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 1988.

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 continuous offers.

Financial Products

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 categories:

  • Debt securities;
  • Equity securities;
  • Managed investment products; and
  • Derivatives.

The FMC Act also provides a regime for licensed providers of discretionary investment management services ("DIMS").

Regulated Offers

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 regulations.

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 Act.

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 statement.

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.


Written by James Moran at 11:00




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