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Deposit Guarantee Scheme - disclosure proposals. Consultative document [2008] NZSecCom 8 (16 October 2008)

Last Updated: 14 November 2014

Deposit Guarantee Scheme – disclosure proposals

The Securities Commission proposes to grant exemptions to facilitate disclosure by financial institutions that are party to a Crown guarantee under the New Zealand deposit guarantee scheme announced on 12 October 2008.

These exemptions will encourage consistent and straightforward disclosure to inform investors about the application of the guarantee scheme.

The Commission proposes to grant exemptions from the usual detailed requirements about disclosure of guarantees and instead require financial institutions to use a standard form of statement to alert investors to the fact that the guarantee applies in respect of an offer of securities. The proposed statement is:

“[name of issuer] has a guarantee under the New Zealand deposit guarantee scheme”.

Issuers will also be able to refer readers to further information about the scheme published on the Treasury website.

The exemptions will also relieve issuers from the need to make immediate amendments to prospectuses and investment statements, in order to avoid unnecessary compliance costs.

Details of the proposed exemptions are set out below. The Commission intends to settle an exemption early next week. The exemption notice will be notified in the NZ Gazette and on the Commission’s website.

Financial institutions must ensure that their advertising does not mislead investors about an institution’s acceptance into the scheme or the application of the scheme to different securities issued by an institution. The Securities Commission may take enforcement action against issuers whose disclosure is misleading.

Details of proposed exemptions

The exemption notice will address compliance matters relating to advertising and require a standard form of disclosure about the scheme. Specifically, the exemption notice will contain exemptions, subject to conditions, relating to the following provisions in the Securities Act and the Securities Regulations:

• regulation 9, concerning the consistency of advertisements with registered prospectuses and disclosure statements,

• regulation 11, concerning references to guarantees in advertisements,

• regulation 17, concerning certificates in respect of advertisements,

• clause 4(2) of Schedule 2 of the Regulations, concerning disclosure about guarantees in registered prospectuses for debt securities, and the equivalent

clauses regarding disclosure about guarantees in registered prospectuses for collective investment schemes,

• regulation 7A(4) and clause 10 of Schedule 3D of the Regulations, concerning the form and content of disclosure about guarantees in investment statements,

• section 54B(1) of the Act and clause 20 of Schedule 3D of the Regulations in relation to making available the financial statements of the Crown.

The exemptions in relation to the investment statement will allow issuers to include information about the deposit guarantee scheme in an insert to accompany investment statements distributed after an institution has been accepted into the scheme.

The exemptions relating to prospectus and advertising content will be conditional on issuers delivering to the Registrar a memorandum of amendments to update their prospectus within 3 days of acceptance into the scheme. Issuers will be able to alert investors about the application of the scheme as soon as notice of an issuer’s acceptance is made public by the Government.