Securities Commission review of Class Exemption Notices - project report [2007] NZSecCom 4 (14 August 2007)

Last Updated: 12 November 2014

SECURITIES COMMISSION REVIEW OF CLASS EXEMPTION NOTICES - PROJECT REPORT

1.
As you are aware, the Securities Commission is currently undertaking a review of the class exemption notices expiring this year and those without expiry dates.


2.
The Commission has now considered all exemptions notices included in the current review, along with all of the submissions we received on those exemption notice.


3.
The Commission has confirmed the general policy of each of the exemption notices and approved their renewal in principle. In most cases the Commission has agreed to renew the exemption notices on the same terms or with only minor amendments. In a few cases, however, the Commission has considered that more substantive changes are required to the particular exemption notice. A division of the Commission is considering, and settling the terms of, these exemption notices.


4.
We note that although the Commission has taken these steps, if you or your clients are continuing to rely on any exemption notice included in the review you should confirm that that the new exemption notice, or an appropriate amendment notice, has in fact been gazetted, and how any amendments may affect your or your clients' position.

Exemption notices being renewed without amendment
5.
The Commission agreed to renew the following exemption notices on their current terms for a period of five years:
(a)
the Securities Act (Advertisements Containing Investment Advice) Exemption Notice 2002;


(b)
the Securities Act (Audiovisual Advertisements) Exemption Notice 2002;


(c)
the Securities Act (Authorised Futures Contracts) Exemption Notice 2002;


(d)
the Securities Act (Banks) Exemption Notice 2002;


(e)
the Securities Act (Bloodstock) Exemption Notice 2002;


(f)
the Securities Act (Commercial Bill Dealers) Exemption Notice 2002;


(g)
the Securities Act (Continuous Debt Issues) Exemption Notice 2002;


(h)
the Securities Act (Contributory Mortgage) Regulations (Solicitors) Exemption Notice 1996;


(i)
the Securities Act (Employee Share Purchase Schemes - Unlisted Companies) Exemption Notice 2005;


(j)
the Securities Act (Estates and Interests in Australian Land) Exemption Notice 2002;


(k)
the Securities Act (Life Insurance Companies) Exemption Notice 2002;


(l)
the Securities Act (Overseas Companies) Exemption Notice 2002;


(m)
the Securities Act (Overseas Listed Issuers) Exemption Notice 2002;


(n)
the Securities Act (Overseas Takeovers by New Zealand Companies) Exemption Notice 2002;


(o)
the Securities Act (Sharebrokers) Exemption Notice 1984;


(p)
the Securities Act (Short Form Prospectus) Exemption Notice 2002;


(q)
the Securities Act (Stock and Station Agents) Exemption Notice 2002; and


(r)
the Securities Act (Unit Trust Certificates) Exemption Notice 2002.




6.
We note that expiry dates will be incorporated into the Securities Act (Sharebrokers) Exemption Notice 1984 and the Securities Act (Contributory Mortgage) Regulations (Solicitors) Exemption Notice 1996.

Exemption notices being renewed with minor amendments


7.
The Commission agreed to renew the following exemption notices for a period of five years with relatively minor amendments:
(a)
the Securities Act (Amalgamations) Exemption Notice 2002;


(b)
the Securities Act (Australian Issuers) Exemption Notice 2002;


(c)
the Securities Act (Charitable and Religious Purposes) Exemption Notice 2003;


(d)
the Securities Act (Co-operative Companies) Exemption Notice 2002;


(e)
the Securities Act (Equity Warrant Issuers) Exemption Notice 2002;


(f)
the Securities Act (Friendly Societies) Exemption Notice 2002;


(g)
the Securities Act (Industrial and Provident Societies) Exemption Notice 2002; and


(h)
the Securities Act (Renewals and Variations) Exemption Notice 2002.


8.
The amendments to these exemption notices include:

(a)
the revocation of the exemption from section 37A(2) of the Securities Act 1978 (which has been repealed) in various exemption notices;


(b)
the revocation of a transitional provision in the Securities Act (Amalgamations) Exemption Notice 2002, which is no longer required.


9.
A more detailed explanation of the specific amendments to those exemption notices you have asked to be updated about is set out below.

Securities Act (Amalgamations) Exemption Notice 2002
10.
The only amendment to be made to the Securities Act (Amalgamations) Exemption Notice 2002 is the revocation of the transitional provision, clause 16, which is no longer required. This transitional provision allowed offers to be made in accordance with a preceding exemption notice if the securities offered were allotted before 31 December 2002.

Securities Act (Australian Issuers) Exemption Notice 2002
11.
The only amendment to be made to the Securities Act (Australian Issuers) Exemption Notice 2002 is the revocation of the reference to section 37A(2). As noted above, this subsection has been repealed.

The Securities Act (Charitable and Religious Purposes) Exemption Notice 2003
12.
The only amendment to be made to the Securities Act (Charitable and Religious Purposes) Exemption Notice 2002 is the removal of the entities named in the schedule to that exemption notice.

Securities Act (Co-operative Companies) Exemption Notice 2002
13.
The only amendment to be made to the Securities Act (Co-operative Companies) Exemption Notice 2002 is the revocation of the reference to section 37A(2). As noted above, this subsection has been repealed.

Securities Act (Equity Warrant Issuers) Exemption Notice 2002
14.
Two minor amendments will be made to the Securities Act (Equity Warrant Issuers) Exemption Notice 2002:
(a)
the revocation of the reference to section 37A(2). As noted above, this section has been repealed; and


(b)
the substitution of references to "New Zealand Stock Exchange" with references to "New Zealand Exchange Limited".

Securities Act (Friendly Societies) Exemption Notice 2002
15.
The only amendment to be made to the Securities Act (Friendly Societies) Exemption Notice 2002 is the revocation of the reference to section 37A(2). As noted above, this subsection has been repealed.

Securities Act (Industrial and Provident Societies) Exemption Notice 2002
16.
Two minor amendments will be made to the Securities Act (Industrial and Provident Societies) Exemption Notice 2002:
(a)
the revocation of the reference to section 37A(2). As noted above, this section has been repealed; and


(b)
amendments to the schedule to the exemption notice, as advised by the named entities.

Securities Act (Renewals and Variations) Exemption Notice 2002
17.
The only amendment to be made to the Securities Act (Renewals and Variations) Exemption Notice 2002 is the revocation of the reference to section 37A(2). As noted above, this subsection has been repealed.

Exemption notices with substantive amendments - for which terms have been settled
18.
The Commission has decided to make more substantive amendments to the following exemption notices, the terms of which have been settled:

(a)
the Securities Act (Building Societies) Exemption Notice 2002;


(b)
the Securities Act (Contributory Mortgage Brokers) Exemption Notice 1983; and


(c)
the Securities Act (Overseas Employee Share Purchase Schemes) Exemption Notice 2002.




19.
These exemption notices will be renewed for a period of five years. A description of the amendments to these exemptions notices is set out below.

Securities Act (Building Societies) Exemption Notice 2002
20.
The Commission agreed to renew the Securities Act (Building Societies) Exemption Notice 2002 for a further period of five years.


21.
The Commission has also agreed to amend the exemption notice to allow a prospectus relating to building society shares to contain similar disclosures to those required in a short form prospectus for equity securities. The terms of the exemption will be consistent with the existing exemption granted to the Canterbury Building Society under the Securities Act (Canterbury Building Society) Exemption Notice 2004, with such modifications as necessary.


22.
The schedule to the exemption notice will also be amended to reflect name changes of building societies named in that schedule.

Securities Act (Contributory Mortgage Brokers) Exemption Notice 1983
23.
The Commission has agreed to renew the Securities Act (Contributory Mortgage Brokers) Exemption Notice 1983 for a period of 5 years.


24.
The exemption notice will be renewed largely on the same terms, however two amendments will clarify and extend the effect of the exemptions contained in the exemption notice.


25.
First, the exemption notice will be amended in order to resolve an apparent conflict between the exemption notice and the Securities Act (Contributory Mortgage) Regulations 1988 ("Contributory Mortgage Regulations"). Consistent with regulation 12(1)(a) of the Securities Regulations 1983, the exemption notice provides, amongst other things, that no advertisement may state the amount of the assets or net assets of any person or persons, other than total assets (in which case the amount of total liabilities must also be stated with equal prominence) or net assets of the mortgagor or the guarantor. However, the Contributory Mortgage Regulations require the value of certain assets to be stated in any valuation report provided to contributors. The amendment clarifies that those values may be stated in an advertisement in respect of interests in a contributory mortgage, as well as any other statement about assets required by the Contributory Mortgage Regulations.


26.
Second, the exemption notice will be amended in order to clarify ambiguities in the exemption notice as to the nature of the guarantee provided by a guarantor. As currently drafted, the exemption notice is unclear as to whether statements may be made about the assets of a guarantor of the obligations of the contributory mortgage broker (or other person) in relation to the interests in a contributory mortgage, as compared solely to statements about the assets of a guarantor of the obligations of the mortgagor to repay the loan for which a mortgage of land was granted. An amendment to the definition of the term "guarantor" will clarify and extend the exemption notice so that it will apply in all such instances.


27.
An expiry date will also be incorporated into the exemption notice.

Securities Act (Overseas Employee Share Purchase Scheme) Exemption Notice 2002
28.
The Commission agreed to renew the Securities Act (Overseas Employee Share Purchase Scheme) Exemption Notice 2002 for a period of five years.


29.
The only amendment to the exemption notice will be the revocation of clause 10 of the Securities Act (Overseas Employee Share Purchase Schemes) Exemption Notice 2002, which required a report to be provided to the Commission on an annual basis relating to securities offered under an issuer's employee share purchase scheme.

Exemption notices being renewed with substantive amendments - for which terms remain to be settled
30.
The Commission is continuing to work on likely amendments to the following exemption notices, the terms of which remain to be settled:

(a)
the Securities Act (Group Investment Index Funds) Exemption Notice 2002;


(b)
the Securities Act (Real Property Proportionate Ownership Schemes) Exemption Notice 2002;


(c)
the Securities Act (Residential Property Developments) Exemption Notice 1999; and


(d)
the Securities Act (Rights, Options, and Convertibles) Exemption Notice 2002.


31.
We will provide further information about the amendments to these exemptions notices to those persons who have expressed an interest once the terms of such exemption notices have been settled.

New exemption proposed - NZSX IPOs
32.
The Commission has agreed in principle to grant a new class exemption for initial public offerings ("IPOs") made by companies listed on, or applying to be listed on, the NZSX market operated by New Zealand Exchange Limited.


33.
The Commission has granted several individual exemptions for IPOs on the NZSX in recent years. Common exemptions in these exemption notices address disclosure issues arising in relation to IPOs. The general effect of the exemptions contained in these exemption notices is that the relevant company:

(a)
was not required to provide information about the vendor, as issuer, of previously allotted shares;


(b)
was not required to include the price and net asset backing of the shares in the offer document, on the condition that information about how the price is set, and estimated net asset backing figures, was disclosed; and


(c)
was permitted to provide prospective cash flow information aligned to the company's balance date.


34.
These exemption notices, often required in the circumstances of an IPO, have become routine. The class exemption notice to cover these issues is not intended to be an extension of exemption policy. The Commission considers that it will assist issuers by reducing the time and resources required to address regulatory compliance issues in undertaking an IPO on the NZSX.


35.
Although the Commission has agreed in principle to grant this exemption notice, its terms remain to be settled.