Financial Markets Conduct Act (FMCA) 2013

NZX_01It could be the beginning of a new era for New Zealand’s Financial markets. This week Queen City Law commercial lawyer Tom Huang looks at the new FMCA 2013 as Phase 2 will come into effect on 1 December 2014 this year.

Tom is passionate about business law including commercial transactions, property and construction law, banking and finance, and mergers and acquisitions. Tom has a commitment to providing an exceptional professional and client-oriented service as well as creating a warm and friendly atmosphere for QCL’s valuable clients.

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If you have any questions about the new FMCA don’t hesitate to contact us.

The new FMCA 2013 Phase 1 came into force on 1 April 2014 and Phase 2 will come into effect on 1 December 2014 this year. It aims to bring the following changes: Tom-Huang

• New Competency Standards (Part 6)
• Fair Dealing (Part 2)
• New offer information standards (Part 3)
• New accountability framework (Part 4) and
• Liability framework (Part 8).
The principle objective of this new legislation is to facilitate capital market activity, in order to help businesses to grow and to provide individuals with opportunities to develop their personal. The new FMCA 2013 has replaced previous financial markets conduct legislations, which primarily comprises Securities Act 1978 (supplemented by the Securities Markets Act 1988), the Securities Transfer Act 1991, the Superannuation Schemes Act 1989, the Unit Trusts Act 1960, and the KiwiSaver Act 2006 (partially replaced).

It has also amended other financial markets legislation including the Financial Advisers Act 2008, Financial Service Provides (Registration and Dispute Resolution) Act 2008, the Securities Trustees and Statutory Supervisors Act 2011 and the Financial Markets Authority Act 2011.  Broadly speaking, under the FMCA2013, investors need to be satisfied that they and their advisers have the information required to make confident and informed decisions, that there will be appropriate governance arrangements in place and that obligations on issuers and others will be enforced. Issuers need investor participation in capital raisings to be successful, and regulation needs to achieve the desired objectives at minimum cost.

Notably, the FMCA 2013 provides regulations to introduce two new ways to raise capital in New Zealand i.e. 1) Crowd Funding and 2) Peer-to-Peer Lending (P2P Lending). In terms of the Crowd Funding, the new Act allows businesses to crowd fund by offering equity of up to NZ$2 million without the burden and costs associated with a prospectus, effectively giving investors skin in the game rather than getting a ‘reward’ or making a donation.

On the other hand, P2P lending has proven itself in overseas markets and demonstrated that this model can succeed and fill a market niche. It allows individual investors and borrowers to form a micro-economic community, that not only provides benefit for the participants, but also benefits New Zealand as a whole. FMCA 2013 oversees this opportunity and includes and defines this service in the regulations for instance the business needs to be licensed to provide. Accordingly, lawyers now need to start thinking about new requirements for their clients under the FMCA 2013. This will not be just another compliance exercise. Take the opportunity to engage with Queen City Law for further details.

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any further action in relation to matters dealt with in this publication. For more information contact us.