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Summary of

Securities Act (Certificates for Securities Transferred Electronically) Exemption Notice 2003

2003/148

Gazetted on 26 June 2003
Expires on 30 June 2008

Effects of the exemption
Overseas companies and issuers (other than issuers of equity securities) whose securities are transferred through the NZX FASTER system, do not need to send certificates to security holders following transfers of securities.

Background and/or Context
The exemption applies to securities quoted on any securities market operated by NZX and approved for transfer by an electronic system approved by the Securities Commission (specified securities) under the Securities Transfer Act 1991. The only such approved system for NZX is the FASTER system.

The Companies Act already contains an exemption from the requirement for New Zealand registered companies to issue share certificates for shares transferred on an approved electronic transfer system. The Securities Act also says that no certificate need be issued for a security by a company that does not have to issue a share certificate for that security under the relevant exemption of the Companies Act 1993.

The intention of those provisions is to allow electronic transfer systems to operate without the need for certificates. However, the legislative provisions leave a gap in respect of overseas companies (which do not fall with the definition of "company" for the purposes of the Companies Act) and issuers of securities other than shares (to which the Companies Act also does not apply).

When it recommended the approval of the FASTER system in 1998 the Commission also granted an exemption so that these overseas issuers, and issuers of non-equity securities, did not have to provide certificates where their securities are transferred through the FASTER system. That exemption expired at the end of May 2003. This notice renews the exemption.

The exemption
Overseas companies and issuers of specified securities are exempted from section 54(1) of the Securities Act in respect of those securities.

Reasons
The FASTER transfer system is designed to allow "paperless" transfers of securities. The Companies Act and the Securities Act both contain provisions that allow transfers of shares through an electronic system without the need for certificates. This exemption allows securities of overseas companies and non-equity securities to be treated in the same way as equity securities of New Zealand companies.