New Securities Law for
Investment Advisers and Market Participants
2008
Glossary
Active decision
A decision, in relation to the Chinese wall defence for insider trading, to trade the securities or disclose the inside information or advise or encourage as the case may be.
Advice advertisement
Any form of communication:
- that is or will be distributed to someone; and
- is authorised by an investment adviser or prepared with the investment adviser's involvement; and
- contains or refers to investment advice or is reasonably likely to induce someone to seek investment advice.
Aggrieved person
A person who has suffered or is likely to suffer loss or damage, as a result of a civil remedy provision (other than an investment advisers' or brokers' disclosure obligation or exemption) being contravened.
Association
A person will be associated with another person if:
- both are members of the same partnership;
- both are relatives or de facto partners;
- both are companies that have substantially the same shareholders or are under the control of the same person or persons;
- one is a body corporate and the other has the power, directly or indirectly, to exercise, or control the exercise of, the right to vote attached to 25% or more of the voting securities of the body corporate;
- one is a body corporate and the other is a director or principal officer of the body corporate.
Authorised futures exchange
A body corporate authorised under the Securities Markets Act to operate a futures market in New Zealand. Currently the Sydney Futures Exchange is the only active authorised futures exchange in New Zealand. Futures contracts based on New Zealand securities are traded on the Sydney Futures Exchange.
Balance of probabilities
The standard of proof that must be met to prove a civil case.
Bank term deposit
A fixed term deposit product offered by a registered bank in New Zealand.
Banning Order
An order made by the court against a person for certain breaches of the law which bans the person from acting as a director, promoter, or manager of a company, or from being an investment adviser or broker.
Body corporate
A body corporate is a person created under law with a separate legal identity
from the individuals who are involved in the organisation, like a company or
an incorporated society.
Broker advertisement
Any form of communication:
- that is, or is to be, distributed to a person;
- is authorised by an investment broker or is prepared with the investment broker's involvement; and
- refers to the investment broker or is reasonably likely to induce someone to seek an investment broker service.
Call debt securities
A debt security under which the principal must be repaid in full at any time on demand, and within 1 working day of the demand, with no penalty, fee, or reduction in interest being applied because of the repayment demand. An example of a call debt security is a bank current account.
Chattel
Moveable property, like a car, a piece of furniture or livestock, but doesn't include a book debt or a negotiable instrument like a cheque.
Chinese wall
Controls on the flow of information within a business, in particular between different divisions of a business that offers several services.
Civil remedy provisions
The provision in the law for civil remedies for contravening:
- insider trading and market manipulation prohibitions or exemptions;
- general dealing misconduct prohibitions;
- continuous disclosure obligations or exemptions;
- substantial security holder disclosure obligations or exemptions; and
- investment adviser's or broker's obligations or exemptions.
Compensatory order
An order made by the court to compensate a person who has suffered loss or damage when a civil remedy provision (other than an investment advisers' or brokers' disclosure obligation or exemption) has been contravened.
Continuous disclosure
The notification of material the continuous disclosure provisions of the listing rules of a registered exchange. A public issuer is required by law to make continuous disclosure when party to a listing agreement with a registered exchange.
Contributory scheme
An investment scheme where a number of investors have similar interests in the scheme. There must be at least 6 investors. If the scheme manager (or someone associated with the manager) manages more than one similar scheme, these will be counted together to determine whether or not there is a contributory scheme.
Corrective order
An order made by the court or the Securities Commission that directs a person who has breached the law to publish a corrective statement. The order can set out what statement must be published, and how and when the corrective statement must be published. The person can be required to publish a corrective statement at their own cost.
Declaration of contravention
A Declaration Issued By the Court When It Finds That A Civil Remedy Provision
has Been Contravened. It Can be Used By A Person Applying for A Compensatory
order Or Other Civil Remedy Order. A Declaration of Contravention is Conclusive
evidence of the Matters That Must be Stated in It, And A Person Will Not Be
required to Prove the Contravention.
Disclosure order
An order made by the court or by the Securities Commission that requires a
person to disclose information to comply with a disclosure obligation, or
make a corrective statement at their own cost.
Disclosure statement
A disclosure statement is the document that an investment adviser or
investment broker must use to make disclosure about themselves and the
investments they give advice on. The document can be in electronic form.
The requirements for a disclosure statement are described here (page 14 in the printed publication).
Futures contract
A contract to buy or sell an underlying asset or instrument, at a certain date
in the future, at a pre-set price.
Independent adviser
A person approved by theTakeovers Panel to advise shareholders on the merits
of a takeover offer under the Takeovers Code.
Information insider
A person who has material information regarding a public issuer that is not generally available to the market, and knows or ought reasonably to know that the information is material information, and knows or ought reasonably to know that the information is not generally available to the market.
Injunction
An order made by a court that stops a person from certain conduct that
contravenes or will contravene the law.
Insider trading
Trading in securities with information that is not generally available to the
market and which, if it was generally known, would be likely to materially
affect the share price.
Investment advice
A recommendation, an opinion or guidance about investment or investing in
securities given to a member of the public.
Investment adviser
A person who gives investment advice about securities to members of the
public as part of their job or business.
Investment advisers' disclosure obligation
Any of the obligations placed on investment advisers to make disclosure under
the Securities Markets Act.
Investment advisers' obligation
Any of the following:
- investment advisers' disclosure obligation under the SecuritiesMarkets Act;
- the obligation that an advice advertisement or a product advertisement is not deceptive, misleading or confusing; and
- the obligation not to recommend an illegal offer.
Investment broker
A person who receives investment money or investment property as part of their job or business.
Investment brokers' disclosure obligation
Any of the obligations placed on investment brokers to make disclosure under the Securities Markets Act.
Investment brokers' obligation
Any of the following:
- an investment brokers' disclosure obligation under the Securities Markets Act;
- the obligation that advertising must not mislead, deceive, or confuse; and
- the obligation to refuse to accept investment money for an illegal offer of securities.
Investment money
Any money received from, or on account of, a member of the public in relation to buying or selling securities.
Investment property
Security certificates or other valuable property received from, or on account of, a member of the public in relation to buying or selling securities. This applies only to investments in securities. An example of investment property is a share certificate showing an investment in a company.
Issuer
An entity or fund or individual, which issues securities to the public for subscription. The most common type of issuer relevant to the new law is a listed company whose ordinary shares are traded on a registered exchange. Issuers include listed companies, finance companies who offer securities to the public, and banks. Managers of unit trusts and other managed funds, trustees of superannuation schemes, and life insurance companies are also issuers.
Listed futures contract
A standardised futures contract that is listed on an authorised futures exchange.
Listed securities
Securities approved for trading on a registered exchange's market. Securities will remain listed even if trading is suspended.
Material information
Material information in relation to:
- an issuer (but not in relation to a futures contract), is information about the issuer's listed securities that a reasonable person would expect, if it were generally available to the public, to have a material effect on the price of the securities;
- a futures contract listed on an authorised futures exchange, is information that a reasonable person would expect, if it were generally available to the market, to have a material effect on the value of that futures contract.
Member of the public
Most investors are members of the public unless they are:
- a relative or a close business associate of the issuer of a security they are investing in; or
- a relative or a close business associate of a director of a company when he or she is investing money with that company; or
- an habitual investor as part of their job; or
- any other person who in all the circumstances can properly be regarded as having been selected otherwise than as a member of the public.
Principal officer
A director of a body corporate or other body or a person whose instructions the directors commonly follow.
Product advertisement
Any form of communication authorised or prepared by an investment adviser that:
- contains or refers to an offer of securities to the public; or
- is likely to induce someone to buy such securities.
Prohibition order
An order made by the court or the Securities Commission to prohibit or restrict the making of any statement or distributing any document to prevent contravention or further contravention of an investment adviser or broker obligation.
Public issuer
A person who is party to a listing agreement with a registered stock exchange who is the issuer of securities that are listed on that exchange. An entity will continue to be a public issuer relating to events that occurred while it was party to a listing agreement even if it has since ceased to be a party to a listing agreement.
Registered stock exchange
A body corporate registered under the Securities Markets Act to operate a securities market in New Zealand. New Zealand Exchange Limited is the only registered exchange under the Securities Markets Act and operates a number of securities markets in New Zealand.
Relative
A person is considered to be a relative of another person if they are:
- married to each other;
- in a civil union with each other;
- brother and sister;
- parent and child;
- aunt or uncle, or niece or nephew of the person.
Remuneration
Remuneration means a commission, fee, or other benefit or advantage,
whether pecuniary or not and whether direct or indirect; but does not include
salary or wages of a fixed amount.
Research
Research is the planned investigation undertaken to gain new knowledge and
understanding.
Security
A security is where an investor gives another person (an issuer) money in return for an interest or share in the other person's capital, assets, earnings, royalties or other property, or where an investor gives another person money and the other person has to repay that money in the future.
For the purposes of the insider trading law, the definition is limited to securities that have been allotted and which are listed on a registered exchange's market or on an authorised futures exchange, but does not include previously allotted securities where they are offered in a prospectus and investment statement under the Securities Act. The definition also includes other interests in a security as defined above, such as:
- any form of beneficial interest in the security;
- the power to exercise, or control the exercise of any right to vote attached to the security;
- the power to acquire or dispose of, or control the acquisition or disposition of the security;
- any power to do any of the above things under a trust, agreement, arrangement or understanding relating to the security.
Substantial security holder
A person who has a relevant interest in 5% or more of a class of the listed voting securities of a listed company.
Takeovers Code
The Takeovers Code is the schedule to the Takeovers Code Approval Order 2000. It came into force in 2001. The Code sets the rules for takeovers of companies which are defined as code companies. These include all listed companies (and companies which have delisted in the past 12 months) and all companies with 50 or more shareholders.
Target company
The company whose voting securities are the subject of a takeover offer or
that has received a takeover notice.
Temporary banning order
An order made by the Securities Commission which can prohibit or restrict
a person from doing things set out in the order for a maximum of 14 days. A
temporary banning order can ban a person from giving investment advice or
receiving investment money or investment property from the public. A
temporary banning order can stop a person from acting as a director or a
promoter of, or taking part in the management of, any incorporated or
unincorporated body, or acting as an employee or agent of an investment
adviser or broker.
Term life insurance policy
A life insurance policy that is for a set term, which must be less than the life
expectancy of the insured person, and where money is only paid out for the
insured person (or their beneficiaries) if that person becomes ill or disabled
or dies during the term of the policy.
Trade securities
To acquire or dispose, buy or sell securities. Trading does not include
acquiring or disposing via an inheritance or gift.
Unincorporated body
A group of individuals who have joined together for a common purpose, but
who have not taken the steps needed to set up a body corporate with a
separate legal identity. The most common example of an unincorporated body
is a partnership.
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