The full force of the Financial Markets Conduct Act 2013 ("FMC
Act") came into effect on 1 December 2014. If you are an issuer of
securities you will need to ready yourself for the transition to
the FMC Act. The main purposes of the FMC Act are to:
- Promote the confident and informed participation of businesses,
investors, and consumers in the financial markets; and
- Promote and facilitate the development of fair, efficient, and
transparent financial markets.
These purposes are consistent with the main objectives and
function of the Financial Markets Authority.
The FMC Act replaces the Securities Act 1978 ("Securities Act")
and also numerous other Acts, including the Securities Markets Act
The Securities Act will continue to apply for transitional
purposes for registering a prospectus until 1 December 2015 for new
offers or 1 December 2016 in the case of continuous issuers for
The Securities Act used the term "security" to cover the various
interests which can be offered. In general a security is either a
share, a debt security (such as a bond or convertible not
convertible at the option of the holder), or a participatory
security (such as an interest in a partnership).
What used to be a security or a unit in a unit trust is now a
"financial product". The FMC Act uses the concept of "financial
product", which is defined by reference to four discrete
- Debt securities;
- Equity securities;
- Managed investment products; and
The FMC Act also provides a regime for licensed providers of
discretionary investment management services ("DIMS").
Under the Securities Act a prospectus and investment statement
was required when a person made an "offer to the public". If an
offer was not to the public, then the offer was not generally
subject to the Securities Act at all. The term "the public" was
never defined in the Securities Act, which made issuers and
promoters rely heavily on what did not constitute an offer to the
public under section 3(2) of the Securities Act.
Now the FMC Act replaces the "offer to the public" threshold
with a distinction between regulated and excluded offers on a
retail/ wholesale basis.
A "regulated offer" is an offer of financial products to 1 or
more investors where the offer to at least 1 of those investors
requires full disclosure in accordance with the FMC Act and its
An offer is not a "regulated offer" where 1 or more investors
are the only investors who are able, under the terms of the offer,
to acquire the products and all investors who acquire the products
under the offer are investors to whom disclosure is not required
under 1 or more of the exclusions under Schedule 1 of the FMC
In comparison, under the Securities Act if an offer was made to
a range of people and some of them were members of the public, all
the offerees were subject to the Act and disclosure was required
for all of them by means of a prospectus or investment
The position is now different under the FMC Act. Formal
disclosure is only required for persons who are not excluded from
the requirement for disclosure, and it will be easier to split an
offer so part of it is regulated, and part of it is not.
The formal disclosure documents required for a "regulated offer"
are a Product Disclosure Statement ("PDS") and a register entry.
This replaces the old documents of a prospectus and investment
statement under the Securities Act.
The purpose of the PDS is to provide key information to a
prudent but non-expert investor to help them decide whether or not
to acquire the financial product.
The register entry is a computerised database the Companies
Office operates called "Disclose", that will hold prescribed
information an issuer must make available on the database, such as
financial statements and material contracts.
For more information on the Financial Markets Conduct Act 2013,
please contact us.