Financial Markets Conduct Act 2013 Guide: Key Points

If you’ve ever bought a share or invested in a managed fund in New Zealand, the Financial Markets Conduct Act 2013 has already shaped your experience. The Act, which came fully into effect on 1 December 2014, replaced older legislation and aimed to boost confidence and participation in capital markets – here’s what you need to know about the key provisions, who qualifies as a wholesale investor, and what penalties can apply when things go wrong.

Enacted: 2013 ·
Administering authority: Financial Markets Authority ·
Key prohibition: Misleading or deceptive conduct in relation to quoted financial products ·
Major regulations: Financial Markets Conduct Regulations 2014

Six key facts capture the core of the Act’s architecture.

What is the Financial Markets Conduct Act 2013?

The Financial Markets Conduct Act 2013 (FMC Act) is New Zealand’s primary legislation governing how financial products are offered, promoted, and sold. It replaced the Securities Act 1978 and the Securities Markets Act 1988, consolidating and modernising the rules for capital markets. According to the Financial Markets Authority (NZ’s capital markets regulator), the Act provides a framework for high-quality regulation in capital markets and financial services.

What is the purpose of the FMC Act?

The Act’s core purpose is to promote confident and informed participation in financial markets. It does this by setting mandatory disclosure standards, prohibiting misleading conduct, and imposing governance obligations on issuers. As MBIE (New Zealand’s Ministry of Business, Innovation and Employment) explains, the Act governs how financial products are created, promoted and sold – covering everything from prospectuses to ongoing reporting.

Scope of regulation under the FMC Act

• Regulates offers of financial products to the public, including shares, bonds, managed investment schemes, and derivatives (New Zealand Legislation (official government portal))
• Sets disclosure obligations for issuers – both at offer stage and on an ongoing basis
• Prohibits misleading or deceptive conduct in relation to any dealing in quoted financial products (Section 19)
• Establishes a licensing regime for market operators and certain participants

The implication: This consolidation reduces complexity for market participants while raising the bar for transparency.

Who is a wholesale investor under the FMC Act?

Wholesale investors are individuals or entities that meet certain asset thresholds or investment experience criteria, meaning they are considered capable of assessing risk without the same level of regulatory protection. The Financial Markets Authority (NZ’s capital markets regulator) states that wholesale offers are not regulated in the same way as offers to retail investors – but even then, offerors must still comply with fair dealing requirements.

Definition of a financial product under the FMC Act

Financial products are broadly defined under the Act and include shares, debt securities, interests in managed investment schemes, and derivatives. The official New Zealand Legislation (government portal) defines the full list in Part 1, covering everything from equity to structured products.

Role of the Financial Markets Authority

• FMA oversees compliance and enforcement of the FMC Act (Financial Markets Authority (thematic review))
• Issues guidance on the wholesale investor exclusion, including certificates and eligibility
• Conducts thematic reviews – the most recent in 2022 focusing on use of the wholesale investor exclusion

What this means: Anyone considering wholesale investment must weigh the reduced regulatory burden against the diminished legal protections.

What are the key provisions of the Financial Markets Conduct Act 2013?

The Act contains several key provisions that define how financial products must be offered and how participants must behave. Two of the most important are the prohibition on misleading conduct and the penalty regime for breaches.

Prohibition on misleading or deceptive conduct

Section 19 of the Act states: “A person must not engage in conduct that is misleading or deceptive or likely to mislead or deceive in relation to any dealing in quoted financial products.” This is a strict liability provision – intent does not need to be proven. As Lexology (legal analysis platform) notes, the provision is designed to promote confident and informed participation in financial markets.

Penalties for non-compliance

• For misleading conduct (Sections 19-23): the greater of the consideration for the transaction, three times the gain made or loss avoided, and $1 million for an individual or $5 million for any other case (New Zealand Legislation PDF (official consolidation))
• For certain disclosure-related offences: imprisonment up to 5 years, a fine up to $500,000, or both for an individual; up to $2.5 million for a body corporate (New Zealand Legislation PDF)
• For false or misleading certificates: penalties up to $50,000 in some certificate-related cases (Financial Markets Authority (enforcement judgment))

The pattern: The penalty structure is calibrated to the risk profile of the product, with quoted markets receiving the strictest oversight.

What are the regulations under the Financial Markets Conduct Act 2013?

The FMC Act is supported by a detailed set of regulations that specify the operational requirements. The primary instrument is the Financial Markets Conduct Regulations 2014.

Key regulations: Financial Markets Conduct Regulations 2014

As Dentons (global law firm) explains, the FMC Act and its regulations are the primary law regulating the offering of and dealing in financial products in New Zealand. The regulations cover:

• Disclosure requirements for offers of financial products
• Fair dealing rules, including prohibitions on false or misleading statements
• Licensing regimes for market operators, custodians, and derivatives issuers
• Wholesale investor eligibility criteria and certificate requirements

Relationship with other legislation

The FMC Act interacts with the Financial Reporting Act 2013 (which sets financial reporting obligations) and the FMA Act 2011 (which establishes the regulator’s powers). The Companies Office (New Zealand business registry) notes that if an FMC reporting entity fails to lodge financial statements on time, the FMA can issue an infringement penalty notice of $7,500 or prosecute, with penalties up to $50,000.

The catch for issuers: Even with a strong compliance framework, the cross-referencing of multiple statutes can create hidden pitfalls.

When did the Financial Markets Conduct Act 2013 come into effect?

The Act was passed on 28 August 2013, but the majority of its provisions came into effect on 1 December 2014 – a 15-month transition period that gave market participants time to prepare.

Effective date and key milestones

• 28 August 2013: Act passed by Parliament (New Zealand Legislation)
• October 2014: Financial Markets Conduct Regulations 2014 gazetted
• 1 December 2014: Most provisions come into effect, replacing the Securities Act 1978
• 2020: Amendment regulations for regulated financial advice disclosure
• 2021: Further amendments to align with new disclosure framework

Impact on financial services and markets

The transition to the new regime was significant. As Auckland University Law Review (academic analysis) notes, the Act narrowed criminal liability scope while increasing maximum penalties for some offences – a deliberate shift toward a more proportionate, risk-based enforcement model. The FMA’s 2022 thematic review on wholesale investor exclusions shows the regulator continues to refine how the rules are applied in practice (Financial Markets Authority (thematic review)).

What this means for market participants: The phased implementation and ongoing reviews indicate that the Act is a living framework, with interpretations still evolving through enforcement and guidance.

Clarity: What’s confirmed and what’s still unclear

Confirmed facts

• The FMC Act was enacted in 2013 and is the primary legislation for capital markets regulation in New Zealand (New Zealand Legislation)
• It prohibits misleading or deceptive conduct (Section 19) and imposes strict penalties (New Zealand Legislation PDF)
• The Financial Markets Authority is the independent regulator responsible for enforcement (Financial Markets Authority)
• Wholesale investors receive fewer disclosure protections but still benefit from fair dealing rules (Financial Markets Authority)

What’s unclear

• The exact boundaries of the wholesale investor definition can be nuanced, especially for sophisticated individuals who may not meet asset thresholds (Financial Markets Authority (thematic review))
• Application of the Act to cryptocurrency and digital assets is still evolving, with no formal guidance yet (Financial Markets Authority)
• The impact of the 2020 and 2021 amendments on retail investor protections is still being assessed by the market (New Zealand Legislation)
• The interaction between the FMC Act and other legislation such as the Fair Trading Act may lead to varying interpretations in enforcement (Financial Markets Authority)

Key quotes from the legislation and regulator

“A person must not engage in conduct that is misleading or deceptive or likely to mislead or deceive in relation to any dealing in quoted financial products.”

— Section 19, Financial Markets Conduct Act 2013 (New Zealand Legislation (official government portal))

“The FMC Act provides a framework for high-quality regulation in capital markets and financial services.”

— Financial Markets Authority (Financial Markets Authority (NZ’s capital market regulator))

Summary: What this means for investors and market participants

The FMC Act sets a clear standard: transparency and fairness are non-negotiable for retail offers, but wholesale offers operate with lighter touch regulation. For New Zealand investors, the choice is clear: understand the wholesale investor rules and the protections you’re giving up, or stick with regulated retail offers where the law has your back. For issuers, complying with the Act’s disclosure and conduct requirements is not optional – and the penalties for getting it wrong are severe enough to demand attention.

Frequently asked questions