Overview of New Zealand regulatory requirements
The passport arrangements have been implemented in New Zealand and the Passport Rules have been incorporated into local law through Subpart 6 of Part 9 of the Financial Markets Conduct Act 2013 (FMC Act), the Financial Markets Conduct (Asia Region Funds Passport) Regulations 2019 (Passport Fund Regulations) and amendments to Financial Markets Conduct Regulations 2014 made by the Financial Markets Conduct (Asia Region Funds Passport) Amendment Regulations 2019.
Becoming a New Zealand passport fund
A New Zealand registered scheme that wants to make an offer into another passport country must first apply to the FMA under section 134(3) of the FMC Act for the scheme to be registered as a passport fund. The manager of the scheme will need to complete an application form (available on the FMA’s website) and email this to the FMA.
FMA will assess whether the scheme meets the registration requirements set out in regulation 82B of the FMC Regulations. This will include an assessment of whether the manager of the scheme is an ‘eligible entity’ under section 3(4) of Annex 2 of the Memorandum of Cooperation on the Establishment and Implementation of the Asia Region Fund Passport (and whether the scheme is and will be operated in compliance with the Passport Rules in Annex 3 of the Memorandum of Cooperation.
Offering interests to New Zealand investors as a notified foreign passport fund
The FMC Act and the FMC Regulations apply to regulated offers of financial products in New Zealand. They set out disclosure, governance and reporting requirements for offers of financial products. They will apply to foreign passport funds that want to offer managed investment products in New Zealand, subject to certain modifications and exemptions.
The Passport Fund Regulations exempt a “recognised offer” from certain parts of the FMC Act, and instead apply modified requirements. The regulations set entry and ongoing compliance requirements for foreign passport funds, and provide for modified disclosure and reporting for foreign passport funds in New Zealand.
To qualify as a recognised offer, the operator of a foreign passport fund must meet the preconditions in regulations 12 to 16 of the Passport Fund Regulations before the offer is made. These preconditions prescribe the process for application and other information that is required once entry has been authorised by the FMA.
Recognised offers under the Passport Fund Regulations are exempt from various requirements under the FMC Act and FMC Regulations, including from most of the governance obligations in Part 4 of the FMC Act and also from financial reporting obligations under Part 7 of the FMC Act that would otherwise apply to the operator of the foreign passport fund by reason of the offer (see regulation 10).
Authorisation for entry
To apply for entry the foreign passport fund will need to complete an application form (which is available on the FMA’s website) and email this to the FMA.
A foreign passport fund will need to apply to the FMA for authorisation for entry to New Zealand and also ensure that the notification process described in section 6 of Annex 2 is completed. The application for entry must be made in accordance with section 4(2) of Annex 2 of the Memorandum of Cooperation. Section 4(2) of Annex 2 of the MOC requires the following information:
- the Passport Fund’s unique registration code
- Part A of the Passport Fund’s Home Economy registration application
- the documents and information set out in regulation 12(2) of the Passport Fund Regulations (which the Passport Fund can provide by completing the application form).
Before applying a foreign passport fund will need to:
- Register on the Financial Service Providers Register (the FSPR).
- Join a dispute resolution scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (the FSP Act).
- Ensure that, in all material respects, they comply with the laws of the home economy.
- Appoint an agent for service in New Zealand.
The entry process by notification as described in section 6 of Annex 2 to the Memorandum of Cooperation must be completed. The entry process is considered complete if the FMA does not, within 15 working days after the application is made, notify the foreign Passport Fund that the application for entry is refused, or that the application does not include all the information required. The consideration period can be extended by up to 7 days at a time, if the foreign Passport Fund and the FMA both agree in writing to the extension.
Other requirements to satisfy before making an offer
A foreign passport fund will also need to meet the other preconditions under regulations the Passport Fund Regulations for an offer by that foreign passport fund to be a “recognised offer” including:
- notification must not have been given on behalf of New Zealand under paragraph 8.6 or 8.8 of the Memorandum of Cooperation that it intends to decline to accept applications for entry by a class of foreign passport funds that includes the foreign passport fund.
- the foreign passport fund must lodge an ‘opt-in’ notice with the Registrar of Financial Service Providers. The notice must be in the prescribed form and accompanied by certain documents and other information including the Product Disclosure Statement or PDS and the register entry information, the constituent document of the foreign passport, a copy of any relevant exemptions given by the home regulator and the most recent audited financial statements for the fund (if any).
A foreign Passport Fund will need to make disclosure under Part 3 of the FMC Act before making a regulated offer in New Zealand. Certain information about the offer must be disclosed in a product disclosure statement or PDS, which is lodged with the Registrar, and in a register entry on the Disclose Register. Together, this disclosure must include all material information about the offer and be up-to-date, accurate and understandable.
Schedule 4 to the FMC Regulations sets out what must be included in the PDS and the register entry, and Part 6 of that Schedule provides modifications that apply to a recognised offer by a foreign passport fund. A statement telling investors about the Asia Region Funds Passport and the differences between offers under the passport funds regime and offers under local New Zealand law (in the form set out in Schedule 26 to the FMC Regulations) must accompany the PDS.
A foreign passport fund will have ongoing obligations under the Passport Fund Regulations, the FMC Act and the FMC Regulations.
The Passport Fund Regulations set out ongoing obligations that apply to ‘recognised offers’ under the funds passport regime. These include requirements:
- to lodge audited financial statements
- to comply with the laws of the home economy and the Passport Rules
- to notify the FMA of certain changes
- to give the FMA notice if the operator becomes aware of certain contraventions of New Zealand law
- to give the FMA a copy of each implementation review report
- for the operator to be registered on the FSPR and have an agent and address for service in New Zealand.
The operator of a foreign passport fund will also have ongoing obligations under the FMC Act and FMC regulations. These include complying with ongoing disclosure requirements. Specific requirements for ongoing disclosure are set out in Schedule 4 to the FMC Regulations, as modified by Part 6 of that Schedule for foreign passport funds.
There is also a range of other obligations that apply under New Zealand law, including those relating to taxation and privacy obligations. Foreign passport funds should get independent advice in relation to other obligations that may apply to them under New Zealand law.
- FMA’s website
- The New Zealand Companies Office website
- Guidance for foreign passport fund operators
- Financial Markets Conduct Act 2013
- Financial Markets Conduct (Asia Region Funds Passport) Regulations 2019
- Financial Markets Conduct (Asia Region Funds Passport) Amendment Regulations 2019 amending the Financial Markets Conduct Regulations 2014
- Financial Service Providers (Registration and Dispute Resolution) Act 2008