Financial Markets Conduct Bill makes fundamental changes for the investment industry

This Bill was introduced to parliament today.  It pulls together a lot of legislation previously under several Acts, harmonises some legislation with Australian securities law and introduces some innovations of its own.

Some salient points to note:

  • regulated financial products will be categorised as equity securities, debt securities, managed investment products and derivatives – based on the economic substance of the financial product, not just its legal form;
  • the offer process is to be modelled more closely on the equivalent Australian legislation;
  • the requirement for issuers to prepare a prospectus and investment statement will be replaced with a requirement to prepare a single product disclosure statement (PDS) tailored to retail investors;
  • safe-harbours will be changed so that there are more ‘bright line’ tests (for example, there are exclusions for offers to wholesale investors, close business associates and for small offers) and issuers will be able to rely on self-certification by wholesale investors that they are exempt;
  • issuers will have duties to make certain ongoing disclosures;
  • there will be enhanced governance requirements for regulated offers of debt securities – although the requirement for there to be a trust deed and a trustee has been retained;
  • a common set of governance requirements will apply for all managed investment schemes;
  • persons who act as a manager of a registered scheme, a provider of a discretionary investment management scheme, a derivatives issuer under regulated offers or an independent trustee of a restricted scheme must be licensed;
  • a modified liability framework – with a policy decision that criminal law will be reserved for conduct where there is knowing or reckless behaviour – and greater use of civil remedies;
  • the Companies Act 1993 is to be amended to introduce a new criminal offence in relation to serious breaches of the duty of directors to act in good faith and in best interests of the company and the duty relating to reckless trading;
  • additional powers will be granted to the Financial Markets Authority, such as the power to designate financial products and make “no action” statements;
  • the current regulatory regime for exchanges will be replaced with a licensing regime for significant non-wholesale markets;
  • current legislation relating to aspects such as insider trading, market manipulation, substantial security-holder disclosure and continuous disclosure are largely unchanged.

Leave a Reply