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Law Reform: Investment Advisers
A Discussion Paper

APPENDIX "C": INVESTMENT ADVISERS (DISCLOSURE) ACT 1996

ANALYSIS

1.	Short Title and commencement
2.	Interpretation
Disclosure by Investment Advisers and Investment Brokers
3.	Initial disclosure by investment advisers and investment brokers
4.	Request disclosure by investment advisers
Method of Disclosure
5.	Method of disclosure
Disclosure not to be Misleading
6.	Disclosure not to be misleading
Enforcement
7.	Power to order certain persons not to give investment advice or receive investment money or investment property
8.	Injunctions may be granted by Court for contravention
9.	Order to disclose information
10.	Civil action for failure to disclose
11.	Offences and penalties
12.	Regulations

BE IT ENACTED by the Parliament of New Zealand as follows:

1	Short Title and commencement- (1) This Act may be cited as the Investment Advisers (Disclosure) Act 1996.
(2)	Subject to subsection (3) of this section, this Act shall come into force on a date to be appointed by the Governor-General by Order in Council.
(3)	This Act shall come into force on the 1st day of October 1997 if no Order in Council is made under subsection (2) of this section appointing a date that is earlier than that date as the date for the coming into force of this Act.

2	Interpretation- (1) In this Act, unless the context otherwise requires,- "Address" means,-
(a)	In the case of an individual, both-
	(i)	The address of the individual's principal place of business in New Zealand (if any) or, if the individual does not have a place of business in New Zealand, the address of the individual's principal place of business outside New Zealand; and
	(ii)	The city, town, or district (whether in New Zealand or elsewhere) in which the principal residence of the individual is situated: (b)   In any other case, the address of the person's principal place of business in New Zealand (if any) or, if the person does not have a place of business in New Zealand, the address of the person's principal place of business outside New Zealand:

"Business" includes any profession, trade, or undertaking, whether or not carried on with the intention of making a pecuniary profit:
"Buy" means purchase, acquire, or subscribe for, or agree to buy, purchase, acquire, or subscribe for:
"Court" means a District Court:
"Director", in relation to a body corporate or unincorporate, includes any person who has substantial control or influence over the conduct of the affairs of the body:
"Disclosure" means disclosure under either section 3 or section 4 of this Act:
"Employment" includes a relationship in the nature of employment:
"Investment advice" and "advice" mean-

		(a)   A recommendation, opinion, or guidance given to a member of the public in relation to buying or selling (or not buying or selling) securities; and
(b)	Without limiting paragraph (a) of this definition, include any such recommendation, opinion, or guidance, that is communicated by letter, newspaper, periodical, broadcasting, sound recording, television, cinematographic film, video, or any form of electronic or other means of communication; but-
(c)	Do not include-
	(i)	Any such recommendation, opinion, or guidance given by a person whose principal occupation is that of a journalist and that is given in that person's capacity as a journalist; or
	(ii)	Any such guidance about the procedure for buying or selling securities:

"Investment adviser" and "adviser" mean a person (whether or not the person is also an investment broker) who, in the course of the person's business or employment, gives investment advice; and,-

(b)	Do not include the issuer or a promoter or a trustee (within the meaning of the Securities Act 1978 or the Unit Trusts Act 1960) or statutory supervisor (within the meaning of the Securities Act 1978), of the particular securities to which the advice relates; and
(c)	Do not include a person who only transmits investment advice relating to particular securities given by the issuer or a promoter or a trustee (within the meaning of the Securities Act 1978 or the Unit Trusts Act 1960) or statutory supervisor (within the meaning of the Securities Act 1978), of those securities:

"Investment broker" and "broker" mean a person (whether or not the person is also an investment adviser) who, in the course of the person's business or employment, receives investment money or investment property; and,-

		(a)   Where a person is receiving such investment money or investment property in the course of his or her employment, include both that person and his or her employer; but
(b)	Do not include-
	(i)	The issuer or a trustee (within the meaning of the Securities Act 1978 or the Unit Trusts Act 1960); or
	(ii)	A nominated person of a trustee (within the meaning of the Unit Trusts Act 1960); or
	(iii)	A nominee of a nominated person of a trustee (within the meaning of the Unit Trusts Act 1960); or
	(iv)	A statutory supervisor (within the meaning of the Securities Act 1978); or
	(iv)	A security registrar appointed by the issuer- of a security to which the investment money or investment property relate
	and
(c)	Do not include a person who only transmits investment money or investment property to a person to whom paragraph (b) of this definition applies, without being able to apply the money or property for any other purpose:

"Investment money" and "money", in relation to an investment broker, mean any money received from, or on account of, a member of the public in relation to buying or selling securities:
"Investment property" and "property", in relation to an investment broker, mean security certificates or other valuable property received from, or on account of, a member of the public in relation to buying or selling securities:
"Investor" means a member of the public to whom investment advice is given, or on whose behalf investment money or investment property is held by an investment adviser or an investment broker:
"Person" includes an individual, a corporation, an unincorporated body of persons, and an association or combination of individuals or corporate or unincorporated bodies:
"Receive", in relation to a document, information, or other matter, includes receive by electronic or other means that enables the recipient to readily store the matter in a permanent and legible form:
"Remuneration" means a commission, fee, or other benefit or advantage, whether pecuniary or not, and whether direct or indirect; but does not include a salary or wages of a fixed amount:
"Security" means a security (within the meaning of the Securities Act 1978) that is being, or has previously been, offered to the public for subscription; but does not include-

		(a)   A security exempted from Part II of the Securities Act 1978 by any of paragraphs (b) to (h) of section 5(1) of that Act; or
(b)	A call debt security as defined in regulations made under that Act: "Sell" includes-
	(a)	Allot, transfer, dispose of, withdraw, or terminate; and
	(b)	Agree to sell, allot, transfer, dispose of, withdraw, or terminate:

"Seller" includes an issuer within the meaning of section 2(1) of the Securities Act 1978:
"Send", in relation to a document, information, or other matter, includes send by electronic or other means that enables the recipient to readily store the matter in a permanent and legible form:
"Voting security" has the same meaning as in section 2 of the Securities Amendment Act 1988:
"Working day" means a day of the week other than-

		(a)   Saturday, Sunday, Good Friday, Easter Monday, Anzac Day, the Sovereign's Birthday, Labour Day, and Waitangi Day; and
(b)	A day in the period commencing with the 25th day of December in any year and ending with the 2nd day of January in the following year; and
	(c)	If the 1st day of January in any year falls on a Friday, the following Monday; and (d)   If the 1st day of January in any year falls on a Saturday or a Sunday, the following Monday and Tuesday:

"Writing" includes-

	(a)	The recording of words in a permanent and legible form; and
	(b)	The display of words by any form of electronic or other means of communication in a manner that enables the words to be readily stored in a permanent form and, with or without the aid of any equipment, to be retrieved and read;- and "written" has a corresponding meaning.
(2)	For the purposes only of determining whether investment advice is given to the public or investment money or investment property is received from the public, section 3 of the Securities Act 1978 (which relates to the construction of references to offering securities to the public) shall apply as if every reference in that section to an offer of securities were a reference to the giving of investment advice or receiving of investment money or investment property, as the case may be.
(3)	For the purposes of this Act, unless the context otherwise requires, "associated persons" or "persons associated with each other" are-
	(a)	Persons who are relatives within the meaning of the Income Tax Act 1994; or
	(b)	Persons who are partners to whom the Partnership Act 1908 applies; or
	(c)	Bodies corporate that consist substantially of the same shareholders or are under the control of the same persons; or
	(d)	A body corporate and a person who has the power, directly or indirectly, to exercise, or control the exercise of, the right to vote attached to 25 percent or more of the voting securities of the body corporate; or
	(e)	A body corporate and a person who is a director or principal officer of the body corporate.

Disclosure by Investment Advisers and Investment Brokers

3	Initial disclosure by investment advisers and investment brokers- (1) Every investment adviser and investment broker (or, in the case of an adviser or broker that is a body corporate or unincorporate, any of whose directors or secretary) who, during the 5 years preceding the date of giving investment advice or receiving investment money or investment property, as the case may be,-
	(a)	Has been convicted of an offence against this Act, or of a crime involving dishonesty (as defined in section 2(1) of the Crimes Act 1961); or
	(b)	Was a director or principal officer of a body corporate at the time the body corporate committed such an offence; or
	(c)	Has been adjudged bankrupt; or
	(d)	Has been prohibited by an Act or by a court from taking part in the management of a company or a business,-
	shall, in accordance with section 5 of this Act, disclose that fact to the investor concerned before giving the investment advice or receiving the investment money or the investment property.

(2)	Every investment broker who receives investment money or investment property shall, before receiving the money or property, disclose to the investor concerned, in accordance with section 5 of this Act, a brief description of the procedures of the broker (or, where the broker is acting in the course of his or her employment, of the employer) relating to the receipt and disbursement of the money or receipt and distribution of the property by the broker, including-
	(a)	How payment or delivery of money or delivery of property should be made to the broker; and
	(b)	Whether or not the money or property received by the broker will be held on trust for the investor, and will be so held until it is disbursed or distributed in accordance with the investor's instructions; and
	(c)	What records will be kept by the broker in relation to the money or property, whether the investor has access to those records, and the terms of any such access; and
	(d)	Whether or not the receipt, holding, and disbursement of the money and the receipt, holding, and distribution of the property, by the broker will be audited by an auditor and, if so, the name of the auditor; and
	(e)	The extent, if any, to which the broker can use the money or property for the benefit of the broker or any other person; and
	(f)	Such other information as is required to be disclosed under this subsection by regulations made under this Act.
(3)	For the purposes of subsection (2)(d) of this section, the term "auditor" means a person who would, if the broker were an issuer of securities, be a qualified auditor within the meaning of section 2C of the Securities Act 1978.