The fair dealing requirements in Part 2 of the Financial Markets Conduct Act 2013 (FMC Act) are broad principles that prohibit misleading or deceptive conduct, false or misleading representations and unsubstantiated representations.
If your ICO is providing a financial product or financial service, all promotional material – including your white paper, website and on social media posts – must comply with the fair dealing provisions in Part 2 of the FMC Act. The provisions prohibit you from engaging in misleading conduct and making false, deceptive or unsubstantiated statements about the financial product or service, irrespective of the type of investor you are offering to, or where they are located.
See Initial coin offers to learn more about when an ICO involves a financial service or a financial product.
Even if your ICO is not providing a financial service or financial product, ‘fair dealing’ requirements still apply to white papers and other communications about your ICO under the Fair Trading Act 1986. This prohibits misleading and deceptive conduct, and applies to the trading of assets, commodities and other goods and services.
The Commerce Commission is responsible for ensuring you comply with this Act.
Other general consumer protection laws also apply to ICOs, including laws preventing fraudulent and other criminal conduct – like obtaining money by deception.
To comply with the fair dealing requirements, all promotional material associated with your ICO – including your whitepaper, website, and any social media, must follow these principles:
If the overall impression of the promotional material is misleading, it will be in breach of the fair dealing requirements.
We have a wide range of powers to address breaches of the fair dealing requirements. These powers allow us to issue orders requiring ICO issuers in New Zealand to comply with the law, including amending or taking down non-compliant promotional material. We may publish these orders.
A breach of the fair dealing requirements is also a civil liability offence with a potential pecuniary penalty. ICO issuers can also be ordered to pay compensation to people who have suffered a loss as a consequence of a breach of the fair dealing requirements.
We encourage you and your legal advisers to speak to us as early as possible to discuss the offer.
We can help you determine whether the ICO involves a financial product or financial service, and whether you meet the fair dealing requirements. We expect you to refrain from seeking to raise funds while discussions with us are ongoing.
Get in touch at: firstname.lastname@example.org
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