Offers under the FMC Act

Issuers are people who are involved in first making a financial product available. See section 11 of the FMC Act. They include:

• the person (other than the guarantor) liable to pay under a debt security
• the company to which an equity security relates
• the manager of a managed investment scheme
• any party that has entered into derivatives.

People who are the issuer for an offer of finanical products for issue or in any other case the person who has the capacity, or agrees to, transfer the financial products. See section 6 of the FMC Act for more information.

The FMC Act defines 4 types of financial products

A regulated offer means an offer of financial products to one or more investors where at least one of those investors requires disclosure, usually a product disclosure statement. See section 41 of the FMC Act .

Note: If a Schedule 1 exclusion applies to all investors, then it isn’t a regulated offer.

Information about ‘regulated offers’ must be disclosed in a product disclosure statement (PDS) and on the Disclose Register. Together, this information must include all material information about the offer of a financial product and be up-to-date, accurate and understandable. The purpose of the information is to assist investors with their investment decisions.

Product disclosure statement (PDS)

The PDS is aimed at prudent but non-expert investors. It is required to be prepared in a clear, concise and effective manner and has a prescribed format and content to make offer information accessible.

A compulsory key information summary (KIS) at the front of the PDS gives investors an overview of key characteristics and the specific risks of the financial product.

A PDS must comply with prescribed length limits. These limits are the maximum allowed – issuers are encouraged to use less where possible. The maximum limits are:

The disclose register

Material information about a regulated offer not included in a PDS needs to be uploaded to the Disclose Register. It also has online registers for managed investment schemes split into managed funds and other managed investments schemes.

The Disclose Register provides supporting information for investors, and enables advisers and analysts to carry out more in-depth research and analysis.  We published guidance on the content and form of the Disclose Register information. 

Related documents

• Corporate Governance in New Zealand: Principles and Guidelines
• Guidance note on the content and form of Disclose register information
• FMA information sheet: Issuers’ registers of regulated products and the FMA’s discretion under section 224
• REGULATORY GUIDE 190: Offering financial products in New Zealand and Australia under mutual recognition

Schedule 1 of the FMC Act sets out a series of statutory exclusions where lighter compliance paths are appropriate. These include exclusions that are due to the circumstances of the:

• offer - for example, an offer through a licensed crowdfunding platform
• investor - for example, an offer to a wholesale investor
• issuer - for example, an offer by a registered bank.

Depending on the exclusion, limited or no disclosure may be required.

There is also a requirement to notify the FMA if you are using the small offers exclusion. Notifications must be made within 1 month of the end of the accounting period in which the offer is made. There is no need to notify us if you intend to raise capital using any of the other exclusions. 

Our Schedule 1 offers table, summarises the circumstances where the disclosure exclusions in Part 1 of Schedule 1 are available and what the associated limited disclosure and other requirements (if any) are for each exclusion. 

Offers under Schedule 1, in general, do not trigger the ongoing financial reporting obligations in Part 7 of the FMC Act. 

Failure to comply with the Schedule 1 exclusion limited disclosure and other requirements in the FMC Regulations may incur civil and criminal liability consequences. However, your offer won't be invalidated, and the financial products offered won't be invalid, void or voidable.

Small personal offers

There are exclusions under Schedule 1 of the FMC Act that allow some offers to be made without having to provide all the usual documentation required, ie product disclosure statements.

One of those exclusions is for small personal offers of debt and equity - see clause 12 of Schedule 1. It allows you to make small offers over a 12-month period that can, in total, involve up to 20 investors and raise up to $2 million without having to produce full documentation. Any offer that would result in you exceeding either or both those limits requires full documentation under part 3 of the FMC Act.

If, over several 12-month periods, you gain 50 or more shareholders from small offers, you'll become a FMC reporting entity.

There is also a requirement to give written notice to the FMA if you have relied on the small offers exclusion. Notifications must be made within 1 month after the end of the accounting period in which the offer was made. Refer to clause 17 of Schedule 8 to the Financial Market Conduct Regulations 2014 for the notification requirements. There is not a specific prescribed form to be completed. Notifications should be sent to the FMA at [email protected] with a subject line “Notification of small offer”. There is no need to notify us if you intend to raise capital using any of the other exclusions.

Crowdfunded companies

Companies that raise capital through a licensed crowdfunding platform, relying on clause 6 of Schedule 1, are not considered FMC reporting entities. This is because the offer is not considered a ‘regulated offer’ under the FMC Act.

Instead, these companies will be subject to the financial reporting requirements under the Companies Act 1993.

Clear, concise and effective offer information helps investors make more informed investment decisions.

We offer a pre-registration review service to help issuers, and their directors, feel more confident their offer documents are likely to satisfy our expectations.

We focus on reviewing new, novel and complex offers

You do not need to talk to us before registering your documents, particularly where there are similar types of offers already in the market that have good ‘precedents’. 

However, if you are offering a novel or complex offer, we are happy to talk with you to clarify whether you would benefit from the additional guidance that a pre-registration review provides.

What you can do to help

To speed up our review, we recommend sharing a near complete draft with us sufficiently early in the process, so you are still open to making substantive changes to the content or structure where necessary. Any proposed financial information should also be included.

In most cases, we will only provide feedback on one draft Word version of an offer document, and, should you request it, a design version when close to registration. This is to get a sense of how the information in the Word version will be presented.

We may agree to review a further draft of an offer document on a case-by-case basis. We are happy to discuss our feedback in person with you and your advisers. You should include representatives of the issuer in these discussions (not just the issuer’s professional advisers).

Other matters to consider when applying for your pre-registration review 

You may identify specific disclosure obligations from which you want to be exempted. The FMA has wide powers under the FMC Act to grant exemptions from compliance obligations where the relevant statutory test is met. Exemptions allow us to provide a tailored approach and ensure requirements for offers are reasonable and do not impose unnecessary regulatory burden.  
 
We are aware that particular issues may arise for complex offers, such as initial public offers of listed equity (IPOs). In some circumstances exemptions may be available from disclosure requirements such as for example prospective financial information. 
 
We also have the power to waive (in part or in full) the 5 working day waiting period after lodgement of a PDS before you can accept applications or issue financial products. This power applies where we are satisfied that our consideration of the PDS is complete or in the circumstances the waiting period is unnecessary. We note that due to the level of scrutiny that an IPO receives before lodgement, both from professional advisors, regulators and other public commentary, the five working day period may not always serve a useful purpose, and a waiver may be available in these circumstances. 
 
The FMA has provided the Government with some recommendations to permanently decrease unnecessary regulatory burden. This includes changing PFI thresholds to more closely align the regime with the Australian requirements. The timetable for law change, if any, has not yet been determined, however, if a company is considering listing, we would encourage them to talk to us early to discuss what relief may be able to be provided in the meantime. 
 
If you think you may want to seek an exemption or waiver, we encourage you to engage early with us as this may result in a longer review timeframe than indicated below. A pre-registration PDS review would usually occur after the terms of any exemption or waiver have been finalised. For more information related to exemptions, please refer to this FMA webpage.  

How we provide guidance

Depending on the circumstances and the timetable, we can provide guidance either in writing or verbally (either by phone or in-person) or both.

We expect you and your advisers to take our feedback on board and make changes that reflect this feedback, unless you disagree and say why. At this point, we are happy to have a further discussion.

Review time-frames

We aim to review an offer document within 10 working days. However, if you let us know what your timetable is early on, we may be able to accommodate this. We can review a design version of the document more quickly if required (but this may be close to print deadlines and launch dates).

We will let you know the person who is leading your review from the start. We will also let you know about the timing and the extent of our review. It is also helpful for us to know your proposed timetable and who is involved from your end, ie, issuer’s representative, legal advisers, auditor, bankers/lead managers and any other key stakeholders.

To get your pre-registration review underway please contact us (ensure you insert "PDS HELP" in your subject line). 

In addition to the obligations for offer information, an issuer has ongoing obligations under the FMC Act.  These obligations vary depending upon the type of issuer or offer, but generally include: 

• maintaining a register of regulated financial products they have issued
• ensuring the register is audited or reviewed by a qualified auditor
• keeping accounting records to support the preparation of compliant financial statements
• ensuring their financial statements are audited at least once a year by a licensed auditor or registered audit firm
• providing certain information (such as annual reports or financial statements) to investors on request.

Additional obligations of listed issuers

A listed issuer is one who is party to a listing agreement with a licensed market operator for a licensed market.  Listed issuers must comply with the listing rules of the relevant licensed market, as set by the licensed market operator.  These issuers, and certain persons related to them, also have ongoing disclosure obligations.

Listed issuers are required to disclose information to the market in accordance with any continuous disclosure provisions of the listing rules of the relevant licensed market.  The continuous disclosure provisions may vary between different licensed markets.

Directors and senior managers of listed issuers, and persons holding specified amounts of quoted voting products of a listed issuer are required to disclose certain information to the issuer and to the market by the FMC Act. Listed issuers are required to keep registers of that disclosed information.

Research reports

We have developed an information sheet for brokers, issuers and research providers to encourage wider publication of research on IPOs for retail clients.

It clarifies that under NZ law there are no required black-out periods and that the FMC Act has a more flexible regime for retail advertising. It also provides examples of the typical controls we expect investment banking firms to have in place to manage conflicts of interest.

Corporate governance

Good corporate governance and board behaviour supports the principles underpinning the FMC Act.

Information about our expectations for good corporate governance can be found in these publications:

• Corporate Governance - Principles and Guidelines
• A Director's Guide
• Going Public - A director's guide