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Summary of

SECURITIES ACT (MINIMUM SUBSCRIPTION) EXEMPTION NOTICE (NO. 2) 1999

SR 1999/365

Gazetted on 14 October 1999

This exemption relates to issues of participatory securities or units in a unit trust for which the price is payable by instalments over a period specified in the registered prospectus with the first instalment to be paid on subscribing for the securities.

Issuers of these securities are exempt from section 37 (2) of the Act in so far as it requires the minimum amount referred to in that section to be paid to, and received by, the issuer within four months after the date of the registered prospectus.

This notice has the effect of extending the Securities Act (Minimum Subscription) Exemption Notice 1999 (SR 1999/217) to cover units in a unit trust.

Revocation

The Securities Act (Minimum Subscription) Exemption Notice 1999 is revoked.

Condition

The exemption is subject to the condition that subscribers for the participatory securities or the units in a unit trust have, within four months after the date of the registered prospectus, become legally bound to pay the minimum amount referred to in section 37 (2) of the Act to the issuer under the trust deed relating to the securities.

Effects of the exemption

This is a class exemption applying to issuers of participatory securities or units in a unit trust where the terms of the securities require that the price of any security or unit is payable by instalments over a period specified in the registered prospectus, with the first instalment to be paid on subscription.

The notice exempts issuers from the requirement that the amount must be paid to and received by them within the four month period.

Reasons

The Commission noted that some participatory schemes and unit trusts provide for the price of the securities to be paid in instalments over a period of time. This is particularly common where the scheme involves a purchase of land or other property that will be paid for by the scheme over a period of time. The purpose of such arrangements is to spread the cost of the investment.

The Commission considered that in the case of securities such as these it may considerably increase the cost to investors if it is necessary to pay the full price (or the majority of the price) on subscription. This in turn may create an unnecessary disincentive to investment in these securities.

This exemption remains generally consistent with the policy of the Act by including as a condition of exemption that allotment may only proceed where subscribers for the specified securities have, within four months after the date of the registered prospectus, become legally bound to pay the minimum amount.