This report updates our project report dated 13 August 2007. In that project report we outlined the Commission's decisions on a number of class exemption notices. Amendment notices to give effect to the renewals and amendments to those exemption notices were, at that stage, still being drafted. Further, we noted that substantive amendments to four exemption notices were in the process of being considered and settled by the Commission.

Several notices have now been notified in the Gazette. These are:

(a)

the Securities Act (Building Societies) Exemption Amendment Notice 2007 (2007/279);

(b)

the Securities Act (Contributory Mortgage Brokers) Exemption Amendment Notice 2007 (2007/266);

(c)

the Securities Act (Equity Warrant Issuers) Exemption Amendment Notice 2007 (2007/278);

(d)

the Securities Act (Extension of Term, Amendment, and Revocation of Certain Exemptions) Exemption Notice 2007 (2007/277). This exemption notice renews and/or amends the class exemption notices listed in Appendix A of this report, in addition to renewing and/or amending, or revoking certain individual exemption notices;

(e)

the Securities Act (Group Investment Index Funds) Exemption Amendment Notice 2007 (2007/301);

(f)

the Securities Act (NZX Issuers) Exemption Notice 2007 (2007/272);

(g)

the Securities Act (Real Property Proportionate Ownership Schemes) Exemption Amendment Notice 2007 (2007/289). This exemption notice renews the class exemption notice. Further amendments to the principal notice, discussed below, are in the process of being drafted; and

(h)

the Securities Act (Rights, Options, and Convertible Securities) Exemption Amendment Notice 2007 (2007/288). This exemption notice renews the class exemption notice. Further amendments to the principal notice, discussed below, are in the process of being drafted.

Please note that the amendments described below in relation to the Securities Act (Real Property Proportionate Ownership Schemes) Exemption Notice 2002, the Securities Act (Residential Property Developments) Exemption Notice 1999, and the Securities Act (Rights, Options, and Convertible Securities) Exemption Notice 2002 have not yet been settled. We encourage any person seeking to rely on these exemption notices to check that relevant exemption amendment notices have been notified in the Gazette and consider the effect of the amendments.

The Securities Act (Real Property Proportionate Ownership Schemes) Exemption Notice 2002

As noted above, the Securities Act (Real Property Proportionate Ownership Schemes) Exemption Notice 2002 was renewed on the same terms for a period of five years pending the drafting of substantive amendments agreed to by the Commission. An amendment notice is in the process of being drafted and, accordingly, its terms have not yet been settled. The following explanation of the proposed amendments is necessarily of a general nature.

It is anticipated that the class of persons who may rely on the exemptions contained in the principal notice will be extended. The Notice defines the term "offeror" and only provides exemptions for persons who fit within that definition. The definition of "offeror" will be extended to apply to lawyers or conveyancing practitioners within the meaning of the Lawyers and Conveyancers Act 2006 ("LCA"). Currently the definition only applies to trustee companies and real estate agents. The extension reflects changes made by the LCA that regulate lawyers and conveyancers acting as real estate agents. The amendment to the notice will come into force upon the enactment of the relevant provisions of the LCA.

It is anticipated that the principal notice will be extended to cover a broader range of contributory schemes. Previously the principal notice did not apply to unit title schemes. The types of scheme structures to which the principal notice will apply are:

(a)

schemes whereby each investor obtains an undivided interest in common (either freehold or leasehold) in the same real property as other investors. These schemes are covered by the Securities Act 1978 ("Securities Act") because the interest in land obtained by each investor falls outside the scope of the statutory exemption in section 5(1)(b) of the Securities Act, and because the investor has a right to participate in the earnings of the whole property.

(b)

unit title schemes which involve an income pooling scheme, whereby investors who each own individual unit titles obtain a right to participate in the earnings of the development as a whole. These schemes are covered by the Securities Act only because they involve income-pooling arrangements; and

(c)

schemes whereby each investor invests in a contributory scheme and obtains an interest in common in a unit in a development, and a right to participate in the earnings of that unit. Returns are affected by the individual unit's share of the costs of the whole development. These schemes are covered by the Securities Act because the interest in land obtained by each investor falls outside the scope of the statutory exemption in section 5(1)(b) of the Securities Act, and because the investor obtains a right to participate in the earnings of their unit.

It is anticipated that the conditions of exemption will be amended:

(a)

to allow for the release of a subscribers subscription money held on trust (in the case of undivided property schemes and undivided unit title schemes) upon the offeror taking all steps necessary to allow title to the real property to pass to each subscriber, and (in the case of unit title pooled schemes) upon the offeror taking all steps necessary to allow title to the real property to pass to the particular subscriber whose subscription money is to be released. Currently the principal notice only allows for the release of subscriptions out of the trust account once registrable title to the real property had been transferred;

(b)

to require funds be held on trust until registrable title is obtainable by the subscriber, and that if registrable title is not obtained by the subscriber within 36 months of that subscribers subscription (in the case of unit title pooled schemes and undivided unit title schemes) or within 36 months of the opening of the offer (in the case of undivided property schemes) then the funds must be returned to the investor;

(c)

to require all advertisements for proportionate ownership schemes to refer to the offeror's statement for that scheme and to require that all prospective financial information that is contained in an advertisement for a proportionate ownership scheme is also contained in the offeror's statement for that scheme. This mirrors the usual requirement for prospective financial information in advertisements in cases where there is a registered prospectus; and

(d)

to require that if prospective financial information is included in the offeror's statement for a scheme that prospective financial information must comply with FRS 42.

SECURITIES COMMISSION REVIEW OF CLASS EXEMPTION NOTICES - UPDATE OF PROJECT REPORT