Derivatives issuers
In section 8(4) of the Financial Markets Conduct Act 2013 (FMC Act), a derivative is defined as an agreement in relation to which the following conditions are satisfied:
It also includes any transaction, regardless of duration, that is recurrently entered into* in the financial markets in New Zealand or overseas and is commonly referred to* as:
A derivatives issuer is required to be licensed when making a regulated offer. A regulated offer includes any offer of derivatives when disclosure must be made to one or more investors. For example, a retail investor. See section 41 of the FMC Act.
Licensees obligations include notifying the FMA of certain events and providing us with information. For example, when a new director or senior manager is appointed by completing a declaration form.
The licence is subject to a condition that the licensee or authorised body may, under the licence, provide only the market services or class of market services to which the licence relates and for which each person is authorised under the licence; and the conditions imposed by the FMA under section 403– these will generally include the standard conditions and/or any specific conditions; and the conditions imposed by regulations (if any).
Derivative issuers are FMC reporting entities and must comply with the following:
All issuers have obligations to disclose offer information in a PDS and on the Disclose Register. They also have ongoing obligations under the FMC Act.
Schedule 1 of the FMC Act includes small offer exclusions which would require limited or no disclosure. The FMA must be notified of the use of these exclusions.
The FMA offers a pre-registration review service to help issuers and their directors feel more confident that their offer documents are likely to satisfy our expectations.
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act) imposes several obligations:
The FMA supervises designated business groups (DBGs) and reporting entities listed in Section 130 of the Act.
Licensed derivatives issuers are required to comply with the new requirements for the handling of derivatives investor money and derivatives investor property. These include:
See Financial Markets Conduct Regulations 2014 for more info.
Licensees are subject to supervision by us. We take a risk-based approach to monitoring, meaning the extent of supervision varies depending upon our priorities and the nature of your business. It can range from a full onsite inspection through to information requests and desk-based reviews. As a minimum, we will seek assurance you are complying with the basics, i.e.:
We will also assess your conduct generally as a licence holder and check you are complying with key legislation such as the Financial Advisers Act 2008, the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 and the fair dealing provisions within the FMC Act.
One of the big shifts for the FMA under the FMC Act is the use of preventative regulation, which aims to identify and anticipate potential causes of harm to New Zealand’s financial markets and investors. Find out more about the seven priority areas of potential harm in our Strategic Risk Outlook.
A key part of our supervision is self-reporting by licensees. If we can see that you can identify and resolve problems it gives us confidence. If you have any significant issues, we encourage you to tell us about them and what you are doing to remedy them.
If you need to contact us at any time during the term of your licence you should email compliance@fma.govt.nz.
The FMA has wide powers to exempt persons or transactions from some financial markets law requirements. These powers enable us to remove rigidities in the law and ensure requirements for businesses are reasonable and cost-effective. Find out more about exemptions you can apply for under the FMC Act and current exemption notices.