Exemption for NZAX issuers
The new AX market is an alternative market, intended to be attractive to
smaller issuers. To achieve this, the NZX wants to lower compliance costs and
to make it easier for issuers to raise capital.
To this end the NZX applied to the Commission for a number of exemptions
for NZAX issuers.
The Commission has granted exemptions designed to provide investors with
good access to information about offers of securities on the NZAX, while
providing significant cost savings for issuers.
The key exemptions are:
- only one offer document is required, but it must be in plain English similar
to an investment statement. This document must be registered as a
prospectus.
- NZAX issuers who believe that their prospects are too uncertain to be able to
provide reliable financial forecasts will not have to do so, but they must
clearly warn investors of the absence of this information.
- for share offers other than the first offer made by an NZAX issuer, the offer
document can be made available to investors via the NZX and the issuer's
web site. The issuer is not required to provide a printed copy to each
subscriber.
The single offer document is intended to make disclosure simpler for both
issuers and investors. It must contain all material information relating to the
offer of securities and be in a similar format to an investment statement.
The document must be registered with the Companies Office as a prospectus.
This will make it familiar to most investors. The registration process and the
signing of a registered prospectus by the directors and promoters are important
protections for investors.
Prospective financial information can be expensive to collate. In the case of
relatively new and developing companies, prospective financial information may
be less meaningful and reliable for investors.
The Commission considered that an exemption from providing financial
forecasts should be available only where the directors of an issuer certify that
they do not consider they are able to provide meaningful projections. In this
case the offer documents must carry extra risk warnings to reflect the
uncertainty associated with the investment.
The exemption for subsequent offers is similar to the exemption granted for the
New Capital Market. Under the AX exemption, issuers will need to register a
new prospectus, in the same format as that for initial offers on the AX market.
However they will be able to raise capital using this prospectus by:
- making an offer announcement to the market; and
- informing investors that the prospectus is available on the NZAX web site,
and also on the issuer's web site - if it has one.
Issuers will save the cost of sending out offer documents, but prospective
investors will have full access to the documents on the internet. The issuer must
provide a printed offer document free of charge to any person who asks for one.
The Commission granted these exemptions to help the NZAX market develop
and to encourage capital raising through regulated registered exchanges. We
trust the NZAX will provide an opportunity for expansion of capital raising,
particularly by smaller companies.
Under the MOU between the Commission and NZX, there will be continuing
dialogue about the operation of this market. NZAX issuers, and people who
trade in these shares, are subject to the market regulations of the Securities
Markets Act 1988.
The NZX will report to the Commission on the operation of NZAX after its
first year. The Commission will then review the exemption and make any
necessary changes.
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Change for Retirement Villages
The Retirement Villages Bill has passed through the select committee stage and is awaiting its third reading in the House of
Representatives.
When this legislation comes into force the Securities Act will no longer apply to offers of securities for interests in retirement villages.
At present, the Securities Act applies to some, but not all, offers of interests in retirement villages. If a village's offer to prospective residents comes within the Act's definition of an offer of securities to the public, then a registered prospectus and investment statement are required. Alternatively, if the offer does not come within the Act's scope, then
these are not required, and the offer is not governed by securities law.
The Commission has commented in the past that this state of affairs is not helpful, and that all offers of interests in retirement villages should be subject to the same legal regime. The Law Commission, in 1999, recommended that new legislation
be introduced to provide for this.
The Retirement Villages Bill will provide a regulatory regime for all offers of interests in retirement villages. Under the Bill retirement villages must be registered, have a statutory supervisor, and conform to an industry code of practice.
The Bill will exclude the application of the Securities Act to retirement villages.
The Commission has extended the life of its exemption notice for retirement villages, the Securities Act (Retirement Villages) Exemption Notice 1999, until the new law comes into force.
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