Derivatives Issuers

Derivatives Issuers

Who needs to comply

What is a derivative?

The Act contains a wide definition of a derivative, which includes:

  • futures contracts and forwards
  • options (except options to acquire an equity security, a debt security, or a managed investment product by way of issue)
  • swaps
  • contracts for difference, margin contracts and rolling spot contracts
  • caps, collars, floors and spreads.

The definition is also wide enough to catch new derivatives products as they are developed.

See section 8 (4) for the full definition.

What is a regulated offer?

A regulated offer includes any offer of derivatives when disclosure must be made to one or more investors, for example, because an investor is a retail investor. See section 41.

Will you need a licence?

You will need a licence if you want to make a regulated offer of derivatives, as defined in the Act.

I offer derivatives services to overseas clients only, do I need a licence?

Under section 47 of the Financial Markets Conduct Act 2013, a derivatives issuer is required to be licensed if it is making a regulated offer.  A regulated offer includes any offer of derivatives when disclosure must be made to one or more investors, for example, because an investor is a retail investor.   However disclosure is only required for offers of financial products in New Zealand.  So if offers are not made to NZ residents, the entity does not need to be licensed.

You should be aware that a registered but not licensed issuer falls within the our jurisdiction, for example under the Fair Dealing provisions of the FMC Act.  We now have the power to direct the Registrar of Financial Service Providers to deregister a provider from the FSPR. This action would be taken where registration is likely to create a false or misleading impression that the provider is regulated in NZ or providing services from or in NZ, or where it is otherwise likely to damage the integrity or reputation of NZ’s financial markets or regulatory arrangements.

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