Act (1) A custodian under this subpart has all the obligations imposed on a broker by Part 3A of the Financial Advisers Act 2008, and sections 77P to 77T of that Act apply in relation to investor property in the same way as they apply to client money and client property under those sections.

See Part 7, which provides for enforcement of this obligation under this Act as a civil remedy provision.
(2) Subpart 7—Holding and application of investor funds and property by derivatives issuers 444 Application of regulations made under this subpart Regulations made under this subpart may apply to a deriva- tives issuer (whether or not it is licensed and whether or not it makes any regulated offer).
5 10 15 445 Regulations regulating holding and application of investor 20 funds and property by derivatives issuers The Governor-General may, by Order in Council made on the recommendation of the Minister in accordance with section 527(2), make regulations for the purposes of— (a) regulating the receipt of money and property from in- 25 vestors by derivatives issuers and the application of that money and property: prescribing requirements relating to the deposit of that money and property in separate investors’ funds ac- counts or safe custody: specifying the duties and obligations of derivatives is- suers in relation to investors’ funds accounts, including obligations to make payments into those accounts: 30 (b) (c) 280 Financial Markets Conduct Bill Part 6 cl 446 (d) (e) (f) (g) providing for the protection of money deposited into investors’ funds accounts and property deposited in safe custody from claims against derivatives issuers: providing for the investment of money referred to in paragraph (d): providing for the FMA to carry out functions under the regulations, and its powers and procedures in doing so: stating which provisions are Part 6 licence provisions for the purposes of this Act.
Subpart 8—Miscellaneous provisions Civil liability 446 Part 6 licence provisions (1) All of the provisions specified in subsections (3) and (4) are Part 6 licence provisions.
5 10 (3) (2) A contravention of any of the provisions listed in subsection 15 (3) may give rise to a civil remedy (see subpart 3 of Part 7), including a pecuniary penalty not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case.
The provisions are the following: (a) section 387 (when provider of market services must be licensed): section 390 (prohibitions on holding out): section 428 (requirement to have client agreement): section 440(2) (money must be held in trust): section 442 (requirement for custodian).
(4) A contravention of any of the following may give rise to a civil remedy (see subpart 3 of Part 7), including a pecuniary penalty not exceeding $200,000 in the case of an individual or 30 $600,000 in any other case: (a) (b) (c) (d) (e) 25 20 section 409 (licensee must deliver regular reports to FMA): section 410 (licensee must report certain matters): section 415 (action plan): section 416 (approval, amendment, or rejection of ac- tion plan): 35 (b) (c) (d) 281 Part 7 cl 447 Financial Markets Conduct Bill (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) 5 section 418 (directions): section 421 (licensee must make disclosure before providing service to retail investor): section 425 (misleading or deceptive statements and omissions): section 426 (further prescribed information to be made available): sections 431 to 433 (duties of DIMS licensee and of directors and senior managers of DIMS licensee): section 435 (requirement for agreed investment man- 10 date with retail investor): section 436 (action that must be taken on limit breaks): section 438 (general prohibition on transactions giv- ing related party benefits): section 440(3) (money must be dealt with in pre- 15 scribed manner and repaid as soon as practicable if required): section 443 (certain broker obligations of Financial Advisers Act 2008 apply under this Act): those provisions of the regulations made under subpart 20 7 that are stated by those regulations to be Part 6 li- cence provisions.
Part 7 Enforcement, liability, and appeals 447 Meaning of contravene 25 In this Act, contravene includes, in relation to a provision, prohibition, obligation, or exemption (a provision),— (a) (b) (c) a contravention of the provision; or an attempt to contravene the provision; or aiding, abetting, counselling, or procuring any other 30 person to contravene the provision; or inducing, or attempting to induce, any other person, whether by threats or promises or otherwise, to contra- vene the provision; or being in any way, directly or indirectly, knowingly con- 35 cerned in, or a party to, the contravention by any other person of the provision; or (d) (e) 282 Financial Markets Conduct Bill Part 7 cl 448 (f) conspiring with any other person to contravene the pro- vision.
Subpart 1—FMA’s enforcement powers Stop orders 448 When FMA may make stop orders 5 The FMA may make a stop order if it is satisfied that— (a) a PDS, a register entry, or a disclosure document under clause 26 of Schedule 1 for an offer of financial prod- ucts— (i) is likely to deceive, mislead, or confuse with re- 10 gard to any particular that is material to the offer of financial products to which it relates; or contains any material misdescription or material error or any material matter that is not clearly legible; or does not comply with this Act or the regulations; or 15 (ii) (iii) (b) (c) (d) (e) (f) 20 any provision of Part 3, section 691, or Schedule 1 has been contravened in respect of an offer of financial products; or section 89 (need for governing document and super- visor) has been contravened in respect of debt secur- ities; or section 111 (need to register) has been contravened in respect of an offer of managed investment products; or 25 a registered scheme no longer meets the registration re- quirements in section 113 or the registration require- ments for a particular type of scheme under sections 114 to 119; or a restricted communication relating to an offer of finan- 30 cial products— (i) is likely to deceive, mislead, or confuse with re- gard to any particular that is material to the offer; or is materially inconsistent with any PDS referred 35 to in it; or (ii) 283 Part 7 cl 449 Financial Markets Conduct Bill (iii) (iv) contains any material misdescription or material error or any material matter that is not clearly legible; or does not comply with this Act or the regulations; or 5 (g) disclosure relating to financial products under subpart 4 of Part 3, or a disclosure statement relating to market services required under subpart 4 of Part 6,— (i) is likely to deceive, mislead, or confuse with re- gard to any particular that is material to the finan- 10 cial products or market services; or does not comply with this Act or the regulations; or (ii) (h) any provision of section 387, 390, or 421
 has been contravened in respect of the supply of market services.
15 449 Terms of stop order A stop order may, in relation to the offer, financial products, registered scheme, or market services referred to in section 448, do 1 or more of the following: (a) 25 prohibit offers, issues, sales, or transfers of financial 20 products specified in the order from being made while the order is in force: prohibit an offeror from accepting applications for fi- nancial products specified in the order while the order is in force: prohibit the distribution of 1 or more of the following while the order is in force: (i) (ii) a PDS or any other disclosure document: a restricted communication referred to in sec- tion 448(f): any restricted communication that relates to the offer of financial products specified in the order: prohibit a person from accepting further contributions or deposits in respect of financial products specified in the order while the order is in force: prohibit the supply of market services specified in the order from being made while the order is in force.
30 35 (iii) (b) (c) (d) (e) 284 Financial Markets Conduct Bill Part 7 cl 451 450 Meaning of restricted communication (1) In this subpart, restricted communication means a form of communication— that— (a) (i) (ii) (iii) directly or indirectly refers to an offer, or in- 5 tended offer, of financial products; or is reasonably likely to induce persons to apply for financial products; or is reasonably likely to induce persons to make further contributions or deposits referred to in 10 section 10(2)(c); and (b) that is authorised or instigated by, or on behalf of, the offeror, the issuer, or an associated person of the offeror or issuer or that is prepared with the co-operation of, or by arrangement with, any of those persons; and that is to be, or has been, distributed to a person.
(c) In this subpart, restricted communication includes any ad- vertisement or publication under subpart 3 of Part 3.

Section 74 applies for the purposes of subsection (1)(a)(ii) or (iii) with any necessary modifications.
(2) (3) 451 FMA may make interim stop order pending exercise of (1) powers The FMA may make an interim order (an interim stop order) of the kind referred to in section 449 that is in force for the period referred to in subsection (2) if— (a) the FMA is considering, at any time, whether it may exercise a power under section 448; and the FMA considers that making an interim stop order is desirable in the public interest.
(b) 15 20 25 (2) An interim stop order is in force from the time at which it is 30 made until the close of— (a) the date that is 15 working days after the day on which it is made; or a later date specified by the FMA by notice to the issuer, offeror, or service provider to which the order relates.
35 (b) (3) For the purposes of subsection (2)(b),— (a) the FMA may specify a later date if the FMA is of the opinion that it is not reasonably practicable for it to 285 Part 7 cl 452 Financial Markets Conduct Bill (4) complete its consideration as referred to in subsection (1)(a) within the 15-working-day period referred to in subsection (2)(a); and the later date must be a date that is no more than 30 working days after the day on which the interim stop 5 order is made.
(b) The FMA— (a) may act under subsection (1) or (2)(b) without giving the issuer, offeror, or service provider to which the order relates an opportunity to make submissions to, or be 10 heard before, the FMA in respect of the matter (and, accordingly, section 457 does not apply); but (b) must, after acting under subsection (1) or (2)(b), give that issuer, offeror, or service provider or that person’s representative an opportunity to make written submis- 15 sions and to be heard on the matter.
(5) In this subpart, service provider means a person that provides a licensed market service.
Compare: 1978 No 103 s 43K 452 Persons to whom stop orders and interim stop orders 20 may apply (1) A stop order or an interim stop order of the kind referred to in— (a) (b) section 449(a), (b), (d), or (e) may apply to any per- son specified in the order (for example, an issuer, an 25 offeror, or a service provider): section 449(c) may apply to 1 or more of an issuer, an offeror, a service provider, or any associated persons of an issuer, an offeror, or a service provider.
If a stop order or an interim stop order of the kind referred to 30 in section 449(c) extends to associated persons of the issuer, offeror, or service provider, the order may require— (a) all, or any specified class or classes, of the associated persons to comply with the order (including associated persons that may be incorporated or formed after the 35 date of the order); and the issuer, offeror, or service provider to provide a copy of the order to all or any of those associated persons.
(b) (2) 286 Financial Markets Conduct Bill Part 7 cl 454 (3) For the purpose of subsection (2), the order is not required to refer to the associated persons by name.
Direction orders 453 When FMA may make direction orders (1) The FMA may make a direction order if it is satisfied that, by 5 engaging in any conduct, a person (the relevant person) has contravened, or would contravene,— (a) (b) (c) (d) (e) (f) (g) a Part 2 misleading or deceptive conduct provision: a Part 3 offer provision: a Part 4 governance provision: a Part 5 market provision: a Part 6 licence provision: an infringement offence provision: section 687, 688(1)(b) or (c), or 691 (transitional requirements).
(2) In this section, an infringement offence provision is a pro- vision in respect of which a contravention is an infringement offence.
454 Terms of direction orders 10 15 20 A direction order may— (a) (b) direct the relevant person to comply with the relevant provision referred to in section 453 (the provision): stipulate any reasonable steps that the relevant person must take in order to comply with the provision or to avoid or mitigate any actual or potential adverse effects 25 of a contravention, including (without limitation)— (i) disclosing, in accordance with the order, infor- mation for the purpose of securing compliance with the provision: publishing, at the relevant person’s own expense 30 and in the manner and at the times specified in the order, corrective statements that are specified in, or are to be determined in accordance with, the order: complying in accordance with the order with a 35 prohibition or restriction on the making of any (ii) (iii) 287 Part 7 cl 455 Financial Markets Conduct Bill statement or the distribution of any document by, or on behalf of, the relevant person for the purpose of preventing a contravention or further contravention of the provision: (c) require the relevant person to report to the FMA within 5 the time specified in the order stating how and when the order will be implemented.
Unsolicited offer orders 455 When FMA may make unsolicited offer orders The FMA may make an unsolicited offer order if the FMA is 10 satisfied that a person has acted, is acting, or intends to act in contravention of an unsolicited offer provision.
Compare: 1988 No 234 s 42EA 456 Terms of unsolicited offer orders (1) An unsolicited offer order may— 15 (a) (b) (c) (d) (e) restrain a person from acquiring a financial product, a power to dispose of a financial product, or an interest in or a right attaching to a financial product, as a result of the unsolicited offer: restrain a person from taking any action that is, or that 20 may reasonably be expected to constitute, a contraven- tion of an unsolicited offer provision: restrain a person from taking specified steps to complete or perform a contract that has been, or may reasonably be expected to be, entered into in contravention of an 25 unsolicited offer provision: direct a person not to register the transfer of a financial product: direct a person to disclose information, make corrective statements, or take any other specified steps, at the per- 30 son’s own expense and in the manner and at the times specified in the order, for the purpose of securing com- pliance with an unsolicited offer provision.
(2) An unsolicited offer order may be directed at any person.
Compare: 1988 No 234 s 42EB 35 288 Financial Markets Conduct Bill Part 7 cl 458 Process for FMA’s orders 457 FMA must follow steps before making orders (1) The FMA may make an order under this Act only if it first takes the following steps: (a) gives the person to whom the order is proposed to be 5 directed written notice— (i) that the FMA may make an order under this Act; and of the reasons why it is considering exercising that power; and 10 (ii) (b) (c) (d) also gives that written notice to the relevant licensed market operator, in the case of a direction order for a contravention of a continuous disclosure obligation or exemption; and gives the notice referred to in paragraph (a) or (b) at 15 least 5 working days before the FMA makes the order; and gives each person to whom notice of the order must be given or the person’s representative an opportunity to make written submissions and to be heard on the matter 20 within that notice period.
(2) However,— (a) (b) (c) the FMA may shorten these steps in accordance with section 458; and in the case of a stop order under section 449(c), the 25 FMA does not have to give the notice referred to in sub- section (1)(a) to any associated persons of the issuer, offeror, or service provider; and this section does not apply to an interim stop order or an order under section 536.
30 Compare: 1988 No 234 s 42F 458 FMA may shorten steps for specified orders If the FMA thinks it necessary or desirable in the public inter- est for any order to be made more urgently than section 457 permits,— (a) it may give less than 5 working days’ notice before it makes the order, and the notice and the submissions may be oral rather than written; but 35 289 Part 7 cl 459 Financial Markets Conduct Bill (b) it must include in that notice the reasons for acting ur- gently and must otherwise comply with that section.
Compare: 1988 No 234 s 42G 459 FMA must give notice after making orders (1) If the FMA makes an order under this Act, the FMA— (a) must, as soon as is reasonably practicable, give written notice to the person to whom the order is directed of— the terms and conditions of the order; and (i) the reasons for the order; and (ii) any other information the FMA thinks relevant in 10 (iii) the circumstances; and 5 (b) must also give the written notice referred to in para- graph (a) to the Registrar and make the notice avail- able on its Internet site, in the case of a stop order or an interim stop order; and in the case of an order other than a stop order or an in- terim stop order, may also give the written notice re- ferred to in paragraph (a) to the Registrar and make the notice available on its Internet site; and (c) 15 (d) must also give the written notice referred to in para- 20 graph (a) to the relevant licensed market operator, in the case of a direction order for a contravention of a continuous disclosure obligation or exemption; and (e) may also give notice to any other person of those mat- ters.
(2) (3) In the case of a stop order of the kind referred to in section 449(c), the FMA does not have to give the notice referred to in subsection (1)(a) to any associated persons of the issuer, offeror, or service provider (but the issuer, offeror, or service provider may be required to do so).

This section does not apply to an order under section 536.
Compare: 1988 No 234 s 42H 25 30 General provisions 460 General provisions on FMA’s orders (1) The FMA may make an order under this Act on the terms and 35 conditions that the FMA thinks fit.

290 Financial Markets Conduct Bill Part 7 cl 463 (2) (3) The FMA may vary an order in the same way as it may make the order under this Act.

The FMA may revoke an order or suspend an order on the terms and conditions it thinks fit.
Compare: 1988 No 234 s 42I 5 461 Consequences of failing to comply with FMA’s orders (1) If an order made by the FMA under this Act applies to a person, the person must comply with the order (see subpart 3, which provides for civil remedies for a contravention of this duty).

(2) A person who refuses or fails, without reasonable excuse, to 10 comply with an order made by the FMA under this Act com- mits an offence and is liable on summary conviction to a fine not exceeding $300,000.
Compare: 1988 No 234 s 42J Subpart 2—High Court’s enforcement powers Injunctions 15 462 Court may grant injunctions The court may, on application by the FMA or any other per- son, grant an injunction restraining a person from engaging in 20 conduct that constitutes or would constitute a contravention of a provision of this Act or the regulations.
Compare: 1988 No 234 s 42K 463 When court may grant injunctions and interim (1) injunctions The court may grant an injunction restraining a person from engaging in conduct of a particular kind if— (a) it is satisfied that the person has engaged in conduct of that kind; or it appears to the court that, granted, it is likely that the person will engage in con- duct of that kind.
(b) if an injunction is not 30 25 (2) The court may grant an interim injunction restraining a person from engaging in conduct of a particular kind if in its opinion it is desirable to do so.

35 291 Part 7 cl 464 Financial Markets Conduct Bill (3) (4) Subsections (1)(a) and (2) apply whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of that kind.
Subsections (1)(b) and (2) apply whether or not the person has previously engaged in conduct of that kind or there is an 5 imminent danger of substantial damage to any other person if that person engages in conduct of that kind.
Compare: 1988 No 234 s 42L 464 Undertaking as to damages not required by FMA (1) If the FMA applies to the court for the grant of an interim 10 injunction under this subpart, the court must not, as a condition of granting an interim injunction, require the FMA to give an undertaking as to damages.

In determining the FMA’s application for the grant of an in- terim injunction, the court must not take into account that the 15 FMA is not required to give an undertaking as to damages.
Compare: 1988 No 234 s 42M (2) Court may make FMA orders under this Part 465 Court may make FMA orders under this Part The court may, on application by any person, make any order 20 that the FMA may make under this Part if the court is satisfied of the same matters that the FMA would need to be satisfied of if the FMA were to exercise that power.
Subpart 3—Civil remedies Overview of civil remedies 466 Overview of civil remedies (1) The following remedies (civil remedy orders) are available for a contravention of a civil remedy provision (except if other- wise provided) under this subpart: (a) (b) a declaration of contravention: a pecuniary penalty order (on application by the FMA or the Commerce Commission only): a compensatory order: other civil remedy orders under section 481.
(c) (d) 292 25 30 Financial Markets Conduct Bill Part 7 cl 469 (2) This section is a guide only to the general scheme and effect of this subpart.
Compare: 1988 No 234 s 42R 467 What are civil remedy provisions In this subpart, a civil remedy provision is— (a) (b) (c) (d) (e) (f) (g) (h) a Part 2 misleading or deceptive conduct provision: a Part 3 offer provision: a Part 4 governance provision: a Part 5 market provision: an unsolicited offer provision: a Part 6 licence provision: section 461(1) (failing to comply with FMA’s orders): section 687, 688(1)(b) or (c), or 691 (transitional requirements).
Compare: 1988 No 234 s 42S 5 10 15 Declarations of contravention and pecuniary penalty orders 468 When court may make declarations of contravention (1) The court may, on the application of the FMA or any other person, make a declaration of contravention if it is satisfied 20 that a person has contravened a civil remedy provision.

The court may also make a declaration of contravention under section 471(3)(b).
(2) 469 Purpose and effect of declarations of contravention (1) The purpose of a declaration of contravention is to enable an 25 applicant for a compensatory order or other civil remedy order under section 481 to rely on the declaration of contravention in the proceedings for that order, and not be required to prove the contravention.

(2) Accordingly, a declaration of contravention is conclusive evi- 30 dence of the matters that must be stated in it under section 470.
Compare: 1988 No 234 s 42U 293 Part 7 cl 470 Financial Markets Conduct Bill 470 What declarations of contravention must state A declaration of contravention must state the following: (a) the civil remedy provision to which the contravention relates; and the person who engaged in the contravention; and the conduct that constituted the contravention and, if a transaction constituted the contravention, the transac- tion; and the issuer and any other offeror to which the conduct relates (if relevant).
(b) (c) (d) 5 10 Compare: 1988 No 234 s 42V 471 When court may make pecuniary penalty orders (1) The FMA may apply for a pecuniary penalty order against a person under this Act.

The Commerce Commission may, with the FMA’s consent, 15 apply for a pecuniary penalty order against a person under this Act in relation to an alleged contravention of any provision of Part 2.
If the FMA or the Commerce Commission applies for a pecu- niary penalty order against a person under this Act, the court— 20 (a) must determine whether the person has contravened a (2) (3) civil remedy provision; and (b) must make a declaration of contravention if it is satis- fied that the person has contravened a civil remedy pro- vision; and (c) may order the person to pay to the Crown a pecuniary penalty that the court considers appropriate if it is satis- fied that the person has contravened a civil remedy pro- vision.
25 (4) However, a pecuniary penalty order may not be made for a 30 contravention of section 16 or 256.
Compare: 1988 No 234 s 42T 472 Directors treated as having contravened in case of defective disclosure and may be ordered to pay pecuniary penalty This section applies if, in a proceeding under section 471, the court is satisfied that— 35 (1) 294 Financial Markets Conduct Bill Part 7 cl 473 (a) (b) (c) (d) an offeror has contravened section 65 (defective dis- closure in PDS or register entry); or an issuer has contravened section 83 (defective on- going disclosure); or a licensee has contravened section 425 (defective dis- 5 closure statement); or an offeror who provided a disclosure document under clause 26 of Schedule 1 has contravened clause 27 of that schedule (defective disclosure document).
For the purposes of section 471(3)(c),— (a) 10 every director of the offeror, issuer, or licensee at the time of the contravention must be treated as also having contravened the provision referred to in subsection (1)(a), (b), (c), or (d) (as the case may be); and the court may order, under section 471(3)(c), 1 or 15 more of the following to pay to the Crown a pecuniary penalty that the court considers appropriate: the offeror, issuer, or licensee: (i) each director referred to in paragraph (a).
(ii) (b) The court may make an order against a director as referred 20 to in subsection (2)(b) only if the FMA has applied for a pecuniary penalty order against the director.

In any proceeding against a director for a pecuniary penalty order in respect of a contravention referred to in subsection (1), it is a defence if the director took reasonable precautions 25 and exercised due diligence to avoid the contravention.
(2) (3) (4) 473 Maximum amount of pecuniary penalty (1) The maximum amount of a pecuniary penalty for a contraven- tion of a civil remedy provision referred to in subsection (2) is the greatest of— (a) the consideration for the transaction that constituted the contravention (if any); and 3 times the amount of the gain made, or the loss avoided, by the person who contravened the civil remedy provi- sion; and $1 million in the case of a contravention by an indi- vidual or $5 million in any other case.
(b) (c) 30 35 295 Part 7 cl 474 Financial Markets Conduct Bill (2) (3) The civil remedy provisions to which subsection (1) applies are— (a) (b) a Part 2 misleading or deceptive conduct provision: a Part 3 offer provision (other than a provision speci- fied in section 84(4)): a Part 4 governance provision (other than a provision specified in section 223(4)): a Part 5 market provision (other than a provision spe- cified in section 385(4)): a Part 6 licence provision (other than a provision spe- 10 cified in section 446(4)): an unsolicited offer provision: section 687, 688(1)(b) or (c), or 691 (transitional requirements).
(c) (d) (e) (f) (g) 5 The maximum amount of a pecuniary penalty for a contraven- 15 tion of any other civil remedy provision is— (a) $200,000 in the case of a contravention by an indi- vidual; or $600,000 in any other case.
(b) Compare: 1988 No 234 s 42W 20 474 Guidance for court on how to determine gains made or losses avoided for purposes of maximum amount For the purposes of section 473(1)(b), a person must be treated as— (a) making a gain if the person acquires a financial product 25 (1) (b) for less than its value: avoiding a loss if the person disposes of a financial prod- uct for more than its value.
In this case, the gain made or loss avoided is the difference between the consideration paid or received (as the case may 30 be) and the value the financial product would have had at the time of the sale if,— (a) in the case of a contravention of any of sections 235 to 237, the material information had been generally available to the market; or in the case of a contravention of section 257 or 260, the conduct, statement, or information had not been misleading, deceptive, or false; or (b) 35 (2) 296 Financial Markets Conduct Bill Part 7 cl 476 in any other case, the contravention had not occurred.
(3) (c) This section does not— (a) (b) limit the circumstances in which the court may find that a person has made a gain or avoided a loss; or prevent the court from finding that the amount of the 5 gain made, or the loss avoided, by a person exceeds an amount calculated under this section.
Compare: 1988 No 234 s 42X 475 Considerations for court in determining pecuniary penalty In determining an appropriate pecuniary penalty, the court must have regard to all relevant matters, including— (a) 10 15 the purposes stated in sections 3 and 4 and any other purpose stated in this Act that applies to the civil remedy provision; and the nature and extent of the contravention; and the nature and extent of any loss or damage suffered by any person, or gains made or losses avoided by the person in contravention, because of the contravention; and the circumstances in which the contravention took place; and whether or not the person in contravention has previ- ously been found by the court in proceedings under this Act, or any other enactment, to have engaged in any 25 similar conduct; and in the case of section 472, the circumstances con- nected with the director’s appointment; and the relationship of the parties to the transaction consti- tuting the contravention.
30 20 (b) (c) (d) (e) (f) (g) Compare: 1988 No 234 s 42Y 476 Court must order that recovery from pecuniary penalty be applied to FMA’s or Commerce Commission’s actual costs If the court orders that a person pay a pecuniary penalty, the 35 court must also order that the penalty must be applied first to pay— 297 Part 7 cl 477 Financial Markets Conduct Bill (a) (b) the FMA’s actual costs in bringing the proceedings; or in the case of an application under section 471(2), the Commerce Commission’s actual costs in bringing the proceedings.
Compare: 1988 No 234 s 42Z 5 Compensatory orders 477 When court may make compensatory orders (1) The court may make a compensatory order, on application by the FMA or any other person, if the court is satisfied that— (a) (b) there is a contravention of a civil remedy provision; and 10 a person (the aggrieved person) has suffered, or is likely to suffer, loss or damage because of the contra- vention.
(2) The court may make a compensatory order whether or not the aggrieved person is a party to the proceedings.

Compare: 1988 No 234 s 42ZA 15 478 Terms of compensatory orders (1) If section 477 applies, the court may make any order it thinks just to compensate an aggrieved person in whole or in part for the loss or damage, or to prevent or reduce the loss or damage, 20 referred to in that section.
(3) (4) (2) An order under this section may include an order to direct a relevant person to pay to the aggrieved person the amount of the loss or damage (in whole or in part).

Subsection (2) does not limit subsection (1).
In this section, relevant person means— (a) (b) any person in contravention; or in the case of a contravention of section 65 (defective disclosure in PDS or register entry), any 1 or more of the following: (i) (ii) (iii) the offeror: any other person who contravened section 65: each director of the offeror at the time of the contravention; or 25 30 (c) in the case of a contravention of section 83 (defective 35 ongoing disclosure), any 1 or more of the following: 298 (d) (e) Financial Markets Conduct Bill Part 7 cl 480 (i) (ii) (iii) the issuer: any other person who contravened section 83: each director of the issuer at the time of the contravention; or in the case of a contravention of section 425 (defective 5 disclosure statement), any 1 or more of the following: (i) (ii) (iii) the licensee: any other person who contravened section 425: each director of the licensee at the time of the contravention; or in the case of a contravention of clause 27 of Sched- ule 1 (defective disclosure document), any 1 or more of the following: (i) the offeror who provided the disclosure docu- ment: any other person who contravened clause 27 of Schedule 1: each director of the offeror who provided the dis- closure document at the time of the contraven- tion.
(ii) (iii) (5) Subsection (4)(b) to (e) apply to a director referred to in those paragraphs even if the director did not commit the contravention (subject to section 479).
Compare: 1988 No 234 s 42ZB 479 Director has due diligence defence (1) In any proceeding against a director referred to in section 478(4) for a compensatory order in respect of a contraven- tion referred to in section 478(4)(b) to (e), it is a defence if the director took reasonable precautions and exercised due diligence to avoid the contravention.

Section 486 does not limit this section.
(2) 480 Person treated as suffering loss or damage in case of (1) defective disclosure This section applies if— (a) a person (A)— (i) acquires financial products under an offer that contravenes section 65; or 299 10 15 20 25 30 35 Part 7 cl 481 Financial Markets Conduct Bill (ii) (iii) acquires financial products, or makes further con- tributions or deposits in respect of financial prod- ucts, after the issuer of the financial products contravenes section 83; or acquires financial products under an offer where 5 the offeror contravenes clause 27 of Schedule 1 in relation to that offer; and (b) the financial products, contributions, or deposits re- ferred to in paragraph (a) have declined in value after the contravention referred to in paragraph (a).
10 (2) A must be treated as having suffered loss or damage because of the contravention unless it is proved that the decline in value was caused by a matter other than the relevant statement, omis- sion, or circumstance.
In this section, the relevant statement, omission, or circum- 15 stance is, as the case may be,— (a) (3) the statement that is misleading or deceptive or is likely to be misleading or deceptive referred to in section 65(1)(a)(i) or 83(1)(a)(i) or clause 27(1)(a)(i) of Schedule 1; or the omission referred to in section 65(1)(a)(ii) or 83(1)(a)(ii) or clause 27(1)(a)(ii) of Schedule 1; or the circumstance referred to in section 63(1)(a)(iii).

(b) (c) This section does not limit section 478.


(4) Other civil remedy orders 481 When court may make other civil remedy orders The court may, on application by the FMA or any other person, make a civil remedy order described in section 482 if the court is satisfied that a person has contravened or intends to contravene a civil remedy provision.
Compare: 1988 No 234 s 42ZE 20 25 30 482 Terms of other civil remedy orders (1) A civil remedy order under section 481 may— (a) direct the person in contravention to refund money or return property to a person who has suffered, or is likely 35 300 Financial Markets Conduct Bill Part 7 cl 482 to suffer, loss or damage because of the contravention (the aggrieved person): if an agreement has been entered into between the per- son in contravention and the aggrieved person,— (i) vary the agreement or any collateral arrangement 5 as specified in the order and, if the court thinks fit, declare the agreement or arrangement to have had effect as so varied on and after a date before the order was made, as specified in the order: cancel the agreement and, if the court thinks fit, 10 declare the cancellation to have had effect on and after a date before the order was made, as speci- fied in the order: require the person in contravention to take any action the court thinks fit to reinstate the parties 15 as near as may be possible to their former pos- itions: (ii) (iii) restrain the exercise of rights attaching to financial products, or the exercise of relevant interests, or declare an exercise of those rights or relevant interests to be 20 void and of no effect: restrain the issue or transfer of financial products or re- strain any distribution due in relation to financial prod- ucts: restrain the acquisition or disposal of financial products 25 or of relevant interests, or restrain the registration of any transfer of that kind: direct the disposal of financial products or of relevant interests (including the person or class of persons to which the products or interests must, or must not, be 30 disposed of) and direct the payment of the proceeds of any disposal: require financial products to be forfeited and require the issuer to cancel the forfeited financial products: cancel an agreement for the acquisition or disposal of 35 financial products or relevant interests.
(b) (c) (d) (e) (f) (g) (h) (2) In this section, relevant interests has the same meaning as in subpart 1 of Part 5.

Compare: 1988 No 234 s 42ZF 301 Part 7 cl 483 Financial Markets Conduct Bill Interrelationship of civil remedies 483 More than 1 civil remedy order may be made for same conduct The court may make a civil remedy order of one kind against a person even though the court has made another civil remedy 5 order of a different kind against the person for the same con- duct.
Examples The court may make a compensatory order and a pecuniary penalty order for the same conduct.

The court may make a civil remedy order requiring forfeiture of financial products and declaring a previous exercise of voting rights attaching to those products to be void.
10 Compare: 1988 No 234 s 42ZG 484 Only 1 pecuniary penalty order may be made for same 15 conduct If conduct by a person constitutes a contravention of 2 or more civil remedy provisions, proceedings may be brought against that person for the contravention of any 1 or more of the provi- sions, but no person is liable to more than 1 pecuniary penalty 20 order for the same conduct.
Compare: 1988 No 234 s 42ZH 485 No pecuniary penalty and fine for same conduct A person cannot be ordered to pay a pecuniary penalty and be liable for a fine under this Act for the same conduct.
Compare: 1978 No 103 s 65F; 1988 No 234 s 43ZC 25 Due diligence defence 486 Defence for persons other than primary person in contravention In any proceeding against a person (A) for contravention of a 30 civil remedy provision, it is a defence if— (a) the contravention was due to the act or omission of an- other person, or some other cause beyond A’s control; and (1) 302 Financial Markets Conduct Bill Part 7 cl 488 (b) A took reasonable precautions and exercised due dili- gence to avoid the contravention.
(2) (3) Subsection (1) does not apply to a person if the person contravened the civil remedy provision as referred to in para- graph (a) of the definition of contravene in section 447.

For the purposes of subsection (1)(a), another person does not include a director, an employee, or an agent of A.
(4) A is not, without the leave of the court, entitled as part of a defence provided by this section to rely on any of the matters specified in subsection (1)(a) unless A has, not later than 7 10 working days before the date on which the hearing of the pro- ceeding commences, served on the other party to the proceed- ing a notice in writing identifying the act, omission, or cause relied on by A.
5 General 487 Rules of civil procedure and civil standard of proof apply to civil remedies The proceedings under this subpart are civil proceedings and the usual rules of court and rules of evidence and procedure for civil proceedings apply (including the standard of proof).
Compare: 1988 No 234 s 42ZI 15 20 Subpart 4—Offences of knowingly or recklessly contravening disclosure provisions 488 Offence of knowingly or recklessly contravening 25 prohibition on offers where defective disclosure in PDS or register entry (1) A person who contravenes section 65 commits an offence if the person— (a) the statement referred to in section 30 knows that 65(1)(a)(i) is misleading or deceptive or is likely to mislead or deceive; or knows that information has been omitted as referred to in section 65(1)(a)(ii); or knows of a circumstance of a kind referred to in section 35 65(1)(a)(iii); or (b) (c) 303 Part 7 cl 489 Financial Markets Conduct Bill (d) is reckless as to any of the matters referred to in para- graph (a), (b), or (c).
(2) A person who commits an offence under subsection (1) is liable on conviction on indictment,— (a) in the case of an individual, to imprisonment for a term 5 not exceeding 10 years, a fine not exceeding $1 million, or both; and in any other case, to a fine not exceeding $5 million.
(b) 489 Offence of knowingly or recklessly contravening other provisions relating to defective disclosure 10 (1) A person who contravenes section 83 or 425 or clause 27 of Schedule 1 commits an offence if the person— (a) the statement knows that referred to in section 83(1)(a)(i) or 425(1)(a)(i) or clause 27(1)(a)(i) of Schedule 1 (as the case may be) is misleading or 15 deceptive or is likely to mislead or deceive; or knows that information has been omitted as referred to in section 83(1)(a)(ii) or 425(1)(a)(ii) or clause 27(1)(a)(ii) of Schedule 1 (as the case may be); or is reckless as to any of the matters referred to in para- 20 graph (a) or (b).
(2) A person who commits an offence under subsection (1) is liable on conviction on indictment,— (a) in the case of an individual, to imprisonment for a term not exceeding 5 years, a fine not exceeding $500,000, 25 or both; and in any other case, to a fine not exceeding $2.5 million.
(b) (c) (b) Subpart 5—Infringement offences Infringement offences If a person is alleged to have committed an infringement of- 30 fence, that person may either— (a) be proceeded against summarily for the alleged offence under the Summary Proceedings Act 1957; or be served with an infringement notice as provided in section 491.
(b) 35 490 (1) 304 Financial Markets Conduct Bill Part 7 cl 492 (2) Despite section 21 of the Summary Proceedings Act 1957, leave of a District Court Judge or a Registrar of a court to lay an information is not necessary where the FMA proceeds with an infringement offence summarily.

491 (1) (2) Infringement notices The FMA may issue an infringement notice to a person if the FMA believes on reasonable grounds that the person is com- mitting, or has committed, an infringement offence.
The FMA may revoke an infringement notice before the in- fringement fee is paid, or an order for payment of a fine is 10 made or deemed to be made by a court under section 21 of the Summary Proceedings Act 1957.

5 (3) An infringement notice is revoked by giving written notice to the person to whom it was issued that the notice is revoked.
492 Procedural requirements for infringement notices (1) An infringement notice may be served on a person— 15 (a) (b) by delivering it, or a copy of it, personally to the person who the FMA believes has committed the infringement offence; or by sending it, or a copy of it, by post, addressed to the 20 person at the person’s last known place of residence or business.

(2) An infringement notice sent under subsection (1)(b) must be treated as having been served on the person on the date it was posted.
(3) An infringement notice must be in the prescribed form and must contain— (a) details of the alleged infringement offence that are suf- ficient to fairly inform a person of the time, place, and nature of the alleged offence; and the amount of the infringement fee; and an address at which the infringement fee may be paid; and the time within which the infringement fee must be paid; and (b) (c) (d) 25 30 35 305 Part 7 cl 493 Financial Markets Conduct Bill (e) (f) (g) a summary of the provisions of section 21(10) of the Summary Proceedings Act 1957; and a statement that the person served with the notice has a right to request a hearing; and a statement of what will happen if the person served 5 with the notice does not pay the fee and does not request a hearing; and any other prescribed matters.
(h) If an infringement notice has been issued, proceedings in re- spect of the infringement offence to which the notice relates 10 may be commenced in accordance with section 21 of the Sum- mary Proceedings Act 1957 and, in that case,— reminder notices may be prescribed; and (a) in all other respects, section 21 of the Summary Pro- (b) ceedings Act 1957 applies with all necessary modifica- 15 tions.

(4) (5) Reminder notices must contain the prescribed information.
493 Payment of infringement fee The FMA must pay all infringement fees received into a Crown Bank Account.
20 Subpart 6—Banning orders 494 When court may make banning orders (1) The court may, on application by an entitled person, make a banning order against a person (A) if— (a) a pecuniary penalty order has been made against A 25 under this Act; or (c) (b) A has been convicted of an offence under any Act re- ferred to in Part 1 of Schedule 1 of the Financial Mar- kets Authority Act 2011; or A has been convicted of an offence under any Act re- 30 ferred to in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 (where A is, or has been, a financial markets participant); or (d) A has, while a director of an entity,— 306 Financial Markets Conduct Bill Part 7 cl 494 (i) (ii) (iii) persistently contravened any Act specified in Part 1 of Schedule 1 of the Financial Markets Author- ity Act 2011; or persistently contravened any Act specified in Part 2 of Schedule 1 of the Financial Markets Author- 5 ity Act 2011 (where A is, or has been, a financial markets participant); or if the entity has persistently contravened any of the Acts referred to in subparagraph (i) or (ii), persistently failed to take all reasonable steps to 10 obtain compliance with those Acts; or A has been convicted of a crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961 (where A is, or has been, a financial markets participant); or A has been prohibited in an overseas jurisdiction from 15 carrying on activities that the court is satisfied are sub- stantially similar to any of the activities referred to in section 495 in connection with a contravention of any law relating to the offering or trading of financial prod- ucts or the supply of financial services.
20 (e) (f) (2) Subsection (1)(d)(iii) applies in respect of the Acts specified in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 only if the entity is, or has been, a financial markets participant.
(3) An entitled person is— 25 (a) (b) (c) (d) the FMA: an entity that— (i) A is a director of at the time of the application; or (ii) A was a director of at the time of the ground that triggers the making of the order under subsec- 30 tion (1): the liquidator of an entity referred to in paragraph (b): a person who is, or has been, a product holder or creditor of an entity referred to in paragraph (b).
(4) An application under this section may be made in the course 35 (5) of any civil or criminal proceedings or at any other time.
In this subpart, director— (a) (b) has the same meaning as in section 6(1); and includes, in relation to an entity,— 307 Part 7 cl 495 Financial Markets Conduct Bill (i) (ii) (iii) (iv) a person in accordance with whose directions or instructions a person referred to in paragraph (a) may be required or is accustomed to act; and a person in accordance with whose directions or instructions the board or other governing body of 5 the entity may be required or is accustomed to act; and a person who exercises or who is entitled to ex- ercise or who controls or is entitled to control the exercise of powers that, apart from the constitu- 10 tion of the entity, would fall to be exercised by the board or other governing body of the entity; and a person to whom a power or duty of the board or governing body of the entity has been directly 15 delegated by the board or governing body with that person’s consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the board or governing body.
Compare: 1978 No 103 s 60A; 1988 No 234 s 43F 20 495 Terms of banning orders A banning order may, permanently or for a period specified in the order, prohibit or restrict the person, without the leave of the court, from doing either or both of the following things: (a) being a director or promoter of, or in any way (whether 25 directly or indirectly) being concerned or taking part in the management of, an entity (other than an overseas company, or other entity, that does not carry on business in New Zealand): providing financial adviser services or broking services 30 (within the meaning of those terms in section 5 of the Financial Advisers Act 2008), or contributing, as em- ployee or agent, to the provision of those services.
(b) Compare: 1978 No 103 s 60B; 1988 No 234 s 43G 496 Offence of contravening banning order 35 An individual who contravenes a banning order under this sub- part commits an offence and is liable on conviction on indict- 308 Financial Markets Conduct Bill Part 7 cl 499 ment to imprisonment for a term not exceeding 3 years, a fine not exceeding $200,000, or both.
Compare: 1978 No 103 s 60C; 1988 No 234 s 43H 497 Only 1 banning order may be made for same conduct If conduct by a person constitutes grounds for making an 5 order under any 1 or more of this subpart, section 44F of the Takeovers Act 1993, and section 383 of the Companies Act 1993, proceedings may be brought against that person under any 1 or more of those provisions, but no person is liable to more than 1 order under those provisions for the same 10 conduct.
Compare: 1978 No 103 s 60D; 1988 No 234 s 43J 498 General provisions for banning orders (1) A Registrar of the court must, as soon as practicable after the making of a banning order by the court under this subpart,— 15 give notice to the Registrar of Companies, the Registrar (a) of Financial Service Providers, and the FMA that the order has been made; and give notice in the Gazette of the name of the person against whom the order is made and the period or dates 20 for which the order applies (or that the order is perman- ent).
(b) (2) A person intending to apply for the leave of the court as re- ferred to in section 495 must give to the FMA not less than 10 working days’ written notice of that person’s intention to 25 apply.

The FMA, and any other persons that the court thinks fit, may attend and be heard at the hearing of the application.
Compare: 1978 No 103 s 60F; 1988 No 234 s 43O (3) Subpart 7—Orders to protect interests of aggrieved persons in case of financial markets investigations or proceedings 499 When court may make order to protect interests of aggrieved persons This section applies if— (1) 30 35 309 Part 7 cl 499 Financial Markets Conduct Bill (a) (b) (c) (d) an investigation is being carried out under the Finan- cial Markets Authority Act 2011 in relation to an act or omission by a person that— (i) constitutes or may constitute a contravention of any Act specified in Part 1 of Schedule 1 of the 5 Financial Markets Authority Act 2011; or constitutes or may constitute a contravention of any Act specified in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 (where the person is, or has been, a financial markets partici- 10 pant); or (ii) (iii) may result in a prosecution or civil proceedings of the kind referred to in any of paragraphs (b) to (d) being begun against the person; or a prosecution has begun against a person for a contra- 15 vention of— (i) any Act specified in Part 1 of Schedule 1 of the Financial Markets Authority Act 2011; or any Act specified in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 (where the 20 person is, or has been, a financial markets partici- pant); or (ii) civil proceedings have begun against a person under, or in respect of,— (i) any Act specified in Part 1 of Schedule 1 of the 25 Financial Markets Authority Act 2011; or any Act specified in Part 2 of Schedule 1 of the Financial Markets Authority Act 2011 (where the person is, or has been, a financial markets partici- pant); or 30 (ii) civil proceedings have begun against a person that, in connection with the offer, issue, transfer, supply, or use of financial products or financial services, seek damages or other relief for fraud, negligence, default, breach of duty, or other misconduct.
35 The court may, on application by the FMA or by an aggrieved person, make 1 or more of the orders listed in section 500 if the court considers it necessary or desirable to do so for the purpose of protecting the interests of an aggrieved person.
(2) 310 Financial Markets Conduct Bill Part 7 cl 500 (3) In this section and section 500,— aggrieved person means any person to whom a relevant per- son is liable associate means an associated person of the relevant person civil proceedings means proceedings in a court (other than 5 criminal proceedings) liable means liable, or may be or become liable, to pay money (whether in respect of a debt, by way of damages or compensa- tion, or otherwise) or to account for financial products or other property relevant person means a person referred to in subsection (1).
Compare: 1978 No 103 s 60G; 1988 No 234 s 43P 10 500 What orders may be made (1) The orders that may be made under this subpart are— (a) 15 (b) (c) (d) an order prohibiting the relevant person from transfer- ring, charging, or otherwise dealing with money, finan- cial products, or other property held or controlled by the relevant person: an order prohibiting a person who is indebted to the rele- 20 vant person, or to an associate, from making a payment in total or partial discharge of the debt to, or to another person at the direction or request of, the relevant person or associate: an order prohibiting a person who holds money on be- 25 half of the relevant person, or on behalf of an associate, from paying all or any of the money to the person, or to another person at the direction or request of that person, on whose behalf the money is held: an order prohibiting a person who holds financial prod- 30 ucts or other property on behalf of the relevant person, or on behalf of an associate, from transferring or other- wise parting with possession of the financial products or property to the person, or to another person at the di- rection or request of that person, on whose behalf the 35 financial products or other property is held: 311 Part 7 cl 500 Financial Markets Conduct Bill an order prohibiting the taking or sending out of New Zealand by a person of money of the relevant person or of an associate: an order prohibiting the taking, sending, or transfer by a person of financial products or other property of the 5 relevant person or of an associate from a place in New Zealand to a place outside New Zealand (including the transfer of financial products from a register in New Zealand to a register outside New Zealand): an order requiring the relevant person, or any person 10 holding money, financial products, or other property on behalf of the relevant person or an associate, to pay or transfer money, financial products, or other property to a specified person to be held on trust pending determin- ation of the
 investigation, prosecution, or civil proceed- 15 ings referred to in section 499(1): an order appointing,— (i) if the relevant person is an individual, a receiver or trustee, having any powers that the court orders, of the property or of part of the property 20 of that person; or if the relevant person is a body corporate, a receiver or receiver and manager, having any powers that the court orders, of the property or of part of the property of that person: 25 (ii) an order removing a person from being a manager of a managed investment scheme to which the investigation, prosecution, or civil proceedings referred to in section 499(1) relates or relate: an order appointing a person as the manager of a man- 30 aged investment scheme to which the investigation, prosecution, or civil proceedings referred to in section 499(1) relates or relate (with any powers, rights, and obligations that the court orders): if the relevant person is an individual, an order requiring 35 that person to deliver up to the court his or her passport and any other documents that the court thinks fit: (e) (f) (g) (h) (i) (j) (k) 312 Financial Markets Conduct Bill Part 7 cl 502 (l) if the relevant person is an individual, an order prohibit- ing that person from leaving New Zealand without the consent of the court.
(2) A reference in subsection (1)(f) or (h) to property of a person includes a reference to property that the person holds other- 5 wise than as sole beneficial owner, for example,— (a) as trustee for, as nominee for, or otherwise on behalf of or on account of, another person; or in a fiduciary capacity.

(b) (3) An order may be expressed to operate for a specified period 10 or until the order is discharged by a further order under this section.
Compare: 1978 No 103 s 60H; 1988 No 234 s 43Q 501 (1) (2) (3) Interim orders If an application is made to the court for an order under sec- 15 tion 499, the court may, if in the opinion of the court it is desirable to do so, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the ap- plication.
The court must not require the FMA, as a condition of making an interim order, to give an undertaking as to damages.

In determining the FMA’s application for the grant of an in- terim order, the High Court must not take into account that the FMA is not required to give an undertaking as to damages.

Compare: 1978 No 103 s 60I; 1988 No 234 s 43R 20 25 502 Relationship with other law Nothing in this subpart affects the powers that the court has apart from this subpart.
Compare: 1978 No 103 s 60J; 1988 No 234 s 43S 30 313 Part 7 cl 503 Financial Markets Conduct Bill Subpart 8—Indemnities or insurance for directors, employees, and auditors of issuers and offerors 503 General prohibition on indemnities or insurance for directors, employees, and auditors of issuer or offeror (1) A specified person, or an associate, must not indemnify, or directly or indirectly effect insurance for, a director, an em- ployee, or an auditor of the specified person in respect of— (a) 5 liability, in connection with conduct regulated by the fi- nancial markets legislation, for any negligence, default, 10 breach of duty, or breach of trust in his or her capacity as a director, employee, or auditor; or costs incurred by that director, employee, or auditor in defending or settling any claim or proceeding relating to that liability.
15 (b) (2) An indemnity given in breach of this section is void.

(3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- 20 part 5).
Compare: 1978 No 103 s 61 (4) 504 Permitted indemnities for certain costs of directors, employees, and auditors of issuers or offerors (1) A specified person, or an associate, may indemnify a director, 25 an employee, or an auditor of the specified person for any costs incurred by him or her in defending or settling a pro- ceeding that relates to liability of a kind referred to in section 503(1)(a) if— (a) judgment is given in his or her favour or if he or she is 30 acquitted; or the proceeding is discontinued.
(b) This section does not limit section 162 of the Companies Act 1993.

Section 503 is subject to this section.
Compare: 1978 No 103 s 61A 35 (2) (3) 314 Financial Markets Conduct Bill Part 7 cl 505 505 Permitted insurance for certain liability of directors and employees of issuer or offeror (1) A specified person, or an associate, may effect insurance for a director or an employee of the specified person in respect of— (a) (b) (c) liability (other than criminal liability) of a kind referred 5 to in section 503(1)(a); or costs incurred by that director or employee in defend- ing or settling any claim or proceeding relating to that liability; or costs incurred by that director or employee in defending 10 any criminal proceedings— (i) that have been brought against the director or em- ployee in relation to any alleged act or omission in his or her capacity as a director or employee; and in which he or she is acquitted.
(ii) 15 (2) (3) The directors of the specified person, or of the associate, who vote in favour of authorising the insurance under subsection (1) must sign a certificate stating that, in their opinion, the cost of effecting the insurance is fair to the specified person 20 or associate (as the case may be).
The director or employee who is insured is personally liable to the specified person or associate for the cost of effecting insurance if— (a) subsection (2) has not been complied with in effecting 25 the insurance; or reasonable grounds did not exist for the opinion set out in the certificate given under subsection (2).

(b) (4) However, subsection (3) does not apply to the extent that the insurance was fair to the specified person or associate at 30 the time the insurance was effected.
(5) A certificate signed for the purposes of section 162(6) of the Companies Act 1993 is effective also for the purposes of sub- section (2); but this section does not limit section 162 of the Companies Act 1993.

Section 503 is subject to this section.
Compare: 1978 No 103 s 61B (6) 35 315 Part 7 cl 506 Financial Markets Conduct Bill 506 Interpretation for this subpart In this subpart,— associate means an associated person of the specified person director includes a former director effect insurance includes pay, whether directly or indirectly, 5 the costs of the insurance employee includes a former employee indemnify includes relieve, exempt, or excuse from liability, whether before or after the liability arises specified person means— (a) an issuer of financial products offered under a regulated offer; or an offeror of financial products offered under a regu- lated offer.
Compare: 1978 No 103 s 61C (b) Subpart 9—Appeals 507 Appeals against market services licence decisions A person may appeal to the court against a decision of the FMA under Part 6 to— (a) (b) decline to issue a licence to the person; or impose conditions on the person’s licence or proposed licence or to vary, revoke, add to, or substitute any con- ditions on the person’s licence; or decline an application to vary the conditions of the per- son’s licence; or exercise a power in respect of the person under section 412 or 416 (which relates to the FMA’s powers in the case of contraventions, etc).
(c) (d) 508 Appeals against other decisions of FMA on questions of law only An aggrieved person that considers that any of the following decisions of the FMA is wrong in law may appeal to the court against the decision on a question of law only: to give (a) a 112(2)(f)(iii) (certificate that the FMA is satisfied that 35 a scheme complies with certain requirements): certificate under section refusal a 10 15 20 25 30 316 Financial Markets Conduct Bill Part 7 cl 512 (c) (d) (b) a decision under section 121 (direction to change a registration): a decision under section 177(1)(a) (removal of a supervisor of a registered scheme): a decision under section 180 (cancellation of the regis- 5 tration of a scheme): a decision under section 189 (direction to the super- visor or issuer): a decision under section 361 (direction to a licensed market operator): a decision under subpart 1 (FMA’s enforcement powers).
Compare: 1988 No 234 s 47A (g) (e) (f) 10 Subpart 10—Miscellaneous 509 Time for laying information for summary offences (1) Any information for an offence against this Act punishable on summary conviction may be laid at any time within 3 years after the date of the offence.

Subsection (1) applies despite section 14 of, or anything else to the contrary in, the Summary Proceedings Act 1957.
Compare: 1988 No 234 s 43U (2) 510 Jurisdiction of courts in New Zealand The High Court has exclusive jurisdiction to hear and deter- mine proceedings in New Zealand under this Act, other than proceedings for offences.

Compare: 1978 No 103 s 65A 511 Orders to secure compliance The court may, for the purpose of securing compliance with any other order it makes under this Act, direct a person to do or refrain from doing a specified act.
Compare: 1978 No 103 s 65C; 1988 No 234 s 43X 512 General provisions as to court’s orders (1) A court order under this Act may be made on the terms and conditions the court thinks fit.

15 20 25 30 317 Part 7 cl 513 Financial Markets Conduct Bill (2) The court may revoke, vary, or suspend an order made under this Act on the terms and conditions the court thinks fit.
Compare: 1978 No 103 s 65E; 1988 No 234 s 43Z 513 Persons entitled to appear before court The following persons are entitled to appear and be heard at 5 the hearing of an application to the court taken under this Act: (a) (b) (c) the applicant: a relevant issuer: a person who is alleged to have suffered, or to be likely to suffer, loss or damage because of an alleged contra- 10 vention (whether that person or another person makes the allegation): the FMA: any relevant licensed market operator: a person directed to be given notice of the application: (d) (e) (f) (g) with the leave of the court, any other person.
Compare: 1988 No 234 s 43ZA 15 514 State of mind of directors, employees, or agents attributed to body corporate or other principal If, in a proceeding under this Act in respect of any conduct 20 engaged in by a body corporate, being conduct in relation to which any provision of this Act applies, it is necessary to es- tablish the state of mind of the body corporate, it is sufficient to show that a director, employee, or agent of the body corpo- rate, acting within the scope of his or her actual or apparent 25 authority, had that state of mind.
If, in a proceeding under this Act in respect of any conduct en- gaged in by a person other than a body corporate, being con- duct in relation to which any provision of this Act applies, it is necessary to establish the state of mind of the person, it is suf- 30 ficient to show that an employee or agent of the person, acting within the scope of his or her actual or apparent authority, had that state of mind.
In this Act, state of mind, in relation to a person, includes the knowledge, intention, opinion, belief, or purpose of the person 35 (1) (2) (3) 318 Financial Markets Conduct Bill Part 7 cl 516 and the person’s reasons for that intention, opinion, belief, or purpose.
Compare: 1986 No 5 s 90(1), (3) 515 Conduct of directors, employees, or agents attributed to (1) (2) body corporate or other principal Conduct engaged in on behalf of a body corporate by any of the following must be treated, for the purposes of this Act, to have been engaged in also by the body corporate: (a) 5 a director, employee, or agent of the body corporate, acting within the scope of his, her, or its actual or ap- 10 parent authority: any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee, or agent of the body corporate, given within the scope of the actual or apparent authority of the dir- 15 ector, employee, or agent.
(b) Conduct engaged in on behalf of a person other than a body corporate (A) by any of the following must be treated, for the purposes of this Act, to have been engaged in also by A: (a) an employee or agent of A acting within the scope of 20 his, her, or its actual or apparent authority; or any other person at the direction or with the consent or agreement (whether express or implied) either of A or of an employee or agent of A, given within the scope of the actual or apparent authority of the employee or 25 agent.
(b) Compare: 1986 No 5 s 90(2), (4) 516 Saving of liability under general law Nothing in this Act limits or diminishes any liability that any person may incur under any rule of law or enactment other 30 than this Act.
Compare: 1978 No 103 s 65 319 Part 8 cl 517 Financial Markets Conduct Bill Part 8 Regulations and exemptions Subpart 1—Regulations 517 Regulations for purposes of Part 3 (disclosure of offers (1) of financial products) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section 527(2), make regulations for all or any of the following purposes: 5 10 Product disclosure statements, register entries, and other matters relating to disclosure regulating product disclosure statements and register entries, including— (i) 20 information, sounds, prescribing the information that must, or must not, be contained in product disclosure state- 15 ments or register entries; and prohibiting or restricting the use in product disclosure statements or register entries of pre- scribed words, images, graphics, or other matters; and prescribing requirements as to the layout or method of presentation of product disclosure statements (including the length of a PDS and of parts of a PDS, the size of type used, and when information may be incorporated by reference); 25 and prescribing the documents that must, or must not, accompany a PDS; and prescribing circumstances for the purposes of sections 38(1)(c) and 42(3); and prescribing information or documents for the purposes of section 47; and 30 (ii) (iii) (iv) (v) (vi) (vii) prescribing circumstances and requirements for the purposes of sections 55(2), 64(4), and 68(6); and (viii) prescribing matters for the purposes of section 35 67; and (a) 320 (b) (c) (d) (e) (f) (g) (h) (i) (j) Financial Markets Conduct Bill Part 8 cl 517 (ix) prescribing circumstances in which a register en- try is not required for a regulated offer: amending any of the dollar amounts specified in Sched- ule 1 (other than the amounts in clause 12 of that schedule (small offers)) by increasing those amounts: providing for the matters referred to in clause 26 of Schedule 1, including prescribing the circumstances in which a disclosure document is required, the period
 within which the disclosure document must be pro- vided, the information and documents to be contained 10 in, or to accompany, a disclosure document, and the conditions that must be complied with: 5 15 Ongoing disclosure and updating of registers prescribing changes that must be notified under section 80: prescribing the documents, information, and other mat- ters that must be made available under section 81 or 82, the times or events referred to in either of those sec- tions, the persons who may make a request under sec- tion 81, the persons to whom documents, information, 20 and other matters must be made available under sec- tion 81, and the manner of making the documents, in- formation, and other matters available (including pre- scribing the manner in which the documents, informa- tion, or matters are to be presented, calculated, or pre- 25 pared): Miscellaneous prescribing matters in connection with money for finan- cial products that is held in trust: prescribing, for the purposes of provisions of Part 3 30 that require money to be repaid with interest, the rate of interest: prescribing circumstances for the purposes of section 71(3)(e): prescribing kinds of entities for the purposes of section 35 71(4)(c): prescribing financial products for the purposes of the definition of specified financial products in clause 8(2) of Schedule 1: 321 Part 8 cl 518 Financial Markets Conduct Bill (k) (l) (m) (n) (o) the purposes of clause prescribing schemes for 11(3)(a) of Schedule 1: prescribing markets and persons for the purposes of clause 19(4) of Schedule 1: prescribing kinds of category 2 products for the pur- 5 poses of clause 20(c) of Schedule 1: prescribing matters for the purposes of the definitions of relevant person, relevant time, and transaction in clause 34 of Schedule 1: prescribing forms and information for the purposes of 10 clause 45 of Schedule 1.
(2) Subsection (1)(a)(v) and (ix) and (h) are subject to sec- tion 523 (which provides for certain procedural requirements relating to regulations made under those provisions).
518 Regulations for purposes of Part 4 (governance of 15 (1) financial products) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section 527(2), make regulations for all or any of the following purposes: 20 (a) (b) (c) (d) Reporting to supervisor prescribing the documents, information, and other mat- ters that must be made available under subpart 2 or 3 of Part 4, the times or events referred to in either of those subparts, and the manner of making the docu- 25 ments, information, and other matters available (includ- ing prescribing the manner in which the documents, in- formation, or matters are to be presented, calculated, or prepared): Particular types of schemes prescribing, for registrations as particular types of schemes, additional application requirements: prescribing other types of registered schemes, and any additional registration requirements applying to those types of schemes: prescribing application and registration requirements for locked-in superannuation schemes: 30 35 322 (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) Financial Markets Conduct Bill Part 8 cl 518 Contents of governing documents prescribing the matters that must be contained in a trust deed for a debt security required for the purposes of Part 4: prescribing provisions to be implied in a governing 5 document (see subsection (2)): Meetings of product holders authorising a person to call meetings of product holders (whether in general, or at specified times or in relation to events or in connection with specified matters): prescribing the methods of holding meetings, the quo- rum, and the other procedures to be followed in calling and conducting meetings of product holders (including providing for electronic voting by product holders) and providing for the making of written resolutions: Custodians prescribing the records that must be kept by a custodian for a registered scheme: 10 15 Management of registered schemes prescribing matters relating to the reporting of limit 20 breaks and
 pricing errors and non-compliance with pric- ing methodologies: prescribing the steps that must be taken to remedy or restore the positions of current and former scheme par- ticipants and the registered scheme if there is a material 25 pricing error or non-compliance (including whose pos- ition needs to be remedied or restored, when, and how, and any related obligations or other matters): prescribing benefits or transactions that may be entered into without the consent of a supervisor under section 30 159 (on terms and conditions, if any): prescribing circumstances for the purposes of section 174(2)(b): Registers that must be kept by issuers prescribing matters for the purposes of subpart 5 of 35 Part 4, including— (i) types of derivatives for the purposes of section 200(2)(a): 323 Part 8 cl 518 Financial Markets Conduct Bill (ii) matters for the purposes of section 200(2)(b) for (iii) and (c): requirements the purposes of section 200(3), including requirements relating to the keeping of records in respect of derivatives, the 5 audit of those records, the inspection of those records, and making copies of, or extracts from, those records available: particulars 202(1)(f): circumstances for 206(2)(c): (vi) purposes for the purposes of section 210(3)(a): (vii) prescribing a different period for the purposes the purposes of section of section purposes (iv) the (v) for 10 of paragraph (b) of the definition of specified 15 period in section 211(2): (viii) prescribing circumstances for the purposes of section 212(1)(b): (o) (p) (q) (r) (s) Miscellaneous prescribing the form of, or information, statements, cer- 20 tificates, or documents that must or must not be con- tained in or attached to, any document or information required to be provided or made by or under Part 4: prescribing, for the purposes of provisions of Part 4 that require money to be repaid with interest, the rate of 25 interest: requiring any matters prescribed by paragraph (a) to (d) to be provided for in
 accordance with the frame- works or methodologies specified in a notice issued by the FMA under subpart 4: prescribing overseas schemes, benefits, or transactions for the purposes of section 160: prescribing the form or contents of any certificate or other document referred to in Part 4, and the manner in which it may be made or given.
35 30 (2) A provision prescribed for the purposes of subsection (1)(f) may, without limitation, do any of the following: (a) specify the duties and powers of the supervisor of the debt security or the scheme: 324 Financial Markets Conduct Bill Part 8 cl 519 (b) specify the duties of the issuer of the debt security or the manager of the scheme.
(3) Subsection (1)(n)(ii), (v), and (viii) are subject to section 523 (which provides for certain procedural requirements re- lating to regulations made under those subparagraphs).
5 519 Regulations for purposes of Part 5 (dealing in financial (1) products on markets) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section 527(2), make regulations for all or any of the following 10 purposes: (a) (b) Insider conduct and market manipulation exempting (on terms and conditions, if any) conduct from being— (i) insider conduct that is conduct that would other- 15 wise fall within section 235, 236, or 237: (ii) market manipulation that is conduct that would otherwise fall within section 256, 257, or 260: Substantial holding disclosure prescribing further matters relating to a matter, a rele- 20 vant event, or a substantial holding, that must be dis- closed under subpart 5 of Part 5, which may include (without limitation)— (i) the nature of the relevant interests in the sub- stantial holding (including before and after the 25 relevant event in the case of sections 271 and 272): the number, nominal value (if any), and class of financial products in which the person has or had the substantial holding (including before and 30 after the relevant event in the case of sections 271 and 272): the date of the relevant event: the terms and conditions (including consid- eration) of the transaction giving rise to the 35 relevant event: (ii) (iii) (iv) 325 Part 8 cl 519 Financial Markets Conduct Bill (c) (d) (e) (f) (g) (v) (vi) (vii) details as to the circumstances in which the rele- vant event occurred: the date of the last disclosure by the person under that subpart in respect of the substantial holding: information relating to the relevant event or sub- 5 stantial holding and concerning other persons who have made disclosures under that subpart: 10 prescribing the documents, certificates, and statements that must accompany or be annexed to those disclos- ures: determining when disclosure of the further matters re- ferred to in paragraph (b) is required (including by re- quiring disclosure only on request): prescribing the form of or for, and the method
 of, dis- closure under that subpart (and of any other acknowl- 15 edgments or notices required by the subpart) or provid- ing for the relevant licensed market operator to deter- mine that form or method and providing for the way in which it must do so: exempting (on terms and conditions, if any) classes of 20 persons, classes of transactions, or classes of relevant interests, substantial holdings, or relevant events from compliance with any provisions of that subpart or regu- lations made under any of paragraphs (b) to (e): Directors’ and senior managers’ disclosure obligations 25 prescribing further matters relating to a relevant inter- est, or acquisition or disposal of a relevant interest, that must be disclosed by directors and senior managers under subpart 6 of Part 5, which may include (with- out limitation)— (i) (ii) the nature of the relevant interest: the number and class of financial products to which the relevant interest relates or related: the date of the disclosure obligation becoming applicable, or the date of the acquisition or dis- 35 posal: the consideration paid or received for the acqui- sition or disposal: 30 (iii) (iv) 326 (h) (i) (j) (k) (l) (m) Financial Markets Conduct Bill Part 8 cl 519 (v) (vi) details as to the circumstances in which the ac- quisition or disposal occurred: the date of the last disclosure by the director or senior manager: determining when the disclosure in paragraph (g) is 5 required (including by requiring disclosure only on re- quest) and prescribing the form of or for, and the method of, disclosure or providing for the relevant licensed mar- ket operator to determine that form or method and for the way in which it must do so: exempting (on terms and conditions, if any) classes of persons, classes of transactions, or classes of relevant interests, acquisitions, or disposals from compliance with any provisions of that subpart or regulations made under paragraph (g) or (h): 10 15 Licensed markets prescribing conduct that
 does not constitute a financial product market for the purposes of this Act: exempting (on terms and conditions, if any) wholesale markets or other financial product markets from the op- 20 eration of subpart 7 of Part 5: prescribing information and the form and method re- ferred to in section 353: Transfer of transferable financial products prescribing matters for the purposes of subpart 9 of 25 Part 5, including— (i) financial products to which that subpart does not apply: forms for the purposes of that subpart: information to be included in products transfers 30 or brokers transfers: persons for the purposes of paragraph (f) of the definition of authorised transaction in section 372(3): (ii) (iii) (iv) (n) Miscellaneous requiring any matter prescribed in regulations under paragraph (j) or (k) to be calculated or determined by 35 327 Part 8 cl 520 Financial Markets Conduct Bill (2) (3) reference to the frameworks or methodologies specified in a notice issued by the FMA under subpart 4.
Subsection (1)(a), (f), (i), and (k) are subject to section 523 (which provides for certain procedural requirements re- lating to regulations made under those paragraphs).

Before making a recommendation in relation to subsection (1)(j) the Minister must have regard to the matters set out in section 306.
5 520 Regulations for purposes of Part 6 (market services) (1) The Governor-General may, by Order in Council, on the 10 recommendation of the Minister in accordance with section 527(2), make regulations for all or any of the following purposes: (a) Issue of licences prescribing matters relating to the issue of market ser- 15 vices licences, including— (i) eligibility criteria for licences (including require- ments relating to competence, qualifications, and experience, prudential requirements, and requirements relating to the business, operation, 20 or management of an applicant): requirements that the applicant’s directors, se- nior managers, and proposed directors and senior managers must satisfy: (ii) (iii) matters that the FMA must have regard to: (iv) 25 persons or classes of persons with whom the FMA must consult: eligibility criteria and requirements for the pur- poses of section 398 (including requirements relating to competence, qualifications, and ex- 30 perience, prudential requirements, and require- ments relating to the business, operation, or man- agement of a subsidiary of the applicant): information for 399(2)(e): the purposes of section 35 (v) (vi) (vii) eligibility criteria to be met by a DIMS licensee before a custodian of investor property is, subject to conditions imposed, under paragraph (c)(iii), 328 (b) (c) (d) (e) Financial Markets Conduct Bill Part 8 cl 520 permitted to be an associated person of the DIMS licensee: prescribing overseas markets and circumstances for the purposes of section 387(2)(c): Conditions of licences prescribing conditions that market services licences are subject to, the kinds of conditions that the FMA may impose on those licences, or matters to which conditions imposed by the FMA may relate, including (without limitation) providing for— (i) 5 10 conditions that regulate the manner in which li- censed market services must be carried out under the licence: conditions that impose prudential requirements on licensees or otherwise regulate the business, 15 operation,
 or management of licensees (for ex- ample, requirements to have a credit rating or to maintain a minimum amount of capital, require- ments relating to margins, or requirements relat- ing to the receipt of money and property from 20 clients): in the case of a DIMS licensee, the conditions subject to which a custodian of investor property is permitted to be an associated person of the DIMS licensee: 25 (ii) (iii) stating whether a condition imposed on a market ser- vices licence by the regulations is a Part 6 licence pro- vision: Reporting prescribing matters relating to reports or other disclos- 30 ure under subpart 3 of Part 6, including the times and events referred to in that subpart and the documents, in- formation, or other matters that must be contained in the reports (including prescribing the manner in which the documents, information, or matters are to be presented, 35 calculated, or prepared): 329 Part 8 cl 520 Financial Markets Conduct Bill Disclosure obligations for licensees providing market services to retail investors prescribing the information that must, or must not, be contained in disclosure statements for the purposes of subpart 4 of Part 6 (including prescribing the manner 5 in which the documents, information, or matters are to be presented, calculated, or prepared): prohibiting or restricting the use in those disclosure statements of prescribed words, information, sounds, images, graphics, or other matters: prescribing requirements as to the form, layout, or method of presentation of those disclosure statements (including the length of the whole or any part of the statement, the size of type used, and when information may be incorporated by reference): determining when disclosure is required under that sub- part (including by requiring disclosure only on request) and what minimum disclosure must be given: regulating the combining of disclosure statements: 10 15 Requirement for licensees to provide certain market services under client
 agreements prescribing the matters that must be contained in a client agreement required for the purposes of subpart 5 of Part 6: prescribing provisions to be implied in a client agree- 25 ment (see subsection (3)): 20 Provision of discretionary investment management services prescribing matters relating to the reporting of limit breaks: Miscellaneous prescribing persons or classes of persons to whom no- tices under Part 6 must be given: prescribing the circumstances referred to in section 422(2) or 424(1): prescribing overseas schemes, benefits, or transactions for the purpose of section 439: 30 35 (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) 330 Financial Markets Conduct Bill Part 8 cl 521 (q) prescribing the form or contents of any certificate or other document referred to in Part 6, and the manner in which it may be made or given.
(2) Subsection (1)(b) is subject to section 523 (which pro- vides for certain procedural requirements relating to regula- 5 tions made under that paragraph).

(3) A provision prescribed for the purposes of subsection (1)(l) may, without limitation, specify the duties of the licensee under the client agreement.
521 Transitionals, savings, and orderly implementation of Act 10 The Governor-General may, by Order in Council, on the (1) recommendation of the Minister in accordance with section 527(2), make regulations for either or both of the following purposes: (a) to any conditions stated in 15 providing that, subject the regulations, transitional or savings provisions prescribed by the regulations that relate to the imple- mentation of this Act (in addition to, or in substitution for, any other transitional provisions in Part 9) apply during the whole or any part of the transitional imple- 20 mentation period ending on the 5-year date: providing that, subject to any conditions stated in the regulations, specified provisions of this Act (including definitions), or provisions of other enactments amended or repealed by this Act, do not apply, or apply with 25 modifications or additions, or both, during the whole or any part of the transitional implementation period ending on the 5-year date.
(b) (2) The Minister must not recommend the making of regulations under this section unless the Minister is satisfied that the regu- 30 lations— (a) are necessary or desirable for the orderly implementa- tion of this Act; and (b) are consistent with the purposes of this Act.

(3) This section is repealed on the close of the 5-year date.

(4) Any regulations made under this section that are in force on 35 the 5-year date are revoked on the close of that day.
331 Part 8 cl 522 Financial Markets Conduct Bill (5) In this section, 5-year date means the date that is 5 years after the date on which this section comes into force.
522 Other regulations (1) The Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section 5 527(2), make regulations for all or any of the following purposes: Definitions providing for matters relating to terms defined in this Act, including the following: (i) 10 excluding dealing from being dealing in financial products for the purposes of this Act: declaring classes of services not to be financial services for the purposes of this Act: prescribing services for the purposes of the def- 15 inition of prescribed intermediary services: declaring interests or rights not to be securities for the purposes of this Act: prescribing matters for the purposes of para- graph (a)(ii) of the definition of derivative in 20 section 8: (ii) (iii) (iv) (v) prescribing kinds of schemes and deposit products for the purposes of section 10(2) and specifying conduct for the purposes of section 10(2)(c)(iv) (definitions relating to issued and issuer): prescribing matters for the purposes of section 12(3): 25 Schedule 3 schemes prescribing the documents, information, and other mat- ters that must be prepared and provided under clause 6 of Schedule 3, the times or events referred to in that 30 clause, and the manner of providing the documents, in- formation, and other matters (including prescribing the manner in which the documents, information, or mat- ters are to be presented, calculated, or prepared): (a) (b) (c) (d) 332 (e) (f) (g) (h) (i) Financial Markets Conduct Bill Part 8 cl 522 Registers prescribing procedures, requirements, and other mat- ters, not inconsistent with this Act, for any register kept under this Act, including matters that relate to— (i) (ii) (iii) the operation of the register: the form of the register: the information or documents to be contained in the register: access to the register: search criteria for the register: circumstances in which amendments must be made to the register: (iv) (v) (vi) Enforcement setting the infringement fee for each infringement of-
 fence, which must not exceed $20,000: prescribing information to be included in infringement notices and reminder notices and the form of notices: 5 10 15 Fees and charges prescribing fees and charges payable in respect of any matter under this Act or the manner in which fees and 20 charges may be calculated: Prescribed manner prescribing, for the purposes of any provision of this Act that requires a thing to be done in a prescribed manner, the manner in which the thing must be done, including 25 prescribing— (i) (ii) when, where, and how the thing must be done: the form that must be used in connection with doing the thing: (iv) (iii) what information or other evidence or documents 30 must be provided in connection with the thing: requirements with which information, evidence, or documents that are provided in connection with the thing must comply: that fees or charges must be paid in connection 35 with doing the thing: (v) 333 Part 8 cl 523 Financial Markets Conduct Bill (j) General providing for any other matters contemplated by this Act, necessary for its administration, or necessary for giving it full effect.
(2) Subsection (1)(a)(i), (ii), and (iv) are subject to section 5 523 (which provides for certain procedural requirements re- lating to regulations made under those subparagraphs).
523 Procedural requirements for regulations relating to exemptions, exclusions, and definitions The Minister must, before making a recommendation in rela- 10 tion to a provision referred to in— (a) subsection (2), have regard to the main and additional purposes of this Act set out in sections 3 and 4; and subsection (2)(a), (b), or (d), be satisfied that the ex- tent to which requirements are disapplied is not broader 15 than is reasonably necessary to address the matters that gave rise to the regulations; and subsection (2)(c) and (e), be satisfied that the extent of the exemption or exclusion is not broader than is rea- sonably necessary to address the matters that gave rise 20 to the regulations.
(b) (c) The provisions are— (a) section 517(1)(a)(v) and (ix) and (h) (regulations may prescribe circumstances in which requirements do not apply): section 518(1)(n)(ii), (v), and (viii) (regulations may prescribe circumstances in which requirements do not apply): section 519(1)(a), (f), (i), and (k) (regulations may provide for exemptions from certain requirements): section 520(1)(b) (regulations may prescribe matters relating to requirement to be licensed): section 522(1)(a)(i), (ii), and (iv) (regulations relat- ing to definitions).
25 30 (b) (c) (d) (e) (1) (2) 334 Financial Markets Conduct Bill Part 8 cl 526 524 Miscellaneous provisions relating to exemptions (1) The breach of a term or condition of an exemption provided by regulations is a breach of the obligation for which the ex- emption applies (unless the regulations otherwise provide).

Exemptions made under regulations may extend to all, or 5 classes of, persons, transactions, or other matters in relation to specified overseas jurisdictions.
Subsection (2) does not limit this subpart.

Compare: 1988 No 234 ss 49E, 49F (2) (3) 525 Miscellaneous provisions relating to fees and charges (1) Regulations may authorise a person to whom a fee or charge is payable to refund or waive, in whole or in part and on any con- ditions that may be prescribed, payment of the fee or charge in relation to any person or class of persons.
10 (2) A person to whom a prescribed fee or charge is payable may 15 refuse to perform a function or exercise a power until the pre- scribed fee or charge is paid.

20 25 (3) Any fee, charge, or other amount payable to a person under this Act is recoverable by the person in any court of competent jurisdiction as a debt due to the person.

This subpart does not limit section 67 of the Financial Markets Authority Act 2011.
(4) 526 Regulations or exemptions may require compliance with generally accepted accounting practice, financial reporting standards, or FMA frameworks or methodologies Regulations, or exemptions granted by the FMA, may require any person, class of persons, information, or class of informa- tion to comply with any of the following: (a) generally accepted accounting practice, either generally 30 or in specified circumstances: a financial reporting standard: a notice issued under subpart 4.
(b) (c) Regulations, or exemptions granted by the FMA, may require compliance with generally accepted accounting practice, a fi- 35 (1) (2) 335 Part 8 cl 527 Financial Markets Conduct Bill nancial reporting standard, or a notice issued under subpart 4— (a) (b) with modifications, additions, or variations specified in in whole or in part; and the regulations.
(3) In this section,— financial reporting standard has the same meaning as in sec- tion 2(1) of the Financial Reporting Act 1993 generally accepted accounting practice has the same mean- ing as in section 3 of the Financial Reporting Act 1993.
527 Miscellaneous provisions relating to regulations (1) Different matters may be prescribed, prohibited, restricted, specified, or required under the regulations in respect of dif- ferent kinds or classes of financial products, services, persons, or other circumstances.

The Minister must consult with the FMA before making a rec- ommendation under this subpart.
(2) 5 10 15 Subpart 2—Exemptions 528 FMA may grant exemptions (1) The FMA may, on the terms and conditions (if any) that it 20 thinks fit, exempt any person or class of persons or any trans- action or class of transactions from compliance with any pro- vision or provisions of— (a) (b) Parts 2 to 6 or subparts 8 to 10 of Part 9; or any regulations.

25 (2) Nothing in subpart 6 or 7 limits subsection (1).
(3) Subpart 5 (general provisions relating to FMA instruments) applies to an exemption granted under this section.
529 Restriction on FMA’s exemption power The FMA must not grant an exemption under this subpart un- 30 less it is satisfied that— (a) granting the exemption is necessary or desirable in order to promote the main purposes of this Act as spe- 336 Financial Markets Conduct Bill Part 8 cl 533 (b) cified in section 3 or any of the additional purposes specified in section 4; and the extent of the exemption is not broader than is rea- sonably necessary to address the matters that gave rise to the exemption.
5 530 Exemption in force for not more than 5 years An exemption granted under this subpart may continue in force for not more than 5 years (and at the close of the date that is 5 years after the exemption first comes into force, the exemption must be treated as having been revoked unless it 10 is sooner revoked or expires).
531 Breach of exemption conditions The breach of a term or condition of an exemption granted under this subpart is a breach of the obligation for which the exemption applies (unless the terms of the exemption other- 15 wise provide).

Compare: 1988 No 234 s 49E 532 Exemptions in respect of specified overseas jurisdictions (1) Exemptions granted under this subpart may extend to all, or classes of, persons, transactions, or other matters in relation to 20 specified overseas jurisdictions.
Subsection (1) does not limit this subpart.
Compare: 1988 No 234 s 49F (2) Subpart 3—FMA’s designation power 533 FMA may designate financial products and offers (1) 25 The FMA may— (a) declare that a security that would not otherwise be a financial product is a financial product of a particular kind: declare that a financial product is, or is to become, a 30 financial product of a particular kind (whether or not it was previously a financial product of a different kind): (b) Example A share is normally an equity security.
337 Part 8 cl 533 Financial Markets Conduct Bill Example—continued However, a particular type of share may have terms that mean that, in substance, the share is similar to a debt security.

The FMA may declare that a share of that kind is a debt security.
5 (c) (d) declare that a security that would otherwise be a finan- cial product of a particular kind is not a financial prod- uct: declare that an offer of financial products that would not otherwise require disclosure under Part 3 because of 10 an exclusion under Part 1 of Schedule 1 does require disclosure under Part 3: Example A small offer is generally excluded from requiring disclos- ure (see clause 12 of Schedule 1).
However, an offer of a particular kind may involve signifi- cant risks for investors that may otherwise be undisclosed to investors.

The FMA may declare that disclosure under Part 3 is required despite the exclusion.
declare that the exception in section 387(3) does not apply to a person or class of persons (and, accordingly, those persons must be licensed under this Act to act as a provider of a discretionary investment management service): declare a person, service, or conduct to be not exempt under section 233(1)(a) to (h) (in relation to either subpart 5 or 6 of Part 5), or under section 279, 281, or 307.
15 20 25 (e) (f) (2) A declaration may specify terms and conditions relating to— 30 (a) (b) the circumstances in which the declaration applies, in- cluding (without limitation) by reference to an issuer, a class of issuers, an offeror, a class of offerors, an offer, or a class of offers: transitional matters.
35 338 Financial Markets Conduct Bill Part 8 cl 535 (3) Nothing in this section prevents the FMA from granting an exemption under subpart 2 that applies to a financial product that is the subject of a declaration under this section.

Example The FMA declares that a particular type of share (which would 5 otherwise be an equity security) is a debt security.

However, some of the regulatory requirements that relate to debt securities are inappropriate in respect of these shares.
Accordingly, the FMA grants an exemption (on terms and condi- tions) from those requirements in order to customise the regula- 10 tory requirements that will apply.

(4) Subpart 5 (general provisions relating to FMA instruments) applies to a declaration under this section.
534 Procedural requirements (1) The FMA must not make a declaration under this subpart un- 15 less— (a) it is satisfied that the declaration is necessary or desir- able in order to promote the main purposes of this Act specified in section 3 or any of the additional purposes specified in section 4; and in the case of section 533(1)(a) to (d), it has had re- gard to the economic substance of the relevant security; and it has consulted the persons or representatives of the persons that the FMA considers will be substantially 25 affected by the declaration.
20 (b) (c) (2) A failure to comply with subsection (1)(c) does not affect the validity of the declaration.

535 Transitional matters A declaration under this subpart— (a) does not apply to financial products issued or trans- ferred before the commencement of the declaration; and applies subject to any terms and conditions of the dec- laration relating to transitional matters.
(b) 30 339 Part 8 cl 536 Financial Markets Conduct Bill 536 FMA may make interim orders pending exercise of (1) powers The FMA may make an interim order that no offers, issues, sales, or transfers of securities specified in the order may be made while the interim order is in force if— (a) the FMA is considering, at any time, whether it may exercise a power under this subpart in respect of those securities; and the FMA considers that making an interim order is de- sirable in the public interest.
(2) An order under subsection (1)— (b) 5 10 (a) must specify the offeror or offerors to which the order applies; and (b) may require— (i) (ii) all, or any specified class or classes, of the associ- 15 ated persons of the offeror or offerors to comply with the order (including associated persons that may be incorporated or formed after the date of the order); and an offeror to provide a copy of the order to all or 20 any of those associated persons.
For the purpose of subsection (2), the order is not required to refer to the associated persons by name.
The FMA— (a) may act under subsection (1) or section 537(1)(b) 25 without giving an offeror to which the order relates an opportunity to make submissions to, or be heard before, the FMA in respect of the matter; but (b) must, after acting under subsection (1) or section 537(1)(b), give that offeror or that offeror’s represen- 30 tative an opportunity to make written submissions and to be heard on the matter.
The FMA must, immediately after making the order, notify each of the following that the order has been made and the reasons for the order: (a) (b) each offeror to which the order relates: the Registrar, if the order relates to a regulated offer.
35 (3) (4) (5) 340 Financial Markets Conduct Bill Part 8 cl 538 537 Period in which interim order is in force (1) An interim order under section 536 is in force from the time at which it is made until the close of— (a) the date that is 15 working days after the day on which it is made; or a later date specified by the FMA by notice to the offeror to which the order relates.
5 (b) (2) For the purposes of subsection (1)(b),— (a) the FMA may specify a later date if the FMA is of the opinion that it is not reasonably practicable for it 10 to complete its consideration as referred to in section 536(1)(a) within the 15-working-day period referred to in subsection (1)(a): the later date must be a date that is no more than 30 working days after the day on which the interim order 15 is made.
Subpart 4—Frameworks or methodologies 538 FMA may specify frameworks or methodologies (1) The FMA may issue a notice that specifies frameworks or methodologies relating to— (a) 20 the manner in which documents, information, or other matters that are to be made available under subpart 4 of Part 3 are to be presented, calculated, or prepared: the eligibility criteria for the issue of market services licences: the conditions that may be imposed on market services licences: any regulations that may be made under section 518(1)(a) to (d): any other matter that, by this Act or any other en- 30 actment, is required or permitted to be presented, calculated, prepared, or determined in accordance with frameworks or methodologies prescribed under this subpart.
25 (b) (b) (c) (d) (e) (2) A notice issued under this subpart applies only to the extent 35 provided for in this Act or the regulations.

(3) A notice issued by the FMA— 341 Part 8 cl 539 Financial Markets Conduct Bill (a) may specify different matters and requirements in re- spect of different kinds or classes of financial products, services, persons, or other circumstances: (b) must not specify matters and requirements that are in- consistent with any regulations.
5 (4) Subpart 5 (general provisions relating to FMA instruments) applies to a notice issued under this section.

Compare: 1978 No 103 s 54D 539 Consultation (1) The FMA must not issue a notice under this subpart unless 10 the FMA has consulted the persons or representatives of the persons that the FMA considers will be substantially affected by the issue of the notice.

(2) A failure to comply with subsection (1) does not affect the validity of the notice.
Compare: 1978 No 103 s 54E Subpart 5—General provisions relating to certain FMA instruments 540 Application of subpart This subpart applies to the following instruments: (a) (b) (c) (d) notices issued under section 53: exemptions granted under subpart 2: declarations made under subpart 3: notices issued under subpart 4.

15 20 541 Status and publication of instruments (1) An instrument to which this subpart applies is a regulation for 25 (2) the purposes of the Regulations (Disallowance) Act 1989.
The following instruments are regulations for the purposes of the Acts and Regulations Publication Act 1989: a notice issued under section 53: (a) a class exemption: (b) a class declaration.
(c) (3) An instrument to which this subpart applies that is not referred to in subsection (2) must, as soon as practicable after it is made, be— 30 35 342 Financial Markets Conduct Bill Part 8 cl 543 (a) published on an Internet site maintained by or on behalf of the FMA; and notified in the Gazette; and (b) (c) made available in printed form for purchase on request by members of the public.
(5) (6) (4) A notification in the Gazette for the purpose of subsection (3)(b) does not have to include the text of the instrument.

The FMA’s reasons for making an instrument (including why the instrument is appropriate) must be published together with the instrument.
In this subpart,— class declaration— (a) means a declaration under subpart 3 that is of general application and that applies to a class of persons or a class of transactions; but does not include a declaration under that subpart in rela- tion to financial products issued or offered by a particu- lar person or persons associated with a particular person (b) 5 10 15 class exemption— (a) means an exemption granted under subpart 2 that is of 20 general application and that applies to a class of persons or a class of transactions; but does not include an exemption granted under that sub- part in relation to— (i) (ii) a particular person or transaction; or persons associated with, or transactions involv- ing, a particular person.
(b) 25 542 Variation and revocation The FMA may vary or revoke an instrument to which this sub- part applies in the same way as it may make the instrument.
30 Subpart 6—Recognition and application regimes 543 Purpose of this subpart The purpose of this subpart is to enable recognition and appli- cation regimes to be implemented that— 35 343 Part 8 cl 544 Financial Markets Conduct Bill (a) (b) provide for exemptions from Parts 3 and 4 and the regulations so that issuers may offer financial products in New Zealand in accordance with the securities laws of designated countries: extend the territorial scope of Parts 3 and 4 and the 5 regulations so that offerors may offer financial prod- ucts in designated countries in accordance with New Zealand laws, and investors in those countries may rely on and enforce those laws.
Compare: 1978 No 103 s 71 544 Definition of country in this subpart In this subpart and subpart 7, country includes a state, terri- tory, country, or group of countries in respect of which a single securities law, or set of laws, is in force.
Compare: 1978 No 103 s 72 Exemption from Parts 3 and 4 and regulations for New Zealand offers under recognition regime 545 Exemption from Parts 3 and 4 and regulations for New Zealand offers under recognition regime 10 15 20 (b) (1) A provision of Part 3 or 4 or the regulations does not apply to a financial product offered to a person in New Zealand if— a recognition regime set out in regulations made under (a) section 546 applies to the product; and the recognition regime provides an exemption from that 25 provision for the product; and the offeror of the product has opted into the recognition regime; and any other preconditions of the recognition regime are met.
(d) (c) 30 For the purposes of subsection (1), an offeror opts into a recognition regime in respect of a product by notifying the Registrar— (a) that an offer of the financial product is to be made under the recognition regime; and of the full name and address in New Zealand of 1 or more persons resident or incorporated in New Zealand (b) 35 (2) 344 Financial Markets Conduct Bill Part 8 cl 547 who are authorised to accept service in New Zealand at that address of documents on behalf of the offeror.
The Registrar must send a copy of the notification to the FMA.

Compare: 1978 No 103 s 73 (3) 546 Power to exempt from Parts 3 and 4 and regulations 5 (1) (2) under recognition regime The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations, for the purpose of implementing a recognition regime for a designated country, that provide for— (a) exemptions from provisions of Parts 3 and 4 and the regulations; and the other matters set out in section 547.
(b) The Minister may recommend making an Order in Council under this section only— (a) if he or she is satisfied that it is in the public interest after having regard to— (i) (ii) after consulting with the FMA.
the securities laws of the designated country; and the interests of New Zealand investors; and (b) Compare: 1978 No 103 s 74 10 15 20 547 Matters that must be stated in regulations implementing (1) recognition regime The regulations made under section 546 must state— (a) (b) the country to which the recognition regime applies; and 25 the classes of financial products to which the recogni- tion regime applies (whether by reference to type of is- suer, offeror, offer, or any other matter); and the exemptions from provisions of Parts 3 and 4 and the regulations for those products; and the preconditions that must be met for the recognition regime to apply, for example (without limitation), re- quiring specified information relating to the offer or fi- nancial products to be provided to the FMA or Regis- trar; and (c) (d) 35 30 345 Part 8 cl 548 Financial Markets Conduct Bill (e) the terms and conditions that must be complied with under the recognition regime, for example (without limitation), requiring— (i) the offer of the financial products to be made in accordance with specified provisions of the 5 designated country’s laws: (ii) warnings to be given to investors so as to in- form them that the offer of the financial products is regulated under the designated country’s laws and that New Zealand laws relating to the offer 10 of financial products do not apply to the offer: specified information relating to the offer or fi- nancial products to be provided to the FMA or Registrar.
(iii) (2) Regulations may provide different exemptions, preconditions, 15 and terms and conditions for different classes of financial prod- ucts, offers, persons, or circumstances.
Compare: 1978 No 103 s 75 548 Offence for breach of regulations implementing 20 25 recognition regime If there is a contravention, in respect of a financial product, of a term or condition that must be complied with under a recognition regime, each of the following persons commits an offence and is liable on summary conviction to a fine not exceeding $50,000: (a) (b) the offeror of the financial product; and every person who is a director of the offeror at the time of the contravention; and every promoter of the financial product; and every person who has authorised himself or herself to 30 be named, and is named, in any advertisement relating to the financial product as a director of the offeror or as having agreed to become a director either immediately or after an interval of time.
(c) (d) Compare: 1978 No 103 s 76 35 346 Financial Markets Conduct Bill Part 8 cl 551 Extension of Parts 3 and 4 and regulations to overseas offers under application regime 549 Extension of Parts 3 and 4 and regulations to overseas offers under application regime A provision of Part 3 or 4 or the regulations applies to a fi- 5 nancial product that is offered to a person outside New Zealand if— (a) an application regime set out in regulations made under section 550 applies to the financial product; and the application regime applies that provision to the fi- 10 nancial product; and any other preconditions of the application regime are met.
(b) (c) Compare: 1978 No 103 s 77 550 Power to extend Parts 3 and 4 and regulations under 15 (1) (2) application regime The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations, for the purpose of implementing an application regime for a desig- nated country, that provide for— (a) the application of provisions of Parts 3 and 4 and the regulations to financial products offered to persons in that country; and the other matters set out in section 551.
(b) The Minister may recommend making an Order in Council 25 under this section only— (a) if he or she is satisfied that it is appropriate for New Zealand laws to apply to financial products offered to persons in the designated country as set out in the pro- posed application regime; and after consulting with the FMA.
30 20 (b) Compare: 1978 No 103 s 78 551 Matters that must be stated in regulations implementing (1) application regime The regulations made under section 550 must state— (a) the country to which the application regime applies; and 35 347 Part 8 cl 552 Financial Markets Conduct Bill (b) (c) the classes of financial products to which the application regime applies (whether by reference to type of issuer, offeror, offer, or any other matter); and the provisions of Parts 3 and 4 and the regulations that apply to those financial products; and (e) (d) whether or not, or the extent to which, exemptions from those provisions granted by the FMA under this Act may also apply for those financial products; and the preconditions (if any) that must be met for the ap- plication regime to apply; and the terms and conditions (if any) that must be complied with under the application regime.
(f) 5 10 (2) The regulations may provide different applications of provi- sions, preconditions, and terms and conditions for different classes of financial products, offers, persons, or circumstances.
15 Compare: 1978 No 103 s 79 Subpart 7—Enforcement of overseas pecuniary penalties under application regime 552 Purpose of this subpart The purpose of this subpart is to enable application regimes to 20 be implemented that provide for enforcement in New Zealand of fines and pecuniary penalties imposed for breaches of se- curities laws of designated countries.
Compare: 1978 No 103 s 71 553 Enforcement of overseas pecuniary penalties under 25 application regime This subpart applies to a judgment given by a court under a provision of the law of another country if— (a) an application regime set out in regulations made under section 554 applies this subpart to that provision of the 30 law of that country; and the judgment requires payment of a penalty; and any other preconditions of the application regime are met.
(b) (c) Compare: 1978 No 103 s 80 35 348 Financial Markets Conduct Bill Part 8 cl 557 554 Power to enforce overseas penalties under application regime The Governor-General may, by Order in Council made on the recommendation of the Minister, for the purpose of imple- menting an application regime for a designated country, make 5 regulations that provide for— (a) the application of this subpart to provisions of the secur- ities laws of that country under or in respect of which a penalty may be imposed; and the preconditions of the application regime (if any).
(b) Compare: 1978 No 103 s 81 555 Interpretation In this subpart,— court of rendition, in relation to a judgment, means the court by which the judgment was given enforcement, in relation to a judgment, includes execution of a judgment judgment includes an order penalty means a fine or other pecuniary penalty (whether criminal or civil) place of rendition, in relation to a judgment, means the coun- try in which the court of rendition is established registered judgment means a judgment that is registered under section 556.
Compare: 1978 No 103 s 82 556 Registration of judgment The High Court must register a judgment to which this sub- part applies under section 553 as a civil judgment debt if an application is made to it in accordance with regulations made under section 554.

Compare: 1978 No 103 s 83 557 Effect of registration (1) A registered judgment has the same force and effect, and may give rise to the same proceedings by way of enforcement, as if the judgment had been given by the High Court.
349 10 15 20 25 30 35 Part 8 cl 558 Financial Markets Conduct Bill (2) Subsection (1) is subject to sections 558 and 559.

Compare: 1978 No 103 s 84 558 Enforceability of registered judgment A registered judgment is capable of being enforced in or by the High Court only if, and to the extent that, at the time when the 5 proceeding for enforcement is or is to be taken, the judgment is capable of being enforced in or by— the court of rendition; or (a) (b) a court in the place of rendition.
Compare: 1978 No 103 s 84 10 559 Stay may be granted (1) (2) (3) The High Court may, on application by a person against whom the registered judgment has been given, order that proceedings in the High Court to enforce the judgment— (a) (b) The order— (a) must be made subject to conditions that,— not be commenced until a specified time; or be stayed for a specified period.
15 (i) (ii) within the period specified in the order, the per- son make and prosecute an appropriate applica- 20 tion for relief in respect of the registered judg- ment; and the application be prosecuted in an expeditious manner; and (b) may be made subject to other conditions, including as 25 to the giving of security, that the High Court thinks fit.
For the purposes of subsection (2)(a)(i), an appropriate ap- plication for relief is an application to set aside, vary, or ap- peal against the registered judgment that is made to a court or tribunal that has jurisdiction under the law in force in the place 30 of rendition to grant the application.
Compare: 1978 No 103 s 86 560 Costs (1) The following are recoverable in proceedings by way of en- forcement of a registered judgment: 35 350 (2) 561 Financial Markets Conduct Bill Part 8 cl 563 (a) (b) the reasonable costs and expenses of, and incidental to, obtaining and lodging the copy of the judgment; and the costs and expenses reasonably incurred in attempt- ing to execute the judgment in the court of rendition.
The entitlement of a person to, and the liability of a person for, 5 the costs or expenses of, and incidental to, those proceedings are the same as they are in proceedings by way of enforcement of— (a) (b) a similar judgment given by the High Court; or if there is no such similar judgment, the most closely 10 analogous judgment given by the High Court.
Compare: 1978 No 103 s 87 Interest Interest on the amount of a registered judgment— (a) is payable at the same rate or rates and in respect of the 15 same period or periods as would be applicable in the court of rendition; and is recoverable to the extent that the judgment creditor satisfies the High Court as to the amount of the interest.
(b) Compare: 1978 No 103 s 88 20 562 Rules of private international law not to apply If a judgment is registered in the High Court under this subpart, the courts of New Zealand must not, merely because of the operation of a rule of private international law, refuse to permit proceedings by way of enforcement of the registered judgment 25 to be taken or continued.
Compare: 1978 No 103 s 89 563 Other regulations for registration of judgments under application regime The Governor-General may, by Order in Council made on the 30 recommendation of the Minister, make regulations providing for the registration of judgments under this subpart, including (without limitation) providing for— (a) (b) the verification requirements for those judgments: the registration and service of facsimiles of those judg- 35 ments: 351 Part 9 cl 564 Financial Markets Conduct Bill (c) (d) the service of notice of registration of those judgments: other requirements for the way in which those judg- ments may be registered (for example, the currency of registrations and the registration of partly satisfied judg- ments).
Compare: 1978 No 103 s 90 Part 9 Repeals, amendments, and transitional provisions Subpart 1—Repeals and revocations 564 Repeals (1) Securities Act 1978 (1978 No 103): Securities Markets Act 1988 (1988 No 234): Securities Transfer Act 1991 (1991 No 119): Superannuation Schemes Act 1989 (1989 No 10): Unit Trusts Act 1960 (1960 No 99).

The following Acts are repealed: (a) (b) (c) (d) (e) Sections 5(3), 16(3), 22, 40, 43(2), and 49(3) to (6) of the Securities Amendment Act 2011 are repealed.
(2) 565 Revocations The following enactments are revoked: (a) Futures Industry (Client Funds) Notice 1991 (SR 1991/43): Futures Industry (Client Funds) Regulations 1990 (SR 1990/227): Securities Act (Contributory Mortgage) Regulations 1988 (SR 1988/143): Securities (Fees) Regulations 1998 (SR 1998/461): Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003 (SR 30 2003/382): Securities Markets 2003/383): Securities Markets (Insider Trading Exemption—Fu- tures Contracts) Regulations 2010 (SR 2010/354): (Fees) Regulations 2003 (SR 35 (b) (c) (d) (e) (f) (g) 352 Financial Markets Conduct Bill Part 9 cl 569 (h) (i) (j) (k) (l) (m) (Moratorium) Regulations (Substantial Security Holders) Securities Markets (Market Manipulation) Regulations 2007 (SR 2007/373): Securities Markets Regulations 2007 (SR 2007/372): Securities 2009/395): Securities (Mutual Recognition of Securities Offer- ings—Australia) Regulations 2008 (SR 2008/153): Securities Regulations 2009 (SR 2009/230): Superannuation Schemes (Fees) Regulations 1992 (SR 10 1992/284): (SR 5 2009 (n) Unit Trusts (Fees) Regulations 1999 (SR 1999/152).
Subpart 2—Amendments to Fair Trading Act 1986 566 Principal Act amended This subpart amends the Fair Trading Act 1986.
567 New section 5A substituted Section 5A is repealed and the following section substituted: “5A Contraventions of financial markets misleading or deceptive conduct or false representation provisions do not contravene sections 9 to 13 Conduct that contravenes Part 2 of the Financial Markets Conduct Act 2011 does not contravene any of sections 9 to 13.” Subpart 3—Amendments to Financial Advisers Act 2008 568 Principal Act amended This subpart amends the Financial Advisers Act 2008.
15 20 25 569 (1) Interpretation Section 5 is amended by repealing the definitions of call build- 30 ing society share or call credit union share, futures con- tract, investment statement, issuer, promoter, prospectus, registered exchange, related body corporate, and security.
353 Part 9 cl 569 Financial Markets Conduct Bill Section 5 is amended by inserting the following definitions in their appropriate alphabetical order: “acquire includes— “(a) obtain by buying, subscribing, entering into the relevant legal relationship, or taking an assignment of; and agree to acquire “(b) “call building society share means a share issued by a build- ing society under which— “(a) 5 the shareholder has a right to demand repayment of the value of the share in full at any time; and the building society has an obligation to repay the value of the share in full not later than 1 working day after the demand is made; and the rate of dividend or interest payable or any other benefit provided does not alter as a result of the demand 15 being made; and 10 “(b) “(c) “(d) no fee or other amount is payable as a result of the prin- cipal sum not having been held by the building society for a particular period of time “call credit union share means a share referred to in section 20 107 of the Friendly Societies and Credit Unions Act 1982, and issued by a credit union, under which— “(a) the member has a right to demand repayment of the value of the share in full at any time; and the credit union has an obligation to repay the value of 25 the share in full in accordance with section 107(4) of the Friendly Societies and Credit Unions Act 1982; and the rate of dividend or interest payable or any other benefit provided does not alter as a result of the demand being made; and “(b) “(c) 30 “(d) no fee or other amount is payable as a result of the prin- cipal sum not having been held by the credit union for a particular period of time “DIMS facility means an agreement, arrangement, or under- standing for the provision of a discretionary investment man- 35 agement service under an investment authority “DIMS licensee means a person who is licensed under the Fi- nancial Markets Conduct Act 2011 and whose licence covers (2) 354 Financial Markets Conduct Bill Part 9 cl 569 10 an equity security: a debt security: a managed
 investment product: a derivative acting as a provider of a discretionary investment management service for the purposes of that Act “financial markets legislation has the same meaning as in section 4 of the Financial Markets Authority Act 2011 “FMCA financial product means each of the following 5 within the meaning of the Financial Markets Conduct Act 2011: “(a) “(b) “(c) “(d) “investment authority has the meaning set out in section 12(3) “investment mandate has the meaning set out in section 12(3) “issuer has the same meaning as in section 10(1)(b) of the Financial Markets Conduct Act 2011 “licensed market has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “offeror has the same meaning as in section 6(1) of the Fi- 20 nancial Markets Conduct Act 2011 “product disclosure statement or PDS has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “promoter means, in relation to an FMCA financial product, a person who is instrumental in the formulation of a plan or 25 programme pursuant to which the product is offered “related body corporate has the same meaning as in section 11(2) of the Financial Markets Conduct Act 2011”.
Section 5 is amended by repealing the definition of category 1 product and substituting the following definition: “category 1 product means— “(a) 30 15 an FMCA financial product (other than a product that is a category 2 product); or a DIMS facility (other than a facility that is a category 2 product); or any other product specified by the regulations; or a renewal or variation of the terms or conditions of an existing category 1 product”.
“(b) “(c) “(d) 35 355 (3) Part 9 cl 570 Financial Markets Conduct Bill (4) (5) (6) The definition of category 2 product in section 5 is amended by inserting the following paragraph after paragraph (j): “(ja) a DIMS facility if the investment mandate covers only category 2 products; or”.

Paragraph (a) of the definition of product provider in section 5 5 is repealed and the following paragraph substituted: “(a) the issuer, in the case of an FMCA financial product:”.
The definition of product provider in section 5 is amended by inserting the following paragraph after paragraph (c): “(ca) the person to whom the investment authority is granted, 10 in the case of a DIMS facility:”.

570 Who are wholesale clients Section 5C(1)(c) is repealed.
(1) Section 5C(1) is amended by repealing paragraphs (f) and (g) (2) and substituting the following paragraphs: “(f) 15 a person who is a wholesale investor within the meaning of clause 3(2) of Schedule 1 of the Financial Markets Conduct Act 2011: a person who is, in relation to an offer of financial prod- ucts, a wholesale investor within the meaning of clause 20 3(3) of Schedule 1 of the Financial Markets Conduct Act 2011 if the service relates to that offer or to finan- cial products that have been subscribed for by that per- son under that offer: “(g) “(ga) a person who is, in relation to an offer of financial prod- 25 ucts, a close business associate of the offeror, or a rela- tive of the offeror or a director of the offeror, within the meaning of clauses 4 and 5 of Schedule 1 of the Fi- nancial Markets Conduct Act 2011 if the service relates to that offer or to financial products that have been sub- 30 scribed for by that person under that offer:”.
(3) Section 5C(3) is repealed.
571 When person provides discretionary investment management service Section 12 is amended by adding the following subsection: 35 356 Financial Markets Conduct Bill Part 9 cl 573 “(3) For the purposes of this Act, the authority referred to in sub- section (1)(b) is the investment authority and the scope of that authority is the investment mandate.” 572 Other exemptions (1) Section 14(1) is amended by inserting the following paragraph 5 after paragraph (k): “(ka) a DIMS licensee providing a discretionary in- vestment management service covered by that li- cence:”.
(2) Section 14(1) is amended by repealing paragraphs (m) and (n) 10 and substituting the following paragraph: “(m) any form of communication made by or on behalf of an issuer or offeror that is contained in, or given in con- nection with, an offer of FMCA financial products that is not a regulated offer (within the meaning of the Fi- 15 nancial Markets Conduct Act 2011) because of any of clauses 3 to 5 of Schedule 1 of that Act:”.
(3) Section 14(1)(o) is amended by repealing subparagraph (i) and substituting the following subparagraph: “(i) a product disclosure statement, a disclosure 20 document under clause 26 of Schedule 1 of the Financial Markets Conduct Act 2011, infor- mation from a register entry (with the meaning of that Act), a document or information under subpart 4 of Part 3 of that Act, or an advertise- 25 ment or publication referred to in section 73 of that Act:”.
573 When financial adviser service is personalised service or class service Section 15 is amended by inserting the following subsection 30 after subsection (2): “(2A) Subsection (1) does not apply to a discretionary investment management service and, in this case, the service is a person- alised service if— “(a) the financial adviser who exercises the investment au- 35 thority under that service— 357 Part 9 cl 574 Financial Markets Conduct Bill “(i) “(ii) has tailored the investment mandate for that ser- vice to take into account the particular financial situation or goals (or any 1 or more of them) of a named client or a client that is otherwise readily identifiable by the financial adviser; or in exercising that investment authority.
takes into account the particular financial situation or goals (or any 1 or more of them) of a named client or a client that is otherwise readily identifiable by the financial adviser; or 5 10 “(b) a client would, in the circumstances in which the service is provided, reasonably expect that financial adviser to tailor the investment mandate, or to exercise the invest- ment authority, in that way.” 574 Who is permitted to provide personalised service to retail 15 (1) (2) (3) (4) clients Section 18(1)(a) is amended by omitting “or providing a dis- cretionary investment management service”.
Section 18(1)(a)(ii) is repealed and the following subpara- graph substituted: “(ii) a QFE adviser (but only if the QFE or a mem- ber of the QFE group is the product provider (or, in the case of an FMCA financial product, a pro- moter) of the relevant category 1 product):”.

20 Section 18(1)(c) is amended by omitting “or providing a dis- 25 cretionary investment management service”.
Section 18 is amended by inserting the following subsection after subsection (1): “(1A) However, subsection (1) does not apply to a discretionary in- vestment management service and, in this case,— “(a) the following persons are permitted to provide the per- sonalised service if the investment mandate is unlimited or covers any category 1 products: “(i) “(ii) an authorised financial adviser: a QFE adviser (but only if the investment man- 35 date is limited so that any category 1 products it covers are products for which the QFE or a mem- 30 358 Financial Markets Conduct Bill Part 9 cl 576 ber of the QFE group is the product provider (or, in the case of an FMCA financial product, a pro- moter): “(b) the following persons are permitted to provide the per- sonalised service if the investment mandate covers only 5 category 2 products: “(i) “(ii) “(iii) a QFE adviser.” an authorised financial adviser: a registered individual: 575 Who is permitted to provide class service to retail clients 10 Section 19 is amended by adding the following subsection as subsection (2): “(2) However,— “(a) subsection (1) does not apply to a discretionary invest- ment management service if the investment mandate is 15 unlimited or covers any category 1 products; and “(b) no person is permitted to provide a class service of that kind under this Act (however, see Part 6 of the Finan- cial Markets Conduct Act 2011 under which persons may be licensed as DIMS licensees).” 20 576 Financial adviser must make disclosure before providing (1) (2) personalised service to retail client The heading to section 22 is amended by omitting “person- alised”.
Section 22 is amended by inserting the following subsection 25 after subsection (1): “(1A) However, in the case of a discretionary investment manage- ment service, a financial adviser who provides that service to a retail client must instead disclose prescribed information re- lating to the service to the client, in accordance with this Act 30 and the regulations,— both— “(a) “(i) “(ii) before any exercise of the investment authority before the investment authority is granted; and (unless there has been previous disclosure that is 35 not out of date under section 29); or 359 Part 9 cl 577 Financial Markets Conduct Bill “(b) if not practicable before, as soon as practicable after, the time applying under paragraph (a).” (3) Section 22(2) is amended by omitting “Subsection (1) does” and substituting “Subsections (1) and (1A) do”.
577 What financial adviser must disclose Section 23(2) is amended by inserting the following paragraph after paragraph (c): “(ca) information relating to any discretionary investment management service provided by the financial ad- viser:”.
5 10 578 QFE must make disclosure before personalised service (1) provided to retail client Section 25 is amended by inserting the following subsection after subsection (1): “(1A) However, in the case of a discretionary investment manage- 15 ment service, a QFE or a member of a QFE group that, acting through a QFE adviser, provides that personalised service to a retail client must ensure that the prescribed information relat- ing to the service is disclosed to the client, in accordance with this Act and the regulations,— “(a) 20 before the investment authority is granted; and both— “(i) “(ii) before any exercise of the investment authority (unless there has been previous disclosure that is not out of date under section 29); or 25 “(b) if not practicable before, as soon as practicable after, the time applying under paragraph (a).” (2) Section 25(2) is amended by inserting the following paragraph after paragraph (c): “(ca) information relating to any discretionary investment 30 management service provided by the QFE adviser:”.
360 Financial Markets Conduct Bill Part 9 cl 582 579 No compliance with disclosure obligation if disclosure out (1) (2) of date Section 29(1) is amended by adding “or, in the case of a dis- cretionary investment management service, the investment au- thority is exercised”.

Section 29(2)(b)(iv) is amended by adding “or, in the case of a discretionary investment management service, change any other instruction in relation to the service”.
5 580 New section 29A inserted The following section is inserted after section 29: 10 “29A Further prescribed information to be made available to clients of discretionary investment management service “(1) A financial adviser who provides a discretionary investment management service to a retail client must at the request of the client or at the prescribed times or on the occurrence of the 15 prescribed events, make available to the client the documents, information, and other matters that are required to be made available under this section by the regulations.
“(2) The documents, information, and other matters must be made available in the prescribed manner.
“(3) The documents, information, and other matters must, if re- quired by the regulations, be presented, calculated, or prepared in accordance with the frameworks or methodologies specified in a notice issued by the FMA under subpart 4 of Part 8 of the Financial Markets Conduct Act 2011.” 20 25 581 What is conduct obligation and when does it apply Section 32(2) is amended by inserting the following paragraph after paragraph (b): “(ba) sections 36A to 36D apply to a discretionary invest- ment management service provided to a retail client 30 (whether it is a personalised service or a class service):”.
582 New sections 36A to 36D inserted The following sections are inserted after section 36: 361 Part 9 cl 582 Financial Markets Conduct Bill “36A Requirement to have agreed investment mandate with retail client “(1) A financial adviser must provide a discretionary investment management service to a retail client under an investment mandate agreed in writing with the client.
5 “(2) The financial adviser must ensure that the investment man- date clearly provides for any limits of the investment author- ity (whether by the nature or type of financial products, size of decision, proportion of each type of financial product, or any other matter) or, if there are no limits, that the investment au- 10 thority is unlimited.
“(3) The investment mandate must provide for the matters set out in this section in accordance with the frameworks or methodolo- gies specified in a notice issued by the FMA under subpart 4 of Part 8 of the Financial Markets Conduct Act 2011 (if any) 15 that apply to it.
“36B Duties on financial adviser providing discretionary investment management service A financial adviser who provides a discretionary investment management service must— “(a) “(b) provide the service in accordance with the agreed in- act honestly in providing that service; and “(c) vestment mandate; and in exercising any powers under or performing any du- ties connected with the investment authority,— “(i) “(ii) act in the best interests of the client; or if it is a class service, act in the best interests of the clients of that service and treat the clients equitably; and 20 25 “(d) not make use of information acquired through providing 30 that service in order to— “(i) gain an improper advantage for the adviser or any other person; or cause detriment to the client.
“(ii) 362 Financial Markets Conduct Bill Part 9 cl 583 “36C Duty to comply with professional standard of care in providing discretionary investment management service A financial adviser must, in exercising any power under or performing any duties connected with the investment author- ity under a discretionary investment management service pro- 5 vided to a retail client, exercise the care, diligence, and skill that a prudent person engaged in that profession would exer- cise in the same circumstances.
“36D Custodial duties under discretionary investment management service 10 “(1) This section applies to a financial adviser who provides a dis- cretionary investment management service under which client money or client property is held on behalf of the retail client.
“(2) The financial adviser must ensure that the client money or client property is held by a separate body corporate that is a 15 broker to which Part 3A applies.” 583 New section 38 substituted Section 38 is repealed and the following section substituted: “38 Authorised financial adviser must not recommend acquisition of FMCA financial products if offer contravenes financial markets legislation 20 “(1) An authorised financial adviser (A) must not recommend to a person that that person acquire FMCA financial products if,— “(a) when the FMCA financial products were or are offered for subscription, the offer contravened or contravenes 25 any financial markets legislation; and the contravention has not been remedied; and “(b) “(c) A knows or ought to know that, when the FMCA finan- cial products were or are offered for subscription, the offer contravened or contravenes any financial markets 30 legislation.
“(2) A person who contravenes subsection (1) commits an of- fence (see section 121).

“Compare: 1988 No 234 s 41S” 363 Part 9 cl 584 Financial Markets Conduct Bill 584 Other exemptions Section 77C(1) is amended by repealing paragraph (d) and substituting the following paragraph: “(d) a person providing a relevant service in the course of acting as a derivatives issuer under a 5 licence under Part 6 of the Financial Markets Conduct Act 2011:”.
585 What is conduct obligation and when does it apply Section 77J(3) is amended by adding “; but” and also by adding the following paragraph: “(c) do apply to a custodian under a discretionary investment management service provided by a DIMS licensee in the circumstances set out in sections 441 and 443 of the Financial Markets Conduct Act 2011.” 586 Restriction on use of term sharebroker 10 15 “(1) Section 77N is amended by repealing subsection (1) and sub- stituting the following subsection: In any advertising or promotional material, the term sharebro- ker must not be used in connection with a person unless the person, or the person’s employer, is a participant in a licensed 20 market.” 587 New section 77O substituted Section 77O is repealed and the following section substituted: “77O Broker must not receive client money if offer contravenes financial markets legislation 25 “(1) A broker (A) must not receive client money or client property from a person for the acquisition of FMCA financial products if,— “(a) when the FMCA financial products were or are offered for subscription, the offer contravened or contravenes 30 any financial markets legislation; and the contravention has not been remedied; and “(b) “(c) A knows or ought to know that, when the FMCA finan- cial products were or are offered for subscription, the 364 Financial Markets Conduct Bill Part 9 cl 592 offer contravened or contravenes any financial markets legislation.
“(2) Contravention of this section may give rise to an offence (see section 134B).” 588 Offence of recommending offer of securities when 5 subscription illegal The heading to section 121 is amended by omitting “of se- curities when subscription illegal” and substituting “that contravenes financial markets legislation”.
589 Offences of receiving client money if offer for subscription 10 illegal The heading to section 134B is amended by omitting “for subscription illegal” and substituting “contravenes financial markets legislation”.

590 Heading to subpart 4 of Part 4 amended 15 The heading to subpart 4 of Part 4 is amended by omitting “, banning orders,”.

591 Sections 137C to 137J and heading repealed Sections 137C to 137J and the heading above section 137F are repealed.
20 592 Pecuniary order for contravening wholesale certification (1) (2) (3) (4) requirement The heading to section 137K is amended by adding “or con- duct obligations related to discretionary investment man- agement service”.

Section 137K(1) is amended by adding “or a conduct obliga- tion under any of sections sections 36A to 36D” Section 137K(5) is repealed.
The heading above section 137K is consequentially amended by adding “or conduct obligations related to discretionary in- 30 vestment management service”.

25 365 Part 9 cl 593 Financial Markets Conduct Bill (5) Section 137L(1) is consequentially amended by inserting “or a conduct obligation related to a discretionary investment man- agement service” after “certification requirement”.
593 When FMA may make temporary banning orders for financial adviser services or broking services Section 137M(a) is amended by omitting “Securities Act 1978” and substituting “Financial Markets Conduct Act 2011”.

5 594 General regulations Section 154(1)(b) is amended by omitting “a security” and 10 substituting “an FMCA financial product”.

Subpart 4—Financial Markets Authority Act 2011 595 Principal Act amended This subpart amends the Financial Markets Authority Act 15 2011.
Interpretation Section 4 is amended by repealing the definition of dealings in securities and substituting the following definition: “dealing in financial products has the same meaning as in 20 section 6(1) of the Financial Markets Conduct Act 2011”.
Section 4 is amended by inserting the following definitions in their appropriate alphabetical order: “financial products has the same meaning as in section 7 of the Financial Markets Conduct Act 2011 “issuer has the same meaning as in section 10(1)(b) of the Financial Markets Conduct Act 2011 “offeror has the same meaning as in section 6(1) of the Fi- nancial Markets Conduct Act 2011 “product holder has the same meaning as in section 6(1) of 30 the Financial Markets Conduct Act 2011 “regulated offer has the same meaning as in section 29(1) of the Financial Markets Conduct Act 2011 25 596 (1) (2) 366 Financial Markets Conduct Bill Part 9 cl 597 (3) “regulated product has the same meaning as in section 29(2) of the Financial Markets Conduct Act 2011”.
Paragraph (b) of the definition of financial markets partici- pant in section 4 is amended by repealing subparagraphs (i) to (iii) and substituting the following subparagraphs: 5 “(i) “(ii) a person who participates in a regulated offer as an issuer or offeror: a person who participates in an offer of finan- cial products as an issuer or offeror and who is required to give a disclosure document under 10 clause 26 of Schedule 1 of the Financial Mar- kets Conduct Act 2011: “(iii) a person who acts, in respect of regulated prod- ucts, as a supervisor, a manager, an investment manager, an administration manager, a custo- 15 dian, or a qualified auditor (within the meaning of those terms in section 6(1) of the Financial Markets Conduct Act 2011): “(iv) a listed issuer (within the meaning of section 6(1) of the Financial Markets Conduct Act 20 2011):”.
(4) Paragraph (c) of the definition of financial markets partici- pant in section 4 is amended by repealing subparagraph (i) and substituting the following subparagraph: “(i) a body corporate that is related to a person re- 25 ferred to in paragraph (a) or (b) (within the mean- ing of section 11(2) of the Financial Markets Conduct Act 2011); or ”.

(5) Section 4 is amended by repealing the definition of securities.
597 FMA’s functions 30 Section 9(1)(a) is amended by adding the following subpara- graph: “(v) stating whether or not, or in what circumstances, the FMA intends to take or not take action over a particular state of affairs or particular conduct 35 (for example, to give a person some level of cer- 367 Part 9 cl 598 Financial Markets Conduct Bill tainty that the FMA will take no further action in relation to a matter):”.
598 FMA may exercise person’s right of action (1) Section 34(3) is amended by repealing paragraph (c) and sub- stituting the following paragraph: “(c) if person A is an issuer, any product holders of financial products issued by person A.” 5 (2) Section 34(4) is repealed.
599 FMA may accept undertakings Section 46 is amended by inserting the following subsection 10 after subsection (1): “(1A) An undertaking may be given in connection with the FMA making a statement under section 9(1)(a)(v) (but this sub- section does not limit subsection (1)).” 600 New section 46A inserted The following section is inserted after section 46: “46A Undertaking may include requirements as to compensation or penalties “(1) An undertaking under section 46 may include— 15 “(a) “(b) an undertaking to pay compensation to any person or 20 otherwise to take action to avoid, remedy, or mitigate any actual or likely adverse effects arising from a contravention or possible contravention of any provi- sion of the financial markets legislation: an undertaking to pay to the FMA an amount in lieu of 25 a pecuniary penalty.
“(2) The FMA must ensure that each amount paid under subsec- tion (1)(b) is paid into a Crown Bank Account (after deducting the FMA’s actual costs incurred in connection with the matter).

If an undertaking referred to in subsection (1)(b) is given, 30 the FMA must give notice of that undertaking on its Internet site (whether or not it gives notification of other undertakings given in relation to the same matter).
“(3) “(4) This section does not limit section 46.” 368 Financial Markets Conduct Bill Part 9 cl 602 601 New heading and section 48A inserted The following heading and section are inserted after section 48: “Power to appear and be heard and adduce evidence 5 “48A FMA may appear and be heard and adduce evidence “(1) The FMA is entitled to appear and be heard in any specified proceedings.
“(2) The FMA has the right to adduce evidence and the right to cross-examine witnesses if the FMA appears under this sec- 10 tion, unless the specified proceedings are by way of appeal.

“(3) The rights referred to in this section apply whether or not the FMA was a party to the specified proceedings at any earlier stage in the proceedings.
In this section, specified proceedings means any of the fol- 15 lowing kinds of proceedings: “(a) “(4) civil or criminal proceedings under, or in respect of, any financial markets legislation: civil proceedings that, in connection with the offer, issue, transfer, supply, or use of financial products or 20 financial services, seek damages or other relief for fraud, negligence, default, breach of duty, or other misconduct.” “(b) 602 FMA may require its warning to be disclosed (1) Section 49(1) is amended by repealing paragraph (b) and sub- 25 stituting the following paragraphs: “(b) in the case of a relevant person that is an issuer or of- feror, ensure that every disclosure document of the kind that is specified in the order and that is distributed by or on behalf of the issuer or offeror contains a copy of the 30 warning in a prominent position or is accompanied by a copy of the warning: “(ba) in the case of a relevant person that is a person to which subpart 4 of Part 6 of the Financial Markets Conduct Act 2011 applies, ensure that every disclosure state- 35 ment under that subpart of the kind that is specified in the order and that is distributed by or on behalf of 369 Part 9 cl 603 Financial Markets Conduct Bill the relevant person contains a copy of the warning in a prominent position or is accompanied by a copy of the warning: “(bb) ensure that every restricted communication of the kind that is specified in the order and that is distributed by or 5 on behalf of the relevant person or any of those associ- ated persons contains a copy of the warning in a promi- nent position or is accompanied by a copy of the warn- ing:”.
(2) (3) (4) (5) Section 49(7)(a)(ii) is amended by omitting “securities” and 10 substituting “financial products”.

Section 49(7) is amended by repealing paragraph (b) and sub- stituting the following paragraph: “(b) a product disclosure statement: a register entry: a disclosure document means any of the following: “(i) “(ii) “(iii) a disclosure document under clause 26 of Schedule 1 of the Financial Markets Conduct Act 2011: 15 “(iv) a document made available under subpart 4 of 20 Part 3 of that Act:”.
Section 49(7)(c) is amended by omitting “securities” and sub- stituting “financial products”.
Section 49(7) is amended by repealing paragraph (d) and sub- stituting the following paragraph: “(d) product disclosure statement, offer, restricted com- munication, register entry, associated person, and distributed have the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011.” 603 Schedule 1 amended Part 1 of Schedule 1 is repealed and the following Part substi- tuted: “Part 1 “Auditor Regulation Act 2011 “Financial Advisers Act 2008 “Financial Markets Authority Act 2011 “Financial Markets Conduct Act 2011 370 25 30 35 Financial Markets Conduct Bill Part 9 cl 606 “Financial Markets Supervisors Act 2011 “Financial Service Providers (Registration and Dispute Resolution) Act 2008 “Part 4 and Schedule 1 of the KiwiSaver Act 2006”.
Subpart 5—Amendments to KiwiSaver Act 2006 5 604 Principal Act amended This subpart amends the KiwiSaver Act 2006.

605 Purpose Section 3(2) is amended by omitting “enables the establish- 10 ment of schemes” and substituting “provides for schemes”.
606 (1) (2) independent trustee, Interpretation Section 4(1) is amended by repealing the definitions of administration manager, complying superannuation fund, defined contribution scheme, department, exempt 15 employer, fee subsidy, investment manager, investment statement, KiwiSaver scheme, Kiwi- Saver schemes register, manager, member’s accumulation, member’s interest, Minister, nominated person, nominee, promoter, registered superannuation scheme, related com- 20 pany, restricted KiwiSaver scheme orrestricted scheme, trust deed, trustee corporation, trustees, and umbrella trust.
Section 4(1) is amended by inserting the following definitions in their appropriate alphabetical order: “administration manager has the same meaning as in sec- tion 6(1) of the Financial Markets Conduct Act 2011 “complying superannuation fund means a superannuation scheme that is identified as a complying superannuation fund on the register of managed investment schemes “department means the department of State that, with the au- thority of the Prime Minister, is responsible for the adminis- tration of Part 4 and Schedule 1 25 30 371 Part 9 cl 606 Financial Markets Conduct Bill “exempt employer means an employer— “(a) who was approved as an exempt employer under section 30 (before its repeal by the Financial Markets Conduct Act 2011), or who has been approved to succeed to exempt employer status under section 151; and 5 “(b) whose approval has not been revoked “investment manager has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “KiwiSaver scheme— “(a) means a scheme that is identified as a KiwiSaver 10 scheme on the register of managed investment schemes; but to avoid doubt, does not include a complying super- annuation fund “(b) “(c) in relation to a member of a “manager has the same meaning as in section 6(1) of the 15 Financial Markets Conduct Act 2011 “member’s accumulation, scheme, means the net value of the total of— the member’s contributions; and “(a) any vested employer contributions in respect of the 20 “(b) member; and any fee subsidies paid in respect of the member under regulations made under section 228(n) or (o) before the revocation of those regulations; and “(d) the Crown contribution paid in respect of the member “member’s interest, in relation to a member of a scheme, means the net value of the total of— “(a) “(b) “Minister, in Part 4 and Schedule 1,— “(a) means the Minister of the Crown who, under the au- thority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the ad- ministration of Part 4 and Schedule 1; and
 includes, for the purposes of sections 131 to 134, any 35 Ministers of the Crown who are jointly responsible for making an appointment under section 131 (if more than 1 Minister is authorised to act jointly) the member’s accumulation; and any unvested employer contributions “(b) 30 25 372 Financial Markets Conduct Bill Part 9 cl 606 5 10 “product disclosure statement has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “register of managed investment schemes means the register of managed investment schemes kept under Schedule 2 of the Financial Markets Conduct Act 2011 “restricted scheme means a scheme that is identified as a restricted scheme on the register of managed investment schemes “scheme means any type or form of managed investment scheme “superannuation scheme means a scheme that is identified as a superannuation scheme on the register of managed invest- ment schemes “supervisor has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “trust deed, in relation to a scheme, means the governing document of the scheme within the meaning of section 6(1) of the Financial Markets Conduct Act 2011.” The definition of default investment product in section 4(1) is amended by omitting “section 177” and substituting “sec- 20 tion 131”.
The definition of default KiwiSaver provider in section 4(1) is amended by omitting “section 177” and substituting “sec- tion 131”.

The definition of default KiwiSaver scheme in section 4(1) is 25 amended by omitting “section 177” and substituting “section 131”.

Paragraph (a) of the definition of defined benefit scheme member in section 4(1) is amended by omitting “registered superannuation scheme” and substituting “superannuation 30 scheme”.
Subparagraph (a)(i) of the definition of defined benefit scheme member in section 4(1) is amended by inserting “or section 165 of the Financial Markets Conduct Act 2011” after “section 9BAA of the Superannuation Schemes Act 35 1989”.

15 (3) (4) (5) (6) (7) 373 Part 9 cl 607 Financial Markets Conduct Bill (8) (9) Paragraph (d) of the definition of fee is amended by omitting “referred to in section 200 or” and substituting “referred to in section 67 of the Financial Markets Authority Act 2011”.
The definition of KiwiSaver scheme rules in section 4(1) is amended by omitting “section 126” and substituting “section 5 116”.
607 Meaning of provider Section 5(1) is amended by repealing subsections (1) and (1A) and substituting the following subsection: “(1) For the purpose of anything that must or may be done by or to 10 or in relation to a scheme, provider, unless the context other- wise requires,— “(a) means the person who is the manager of the scheme; “(b) and in the case of a restricted scheme, includes any person to 15 whom the manager has made a lawful delegation to do any thing (for example, an administration manager).” 608 Outline (1) (2) (3) Section 8(3) is amended by omitting “regulates” and substitut- ing “contains additional governance provisions relating to”.
Section 8(5) is amended by omitting “and Schedules 2 and 3 contain” and substituting “contains”.

Section 8(6) is amended by omitting “and the Superannuation Schemes Act 1989”.
Section 8 is amended by adding the following subsection: (4) “(7) Also, other rules about KiwiSaver schemes and complying superannuation funds are contained in the Financial Markets Conduct Act 2011 (for example, rules about registration, gov- ernance, and offers of interests).” 20 25 609 Outline of how people become members of overall 30 KiwiSaver scheme Section 9(2) is amended by omitting “This subpart” and sub- stituting “Subpart 4 of Part 4”.
374 Financial Markets Conduct Bill Part 9 cl 613 610 Extension of opt-out period Section 18(1)(b) is amended by omitting “an investment state- ment” in each place where it appears and substituting in each case “the product disclosure statement”.

611 Sections 24 to 32 and heading repealed Sections 24 to 32 (which relate to exempt employers) and the heading above section 24 are repealed.
5 (1) 612 Employer must also supply investment statement for employer’s chosen KiwiSaver scheme (if any) The heading to section 43 is amended by omitting “invest- 10 ment statement” and substituting “product disclosure state- ment”.

Section 43(a) is amended by omitting “an investment state- ment” and substituting “the product disclosure statement”.
(2) 613 Effect of employer choice of KiwiSaver scheme 15 Section 48 is amended by repealing subsections (2) to (6) and substituting the following subsections: “(2) On the first day that this section applies to an employee, the employee is treated as having— “(a) been given a product disclosure statement for the em- 20 ployer’s chosen KiwiSaver scheme; and applied to become a member of that scheme; and become a member of that scheme.
“(b) “(c) “(3) The provider of the employer’s chosen KiwiSaver scheme must accept that application and register the employee as a 25 member of the scheme.

“(4) The membership contract of the KiwiSaver scheme is binding on the employee and the provider, and enforceable as if it were a contract that was freely and voluntarily entered into.
“(5) The contract may be varied, replaced, cancelled, or otherwise 30 terminated, and the managed investment products may be re- turned,— “(a) “(b) to the extent permitted by sections 129 and 130; and except as provided by those sections, in the same way as if the contract were freely and voluntarily entered into.” 35 375 Part 9 cl 614 Financial Markets Conduct Bill (1) 614 Commissioner provisionally allocates certain people to default KiwiSaver schemes and sends investment statement The heading to section 50 is amended by omitting “invest- ment statement” and substituting “product disclosure state- 5 ment”.
Section 50(3)(c) is amended by omitting “investment state- ment ”and substituting “product disclosure statement”.
Section 50(4) is amended by repealing paragraphs (b) to (c) and substituting the following paragraphs: “(b) (2) (3) the Commissioner receives notice under section 196(1)(b) of the Financial Markets Conduct Act 2011 (which relates to transfers to another scheme on a scheme’s winding up) and paragraph (bb) does not apply; or “(bb) a scheme winds up, if that winding up is after the Com- missioner receives notice under that section; or the Commissioner 130(2); or”.
receives notice under section “(c) 615 New section 52 substituted Section 52 is repealed and the following section substituted: “52 Effect of completion of allocation “(1) A person whose allocation is completed under section 51 is 10 15 20 treated as having— “(a) been given a product disclosure statement for the de- 25 fault KiwiSaver scheme; and applied to become a member of that scheme; and become a member of that scheme.
“(b) “(c) “(2) The provider of the default KiwiSaver scheme to which the person has been allocated must accept that application and 30 register the person as a member of the scheme.

“(3) The membership contract of the default KiwiSaver scheme is binding on the person and the provider, and enforceable as if it were a contract that was freely and voluntarily entered into.
“(4) The contract may be varied, replaced, cancelled, or otherwise 35 terminated, and the managed investment products may be re- turned,— 376 Financial Markets Conduct Bill Part 9 cl 619 “(a) “(b) to the extent permitted by sections 129 and 130; and except as provided in those sections, in the same way as if the contract were freely and voluntarily entered into.” 616 Notification of transfers and requirement to transfer funds and information Section 56 is amended by repealing subsection (6) and substi- tuting the following subsection: 5 “(6) The circumstances are that— “(a) members have been notified of a proposal to transfer all of the members of the old scheme to another scheme 10 under section 164 of the Financial Markets Conduct Act 2011; or a copy of a winding-up order or resolution of the old scheme has been lodged with the FMA under section 196 of that Act.” 15 “(b) 617 Compulsory employer contribution amount: general rule Section 101D(5)(b) is amended by— (a) omitting “registered superannuation scheme” and sub- stituting “retirement scheme within the meaning of the Financial Markets Conduct Act 2011”; and inserting in subparagraph (i) “or section 163 of the Financial Markets Conduct Act 2011” after “or section 119G of this Act”.
20 (b) 618 Sections 101H to 101K and heading repealed Sections 101H to 101K (which relate to complying superannu- 25 ation funds) and the heading above section 101H are repealed.
619 Part 4 substituted Part 4 is repealed and the following Part substituted: “Part 4 “Additional Governance Provisions 30 “115 Overview of Part This Part contains governance provisions relating to schemes that are additional to those contained in the Financial Markets 377 Part 9 cl 619 Financial Markets Conduct Bill Conduct Act 2011, and other matters related to the functions of the Financial Markets Authority, as follows: “(a) subpart 1 provides for implied terms in trust deeds and regulates other scheme matters: “(b) subpart 2 provides for default KiwiSaver schemes: “(c) subpart 3 provides for certain schemes to continue to be complying superannuation funds: 5 “(d) subpart 4 provides for certain employers to continue to be exempt employers, with the effect that the automatic enrolment rules will not apply to their employees when 10 they start new employment: subpart 5 contains miscellaneous matters.
“(e) “Subpart 1—Implied terms and other regulation of schemes “KiwiSaver scheme rules 15 “116 KiwiSaver scheme rules are implied in trust deeds establishing KiwiSaver scheme “(1) The provisions set out in Schedule 1 are to be known as the KiwiSaver scheme rules.

“(2) The KiwiSaver scheme rules set out in Schedule 1 are implied 20 in every trust deed that establishes a KiwiSaver scheme in re- lation to the KiwiSaver scheme.
“(3) The KiwiSaver scheme rules— “(a) apply despite anything to the contrary in the trust deed; and are enforceable by the manager, the supervisor, or any member of the scheme.
“Compare: 2006 No 40 s 126 as at October 2011 “(b) “Provisions about unreasonable fees that apply to both KiwiSaver schemes and complying superannuation funds “117 Duty to give notice to FMA about fee increases “(1) Any person who increases a fee must give notice of the in- crease to the FMA as soon as is reasonably practicable after the increase takes effect if— 378 25 30 35 Financial Markets Conduct Bill Part 9 cl 619 “(a) “(b) the person is referred to in clause 2 of the KiwiSaver scheme rules (which relates to a requirement that fees not be unreasonable), and that clause applies to the fee; or the person is a supervisor, manager, administration 5 manager, investment manager, or other person who charges a fee for services in relation to the provision of a complying superannuation fund.
“(2) Every person commits an offence against this Part, and is liable on summary conviction to a fine not exceeding the amount set 10 out in subsection (4), who refuses or fails without reasonable excuse to give notice to the FMA of a fee increase as and when required by this section.

If any company commits an offence against this Part, every officer of the company who knowingly authorises or permits 15 the offence also commits an offence against this Part.
“(4) A person who is convicted of an offence under this section is “(3) liable,— “(a) the first time that the person is convicted in relation to a particular type of offence, to a fine not exceeding 20 $25,000; and “(b) on every other occasion that the person is convicted for the same type of offence, to a fine not exceeding $50,000.
“Compare: 1989 No 10 s 39; 2006 No 40 ss 189B, 199 as at October 2011 25 “118 Exercise of functions by FMA about unreasonable fees In considering whether a fee is unreasonable in relation to the provision of a KiwiSaver scheme or a complying superannu- ation fund, the FMA— “(a) must have regard to any prescribed matter: “(b) may have regard to any other matter that the FMA con- siders relevant: “(c) may make decisions in accordance with any prescribed process.
“Compare: 2006 No 40 s 127 as at October 2011 30 35 379 Part 9 cl 619 Financial Markets Conduct Bill “119 Powers of High Court in relation to unreasonable fees “(1) If the High Court is satisfied, on the application of a member of a scheme or the FMA, that any of the persons referred to in section 117 have charged a fee that is unreasonable, it may order that the fee be annulled or reduced.
5 “(2) The High Court may make any other order it thinks fit for the purpose of giving effect to an order under subsection (1).

“(3) An application for an order may be made within 1 year of the “(4) day that the fee is imposed or debited.

In determining whether a fee is unreasonable for the purposes 10 of this section, the High Court— “(a) must have regard to any prescribed matter; and “(b) may have regard to any other matter it thinks fit.
“Compare: 1989 No 10 s 40; 2006 No 40 s 189C as at October 2011 “Other implied terms 15 “120 Terms relating to backdated validation implied into trust deeds of KiwiSaver schemes “(1) Terms necessary for giving effect to the law relating to back- dated validation of invalid membership under subpart 4 of Part 2 are implied into the trust deed that establishes a KiwiSaver 20 scheme in relation to the KiwiSaver scheme.
“(2) The terms— “(a) apply despite anything to the contrary in the trust deed of the scheme; and are enforceable by the manager, the supervisor, or a 25 member of the scheme.
“(b) “Compare: 2006 No 40 s 128B as at October 2011 “121 Terms relating to members’ tax credits implied into trust deeds of KiwiSaver schemes and complying superannuation funds “(1) Terms necessary for giving effect to the law relating to the tax credits described in section MK 1 of the Income Tax Act 2007 are implied into the trust deed that establishes— “(a) a KiwiSaver scheme in relation to the KiwiSaver scheme: 30 35 380 Financial Markets Conduct Bill Part 9 cl 619 “(b) a complying superannuation fund in relation to the com- plying superannuation fund.
“(2) The terms— “(a) apply despite anything to the contrary in the trust deed of the scheme; and are enforceable by the manager, the supervisor, or a member of the scheme.
“(b) “Compare: 2006 No 40 s 128A as at October 2011 “122 Terms relating to compulsory employer contributions implied into trust deeds of KiwiSaver schemes and complying superannuation funds 5 10 “(1) Terms necessary for giving effect to the law relating to com- pulsory employer contributions are implied into the trust deed that establishes— “(a) a KiwiSaver scheme in relation to the KiwiSaver 15 scheme: a complying superannuation fund in relation to the com- plying superannuation fund.
“(b) “(2) The terms— “(a) apply despite anything to the contrary in the trust deed 20 of the scheme; and are enforceable by the manager, the supervisor, or a member of the scheme.
“(b) “Compare: 2006 No 40 s 128D as at October 2011 “123 Terms relating to lump sum payments by complying 25 superannuation funds “(1) Terms necessary for giving effect to clause 2(c) of Schedule 28 of the Income Tax Act 2007 are implied into the trust deed that establishes a complying superannuation fund in relation to the complying superannuation fund.
“(2) The terms— “(a) apply despite anything to the contrary in the trust deed of the scheme; and are enforceable by the manager, the supervisor, or a member of the scheme.
“(b) “Compare: 2006 No 40 s 128C as at October 2011 381 30 35 Part 9 cl 619 Financial Markets Conduct Bill “Other regulation of schemes “124 Requirement for annual return “(1) The manager of a KiwiSaver scheme and the manager of a complying superannuation fund must provide an annual return to the FMA that— “(a) “(b) meets any further prescribed requirements.
is in the prescribed form; and 5 “(2) The prescribed requirements may include a requirement to provide statistical information in relation to the KiwiSaver scheme.

10 “(3) The annual return must be provided before the prescribed date and relate to the prescribed 12-month period.
“(4) Nothing in this section requires the manager to provide— “(a) “(b) “(c) information about an identifiable individual; or information that is not in the possession or control of 15 the manager; or information that is not reasonably ascertainable from information that is in the possession or control of the manager.
“(5) Every person commits an offence against this Part, and is liable 20 on summary conviction to a fine not exceeding the amount set out in subsection (7), who refuses or fails without reason- able excuse to provide an annual return under this section as and when required by this Part or any regulations made under section 228.

If any company commits an offence against this Part, every officer of the company who knowingly authorises or permits the offence also commits an offence against this Part.
“(7) A person who is convicted of an offence under this section is “(6) 25 liable,— “(a) the first time that the person is convicted in relation to a particular type of offence, to a fine not exceeding $25,000; and 30 “(b) on every other occasion that the person is convicted for the same type of offence, to a fine not exceeding 35 $50,000.
“Compare: 2006 No 40 ss 125, 199 as at October 2011 382 Financial Markets Conduct Bill Part 9 cl 619 “125 Unclaimed money held in KiwiSaver scheme “(1) Section 77 of the Trustee Act 1956 applies subject to this sec- tion in relation to a member’s interest in a KiwiSaver scheme held by, or in the control of, the supervisor or manager of that scheme.
5 “(2) Section 77 of the Trustee Act 1956 applies to the member’s interest only if, at the time that section is applied,— “(a) the member of the scheme in respect of which the trust exists is able to be identified, according to the informa- tion held by or available to the manager, as being at least 10 5 years older than the date on which a withdrawal is per- mitted under clause 4 of the KiwiSaver scheme rules; and the manager has ensured that reasonable efforts have been made to locate the member but the member is un- 15 able to be found; and there has been no contribution made to the member’s account in the preceding 5 years, excluding any Crown contribution.
“(b) “(c) “Compare: 2006 No 40 s 195 as at October 2011 20 “126 Member’s interest in KiwiSaver scheme not assignable “(1) Except as expressly provided in this Act, a member’s interest or any future benefits that will or may become payable to a member under the KiwiSaver scheme must not be assigned or charged or passed to any other person whether by way of 25 security, operation of law, or any other means.
“(2) However, subsection (1) does not prevent a member’s inter- est or any future benefits that will or may become payable to a member under the KiwiSaver scheme from being released, assigned, or charged, or from passing to any other person if 30 it is required by the provisions of any enactment, including a requirement by order of the court under any enactment (in- cluding an order made under section 31 of the Property (Rela- tionships) Act 1976).
“Compare: 2006 No 40 s 196 as at October 2011 35 383 Part 9 cl 619 Financial Markets Conduct Bill “127 Application of Financial Transactions Reporting Act 1996 to default allocation of members to KiwiSaver schemes “(1) This section applies in respect of any allocation of a person (A) to, or any application by a person (A) to become a member of, a KiwiSaver scheme under sections 50 to 52.
5 “(2) For the purposes of section 6 of the Financial Transactions Reporting Act 1996, an application or allocation to which this section applies is not a request to a financial institution for the person to become a facility holder as defined in section 2(1) of that Act.
10 “(3) Despite subsection (2),— “(a) “(b) a provider of a KiwiSaver scheme must make reason- able efforts to verify A’s identity at the time that A be- comes a member of a KiwiSaver scheme; and if A makes a voluntary payment into the KiwiSaver 15 scheme, the payment must, for the purposes of section 6 of the Financial Transactions Reporting Act 1996, un- less the provider has already verified A’s identity, be treated as a request to a financial institution for the per- son to become a facility holder within the meaning of 20 that Act.
“(4) In this section, voluntary payment means,— “(a) “(b) in relation to a member of a KiwiSaver scheme who has become a member of that scheme under section 48 or 52, a payment made by or for the benefit of that person 25 into the KiwiSaver scheme that is not a deduction from salary or wages made under subpart 1 of Part 3; and in relation to a member of a KiwiSaver scheme to whom paragraph (a) does not apply, a payment made by or for the benefit of that person into the KiwiSaver scheme 30 that is in excess of the amount the member is contrac- tually bound to pay into the scheme within a defined period.
“Compare: 2006 No 40 s 204 as at October 2011 “128 Product disclosure statements must contain responsible 35 investment statement “(1) Every product disclosure statement relating to a KiwiSaver scheme or a complying superannuation fund must contain a 384 Financial Markets Conduct Bill Part 9 cl 619 statement in the following form if it is a scheme that takes responsible investment, including environmental, social, and governance considerations, into account in the investment policies and procedures of the scheme: “’Responsible investment, including environmental, social, 5 and governance considerations, is taken into account in the investment policies and procedures of the scheme as at the date of this product disclosure statement.
You can obtain an explanation of the extent to which responsible investment is taken into account in those policies and procedures at the 10 issuer’s Internet site at [specify Internet site address].’ “(2) Every product disclosure statement relating to a KiwiSaver scheme or a complying superannuation fund must contain a statement in the following form if it is a scheme that does not take responsible investment, including environmental, social, 15 and governance considerations, into account in the investment policies and procedures of the scheme: “’Responsible investment, including environmental, social, and governance considerations, is not taken into account in the investment policies and procedures of the scheme as at the 20 date of this product disclosure statement.’” “(3) A failure to comply with this section must be treated as if it were a failure to comply with the requirements of regulations made under the Financial Markets Conduct Act 2011 as to the information that a product disclosure statement must contain.
25 “Compare: 2006 No 40 s 205A as at October 2011 “Interface with securities law “129 Application of Financial Markets Conduct Act 2011 “(1) An employer does not contravene the Financial Markets Con- duct Act 2011 by reason only that, acting as an employer, that 30 person— “(a) complies with the person’s responsibilities as an em- ployer under this Act; or chooses a KiwiSaver scheme as the employer’s chosen KiwiSaver scheme under section 47.
“(b) 35 “(2) No act or omission by the Crown, or any officer or employee of the Crown, that occurs during the performance or exercise, or 385 Part 9 cl 619 Financial Markets Conduct Bill intended performance or exercise, of any functions, duties, or powers in respect of KiwiSaver schemes and complying super- annuation funds, gives rise to any civil or criminal liability of the Crown or those officers or employees under the Financial Markets Conduct Act 2011.
“Compare: 2006 No 40 s 209 as at October 2011 5 “130 Certain sections of Financial Markets Conduct Act 2011 modified in relation to KiwiSaver scheme “(1) This section applies if an interest in a KiwiSaver scheme is issued in contravention of Part 3 of the Financial Markets 10 Conduct Act 2011.
“(c) “(a) “(b) “(2) The manager must provide the Commissioner with notice of— any member who has given notice under section 41(2) of the Financial Markets Conduct Act 2011; and any member to whom money would have had to have 15 been repaid under section 64(1)(a) or 68(3)(a) of that Act, but for subsection (3); and any member who has not confirmed that he or she still wants to acquire the financial products under section 64(2) or 68(4) of that Act; and if all or part of the consideration for the issue of financial products to that member was the transfer of the mem- ber’s accumulation from another KiwiSaver scheme, the name of that scheme from which the member’s ac- cumulation was transferred; and the name, address, and tax file number of the member.
“(e) If a member is notified to the Commissioner under subsec- tion (2), “(a) “(d) “(3) 20 25 the following do not apply: “(i) any right of the member to return the financial 30 products and to have the relevant money repaid; and any duty of the issuer or any other person to repay any contribution under section 41, 64, or 68 of the Financial Markets Conduct Act 2011; and 35 “(ii) “(b) instead, the following both apply: “(i) a process for the person to be allocated to a new scheme (see sections 50 to 52 and 211); and 386 Financial Markets Conduct Bill Part 9 cl 619 “(ii) a process for the person to be transferred to a new scheme (see section 57).
“Compare: 2006 No 40 s 210 as at October 2011 “Subpart 2—Default KiwiSaver schemes “131 Appointment of default providers “(1) The Minister may appoint 1 or more managers for a specified 5 term to provide— “(a) “(b) a default KiwiSaver scheme that is specified in the in- strument of appointment; and a default investment product of that default KiwiSaver 10 scheme that is specified in the instrument of appoint- ment.
“(2) The appointment may be made subject to such terms and con- ditions as the Minister considers fit.

“(3) The instrument of appointment must— 15 “(a) identify the default KiwiSaver scheme and the default investment product of the scheme: state any terms and conditions of the appointment: state any prescribed information.

“(b) “(c) In determining whether to appoint a manager as a default 20 KiwiSaver provider under this section, the Minister must seek the advice of the FMA.
“(4) “(5) A restricted scheme is not eligible to be a default KiwiSaver scheme.

“Compare: 2006 No 40 s 177 as at October 2011 25 “132 Provisions of instrument of appointment to prevail over provisions of trust deed “(1) The manager and the supervisor must take all reasonable steps to ensure that the trust deed of a default KiwiSaver scheme is consistent with the instrument of appointment.
30 “(2) The provisions of the instrument of appointment prevail over the terms of the trust deed establishing the KiwiSaver scheme that relate to the KiwiSaver scheme.

“(3) A product disclosure statement relating to a KiwiSaver scheme to which an instrument of appointment under section 131 35 relates must draw attention to the implications of this section.
387 Part 9 cl 619 Financial Markets Conduct Bill “(4) Section 127(1)(a) of the Financial Markets Conduct Act 2011 (which relates to the power to make FMA-approved changes to trust deeds) applies to changes to the trust deed that are required under this section.
“Compare: 2006 No 40 s 178 as at October 2011 5 “133 Effect of appointment under section 131 If a person is appointed as a provider of a default KiwiSaver scheme under an instrument of appointment under section 131,— “(a) the default KiwiSaver scheme must be shown as a de- 10 fault KiwiSaver scheme on the register of managed in- vestment schemes; and the Commissioner may nominate the default investment product of the scheme as a default investment product to which persons may be allocated for the purposes of 15 sections 50 to 52.
“(b) “Compare: 2006 No 40 s 179 as at October 2011 “134 Appointment must be notified “(1) The Minister must, as soon as practicable after an appointment under section 131 has been made, notify the FMA, the Com- 20 missioner, and the Registrar of Financial Service Providers (for the purposes of making the appointment available and up- dating the register) that the appointment has been made, and provide each of them with a copy of the instrument of appoint- ment.
25 “(2) This section also applies to any variation, renewal, or revoca- tion of the instrument of appointment.
“Compare: 2006 No 40 s 180 as at October 2011 “135 Power of High Court to act in respect of terms and conditions of appointment as default KiwiSaver scheme and regulations relating to default KiwiSaver schemes “(1) This section applies if the High Court is satisfied that the man- ager of a default KiwiSaver scheme appointed under section 131 intends to engage, or is engaging or has engaged, in con- duct that constitutes, or would constitute,— 30 35 388 Financial Markets Conduct Bill Part 9 cl 619 “(a) “(b) a breach of the terms and conditions of the instrument of appointment referred to in section 131; or a breach of regulations made under section 230.
“(2) Sections 462 and 463 of the Financial Markets Conduct Act 2011 (which relate to injunctions) apply as if that conduct or 5 intended conduct were a contravention of that Act or regula- tions made under that Act.
“(3) Without limiting those sections, the High Court may make any orders on any terms and conditions that it thinks appropriate, including— “(a) “(b) an order to restrain the manager or the supervisor of the scheme, or both, from engaging in conduct that consti- tutes, or would constitute, the breach: an order to require the manager or the supervisor of the scheme, or both,— “(i) “(ii) to do a particular act or thing: to comply with the conditions of the instrument of appointment: an interim order.
“(c) “Compare: 2006 No 40 s 183 as at October 2011 “136 Revocations, etc, of instruments of appointment “(1) An instrument of appointment may provide for its renewal or variation or expiry or revocation by the Minister or the provider.
10 15 20 “(2) Despite any matter provided for in an instrument of appoint- 25 ment as to its expiry or revocation, the Minister may, by notice in writing to a provider, revoke an instrument of appointment if— “(a) the scheme’s registration as a KiwiSaver scheme is re- moved under section 121 of the Financial Markets 30 Conduct Act 2011; or the scheme’s registration as a managed investment scheme is cancelled under section 180 of that Act; or an order or resolution to wind up the scheme is made as referred to in section 196 of that Act; or the Minister is satisfied that— 35 “(b) “(c) “(d) 389 Part 9 cl 619 Financial Markets Conduct Bill “(i) “(ii) the provider is not operating in accordance with the terms and conditions of the instrument of ap- pointment; and the failure to operate in accordance with the terms and conditions of the instrument of appointment 5 is a significant breach as prescribed in regulations made under section 230.
“(3) The appointment of the provider under section 131 ceases on revocation of the instrument of appointment.

“(4) The Minister must notify the FMA, the Commissioner, and 10 the Registrar of Financial Service Providers (for the purpose of updating the register) as soon as practicable after an instrument of appointment is revoked.
“Compare: 2006 No 40 s 184 as at October 2011 “137 Duration of obligations as default provider after 15 “(1) terminating event In this section,— “reporting obligations, provider’s scheme, means— “(a) in relation to a provider and the any requirement for the provider to report to persons 20 specified in an instrument of appointment; and any requirement for the provider to produce to any persons specified in an instrument of appointment any papers, documents, records, or things in respect of the scheme (and the power of any person to require pro- 25 duction of those papers, document, records, or things) “terminating event means— “(a) the revocation of an instrument of appointment by the provider or the Minister under the terms and conditions of the instrument of appointment; or the revocation of an instrument of appointment in ac- cordance with section 136(2); or the expiry of the term of appointment (as specified in the instrument of appointment and in accordance with any renewal of the term of appointment).
30 35 “(b) “(b) “(c) “(2) Despite any terminating event,— 390 Financial Markets Conduct Bill Part 9 cl 619 “(a) “(b) any terms and conditions of the instrument of appoint- ment that relate to a provider’s reporting obligations in respect of the provider’s scheme continue to apply until the date when the term of appointment would have ex- pired but for the terminating event; and regulations made under section 230 continue to apply in relation to the provider until the provider has com- pleted every act or thing that the regulations require the provider to do following any terminating event.
“Compare: 2006 No 40 s 185 as at October 2011 5 10 “Subpart 3—Complying superannuation funds “138 Outline of subpart “(1) This subpart contains rules relating to complying superannu- ation funds (which are superannuation schemes that were ap- 15 proved for the purposes of the Income Tax Act 2007 under section 35 of the Superannuation Schemes Act 1989 before its repeal) as follows: “(a) “(b) the rules that apply to complying superannuation funds: the rules relating to revocation of approval of comply- 20 ing superannuation funds.
“(2) These rules are in addition to rules elsewhere in this Act that apply to complying superannuation funds (for example, in re- lation to implied terms and unreasonable fees).

“139 Failure to pay: provider notice “(1) This section applies if the provider of a complying superannu- ation fund knows that an employer has failed to pay to the provider an amount of compulsory employer contribution in accordance with subpart 3A of Part 3.
25 “(2) The provider must, as soon as practicable, give a notice to the 30 employer requesting the payment of the amount of compulsory employer contribution.

The provider must send to the FMA a copy of the notice.
If the employer does not pay the amount of compulsory em- ployer contribution to the provider within 1 month of this sec- 35 tion first applying for the amount, and the total of the amounts “(3) 391 Part 9 cl 619 Financial Markets Conduct Bill of compulsory employer contributions unpaid is more than $500, then the provider must immediately give a notice to the FMA.
“(4) A notice under subsection (3) must specify the following: “(a) “(b) “(c) “(d) “(e) 5 the name of the employer; and the amounts of compulsory employer contributions un- paid; and the employer’s name, address, and tax file number (if known); and the relevant employees to whom the failure to pay re- 10 lates and their tax file numbers and addresses; and the pay periods and relevant amounts for the employees to whom the failure to pay relates; and other information required by the FMA.
“(f) If the employer pays an amount of compulsory employer con- 15 tribution remedying a failure to pay that was notified to the FMA under subsection (3), the provider must immediately give a notice to the FMA showing relevant details of the em- ployer’s payment.
“Compare: 2006 No 40 s 101H as at October 2011 20 “(5) “140 Failure to pay: FMA’s duties “(1) If the FMA receives a notice under section 139(3), the FMA must decide the amount of compulsory employer contribution that an employer to which the notice relates has failed to pay for the relevant calendar months.
“(2) The FMA may use any power (with necessary modifications for complying superannuation funds) that the FMA has in re- spect of KiwiSaver schemes in the performance of the duty to decide imposed by subsection (1).

25 “(3) As soon as practicable, the FMA must give a notice to the 30 employer showing the information described in subsection (4).
“(4) A notice under subsection (3) must— “(a) require the payment of the amount (the liable amount) that the FMA has decided, under subsection (1), that 35 an employer has failed to pay to the provider; and 392 Financial Markets Conduct Bill Part 9 cl 619 “(f) “(c) “(e) “(d) “(g) “(b) specify the relevant calendar months and related amounts; and specify that the employer must pay the liable amount within 28 days after the notice is given; and specify the employer’s name, address, and tax file num- 5 ber (if known); and specify the relevant employees to whom the failure to pay relates and their tax file numbers and addresses; and specify the pay periods and relevant amounts for the employees to whom the failure to pay relates; and inform the employer that failure to comply with the no- tice will result in the Commissioner receiving notice of the failure to comply; and “(h) show other information required by the Commissioner.
If the employer does not pay the liable amount in the period 15 specified in subsection (4)(c) and the employer has not ob- jected to the FMA’s decision under subsection (1) within the time allowed under section 155, the FMA must imme- diately— “(a) give to the Commissioner a notice showing the infor- 20 mation described in subsection (6); and send to the provider a copy of the notice.
“(b) 10 “(5) “(6) A notice under subsection (5) must— “(a) “(b) “(c) “(d) “(e) 25 state that the employer has failed to comply with notices under section 139(3) and subsection (3); and show the information described in subsection (4); and specify the extent to which an amount of compulsory employer contributions remains unpaid for the liable amount; and specify the relevant employees to whom the unpaid 30 amounts relate and their tax file numbers and addresses; and specify the pay periods and relevant amounts for the employees to whom the unpaid amounts relate.
“(7) If the FMA makes a decision, upon an employer’s objection to 35 the FMA’s decision under subsection (1), and the decision is that the employer to which the notice under section 139(3) relates has failed to pay an amount of compulsory employer contribution for the relevant calendar months, the employer is 393 Part 9 cl 619 Financial Markets Conduct Bill treated as having not objected, and the FMA must immediately give the Commissioner the notice described in subsection (5).
“Compare: 2006 No 40 s 101I as at October 2011 “141 Failure to pay: Commissioner “(1) If the Commissioner receives a notice under section 140(5), the amount of compulsory employer contributions unpaid for the liable amount, specified in that notice, is treated as an amount due and payable by the employer to the Commissioner on the 20th working day after the Commissioner receives the 10 notice under section 140(5).
5 “(2) The Commissioner must send the employer a notice of the amount due and payable, and the due date, specified in sub- section (1).

“Compare: 2006 No 40 s 101J as at October 2011 15 “142 Recovered amounts An amount of compulsory employer contribution for an em- ployee’s complying superannuation fund that is received by the FMA or the Commissioner by virtue of subpart 3A of Part 3 must be paid by them to the relevant provider.
The relevant 20 amount of compulsory employer contributions remaining un- paid for the relevant liable amount is consequentially reduced.
“Compare: 2006 No 40 s 101K as at October 2011 “143 Reduction of scheme insurance upon transfer out of complying superannuation fund 25 “(1) This section applies to a complying superannuation fund (scheme A) if— “(a) scheme A provides or facilitates the provision of in- surance (the scheme insurance) to a member or other beneficiary (the person); and the benefit of the scheme insurance is calculated by ref- erence to contributions for the person held by a comply- ing superannuation fund (the contributions); and an amount of contributions is transferred out of the com- plying superannuation fund to a complying superannu- 35 ation fund or KiwiSaver scheme (other than scheme A).
30 “(b) “(c) 394 Financial Markets Conduct Bill Part 9 cl 619 “(2) A term is implied into the trust deed of scheme A.

That term must have the effect of allowing the benefit of the person’s scheme insurance to be reduced in proportion to the amount of contributions transferred out of the complying superannu- ation fund to a complying superannuation fund or KiwiSaver 5 scheme (other than scheme A).
“Compare: 1989 No 10 s 9D “144 Revocation of approval of complying superannuation funds “(1) The FMA may revoke the approval of a scheme as a complying 10 superannuation fund if either— “(a) the FMA is satisfied that the scheme no longer meets the requirements in subsection (2); or the manager of the scheme makes an application for revocation.
“(2) The requirements are that— “(b) 15 “(a) “(b) “(c) 20 relevant contributions: returns on relevant contributions: the scheme and any relevant participation agreement must contain rules that subject the following to comply- ing fund rules (as defined in section YA 1 of the Income Tax Act 2007): “(i) “(ii) “(iii) relevant benefits; and the scheme must have at least 20 members, treating all interests in the registered scheme or account held by 25 associated persons within the meaning of section YA 1 of the Income Tax Act 2007 as being held by 1 person; and the fund must have rules that meet all the requirements set out in Schedule 28 of the Income Tax Act 2007 (re- 30 quirements for complying fund rules) or do not detract from those requirements.
“(3) The FMA must not exercise a power under subsection (1)(a), or refuse an application for a revocation made by a manager of a scheme, unless— “(a) the FMA gives the manager of the scheme no less than 10 working days’ written notice of the following mat- ters before it exercises the power: 35 395 Part 9 cl 619 Financial Markets Conduct Bill “(i) that the FMA may exercise the power or refuse the application (as the case may be); and the reasons why it may do so; and “(ii) the FMA gives the manager or the manager’s represen- tative an opportunity to make written submissions on 5 the matter within that notice period.
“(b) “(4) The FMA must, as soon as practicable after revoking the ap- proval, give notice to— “(a) “(b) the manager of the scheme; and the Registrar of Financial Service Providers, for the pur- 10 pose of updating the register of managed investment schemes; and any person who originally applied for approval under section 34 of the Superannuation Schemes Act 1989; and the Commissioner.
15 “(c) “(d) “(5) The manager of a scheme who is notified that approval is re- voked must immediately— “(a) give notice of that revocation to each member who may be affected, and to their employers; and “(b) give notice to the Commissioner of each member who may be affected, and of their employers.

“(6) Each of those notices must specify an effective revocation date.
“Compare: 1989 No 10 ss 35, 36 20 25 “Subpart 4—Exempt employers “145 Effect of being exempt employer and outline of subpart “(1) A person who starts new employment with an exempt em- ployer is exempt from the automatic enrolment rules.
“(2) For the avoidance of doubt, subsection (1)— 30 “(a) does not prevent an employee of an exempt employer from opting in under this subpart; and “(b) does not prevent a person who is already a member of a KiwiSaver scheme from becoming liable for automatic deduction of contributions from the salary or wages 35 paid in respect of employment with an exempt employer under section 15(1)(a)(ii) or 36(1)(a)(ii).
396 Financial Markets Conduct Bill Part 9 cl 619 “(3) This subpart contains rules relating to exempt employers (as approved under section 30 before its repeal by the Financial Markets Conduct Act 2011) as follows: “(a) “(b) the rules that apply to exempt employers: the rules relating to revocation of approval of exempt 5 employers.

“(4) These rules are in addition to rules elsewhere in this Act that apply to exempt employers.
“Compare: 2006 No 40 s 24 as at October 2011 “146 Eligibility to continue to be exempt employer “(1) An employer is eligible to continue to be an exempt employer if the FMA is satisfied that the employer provides access to a superannuation scheme for its employees that complies with the following rules: “(a) 10 20 every person who becomes a permanent employee (in- 15 cluding a part-time employee) of that employer, and who is aged 18 or over but less than the New Zealand superannuation qualification age, must be eligible, in practice, at the time when the person so becomes an em- ployee,— “(i) “(ii) to become a member of the scheme; and to transfer to the scheme the member’s accumula- tion in relation to other superannuation schemes (to the extent that transfers are available from those other superannuation schemes); and the trust deed of the scheme must have the effect that each member who satisfies the scheme’s requirements for a withdrawal benefit, and who elects to withdraw from membership of the scheme, may transfer the mem- ber’s accumulation to another superannuation scheme 30 or KiwiSaver scheme (to the extent that transfers are available to those other schemes); and the trust deed of the scheme must provide for an amount equal to at least 4% of annual gross base salary or wages to be contributed to, or otherwise credited within, the 35 scheme in respect of each person who becomes a per- manent employee of that employer and a member of the scheme.
25 “(b) “(c) 397 Part 9 cl 619 Financial Markets Conduct Bill “(2) However, subsection (1)(c) does not apply— “(a) “(b) to the extent that an employee is, in accordance with the terms of the scheme, temporarily relieved from contri- butions at that rate (for example, in the event of financial hardship); or if the scheme is a defined benefit scheme of a type that does not satisfy the 4% minimum amount rule in sub- section (1)(c), and if the actuary of the scheme cer- tifies, to the satisfaction of the FMA, that the value of each employee’s accrued benefits to be provided by the 10 scheme is, as a matter of fact, increasing, during each membership period, by an amount at least equivalent to such minimum amount that would otherwise be re- quired by this section and section 147.
5 “(3) In this section,— “defined benefit scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “permanent employees means employees— “(a) who are not employed in temporary employment (as “(b) described in section 12); and to whom the automatic enrolment rules would apply, but for the application of this section.
“Compare: 2006 No 40 s 25 as at October 2011 “147 How 4% minimum amount may be calculated for exempt employer defined contribution schemes “(1) For the purposes of section 146(1)(c),— the minimum amount required by section 146(1)(c) may be made up— entirely of contributions by the employee; or “(i) “(ii) entirely of contributions by an employer; or “(iii) partially of contributions by the employee and partially of contributions by an employer; and the minimum amount required by section 146(1)(c) must be treated as satisfied if the sum of the following amounts is equal to at least 4% of annual gross base 35 salary or wages: “(i) the minimum prescribed amount that the em- ployee must contribute: “(a) “(b) 398 15 20 25 30 “(c) Financial Markets Conduct Bill Part 9 cl 619 “(ii) the maximum prescribed amount that the em- ployer would be required to contribute if the member were to contribute the maximum pre- scribed amount: any amount contributed to the scheme by an employer 5 in respect of an employee does not count towards the minimum amount required by section 146(1)(c) un- less— “(i) the employee is legally entitled to require the em- ployer to contribute that amount on his or her be- 10 half; and the trust deed of the scheme provides for the min- imum amount required by section 146(1)(c) to vest completely in the employee no later than the time when the employee begins his or her sixth 15 year as a member of the scheme; and “(ii) “(d) any amount contributed to the scheme by an employer in respect of an employee must be calculated, for the purposes of the minimum amount required by section 146(1)(c), before any ESCT payable under the ESCT 20 rules is deducted.
“(2) Subsection (1)(b) does not limit subsection (1)(c) or (d).

Example Company A provides access to a superannuation scheme for its employees.

The trust deed provides that employees, if they de- 25 cide to become members, must contribute at either 1% or 3% of annual gross base salary.

The employer is obliged to match the employee’s contributions (eg, if employee contributes 1%, com- pany must contribute 1%).
The scheme complies with the rule as to the 4% minimum con- 30 tribution as follows: Minimum amount employee member must contribute Maximum amount that employer must contribute in re- spect of employee member “Compare: 2006 No 40 s 26 as at October 2011 1% 3% 4% 399 Part 9 cl 619 Financial Markets Conduct Bill “148 Exempt employers who provide access to more than 1 scheme An employer who provides access to more than 1 superannu- ation scheme for its employees is eligible to continue to be an exempt employer if the FMA is satisfied that, if all of 5 those schemes were considered as a whole (as if they were 1 scheme), the rules in section 146 would be complied with.
“Compare: 2006 No 40 s 27 as at October 2011 “149 Exempt employers who have schemes established under master trusts An employer who provides access to a superannuation scheme for its employees that is established under a master trust is eligible to continue to be an exempt employer if the FMA is satisfied that the rules in section 146 would be complied with if the FMA considered only— “(a) the master trust in so far as it relates to the employer’s scheme; and the participation agreement executed by the employer in relation to the membership of the employer’s employees in the scheme; and anything else that the FMA decides is relevant to evi- dencing compliance with the rules in section 146, in respect of the employer’s employees.
“(b) “(c) 10 15 20 “Compare: 2006 No 40 s 28 as at October 2011 “150 Employers may apply to succeed to former employer’s 25 exempt employer status “(1) A person may make an application to the FMA for approval to succeed to an exempt employer’s exempt employer status if the person is a succeeding employer for that exempt employer.
“(2) The application must be accompanied by— 30 “(a) “(b) “(c) information that satisfies the FMA that the scheme com- plies with the rules in section 146 (or, if applicable, section 148 or 149); and the names, addresses, and tax file numbers of each em- ployer in respect of whom the application is made; and 35 if the application is made in respect of an employer that is part of a group of companies, any details of the names, 400 Financial Markets Conduct Bill Part 9 cl 619 addresses, tax file numbers, and payroll arrangements of any other members of the group that the FMA may request.
“(3) In this section, succeeding employer means an employer who succeeds an exempt employer because of a merger with, or an 5 acquisition of, the exempt employer.
“Compare: 2006 No 40 s 29 as at October 2011 “151 How applications to succeed to former employer’s exempt employer status must be dealt with “(1) The FMA must, within 20 working days after receiving an ap- 10 plication made under section 150(1) and the documents re- quired under section 150(2) to accompany the application,— consider whether the FMA is satisfied that each em- “(a) ployer in respect of whom the application is made com- plies with the rules in section 146 or, if applicable, 15 section 148 or 149; and if so satisfied, approve the employer as an exempt em- ployer and register the employer on the register of ex- empt employers kept under section 154.
“(b) “(2) The FMA must— 20 “(a) “(b) give notice to the employer as soon as practicable after approving, or declining to approve, the employer as an exempt employer; and specify in that notice an effective date after which an employee who starts new employment with the em- 25 ployer will be exempt from the automatic enrolment rules (unless those rules do not otherwise apply).
“Compare: 2006 No 40 s 30 as at October 2011 “152 Revocation of exempt employer approval “(1) The FMA may revoke an approval as an exempt employer 30 given under this Act if either— “(a) the FMA is satisfied that the employer is no longer eli- gible to be an exempt employer because the employer no longer provides access to a scheme for its employ- ees that complies with the rules in section 146 or, if 35 applicable, section 148 or 149; or the employer makes an application for revocation.
“(b) 401 Part 9 cl 619 Financial Markets Conduct Bill “(2) The FMA must not exercise a power under subsection (1)(a), or refuse an application for a revocation made by an employer, unless— “(a) the FMA gives the employer no less than 10 working days’ written notice of the following matters before it 5 exercises the power: “(i) that the FMA may exercise the power or refuse the application (as the case may be); and the reasons why it may do so; and “(ii) the FMA gives the employer or the employer’s repre- 10 sentative an opportunity to make written submissions on the matter within that notice period.
“(b) “(3) The FMA must— “(a) “(b) “(c) give notice to the employer as soon as practicable after revoking the approval; and specify in that notice an effective revocation date after which an employee who starts new employment with the employer will be subject to the automatic enrolment rules (unless those rules do not otherwise apply); and ensure that the employer is removed from the register 20 of exempt employers.
15 “Compare: 2006 No 40 s 31 as at October 2011 “153 FMA must give notice to Commissioner of exempt employers The FMA must give notice to the Commissioner as soon as 25 practicable after an employer is approved under section 151 or an approval is revoked under section 152.

“Compare: 2006 No 40 s 32 as at October 2011 “154 Register of exempt employers “(1) The FMA must ensure that a register is kept that contains the 30 names of employers who are exempt employers.
“(2) That register may be part of the register of managed invest- ment schemes, in which case the Financial Markets Conduct Act 2011 applies to the keeping of the register accordingly.
402 Financial Markets Conduct Bill Part 9 cl 619 “Subpart 5—Miscellaneous “155 Right of appeal against certain decisions of FMA “(1) A person affected by a decision of the FMA under any of the following provisions may appeal against the decision to the High Court: “(a) “(b) section 144 (revocation of approval of complying section 140 (failure to pay: FMA’s duties): 5 “(c) superannuation funds): section 151 (how applications to succeed to former employer’s exempt employer status must be dealt with): 10 “(d) section 152 (revocation of exempt employer ap- proval).
“(2) A decision against which an appeal is lodged under this section continues in force unless the High Court orders otherwise.
“Compare: 2006 No 40 s 186 as at October 2011 15 “156 Sharing of information and documents with Commissioner for purpose of administering KiwiSaver schemes “(1) The FMA may provide to the Commissioner any information, or a copy of any document, that the FMA— “(a) holds in relation to the performance or exercise of the FMA’s functions, powers, or duties under this Act or in connection with 1 or more KiwiSaver schemes or complying superannuation funds under this Act or any other enactment; and considers may assist the Commissioner in the per- formance or exercise of the Commissioner’s functions, powers, or duties under this Act or in connection with 1 or more KiwiSaver schemes or complying superannu- ation funds under this Act or any other enactment.
“(b) 20 25 30 “(2) The FMA may use any information, or a copy of any docu- ment, provided to it by the Commissioner under any enactment in the FMA’s performance or exercise of its functions, powers, or duties under this Act or in connection with 1 or more Kiwi- Saver schemes or complying superannuation funds under this 35 Act or any other enactment.

403 Part 9 cl 619 Financial Markets Conduct Bill “(3) This section applies despite anything to the contrary in any contract, deed, or document.
“Compare: 2006 No 40 s 188 as at October 2011 “157 Conditions that may be imposed on providing information, documents, or evidence to Commissioner 5 “(1) The FMA may impose any conditions in relation to providing information or documents to the Commissioner (whether in compliance with a request or otherwise).

“(2) The FMA must, in considering what conditions to impose, have regard to whether conditions are necessary or desirable 10 in order to protect the privacy of any individual.
“(3) Those conditions may include, without limitation, conditions relating to— “(a) maintaining the confidentiality of anything provided (in particular, information that is personal information 15 within the meaning of the Privacy Act 1993): the storing of, use of, or access to anything provided: the copying, returning, or disposing of copies of docu- ments provided.
“(b) “(c) “Compare: 2006 No 40 s 189 as at October 2011 20 “158 Annual report by FMA “(1) The FMA must, within 3 months after the end of every finan- cial year, report to the Minister on the principal matters trans- acted under this Act during that year.

“(2) Every report must be presented to the House of Representa- 25 tives by the Minister as soon as practicable after it has been received by that Minister.
“Compare: 1989 No 10 s 28; 2006 No 40 s 194 as at October 2011 “159 Offence to supply false or misleading information, etc “(1) Every person commits an offence against this Part, and is liable 30 on summary conviction to a fine not exceeding the amount set out in subsection (3), who makes any statement or supplies any paper, document, record, report, copy, thing, or certificate required by this Act knowing that it is false or misleading.
404 Financial Markets Conduct Bill Part 9 cl 620 “(2) If any company commits an offence against this Act, every officer of the company who knowingly authorises or permits the offence also commits an offence against this Act.

“(3) A person who is convicted of an offence under this section is liable to a fine not exceeding $300,000.
“Compare: 2006 No 40 ss 198(1)(f), 199 as at October 2011 5 “160 No Crown guarantee of KiwiSaver schemes or products “(1) There is no Crown guarantee in respect of any KiwiSaver scheme or investment product of a KiwiSaver scheme.

“(2) Every product disclosure statement relating to a KiwiSaver 10 scheme must contain a statement to that effect.
“Compare: 2006 No 40 s 205 as at October 2011 “161 Factual description of, or transmission of information about, KiwiSaver scheme not financial adviser service For the avoidance of doubt, the Crown or any other person 15 does not perform a financial adviser service for the purposes of the Financial Advisers Act 2008 if the Crown or that person— supplies an information pack as required or authorised “(a) by this Act; or “(c) “(b) gives a factual description to another person of the fea- 20 tures of a KiwiSaver scheme or of KiwiSaver schemes (for example, information about admission as a mem- ber or termination of membership); or gives information of the type referred to in paragraph (b) in the course of promoting the benefits of retirement 25 savings in general; or acts only as an intermediary who transmits information about a KiwiSaver scheme; or otherwise exercises or carries out a function, duty, or power under this Act.
“(d) “(e) 30 “Compare: 2006 No 40 s 206 as at October 2011 620 Sections 205 to 206 repealed Sections 205 to 206 are repealed.

405 Part 9 cl 621 Financial Markets Conduct Bill 621 Sections 209 and 210 and heading repealed Sections 209 and 210 and the heading above section 209 are repealed.

622 Duty of Commissioner under section 50 modified in (1) (2) certain cases in which section 210 applies The heading to section 211 is amended by omitting “section 210” and substituting “section 130”.
Section 211(1)(a) is amended by omitting “section 210(2)” and substituting “section 130(2)”.

623 Section 220 substituted Section 220 is repealed and the following section substituted: “220 Special rules about giving of product disclosure statements Sections 217 to 219 apply to the giving or supplying of a prod- uct disclosure statement under this Act as if it were the giving of a notice.” 624 Administration of Act (1) (2) Section 224(1) is amended by omitting “and Schedule 3”.
Section 224(2) is amended by omitting “Schedules 1 and 2” and substituting “Schedule 1”.

625 Section 225 repealed Section 225 is repealed.

626 Status of Crown contribution and fee subsidy for tax (1) (2) purposes The heading to section 227 is amended by omitting “and fee subsidy”.

Section 227 is amended by omitting “or a fee subsidy paid in respect of a member of a KiwiSaver scheme under regulations made under section 228(n)”.
627 Section 228 substituted Section 228 is repealed and the following section substituted: 30 406 Financial Markets Conduct Bill Part 9 cl 627 “228 Regulations “(1) The Governor-General may, by Order in Council, make regu- lations for all or any of the following purposes: “(a) prescribing fees payable to the Commissioner or the FMA in respect of any matter under this Act or the man- 5 ner in which fees may be calculated: “(b) prescribing the information or matters that must be in- “(c) cluded in the information packs referred to in Part 2: providing for operational matters and electronic com- patibility between the Commissioner and all or any 10 class of providers, including— “(i) requiring the Commissioner and all or any class of providers to sign scheme provider agreements before registration of a scheme as a KiwiSaver scheme; and 15 “(ii) providing for the updating of those agreements after registration; and “(iii) specifying the matters that may be required to be covered in all or any of those agreements: “(d) prescribing requirements in relation to annual returns 20 for the purposes of section 124, including the date by which the return must be provided and the 12-month period to which it must relate (by reference to annual dates): prescribing what must be treated as reasonable efforts 25 for the purposes of section 127: specifying information that must be contained in the instrument of appointment referred to in section 131: “(g) providing for fees or charges that must be treated as fees “(e) “(f) for the purposes of this Act: 30 “(h) prescribing matters that are relevant to a determination or consideration as to whether a fee is unreasonable for the purposes of clause 2 of the KiwiSaver scheme rules or section 118: prescribing circumstances in which the purchase of an 35 estate in land enables a withdrawal under clause 8 of the KiwiSaver scheme rules: prescribing circumstances for the purposes of clause 8(3)(a) of the KiwiSaver scheme rules or prescribing “(j) “(i) 407 Part 9 cl 628 Financial
 Markets Conduct Bill who is a qualifying person for the purpose of clause 8(3)(c)(ii) of the KiwiSaver scheme rules: “(l) “(k) prescribing matters that may be regarded as matters from which significant financial difficulties have arisen for the purposes of clause 11 of the KiwiSaver scheme 5 rules: recognising specific foreign superannuation schemes or classes of specific foreign superannuation schemes that are based in named countries as schemes to which funds can be transferred on permanent emigration under 10 the provision implied by clause 14 of the KiwiSaver scheme rules: “(m) providing for any other matters contemplated by this Act, necessary for its administration, or necessary for giving it full effect.
15 “(2) Regulations may be made under this section for the purpose of a matter dealt with in Part 4 only on the recommendation of the Minister.” 628 Regulations relating to default KiwiSaver providers (1) Section 230(1)(a) is amended by omitting “section 184(2)” 20 and substituting “section 136(2)”.

Section 230(1)(b)(iii) is amended by omitting “section 184(2)” and substituting “section 136(2)”.

(2) 629 Sections 231 to 237 repealed Sections 231 to 237 are repealed.
25 630 Amendments to Schedule 1 (KiwiSaver scheme rules) Clauses 1 to 1E of Schedule 1 are repealed and the following clause is substituted: Application The KiwiSaver scheme rules apply to all KiwiSaver schemes.” 30 “1 631 Further amendments to Schedule 1 (KiwiSaver scheme rules) Clause 2(1) of Schedule 1 is amended by repealing paragraphs (a) and (ab) and substituting the following paragraphs: (1) 408 Financial Markets Conduct Bill Part 9 cl 631 10 the manager of the scheme: “(a) “(ab) the supervisor of the scheme:”.
Clause 2(1) of Schedule 1 is amended by repealing paragraph (d).

Clause 4B of Schedule 1 is amended by omitting “trustees (in 5 the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substitut- ing “manager”.

The heading to clause 5 of Schedule 1 is amended by omitting “Trustees and managers” and substituting “Manager”.
Clause 5(1) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

The heading to clause 6 of Schedule 1 is amended by omitting 15 “Trustees and managers” and substituting “Manager”.

Clause 6 of Schedule 1 is amended by omitting “trustee (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “man- ager”.
Clause 7(1) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

Clause 8(7)(b) of Schedule 1 is amended by omitting “trustees 25 (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.
20 (2) (3) (4) (5) (6) (7) (8) (9) (10) Clause 8(7)(b)(ii) of Schedule 1 is amended by omitting “trustees or the manager (as the case may be) make” and 30 substituting “manager makes”.

(11) Clause 8(7)(iii) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.
35 (12) Clause 9 of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the 409 Part 9 cl 631 Financial Markets Conduct Bill case of any other KiwiSaver scheme)” and substituting “man- ager”.

(13) Clause 10(1) of Schedule 1 is amended by omitting “trustees” and substituting “manager (in the case of a restricted Kiwi- Saver scheme) or the supervisor (in the case of any other Kiwi- 5 Saver scheme)”.
(14) Clause 10(2) of Schedule 1 is amended by omitting “the trustees’ approval” and substituting “the manager’s approval (in the case of a restricted KiwiSaver scheme) or the super- visor’s approval (in the case of any other KiwiSaver scheme)”.

10 (15) Clause 10(3) of Schedule 1 is amended by omitting “trustees” and substituting “manager (in the case of a restricted Kiwi- Saver scheme) or the supervisor (in the case of any other Kiwi- Saver scheme)”.
(16) Clause 10(3)(b) of Schedule 1 is amended by omitting 15 “trustees’ opinion” and substituting “opinion of the manager (in the case of a restricted KiwiSaver scheme) or the super- visor (in the case of any other KiwiSaver scheme)”.

(17) Clause 12(1) of Schedule 1 is amended by omitting “trustees are” and substituting “manager (in the case of a restricted 20 KiwiSaver scheme) or the supervisor (in the case of any other KiwiSaver scheme) is”.
(18) Clause 12(1) of Schedule 1 is amended by omitting “trustees in” and substituting “manager (in the case of a restricted Kiwi- Saver scheme) or the supervisor (in the case of any other Kiwi- 25 Saver scheme) in”.

(19) Clause 13(1) of Schedule 1 is amended by omitting “trustees” and substituting “manager (in the case of a restricted Kiwi- Saver scheme) or the supervisor (in the case of any other Kiwi- Saver scheme)”.
30 (20) Clause 13(2) of Schedule 1 is amended by omitting “trustees” and substituting “manager (in the case of a restricted Kiwi- Saver scheme) or the supervisor (in the case of any other Kiwi- Saver scheme)”.

(21) Clause 14(1) of Schedule 1 is amended by omitting “trustees 35 (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.
410 Financial Markets Conduct Bill Part 9 cl 631 (22) Clause 14(2) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme)” and substituting “manager”.

(23) Clause 14(2) of Schedule 1 is amended by omitting “trustees 5 or manager (as the case may be)” and substituting “manager”.

(24) Clause 14(3) of Schedule 1 is amended by omitting “trustees or manager (as the case may be)” and substituting “manager”.
(25) Clause 14(3)(b) of Schedule 1 is amended by omitting “trustees or manager (as the case may be)” and substituting 10 “manager”.

(26) Clause 14(4) of Schedule 1 is amended by omitting “trustees or manager (as the case may be)” and substituting “manager”.

(27) Clause 14B(1) of Schedule 1 is amended by omitting “trustees or manager (as the case may be)” and substituting “manager”.
15 (28) Clause 14B(2) of Schedule 1 is amended by omitting “trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme), have the trustees or the manager (as the case may be)” and substituting “man- ager, have the manager”.

(29) Clause 14B(3) of Schedule 1 is amended by omitting “trustees or the manager (as the case may be)” and substituting “man- ager”.
(30) Clause 14B(4) of Schedule 1 is amended by omitting “trustees 20 or the manager (as the case may be)” and substituting “man- 25 ager”.

(31) Clause 14B(4)(b) of Schedule 1 is amended by omitting “trustees or the manager (as the case may be)” and substituting “manager”.

(32) Clause 14B(5) of Schedule 1 is amended by omitting “trustees 30 or the manager (as the case may be)” and substituting “man- ager”.
(33) Clause 16(1) of Schedule 1 is amended by omitting “trustees, apply to have the trustees” and substituting “manager, apply to have the manager”.

35 (34) Clause 16(2) of Schedule 1 is amended by omitting “trustees” and substituting “manager”.

411 Part 9 cl 632 Financial Markets Conduct Bill 632 Schedules 2 and 3 repealed Schedules 2 and 3 are repealed.
Subpart 6—Amendments to Securities Trustees and Statutory Supervisors Act 2011 633 Principal Act amended 5 This subpart amends the Act that was previously called the Securities Trustees and Statutory Supervisors Act 2011.
634 Name of principal Act changed (1) As from the commencement of this section,— (a) (b) the Securities Trustees and Statutory Supervisors Act 10 2011 is called the Financial Markets Supervisors Act 2011; and every reference in any enactment and in any document to the Securities Trustees and Statutory Supervisors Act 2011 must, unless the context otherwise provides, be 15 read as a reference to the Financial Markets Supervisors Act 2011.
(2) Section 1 is amended by omitting “Securities Trustees and Statutory” and substituting “Financial Markets”.
635 New section 3 substituted 20 Section 3 is repealed and the following section substituted: Purpose The purpose of this Act is to protect the interests of product holders, and of residents of retirement villages, and to enhance investor confidence in financial markets and retirement vil- 25 lages, by— “(a) requiring persons who wish to be appointed as super- visors to be capable of effectively performing the func- tions of supervisors; and requiring supervisors to perform their functions effect- 30 ively; and enabling supervisors to be held accountable for any fail- ure to perform their functions effectively.” “(b) “(c) “3 412 636 (1) (2) Financial Markets Conduct Bill Part 9 cl 636 licensee, Interpretation The definitions of deed of participation, governing docu- ment, issuer, issuer obligation, KiwiSaver scheme, Kiwi- Saver trustee, licensee obligation, restricted scheme, security, statutory supervisor, supervised issuer, 5 trust deed, trustee, and unit trustee in section 4(1) are repealed.
Section 4(1) is amended by inserting the following definitions in their appropriate alphabetical order: “debt security has the same meaning as in section 8 of the 10 Financial Markets Conduct Act 2011 “financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011 “governing document means, as the context requires,— “(a) a governing document within the meaning of section 15 6(1) of the Financial Markets Conduct Act 2011: a deed of supervision “(b) “issuer,— “(a) “(b) in respect of a debt security, means the issuer of the debt security within the meaning of section 10 of the 20 Financial Markets Conduct Act 2011: in respect of a registered scheme, means the manager of the scheme within the meaning of section 6(1) of the Financial Markets Conduct Act 2011 the governing document that relates to the product: the terms of any offer of the product: a court order relating to the product: this Act: the Financial Markets Conduct Act 2011: the KiwiSaver Act 2006: “issuer obligation means an obligation imposed on the issuer 25 of a financial product by or under any or all of the following: “(a) “(b) “(c) “(d) “(e) “(f) “(g) Part 5D of the Reserve Bank of New Zealand Act 1989 “licensee— “(a) means a supervisor that holds a licence; and “(b) includes an FMA appointee, whether or not that ap- pointee holds a licence 30 35 413 Part 9 cl 636 Financial Markets Conduct Bill 5 every governing document: the terms of the offer of the financial product: a court order relating to a supervised interest: this Act: the Financial Markets Conduct Act 2011: the KiwiSaver Act 2006: “licensee obligation means an obligation imposed on a li- censee by or under any or all of the following: “(a) “(b) “(c) “(d) “(e) “(f) “(g) Part 5D of the Reserve Bank of New Zealand Act 1989: “(h) “product holder has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “registered scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “supervised issuer, in relation to a
 supervisor of a debt secur- 15 ity or registered scheme, means the issuer of the debt security or managed investment products in the scheme “supervisor or statutory supervisor means,— “(a) the Retirement Villages Act 2003 in relation to a debt security or registered scheme, a supervisor within the meaning of section 6(1) of the 20 Financial Markets Conduct Act 2011: in relation to a retirement village, a statutory supervisor as defined in section 5 of the Retirement Villages Act 2003”.
“(b) 10 Paragraph (a) of the definition of material change of circum- 25 stances in section 4(1) is amended by omitting “trustee or statutory supervisor in respect of a security” and substituting “supervisor in respect of a debt security or registered scheme”.
The definition of supervised interest in section 4(1) is amended by repealing paragraph (a) and substituting the 30 following paragraph: “(a) in relation to a supervisor of a debt security or regis- tered scheme (S), a debt security or scheme in respect of which S is the supervisor:”.

Section 4(2) is amended by omitting “Securities Act 1978 35 (in relation to securities)” and substituting “Financial Markets Conduct Act 2011 (in relation to financial products)”.
(3) (4) (5) 414 Financial Markets Conduct Bill Part 9 cl 642 637 Heading to Part 2 The heading to Part 2 is amended by omitting “trustees and statutory”.

638 Heading to subpart 1 of Part 2 The heading to subpart 1 of Part 2 is amended by omitting 5 “trustees and statutory”.

639 New section 6 substituted Section 6 is repealed and the following section substituted: Supervisor must be licensed “6 “(1) A supervisor in respect of a debt security must hold a licence 10 that covers supervision of the security.
“(2) A supervisor in respect of a registered scheme must hold a licence that covers supervision of the scheme.

“(3) A statutory supervisor in respect of a retirement village must hold a licence that covers supervision of the retirement village.
15 “(4) A contravention of this section may give rise to a pecuniary penalty under section 41.” 640 New section 8 substituted Section 8 is repealed and the following section substituted: Prohibition on holding out “8 “(1) A person must not represent that the person is licensed to be a supervisor in respect of a debt security, registered scheme, or retirement village if the person does not hold a licence that covers supervision of the debt security, registered scheme, or retirement village.
20 25 “(2) A contravention of this section may give rise to a pecuniary penalty under section 41.” 641 Requirement to be licensed: exception for certain FMA appointees Section 9 is amended by omitting “Sections 6 and 8(1) and (2) 30 do” and substituting “Section 6 does”.
642 New section 10 substituted Section 10 is repealed and the following section substituted: 415 Part 9 cl 643 Financial Markets Conduct Bill “10 FMA may license supervisors “(1) The FMA may license a person to be 1 or more of the follow- ing: “(a) “(b) “(c) debt securities of 1 or more classes: a supervisor in respect of debt securities: a supervisor in respect of registered schemes: a statutory supervisor in respect of retirement villages.
“(2) A licence may cover supervision of all debt securities, all registered schemes, all retirement villages, or any 1 or more of the following: “(a) “(b) 1 or more particular issues of debt securities: registered schemes of 1 or more classes: “(c) “(d) 1 or more particular registered schemes: retirement villages of 1 or more classes: “(e) 1 or more particular retirement villages.
“(f) “(3) A class may be defined (to include or exclude supervision of a debt security, registered scheme, or retirement village) in any way, including, without limitation, by reference to— “(a) “(b) a particular issuer or operator; or a particular class of issuer or operator.” 5 10 15 20 643 FMA may impose conditions on licence (1) Section 11(2)(b) is amended by repealing subparagraph (i) and substituting the following subparagraphs: “(i) supervisor in respect of a particular debt security or class of debt security; or 25 “(ia) supervisor in respect of a particular registered scheme or class of registered scheme; or”.
Section 11(4) is amended by repealing paragraphs (a) and (b) and substituting the following paragraphs: “(a) limiting the number of appointments as supervisor that 30 may be held by the licensee: setting a maximum value for supervised interests that are debt securities or registered schemes:”.
“(b) Information to be stated in licence Section 13 is amended by repealing paragraphs (b) and (c) and 35 substituting the following paragraphs: (2) 644 416 Financial Markets Conduct Bill Part 9 cl 646 “(b) “(c) in the case of debt securities, the debt security or debt securities the supervision of which is covered by the licence: in the case of registered schemes, schemes the supervision of which is covered by the 5 licence: the scheme or “(ca) in the case of retirement villages, the retirement village or villages the supervision of which is covered by the licence:”.
645 FMA must send licence and details to licensee and others Section 14(4)(a) is amended by omitting “security” and sub- (1) stituting “debt security or registered scheme”.

Section 14(4)(b) is amended by omitting “trustee of” and sub- stituting “supervisor of a debt security issued by”.
(2) 10 646 Decision on application for, or to vary, licence (1) Section 16 is amended by repealing subsection (1) and substi- tuting the following subsection: 15 “(1) The FMA may issue or vary a licence only if the FMA is sat- isfied that, having regard to any conditions imposed on the li- cence, the applicant is capable of effectively performing (or 20 will, after the variation, be capable of effectively perform- ing)— “(a) the functions of a supervisor in respect of debt secur- ities or registered schemes the supervision of which is covered by the licence: the functions of a statutory supervisor in respect of re- tirement villages the supervision of which is covered by the licence.” 25 “(b) (2) (3) (4) Section 16(2)(c) is amended by omitting “a security” and sub- stituting “supervision of a debt security or registered scheme”.
30 Section 16(2)(d) is amended by inserting “supervision of” after “covers”.

Section 16(3)(e) is amended by repealing subparagraph (i) and substituting the following subparagraph: “(i) in the case of a licence relating to debt secur- 35 ities or registered schemes, issuers of those debt 417 Part 9 cl 647 Financial Markets Conduct Bill securities or of managed investment products in those schemes comply with the issuer obliga- tions; and”.
(5) Section 16(3) is amended by repealing paragraph (i) and sub- stituting the following paragraph: “(i) other prescribed matters that relate to the applicant, to debt securities, registered schemes, or retirement vil- lages the supervision of which is covered by the licence, and to issuers or operators covered by the licence:”.

647 Application to cancel licence Section 17(2) is amended by omitting “trustee or statutory”.
5 10 648 Notice, consultation, and submissions concerning decision under section 16(1) Section 18(1)(a) and (b) are amended by inserting “supervi- sion of” after “covers”.
15 649 Appeal to High Court against FMA’s decision on “(2) application Section 19 is amended by repealing subsection (2) and substi- tuting the following subsection: If a supervisor in respect of a debt security, registered scheme, 20 or retirement village lodges an appeal against a decision not to issue a new licence that covers supervision of the debt se- curity, scheme, or retirement village, the court may extend the validity of the supervisor’s current licence, to the extent that it covers supervision of the debt security, scheme, or retirement 25 village, until the appeal has been determined or withdrawn.” 650 Effect of expiry of licence Section 20(1) is amended by omitting “trustee or statutory”.
651 Licensee must apply for new licence or notify issuer or operator before licence expires Section 21 is amended by repealing subsection (1) and substi- tuting the following subsection: 30 418 Financial Markets Conduct Bill Part 9 cl 652 “(1) A licensee appointed as a supervisor in respect of a debt secur- ity, registered scheme, or retirement village must, between 9 and 12 months before the expiry date of the licence, either— “(a) make an application under section 16 for a new licence that covers supervision of that debt security, scheme, or 5 retirement village; or “(b) notify the issuer of the debt security or managed invest- ment products in the scheme or the operator of that re- tirement village (as the case may be) and the FMA, in writing, that the licensee does not intend to make the 10 application referred to in paragraph (a).” 652 Rejection of application for new licence: FMA may (1) (2) replace existing appointee Section 22 is amended by omitting the heading and substitut- ing the following heading:“FMA may make temporary ap- 15 pointment”.
Section 22 is amended by repealing subsections (1) and (2) and substituting the following subsections: “(1) This section applies if— “(a) “(b) 20 all of the following are satisfied: “(i) the FMA rejects an application by a supervisor in respect of a debt security or registered scheme or a statutory supervisor in respect of a retire- ment village (the existing appointee) for a new licence that covers supervision of the debt secur- 25 ity, scheme, or retirement village; and the existing appointee no longer holds a licence that covers supervision of the debt security, regis- tered scheme, or retirement village; and “(iii) the existing appointee has not been replaced; or a debt security, a registered scheme, or a retirement vil- lage does not, for any reason, have a supervisor.
“(ii) 30 “(2) The FMA may,— “(a) in the case of subsection (1)(a), remove the existing appointee as supervisor in respect of the debt security or 35 registered scheme, or as statutory supervisor in respect of the retirement village, by written notice to the exist- ing appointee; and 419 Part 9 cl 653 Financial Markets Conduct Bill (3) (4) (5) (6) “(b) appoint a person (the FMA appointee) to the position of supervisor of the debt security, registered scheme, or retirement village for a period of 6 months.” Section 22(4) is amended by omitting “of the security, or the operator of the retirement village” and substitute “or the oper- 5 ator”.
Section 22(6) is amended by omitting “under which the exist- ing appointee was appointed” and substitute “relating to the debt security, registered scheme, or retirement village”.

Section 22(7)(b) is amended by omitting “of the security” and 10 substituting “of the debt security or managed investment prod- uct”.
Section 22(9) is amended by repealing paragraph (b) and sub- stituting the following paragraph: “(b) appoint the FMA appointee as the supervisor on a con- 15 tinuing basis (provided that the FMA appointee holds a licence that covers supervision of the debt security, registered scheme, or retirement village).” 653 Expiry of licence: issuer or operator may replace existing (1) appointee or FMA appointee Section 23 is amended by repealing subsections (1) and (2) and substituting the following subsections: 20 “(1) This section applies if— “(a) the licence of a supervisor in respect of a debt secur- ity or registered scheme or of a statutory supervisor of 25 a retirement village (the existing appointee) is due to expire; and the existing appointee will, on the expiry of the licence, no longer hold a licence that covers supervision of the debt security, registered scheme, or retirement village.
“(2) For the purposes of subsection (1)(a), a licence is due to “(b) 30 expire if— “(a) the licensee has given notice in accordance with sec- tion 21(1)(b) (notice that the licensee does not intend to apply for a new licence that covers supervision of the 35 debt security, registered scheme, or retirement village); or 420 Financial Markets Conduct Bill Part 9 cl 654 (2) “(4) “(b) the FMA has given notice in accordance with section 18(3)(b) (notice that the FMA will not be issuing a new licence as proposed in the application).” Section 23 is amended by repealing subsection (4) and substi- tuting the following subsection: If the issuer of the debt security or managed investment prod- ucts, or the operator of the retirement village, appoints a person (the new appointee) as the supervisor in place of the existing appointee or the FMA appointee, and the new appointee ac- cepts the appointment, the issuer or operator may remove the 10 existing appointee or the FMA appointee by written notice to the existing appointee or the FMA appointee.” 5 654 Expiry of licence: existing appointee must provide (1) (2) documents The heading to section 24 is amended by omitting “Expiry of 15 licence: existing” and substituting “Existing”.
Section 24 is amended by repealing subsection (4) and substi- tuting the following subsection: “(4) An existing appointee or a FMA appointee to whom a notice is given under subsection (1) or (2) must comply with the no- 20 tice.” Section 24 is amended by repealing subsection (6) and substi- tuting: (3) “(6) A contravention of subsection (4) or (5) may give rise to a (4) pecuniary penalty under section 41.” Section 24(7) is amended by repealing the definition of exist- ing appointee and substituting the following definition: “existing appointee— “(a) has the meaning given in section 22(1)(a)(i) or 23(1)(a); and includes, in relation to an FMA appointee who is ap- pointed in the circumstances referred to in section 22(1)(b), the person who held the position of supervisor of the debt security, registered scheme, or retirement village before the FMA appointee was appointed”.
“(b) 25 30 35 421 Part 9 cl 655 Financial Markets Conduct Bill 655 FMA may vary licence because of material change of (1) (2) (3) circumstances, etc Section 30(1)(c)(iii) is amended by omitting “, 36, or 49” and substituting “or 36”.

Section 30(1)(c) is amended by inserting the following sub- 5 paragraph after subparagraph (iii): “(iiia) fails to comply with a direction of the FMA under section 189 of the Financial Markets Conduct Act 2011 by the date specified in the direction; or”.
10 Section 30(3) is amended by omitting “a trustee or statutory supervisor in respect of securities” and substitute “a supervisor in respect of debt securities or registered schemes”.

656 FMA’s powers if action plan not submitted, etc (1) Section 32(1)(c) is amended by omitting “, 36, or 49” and 15 substituting “or 36”.
Section 32(1) is amended by inserting the following paragraph after paragraph (c): “(ca) fails to comply with a direction of the FMA under sec- (2) tion 189 of the Financial Markets Conduct Act 2011 20 by the date specified in the direction; or”.
657 Removal notice (1) Section 33 is amended by repealing subsection (4) and substi- tuting the following subsection: “(4) The removal of the existing appointee as supervisor in respect 25 of an affected debt security or scheme, or as statutory super- visor of an affected retirement village, takes effect on the final removal date unless the existing appointee is removed from that appointment before that date (whether under section 38(1) or otherwise).” Section 33(5) is amended by repealing the definition of af- fected person and substituting the following definition: “affected person means— “(a) the issuer in respect of an affected debt security or scheme: the operator of an affected retirement village”.
(2) 30 35 “(b) 422 Financial Markets Conduct Bill Part 9 cl 661 (3) Section 33(5) is amended by repealing the definition of af- fected security and substituting the following definition: “affected debt security or scheme means a debt security or registered scheme to which a removal notice applies”.
658 Removal notice: FMA may give direction to existing 5 (1) (2) appointee Section 36(1) is amended by omitting “trustee or statutory supervisor in respect of an affected security” and substituting “supervisor in respect of an affected debt security or scheme”.
Section 36 is amended by repealing subsection (5) and substi- 10 tuting the following subsection: “(5) A person who refuses or fails, without reasonable excuse, to comply with a direction under subsection (1) commits an of- fence and is liable on summary conviction to a fine not exceed- ing $300,000.” 15 (3) (4) 659 Removal notice: FMA may replace existing appointee (1) (2) Section 37(1) is amended by omitting “trustee or statutory”.
Section 37(2) is amended by omitting “relevant issuer or op- erator” and substituting “affected person”.

Section 37(6)(b) is amended by omitting “security” and sub- 20 stituting “debt security or managed investment products”.
Section 37(8) is amended by repealing paragraph (b) and sub- stituting the following paragraph: “(b) appoint the FMA appointee as the supervisor on a con- tinuing basis (provided that the FMA appointee holds 25 a licence that covers supervision of the debt security, registered scheme, or retirement village).” 660 Replacement notice: affected person may replace existing appointee or FMA appointee Section 38(1) is amended by omitting “trustee or statutory”.
30 661 Notice requiring documents: existing appointee, etc, must (1) provide documents Section 39(4)(b) and (6)(a) are amended by omitting “trustee or statutory supervisor in respect of the affected security” and 423 Part 9 cl 662 Financial Markets Conduct Bill substituting in each case “supervisor in respect of the affected debt security or scheme”.
Section 39 is amended by repealing subsection (5) and substi- tuting the following subsection: (2) “(5) An existing appointee, a FMA appointee, or a new appointee 5 to whom a notice is given under any of subsections (1) to (3) must comply with the notice.” Section 39 is amended by repealing subsection (7) and substi- tuting: (3) “(7) A contravention of subsection (5) or (6) may give rise to a 10 pecuniary penalty under section 41.” 662 New section 41 substituted Section 41 is repealed and the following section substituted: “41 Pecuniary penalty orders “(1) The High Court may, on application by the FMA, order a li- 15 censee or other person to pay a pecuniary penalty to the Crown if the court is satisfied that— “(a) 20 the licensee or other person has contravened section 6, 8, 24(4) or (5), or 39(5) or (6); or “(b) the licensee has contravened a licensee obligation.
In determining whether or not to make a pecuniary penalty order and (if an order is to be made) the amount of the penalty to be imposed, the court must have regard to all relevant mat- ters, including— “(a) “(b) the nature and extent of the contravention: in the case of a contravention relating to a debt secur- ity or registered scheme, the likelihood, nature, and ex- tent of any damage to the integrity or reputation of New Zealand’s financial markets as a result of the contraven- tion: the nature and extent of any loss or damage suffered by product holders or residents because of the contraven- tion: “(d) the circumstances in which the contravention occurred: “(e) whether or not the licensee or other person has previ- 35 ously contravened this Act or a licensee obligation: “(c) 30 25 “(2) 424 Financial Markets Conduct Bill Part 9 cl 666 “(f) “(g) the public benefit in encouraging prompt and honest self-reporting of breaches or possible breaches of li- censee obligations: any other circumstances that the court considers rele- vant.
5 “(3) The maximum amount of a pecuniary penalty under this sec- “(4) tion is $600,000.
If conduct by a person constitutes a contravention of 2 or more provisions referred to in subsection (1) or licensee obliga- tions, proceedings may be brought against that person for the 10 contravention of any 1 or more of the provisions or obligations, but a person is not liable to more than 1 pecuniary penalty order for the same conduct.” 663 Compensation orders Section 42(1) is amended by omitting “security holder, or a 15 resident, order a licensee to pay compensation to any security holder” and substituting “product holder, or a resident, order a licensee to pay compensation to any product holder”.
664 Part 3 repealed Part 3 is repealed.

20 665 FMA may vary or cancel direction Section 51(1) is amended by omitting “, 36, or 49” and substi- tuting “or 36”.

666 New section 52 substituted Section 52 is repealed and the following section substituted: 25 “52 Protection for supervisor who complies with FMA’s direction “(1) No civil, criminal, or disciplinary proceedings may be brought against a supervisor in respect of a protected act.
“(2) No person may terminate the appointment of a supervisor by 30 reason of a protected act.

“(3) No tribunal, body, or authority that has jurisdiction in respect of the professional conduct of a supervisor may make an order 425 Part 9 cl 667 Financial Markets Conduct Bill “(4) against, or do any act in relation to, the supervisor in respect of a protected act.
In this section, protected act, in relation to a supervisor means an act of, or omission to act on the part of, the supervisor in compliance in good faith with a direction under section 29 or 5 36.
“Compare: 1989 No 157 s 157ZH” Transitional provisions 667 FMA may vary licences under Financial Markets (1) Supervisors Act 2011 The FMA may, by written notice to a licensee, vary a licence if the FMA is satisfied that the variation is necessary or desirable in connection with the orderly implementation of Parts 1 to 8 (for example, to change the matters referred to in section 10 of the principal Act or impose further conditions as referred to 15 in section 11 of the principal Act).
10 (2) A power under subsection (1) may be exercised— (a) only on or before the date that is 2 years after the com- mencement of this section: despite anything to the contrary in the principal Act.
(b) The FMA may vary a licence under this section only if the FMA gives the licensee— (a) at least 10 working days’ written notice of the following matters before the FMA varies the licence: (i) (ii) that the FMA may vary the licence; and the reasons why it is considering taking that ac- tion; and (b) an opportunity to make written submissions and to be heard on the matter within that notice period.

the FMA’s reasons for varying the licence; and the date on which the variation takes effect.
The notice under subsection (3) must state— (a) (b) In this section and section 668,— licence means a licence issued under the principal Act before the commencement of this section licensee means a person who holds a licence.
20 25 30 35 (3) (4) (5) 426 Financial Markets Conduct Bill Part 9 cl 670 668 Appeal against licence decision (1) A licensee who is dissatisfied with the FMA’s decision under section 667 may appeal to the High Court no later than 20 working days, or such further period as the court may allow, after receiving written notice of the decision.

(2) A decision against which an appeal is lodged remains valid pending the determination of the appeal unless the court orders otherwise.
Subpart 7—Amendments to other enactments 669 Amendments to other enactments The enactments specified in Schedule 4 are amended in the manner indicated in that schedule.

Subpart 8—Transitional provisions for offers of financial products 670 Act applies to offer unless former enactments continue to (1) (2) apply This Act applies to an offer of financial products unless the former enactments apply in accordance with this subpart.
In this subpart,— 1978 Act means the Securities Act 1978 12-month date means the date that is 12 months after the com- mencement of this section former enactments means each of the following (as in force immediately before the commencement of this section): (a) (b) the 1978 Act: the Securities Regulations 2009 and any other regula- tions made under the 1978 Act: exemptions granted under the 1978 Act (to the extent that those exemptions apply to the relevant offer of se- 30 curities).
(c) (3) In this subpart, issuer, prospectus, registered prospectus, and securities have the same meanings as in the 1978 Act.
427 Part 9 cl 671 Financial Markets Conduct Bill 671 Former enactments continue to apply if prospectus registered before commencement If securities are offered in a prospectus that is registered under the 1978 Act before the commencement of this section, the former enactments continue to apply to the offer and allotment 5 of those securities under that prospectus as if this Act had not been enacted.
672 Issuer may elect to comply with former enactments instead of this Act if prospectus registered within 12 months of commencement 10 (2) (1) Despite the repeal of the 1978 Act, an issuer of securities may register a prospectus in respect of the securities in accordance with the former enactments on or before the 12-month date.
If securities are offered in a prospectus that is registered under subsection (1), the former enactments apply, as if this Act 15 had not been enacted, to the offer and allotment of those secur- ities under that prospectus only if the issuer makes an election under subsection (3).

For the purposes of subsection (2), an issuer may elect for the former enactments to apply to an offer of securities by 20 including a statement in the prospectus to the effect that the Securities Act 1978 applies to the offer.
The statement referred to in subsection (3) may include ad- ditional information about an applicable exemption granted under the 1978 Act that is necessary to ensure that the state- 25 ment is not misleading.
(3) (4) 673 Former enactments apply if no prospectus is required unless issuer elects otherwise If, under the 1978 Act or an exemption granted under that Act, no registered prospectus is required for an offer of securities 30 to the public in New Zealand, the former enactments apply, as if this Act had not been enacted, to any offer and allotment of those securities that is made before the close of the 12-month date unless the issuer makes an election, under subsection (2), for this Act to apply.
35 (1) 428 Financial Markets Conduct Bill Part 9 cl 676 (2) For the purposes of subsection (1), an issuer may elect for this Act to apply to an offer of securities made after a particular date by— (a) giving to the FMA, before that date, a notice to the effect that this Act applies to the offer of the securities made 5 after that date; and including a copy of that notice on an Internet site main- tained by, or on behalf of, the issuer at all reasonable times during the period between that date and the ear- lier of the close of the offer or the close of the 12-month 10 date.
(b) 674 Transitional provisions that apply after 12-month date in respect of registered prospectuses If, before the close of the 12-month date, the former enact- ments apply to an offer of securities in a registered prospectus, 15 those securities may continue to be offered and allotted under that prospectus and, for that purpose, the former enactments continue to apply as if this Act had not been enacted.
675 This Act and 1978 Act are (on transitional basis) alternative means of compliance If, in accordance with this subpart,— (a) this Act applies to an offer of securities, the former en- actments do not apply to the offer: the former enactments apply to an offer of securities, this Act does not apply to the offer.
(b) 20 25 676 All offers and allotments under old law must cease Despite sections 670 to 675, no offer or allotment of managed investment products may be made under the former enactments after the date on which the managed investment scheme to which the products relate becomes a registered 30 scheme (or is treated as being a registered scheme under subpart 9).
429 Part 9 cl 677 Financial Markets Conduct Bill 677 All offers and allotments under old law must cease within 2 years of commencement Despite sections 670 to 675, no offer or allotment of secur- ities may be made under the former enactments after the date that is 2 years after the commencement of this section.
5 678 FMA may continue to perform and exercise functions, duties, and powers If the former enactments continue to apply to an offer of se- curities, the FMA may continue to perform and exercise all of its functions, duties, and powers conferred or imposed on it by 10 or under the former enactments as if this Act had not been en- acted (for example, it may grant an exemption under section 70B of the 1978 Act).
679 Subpart does not prevent PDS from being lodged Nothing in this subpart prevents an issuer from lodging a PDS 15 in preparation for making an offer of financial products under Part 3.

680 Transitional and application provisions subject to exemption This subpart is subject to— (a) (b) any regulations made under section 521: any exemption granted under subpart 2 of Part 8.
Subpart 9—Transitional provisions relating to securities offered under Securities Act 1978 20 25 681 Subpart applies to securities offered under Securities (1) Act 1978 This subpart applies to a security offered pursuant to an offer for which, or for which but for an exemption granted by the FMA or the Securities Commission under the 1978 Act, an 30 investment statement or a registered prospectus, or both, is or was required under that Act.
(2) However, this subpart does not apply to a security if, before the commencement of this section, the security was cancelled, 430 (3) 682 (1) Financial Markets Conduct Bill Part 9 cl 683 redeemed, or forfeited, or all of the obligations owing under the security had been discharged.

The securities referred to in subsection (1) include securities offered under an offer to which the 1978 Act applies under subpart 8.
Interpretation in this subpart In this subpart,— 1978 Act means the Securities Act 1978 effective date, in relation to a particular security, means the earlier of the dates set out in section 685(1) issuer, in relation to a security, means,— (a) before the effective date, the issuer within the meaning of the 1978 Act: on and after the effective date, the issuer within the meaning of section 10 (b) 5 10 15 (2) KiwiSaver schemes register means the KiwiSaver schemes register established under the KiwiSaver Act 2006.
In this subpart, investment statement, registered prospec- tus, and securities have the same meanings as in the 1978 Act (as in force immediately before the commencement of this sec- 20 tion).
683 Former enactments continue to apply until effective date To the extent that the former enactments (as in force immedi- (1) ately before the commencement of this section) would other- wise apply to a security to which this subpart applies (or to any 25 scheme to which the security relates), those enactments con- tinue to apply during the transition period as if this Act had not been enacted.
In this section, former enactments— (a) means the 1978 Act, the Securities Regulations 2009, 30 exemptions granted under the 1978 Act, and any other enactments made under the 1978 Act: includes,— (i) in relation to an interest in a KiwiSaver scheme, the KiwiSaver Act 2006: (b) (2) 35 431 Part 9 cl 684 Financial Markets Conduct Bill (ii) (iii) (iv) in relation to an interest in a superannuation scheme (other than a KiwiSaver scheme), the Superannuation Schemes Act 1989: in relation to a unit in a unit trust, the Unit Trusts Act 1960: the Securities Trustees and Statutory Supervisors Act 2011.
5 (4) In this section and section 684, KiwiSaver scheme, scheme, superannuation scheme, unit, and unit trust have the same meanings as in section 2(1) of the 1978 Act (as in force imme- 10 diately before the commencement of this section).
684 KiwiSaver schemes, superannuation schemes, and unit trusts continue under former enactments until effective date If a security to which this subpart applies is— (a) (1) 15 (b) an interest in a KiwiSaver scheme, the KiwiSaver scheme continues to be registered in the KiwiSaver schemes register during the transition period as if this Act had not been enacted: an interest in a superannuation scheme (other than 20 a KiwiSaver scheme), the superannuation scheme continues to be registered under the Superannuation Schemes Act 1989 during the transition period as if this Act had not been enacted: a unit in a unit trust, the unit trust continues to be subject 25 to the Unit Trusts Act 1960 during the transition period as if this Act had not been enacted.
This section does not limit section 683.
(c) (2) 685 Transition period (1) In this subpart, the transition period for a particular security 30 is the period beginning on the date on which this section comes into force and ending on the close of the day before the earlier of the following dates: (a) the date that the issuer of the security elects to comply with subpart 4 of Part 3 and Part 4 in accordance 35 with subsection (2); or 432 Financial Markets Conduct Bill Part 9 cl 687 (b) the date that is 2 years after the commencement of this section.
(2) If the issuer elects an effective date that is earlier than 2 years after the commencement of this section, the issuer must notify the FMA and the Registrar of the elected date at least 20 work- 5 ing days before that date.
686 Ongoing requirements of this Act apply on and after effective date (1) On and after the effective date for a particular security to which 15 20 25 (b) (c) (d) (b) this subpart applies, the following apply to the security (and, 10 in the case of a managed investment product, to the managed investment scheme to which it relates): (a) subpart 4 of Part 3 (ongoing disclosure and updating of registers): Part 4 (governance of financial products): any regulations made for the purposes of subpart 4 of Part 3 or Part 4: any other provision of this Act relating to the enforce- ment, application, or effect of subpart 4 of Part 3 or Part 4.
(2) However, subsection (1) and sections 687 and 688 do not apply if,— (a) before the effective date, the security is cancelled, re- deemed, or forfeited, or all of the obligations owing under the security have been discharged; or on the effective date, the security is not a financial prod- uct within the meaning of section 7.
(3) The provisions referred to in subsection (1) apply— (a) with all necessary modifications as if the security had been offered under a regulated offer under this Act; and 30 subject to any applicable exemption from the provisions granted under subpart 2 of Part 8.
(b) 687 (1) Issuer of debt security must lodge trust deed and supply information If a security to which this subpart applies is a debt security 35 (within the meaning of section 8), the issuer must— 433 Part 9 cl 688 Financial Markets Conduct Bill (a) (b) ensure that a copy of the trust deed that complies with sections 90 to 92 is lodged with the Registrar on or before the effective date; and supply to the Registrar and the FMA, before the effect- ive date,— (i) the names and addresses of the persons who, on the effective date, will be the issuer and the li- censed supervisor; and all other prescribed information and documents relating to the debt security.
(ii) 5 10 (2) See subpart 3 of Part 7, which provides for civil remedies for a contravention of subsection (1).
688 Managed investment scheme treated as being registered (1) and issuer must supply information If a security to which this subpart applies is a managed invest- 15 ment product,— (a) (b) (c) the managed investment scheme to which the product relates (the scheme) must, on and after the effective date, be treated as being a registered scheme; and the issuer must ensure that a copy of the governing 20 document for the scheme that complies with sections 122 to 124 is lodged with the Registrar on or before the effective date; and the issuer must supply to the Registrar and the FMA, before the effective date,— (i) the names and addresses of the persons who, on the effective date, will be the manager and the licensed supervisor; and all other prescribed information and documents relating to the managed investment product and 30 the scheme.
(ii) 25 (2) See subpart 3 of Part 7, which provides for civil remedies for a contravention of subsection (1)(b) or (c).

(3) Nothing in this section or section 689 prevents the FMA from— (a) (b) 434 directing that the registration of a scheme to which this section applies be cancelled under section 180; or exercising any other power in respect of such a scheme.
35 Financial Markets Conduct Bill Part 9 cl 690 689 Type of registration (1) A managed investment scheme that is treated as being regis- tered under section 688 must be treated as being registered on the register of managed investment schemes as a— (a) KiwiSaver scheme if, immediately before the effective 5 date, the scheme was registered as a KiwiSaver scheme in the KiwiSaver schemes register: (c) (d) (b) KiwiSaver scheme that is a restricted scheme if para- graph (a) applies and, immediately before the effective date, the scheme was identified as a restricted scheme 10 on the KiwiSaver schemes register: superannuation scheme if, immediately before the ef- fective date, the scheme was registered under the Super- annuation Schemes Act 1989: superannuation scheme that is a restricted scheme if 15 paragraph (c) applies and an Order in Council has des- ignated the scheme as a restricted scheme under sub- section (2): a complying superannuation fund if paragraph (c) ap- plies and, immediately before the effective date, the 20 scheme was approved as a complying superannuation fund under section 35 of the Superannuation Schemes Act 1989.
(e) (2) (3) The Governor-General may, by Order in Council, on the ad- vice of the Minister given in accordance with a recommenda- 25 tion of the FMA, designate a scheme as a restricted scheme for the purposes of subsection (1)(d).
Section 117(1)(c) (which prevents certain changes without the FMA’s consent to the conditions of entry of scheme par- ticipants) applies to a restricted scheme on and after the date 30 on which a designation by Order in Council comes into force under subsection (2) in all cases as if that date of designation were the date of the scheme’s registration under this subpart.
690 Registrar to amend register (1) The Registrar must, on or as soon as practicable after the ef- 35 fective date for a managed investment scheme to which sec- tion 688(1)(a) applies, amend the register of managed invest- ment schemes to include an entry relating to the scheme.

435 Part 9 cl 691 Financial Markets Conduct Bill (2) Subsection (1) does not apply if section 688(1)(b) or (c) has not been complied with.
5 (1) 691 Restriction on making regulated offers and accepting contributions if requirements have not been complied with This section applies if an issuer contravenes section 688(1)(b) or (c) in respect of a managed investment scheme that is treated as being a registered scheme under section 688(1)(a).

The issuer must not, on and after the effective date, make a 10 regulated offer of a managed investment product, or accept further contributions, in respect of that managed investment scheme.
Subsection (2) ceases to apply if— (a) (3) (2) the issuer lodges with the Registrar a copy of the gov- 15 erning document for the scheme that complies with sec- tions 122 to 124; and the issuer supplies to the Registrar and the FMA the prescribed information and documents; and the register of managed investment schemes includes an 20 entry relating to the scheme.

(b) (c) See subpart 3 of Part 7, which provides for civil remedies for a contravention of this section.
25 (b) Issuer may amend or replace governing document with FMA’s consent This section applies— (a) to a governing document that, immediately before the commencement of this section, relates to a debt security or constitutes or governs a scheme; and despite anything to the contrary in the governing docu- 30 ment or in any enactment, rule of law, or agreement, in- cluding anything relating to the consent of any person to the making of amendments to the governing document.
The issuer of the debt security or the manager of the scheme (as the case may be) may amend or replace the governing docu- 35 ment with the FMA’s consent if the FMA is satisfied that the (4) 692 (1) (2) 436 Financial Markets Conduct Bill Part 9 cl 693 amendment or replacement is necessary or desirable to ensure, or in connection with ensuring, that the governing document complies with the requirements of this Act.
(3) An amendment or replacement made under this section must be treated for all purposes as if it were made in accordance 5 with the governing document.
(4) On the amendment or replacement under this section of a gov- erning document that constitutes or governs a scheme,— (a) (b) (c) the scheme must be treated as the same scheme as it was immediately before the replacement of the existing 10 governing document; and the persons who were members of the scheme immedi- ately before the replacement of the existing governing document continue to be members of the same scheme; and the assets or liabilities of a scheme or fund must be treated as if they vested in the scheme or fund imme- diately after the replacement of the existing governing document, but for the purposes of the Inland Revenue Acts this must be treated as if it is not a transfer (as de- 20 fined in section YA 1 of the Income Tax Act 2007).
15 (5) (6) In this section and sections 693 and 694, scheme has the same meaning as in section 2(1) of the 1978 Act (as in force immediately before the commencement of this section).

To avoid doubt, this section does not limit the ways in which a 25 governing document may be amended or replaced in accord- ance with its terms or any enactment or rule of law.
693 Conversion of governing documents to separate governing (1) documents This section applies— (a) 30 to a governing document (existing governing docu- ment) that, immediately before the commencement of this section, constitutes or governs 2 or more schemes or funds; and despite anything to the contrary in the governing docu- 35 ment or in any enactment, rule of law, or agreement, in- cluding anything relating to the consent of any person to the making of amendments to the governing document.
(b) 437 Part 9 cl 693 Financial Markets Conduct Bill (2) The parties to an existing governing document may rescind the existing governing document, provided that the existing governing document is immediately replaced with a new gov- erning document in respect of each scheme or fund constituted or governed by the existing governing document.
5 (3) However,— (a) (b) an existing governing document must not be rescinded, and new governing documents must not be executed, under this section without the prior written consent of the FMA; and the parties to, and provisions of, a new governing docu- ment must differ from the parties to, and provisions of, the existing governing document only to the extent that is necessary or desirable to ensure, or in connection with ensuring, that the new governing document complies 15 with this Act.
10 (4) On the replacement of an existing governing document with new governing documents under this section,— (a) the 2 or more schemes or funds are governed by sep- arate governing documents rather than by the existing 20 governing document; and a scheme or fund must be treated as the same scheme or fund as it was immediately before the replacement of the existing governing document; and the persons who were members of a scheme or fund im- 25 mediately before the replacement of the existing gov- erning document continue to be members of the same scheme or fund; and no assets or liabilities are removed from any of the schemes or funds; and the 2 or more schemes must be treated as separate per- sons for the purposes of the Inland Revenue Acts; and no new settlement (as defined in section YA 1 of the Income Tax Act 2007) occurs.
30 (b) (c) (d) (e) (f) This section expires, and is repealed, 2 years after the com- 35 mencement of this section.

To avoid doubt, this section does not limit the ways in which a scheme or fund may be divided into separate schemes in (5) (6) 438 Financial Markets Conduct Bill Part 9 cl 694 accordance with the terms of the governing document or any enactment or rule of law.
Compare: 2011 No 8 s 64 694 Amalgamation of schemes This section applies— (1) (a) 5 (b) to 2 or more governing documents (existing governing documents) that, immediately before the commence- ment of this section, constitute or govern 2 or more schemes or funds (existing separate schemes); and despite anything to the contrary in the existing gov- 10 erning documents or in any enactment, rule of law, or agreement, including anything relating to the consent of any person to the making of amendments to the existing governing documents.
(2) The parties to the existing governing documents may rescind 15 the existing governing documents, provided that the existing governing documents are immediately replaced with 1 new governing document and 1 scheme or fund (amalgamated scheme) in respect of all of the existing separate schemes con- stituted or governed by the existing governing documents.
20 (3) However,— (a) (b) existing governing documents must not be rescinded, and a new governing document must not be executed, under this section without the prior written consent of the FMA; and the parties to, and provisions of, a new governing docu- ment must differ from the parties to, and provisions of, the existing governing documents only to the extent that is necessary or desirable to ensure, or in connection with ensuring, that the new governing document complies 30 with this Act.
25 (4) On the replacement of the existing governing documents with 1 new governing document and the amalgamated scheme under this section,— (a) the amalgamated scheme is governed by 1 governing 35 document rather than each existing separate scheme be- ing governed by separate governing documents; and 439 Part 9 cl 695 Financial Markets Conduct Bill (b) (c) (d) (e) (f) the amalgamated scheme must be treated as the same scheme as the existing separate schemes combined for all purposes (other than as specified in paragraphs (d) to f)); and the persons who were members of each existing separ- 5 ate scheme immediately before the replacement of the existing governing documents are members of the amal- gamated scheme; and the amalgamated scheme must be treated as the same person as the existing separate schemes combined for 10 the purposes of the Inland Revenue Acts other than— for the purposes of the PIE rules (as defined in (i) section YA 1 of the Income Tax Act 2007); and as specified in paragraph (f)); and (ii) the assets or liabilities of the existing separate schemes 15 must be treated as if they vested in the amalgamated scheme immediately after the replacement of the exist- ing governing document, but for the purposes of the In- land Revenue Acts this must be treated as if it is not a transfer (as defined in section YA 1 of the Income Tax 20 Act 2007); and subparts IA and IQ of Part I of the Income Tax Act 2007 (which relate to the treatment of tax losses) do not apply to any carry forward of a loss balance of an existing separate scheme to the amalgamated scheme for the in- 25 come year in which the existing governing document is replaced or for any later income year.
(5) (6) This section expires, and is repealed, 2 years after the com- mencement of this section.

To avoid doubt, this section does not limit the ways in which 30 schemes or funds may be amalgamated in accordance with the terms of their governing documents or any enactment or rule of law.
695 Amended enactments continue to apply or have effect in connection with securities If, before the commencement of this section, an enactment that is amended by this Act applied, or had an effect, in connection with a security to which this subpart applies, the enactment 35 (1) 440 (2) (3) 696 (1) Financial Markets Conduct Bill Part 9 cl 696 continues to apply or have the effect in connection with the security as if this Act had not been enacted until the effective date (unless the context otherwise requires).
Subsection (1) must be treated as applying to a security of- fered under the 1978 Act in accordance with subpart 8.

See section 702 (amended enactments continue to apply or have effect in connection with schemes).
5 Issuer must send notification to security holders The issuer of a security must, before or within 3 months after the effective date, send a written notice containing the fol- 10 lowing information to the security holder at the holder’s last known address: (a) the effective date and a statement to the effect that re- quirements of this Act will apply after that date: the names and addresses of the issuer, the supervisor (if 15 any), and the custodian (if any): in the case of a debt security or managed investment product,— (i) (ii) a statement to the effect that the holder may ob- tain a copy of the governing document by elec- 20 tronic means; and a statement to the effect that the holder has a right to receive from the issuer, free of charge, a copy of the governing document if the holder, within 15 working days of receiving the notice, makes 25 a request to the issuer to receive a copy of the governing document: if a PDS has been lodged for an offer of financial prod- ucts of the same class as the security, a statement to the effect that the holder may obtain a copy of the PDS by 30 electronic means: in the case of a managed investment product, the state- ment of investment policy and objectives or a statement to the effect that the holder may obtain a copy of that statement by electronic means: if the notice contains a statement to the effect that the holder may obtain a copy of a document by electronic means, a statement as to how the holder may obtain a 35 441 (b) (c) (d) (e) (f) Part 9 cl 697 Financial Markets Conduct Bill (2) copy of the document by electronic means (for example, from a specified Internet site address): any other prescribed information.
(g) If a security holder, within 15 working days of receiving the notice, makes a request to the issuer to receive a copy of the 5 governing document, the issuer must, as soon as practicable, send to the holder, free of charge, a copy of that document.

(4) (3) A person who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $50,000.

The offence in this section is an infringement offence (see sub- part 5 of Part 7).
In this section and section 697, security holder means,— (a) (5) 10 in the case of a security to which section 200 does not apply, the holder of that security on the date that the 15 notice is sent under subsection (1); or in the case of any other security, the person who is regis- tered as the holder of the security in a register kept under subpart 5 of Part 4 on the date that the notice is sent under subsection (1).
20 697 PDS treated as having been given (1) This section applies if— (a) a notice is sent to a security holder under section 696 before the effective date; and a PDS has, before the effective date, been lodged for 25 an offer of financial products of the same class as the security held by the security holder; and a statement is included in the notice referred to in para- graph (a) as required by section 696(1)(d); and the security held by the security holder is a financial 30 product that the issuer, in the ordinary course of its busi- ness, continuously offers for issue.
(2) The PDS referred to in subsection (1)(b) must be treated as having been given to the security holder for the purposes of section 37.
35 442 (b) (b) (c) (d) Financial Markets Conduct Bill Part 9 cl 700 698 FMA may continue to perform and exercise functions, duties, and powers If the former enactments continue to apply to securities or a scheme under this subpart, the FMA may continue to perform and exercise all of its functions, duties, and powers conferred 5 or imposed on it by or under the former enactments as if this Act had not been enacted (for example, it may grant an exemp- tion under section 70B of the 1978 Act).
699 Transitional and application provisions subject to exemption This subpart is subject to— (a) (b) any regulations made under section 521: any exemption granted under subpart 2 of Part 8.
Subpart 10—Other transitional provisions Unit trusts and superannuation schemes in relation to which offers to the public have not been made 700 Unit trusts in relation to which offers to public have not 10 15 (1) (2) (3) been made This section applies to a unit trust to which the Unit Trusts 20 Act 1960 applied immediately before the commencement of this section unless subpart 9 applies to any unit in the unit trust.
The Unit Trusts Act 1960 (as in force immediately before the commencement of this section) continues to apply during the 25 transition period described in subsection (3) as if this Act had not been enacted.
The transition period for a unit trust is the period beginning on the date on which this section comes into force and ending on the close of the day before the earlier of the following dates: the date that the unit trust is registered as a registered (a) scheme under this Act; or the date that is 2 years after the commencement of this section.

(b) 30 (4) In this section, unit and unit trust have the same meanings as 35 in section 2(1) of the Securities Act 1978.
443 Part 9 cl 701 Financial Markets Conduct Bill 701 Superannuation schemes in relation to which offers to (1) (2) (3) public have not been made This section applies to a superannuation scheme that, immedi- ately before the commencement of this section, was registered under the Superannuation Schemes Act 1989 unless subpart 5 9 applies to any interest in the scheme.
The Superannuation Schemes Act 1989 (as in force immedi- ately before the commencement of this section) continues to apply during the transition period described in subsection (3) as if this Act had not been enacted.
The transition period for a superannuation scheme is the period beginning on the date on which this section comes into force and ending on the close of the day before the earlier of the following dates: (a) the date that the scheme is registered as a registered 15 scheme under this Act or is approved as a Schedule 3 scheme; or the date that is 2 years after the commencement of this section.
(b) 10 Amended enactments continue to apply or have effect in connection with schemes 20 702 Amended enactments continue to apply or have effect (1) in connection with schemes If, before the commencement of this section, an enactment that is amended by this Act applied, or had an effect, in connection 25 with a specified scheme, the enactment continues to apply, or have the effect, in connection with the specified scheme as if this Act had not been enacted until the end of the transition period (unless the context otherwise requires).
(3) (2) A specified scheme that is a KiwiSaver scheme or superannu- 30 ation scheme must, during the transition period, be treated as being a retirement scheme under section 111(4).
In this section,— specified scheme means any of the following: (a) a KiwiSaver scheme, superannuation scheme, or unit 35 trust referred to in section 684: a unit trust referred to in section 700: (b) 444 Financial Markets Conduct Bill Part 9 cl 705 a superannuation scheme referred to in section 701 (c) transition period means, in relation to a specified scheme, the transition period that applies to the scheme under subpart 9 or section 700 or 701 (as the case may be).
Extra transitional provisions relating to managed investment schemes 703 Remaining trustees (if any) cease to hold office (1) This section applies to a person (if any) who is a trustee of a registered scheme that is a trust and who is not the manager or supervisor of the scheme under this Act.

The person ceases to hold office at the end of the transition period referred to in section 702(3), provided that there is a manager or supervisor for the scheme as required by this Act.
(2) 5 10 704 Restricted schemes have 3 years to comply with related party asset cap rule Section 161 (which requires the manager of a restricted scheme to ensure that the restricted scheme does not have more than 5% of the scheme property in investments related to or managed by a related party of the scheme or a scheme participant) does not apply to the scheme until the 3rd an- 20 niversary of the date on which this section comes into force.
15 705 Savings related to Superannuation Schemes Act 1976 (1) All superannuation annuities, superannuation allowances, an- nuities, amounts, expenses, and refunds that were payable out of the Consolidated Account under sections 5A(2), 6(4), and 25 7(6) of the Superannuation Schemes Act 1976 (which related to certain payments out of the Consolidated Account as a result of the dissolution of the New Zealand Superannuation Corpor- ation and the New Zealand Superannuation Scheme) continue to be so payable as if those sections and section 5A(3) of that 30 Act had not been repealed.
This section applies despite the repeal of— (a) the Superannuation Schemes Act 1976 by section 32 of the Superannuation Schemes Act 1989; and (2) 445 Part 9 cl 706 Financial Markets Conduct Bill (b) section 33 of the Superannuation Schemes Act 1989 by section 564 of this Act.
Compare: 1989 No 10 s 33 Repealed enactments continue to be financial markets legislation 5 706 Repealed enactments continue to be financial markets legislation Every enactment that is repealed or revoked by this Act and that was, immediately before the commencement of this sec- tion, financial markets legislation within the meaning of sec- 10 tion 4 of the Financial Markets Authority Act 2011 must be treated as continuing to be financial markets legislation within the meaning of that Act.
Licensing of financial product markets 707 Transition process for existing financial product markets (1) 15 In this section,— deemed licence means a financial product market licence that an existing exchange is, by subsection (2), deemed to hold existing exchange means a person that, immediately before the commencement of subsection (2), was a registered ex- 20 change within the meaning of section 2(1) of the Securities Markets Act 1988 or an authorised futures exchange within the meaning of section 37(1) of that Act existing market means a market that, immediately before the commencement of subsection (2), was a registered market 25 within the meaning of section 2(1) of the Securities Markets Act 1988 or an authorised futures market within the meaning of section 37(1) of that Act existing market rules means market rules, within the mean- ing of section 2(1) of the Securities Markets Act 1988, that, 30 immediately before the commencement of subsection (2), applied to an existing market existing unlicensed market operator means a person other than an existing exchange that, immediately before the com- mencement of subsection (7), lawfully operated a securities 35 446 Financial Markets Conduct Bill Part 9 cl 707 market or futures market within the meaning of the Securities Markets Act 1988 market of an existing exchange, in relation to an existing exchange, means an existing market that the existing exchange was, immediately before the commencement of subsection 5 (2), authorised to operate transitional period means the period that commences on the commencement of subsection (7) and ends on the com- mencement of section 308.
Existing exchanges 10 (3) (2) On and from the commencement of this subsection, every existing exchange is deemed to hold, under this Act, for each market of the existing exchange a financial product market li- cence that authorises the existing exchange to operate a finan- cial product market that is of the same kind as the existing 15 market of the existing exchange.
Every existing market rule for an existing market continues to have effect in relation to that market as if it had been approved under section 330 or, as the case requires, been notified under section 333.
Section 320, so far as applicable and with any necessary modifications, applies to each existing market, and the FMA must, as soon as practicable after the commencement of this subsection, set out, for each existing market, the matters re- quired to be included by subsection (2) of that section and, 25 in doing so, must— (a) (4) 20 treat the commencement of this subsection as the date on which the deemed licence was issued; and formulate, in consultation with the existing exchange, the conditions of the deemed licence, being conditions 30 of the kind described in section 316(1)(a) to (d); and determine whether the deemed licence is deemed to have been issued under section 314 or 315.
(b) (c) (5) Any matter stated under section 320(2), as applied by sub- section (4), is deemed to be incorporated into the deemed 35 licence.
(6) Nothing in this section prevents— (a) the Minister from exercising a power under this Act— 447 Part 9 cl 708 Financial Markets Conduct Bill (i) to vary, revoke, add to, or substitute the condi- tions of a deemed licence; or (ii) to suspend or cancel a deemed licence; or the exercise, in respect of a deemed licence, of any other power that may, under this Act, be exercised in respect 5 of a financial product market licence.
(b) Existing unlicensed market operator (7) On an application to the Minister by an unlicensed market op- erator, the Minister may, during the transitional period, issue a financial product market licence to the existing unlicensed 10 market operator and, after the transitional period, that licence has effect as if it had been issued under section 314 or, as the case requires, section 315.
(8) During the transitional period, the Minister may approve any proposed market rules for the market operated by an existing 15 unlicensed market operator and, after the transitional period, that approval has effect as if it had been given by the FMA under section 330.
Market services licences 708 Authorised dealers treated as holding market services 20 licence Every person who, immediately before the commencement of this section, is authorised or approved to carry on the business of dealing in futures contracts under section 38 of the Secur- ities Markets Act 1988 must be treated as holding, on and from 25 the commencement of this section, a licence issued under sub- part 2 of Part 6.
Subsection (1) does not apply if the person is not required to hold a licence under Part 6.
The licence under subsection (1) must be treated as— (a) covering the same service that is authorised or approved under section 38 of the Securities Markets Act 1988: subject to the conditions, limitations, or restrictions that, immediately before the commencement of this section, were imposed by or under the Securities Mar- 35 kets Act 1988 on the authorisation or approval: (b) 30 (1) (2) (3) 448 Financial Markets Conduct Bill Part 9 cl 711 (c) (d) in the case of a registered bank, covering the service of acting as a derivatives issuer for all derivatives: expiring on the earlier of— (i) (ii) the date that the licence is cancelled; or the date that is 2 years after the commencement 5 of this section.
(4) Subsection (3)(a) and (b) do not limit subsection (3)(c).

709 FMA may exercise powers in respect of licences (1) Nothing in section 708 prevents the FMA from exercising— (a) a power to vary, revoke, add to, or substitute any of the 10 conditions of a licence referred to in that section; or any other powers under this Act in respect of the licence.

(2) A licence referred to in section 708 may be subject to the (b) conditions prescribed by the regulations.
Approval of electronic transfer systems continues 15 710 Approval of electronic transfer systems continues An Order in Council made under section 7 of the Securities Transfer Act 1991 that is in force immediately before the re- peal of that Act continues in force as if it had been made under 20 section 376 (and may be amended or revoked as if it had been made under that section).
References to banning orders under this Act include references to banning orders under former enactments 25 711 References to banning orders under this Act include (1) (2) references to banning orders under former enactments This section applies to a provision of any enactment that refers to a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an 30 incorporated or unincorporated body under this Act (or any similar reference).
The provision must be treated as including a reference to a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, 35 449 Part 9 cl 712 Financial Markets Conduct Bill an incorporated or unincorporated body under the Securities Act 1978, the Securities Markets Act 1988, or the Financial Advisers Act 2008.
Example Section 151(2)(ea) of the Companies Act 1993 specifies that a 5 person is disqualified from being a director of a company if the person is prohibited from being a director or promoter under this Act.

If a person has been so prohibited under the Securities Act 1978, the Securities Markets Act 1988, or the Financial Advisers Act 10 2008, the person will be disqualified under section 151(2)(ea).
Financial Reporting Act 1993 712 Issuers continue to be issuers under Financial Reporting Act 1993 (1) A person who, immediately before the commencement of this 15 section, was an issuer under section 4(1)(a) to (b) of the Finan- cial Reporting Act 1993 (as in force before the commencement of this section) in relation to securities continues to be an issuer in respect of those securities for the purposes of the Financial Reporting Act 1993 until— (a) 20 all of those securities are cancelled, redeemed, or for- feited; or all of the obligations owing under those securities have been discharged.
(b) (2) Subsection (1) must be treated as applying to a person— (a) who makes an offer of securities to which the Securities Act 1978 continues to apply in accordance with sub- part 8; and (b) who would, if this Act had not been enacted, have been 25 an issuer under section 4(1)(a) to (b) of the Financial 30 Reporting Act 1993 (as in force before the commence- ment of this section).
713 External Reporting Board must review tiers of financial reporting The External Reporting Board must, within 6 months after the 35 commencement of this section, review the strategy that has 450 Financial Markets Conduct Bill Part 9 cl 713 been approved under section 34C of the Financial Reporting Act 1993 in order to consider whether a variation of the strat- egy is necessary or desirable in connection with the enactment of this Act.
451 Schedule 1 Financial Markets Conduct Bill Schedule 1 Provisions relating to when disclosure is required and exclusions Contents ss 27, 28 Part 1 Disclosure exclusions for offers of financial products for issue or sale Overview of Part Part subject to FMA’s power to require disclosure Exclusion for wholesale investors Offer to wholesale investor Exclusion for persons in close relationship Offers to close business associates Offers to relatives Exclusion for offers through licensed intermediaries and DIMS licensees Offers of financial products through licensed intermediaries Offers of financial products through DIMS licensees Exclusion for employee share purchase schemes Offers under employee share purchase schemes Exclusion for persons under control Offers to persons under control do not need disclosure Exclusion for dividend reinvestment plan Offers of financial products under dividend reinvestment plans Exclusion for financial products for no consideration Offers of financial products for no consideration Exclusion for small offers Small offers Advertising restriction for small offers Matters relating to calculation Page 454 455 455 456 457 457 458 458 459 459 461 461 463 463 452 Financial Markets Conduct Bill Schedule 1 Exclusion for transfer of controlling interest Offers of controlling interest where there are 5 or fewer investors Exclusion for small schemes Exclusion for small schemes Advertising restriction for small schemes Counting of scheme participants Exclusions for derivatives Exclusions for certain offers of derivatives Exclusion for registered banks Offers of category 2 products or debt securities by registered banks Exclusion for the Crown, local authorities, etc Offers by the Crown, local authorities, etc Exclusion for retirement villages Offers of interests in retirement villages Exclusion for renewals or variations Offers of renewals or variations Exclusion for contributory mortgages Offers of interests in contributory mortgages offered by solicitors Limited
 disclosure and other requirements Purposes of clauses 26 to 28 Disclosure and other requirements Misleading or deceptive statements and omissions Regulations may prevent exclusions from applying in inappropriate circumstances Part 2 Which offers of financial products for sale require disclosure Application of this Part Sale where financial products issued with view to original subscriber dealing with products Sale where issuer advises, encourages, or knowingly assists offeror Off-market sale by controller Sale amounting to indirect off-market sale by controller Schedule 1 Financial Markets Conduct Bill Part 3 Definitions Definitions relating to wholesale investor and retail investor Meaning of retail investor and definitions of certain other terms Investment businesses Investment activity criteria Meaning of large Definition of government agency Eligible investors Offeror may not rely on eligible investor certificate in certain circumstances Confirmation of certification Safe harbour if certificate given Offeror may not rely on safe harbour certificate that was given more than 2 years before offer Offeror may not rely on safe harbour certificate if knew that A was not in fact wholesale investor Other provisions relating to certificates Offences relating to certificates Meaning of control in this schedule Control 475 475 476 478 479 479 480 481 481 482 482 482 483 483 Part 1 Disclosure exclusions for offers of financial products for issue or sale Overview of Part In this Part,— (a) (b) clauses 3 to 11 specify that offers to particular per- 5 sons do not require disclosure under Part 3 of this Act (although disclosure to other persons may be required): clauses 12 to 24 specify that certain offers as a whole do not require disclosure under Part 3 of this Act, whether as a result of the nature of the offer (for 10 example, a small offer) or
 the nature of the issuer (for example, an offer by the Crown): 34 35 36 37 38 39 40 41 42 43 44 45 46 47 1 454 Financial Markets Conduct Bill Schedule 1 Part 1—continued (c) clauses 25 to 28 provide for limited disclosure and other requirements, and for restrictions, in relation to the exclusions.
2 Part subject to FMA’s power to require disclosure This Part is subject to a declaration under section 533(1)(d) 5 (FMA’s power to declare that offer requires disclosure).

Exclusion for wholesale investors Offer to wholesale investor 3 (1) An offer of financial products to a wholesale investor does not require disclosure under Part 3 of this Act.
(2) A person is a wholesale investor if— (a) (b) (c) (d) the person is an investment business (see clause 35); or the person meets the investment activity criteria speci- fied in clause 36; or the person is large (see clause 37); or the person is a government agency (see clause 38).
(3) A person is also a wholesale investor, in relation to an offer of financial products (or other prescribed transaction), if— the person is an eligible investor (see clause 39); or (a) in relation to an offer of financial products for issue or (b) sale,— (i) 10 15 20 (ii) the minimum amount payable by the person on acceptance of the offer is at least $500,000; or the amount payable by the person on acceptance 25 of the offer plus the amounts previously paid by the person for financial products of the issuer of the same class that are held by the person add up to at least $500,000.
(4) In calculating the amount payable, or paid, for financial 30 products for the purposes of subclause (3)(b), any amount payable, or paid, must be disregarded to the extent to which it is to be paid, or was paid, out of money lent by the offeror or any associated person of the offeror.
455 Schedule 1 Financial Markets Conduct Bill Part 1—continued Exclusion for persons in close relationship Offers to close business associates 4 (1) An offer of financial products to a close business associate of the offeror does not require disclosure under Part 3 of this Act.
5 (2) A person (A) is a close business associate of the offeror if— A is a director or senior manager of the offeror or of a related body corporate of the offeror; or (a) (b) A holds or controls 5% or more of the voting products (c) of the offeror; or A holds or controls 20% or more of the voting products of a related body corporate of the offeror; or 10 (d) A is a partner of the offeror or of a director of the offeror (e) (f) (under the Partnership Act 1908); or A is a spouse, civil union partner, or de facto partner of 15 a person who is a close business associate of the offeror under any of paragraphs (a) to (d) or subclause (3); or A is a child, parent, brother, or sister of a person who is a close business associate of the offeror under any of 20 paragraphs (a) to (e) or subclause (3) (whether or not by a step relationship).
(3) A person (A) is also a close business associate of the offeror, in relation to an offer of financial products, if A has a close professional or business relationship with the offeror, or a dir- 25 ector or senior manager of the offeror, that allows A to obtain the information that will enable A to assess— (a) (b) the merits of the offer; and the adequacy of any information provided by the offeror and any other person involved in the offer.
30 (4) In this clause, control, in relation to a voting product, means having, directly or indirectly, effective control of the voting rights attached to the product.

456 Financial Markets Conduct Bill Schedule 1 Part 1—continued Offers to relatives 5 (1) An offer of financial products to a relative of the offeror or of a director of the offeror does not require disclosure under Part 3 of this Act.
In this clause, relative, in relation to a person (A), means any 5 of the following: (a) (b) (2) A’s spouse, civil union partner, or de facto partner (B): a grandparent, parent, child, grandchild, brother, sister, nephew, niece, uncle, aunt, or first cousin of A or B, whether or not by a step relationship: a spouse, civil union partner, or de facto partner of a person who is a relative under paragraph (b): a trustee of a trust under which A, or a relative of A (under paragraphs (a) to (c)), is a beneficiary who— (i) (c) (d) 10 is presently entitled to a share of the trust estate 15 or of the income of the trust estate; or is, individually or together with other beneficiar- ies, in a position to control the trustee.
(ii) Exclusion for offers through licensed intermediaries and DIMS licensees 6 Offers of financial products through licensed intermediaries (1) An offer of financial products to a person (A) does not require disclosure under Part 3 of this Act if— (a) (b) the offer is through a licensed intermediary; and the prescribed intermediary services provided to A by the licensed intermediary in relation to the offer are covered by the market services licence held by the li- censed intermediary.
20 25 (2) In this clause, licensed intermediary means a person who 30 holds a market services licence that covers prescribed inter- mediary services.
457 Schedule 1 Financial Markets Conduct Bill Part 1—continued 7 Offers of financial products through DIMS licensees An offer of financial products to a person (A) does not require disclosure under Part 3 of this Act if— (a) (b) the offer is through a DIMS licensee; and the DIMS licensee decides whether to acquire the finan- 5 cial products on behalf of A in the course of providing a discretionary investment management service to A. Exclusion for employee share purchase schemes Offers under employee share purchase schemes 8 (1) An offer of specified financial products to an eligible person 10 under an employee share purchase scheme does not require disclosure under Part 3 of this Act if— (a) (b) (c) the offer is made as part of the remuneration arrange- ments for the eligible person or is otherwise made in connection with the employment or engagement of the 15 eligible person, and is separate from any other offer of specified financial products by the issuer; and raising funds for the issuer is not the primary purpose of the offer to the eligible person; and the total number of specified financial products issued 20 or transferred under all of the issuer’s employee share purchase schemes to eligible persons in any 12-month period does not exceed,— (i) in the case of an offer of voting products, 10% of the voting products of the issuer as at the start of 25 the 12-month period: in the case of any other offer of specified financial products, 10% of the specified financial products of the issuer that are of the same class as at the start of the 12-month period.
(ii) 30 In this clause,— eligible person— (a) means an employee or a director of the issuer of the specified financial products or of any of its subsidiaries; and 35 (2) 458 Financial Markets Conduct Bill Schedule 1 Part 1—continued (b) includes a person who provides personal services (other than as an employee) principally to the issuer of the specified financial products or any of its subsidiaries 5 equity securities; or prescribed financial products.
specified financial products means— (a) (b) In calculating the total number of specified financial products issued or transferred under all of the issuer’s employee share purchase schemes to eligible persons for the purposes of sub- clause (1)(c), an issue or a sale to a person must be disre- 10 garded if the issue or sale results from an offer that— (a) does not require disclosure under Part 3 of this Act because of any other exclusion under this schedule; or is not received in New Zealand; or is a regulated offer.
(b) (c) 15 (3) Exclusion for persons under control 9 Offers to persons under control do not need disclosure If, under any of clauses 3 to 8, an offer of financial products to a person (A) would not require disclosure under Part 3 of this Act, an offer of financial products to a person controlled 20 by A does not require disclosure under Part 3 of this Act.
Exclusion for dividend reinvestment plan 10 Offers of financial products under dividend reinvestment plans (1) An offer of specified financial products to a person (A) under a 25 dividend reinvestment plan does not require disclosure under Part 3 of this Act if— (a) A already holds financial products of the issuer that are of the same class as the specified financial products, and— (i) A is entitled to subscribe for those products by applying all or any specified part of any divi- dends declared by the issuer and payable to A; or 30 459 Schedule 1 Financial Markets Conduct Bill Part 1—continued (ii) A has a right to require the issuer to issue those products to A as fully paid financial products in consideration only for A forgoing the right to re- ceive all or any specified part of any dividends declared by the issuer and otherwise payable to 5 A; and (b) the dividend reinvestment plan contains provisions re- quiring that,— (i) at the time the price of the specified financial products is set, the issuer has no information that 10 is not publicly available that would, or would be likely to, have a material adverse effect on the realisable price of the financial products if the information were publicly available; and the right to subscribe for, or require the issuer to 15 issue, specified financial products is offered to all holders of financial products of the issuer of the same class, other than product holders who are resident outside New Zealand and who are ex- cluded by the issuer to avoid a risk of breaching 20 the laws of the relevant overseas country; and every product holder to whom the right is offered is given a reasonable opportunity to accept it; and the specified financial products issued to a prod- uct holder are issued on the terms disclosed to the 25 holder; and the specified financial products issued to a prod- uct holder are subject to the same rights as the fi- nancial products issued to all holders of financial products of the same class who agree to receive 30 the financial products.
(ii) (iii) (iv) (v) In this clause,— dividend means,— (a) in relation to equity securities, a dividend within the meaning of the Companies Act 1993; and 35 (2) 460 Financial Markets Conduct Bill Schedule 1 Part 1—continued (b) in relation to managed investment products, a distribu- tion of the financial benefits of the scheme to a holder of the product specified financial products means— (a) equity securities in a company: (b) managed investment products.
5 Exclusion for financial products for no consideration Offers of financial products for no consideration 11 (1) An offer of financial products (other than options or other fi- 10 nancial products to which this clause does not apply) does not require disclosure under Part 3 of this Act if no consideration is to be provided for the issue or transfer of the products.
(2) An offer of an option to a person does not require disclosure (3) 12 (1) under Part 3 of this Act if— (a) (b) no consideration is to be provided for the issue or trans- fer of the option; and no consideration is to be provided for the underlying financial products on the exercise of the option.
This clause does not apply if the financial products— (a) are interests in a KiwiSaver scheme, a superannuation scheme, or a prescribed scheme; or impose a liability on the product holder in respect of the issuer or a registered scheme (for example, an obli- gation to make contributions or to pay a call).
(b) 15 20 25 Exclusion for small offers Small offers Specified offers of financial products do not require disclosure under Part 3 of this Act if— (a) the financial products are equity securities or debt se- 30 curities; and none of the offers results in a breach of the 20-investor limit under subclause (2)(a) or (3)(a); and (b) 461 Schedule 1 Financial Markets Conduct Bill Part 1—continued (c) none of the offers results in a breach of the $2 million limit under subclause (2)(b) or (3)(b).
(2) An offer by a person to issue financial products— (a) (b) results in a breach of the 20-investor limit if it results in the number of persons to whom financial products of the 5 issuer have been issued exceeding 20 in any 12-month period: results in a breach of the $2 million limit if it results in the amount being raised from the issue of financial prod- ucts of the issuer exceeding $2 million in any 12-month 10 period.
(a) (3) An offer by a person to sell financial products of an issuer— results in a breach of the 20-investor limit if it results in the number of persons to whom the person sells finan- cial products of the issuer exceeding 20 in any 12-month 15 period: results in a breach of the $2 million limit if it results in the amount being raised by the person from selling financial products of the issuer exceeding $2 million in any 12-month period.
(b) 20 Subclause (1) does not apply to an offer for sale to which clause 30 or 33 applies.
In this clause,— financial products of the issuer means equity securities and debt securities issued by the issuer (regardless of whether or 25 not those products are of the same class or kind as those under offer) specified offer means an offer that is made to, and may only be accepted by, a person who— (a) is likely to be interested in the offer, having regard to— 30 previous contact between the person making the (i) offer and that person; or some professional or other connection between the person making the offer and that person; or statements or actions by that person that indicate 35 that that person is interested in offers of that kind (iii) (ii) (4) (5) 462 Financial Markets Conduct Bill Schedule 1 Part 1—continued (b) (for example, through that person’s membership of or participation in an angel network); or has an annual gross income of at least $200,000 for each of the person’s 2 most recently completed finan- cial years before the relevant time.
5 (2) Advertising restriction for small offers 13 (1) A person must not advertise an offer or intended offer of finan- cial products that would be a regulated offer but for clause 12.

Subclause (1) does not apply to a communication that is dis- tributed by or on behalf of the offeror if the offeror took all 10 reasonable steps to ensure that the only persons who received the communication were persons referred to in the definition of specified offer in clause 12(5) or persons acting on their behalf.
(3) A contravention of this clause does not prevent the exclusion 15 referred to in clause 12 from continuing to apply (but may give rise to consequences under Part 7 of this Act).
14 Matters relating to calculation (1) In calculating issues and sales of the financial products of an issuer, and the amount raised from issues and sales, for the 20 purposes of clause 12, an issue or a sale to a person must be disregarded if the issue or sale results from an offer that— (a) does not require disclosure under Part 3 of this Act because of any other exclusion under this schedule; or is not received in New Zealand; or is a regulated offer.
(b) (c) In calculating the amount of money raised by the person by issuing financial products, the following must be included: (a) the amount payable for the products at the time when the products are issued: if the products are shares issued partly paid, any amount payable at a future time if a call is made: if the product is an option, any amount payable on the exercise of the option: 25 30 (b) (c) (2) 463 Schedule 1 Financial Markets Conduct Bill Part 1—continued (d) if the products carry a right to convert the products into other financial products, any amount payable on the ex- ercise of that right.
For the purposes of paragraph (b) of the definition of speci- fied offer in clause 12,— (a) 5 in determining the annual gross income of the person, the annual gross income of an entity controlled by the person may be included in the annual gross income of the person; and the frameworks and methodologies prescribed by the 10 FMA under subpart 4 of Part 8 of this Act for the purposes of that paragraph (if any) must be complied with when determining whether the paragraph is satis- fied.
(b) The frameworks or methodologies may, without limitation,— 15 include requirements relating to how gross income is to (a) be determined, calculated, or valued: provide for income to be included or disregarded (in whole or in part) for the purposes of paragraph (a).
(b) Exclusion for transfer of controlling interest Offers of controlling interest where there are 5 or fewer investors An offer of equity securities that comprise more than 50% of the voting products of an entity does not require disclosure under Part 3 of this Act if— (a) 5 or fewer persons acquire equity securities under the offer; and if more than 1 person acquires equity securities under the offer, those persons are acting jointly or in concert; and in the circumstances, the persons who acquire equity se- curities under the offer are in a position to obtain from the offeror the information that will enable those per- sons to assess— (i) the merits of the offer; and (b) (c) 20 25 30 35 (3) (4) 15 464 Financial Markets Conduct Bill Schedule 1 Part 1—continued (ii) the adequacy of any information provided by the offeror and any person involved in the offer.
Exclusion for small schemes 16 Exclusion for small schemes An offer of managed investment products does not require dis- 5 closure under Part 3 of this Act if the relevant managed in- vestment scheme— (a) (b) has 5 or fewer scheme participants (see clause 18); and is not promoted by a person, or an associate of a per- son, who is in the business of promoting managed in- 10 vestment schemes.
Advertising restriction for small schemes 17 (1) A person must not advertise an offer or intended offer of finan- cial products that would be a regulated offer but for clause 16.

(2) A contravention of this clause does not prevent the exclusion 15 referred to in clause 16 from continuing to apply (but may give rise to consequences under Part 7 of this Act).
18 (1) (2) 20 (b) Counting of scheme participants For the purposes of counting the number of scheme partici- pants in a managed investment scheme,— (a) joint holders of a managed investment product count as a single scheme participant; and a managed investment product held on trust for a bene- ficiary is taken to be held by the beneficiary (rather than the trustee) if the beneficiary is presently entitled to a 25 share of the trust estate or of the income of the trust es- tate or the beneficiary is, individually or together with other beneficiaries, in a position to control the trustee.
The FMA may, in writing, determine that the total number of scheme participants in all of the schemes subject to the deter- 30 mination must be counted (as if they were 1 scheme) for the purposes of determining the number of scheme participants of any 1 of those schemes under this Part.

465 Schedule 1 Financial Markets Conduct Bill Part 1—continued (3) The FMA must give written notice of the determination to the manager of each of the schemes.
Exclusions for derivatives Exclusions for certain offers of derivatives 19 (1) An offer of a derivative for issue does not require disclosure 5 under Part 3 of this Act if the person who offers the derivative is not a derivatives issuer.

(2) An offer of a derivative for sale does not require disclosure under Part 3 of this Act if the derivative was issued by a per- son who is not a derivatives issuer.
10 (3) An offer of a quoted derivative for issue or sale does not re- quire disclosure under Part 3 of this Act if the derivative is issued by a participant in the licensed market on which the derivative is quoted.

(4) An offer of a derivative for issue or sale does not require dis- 15 closure under Part 3 of this Act if the derivative is— (a) (b) quoted on a prescribed overseas market; and issued by a prescribed person.
Exclusion for registered banks Offers of category 2 products or debt securities by registered banks An offer of financial products does not require disclosure under Part 3 of this Act if the financial products are— (a) (b) (c) category 2 products issued by a registered bank; or debt securities issued by a registered bank; or category 2 products of a kind prescribed for the pur- poses of this paragraph that are issued by a subsidiary of a registered bank.
20 25 20 466 Financial Markets Conduct Bill Schedule 1 Part 1—continued Exclusion for the Crown, local authorities, etc Offers by the Crown, local authorities, etc 21 (1) An offer of financial products does not require disclosure under Part 3 of this Act if the issuer of the financial products is— (a) (b) (c) 5 10 the Crown; or a local authority; or the Board of Trustees of the National Provident Fund continued under the National Provident Fund Restruc- turing Act 1990; or the Reserve Bank; or Housing New Zealand Corporation established by the Housing Corporation Act 1974; or the Maori Trustee, but in relation only to money consti- tuted in the common fund of the Maori Trustee that is 15 entitled to the protection against deficiency afforded by section 27 of the Maori Trustee Act 1953; and Public Trust, but in relation only to money constituted in the common fund of Public Trust that is entitled to the protection against deficiency afforded by section 52 20 of the Public Trust Act 2001.
(d) (e) (f) (g) (2) An offer of an interest in the Government Superannuation Fund does not require disclosure under Part 3 of this Act.

22 23 Exclusion for retirement villages Offers of interests in retirement villages An offer of an interest in a retirement village does not require disclosure under Part 3 of this Act if the interest is exempted from requiring disclosure by section 107(1) of the Retirement Villages Act 2003.
Exclusion for renewals or variations Offers of renewals or variations An offer of a renewal or variation of the terms or conditions of a financial product does not require disclosure under Part 3 of this Act.
25 30 467 Schedule 1 Financial Markets Conduct Bill Part 1—continued Exclusion for contributory mortgages 24 Offers of interests in contributory mortgages offered by solicitors (1) An offer of an interest in a contributory mortgage by a solicitor does not require disclosure under Part 3 of this Act if— (a) (b) the solicitor is not a mortgagor under the mortgage; and the solicitor is not a person to whom or for whose bene- fit any money is lent in consideration for the mortgage given by the mortgagor; and the solicitor complies, in relation to the offer, with— 10 (i) (c) 5 regulations made under section 115 of the Lawyers and Conveyancers Act 2006 (relating to trust accounts); and rules made under section 96 of that Act (practice rules in relation to nominee companies).
(ii) 15 20 25 In this clause, contributory mortgage means a mortgage of land that— (a) secures money owing to a nominee company on behalf of 2 or more persons, whether or not the mortgage ori- ginally secured money owing to only 1 person; or has the same priority in respect of the land as another mortgage or mortgages of that land.

(b) For the purposes of the definition of contributory mortgage, money owing to not more than 5 persons as joint tenants must be treated as being owed to 1 person.
Limited disclosure and other requirements Purposes of clauses 26 to 28 The purposes of clauses 26 to 28 are to— (a) provide for limited disclosure and conditions to apply where, although PDS disclosure and governance re- 30 quirements under Part 4 of this Act are not necessary, some disclosure and other requirements are necessary or desirable in order to promote the main purposes of this Act specified in section 3 or the additional purposes specified in section 4; and 35 (2) (3) 25 468 26 (1) Financial Markets Conduct Bill Schedule 1 Part 1—continued (b) prevent an exclusion from applying in inappropriate circumstances (having regard to whether the exclusion may cause significant detriment to retail investors).
Disclosure and other requirements This clause applies to a person (A) who offers financial prod- 5 ucts to another person (B) without disclosure under Part 3 of this Act in reliance upon— (a) (b) (c) clause 6 (offers through licensed intermediaries); or clause 7 (offers through DIMS licensees); or clause 8 (offers under employee share purchase 10 schemes); or clause 10 (offers of financial products under dividend reinvestment plan); or clause 11 (offers of financial products for no consid- eration); or clause 12 (small offers); or clause 15 (offers of controlling interest); or clause 16 (offers for small schemes); or clause 19 (offers of derivatives); or clause 20 (offers of category 2 products or debt secur- 20 ities by registered banks); or clause 21 (offers by the Crown, local authorities, etc); or clause 23 (offers of renewals or variations).
(d) (e) (f) (g) (h) (i) (j) (k) (l) 15 (2) A must ensure that— 25 (a) (b) B is provided with a disclosure document that contains, or is accompanied by, the prescribed information and documents (if any); and all other prescribed conditions (if any) are complied with (for example, restrictions on advertising and pub- 30 licity, a requirement to keep records, or a requirement to provide information or documents to the Registrar or the FMA that relate to an offer).
(3) A must perform the duty under subclause (2)(a) in the pre- scribed manner.

35 469 Schedule 1 Financial Markets Conduct Bill Part 1—continued (4) Subclauses (2)(a) and (3) apply only if the regulations re- quire a disclosure document to be provided.

(5) A contravention of this clause does not prevent the exclusion referred to in subclause (1) from continuing to apply (but may give rise to consequences under Part 7 of this Act).
5 27 Misleading or deceptive statements and omissions (1) A person must not provide a disclosure document to a person under clause 26 if— there is— (a) (i) (ii) a statement in the disclosure document that is 10 misleading or deceptive or is likely to mislead or deceive; or an omission from the disclosure document of in- formation that is required to be contained in the disclosure document by the regulations; and the matter referred to in paragraph (a) is materially adverse from the point of view of an investor.
15 (b) (2) (3) (4) (5) For the purposes of this clause, a statement about a future mat- ter (including the doing of, or refusing to do, an act) must be taken to be misleading if the person making the statement does 20 not have reasonable grounds for making it.

Subclause (2) does not limit the meaning of a reference to a misleading statement.

This clause does not limit clause 26(2) or (3).


See section 489 (offence to knowingly or recklessly contra- 25 vene this clause) and section 480 (which provides that a per- son may be treated as suffering loss or damage in the case of a contravention of this clause).
28 Regulations may prevent exclusions from applying in inappropriate circumstances 30 (1) An exclusion under any of clauses 8, 11 to 16, and 23 does not apply— (a) in the circumstances prescribed by regulations made under this clause; or 470 (2) (3) Financial Markets Conduct Bill Schedule 1 Part 1—continued (b) if any additional requirements prescribed by regulations made under this clause are not satisfied.
The Governor-General may, by Order in Council, on the rec- ommendation of the Minister in accordance with subclause (3), make regulations— (a) prescribing circumstances in which an exclusion re- ferred to in subclause (1) does not apply: prescribing additional requirements that must be satis- fied before an exclusion referred to in subclause (1) may apply: prescribing transitional and savings provisions in con- nection with any regulations made under paragraph (a) or (b).
(b) (c) The Minister must, before making a recommendation under subclause (2),— (a) (b) consult with the FMA; and be satisfied that the regulations are needed in order to prevent an exclusion referred to in subclause (1) from applying in inappropriate circumstances, having regard to whether the exclusion may, in relation to particular 20 financial products, cause significant detriment to sub- scribers for those products who are retail investors.
5 10 15 Part 2 Which offers of financial products for sale require disclosure 25 29 (1) Application of this Part Clauses 30 to 33 specify when an offer of financial products for sale requires disclosure under Part 3 of this Act.

(2) However, an offer of financial products for sale does not re- quire such disclosure if an exclusion under Part 1 of this 30 schedule applies to the sale offer.
471 Schedule 1 Financial Markets Conduct Bill Part 2—continued 30 Sale where financial products issued with view to original subscriber dealing with products (1) An offer of financial products for sale requires disclosure under Part 3 of this Act if— (a) the issuer issued the financial products with a view to 5 the original subscriber dealing with the products; and the offer of the financial products for sale is made within 12 months after the date on which the financial products were issued; and the financial products have not previously been offered 10 for issue or sale under— (i) (ii) a regulated offer; or an offer outside New Zealand under an applica- tion regime under subpart 6 of Part 8 of this Act.
15 (2) An offer of financial products for sale to a person outside New Zealand requires disclosure under Part 3 of this Act if— (a) section 37 (when PDS must be given) applies to the products under section 549; and the issuer issued the financial products with a view to 20 the financial products being offered for sale outside New Zealand in circumstances in which an application regime under subpart 6 of Part 8 of this Act would have applied to the products; and the offer of the financial products for sale is made within 25 12 months after the date on which the financial products were issued; and the financial products have not previously been offered for issue or sale under a regulated offer or outside New Zealand under an application regime under subpart 6 30 of Part 8 of this Act.
(b) (c) (b) (c) (d) Financial products must be taken to be issued with the view referred to in subclause (1)(a) or (2)(b) if there are reason- able grounds for concluding that the products were issued with the view (whether or not there may have been other reasons or 35 purposes for the issue).
In this clause,— (3) (4) 472 Financial Markets Conduct Bill Schedule 1 Part 2—continued dealing with the products means selling or transferring the financial products, or granting, issuing, or transferring inter- ests in, or options over, the financial products original subscriber means the person to whom the financial products were issued.
Compare: 1978 No 103 s 6(2), (2AA); Corporations Act 2001 s 707(3), (4) (Aust) 5 31 Sale where issuer advises, encourages, or knowingly assists offeror (1) An offer of financial products for sale requires disclosure 10 under Part 3 of this Act if either— (a) the issuer advises, encourages, or knowingly assists the offeror in connection with the offer of the financial products; or the issuer is the offeror.
(2) However, subclause (1) does not apply— (b) 15 (a) (b) (c) if the offer of the financial products is made only to per- sons who, at the time of the offer, are holders of financial products of the issuer under terms of the constitution of the issuer that require the offer to be made to those per- 20 sons; or to an offer of quoted financial products for sale; or to an offer of financial products for sale through a facil- ity that is described in section 307(2)(b).
Compare: 1978 No 103 s 6(2A), (3) 32 Off-market sale by controller An offer of financial products for sale requires disclosure under Part 3 of this Act if— (a) (b) the offeror controls the issuer; and either— (i) (ii) the financial products are not quoted; or although the financial products are quoted, the products are not offered for sale in the ordinary course of trading on a licensed market.
Compare: Corporations Act 2001 s 707(2) (Aust) 473 25 30 35 Schedule 1 Financial Markets Conduct Bill Part 2—continued Sale amounting to indirect off-market sale by controller 33 (1) An offer of financial products for sale requires disclosure under Part 3 of this Act if— (a) (b) (c) the offer of the financial products is made within 12 months after the date on which the products were sold 5 by a person who controlled the issuer (the controller) at the time of the sale; and the controller sold the financial products with a view to the purchaser dealing with the products; and at the time of the sale by the controller, either— the financial products were not quoted; or (i) although the financial products were quoted, (ii) those products were not offered for sale in the ordinary course of trading on a licensed market; and 10 15 (d) the controller sold the financial products otherwise than under a regulated offer.
Financial products must be taken to be sold with the view re- ferred to in subclause (1)(b) if there are reasonable grounds for concluding that the products were sold with that view 20 (whether or not there may have been other reasons or purposes for the sale).
In this clause,— dealing with the products means selling or transferring the financial products, or granting, issuing, or transferring inter- 25 ests in, or options over, the financial products purchaser means the person to whom the financial products were sold by the controller.
Compare: Corporations Act 2001 s 707(5), (6) (Aust) (2) (3) 474 Financial Markets Conduct Bill Schedule 1 Part 3 Definitions Definitions relating to wholesale investor and retail investor 34 Meaning of retail investor and definitions of certain other 5 terms (2) (3) (1) A person is a retail investor, in relation to a transaction, if the person is not a wholesale investor in relation to the transaction.

See clause 3 for the definition of wholesale investor.
In this schedule,— control has the meaning set out in clause 47 relevant person, in relation to— (a) (b) an offer of financial products, means the offeror: a prescribed transaction, means the person prescribed for the purposes of this definition 10 15 relevant time, in relation to— (a) a certificate given under clause 42, means immediately before the certificate is given (see clause 42(4)): an offer of financial products to a person in any other case, means immediately before financial products are 20 issued or transferred to the person under the offer: a prescribed transaction in any other case, means the time prescribed for the purposes of this definition (b) (c) transaction means— (a) (b) an offer of financial products for issue or sale; or any other prescribed transaction involving any dealing in financial products or any supply of market services.
25 35 Investment businesses A person is an investment business if the person is— (a) an entity whose principal business consists of 1 or more 30 of the following: (i) (ii) investing in financial products; or providing any of the financial services referred to in section 5(1)(a), (d), or (k) of the Financial Ser- vice Providers (Registration and Dispute Reso- 35 lution) Act 2008; or (b) a registered bank; or 475 Schedule 1 Financial Markets Conduct Bill Part 3—continued (c) (d) (e) (f) (g) a deposit taker (within the meaning of section 157C of the Reserve Bank of New Zealand Act 1989); or a licensed insurer (within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2010); or a manager of a registered scheme, or a discretionary in- 5 vestment management service, that holds a market ser- vices licence; or a derivatives issuer that holds a market services licence; or a QFE or an authorised financial adviser.
10 Investment activity criteria 36 (1) A person (A) meets the investment activity criteria for the pur- poses of clause 3(2)(b) if 2 or more of the following para- graphs apply: (a) A owns, or at any time during the 2-year period before 15 the relevant time has owned, a portfolio of specified financial products of a value of at least $1 million (in aggregate): (b) A has, during the 2-year period before the relevant time, (c) carried out 10 or more separate transactions to acquire 20 specified financial products where the price under each of those transactions is at least $20,000 and the person who is disposing of the specified financial products is not an associated person of A: A has, during the 2-year period before the relevant time, 25 carried out 5 or more separate transactions to acquire specified financial products where the price under each of those transactions is at least $100,000 and the person who is disposing of the specified financial products is not an associated person of A: 30 (d) A has net assets of at least $2 million as at the last day of A’s most recently completed financial year before the relevant time or an annual gross income of at least $200,000 for each of A’s 2 most recently completed fi- nancial years before the relevant time: 35 476 Financial Markets Conduct Bill Schedule 1 Part 3—continued (e) A is an individual who has, within the last 10 years be- fore the relevant time, been employed or engaged in an investment business and has, for at least 1 year during that 10-year period, participated to a material extent in the investment decisions made by the investment busi- 5 ness.
(2) For the purposes of— (a) subclause (1)(a), in determining the specified finan- cial products owned by A, the specified financial prod- ucts owned by an entity controlled by A may be treated 10 as being owned by A: subclause (1)(b) and (c), in determining the transac- tions carried out by A, transactions carried out by an entity controlled by A may be treated as carried out by A: subclause (1)(d), in determining the net assets or an- nual gross income of A, the net assets or annual gross income of an entity controlled by A may be included in the net assets or annual gross income of A.
15 (b) (c) (4) (3) A particular transaction may be taken into account for the pur- 20 poses of subclause (1)(b) or (c) but not for the purposes of both of those paragraphs.

The frameworks and methodologies prescribed by the FMA under subpart 4 of Part 8 of this Act for the purposes of this clause (if any) must be complied with when determining 25 whether any of the paragraphs of subclause (1) are satisfied.
The frameworks or methodologies may, without limitation,— include requirements relating to how financial products, (a) transactions, prices, net assets, or gross income are to be determined, calculated, or valued: provide for assets, liabilities, or income to be included or disregarded (in whole or in part) for the purposes of paragraph (a).
(b) (5) 30 (6) In this clause, specified financial products, in relation to A, means financial products other than— (a) category 2 products: 35 477 Schedule 1 Financial Markets Conduct Bill Part 3—continued (b) (c) interests in a KiwiSaver scheme or a superannuation scheme: financial products issued by an associated person of A.
37 Meaning of large (1) A person is large if at least 1 of the following paragraphs 5 apply: (a) (b) as at the last day of each of the relevant periods, the total assets (including intangible assets) of the person and the entities controlled by the person exceeded $10 million: in each of the relevant periods or in the last 24 months 10 before the relevant time, the total consolidated turnover of the person and the entities controlled by the person exceeded $20 million.
The frameworks and methodologies prescribed by the FMA under subpart 4 of Part 8 of this Act for the purposes of 15 this clause (if any) must be complied with when determining whether either of the paragraphs of subclause (1) is satisfied.
The frameworks or methodologies may, without limitation,— include requirements relating to how total assets or (a) turnover are to be determined, calculated, or valued: provide for assets or revenue to be included or disre- garded (in whole or in part) for the purposes of para- graph (a).
(b) 20 In this clause, relevant periods, in relation to— (a) a certificate given under clause 42, means the 2 most 25 recently completed financial years of the person giv- ing the certificate immediately before the certificate is given: an offer of financial products to a person in any other case, means the 2 most recently completed financial 30 years of the person immediately before financial prod- ucts are issued or transferred to the person under the offer: a prescribed transaction in any other case, means the periods prescribed for the purposes of this definition.
35 (b) (c) (2) (3) (4) 478 Financial Markets Conduct Bill Schedule 1 Part 3—continued 38 Definition of government agency A government agency is any of the following: (a) (b) (c) (d) (e) (f) a government department named in Schedule 1 of the State Sector Act 1988: a Crown entity under section 7 of the Crown Entities 5 Act 2004: a local authority: a State enterprise (within the meaning of section 2 of the State-Owned Enterprises Act 1986): the Reserve Bank: the Board of Trustees of the National Provident Fund continued under the National Provident Fund Restruc- turing Act 1990 (and a company appointed under clause 3(1)(b) of Schedule 4 of that Act).
10 Eligible investors 39 (1) A person (A) is an eligible investor, in relation to a transaction 15 or class of transactions, if— (a) A certifies in writing, before the relevant time,— (i) as to the matters specified in subclause (2) or (3) (as the case may be); and that A understands the consequences of certify- ing himself, herself, or itself to be an eligible in- vestor; and (ii) (b) A states in the certificate the grounds for this certifica- (c) tion; and an authorised financial adviser, a chartered accountant, or a solicitor signs a written confirmation of the certifi- cation in accordance with clause 41.
20 25 (2) In relation to an offer of financial products or any other trans- action involving a dealing in financial products (or a class of 30 those transactions), A must certify that A has previous experi- ence in acquiring or disposing of financial products that allows A to assess— (a) the merits of the transaction or class of transactions (in- cluding assessing the value of the financial products in- 35 volved); and 479 Schedule 1 Financial Markets Conduct Bill Part 3—continued (b) A’s own information needs in relation to the transaction (c) or those transactions; and the adequacy of the information provided by any person involved in the transaction or those transactions.
In relation to a transaction involving the supply of market ser- 5 vices (or a class of those transactions), A must certify that A has previous experience in acquiring or disposing of financial products that allows A to assess— (a) (b) (c) the merits of the transaction or class of transactions; and the merits of the service or services to be provided; and 10 A’s own information needs in relation to the transaction or those transactions; and the adequacy of the information provided by any person involved in the transaction or those transactions.
(d) The certification must specify the transaction or class of trans- 15 actions to which it applies.
Offeror may not rely on eligible investor certificate in certain circumstances Clause 39 does not apply to an offer of financial products or any other transaction if the offeror or other relevant person, 20 before the relevant time,— (a) knew that A did not in fact have previous experience of the kind referred to in clause 39(2) or (3) (as the case may be); or had reasonable grounds to believe that the certification 25 was incorrect.
(b) Clause 39 does not apply to an offer of financial products or any other transaction if the authorised financial adviser, char- tered accountant, or solicitor referred to in clause 39(1)(c) is an associated person of the offeror or other relevant person.

Clause 39 does not apply to an offer of financial products or any other transaction if the certificate was given more than 2 years before the relevant time.
30 (3) (4) 40 (1) (2) (3) 480 Financial Markets Conduct Bill Schedule 1 Part 3—continued Confirmation of certification 41 (1) An authorised financial adviser, a chartered accountant, or a solicitor (A) must not confirm a certification of a person (B) under clause 39 unless A, having considered B’s grounds for the certification,— (a) is satisfied that B has been sufficiently advised of the consequences of the certification; and has no reason to believe that the certification is incorrect or that further information or investigation is required as to whether or not the certification is correct.
(b) 5 10 (2) 42 (1) The person who confirms the certification of a person may be the financial adviser, chartered accountant, or solicitor of the person (but does not need to be).

Safe harbour if certificate given The purpose of this clause is to provide certainty to an offeror 15 (or other relevant person) that a person is a wholesale investor of the kind referred to in clause 3(2) (subject to clauses 43 to 45).
(2) A person (A) must be treated as being a wholesale investor if A— (a) (b) 20 certifies in writing that A— (i) is a wholesale investor within the meaning of clause 3(2); and understands the consequences of certifying him- self, herself, or itself to be a wholesale investor; 25 and states in the certificate— (i) the paragraph in clause 3(2) that is claimed to apply to A; and the grounds on which A claims that the paragraph 30 applies; and (ii) (ii) (c) gives a copy of the certificate to the offeror or other relevant person.
(3) A certificate under this clause ceases to be effective on the date that is 2 years after the date on which it was given.

35 481 Schedule 1 Financial Markets Conduct Bill Part 3—continued (4) 43 44 (1) (2) If A is giving a certificate under this clause on the basis of meeting the investment activity criteria under clause 36, or of being large under clause 37, the relevant time for the purposes of the application of those clauses is immediately before the certificate is given.
5 Offeror may not rely on safe harbour certificate that was given more than 2 years before offer Clause 42(2) does not apply to an offer of financial products or other transaction if the certificate was given more than 2 years before the time that the offer is made or the transaction 10 is entered into (as the case may be).
Offeror may not rely on safe harbour certificate if knew that A was not in fact wholesale investor Clause 42(2) does not apply to an offer of financial products to A if the offeror, before the financial products are issued or 15 transferred to A under the offer,— (a) knew that A was not in fact a wholesale investor within the meaning of clause 3(2) at the time the certificate was given; or had reasonable grounds to believe that the certification 20 was incorrect.
(b) Clause 42(2) does not apply to any transaction (other than an offer of financial products) entered into with A if the relevant person, before the transaction is entered into,— (a) knew that A was not in fact a wholesale investor within 25 the meaning of clause 3(2) at the time the certificate was given; or had reasonable grounds to believe that the certification was incorrect.
(b) Other provisions relating to certificates 45 (1) A certificate under clause 39 or 42 is effective only if the 30 certificate is— (a) (b) in a separate written document; and in the prescribed form (if any); and 482 Financial Markets Conduct Bill Schedule 1 Part 3—continued (2) 46 (1) (2) (3) contains the prescribed information (if any).
(c) If a person gives written notice to an offeror or other relevant person that the certificate under clause 39 or 42 is revoked, the offeror or relevant person may not rely on the certificate in respect of any subsequent offer or transaction.

5 Offences relating to certificates Every person commits an offence who gives a certificate under clause 39 or 42 knowing that it is false or misleading in a material particular.
Every person (A) commits an offence who incites, counsels, or 10 procures any person to give a certificate under clause 39 or 42 that A knows is false or misleading in a material particular.

Every person who commits an offence under this clause is li- able, on summary conviction, to a fine not exceeding $50,000.
15 20 Control 47 Meaning of control in this schedule (1) (2) (3) In this schedule, a person controls an entity if the person has the capacity to determine the outcome of decisions about the entity’s financial and operating policies.
In determining whether the person has this capacity,— (a) the practical influence the person can exert (rather than the rights the person can enforce) is the issue to be con- sidered; and any practice or pattern of behaviour affecting the en- tity’s financial or operating policies must be taken into 25 account (even if it involves a breach of an agreement or a breach of trust).
(b) The person does not control the entity merely because the per- son and another person jointly have the capacity to determine the outcome of decisions about the entity’s financial and oper- 30 ating policies.
Compare: Corporations Act 2001 s 50AA (Aust) 483 Schedule 2 Financial Markets Conduct Bill Schedule 2 Registers Contents Register of offers of financial products Register of offers of financial products Purposes of register Contents of register Register of managed investment schemes Register of managed investment schemes Purposes of register Contents of register Registration decisions by FMA Keeping of registers under this schedule Registrar may keep other registers Registers to be kept by Registrar Operation of and access to registers Amendments to registers Search of register Miscellaneous Lodging or giving documents or otherwise notifying Registrar Certificate of lodgement or registration When documents are lodged Registrar may give notice of lodgement or notification Certified copy of information on register Power of Registrar to delegate s 6 Page 484 485 485 486 486 487 487 487 488 488 488 488 489 489 490 490 490 490 Register of offers of financial products Register of offers of financial products A register called the register of offers of financial products is established.
Compare: 1978 No 103 s 43N 5 484 2 3 (1) Financial Markets Conduct Bill Schedule 2 Purposes of register The purposes of the register of offers of financial products are— (a) (b) to give public notice of offers of financial products; and to enable any person to— (i) obtain information contained in, or concerning, product disclosure statements; and obtain other information about, or copies of documents relating to, offers of financial prod- ucts; and compare information about offers of financial products; and (ii) (iii) (c) (d) (e) to assist any person to decide whether or not to sub- scribe for financial products under an offer of financial products; and to assist any person to perform a financial adviser ser- vice (within the meaning of the Financial Advisers Act 2008) or to otherwise comment on an offer of financial products; and to assist any person— (i) in the exercise of the person’s powers under this Act or any other enactment; or in the performance of the person’s functions or duties under this Act or any other enactment.
(ii) Compare: 1978 No 103 s 43O Contents of register The register of offers of financial products must contain all of the following information and documents, to the extent that the information or documents are relevant, for each regulated offer: (a) the name of the issuer and the issuer’s financial service provider number (if any): in the case of a sale offer, the name of the offeror and the offeror’s financial service provider number (if any): the name of any supervisor and the supervisor’s finan- 35 cial service provider number (if any): (b) (c) 485 Schedule 2 Financial Markets Conduct Bill (d) (e) (f) (g) (h) the name of the offer that is specified in the PDS and the offer number given by the Registrar on lodgement of the PDS: the kind of financial product or products being offered (for example, an equity security, a debt security, a man- 5 aged investment product, or a derivative): the date of the PDS: the status of the PDS (being a status that is determined and described in the prescribed manner): any other prescribed information or documents.
10 (2) However, a register entry for a regulated offer is not required in the prescribed circumstances.

The register must contain any other prescribed information and documents (whether or not relating to a regulated offer).

In this clause, financial service provider number, in relation 15 to a person, is the number given to the person on the person’s registration under the Financial Service Providers (Registra- tion and Dispute Resolution) Act 2008.
Register of managed investment schemes Register of managed investment schemes A register called the register of managed investment schemes is established.
20 Purposes of register The purposes of the register of managed investment schemes are— (a) to give public notice of the registration of managed in- vestment schemes; and to enable any person to— (i) obtain information about, and copies of docu- ments relating to, registered schemes; and know how to contact the managers and super- visors of registered schemes; and (ii) to assist any person— (i) in the exercise of the person’s powers under this Act or any other enactment; or (b) (c) 25 30 35 (3) (4) 4 5 486 Financial Markets Conduct Bill Schedule 2 (ii) in the performance of the person’s functions or duties under this Act or any other enactment.
6 (1) the name of the scheme: Contents of register The register of managed investment schemes must contain all of the following information and documents, to the extent that 5 the information or documents are relevant, for each scheme: (a) (b) what type of scheme it is (if any) (for example, whether it is a KiwiSaver scheme or a superannuation scheme or other prescribed type of scheme): whether the scheme is a restricted scheme or a com- plying superannuation fund or a default KiwiSaver scheme: the names of each person who is a licensed manager or licensed supervisor of the scheme and an address for 15 service in each case: for a restricted scheme, the name of the licensed inde- pendent trustee: any other prescribed information and documents.
(d) (e) (c) 10 (f) (2) However, the register of managed investment schemes is not 20 required to contain information or documents in the prescribed circumstances.
7 8 Registration decisions by FMA The Registrar must make the appropriate entry in the register of managed investment schemes (or not enter a matter in the 25 register) in accordance with any direction made by the FMA that a scheme be registered or is not entitled to be registered, or otherwise made by the FMA in the exercise of any other discretion under Part 4 relating to, or affecting, the register.
Keeping of registers under this schedule 30 Registrar may keep other registers The Registrar may keep any other registers that he or she con- siders necessary for the purposes of this Act.

487 Schedule 2 Financial Markets Conduct Bill 9 10 (1) (2) (3) 11 (1) (2) Registers to be kept by Registrar Each register established under this schedule (the register) must be kept by the Registrar in accordance with this schedule and the regulations.
5 Operation of and access to registers The register may be— (a) (b) The register must be operated at all times unless— (a) an electronic register; or kept in any other manner that the Registrar thinks fit.

the Registrar suspends the operation of the register, in 10 whole or in part, in accordance with subclause (3); or otherwise provided in regulations.
(b) The Registrar may refuse access to the register or otherwise suspend the operation of the register, in whole or in part, if the Registrar considers that it is not practical to provide access to 15 the register.
Amendments to registers The Registrar may amend the register if— (a) an issuer or the FMA informs the Registrar of informa- tion that is different from the information entered on the 20 register; or the Registrar is satisfied at any time that the register contains a typographical error or a mistake, or omits information supplied to the Registrar.

(b) The Registrar must amend the register if the regulations re- 25 quire the Registrar to do so in circumstances specified by the regulations.
Compare: 1978 No 103 s 43R Search of register 12 (1) A person may search the register in accordance with this Act 30 or the regulations.

The register may be searched only by reference to the contents of the register required by this schedule or any other prescribed criteria.
(2) 488 Financial Markets Conduct Bill Schedule 2 (3) A search of the register may be carried out only by the follow- ing persons for the following purposes: (a) a person, for a purpose referred to in clause 2 or 5 or, in the case of a register kept under clause 8, a prescribed purpose: a person, for the purpose of advising another person in connection with any of the purposes referred to in this clause: an individual, or a person with the consent of the in- dividual, for the purpose of searching for information 10 about that individual.
5 (b) (c) (4) A person who searches the register for personal information in breach of this clause must be treated, for the purposes of Part 8 of the Privacy Act 1993, as having breached an information privacy principle under section 66(1)(a)(i) of that Act.
Compare: 1978 No 103 s 43S 15 13 (1) (2) 14 (1) (2) Miscellaneous Lodging or giving documents or otherwise notifying Registrar If this Act requires a document or notification to be lodged 20 with or given to the Registrar, the document or notification must be lodged or given in the manner specified by the Regis- trar (who, for example, may specify a form to be used or re- quire notification by electronic means, or may specify any of the matters referred to in section 522(1)(i)(i) to (iv)).
The Registrar may refuse to perform or exercise a function, power, or duty in relation to the document or notification if subclause (1) is not complied with.

25 Certificate of lodgement or registration The Registrar must, on the lodgement of a PDS, give a cer- 30 tificate of the lodgement (and the certificate is conclusive evi- dence that the PDS has been lodged).
The Registrar must, on the registration of a managed invest- ment scheme, give a certificate of the registration (and the cer- tificate is conclusive evidence that the scheme has been regis- 35 tered).

489 Schedule 2 Financial Markets Conduct Bill (3) The certificate must, in the case of a PDS, specify an offer number for the regulated offer.
Compare: 1978 No 103 s 42(3), (4) 15 When documents are lodged A document is lodged when— (a) the document itself is constituted as part of the register; or particulars of the document are entered in the register.
(b) 5 16 (1) (2) 17 (1) Registrar may give notice of lodgement or notification If a document or notification is lodged with or given to the 10 Registrar under this Act, the Registrar may, in any manner that the Registrar thinks fit, give notice of the lodgement or notification to any person or class of persons or to the public generally.
The Registrar may, in any manner that the Registrar thinks fit, 15 give notice to any person or class of persons or to the public generally of any changes in the information kept in a register.

Certified copy of information on register The Registrar must provide a copy, or a certified copy, of any information on a register to any person who applies for it and 20 pays the prescribed fee (if any).
(2) A certified copy of information on a register purporting to be signed by the Registrar is conclusive evidence for all purposes that the information in the certified copy has been duly entered in the register.

18 (1) Power of Registrar to delegate The Registrar may delegate to any person, either generally or particularly, any of the Registrar’s functions, duties, and powers under this Act except the power of delegation.
(2) A delegation— (a) must be in writing; and (b) may be made subject to any restrictions and conditions the Registrar thinks fit; and is revocable at any time, in writing; and (c) 25 30 490 Financial Markets Conduct Bill Schedule 2 (d) does not prevent the performance or exercise of a func- tion, duty, or power by the Registrar.
(3) A person to whom any functions, duties, or powers are dele- gated may perform and exercise them in the same manner and with the same effect as if they had been conferred directly by 5 this Act and not by delegation.

(4) A person who appears to act under a delegation is presumed to be acting in accordance with the terms of the delegation in the absence of evidence to the contrary.
491 Schedule 3 Financial Markets Conduct Bill 1 2 Schedule 3 Schedule 3 schemes s 6(1) Purpose of schedule The purpose of this schedule is to provide for the statutory recognition of single person self-managed superannuation 5 schemes.
Approval of Schedule 3 schemes The FMA may, by written notice to the trustees of a scheme,— approve the scheme as a Schedule 3 scheme if it is (a) satisfied the scheme meets the approval criteria set out 10 in clause 3: (b) withdraw an approval of the scheme if— (i) (ii) it is no longer satisfied that the scheme meets those approval criteria; or the trustees have contravened the obligations re- 15 lating to the scheme under this schedule.
Criteria for approving Schedule 3 schemes 3 (1) A scheme may be approved as a Schedule 3 scheme if— (a) the scheme meets the following requirements: (i) it is a trust established and governed by a trust 20 deed that is interpreted and administered in ac- cordance with New Zealand law; and its purpose is to provide retirement benefits to the scheme participant; and participation is restricted to persons who meet the 25 New Zealand criteria set out in subclause (2); and (ii) (iii) (b) (c) the scheme has only 1 scheme participant who is an individual; and the scheme participant is either a trustee, or a director 30 of a sole corporate trustee, of the scheme.
The New Zealand criteria are that the person, at the time of becoming a participant,— (a) is, or normally is, living in New Zealand, or is an em- ployee of the State services (within the meaning of the 35 State Sector Act 1988) who is— (2) 492 4 5 (1) (2) 6 Financial Markets Conduct Bill Schedule 3 (i) (ii) (iii) serving outside New Zealand; and employed on New Zealand terms and conditions; and serving in a jurisdiction where offers of super- annuation scheme membership are lawful; and 5 (b) is a New Zealand citizen or is entitled, in terms of the Immigration Act 2009, to be in New Zealand indefin- itely.
15 20 Procedure for exercising powers The FMA must not exercise a power under clause 2(b) un- 10 less— (a) the FMA gives the trustees no less than 10 working days’ written notice of the following matters before it exercises the power: that the FMA may exercise the power; and (i) (ii) the reasons why it may exercise the power; and the FMA gives the trustees or the trustees’ representa- tive an opportunity to make written submissions on the matter within that notice period.
(b) Notice requirements The notice under clause 2(b) must— (a) (b) state the FMA’s reasons for giving the notice; and specify the date on which the withdrawal of the ap- proval takes effect.

The FMA must give a copy of the notice to every prescribed 25 person.
Reporting obligations for approved Schedule 3 schemes The trustees of an approved Schedule 3 scheme must,— (a) if the scheme is a defined benefit scheme within the meaning of section 155(1)(a), comply with that sec- 30 tion as if they were the manager of the scheme; and at the prescribed times or on the occurrence of the pre- scribed events and otherwise in the prescribed manner, prepare and provide to the FMA reports that contain the (b) 493 Schedule 3 Financial Markets Conduct Bill documents, information, or other matters that are re- quired to be provided by the regulations.
494 Financial Markets Conduct Bill Schedule 4 Schedule 4 Consequential amendments Part 1 Amendments to Acts s 669 Accident Compensation Act 2001 (2001 No 49) Section 11(1)(g): omit “a superannuation scheme or pension fund not registered under the Superannuation Schemes Act 1989” and substi- tute “a retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011) or pension fund that is not such a retirement scheme”.
Section 321(5)(b): omit “registered superannuation scheme” and substitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.

5 10 Airport Authorities Act 1966 (1966 No 51) Definitions of debt security and equity security in section 2: repeal 15 and substitute: “debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011 “equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.
Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (2009 No 35) Section 5: insert in their appropriate alphabetical order: “KiwiSaver scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “superannuation scheme has the same meaning as in sec- tion 6(1) of the Financial Markets Conduct Act 2011”.

Paragraph (b)(ii) of the definition of facility in section 5: repeal and substitute: 20 25 “(ii) membership of a superannuation scheme or 30 KiwiSaver scheme:”.
Paragraph (c) of the definition of facility holder in section 5: repeal and substitute: “(c) if that facility consists of membership of a super- annuation scheme or KiwiSaver scheme, means the 35 495 Schedule 4 Financial Markets Conduct Bill Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (2009 No 35)—continued Part 1—continued product holder of the managed investment product in the scheme (within the meanings of product holder and managed investment product in section 6(1) of the Financial Markets Conduct Act 2011)”.
Section 18(2)(a): repeal and substitute: 5 “(a) a company that is a listed issuer (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011):”.

Section 48(b)(vi) and (vii): repeal and substitute: “(vi) the Financial Markets Conduct Act 2011.” 10 Section 137(4) and (5): omit “Securities Act 1978, the Securities Markets Act 1988” and substitute in each case “Financial Markets Conduct Act 2011”.
Section 140(2)(k) and (l): repeal and substitute: “(k) the Financial Markets Conduct Act 2011:”.

15 Armed Forces Canteens Act 1948 (1948 No 51) Section 15A(1): omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retire- ment scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
20 Auditor Regulation Act 2011 (2011 No 21) Definition of director in section 6(1): omit “section 2 of the Secur- ities Act 1978” and substitute “section 6(1) of the Financial Markets Conduct Act 2011”.

Paragraph (b) of the definition of issuer audit in section 6(1): omit 25 “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.
496 Financial Markets Conduct Bill Schedule 4 Part 1—continued Bank of New Zealand Officers’ Provident Association Act 1971 (1971 No 3 (P)) Insert after section 9: “9A Application of Financial Markets Conduct Act 2011 For the purposes of the Financial Markets Conduct Act 5 2011,— “(a) the Association must be treated as if it were a trust es- tablished and governed by a trust deed that is interpreted and administered in accordance with New Zealand law for the purposes of section 115(1)(a); and the rules of the Association must be treated as if they were the trust deed of the scheme; and the members of the Board of Management of the Asso- ciation must be treated as if they were the trustees of the scheme.” 10 15 “(b) “(c) Building Act 2004 (2004 No 72) Clause 2(2)(b) of Schedule 3: omit “Securities Act 1978, or the Se- curities Markets Act 1988” and substitute “Financial Markets Con- duct Act 2011”.
Building Societies Act 1965 (1965 No 22) Definition of debt security in section 2(1): repeal and substitute: 20 “debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Definition of participatory security in section 2(1): repeal.

Section 113I(1) and (2): omit “debt or participatory securities” and 25 substitute in each case “debt securities”.
Section 113J(1), (2), and (3)(b): omit “debt or participatory secur- ities” in each place where it appears and substitute in each case “debt securities”.

Charities Act 2005 (2005 No 39) Section 16(2)(d): omit “Securities Act 1978, the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.
30 497 Schedule 4 Financial Markets Conduct Bill Part 1—continued Chartered Professional Engineers of New Zealand Act 2002 (2002 No 17) Clause 2(b) of Schedule 1: omit “Securities Act 1978, or the Secur- ities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.
Children’s Commissioner Act 2003 (2003 No 121) Clause 6(1) of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and sub- stitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
Commerce Act 1986 (1986 No 5) Section 10(5): omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “re- tirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.

Companies Act 1993 (1993 No 105) Definition of securities in section 2(1): repeal.
Section 2(1): insert in their appropriate alphabetical order: “financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011 “licensed market has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “listed issuer has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “stock exchange means— a licensed market; or “(a) a financial product market that is authorised to operate “(b) in an overseas jurisdiction in accordance with the laws of that jurisdiction”.
Section 40: omit “securities” and substitute “financial products”.

Section 46: omit “securities” and substitute “financial products”.

Section 47(8)(a): omit “securities” and substitute “financial prod- ucts”.

5 10 15 20 25 30 498 Financial Markets Conduct Bill Schedule 4 Companies Act 1993 (1993 No 105)—continued Part 1—continued Heading to section 49: omit “securities” and substitute “financial products”.
Section 49: omit “securities” in each place where it appears and sub- stitute in each case “financial products”.
Section 61(7): repeal and substitute: “(7) Nothing in subsections (5) and (6) applies to an offer to a share- 5 holder by a company if— “(a) “(b) the company is a listed issuer; and the offer is to acquire fewer of the quoted shares of the company than the minimum holding of those shares in 10 the company determined by the operator of the relevant licensed market.” Section 67C(2): omit “section 7 of the Securities Transfer Act 1991” and substitute “section 376 of the Financial Markets Conduct Act 2011”.
Section 67C(4): repeal and substitute: “(4) A company must not grant an option to acquire a share it holds in itself or enter into any obligations to transfer such a share if— “(a) 15 the company has received notice in writing of a takeover 20 offer made under the takeovers code in force under the Takeovers Act 1993; or in the case of shares that are quoted on a stock ex- change, the stock exchange makes a public release that a takeover offer for more than 20% of the quoted shares 25 is to be made.” “(b) Section 85(1) and (2): omit “section 7 of the Securities Transfer Act 1991” in each place where it appears and substitute in each case “section 376 of the Financial Markets Conduct Act 2011”.
Section 95(2): omit “authorised or approved under the Securities 30 Transfer Act 1991” and substitute “approved under section 376 of the Financial Markets Conduct Act 2011”.

Section 95(6A): omit “section 54 of the Securities Act 1978” and sub- stitute “section 211 of the Financial Markets Conduct Act 2011”.
499 Schedule 4 Financial Markets Conduct Bill Companies Act 1993 (1993 No 105)—continued Part 1—continued Section 147(1)(b): repeal and substitute: “(b) that person is authorised to undertake trading activities on a licensed market and has the relevant interest by reason only of acting for another person to acquire or dispose of that share on behalf of the other person in 5 the ordinary course of business of carrying out those trading activities; or”.
Section 149(1), (2), (4), (5): omit “securities” in each place where it appears and substitute in each case “financial products”.

Section 149(3): omit “security” and substitute “financial product”.

Section 149(6): repeal and substitute: “(6) Nothing in this section applies to financial products that are 10 quoted on a licensed market.” Section 151(2)(ea): omit “Securities Act 1978 or the Securities Markets Act 1988” and substitute “Financial Markets Conduct 15 Act 2011”.
Section 225A(3): omit “security” in each place where it appears and substitute in each case “financial product”.

Section 225A(4): repeal.

Section 237(1)(b): omit “securities” and substitute “financial prod- 20 ucts”.

Section 239AI(1)(b)(ii) and (iii): repeal and substitute: “(ii) the Financial Markets Conduct Act 2011:”.

Definition of promoter in section 239AM(3): repeal.

Definition of promoter in section 245A(3): repeal.


Section 258A(1)(b) and (c): repeal and substitute: “(b) the Financial Markets Conduct Act 2011:”.

Section 266(4): omit “section 60A of the Securities Act 1978, section 43F of the Securities Markets Act 1988” and substitute “subpart 6 of Part 7 of the Financial Markets Conduct Act 2011”.

Section 280(1)(ka): omit “Securities Act 1978, or the Securities Markets Act 1988,” and substitute “Financial Markets Conduct Act 2011”.
25 30 500 Financial Markets Conduct Bill Schedule 4 Companies Act 1993 (1993 No 105)—continued Part 1—continued Section 371A(3): omit “Securities Act 1978” and substitute “Finan- cial Markets Conduct Act 2011”.

Section 373(1)(3): omit “securities” and substitute “financial prod- ucts”.

Section 374(2)(7): omit “securities” and substitute “financial prod- 5 ucts”.
Section 383(1)(c)(i): omit “or the Companies Act 1955, the Secur- ities Act 1978, the Securities Markets Act 1988” and substitute: “, the Financial Markets Conduct Act 2011”.

Section 383(1): omit “for such period not exceeding 10 years as may 10 be specified in the order” and substitute “permanently or for a period specified in the order”.
Section 383(4A): omit “section 43F of the Securities Markets Act 1988, section 44F of the Takeovers Act 1993, and section 60A of the Securities Act 1978” and substitute “section 44F of the 15 Takeovers Act 1993, and subpart 6 of Part 7 of the Financial Markets Conduct Act 2011”.

Section 385(3): omit “5 years” and substitute “10 years”.

Paragraph (da) of Schedule 2: omit “securities” and substitute “fi- nancial products”.
Paragraph (h) of Schedule 4: omit “if the company is a party to a list- ing agreement with a registered exchange (within the meaning of sec- tion 2(1) of the Securities Markets Act 1988)” and substitute “in re- spect of shares of the company that are quoted on a stock exchange”.
Paragraph (i) of Schedule 4: omit “if the company is not a party to 25 a listing agreement with a registered exchange (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “in respect of shares of the company that are not quoted on a stock exchange”.
Schedule 4: insert after paragraph (j): 30 20 “(ja) a statement as to whether the company at any time since the last annual return or, in the case of the first annual return, since the date of registration has been the offeror of financial products under a regulated offer (as defined 501 Schedule 4 Financial Markets Conduct Bill Companies Act 1993 (1993 No 105)—continued Part 1—continued in section 29 of the Financial Markets Conduct Act 2011): “(jb) a statement as to whether the company at any time since the last annual return or, in the case of the first annual re- turn, since the date of registration has been the offeror of 5 financial products for which a disclosure document was required to be provided under clause 26 of Schedule 1 of the Financial Markets Conduct Act 2011, and, if so, the exclusion under that schedule that the offeror re- lied on: 10 “(jc) a statement as to whether the company at any time since the last annual return or, in the case of the first annual return, since the date of registration has been the offeror of financial products and has knowingly relied on an exclusion under clause 3(2)(b), 3(3), 4(3), 8, 10, 11, 15 12, 15, or 16 of Schedule 1 of the Financial Markets Conduct Act 2011, and, if so, which of those exclusions the offeror relied on:”.
Construction Contracts Act 2002 (2002 No 46) Section 7(1)(a)(ii): omit “section 5B(2) of the Securities Markets 20 Act 1988” and substitute “section 11(2) of the Financial Markets Conduct Act 2011”.

Definition of control right in section 7(2): omit “voting security” and substitute “voting product”.
Section 7(3): repeal and substitute: “(3) For the purposes of this section, a person has a control right if the person would have a relevant interest, under sections 230 to 233 of the Financial Markets Conduct Act 2011, in the voting products that confer that right,— “(a) 25 if voting product, in relation to a body, meant a financial 30 product of the body that confers a right to vote at meet- ings of members (whether or not there is any restriction or limitation on the number of votes that may be cast by, or on behalf of, the holder of the financial product); and includes a financial product that, in accordance with the 35 502 Financial Markets Conduct Bill Schedule 4 Construction Contracts Act 2002 (2002 No 46)—continued Part 1—continued “(b) terms of the financial product, is convertible into a fi- nancial product of that kind; and if references in those sections to a number or percent- age of voting products were a reference to the number or percentage of the votes conferred by those financial 5 products.
“(4) In subsection (3), financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011.” Co-operative Companies Act 1996 (1996 No 24) Section 26(3): repeal and substitute: “(3) A company must not grant an option to acquire a share it holds in itself or enter into any obligations to transfer such a share if— “(a) 10 the company has received notice in writing of a takeover offer made under the takeovers code in force under the 15 Takeovers Act 1993; or in the case of shares that are quoted on a stock ex- change, the stock exchange makes a public release that a takeover offer for more than 20% of the quoted shares is to be made.” 20 “(b) Heading above section 29: omit “and Securities Act 1978”.
Section 29A: repeal.

Crimes Act 1961 (1961 No 43) Section 242(1): omit “, whether in any prospectus, account, or other- wise,”.

Section 242(1)(a): repeal and substitute: 25 “(a) to induce any person, whether ascertained or not, to sub- scribe to any financial product within the meaning of the Financial Markets Conduct Act 2011; or”.

Crown Entities Act 2004 (2004 No 115) Section 12(3): omit “securities, borrowing, derivatives” and substi- tute “financial products, borrowing”.
30 503 Schedule 4 Financial Markets Conduct Bill Crown Entities Act 2004 (2004 No 115)—continued Part 1—continued Paragraph (b)(i) and (ii) of the definition of natural person act in section 24: repeal and substitute: “(i) acquisition of financial products or borrowing:”.

Section 30(2)(b): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct 5 Act 2011”.

Definitions of debt security, derivative transaction, and security in section 136(1): repeal.
Section 136(1): insert in their appropriate alphabetical order: “debt security has the same meaning as in section 8 of the 10 Financial Markets Conduct Act 2011 “derivative— “(a) has the same meaning as in section 8 of the Financial Markets Conduct Act 2011; and includes a foreign exchange transaction “(b) “financial product means any of the following: “(a) an equity security (within the meaning given in the Fi- nancial Markets Conduct Act 2011): a debt security: a managed investment product within the meaning of 20 that Act (except a managed investment product in a superannuation scheme or a KiwiSaver scheme): a derivative”.
“(b) “(c) “(d) 15 Heading above section 159: omit “securities, borrowing, guarantees, indemnities, and derivative transactions” and substitute “financial 25 products, borrowing, guarantees, indemnities, and derivatives”.

Heading to section 159: omit “securities, borrowing, guarantees, indemnities, and derivative transactions” and substitute “financial products, borrowing, guarantees, indemnities, and derivatives”.
Heading to section 160: omit “securities, borrowing, guarantees, 30 indemnities, and derivative transactions” and substitute “financial products, borrowing, guarantees, indemnities, and derivatives”.

Heading to section 161: omit “securities” and substitute “financial products”.

504 Financial Markets Conduct Bill Schedule 4 Crown Entities Act 2004 (2004 No 115)—continued Part 1—continued Section 161(1): omit “acquire securities” and substitute “acquire fi- nancial products”.
Section 161(2): omit “security” and substitute “financial product”.
Section 161: insert after subsection (2): “(2A) This section does not apply to derivatives.” Section 164: repeal and substitute: “164 Restrictions on use of derivatives A Crown entity must not enter into an agreement constituting a derivative, or amend the terms of that agreement, other than as provided in section 160.” Section 173(1)(c): repeal and substitute: 5 10 “(c) prescribing the nature and extent of the acquisition of financial products that may be undertaken by Crown en- tities, the financial products that Crown entities may ac- quire, the persons with whom a Crown entity may enter 15 into agreements that constitute financial products, and any other matters relating to the acquisition of financial products or entering into those agreements:”.
Section 173(1)(f): repeal.

Section 173(1)(i): omit “securities” and substitute “financial prod- 20 ucts”.

Column headings in Schedule 1 and Schedule 2: omit “securities” in each place where it appears and substitute in each case “financial products”.

Schedule 3: omit “securities, borrowing, guarantees, indemnities, 25 and derivative transactions” in the first place where it appears and substitute “financial products, borrowing, guarantees, indemnities, and derivatives”.
Schedule 3: omit “Restrictions on acquisition of securities, borrow- ing, guarantees, indemnities, and derivative transactions” and sub- 30 stitute “Restrictions on acquisition of financial products, borrowing, guarantees, indemnities, and derivatives”.
505 Schedule 4 Financial Markets Conduct Bill Part 1—continued Crown Research Institutes Act 1992 (1992 No 47) Paragraph (d) of the definition of assets in section 23(1): omit “se- curities within the meaning of the Securities Act 1978” and substitute “financial products within the meaning of the Financial Markets Con- duct Act 2011”.

Paragraph (b) of the definition of liabilities in section 23(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.
5 Crown Retail Deposit Guarantee Scheme Act 2009 (2009 No 30) Definition of debt security in section 3: repeal and substitute: 10 “debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.
Dairy Industry Restructuring Act 2001 (2001 No 51) Section 102(3): repeal and substitute: “(3) New co-op may not issue capital notes under section 101 if,— 15 “(a) “(b) during the month immediately before the capital notes are to be issued, capital notes of the same class as the capital notes to be issued have not been traded on a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011); or capital notes of the same class as the capital notes to be issued have not been quoted continuously on the li- censed market for 6 months or more.” 20 Section 106(2) and (3): repeal and substitute: “(2) New co-op must ensure that the terms and effect of financial 25 products offered or issued in new co-op are the same for new entrants as for shareholding farmers.
In this section, financial products has the same meaning as in section 7 of the Financial Markets Conduct Act 2011.” “(3) Section 116(2): repeal and substitute: “(2) Nothing in Part 3 of the Financial Markets Conduct Act 2011 applies to the disclosure of information required by regulations made under subsection (1).” 30 506 Financial Markets Conduct Bill Schedule 4 Part 1—continued Defence Act 1990 (1990 No 28) Section 73A: omit “has the same meaning as in the Superannuation Schemes Act 1989” and substitute “means a retirement scheme within the meaning of section 111(4) of the Financial Markets Conduct Act 2011”.
Section 73C(a): repeal.

5 10 Education Act 1989 (1989 No 80) Section 67B(2): omit “a derivative transaction, or amend the terms of that transaction,” and substitute “an agreement constituting a deriva- tive, or amend the terms of that agreement,”.

Section 103(1)(d): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.
Paragraph (d) of the definition of assets in section 216(1): omit “se- curities within the meaning of the Securities Act 1978” and substitute 15 “financial products within the meaning of the Financial Markets Con- duct Act 2011”.

Paragraph (b) of the definition of liabilities in section 216(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.
Paragraph (b)(i) and (ii) of the definition of natural person act in clause 1C(2) of Schedule 6: repeal and substitute: 20 “(i) acquisition of financial products (within the meaning of section 7 of the Financial Markets Conduct Act 2011) or borrowing of money; or”.
25 Electoral Act 1993 (1993 No 87) Clause 4(1) of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and sub- stitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
30 507 Schedule 4 Financial Markets Conduct Bill Part 1—continued Electricity Industry Act 2010 (2010 No 116) Clause 4(1)(c) of Schedule 2: repeal and substitute: “(c) that person is authorised to undertake trading activities on a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011) and 5 has the involvement by reason only of acting for an- other person to acquire or dispose of a financial product on behalf of the other person in the ordinary course of business of carrying out those trading activities; or”.
Clause 5(1) of Schedule 2: omit “voting security” and substitute 10 “voting product”.
Clause 5(2) of Schedule 2: repeal and substitute: “(2) A person has a control right if the person would have a relevant interest, under sections 230 to 233 of the Financial Mar- kets Conduct Act 2011, in the voting products that confer that 15 right,— “(a) if voting product, in relation to a body, meant a financial product of the body that confers a right to vote at meet- ings of members (whether or not there is any restriction or limitation on the number of votes that may be cast by, 20 or on behalf of, the holder of the financial product); and includes a financial product that, in accordance with the terms of the financial product, is convertible into a fi- nancial product of that kind; and if references in those sections to a number or percent- 25 age of voting products were a reference to the number or percentage of the votes conferred by those financial products.
“(b) “(3) In subclause (2), financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011.” 30 Clause 8(1)(a)(ii) of Schedule 2: omit “section 5B(2) of the Secur- ities Markets Act 1988” and substitute “section 11(2) of the Finan- cial Markets Conduct Act 2011”.
508 Financial Markets Conduct Bill Schedule 4 Part 1—continued Energy Companies Act 1992 (1992 No 56) Definition of debt security in section 2(1): repeal and substitute: “debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Definition of equity security in section 2(1): repeal and substitute: “equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.
5 Estate and Gift Duties Act 1968 (1968 No 35) Paragraph (c) of the definition of group superannuation scheme in section 2(1): repeal and substitute: 10 “(c) any registered scheme within the meaning of section 6(1) of the Financial Markets Conduct Act 2011 that is— “(i) a superannuation scheme or KiwiSaver scheme within the meaning of section 6(1) of the Fi- 15 nancial Markets Conduct Act 2011; and established for the benefit of contributors to the scheme otherwise than as employees of any em- ployer”.
“(ii) Finance Act (No 2) 1990 (1990 No 73) Section 3(1): omit “established under the Unit Trusts Act 1960” and substitute “(within the meaning of section YA 1 of the Income Tax Act 2007)”.

Section 5(3): repeal.

Section 8: repeal.

Section 9A: repeal.

Financial Reporting Act 1993 (1993 No 106) Paragraph (a) of the Long Title: omit “issuers of securities to the public” and substitute “certain issuers of financial products”.

Paragraph (e) of the definition of director in section 2(1): repeal.
20 25 30 509 Schedule 4 Financial Markets Conduct Bill Financial Reporting Act 1993 (1993 No 106)—continued Part 1—continued Definition of equity security in section 2(1): repeal and substitute: “equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.
Section 2(1): insert in their appropriate alphabetical order: “financial product has the same meaning as in section 7 of 5 the Financial Markets Conduct Act 2011 “manager, in relation to a registered scheme, has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011 “registered scheme has the same meaning as in section 6(1) 10 of the Financial Markets Conduct Act 2011 “regulated offer has the same meaning as in section 29 of the Financial Markets Conduct Act 2011”.
“(b) Definition of security in section 2(1): repeal.

Paragraphs (a) to (b) of the definition of issuer in section 4(1): repeal 15 and substitute: “(a) every person who is an issuer of financial products that are, or have been, offered under a regulated offer (where issuer in this paragraph has the same meaning as in sec- tion 10 of the Financial Markets Conduct Act 2011): every person who is a manager of a registered scheme:”.
Paragraph (c) of the definition of issuer in section 4(1): repeal and substitute: “(c) every listed issuer that has financial products quoted on a licensed market (where listed issuer, quoted, and 25 licensed market have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011): “(ca) every registered bank (within the meaning of section 2(1) of the Reserve Bank of New Zealand Act 1989):”.
20 Section 4(2) to (4): repeal and substitute: “(2) If an offer of financial products would require disclosure under Part 3 of the Financial Markets Conduct Act 2011 but for an exemption granted by the FMA under that Act, the person who is the issuer of the financial products under the offer for the purposes of that Act must be treated as being an issuer under 35 30 510 Financial Markets Conduct Bill Schedule 4 Financial Reporting Act 1993 (1993 No 106)—continued Part 1—continued “(3) subsection (1)(a) by virtue of that offer unless the exemption contains a statement that this subsection does not apply.
In subsection (1)(a), a reference to financial products must be taken to be a reference to financial products that have not been cancelled, redeemed, forfeited, or in respect of which 5 obligations owing under them have not been discharged.” Section 4A(1)(b): repeal and substitute: “(b) the conduit issuer raises an amount of money by the issue of financial products under a regulated offer; and”.
Section 9A(1) to (3): repeal and substitute: “(1) For the purposes of this Act, a requirement on the directors of an issuer of financial products in relation to a registered scheme to prepare and register financial statements must be construed as including a requirement to prepare and register (in addition to financial statements in respect of the issuer it- 15 self),— “(a) 10 if the liabilities of the issuer and the scheme are not limited to a particular group of assets (a separate fund), financial statements in respect of the scheme; or if the liabilities of the issuer or the scheme are limited to 20 a separate fund, financial statements in respect of both the scheme and that fund.” “(b) Section 15(3): repeal.
Section 18(1A): repeal and substitute: “(1A) Any financial statements to which subsection (1) applies and 25 that are required for the purposes of this Act may also contain or be accompanied by financial statements, and any auditor’s report on those statements, that are required for the purposes of a product disclosure statement, or register entry, under the Financial Markets Conduct Act 2011.” 30 Section 34B: insert after subsection (3): “(3A) Nothing in this Act prevents— “(a) different tiers of financial reporting from applying in respect of different classes of issuers: 511 Schedule 4 Financial Markets Conduct Bill Financial Reporting Act 1993 (1993 No 106)—continued Part 1—continued “(b) the tier of financial reporting that applies in respect of the financial statements of an issuer of managed invest- ment products from being different from the tier of fi- nancial reporting that applies in respect of the financial statements of a scheme or separate fund referred to in 5 section 9A(1).” Section 35A(2)(a): repeal and substitute: “(a) the exemption would not cause significant detriment to subscribers for the financial products of the issuer in New Zealand, having regard to the financial reporting 10 requirements that must be complied with in relation to the issuer under the law in force in the country where the issuer is incorporated or constituted; and”.
Financial Service Providers (Registration and Dispute Resolution) Act 2008 (2008 No 97) Section 5(i) and (ia): repeal and substitute: “(i) participating in a regulated offer as the issuer or offeror of the financial products: “(ia) acting in any of the following capacities in respect of regulated products: as an issuer: “(i) as a supervisor: “(ii) “(iii) as an investment manager: “(ib) a licensed market service: “(ic) acting as a custodian: “(id) acting as a licensed market operator:”.
15 20 25 Section 5: add as subsection (2): “(2) In this section, custodian, investment manager, issuer, li- censed market operator, licensed market service, offeror, regulated offer, regulated products, and supervisor have 30 the same meanings as in section 6(1) of the Financial Mar- kets Conduct Act 2011.” 512 Financial Markets Conduct Bill Schedule 4 Financial Service Providers (Registration and Dispute Resolution) Act 2008 (2008 No 97)—continued Part 1—continued Section 7(2)(j): repeal and substitute: “(j) an employer while providing services to enable employ- ees of the employer to obtain rights or benefits under a retirement scheme (as defined in section 111(4) of the Financial Markets Conduct Act 2011), being a scheme 5 in which that employer participates for the benefit of its employees:”.
Section 8A(b): add “; or”.

Section 8A: add: “(c) is, or is required to be, registered under this Act under 10 any other enactment.” Section 14(2)(b) and (c): omit “Securities Act 1978, the Securities Markets Act 1988” and substitute in each case “Financial Markets Conduct Act 2011”.

Section 44(1)(a): omit “5(n)” and substitute “5(1)(n)”.
Section 48(3): repeal and substitute: “(3) However, this obligation does not apply to— 15 “(a) “(b) “(c) a financial service provider in relation to providing a financial service referred to in section 5(1)(i) or (ia)(i) if providing that service is not the provider’s only or 20 principal business; or a financial service provider in relation to the financial service of acting as a licensed market operator (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011); or a financial service provider (whether generally or in re- spect of a particular financial service or class of finan- cial service) if it is exempted from the obligation by or under any other Act or by regulations made under sec- tion 79.” 30 25 Section 49(2)(b): repeal.
513 Schedule 4 Financial Markets Conduct Bill Financial Service Providers (Registration and Dispute Resolution) Act 2008 (2008 No 97)—continued Part 1—continued Section 49(2)(d) to (f): repeal and substitute: “(d) “(e) “(f) a related body corporate (within the meaning of sec- tion 11(2) of the Financial Markets Conduct Act 2011) of an entity to which paragraph (c) applies: a person who is a wholesale investor (within the mean- 5 ing of clause 3(2) of Schedule 1 of the Financial Mar- kets Conduct Act 2011): a person who is, in relation to an offer of financial products, a wholesale investor (within the meaning of clause 3(3) of Schedule 1 of the Financial Markets 10 Conduct Act 2011), if the service relates to that offer or to financial products that have been subscribed for by that person under that offer: “(fa) a person who is, in relation to an offer of financial prod- ucts, a close business associate of the offeror (within 15 the meaning of clause 4 of Schedule 1 of the Finan- cial Markets Conduct Act 2011), if the service relates to that offer or to financial products that have been sub- scribed for by that person under that offer: “(fb) a person who is, in relation to an offer of financial prod- 20 ucts, a relative of the offeror or a director of the offeror (within the meaning of clause 5 of Schedule 1 of the Financial Markets Conduct Act 2011), if the service re- lates to that offer or to financial products that have been subscribed for by that person under that offer:”.
25 item relating to the Securities Trustees and Statutory Definition of private offer of securities in section 49(4): repeal.
Schedule 2: Supervisors Act 2011: omit and substitute: Financial Markets Au- thority Financial Markets Super- visors Act 2011 Licensed supervisors in respect of debt securities and managed investment schemes Schedule 2: add: Financial Markets Au- thority 514 Persons who hold a mar- ket services licence Financial Markets Con- duct Act 2011 Financial Markets Conduct Bill Schedule 4 Part 1—continued Financial Transactions Reporting Act 1996 (1996 No 9) Section 2(1): insert in its appropriate alphabetical order: “KiwiSaver scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011”.
Paragraph (b)(ii) of the definition of facility in section 2(1): repeal 5 and substitute: “(ii) membership of a superannuation scheme or KiwiSaver scheme:”.
Paragraph (d) of the definition of facility holder in section 2(1): re- peal and substitute: “(d) if that facility consists of membership of a super- annuation scheme or KiwiSaver scheme, means the product holder of the managed investment product in the scheme (within the meanings of product holder and managed investment product in section 6(1) of the 15 Financial Markets Conduct Act 2011)”.
Definition of superannuation scheme in section 2(1): repeal and substitute: 10 “superannuation scheme has the same meaning as in sec- tion 6(1) of the Financial Markets Conduct Act 2011”.

20 Section 3(1)(h) to (i): repeal and substitute: “(h) a supervisor or a manager of a registered scheme (within the meanings of those terms in section 6(1) of the Fi- nancial Markets Conduct Act 2011):”.
Friendly Societies and Credit Unions Act 1982 (1982 No 118) Section 78(2)(a) and (b): repeal and substitute: 25 “(a) “(b) a member, or a person claiming through a member (un- less that member or person is a supervisor appointed for the purposes of subpart 2 of Part 4 of the Finan- cial Markets Conduct Act 2011) or under the rules of a 30 registered society or branch, and the society or branch or an officer of the society or branch; or any person aggrieved who has ceased to be a member of a registered society or branch, or any person claim- 515 Schedule 4 Financial Markets Conduct Bill Friendly Societies and Credit Unions Act 1982 (1982 No 118)—continued Part 1—continued ing through such person aggrieved (unless that person aggrieved or other person claiming through that person is a supervisor appointed for the purposes of subpart 2 of Part 4 of the Financial Markets Conduct Act 2011), and the society or branch or an officer of the society or 5 branch; or”.
Section 99(1)(d): repeal.

Section 109A: repeal and substitute: “109A Power of credit union to appoint supervisor for debt securities 10 “(1) A credit union may appoint a supervisor and sign or amend a trust deed for the purposes of subpart 2 of Part 4 of the Financial Markets Conduct Act 2011.
“(2) This section applies regardless of anything to the contrary in the rules of a credit union.” Section 112(1A): repeal and substitute: “(1A) However, regardless of the rules of a credit union, if a super- visor has been appointed in respect of a debt security for the purposes of subpart 2 of Part 4 of the Financial Markets Conduct Act 2011, then that supervisor may exercise any 20 rights it has under that Act in respect of the property of the credit union.” 15 Goods and Services Tax Act 1985 (1985 No 141) Section 3(1)(j): omit “superannuation scheme” in each place where it appears and substitute in each case “retirement scheme”.
Section 3(1)(ka): omit “superannuation scheme” and substitute “re- tirement scheme”.
Section 3(2): insert in its appropriate alphabetical order: 25 “contributory scheme— “(a) means any scheme or arrangement that, in substance 30 and irrespective of the form of the scheme or arrange- ment, involves the investment of money where— 516 Financial Markets Conduct Bill Schedule 4 Goods and Services Tax Act 1985 (1985 No 141)—continued Part 1—continued “(i) “(ii) the investor acquires or may acquire an interest in or right in respect of property; and that interest or right will or may be, under the terms of investment, used or exercised in con- junction with any other interest in or right in 5 respect of property acquired in similar circum- stances, whether at the same time or not; but “(b) does not include a scheme or arrangement described in paragraph (a) that has 5 or fewer investors, provided that neither the manager of the scheme nor any associ- 10 ated person of the manager is the manager of another such scheme or arrangement”.
Definition of participatory security in section 3(2): omit “(as de- fined in section 2 of the Securities Act 1978); and includes an inter- est in a unit trust within the meaning of the Unit Trusts Act 1960;” 15 and substitute “; and includes an interest in a unit trust (within the meaning of section YA 1 of the Income Tax Act 2007);”.
Definition of superannuation scheme in section 3(2): repeal and substitute: “retirement scheme has the meaning given in section 20 111(4) of the Financial Markets Conduct Act 2011”.

Section 3(3)(d): omit “superannuation scheme” and substitute “re- tirement scheme”.
Government Superannuation Fund Act 1956 (1956 No 47) Section 15C(1)(c): repeal and substitute: 25 “(c) enter into an agreement constituting a derivative (within the meaning of section 8 of the Financial Markets Con- duct Act 2011) or amend the terms of that agreement.” Section 19H: repeal and substitute: “19H Application of Part 4 of Financial Markets Conduct Act 30 2011 Each of the schemes must be treated for the purposes of this Act and any other Act as if it is registered on the register of managed investment schemes under the Financial Markets 517 Schedule 4 Financial Markets Conduct Bill Government Superannuation Fund Act 1956 (1956 No 47)—continued Part 1—continued Conduct Act 2011 as a superannuation scheme, but Part 4 of that Act otherwise does not apply to it.” Section 61S(1)(c): omit “superannuation scheme nominated by the contributor that is approved by the Authority and is registered under the Superannuation Schemes Act 1989” and substitute “retirement 5 scheme (within the meaning of section 111(4) of the Financial Mar- kets Conduct Act 2011) that is nominated by the contributor and ap- proved by the Authority”.
Section 71K(3): omit “superannuation scheme nominated by the contributor that is approved by the Authority and is registered under 10 the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011) that is nominated by the contributor and approved by the Authority”.
Section 81P(1)(b): omit “superannuation scheme nominated by him 15 or her that is approved by the Authority and is approved under the Superannuation Schemes Act 1976 and classified under that Act as an employee pension superannuation scheme or a personal pension superannuation scheme or is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the 20 meaning of section 111(4) of the Financial Markets Conduct Act 2011) that is nominated by him or her and approved by the Author- ity”.
Health Sector (Transfers) Act 1993 (1993 No 23) Paragraph (c) of the definition of assets in section 2(1): omit “se- 25 curities within the meaning of the Securities Act 1978” and substi- tute “financial products within the meaning of the Financial Markets Conduct Act 2011”.

Paragraph (b) of the definition of liabilities in section 2(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct 30 Act 2011”.
518 Financial Markets Conduct Bill Schedule 4 Part 1—continued Housing Restructuring and Tenancy Matters Act 1992 (1992 No 76) Paragraph (c) of the definition of Corporation assets in section 2(1): omit “securities within the meaning of the Securities Act 1978” and substitute “financial products within the meaning of the Financial 5 Markets Conduct Act 2011”.

Paragraph (b) of the definition of liabilities in section 2(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.
10 Human Rights Act 1993 (1993 No 82) Section 70(5): omit “or the trustees of the scheme” and substitute “or the supervisor or manager of the scheme”.

Section 70(5)(d): omit “section 9C of the Superannuation Schemes Act 1989” and substitute “section 167 of the Financial Markets Conduct Act 2011”.
Clause 6(1) of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and sub- stitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.

Clause 6(1) of Schedule 2: omit “superannuation scheme that is 20 registered under the Superannuation Schemes Act 1989” and sub- stitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
15 Income Tax Act 2007 (2007 No 97) Section EY 11(3): repeal and substitute: “(3) At all times in the income year, the fund must be registered as a superannuation scheme on the register of managed investment schemes (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011).” 25 519 Schedule 4 Financial Markets Conduct Bill Income Tax Act 2007 (2007 No 97)—continued Part 1—continued Heading above section EY 11(13) and section EY 11(13): repeal and substitute: “Objection against FMA decision “(13) A person dissatisfied with the FMA’s decision may appeal against the decision to the High Court and has no right of ob- 5 jection under the Tax Administration Act 1994.
“(13A) A decision against which an appeal is lodged under sub- section (13) continues in force unless the High Court orders otherwise.” Section HM 18(1)(c): omit “prospectus” and substitute “product dis- 10 closure statement”.

Section HM 19B(2)(a): omit “to which the Unit Trusts Act 1960 applies”.

Section RH 3(2)(b)(iv): omit “under the KiwiSaver Act 2006”.
Definition of complying superannuation fund in section YA 1: re- 15 peal and substitute: “complying superannuation fund has the same meaning as in sec- tion 4(1) of the KiwiSaver Act 2006”.

Definition of defined benefit fund in section YA 1: repeal and sub- stitute: 20 “defined benefit fund means a superannuation scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011) that operates on the principle of unallo- cated funding”.
Paragraph (a) of the definition of public unit trust in section YA 25 1: omit “that offers securities to the public under the Securities Act 1978” and substitute “in respect of which regulated offers are made under the Financial Markets Conduct Act 2011”.
Paragraph (b)(vi) and (vii) of the definition of public unit trust in section YA 1: omit “if the unit trust offers securities to the public 30 under the Securities Act 1978” and substitute in each case “if regu- lated offers in respect of the unit trust are made under the Financial Markets Conduct Act 2011”.

Paragraph (c) of the definition of relative in section YA 1: repeal.
520 Financial Markets Conduct Bill Schedule 4 Income Tax Act 2007 (2007 No 97)—continued Part 1—continued Definition of superannuation fund in section YA 1: repeal and sub- stitute: “superannuation fund means— “(a) a retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011); 5 and for a retirement scheme that is a trust, the trustees of the retirement scheme”.
“(b) Independent Police Conduct Authority Act 1988 (1988 No 2) Section 11: omit “superannuation scheme that is registered under 10 the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 111(4) of the Financial Mar- kets Conduct Act 2011)”.
Insolvency Act 2006 (2006 No 55) Paragraph (w)(v) of Schedule 1: repeal and substitute: 15 “(v) financial products (within the meaning of section 7 of the Financial Markets Conduct Act 2011) if sold on a stock exchange (within the meaning of section 2(1) of the Companies Act 1993).” Insurance Intermediaries Act 1994 (1994 No 41) Section 15(1): omit “section 2 of the Securities Act 1978” and sub- stitute “section 8 of the Financial Markets Conduct Act 2011”.
20 Insurance (Prudential Supervision) Act 2010 (2010 No 111) Section 6(1): insert in its appropriate alphabetical order: “derivative transaction means— “(a) a transaction that is a rate swap transaction, swap option, basis swap, forward rate transaction, interest rate option, foreign exchange transaction, cap trans- action, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, 30 currency option, commodity swap, commodity option, 25 521 Schedule 4 Financial Markets Conduct Bill Insurance (Prudential Supervision) Act 2010 (2010 No 111)—continued Part 1—continued “(b) equity or equity index swap, equity or equity index option, bond option, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread transaction, forward purchase or sale of a security, or commodity or other 5 financial instrument or interest (including an agreement or option that relates to any of these transactions); or a transaction that is similar to any transaction referred to in paragraph (a) that— “(i) is currently, or in the future becomes, recurrently 10 entered into in the financial markets; and is a forward, swap, future, option, or other derivative on 1 or more rates, currencies, com- modities, equity securities or other equity instru- ments, debt securities or other debt instruments, 15 economic indices or measures of economic risk or value, environmental or climatic variable, or other benchmarks against which payments or deliveries are to be made”.
“(ii) Section 7(3)(a): omit “(within the meaning of section 136(1) of the 20 Crown Entities Act 2004)”.

Section 7(3)(e): omit “superannuation scheme (within the meaning of section 2A of the Superannuation Schemes Act 1989) or a Kiwi- Saver scheme (within the meaning of section 4(1) of the KiwiSaver Act 2006)” and substitute “retirement scheme (within the meaning 25 of section 111(4) of the Financial Markets Conduct Act 2011)”.
Section 99(8): repeal and substitute: “(8) In this section, public issuer means a person who is a party to a listing agreement with, or whose securities are otherwise quoted on,— “(a) a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011); or a securities market that is authorised to operate in an overseas jurisdiction in accordance with the laws of that jurisdiction.” 30 35 “(b) 522 Financial Markets Conduct Bill Schedule 4 Part 1—continued Judicature Act 1908 (1908 No 89) Section 24B(1)(e): omit “Securities Act 1978 or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.
Section 26G: omit “registered superannuation scheme” and substi- 5 tute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.

Lawyers and Conveyancers Act 2006 (2006 No 1) Section 322(5)(d): omit “body that is a party to a listing agreement with a stock exchange” and substitute “listed issuer”.

Paragraph (c) of the definition of company in section 322(6): omit “party to a listing agreement with a stock exchange” and substitute “listed issuer”.
Section 322(6): add: 10 “listed issuer has the same meaning as in section 6(1) of the 15 Financial Markets Conduct Act 2011.” Clause 9(1) of Schedule 5: omit “scheme registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
20 Local Government Act 2002 (2002 No 84) Definition of equity security in section 5(1): repeal and substitute: “equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Section 71A(1) : omit “listed on a stock exchange” and substitute 25 “quoted on a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.
Section 122: repeal and substitute: “122 Disclosure document and loan documents to contain statement that the Crown does not guarantee financial products or loan If a local authority is named as the issuer, or is otherwise named with its consent, in a disclosure document (within the 30 “(1) 523 Schedule 4 Financial Markets Conduct Bill Local Government Act 2002 (2002 No 84)—continued Part 1—continued meaning of section 6(1) of the Financial Markets Conduct Act 2011), that disclosure document must, unless the finan- cial products being offered under the disclosure document are expressly guaranteed by the Crown under the Public Finance Act 1989, contain a statement that the financial products being 5 offered under the disclosure document are not guaranteed by the Crown.
If a local authority enters into any loan agreement or incidental arrangement, that agreement or arrangement must include a statement that the loan or other liability under the incidental 10 arrangement is not guaranteed by the Crown.

“(2) “(3) Subsection (2) does not apply in relation to liability for any sum of a kind described in section 49 of the Public Finance Act 1989.” Clause 21(5)(c)(ii)(D) of Schedule 7: omit “Securities Act 1978” and 15 substitute “Financial Markets Conduct Act 2011”.
Local Government (Auckland Council) Act 2009 (2009 No 32) Clause 5(2)(c) of Schedule 2: omit “Securities Act 1978, or the Se- curities Markets Act 1988” and substitute “Financial Markets Con- duct Act 2011”.

20 Local Government Borrowing Act 2011 (2011 No 77) Heading above section 8 and section 8: repeal.
Mackelvie Trust Act 1958 (1958 No 2 (P)) Section 7(2): omit “stock, shares, or debentures of any company quoted on a registered exchange’s securities market (within the 25 meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “quoted financial products of a listed issuer”.

Section 7(3): omit “stock, shares, or debentures of any company” and substitute “quoted financial products”.
Section 7(3): omit “a registered exchange’s securities market (within 30 the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “a licensed market”.

524 Financial Markets Conduct Bill Schedule 4 Mackelvie Trust Act 1958 (1958 No 2 (P))—continued Part 1—continued Section 7: add: “(4) In this section, quoted, financial products, and licensed mar- ket have the same meanings as in section 6(1) of the Finan- cial Markets Conduct Act 2011”.
Maori Language Act 1987 (1987 No 176) Clause 10(1) of Schedule 2: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substi- tute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.

Maori Reserved Land Amendment Act 1997 (1997 No 101) Section 8(1) to (3): omit “voting securities” and substitute in each case “voting products”.
Section 8(5)(a): repeal and substitute: 5 10 “(a) company includes any body corporate with voting products; but does not include a company that is a 15 listed issuer (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011):”.

Section 8(5)(c): omit “sections 5 to 5B of the Securities Markets Act 1988” and substitute “sections 230 to 233 of the Financial Markets Conduct Act 2011”.
Section 8(5)(e): repeal and substitute: “(e) voting product has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011.” Māori Television Service (Te Aratuku Whakaata Irirangi Māori) Act 2003 (2003 No 21) Clause 2(2)(b) of Schedule 2: omit “Securities Act 1978, or the Se- curities Markets Act 1988” and substitute “Financial Markets Con- duct Act 2011”.
20 25 Masterton Trust Lands Act 2003 (2003 No 1 (L)) Clause 8(1) of Schedule 2: omit “superannuation scheme which is 30 registered under the Superannuation Schemes Act 1989” and substi- 525 Schedule 4 Financial Markets Conduct Bill Masterton Trust Lands Act 2003 (2003 No 1 (L))—continued Part 1—continued tute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
Mental Health Commission Act 1998 (1998 No 5) Clause 10(1) of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substi- 5 tute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
Methodist Charitable and Educational Trusts Act 1911 (1911 No 1 (L)) Section 30(1)(e): omit “company that is party to a listing agreement 10 with a registered exchange (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “listed issuer”.
Section 30(1)(f): omit “the securities of any company whether in- corporated in New Zealand or elsewhere, which are listed on a regis- tered exchange’s securities market (within the meaning of section 15 2(1) of the Securities Markets Act 1988)” and substitute “quoted fi- nancial products of any listed issuer that is a company whether in- corporated in New Zealand or elsewhere”.

Section 30(2) and (6): omit “securities” and substitute in each case “financial products”.
Section 30: add: “(7) In this section, listed issuer, quoted, and financial products have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.” 20 Motor Vehicle Sales Act 2003 (2003 No 12) Section 24(i): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Section 68(1)(c)(i): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.
25 30 526 Financial Markets Conduct Bill Schedule 4 Part 1—continued Museum of New Zealand Te Papa Tongarewa Act 1992 (1992 No 19) Clause 7(1) of Schedule 1: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and sub- stitute “retirement scheme (within the meaning of section 111(4) 5 of the Financial Markets Conduct Act 2011)”.
National Heart Foundation of New Zealand Empowering Act 1970 (1970 No 3 (P)) Section 3(1): omit “the securities of any company, whether incorp- orated in New Zealand or elsewhere, which are officially listed on a 10 registered exchange’s securities market (within the meaning of sec- tion 2(1) of the Securities Markets Act 1988 and which comprise” and substitute “quoted financial products of any company whether incorporated in New Zealand or elsewhere and that comprise”.
Section 3(2) and (3): omit “securities” and substitute in each case 15 “financial products”.

Section 3: add: “(6) In this section, quoted and financial products have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.” 20 National Provident Fund Restructuring Act 1990 (1990 No 126) Definition of debt security in section 2: repeal and substitute: “debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.
Definition of equity security in section 2: repeal and substitute: 25 “equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Section 2: insert in their appropriate alphabetical order: “managed investment product has the same meaning as in section 8 of the Financial Markets Conduct Act 2011 “registered scheme has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011”.
30 527 Schedule 4 Financial Markets Conduct Bill National Provident Fund Restructuring Act 1990 (1990 No 126)—continued Part 1—continued Paragraph (b) of the definition of market value in section 2: omit “under section 14 of the Superannuation Schemes Act 1989”.
Definition of superannuation scheme in section 2: omit “has the same meaning as in section 2 of the Superannuation Schemes Act 1989” and substitute “means a retirement scheme (within the 5 meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.

Section 20(3): omit “a trustee of a superannuation scheme registered under the Superannuation Schemes Act 1989” and substitute “a man- ager of a registered scheme under the Financial Markets Conduct 10 Act 2011”.
Section 25(1)(a): omit “the Superannuation Schemes Act 1989” and substitute “subpart 3 of Part 4 of the Financial Markets Conduct Act 2011”.

Section 42(2): omit “Notwithstanding section 9B of the Superannu- 15 ation Schemes Act 1989” and substitute “Despite sections 162 to 166 of the Financial Markets Conduct Act 2011”.

Section 53(1) and (2): omit “participatory securities” and substitute in each case “managed investment products”.
Section 53(4): omit “section 8 of the Superannuation Schemes 20 Act 1989 or”.

Section 57(1)(a): repeal.

Section 57(2): repeal.
Part 4: insert after section 59: “Application of Financial Markets Conduct Act 2011 “59A Application of Financial Markets Conduct Act 2011 The Financial Markets Conduct Act 2011 applies to an exist- ing scheme on and after the effective date for the scheme in accordance with section 682 of that Act as follows: “(a) the scheme must be treated, for the purposes of that Act, as a trust established and governed by a trust deed that is interpreted and administered in accordance with New Zealand law, rather than under this Act; and 25 30 528 Financial Markets Conduct Bill Schedule 4 National Provident Fund Restructuring Act 1990 (1990 No 126)—continued Part 1—continued “(b) “(c) “(d) “(e) “(f) the Board is the manager of the scheme for the purposes of that Act; and the trust deed of the scheme must be treated as including the terms and conditions contained or implied in the trust deed by that Act and this Act; and the scheme must be treated as meeting the registration requirements for a restricted superannuation scheme for the purposes of sections 113, 115, and 117 of the Financial Markets Conduct Act 2011; and to avoid doubt, the obligation under that Act to have an 10 independent trustee does not apply; and the duty on the manager under section 131 of that Act is subject to section 53 of this Act.” 5 National Provident Fund Restructuring Amendment Act 1997 (1997 No 83) Section 17(3): repeal.
Section 20(4)(b): repeal.

Section 27(3): omit “the Superannuation Schemes Act 1989 or any other” and substitute “any”.

Section 30(1): omit “, the Superannuation Schemes Act 1989,”.

Section 30(2): omit “, the Superannuation Schemes Act 1989,”.

Clause 3(c) of Schedule 1: repeal.


15 20 New Zealand Council for Educational Research Act 1972 (1972 No 35 Section 15(2): omit “superannuation scheme which is registered 25 under the Superannuation Schemes Act 1989” and substitute “re- tirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
529 Schedule 4 Financial Markets Conduct Bill Part 1—continued New Zealand Horticulture Export Authority Act 1987 (1987 No 93) Section 19: omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 111(4) of the Financial Mar- 5 kets Conduct Act 2011)”.
New Zealand Maori Arts and Crafts Institute Act 1963 (1963 No 51) Section 18(3): omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “re- 10 tirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.

New Zealand Public Health and Disability Act 2000 (2000 No 91) Clause 45A(2) of Schedule 3: omit “a derivative transaction” and substitute “an agreement constituting a derivative”.
15 New Zealand Stock Exchange Restructuring Act 2002 (2002 No 1 (P)) Section 12(1): repeal and substitute: “(1) There must be a control limit under section 343 of the Finan- cial Markets Conduct Act 2011 in respect of the Company on 20 and from the commencement of this subsection.” New Zealand Superannuation and Retirement Income Act 2001 (2001 No 84) Clause 1(1) of Schedule 6: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989 and” and 25 substitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011) that is”.
Ombudsmen Act 1975 (1975 No 9) Section 12: omit “scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the 30 530 Financial Markets Conduct Bill Schedule 4 Ombudsmen Act 1975 (1975 No 9)—continued Part 1—continued meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.

Personal Property Securities Act 1999 (1999 No 126) Definition of futures contract in section 16(1): repeal.
Definition of investment security in section 16(1): omit “futures 5 contract” and substitute “derivative (within the meaning of section 8 of the Financial Markets Conduct Act 2011)”.

Section 17A(b): omit “security (as defined in section 2D of the Secur- ities Act 1978)” and substitute “financial product (within the meaning of section 7 of the Financial Markets Conduct Act 2011)”.
10 Port Companies Act 1988 (1988 No 91) Definition of debt security in section 2(1): repeal and substitute: “debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Definition of equity security in section 2(1): repeal and substitute: “equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.
15 Section 13: omit “listing of the shares of a port company on a regis- tered exchange’s securities market (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “quotation of 20 the shares of a port company on a licensed market (within the mean- ing of section 6(1) of the Financial Markets Conduct Act 2011)”.
Privacy Act 1993 (1993 No 28) Part 1 of Schedule 2: insert after the item relating to the Electricity Act 1992: 25 Financial Markets Conduct Act 2011 Sections 200 and 287 and clauses 1 and 4 of Schedule 2 Items relating to the Securities Act 1978 in Part 1 of Schedule 2: repeal.

531 Schedule 4 Financial Markets Conduct Bill Part 1—continued Property Law Act 2007 (2007 No 91) Section 167(1)(b)(ii): omit “Securities Act 1978” and substitute “Fi- nancial Markets Conduct Act 2011”.
Property (Relationships) Act 1976 (1976 No 166) Section 44D(4): omit “section 2 of the Securities Act 1978” and sub- 5 stitute “section 8 of the Financial Markets Conduct Act 2011”.

Public Finance Act 1989 (1989 No 44) Section 1A(2)(f)(iii): omit “derivative transactions” and substitute “derivatives”.
Definition of derivative transaction in section 2(1): repeal and sub- 10 stitute: “derivative— “(a) 15 “(b) has the same meaning as in section 8 of the Financial Markets Conduct Act 2011; and includes a foreign exchange transaction”.

Heading to Part 6: omit “derivative transactions” and substitute “derivatives”.

Heading to subpart 3 of Part 6: omit “Derivative transactions” and substitute “Derivatives”.

Heading above section 65F: omit “derivative transactions” and sub- 20 stitute “derivatives”.
Heading to section 65F: omit “derivative transactions” and substi- tute “derivatives”.

Section 65F: omit “derivative transaction” and substitute “deriva- tive”.

Heading to section 65G: omit “derivative transactions” and substi- tute “derivatives”.

Section 65G(1) and (2): omit “derivative transaction” and substitute in each case “derivative”.

Heading above section 65H: omit “derivative transactions” and sub- 30 stitute “derivatives”.
Heading to section 65H: omit “derivative transactions” and substi- tute “derivatives”.

25 532 Financial Markets Conduct Bill Schedule 4 Public Finance Act 1989 (1989 No 44)—continued Part 1—continued Section 65H(1) and (2): omit “derivative transaction” in each place where it appears and substitute in each case “derivative”.
Public Trust Act 2001 (2001 No 100) Section 66: add: “(5) In this section, stock exchange has the same meaning as in 5 section 2(1) of the Companies Act 1993.” Section 71(2)(c): repeal and substitute: “(c) a product disclosure statement in relation to the invest- ment of that money in the fund has been lodged in ac- cordance with the requirements of Part 3 of the Finan- 10 cial Markets Conduct Act 2011 and regulations made under that Act.” New section 72C: insert after section 72B: “72C Public Trust may not make regulated offer of managed investment products in certain group investment funds 15 “(1) Public Trust may not make a regulated offer of managed in- vestment products in a group investment fund established by it under this Part if the fund was established after the date on which this section comes into force.
“(2) Nothing in subsection (1) affects the rights, powers, and du- 20 “(3) ties of Public Trust under sections 61 to 72B.

In this section, regulated offer and managed investment products have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.” Heading above section 166 and section 166: repeal.
Racing Act 2003 (2003 No 3) Clause 31 of Schedule 1: omit “superannuation scheme that is regis- tered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
Clause 7(1) of Schedule 3: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and sub- 25 30 533 Schedule 4 Financial Markets Conduct Bill Part 1—continued Racing Act 2003 (2003 No 3)—continued stitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.

Real Estate Agents Act 2008 (2008 No 66) Section 37(1)(g): omit “Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.
Section 137(2)(i): repeal and substitute: 5 “(i) an entity that has an interest in the licensee or an en- tity in which the licensee has an interest (except where either interest is in quoted financial products within the meaning given for those terms in section 6(1) of the 10 Financial Markets Conduct Act 2011).” Receiverships Act 1993 (1993 No 122) Section 5(1)(k): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.
Section 28(1)(b): omit “Securities Act 1978” and substitute “Finan- 15 cial Markets Conduct Act 2011”.

Remuneration Authority Act 1977 (1977 No 110) Section 2: insert in its appropriate alphabetical order: “retirement scheme has the same meaning as in section 111(4) of the Financial Markets Conduct Act 2011.” Section 12(2A)(a) and (b) and (2B): omit “registered superannuation scheme” and substitute in each case “retirement scheme”.

Section 12(2C): repeal.


Section 12AA(1)(a) and (b) and (6)(c): omit “registered superannu- ation scheme” and substitute in each case “retirement scheme”.

Section 12AA(7): repeal.

Section 12B(3)(a) and (b) and (7): omit “registered superannuation scheme” and substitute in each case “retirement scheme”.

Section 12B(8): repeal.


20 25 534 Financial Markets Conduct Bill Schedule 4 Part 1—continued Reserve Bank of New Zealand Act 1989 (1989 No 157) Section 2(1): insert in their appropriate alphabetical order: 10 “debt security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011 “financial product has the same meaning as in section 7 of 5 the Financial Markets Conduct Act 2011 “managed investment scheme has the same meaning as in section 9 of the Financial Markets Conduct Act 2011”.
Paragraph (e) of the definition of foreign exchange in section 2(1): omit “security” and substitute “debt security”.

Definition of security in section 2(1): repeal.

Section 2(3)(a) and (b): omit “securities” and substitute in each case “financial products”.

Heading to section 35: omit “Securities” and substitute “Financial products”.

Section 35(1): omit “securities” in each place where it appears and substitute in each case “financial products”.
Section 35(1)(c): omit “security” and substitute “financial product”.

Section 35(2): omit “Securities” and substitute “Financial products”.

Section 39(b): omit “securities” and substitute “financial products”.

20 Section 46(1)(j): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.

Section 58(h): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.
Section 64(3): omit “unit trust of which the registered bank is a trustee or a manager within the meaning of the Unit Trusts Act 1960” and substitute “managed investment scheme of which the registered bank is a supervisor or a manager within the meaning of section 6(1) of the Financial Markets Conduct Act 2011”.
Section 65(1)(e): omit “unit trust of which the registered bank or the associated person is a trustee or manager within the meaning of the Unit Trusts Act 1960” and substitute “managed investment scheme of which the registered bank or the associated person is a supervisor 30 25 15 535 Schedule 4 Financial Markets Conduct Bill Part 1—continued Reserve Bank of New Zealand Act 1989 (1989 No 157)—continued or a manager within the meaning of section 6(1) of the Financial Markets Conduct Act 2011”.
Section 156K(2): omit “Securities Act 1978” and substitute “Finan- cial Markets Conduct Act 2011”.

Definition of Minister responsible for the Securities Act 1978 in 5 section 156M(1): repeal and substitute: “Minister responsible for the Financial Markets Conduct Act 2011 means the Minister of the Crown who, under the au- thority of any warrant or with the authority of the Prime Min- ister, is for the time being responsible for the administration of 10 the Financial Markets Conduct Act 2011”.
15 Section 156N(1): omit “Securities Act 1978” and substitute “Finan- cial Markets Conduct Act 2011”.

Section 156P(1)(g): omit “Securities Act 1978” and substitute “Fi- nancial Markets Conduct Act 2011”.

Section 156Y(3)(d): omit “Securities Act 1978” and substitute “Fi- nancial Markets Conduct Act 2011”.

Section 156ZA(1)(a): omit “Securities Act 1978” and substitute “Fi- nancial Markets Conduct Act 2011”.

Section 156ZD: omit “Securities Act 1978” and substitute “Financial 20 Markets Conduct Act 2011”.
Section 156ZE: omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Section 156ZG(3): omit “Securities Act 1978” and substitute “Fi- nancial Markets Conduct Act 2011”.

Definitions of collective investment scheme, debt security, trust deed, and trustee in section 157B(1): repeal.
Section 157B(1): insert in their appropriate alphabetical order: 25 “regulated offer has the same meaning as in section 29 of the Financial Markets Conduct Act 2011 “trust deed, in relation to a deposit taker, means— “(a) a trust deed required by subpart 2 of Part 4 of the Financial Markets Conduct Act 2011 in respect of any 30 536 Financial Markets Conduct Bill Schedule 4 Part 1—continued Reserve Bank of New Zealand Act 1989 (1989 No 157)—continued “(b) debt security offered under a regulated offer by the de- posit taker; or a trust deed required by section 33(2)(a) of the Secur- ities Act 1978 in respect of any debt security offered to the public by the deposit taker 5 “trustee, in relation to a deposit taker, means— “(a) a licensed supervisor who, for the purposes of subpart 2 of Part 4 of the Financial Markets Conduct Act 2011, is designated or appointed as the trustee under a trust deed (or under the Financial Markets Supervisors Act 10 2011) in respect of any debt security offered under a regulated offer by the deposit taker; or a person appointed as trustee in accordance with the Se- curities Act 1978 in respect of any debt security offered to the public by the deposit taker”.
15 “(b) Section 157C(1)(a)(i): repeal and substitute: “(i) makes regulated offers of debt securities in New Zealand; and”.

Section 157C(1)(c)(i): repeal.
Section 157C(2) to (4): repeal and substitute: “(2) A person must be treated as satisfying the requirement in sub- 20 section (1)(a)(i) if— either— “(a) “(i) “(ii) the person has, before this subsection comes into force, offered debt securities to the public in New 25 Zealand; or the person makes an offer of debt securities to the public in New Zealand to which the Securities Act 1978 continues to apply in accordance with sections 670 to 677 of the Financial Markets 30 Conduct Act 2011; and “(b) any of those debt securities remain unpaid.
“(3) For the purposes of subsection (2), a reference to an offer of debt securities to the public has the same meaning as an offer 537 Schedule 4 Financial Markets Conduct Bill Part 1—continued Reserve Bank of New Zealand Act 1989 (1989 No 157)—continued of debt securities to the public as set out in section 3 of the Securities Act 1978.
“(4) A person remains a deposit taker until all debt securities of- fered by the person under regulated offers (or offers referred to in subsection (2)) are repaid.” 5 Section 157D: repeal and substitute: “157D Application of Part This Part, in so far as it applies to trust deeds, applies to every trust deed— “(a) whether or not the trust deed was registered under the 10 Securities Act 1978 or lodged under the Financial Mar- kets Conduct Act 2011; and regardless of when it was so registered or lodged.” “(b) Section 173(f): omit “securities” and substitute “financial products”.
Retirement Villages Act 2003 (2003 No 112) Section 5: insert in its appropriate alphabetical order: 15 “financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2011”.
Definition of security interest in section 5: repeal and substitute: “security interest, in relation to a retirement village, means 20 an interest that a person has in all or any part of the retirement village as a consequence of a mortgage (within the meaning of the Property Law Act 2007) over that part of the retirement village”.

Section 38(1): omit “Securities Trustees and Statutory Supervisors 25 Act 2011 that covers” and substitute “Financial Markets Supervisors Act 2011 that covers supervision of”.
Section 39(3): omit “Securities Trustees and Statutory Supervisors Act 2011” and substitute “Financial Markets Supervisors Act 2011”.
Section 43(1)(c): repeal and substitute: 30 “(c) apply to the court for an order under section 43A.” 538 Financial Markets Conduct Bill Schedule 4 Retirement Villages Act 2003 (2003 No 112)—continued Part 1—continued New section 43A: insert after section 43: “43A Court may make orders “(1) The court may, on application by a statutory supervisor under section 43(1)(c) and after giving the operator and any other person that the court thinks fit the opportunity to be heard, 5 make 1 or more of the orders listed in subsection (2).
“(2) The orders may— “(a) “(b) amend the provisions of the deed of supervision: impose restrictions on the activities of the operator (in- cluding restrictions on advertising) that the court thinks 10 are necessary to protect the interests of the residents: direct that no offer of occupation of the kind specified in the order be made while the order is in force: “(d) direct the operator to convene a meeting of the residents “(c) (and give any other directions it thinks fit relating to the 15 conduct of that meeting) for the purpose of— “(i) having placed before the residents by the statu- tory supervisor the information or proposal that the court or the statutory supervisor thinks neces- sary or appropriate and that relates to their inter- 20 ests; and “(ii) obtaining the opinions or directions of the resi- dents: “(e) “(f) “(g) “(h) “(i) 25 give directions in relation to the conduct of any meeting convened in accordance with paragraph (d): stay any civil actions or civil proceedings before the court by or against the statutory supervisor or the op- erator: restrain the transfer of an interest in all or any part of the retirement village: appoint a receiver or manager of the property that con- stitutes the retirement village (with any powers that the court orders): give any other directions that the court considers neces- sary to protect the interests of the residents or the public.
35 30 “(3) The court may vary or cancel an order made under this section.

539 Schedule 4 Financial Markets Conduct Bill Retirement Villages Act 2003 (2003 No 112)—continued Part 1—continued “(4) In exercising its powers under this section, the court must have regard to the interests of all creditors of the operator.” Section 107(1): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.
Section 107(2): repeal and substitute: “(2) Subsection (1) does not exempt any person from the appli- cation of any provision of the Financial Markets Conduct Act 2011— “(a) 5 in the retirement village; or in relation to the offer of any financial products (other than a financial product arising out of a matter referred 10 to in subsection (1)(a)),— “(i) “(ii) by any operator of a retirement village; or in relation to an offer of financial products to any per- son who is already a resident and who is not obliged to 15 subscribe for the products by an occupation right agree- ment.” “(b) Royal Society of New Zealand Act 1997 (1997 No 2 (P)) Clause 6(1) of the Schedule: omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substi- 20 tute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
Sale of Liquor Act 1989 (1989 No 63) Section 2: insert in its appropriate alphabetical order: “stock exchange has the same meaning as in section 2(1) of 25 the Companies Act 1993”.

Section 200(1A): omit “is a party to a listing agreement with a stock exchange and that has issued securities which are quoted on such an exchange” and substitute “has issued equity securities that are quoted on a stock exchange”.
30 540 Financial Markets Conduct Bill Schedule 4 Sale of Liquor Act 1989 (1989 No 63)—continued Part 1—continued 5 “(c) Section 225(1) and (2): repeal and substitute: “(1) A company registered under the Companies Act 1993 that holds a licence must notify the Secretary of the Licensing Au- thority of— “(a) “(b) any change in the directors of the company; and in respect of shares of the company that are not quoted on a stock exchange, any change in the shareholding of the company; and in respect of shares of the company that are quoted on a stock exchange, any change in the shareholding of the 10 company under which any person becomes the holder of at least 20% of the quoted shares or of any particular class of quoted shares of the company, if that person did not hold at least 20% of the quoted shares or of that class of quoted shares when the licence was issued to 15 the company.” Section 225(3): omit “or subsection (2)”.
Section 225(4): omit “incorporated under the Companies Act 1955 or” and substitute “registered under”.

20 Social Security Act 1964 (1964 No 136) Section 3(3)(c): omit “superannuation scheme registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
Definition of cash assets in section 61E(1): omit “the KiwiSaver 25 Act 2006” in each place where it appears and substitute in each case “subpart 3 of Part 4 of the Financial Markets Conduct Act 2011”.

Paragraph (ea) of the definition of exempt assets in clause 4 of Schedule 27: omit “the KiwiSaver Act 2006” and substitute “sub- part 3 of Part 4 of the Financial Markets Conduct Act 2011”.
Paragraph (ea)(ii) of the definition of exempt assets in clause 4 of Schedule 27: omit “that Act” and substitute “the KiwiSaver Act 2006”.

30 541 Schedule 4 Financial Markets Conduct Bill Part 1—continued Sports Anti-Doping Act 2006 (2006 No 58) Section 11(1): omit “superannuation scheme that is registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 111(4) of the Financial Mar- kets Conduct Act 2011)”.
5 State Sector Act 1988 (1988 No 20) Definition of superannuation scheme or scheme in section 84: re- peal and substitute: “superannuation scheme or scheme means any retirement scheme (within the meaning of section 111(4) of the Finan- 10 cial Markets Conduct Act 2011).” Section 84B(a): repeal.
State Sector Amendment Act 1990 (1990 No 78) Section 3: omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “retirement 15 scheme (within the meaning of section 111(4) of the Financial Mar- kets Conduct Act 2011)”.
St John’s College Trusts Act 1972 (1972 No 6 (P)) Section 11(1)(c): omit “securities of any company, whether incorp- orated in New Zealand or elsewhere, which is officially listed on a 20 registered exchange’s securities market (within the meaning of sec- tion 2(1) of the Securities Markets Act 1988)” and substitute “finan- cial products of a company, whether incorporated in New Zealand or elsewhere, that is a listed issuer (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.
Section 11(1)(c): omit “made in the securities” and substitute “made in the financial products”.

25 State-Owned Enterprises Act 1986 (1986 No 124) Section 12(2)(c): omit “Securities Act 1978” and substitute “Finan- cial Markets Conduct Act 2011”.

Section 18(4) and (5): omit “Securities Markets Act 1988” and sub- stitute in each case “Financial Markets Conduct Act 2011”.
30 542 Financial Markets Conduct Bill Schedule 4 State-Owned Enterprises Act 1986 (1986 No 124)—continued Part 1—continued Paragraph (d) of the definition of assets in section 29(1): omit “se- curities within the meaning of the Securities Act 1978” and substitute “financial products within the meaning of the Financial Markets Con- duct Act 2011”.

Paragraph (b) of the definition of liabilities in section 29(1): omit 5 “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.
Summary Proceedings Act 1957 (1957 No 87) Definition of infringement notice in section 2(1): insert after para- graph (b): “(baa) section 491 of the Financial Markets Conduct Act 2011; or”.

Part 2 of Schedule 1: items relating to the Securities Act 1978 and the Securities Markets Act 1988: repeal.
Part 2 of Schedule 1: insert in its appropriate alphabetical order: 10 15 Financial Markets Conduct Act 2011 35 40 70 198 238 259 264 488 489 496 Failure to prepare and lodge PDS Offence to knowingly or recklessly contravene section 37 Offering financial products in entity that does not exist Offence of false or misleading statements Contravention of insider conduct prohibition False or misleading statement or information Creating false or misleading appearance of trading Offence of knowingly or recklessly contravening prohibition on further offers where defective disclosure in PDS or register entry Offence of knowingly or recklessly contravening other provisions relating to defective disclosure Offence of contravening management banning order 543 Schedule 4 Financial Markets Conduct Bill Part 1—continued Takeovers Act 1993 (1993 No 107) Paragraph (a) of the definition of code company in section 2(1): re- peal and substitute: “(a) is a listed issuer that has financial products that confer voting rights quoted on the relevant licensed market; 5 or”.
Definitions of quoted, registered exchange, registered exchange’s securities market, and security in section 2(1): repeal.
Section 2(1): insert in their appropriate alphabetical order: “financial product, in relation to a code company,— “(a) means— “(i) 10 “(ii) an equity security within the meaning of section 8 of the Financial Markets Conduct Act 2011, whether or not the security carries voting rights: a debt security, within the meaning of section 15 8 of the Financial Markets Conduct Act 2011, which carries the right to vote at any annual or general meeting of the code company: “(iii) a managed investment product, within the mean- ing of section 8 of the Financial Markets Con- 20 duct Act 2011, which carries the right to vote at any annual or general meeting of the code com- pany; and “(b) includes a financial product that is convertible, at the option of the product holder, into a financial product of 25 the type referred to in paragraph (a)(i), (ii), or (iii) “licensed market has the meaning set out in section 6(1) of the Financial Markets Conduct Act 2011 “licensed market operator has the meaning set out in sec- tion 6(1) of the Financial Markets Conduct Act 2011 “listed issuer has the meaning set out in section 6(1) of the Financial Markets Conduct Act 2011 “quoted in relation to financial products of a person, means financial products of the person that are approved for trading on a licensed market (and, for the avoidance of doubt, financial 35 products do not cease to be quoted merely because trading in those financial products is suspended)”.
30 544 Financial Markets Conduct Bill Schedule 4 Takeovers Act 1993 (1993 No 107)—continued Part 1—continued Paragraphs (a) and (b) of the definition of voting right in section 2(1): omit “security” and substitute in each case “financial product”.

Section 20(1)(c) and (e): omit “securities” and substitute in each case “financial products”.

Section 21(b), (c), and (f): omit “security” in each place where it 5 appears and substitute in each case “financial product”.
Section 21(e) and (f): omit “securities” and substitute in each case “financial products”.

Section 22(b): omit “securities” and substitute “financial products”.

Section 22(c): omit “security” and substitute “financial product”.

Section 23(a) and (b): omit “securities” and substitute in each case “financial products”.

Section 33(a) to (c) and (e) to (g): omit “securities” in each place where it appears and substitute in each case “financial products”.
Section 33C(1)(a)(ii): omit “, the Securities Act 1978, or the Se- 15 curities Markets Act 1988” and substitute “or the Financial Markets Conduct Act 2011”.

Section 33J(a) to (h): omit “securities” in each place where it appears and substitute in each case “financial products”.

Section 33J(e): omit “public”.

Section 33M(c)(ii): omit “securities” and substitute “financial”.

Section 33Q(c): omit “securities” and substitute “financial”.
Section 35(1)(b): repeal and substitute: 20 10 “(b) if the code company’s financial products are, or were at any material time, quoted on a licensed market, the 25 licensed market operator:”.

Section 35(1)(d) and (e): omit “security” and substitute in each case “financial product”.

Section 35(1)(f): omit “securities” and substitute “financial prod- ucts”.
Section 35(3)(a): repeal and substitute: 30 “(a) if the code company’s financial products are, or were at any material time, quoted on a licensed market, the licensed market operator:”.

545 Schedule 4 Financial Markets Conduct Bill Takeovers Act 1993 (1993 No 107)—continued Part 1—continued Section 35(3)(c) and (d): omit “security” and substitute in each case “financial product”.

Section 35(3)(e): omit “securities” and substitute “financial prod- ucts”.
Section 42(1)(a) and (b): omit “security” and substitute in each case 5 “financial product”.

Example in section 43: omit “securities” in each place where it ap- pears and substitute in each case “financial products”.

Section 44B(1)(b)(i) and (ii) and (2): omit “securities” and substitute in each case “financial products”.
Section 44F(b)(i): omit “the Securities Markets Act 1988, the Secur- ities Act 1978, the Securities Trustees and Statutory Supervisors Act 2011,” and substitute “the Financial Markets Conduct Act 2011, the Financial Markets Supervisors Act 2011,”.

Section 44G: omit “for a period stated in the order of 10 years or less” 15 and substitute “permanently or for a period specified in the order”.
Section 44I: omit “section 60A of the Securities Act 1978, section 43F of the Securities Markets Act 1988,” and substitute “subpart 6 of Part 7 of the Financial Markets Conduct Act 2011,”.

Definition of associated persons in section 44L(3): repeal and sub- 20 stitute: 10 “associated person has the same meaning as in section 11(1) of the Financial Markets Conduct Act 2011”.

Definition of liable in section 44L(3): omit “securities” and substi- tute “financial products”.
Section 44M(1)(a), (c), (e), and (f): omit “securities” in each place where it appears and substitute in each case “financial products”.

Section 44V(c): repeal and substitute: 25 “(c) if the code company’s financial products are, or were at any material time, quoted on a licensed market, the 30 licensed market operator:”.

Section 44V(f): omit “security” and substitute “financial product”.

Section 44V(g): omit “securities” and substitute “financial prod- ucts”.
546 Financial Markets Conduct Bill Schedule 4 Part 1—continued Tarawera Forest Act 1967 (1967 No 45) Section 10(3): omit “Securities Act 1978” and substitute “Financial Markets Conduct Act 2011”.

Trustee Act 1956 (1956 No 61) Section 42E: omit “, in the Superannuation Schemes Act 1989,” and 5 substitute “, in the Financial Markets Conduct Act 2011,”.
Trustee Companies Act 1967 (1967 No 35) Section 7(2)(m): omit “Securities Trustees and Statutory Supervisors Act 2011” and substitute “Financial Markets Supervisors Act 2011”.

Section 7(2)(p): repeal and substitute: “(p) supervisor (as defined in section 4(1) of the Financial Markets Supervisors Act 2011) in respect of a financial product or scheme the supervision of which is covered by the trustee company’s licence under that Act:”.
Section 31: add: “(4) In this section, stock exchange has the same meaning as in section 2(1) of the Companies Act 1993.” 10 15 Section 32A(2)(c): repeal and substitute: “(c) a product disclosure statement in relation to the invest- ment of that money in the fund has been lodged in ac- 20 cordance with the requirements of Part 3 of the Finan- cial Markets Conduct Act 2011 and regulations made under that Act.” New section 33C: insert after section 33B: “33C Trustee company may not make regulated offer of 25 managed investment products in certain group investment funds “(1) A trustee company may not make a regulated offer of managed investment products in a group investment fund established by it under this Part if the fund was established after the date on 30 which this section comes into force.
“(2) Nothing in subsection (1) affects the rights, powers, and du- ties of a trustee company under sections 29 to 33B.
547 Schedule 4 Financial Markets Conduct Bill Trustee Companies Act 1967 (1967 No 35)—continued Part 1—continued “(3) In this section, regulated offer and managed investment products have the same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.” Veterinarians Act 2005 (2005 No 126) Clause 22 of Schedule 1: omit “superannuation scheme that is regis- 5 tered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
10 Wellington Methodist Charitable and Educational Trusts Act 1916 (1916 No 13 (L)) Section 31(1)(b): omit “securities of any company, whether incorp- orated in New Zealand or elsewhere, which are officially listed on a registered exchange’s securities market (within the meaning of sec- tion 2(1) of the Securities Markets Act 1988)” and substitute “finan- cial products of any company, whether incorporated in New Zealand 15 or elsewhere, that is a listed issuer”.
Section 31(2) and (6): omit “securities” and substitute in each case “financial products”.
Section 31: add: “(7) In this section, financial products and listed issuer have the 20 same meanings as in section 6(1) of the Financial Markets Conduct Act 2011.” Winston Churchill Memorial Trust Act 1965 (1965 No 39) Section 27(3): omit “superannuation scheme which is registered under the Superannuation Schemes Act 1989” and substitute “re- 25 tirement scheme (within the meaning of section 111(4) of the Financial Markets Conduct Act 2011)”.
548 Financial Markets Conduct Bill Schedule 4 Part 2 Amendments to regulations Building Societies Regulations 1989 (SR 1989/33) Definition of equity security in regulation 17(1): revoke and substi- tute: 5 “equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.

Definition of security in regulation 17(1): revoke and substitute: “security means any financial product within the meaning of section 7 of the Financial Markets Conduct Act 2011”.
Regulation 31(b)(v): omit “other bodies corporate that are parties to listing agreements with a registered exchange (within the meaning of section 2(1) of the Securities Markets Act 1988)” and substitute “listed issuers (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.
Climate Change (Unit Register) Regulations 2008 (SR 2008/357) Paragraph (c)(ii)(F) of the definition of qualified person in regula- tion 3: omit “Securities Act 1978, the Securities Markets Act 1988,” and substitute “Financial Markets Conduct Act 2011”.

Deer Industry New Zealand Regulations 2004 (SR 2004/323) Definition of associated persons in regulation 3: omit “section 2 of the Securities Act 1978” and substitute “section 11(1) of the Finan- cial Markets Conduct Act 2011”.
10 15 20 Electricity (Statistics) Regulations 1996 (SR 1996/17) Definition of equity security in regulation 2(1): revoke and substi- 25 tute: “equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.
549 Schedule 4 Financial Markets Conduct Bill Part 2—continued Financial Advisers (Definitions, Voluntary Authorisation, Prescribed Entities, and Exemptions) Regulations 2011 (SR 2011/50) Regulation 4(3): revoke and substitute: “(3) Unless the context otherwise requires, any term or expression 5 that is defined in the Financial Markets Conduct Act 2011 or the regulations made under that Act and used, but not defined, in this regulation has the same meaning as in that Act or those regulations.” Regulation 6(2)(a) and (b): revoke and substitute: 10 “(a) “(b) associated persons within the meaning of section 11(1) of the Financial Markets Conduct Act 2011 (whether or not that Act otherwise applies to those persons); or related bodies corporate within the meaning of sec- 15 tion 11(2) of the Financial Markets Conduct Act 2011 (whether or not that Act otherwise applies to those bod- ies corporate); or”.
Regulation 7: revoke.

Financial Service Providers (Exemptions) Regulations 2010 (SR 20 2010/423) Regulation 5(2): omit “section 5B(2) of the Securities Markets Act 1988” and substitute “section 11(2) of the Financial Markets Con- duct Act 2011”.

Gas Governance (Compliance) Regulations 2008 (SR 2008/253) Regulation 63(b): omit “Securities Act 1978, or the Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.
25 Gas (Information Disclosure) Regulations 1997 (SR 1997/127) Definition of equity security in regulation 2(1): revoke and substi- 30 tute: “equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.
550 Financial Markets Conduct Bill Schedule 4 Gas (Information Disclosure) Regulations 1997 (SR 1997/127)—continued Part 2—continued Definition of security in regulation 2(1): revoke and substitute: “security means any of the following within the mean- ings given in section 8 of the Financial Markets Conduct Act 2011: “(a) “(b) “(c) an equity security: a debt security: a managed investment product”.
5 Gas (Statistics) Regulations 1997 (SR 1997/128) Definition of equity security in regulation 2(1): revoke and substi- tute: 10 “equity security has the same meaning as in section 8 of the Financial Markets Conduct Act 2011”.
Government Superannuation Fund (Ceasing Contributions) Regulations 1995 (SR 1995/172) Definition of registered superannuation scheme in regulation 2(1): 15 omit “superannuation scheme that is registered under the Superannu- ation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.
Health Entitlement Cards Regulations 1993 (SR 1993/169) Paragraph (c) of the definition of net income in regulation 2(1): omit “superannuation scheme registered under the Superannuation Schemes Act 1989” and substitute “retirement scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.
20 25 Lawyers and Conveyancers Act (Lawyers: Nominee Company) Rules 2008 (SR 2008/213) Paragraph (e) and (f) of the definition of lawyer attorney and lawyer trustee in rule 3.1: omit “party to a listing agreement with a stock exchange” and substitute in each case “listed issuer”.
30 551 Schedule 4 Financial Markets Conduct Bill Part 2—continued Lawyers and Conveyancers Act (Lawyers: Nominee Company) Rules 2008 (SR 2008/213)—continued Rule 3.1: insert in its appropriate alphabetical order: “listed issuer has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2011”.
Overseas Investment Regulations 2005 (SR 2005/220) Regulation 33(1)(l): omit “trustee of a superannuation scheme regis- 5 tered under the Superannuation Schemes Act 1989” and substitute “supervisor or manager of a retirement scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011)”.
Public Trust Regulations 2002 (SR 2002/198) Paragraph (a)(i) of the definition of continuing investment in regu- 10 lation 13(2): revoke and substitute: “(i) a disclosure statement has been lodged in accord- ance with the requirements of Part 3 of the Fi- nancial Markets Conduct Act 2011 and regula- tions made under that Act; or”.
15 Regulation 15: revoke and substitute: “15 Dispensation from ongoing disclosure Public Trust is not required to make ongoing disclosure in re- spect of a qualifying beneficiary to whom, in accordance with the requirements of— “(a) Part 3 of the Financial Markets Conduct Act 2011 and regulations made under that Act, a product disclosure statement was required to be, and was, given; or sections 33 and 37A of the Securities Act 1978 and regulations made under that Act, an investment state- 25 ment was required to be, and was, issued.” “(b) 20 552 Financial Markets Conduct Bill Schedule 4 Part 2—continued Real Estate Agents (Duties of Licensees) Regulations 2009 (SR 2009/281) Paragraph (i) of the definition of related person in form 2 of the Schedule: revoke and substitute: “(i) an entity that has an interest in the licensee or an en- 5 tity in which the licensee has an interest (except where either interest is in quoted financial products within the meanings given for those terms in section 6(1) of the Financial Markets Conduct Act 2011).” Real Estate Agents (Licensing) Regulations 2009 (SR 2009/282) Paragraph 11 of form 5 in Schedule 2: omit “Securities Markets Act 1988” and substitute “Financial Markets Conduct Act 2011”.
10 Securities Transfer (Approval of Austraclear New Zealand Electronic Registries Interface System) Order 2010 (SR 2010/4) Clause 3: omit “Securities Transfer Act 1991” and substitute “Finan- 15 cial Markets Conduct Act 2011”.

Heading to clause 4: omit “securities” and substitute “financial products”.

Clause 4: omit “securities” and substitute “financial products to which subpart 9 of Part 5 of the Financial Markets Conduct Act 20 2011 applies”.
Clause 1 of the Schedule: insert in its appropriate alphabetical order: “security means a financial product to which subpart 9 of Part 5 of the Financial Markets Conduct Act 2011 applies”.

Clause 2(o)(iii) of the Schedule: omit “conduct rules of an exchange 25 registered under Part 2B of the Securities Markets Act 1988” and substitute “market rules of a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2011”.
Securities Transfer (Approval of FASTER System) Order 2001 (SR 2001/238) Clause 3: omit “Securities Transfer Act 1991” and substitute “Finan- cial Markets Conduct Act 2011”.

30 553 Schedule 4 Financial Markets Conduct Bill Part 2—continued Securities Transfer (Approval of FASTER System) Order 2001 (SR 2001/238)—continued Heading to clause 4: omit “securities” and substitute “financial products”.
Clause 4: omit “securities” and substitute “financial products to which subpart 9 of Part 5 of the Financial Markets Conduct Act 2011 applies”.

Definition of securities in clause 1 of the Schedule: omit “securities within the meaning of section 2 of the Securities Transfer Act 1991” and substitute “financial products to which subpart 9 of Part 5 of the Financial Markets Conduct Act 2011 applies”.
5 Securities Transfer (Approval of System for Electronic Transfer 10 of Securities on Australian Stock Exchange) Order 1997 (SR 1997/102) Clause 2: omit “Securities Transfer Act 1991” and substitute “Finan- cial Markets Conduct Act 2011”.

Heading to clause 3: omit “securities” and substitute “financial 15 products”.
Clause 3: omit “securities on the Australian Stock Exchange, the essential requirements of which are described in the Schedule, is ap- proved for the transfer of securities” and substitute “financial prod- ucts on the Australian Stock Exchange, the essential requirements of 20 which are described in the Schedule, is approved for the transfer of financial products to which subpart 9 of Part 5 of the Financial Markets Conduct Act 2011 applies”.
Definition of approved security in the Schedule: omit “means a se- curity” and substitute “means a financial product”.

25 Social Security (Income and Cash Assets Exemptions) Regulations 2011 (SR 2011/287) Definition of non-KiwiSaver scheme in regulation 32: revoke and substitute: “non-KiwiSaver scheme means a scheme that is registered 30 as a superannuation scheme under subpart 3 of Part 4 of the Financial Markets Conduct Act 2011”.
554 Financial Markets Conduct Bill Schedule 4 Social Security (Income and Cash Assets Exemptions) Regulations 2011 (SR 2011/287)—continued Part 2—continued Definition of scheme in regulation 32: revoke and substitute: “scheme means a retirement scheme within the meaning of section 111(4) of the Financial Markets Conduct Act 2011 (for example, a KiwiSaver scheme or a non-KiwiSaver scheme)”.
5 Social Security (Long-term Residential Care) Regulations 2005 (SR 2005/183) Regulation 10(1D): omit “subclause (1)(i)” and substitute “this sub- clause and in subclause (1)(i)”.

Regulation 10(1D): insert in its appropriate alphabetical order: 10 “benefit means any lump sum, annuity, pension, allowance, refund, or other payment arising from membership of a super- annuation scheme”.
Paragraph (a) of the definition of specified non-KiwiSaver scheme or scheme in regulation 10(1D): revoke and substitute: 15 “(a) is registered as a superannuation scheme under subpart 3 of Part 4 of the Financial Markets Conduct Act 2011; and”.

Paragraph (a) of the definition of withdrawal in regulation 10(1D): omit “(as defined in section 2(1) of the Superannuation Schemes 20 Act 1989)”.
Social Security (Temporary Additional Support) Regulations 2005 (SR 2005/334) Definition of non-KiwiSaver scheme in regulation 8B(5): revoke and substitute: 25 “non-KiwiSaver scheme means a scheme that is registered as a superannuation scheme under subpart 3 of Part 4 of the Financial Markets Conduct Act 2011”.
Definition of scheme in regulation 8B(5): revoke and substitute: “scheme means a retirement scheme within the meaning 30 of section 111(4) of the Financial Markets Conduct Act 555 Schedule 4 Financial Markets Conduct Bill Social Security (Temporary Additional Support) Regulations 2005 (SR 2005/334)—continued Part 2—continued 2011 (for example, a KiwiSaver scheme or a non-KiwiSaver scheme)”.
Takeovers Code Approval Order 2000 (SR 2000/210) Paragraph (a) of the definition of code company in rule 3(1) of the Schedule: revoke and substitute: 5 “(a) is a listed issuer and that has financial products that con- fer voting rights quoted on the relevant licensed market; or”.

Paragraph (c) of the definition of equity security in rule 3(1) of the Schedule: omit “securities” and substitute “financial products”.
Definitions of listed, registered exchange, and registered ex- change’s securities market in rule 3(1) of the Schedule: revoke.
Rule 3(1) of the Schedule: insert in their appropriate alphabetical order: 10 “licensed market has the meaning set out in section 6(1) of 15 the Financial Markets Conduct Act 2011 “licensed market operator has the meaning set out in sec- tion 6(1) of the Financial Markets Conduct Act 2011 “listed issuer has the meaning set out in section 6(1) of the Financial Markets Conduct Act 2011”.
Rule 25(5)(c) of the Schedule: revoke and substitute: 20 “(c) the licensed market operator (if any voting securities of the target company are quoted on a licensed market operated by the operator).” Rule 26(2)(c) of the Schedule: revoke and substitute: 25 “(c) the licensed market operator (if any voting securities of the target company are quoted on a licensed market operated by the operator).” Rule 28(1)(d) of the Schedule: revoke and substitute: “(d) the licensed market operator (if any voting securities 30 of the target company are quoted on a licensed market operated by the operator).” 556 Financial Markets Conduct Bill Schedule 4 Part 2—continued Takeovers Code Approval Order 2000 (SR 2000/210)—continued Rule 36(2)(a) of the Schedule: revoke and substitute: “(a) be given no later than the day after the date of acquisi- tion,— “(i) if any of the offeror, any holding company of the offeror, or the target company is a listed issuer, to 5 the target company, the licensed market operator, and the Panel; or if none of the offeror, any holding company of the offeror, or the target company is a listed issuer, to the target company and the Panel; and”.
Rule 41(2) and (3) of the Schedule: revoke and substitute: “(2) “(ii) 10 15 If the offer will involve a regulated offer under the Financial Markets Conduct Act 2011, the notice referred to in subclause (1) must be accompanied by a copy of every relevant docu- ment.
In subclause (2), every relevant document means every document that must be registered or lodged with, or produced to, any of the following persons or bodies for the offer to com- ply with the Financial Markets Conduct Act 2011 (including any exemption granted under the Financial Markets Conduct 20 Act 2011 or any mutual recognition scheme established under that Act) or with the laws of any overseas jurisdiction in which the offer of the equity securities is to be made: “(a) the Registrar of Financial Service Providers (including any equivalent person or body in an overseas jurisdic- 25 tion): any regulatory body (including a regulator in an over- seas jurisdiction): any offeree of the securities.
“(b) “(c) “(3) “(4) Subclauses (2) and (3), as in force before the commencement 30 of this subclause, continue to apply to an offer of securities to which the Securities Act 1978 applies as if the Financial Markets Conduct Act 2011 had not been enacted.” 557 Schedule 4 Financial Markets Conduct Bill Part 2—continued Takeovers Code Approval Order 2000 (SR 2000/210)—continued Rule 41A(1) of the Schedule: revoke and substitute: “(1) If the target company is a listed issuer, the offeror must send (electronically, if possible) to the licensed market operator a copy of the documents that the offeror is required to send under rule 41.” Rule 41A(2) of the Schedule: omit “registered exchange” and sub- stitute “licensed market operator”.
Rule 42(1) of the Schedule: revoke and substitute: “(1) If it is a listed issuer, the target company must, immediately on receipt of a takeover notice,— “(a) notify the licensed market operator in writing that a takeover notice has been received; and send (electronically, if possible) to the licensed market operator a copy of the notice and the documents that accompanied it under rule 41.” “(b) 5 10 15 Rule 42(2) of the Schedule: omit “listed company” and substitute “listed issuer”.
Rule 44(1)(d)(ii) of the Schedule: omit “Securities Act 1978 or any other applicable law to accompany an offer of securities” and substi- tute “Financial Markets Conduct Act 2011, the Securities Act 1978, 20 or any other applicable law to accompany an offer of equity secur- ities”.

Rule 45(1)(b) of the Schedule: omit “registered exchange” and sub- stitute “licensed market operator”.
Rule 45(2) of the Schedule: revoke and substitute: “(2) Subclause (1)(b) applies only if the offeror’s or the target com- pany’s voting securities are quoted on a licensed market that is operated by the licensed market operator.” Rule 46(a)(ii)(C) of the Schedule: revoke and substitute: 25 “(C) the licensed market operator (if the voting 30 securities of the target company or the of- feror are quoted on a licensed market that is operated by the operator); and”.
558 Financial Markets Conduct Bill Schedule 4 Part 2—continued Takeovers Code Approval Order 2000 (SR 2000/210)—continued Rule 49A(2) of the Schedule: revoke and substitute: “(2) If the target company or the offeror or any holding company of the offeror is a listed issuer, the offeror must provide the licensed market operator with the same notification that is re- quired under subclause (1).” 5 Rule 51 of the Schedule: revoke and substitute: “51 Notification of dominant ownership If a person becomes a dominant owner in a code company, that person must immediately send a written notice of that fact to the code company, the Panel, and the licensed market operator 10 (if any voting securities of the code company are quoted on a licensed market that is operated by the operator).” Rule 54(4)(a) of the Schedule: revoke and substitute: “(a) sent immediately to the code company, the Panel, and (if the code company is a listed issuer) the licensed market 15 operator; and”.
Rule 57(5)(a) of the Schedule: revoke and substitute: “(a) immediately to the Panel and, if the target company is a listed issuer, to the licensed market operator; and”.

Rule 57(6)(a) of the Schedule: revoke and substitute: 20 “(a) immediately to the Panel and, if the target company is a listed issuer, to the licensed market operator; and”.
Paragraph (a) of the definition of annual report in clause 18(6) of Schedule 2 of the Schedule: revoke and substitute: “(a) if any voting securities of the target company are quoted 25 on a licensed market, the annual report and financial statements (including the auditor’s report on those fi- nancial statements) that the target company is required by the licensed market operator to send to the target company’s equity security holders; or”.
Paragraph (a) of the definition of half-yearly report in clause 18(6) of Schedule 2 of the Schedule: revoke and substitute: 30 “(a) if any voting securities of the target company are quoted on a licensed market, the half-yearly report and half- 559 Schedule 4 Financial Markets Conduct Bill Part 2—continued Takeovers Code Approval Order 2000 (SR 2000/210)—continued yearly financial statements (including the auditor’s re- port on such financial statements, if any) that the issuer is required by the rules of the licensed market to send to equity security holders of the issuer; or”.
Clause 22 of Schedule 2 of the Schedule: omit “stock exchange” and 5 substitute “licensed market”.

Clause 23(1) of Schedule 2 of the Schedule: omit “stock exchange” and substitute “licensed market”.

Clause 23(1)(b) of Schedule 2 of the Schedule: omit “exchange” and substitute “licensed market”.

Clause 23(2) of Schedule 2 of the Schedule: omit “exchange” and substitute “licensed market”.
10 Trustee Companies (Group Investment Funds: Disclosure of Expenses and Management Fees) Regulations 2003 (SR 2003/121) Paragraph (a)(i) of the definition of continuing investment in regu- lation 13(2): revoke and substitute: 15 “(i) a disclosure statement has been lodged in accord- ance with the requirements of Part 3 of the Fi- nancial Markets Conduct Act 2011 and regula- 20 tions made under that Act; or”.
Regulation 15: revoke and substitute: “15 Dispensation from ongoing disclosure The trustee company is not required to make ongoing disclos- ure in respect of a qualifying beneficiary to whom, in accord- 25 ance with the requirements of— “(a) Part 3 of the Financial Markets Conduct Act 2011 and regulations made under that Act, a product disclosure statement was required to be, and was, given; or sections 33 and 37A of the Securities Act 1978 and 30 regulations made under that Act, an investment state- ment was required to be, and was, issued.
“(b) “Compare: SR 2002/198 r 15”.

560 Financial Markets Conduct Bill Schedule 4 12 Wellington, New Zealand: Published under the authority of the New Zealand Government—2011 561