benefit from clarification and improvement. But most of those issues are already being addressed by some form of action plan." One problem area she highlighted is the absence of any real regulatory regime, such as licensing, for investment advisers. Ms Gulde said she had an open mind on whether licensing rather than selfregulation is the answer. "I don't think we would be prescriptive on this, but self-regulation has to prove it can be as effective as central regulation and it would have to be implemented in a transparent manner." The securities sector was assessed primarily by Janet Holmes, a senior legal counsel with the Ontario Securities Commission. The Commission spent more than three days with Janet Holmes and other experts assessing securities regulation. The meetings were based on questionnaires that had been completed and submitted beforehand. We were impressed by the professional calibre of the FSAP team, their in-depth preparation, and the quality of the discussions. Some 66 countries have previously been assessed by FSAP missions, but New Zealand is the first to use a new methodology to assess how well a country has implemented the IOSCO Objectives and Principles of Securities Regulation. We have been asked to provide feed-back on the methodology both to IOSCO and to the IMF. The FSAP mission team will report on their work in the first half of 2004. Directors and officers disclosure regulations approved The Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003 will come into force on 1 March 2004. The regulations were promulgated in December 2003. Amendments to the Securities Markets Act 1988, enacted in 2002, introduced a requirement that directors and officers of a public issuer disclose relevant interests and dealings in securities of that public issuer and any related body corporate within five trading days. "The purpose of these provisions is to improve transparency by ensuring that information about directors' and officers' holdings is up-to-date and relevant to the market," Lianne Dalziel said when announcing the regulations. "This should reduce opportunities for insider trading and market manipulation." The regulations clarify who is considered to be an 'officer' for the purposes of the Act. Broadly, the effect of the regulations is that a person is an "officer" for the purposes of disclosing relevant interests and dealings only if he or she is concerned or takes part in the management of the public issuer's business and reports directly to the board of directors; or reports directly to a person who reports directly to the board; or reports directly to a person in (b); or manages a principle business unit, division, or function of a public issuer. The regulations also set out the details of the disclosure requirements. They include a set form for disclosure, which minimises the compliance costs. The regulations also provide exemptions for situations where disclosure is required, but would not convey any relevant information to the market. This includes exemptions for "technical" interests and employee share schemes. The statutory obligations will replace those currently found in the NZX Listing Rules that were introduced by NZX following the amendments to the Securities Markets Act, in anticipation of these regulations. Obligations of issuers of securities The rules about the offer and allotment of securities to the public are set out in Part II of the Securities Act 1978. The Commission regularly emphasises that issuers should understand their obligations when they offer securities to the public. We suggest that in most cases issuers are best served by taking specialist advice from a lawyer who is familiar with securities law. This is equally important when an issuer seeks to rely upon an exemption from the Act or the regulations - whether the exemption is set out in the Act or granted by the Commission. Section 3(2) of the Act provides for certain situations which do not constitute offers of securities to the public. In the Commission's experience, issuers or their advisers tend to interpret these provisions more broadly than the Courts have done. Issuers may decide not to take legal advice on an offer based on a mistaken belief that it is not "an offer to the public" so the obligations of the Act do not apply. The consequences are likely to be severe for an issuer that seeks to rely on an exception in section 3(2) that is not legally available to them. Frequently parties have purported to offer to "habitual investors" only. This appears to be a reference to section 3(2)(a)(ii) of the Act which provides that an offer of securities made only to "... persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money ..." shall not constitute an offer of securities to the public. The exception only applies to persons who invest money in the course of their business. A person who simply invests regularly will not qualify by that fact alone. To therefore describe the exception as being available to any "habitual investor" is an over-simplification of the actual terms of the law and will not hold up should it ever be tested. There is another exception in section 3(2)(a)(i) for relatives or close business associates of the issuer. It is important to stress here that the offerees have to be (continued page 3)

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