Changes to securities law
A series of changes to securities law came into effect on 15 April 2004. The amendments were part of a wider package of legislative change included in the Business Law Reform Bill 2003.
Employer superannuation schemes no longer need to provide a registered prospectus. Securities can now be offered to a
wealthy person or an experienced investor, both of whom are defined in the new legislation, without needing to meet the
normal disclosure requirements for offers of securities. Issuers are now allowed to make pre-offer statements inviting
expressions of interest before a formal offer of securities is made.
The new legislation is available from Bennetts government bookshops, or can be viewed on www.legislation.govt.nz. |
Summary of main changes
Securities Amendment Act 2004 (amends the Securities Act 1978)
- Employer superannuation schemes are exempt from the requirement to register a prospectus, but must meet a number of specific conditions.
- Offers of securities -
- -
- The list of people who are not members of the public is extended to include relatives or close business associates of a
director of the issuer in addition to close business associates and relatives of the issuer;
- -
- Offers of securities to eligible persons are offers to the public, but are exempt from the disclosure requirements. An
eligible person is someone who is:
- (a)
- wealthy; and/or
- (b)
- experienced in investing money; and/or
- (c)
- experienced in the industry or business concerned.
Note: The exemption does not exempt offers to wealthy and experienced persons from section 38B (which empowers the Commission to prohibit advertisements that are likely to deceive, mislead or confuse) or from section 58 (which imposes criminal liability for misstatements in advertisements or registered prospectuses).
A person is wealthy if an independent chartered accountant has reasonable grounds to be satisfied that the person has net assets of at least $2,000,000 or that the person has had an annual gross |
income of at least $200,000 for each of
the last two financial years. The accountant must sign a statement to this effect no more than 6 months before the offer is made.
A person is experienced in investing money or experienced in the industry or business to which the security relates if -
- (a)
- an independent financial service provider has reasonable grounds to be satisfied that the person's experience enables the person to assess-
- (i)
- the merits of the offer; and
- (ii)
- the value of the security; and
- (iii)
- the risks in accepting the offer; and
- (iv)
- their own information needs; and
- (v)
- the adequacy of the information provided; and
- (b)
- the financial service provider gives a written statement of the reasons for being satisfied as to those matters to the person concerned, before the security is allotted to them; and
- (c)
- the person concerned signs a written acknowledgement, before the security is allotted, that they have not received an investment statement or registered prospectus for the security.
- The scope of pre-offer statements is extended to allow statements inviting expressions of interest. Such statements are now considered to be advertisements and are subject to the Commission's prohibition powers under section 38B.
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- The Commission's power to grant exemptions is broadened, allowing it to grant exemptions for transactions or classes of transactions as well as persons or classes of persons.
- All subscriptions for securities offered to the public are now required to be held in trust for the subscribers until the securities are allotted or until the subscriptions are repaid to subscribers.
- The obligation to raise any minimum subscription amount within 4 months of the issue of a prospectus is extended to apply to all offers, not simply the first offer made by an issuer.
- The indemnities and insurance that may be given to directors, employees, and auditors of an issuer have been made consistent with the indemnities and insurance permitted under the Companies Act 1993.
- The High Court is empowered to make relief orders in connection with contraventions of sections 37(1) and 37A. The amendment is retrospective, empowering the High Court to consider breaches of sections 37(1) and 37A before or after the date of the enactment.
Securities Markets Amendment Act 2004 (amends the Securities Markets Act 1988)
- Public issuers are now required to disclose the identity of substantial security holders with their annual report or financial statements sent to shareholders.
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