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New Zealand Securities Commission |
Last Updated: 19 April 2014
Ref: 500-080 / #22175
OFFICE OF PO BOX 1179
SECURITIES COMMISSION TELEPHON 729-830
LEVEL 6 GREENOCK HOUSE 102-112 LAMBTON QUAY –39 THE
TERRACE WELLINGTON 1 NZ
1 May, 1984
SECURITIES COMMISSION BULLETIN NO.2
PRE-PROSPECTUS PUBLICITY
have sometimes had complaints from sharebrokers themselves that they would not
have agreed to participate in the underwriting of certain issues being
brought out by their fellows if they had known facts subsequently
disclosed in
the prospectus. We think sharebrokers can and should be left to look after their
own inter-relationships in this matter.
That seems to us to be the policy of
section 3(2)(a) and (b) of the Act, which exempts from the legislation offers
that are made
to classes of people we can call professionals. Accordingly, the
regulation of communications among sharebrokers has been left to
the New Zealand
Stock Exchange. The Commission is concerned when the “conditioning”
process is aimed at the public.
The purpose of this bulletin is to call the
attention of issuers, underwriters, sharebrokers, professional advisers and the
media
to the law about publications before the registration of a prospectus,
that arouse interest in securities that are about to be offered
for public
subscription.
ensure that the registered prospectus is, and at all times
remains, the authoritative source of information about the offer and the
securities offered.
a noun; but it is further enacted that, as a verb, the word has a corresponding meaning.
So, when we read, in section 33, that “no security shall be offered to
the public ... ” except upon certain conditions,
we must be careful to
understand that the prohibition extends to offers, invitations and proposals.
The Act is not avoided by taking
care to see that a communication does not
contain an offer in the strict sense of the law of contract. The extended
definition ensures
that the Act applies to all kinds of communications which can
fairly be taken as encouraging the public to take up issues of new
securities
that are available, or are about to become available.
“on behalf of” can mean “in the interests
of” or “for the benefit of’. On either view, it seems
that if
the matter that is published was supplied by the issuer, especially, for
example, to a financial journalist, a Court could
readily infer that the
publication was made “on behalf of” the issuer in both senses of the
term. Accordingly, the Commission
takes the view that where it is the
issuer’s song that is being sung, where the information purveyed stems
from the issuer
or his public relations advisers, where it is the issuer’s
interests that are being served, there are strong grounds for the
view that an
“offer” is being made “on behalf of” the issuer.
(a) Meetings of the issuer, (para. 6)
(b) Announcements of a pending issue, (para. 7) (c) Prospectuses, (para. 8)
(d) Advertisements, (para. 9)
(a) Section 3(7)(b), which deals with statements or reports made by or on
behalf of the issuer to a stock exchange to comply with
listing requirements,
and reports (for example in the daily press) of such a statement or
report;
(b) Section 3(6), which deals with statements made by or on behalf of the
issuer that contain no information or matter other than
the information or
matter described in that subsection.
These provisions are set out in the attachment to this bulletin.
Announcements made in conformity with them do not constitute offers
of
securities to the public for the purposes of the Securities legislation.
(a) A “registered prospectus”;
(b) An “authorised advertisement”.
The scheme of the Act envisages that an “offer” will be made by
distributing documents that are identical with the document
registered with the
Registrar, including amendments, if any, but without endorsements, attachments
and signatures.
The registered prospectus contains the terms of the offer that are intended
to become incorporated in the securities and the contracts
relating to them, as
well as the relevant factual information about the issuer and its affairs that
is prescribed in the Act and
Regulations. It carries strict liability for
misleading statements or for the omission of material facts relating to the
offer.
Sometimes it is desired to publish the prospectus in a different format, such as an advertisement in a newspaper. This is often done overseas. Section 42(4)(b)
facilitates it by enabling the Registrar to register different formats of the
same content.
can be almost infinitely various. Where assets are being acquired from the promoters,
the terms are especially important. Sometimes the promoters want cash from
the proceeds of issue – and this is an important
element in assessing the
risk of investing in the issue. Other promoters, by taking shares in the issue
in exchange for their assets,
give some demonstration of their confidence in the
new venture. Another variant is the vendor’s option to take up shares for
cash after a time, sometimes, as in a recent case, on payment by the vendor to
the company of a premium in addition to the par value.
To prepare for
publication a responsible opinion about an issue of securities requires
knowledge of the facts of these and many other
matters, all of which are dealt
with in the registered prospectus.
The definition in section 2 extends to any communication, other than a registered prospectus, that refers to an offer of securities to the public or that is reasonably likely to induce persons to subscribe for securities that have been, or are to be , offered to
the public. (Our underlining.) An advertisement within the meaning of
the Act extends to anything that encourages acceptance of the
“offer”.
A journalist’s article can be an advertisement for
the purposes of the Act.
particular regulations (Regs. 8 to 23). Within these rules, an issuer is free to make use
of any means of drawing attention to the offer contained in the registered
prospectus.
may deploy the full range of his talents and skills in reporting, discussing and
commenting on the matter contained in the prospectus. This is the established
law designed to ensure that the offer in the prospectus
is not misrepresented to
the public.
15. Extracts from the Act relevant to this subject are attached.
ATTACHMENT
“Advertisement” (except in section 3(1) (c) of this Act) means any form of communication (not being a registered prospectus or a statement made in accordance with section 3(6) of this Act, or a statement or report made in accordance with section 3(7) of this Act) that is to be, or has been, distributed to any person by any means, and which is authorised or instigated by or on behalf of the issuer, or prepared with the co-
operation of, or by arrangement with, the issuer, and –
“(a) That contains or refers to an offer of securities to the public
for subscription; or
(b) That is reasonably likely to induce persons to subscribe for securities of the issuer, being securities to which that communication relates and which have been, or are to be, offered to the public for subscription, - whether or not consideration is to be, or
has been paid for the distribution of that communication; and includes a
statement relating to an interest in a contributory mortgage
required to be
distributed to any person by regulations made under this Act:”.
“Distribute” includes make available, publish, and
circulate; and also includes disseminate by letter, newspaper, broadcasting,
television,
cinematograph film, or any other means whatsoever:
“Offer” includes an invitation, and any proposal or invitation to make an offer; and “to offer”
has a corresponding meaning.
Section 33(1)
“(1) No security shall be offered to the public for subscription, by or
on behalf of an issuer, unless –
“(a) The offer is made in, or accompanied by, a registered prospectus that complies with this Act and all regulations made under this Act;
or
“(b) The offer is made in an authorised advertisement.”
Section 3(2)
“(2) None of the following offers shall constitute an offer of securities to the public: (a) An offer of securities made to any or all of the following persons only:
(i) Relatives or close business associates of the issuer:
(ii) Persons whose principal business is the investment of money or who, in
the course of and for the purposes of their business, habitually invest money:
(iii) Any other person who in all the circumstances can properly be regarded
as having been selected otherwise than as a member of the public:
(b) An invitation to a person to enter into a bona fide underwriting or
sub-writing agreement with respect to an offer of securities:
(c) A take-over offer within the meaning of Part I of Companies Amendment Act
1963.” Section 3(4)
“(4) Any reference in this Act to an offer of securities to the public
shall be construed as including a reference to distributing
an advertisement, a
prospectus, a registered prospectus, or an application form for the subscription
of securities.”
Section 3(6)
“(6) A statement made by or on behalf of an issuer to the effect that
the issuer intends to make an offer of securities to the
public for subscription
and which contains no information or matter other than –
“(a) The name of the issuer, and
“(b) A description of the securities intended to be offered, including
a brief description of any rights or privileges to be
attached thereto;
and
“(c) A statement, of the rate or rates of interest (if any) that may be
earned by holding the securities intended to be offered;
and
“(d) A statement of the total number of securities intended to be
offered; and
“(e) A statement of the intended use of the subscriptions; and
“(f) The terms of the intended offer; and
“(g) A description of the class of persons to whom it is intended the
offer will be made; and
“(h) The date at which the issuer expects that the offer will be made
–
shall not constitute an offer of securities to the public. Section 3(7)
“(7) A statement or report –
“(a) Made to or for the purposes of a general meeting of the members of
the issuer, or a report of the proceedings of such a
meeting; or
“(b) Relating to the affairs of the issuer made to any stock exchange
for the purposes of compliance with the listing requirements
relating to that
stock exchange, by or on behalf of that issuer, or any report of such statement
or report –
shall not constitute an offer of securities to the public.”
Section 38
“38. In this Act the term ‘authorised advertisement’means an advertisement that – “(a) Refers to a registered prospectus that relates to all the securities referred to in the
advertisement, and states the date of registration thereof; and
“(b) States that allotments of the securities shall be made only on
receipt of a form of application forming part of, or issued
with, a registered
prospectus; and
“(c) Specifies the place or places at which a registered prospectus may
be obtained, or contains a coupon or coupons to be completed
by any person who
wishes to be sent a registered prospectus, or both; and
“(d) Complies with this Act and with all regulations made under this
Act relating to advertisements
“(e) Complies with this Act and with all regulations made under this
Act relating to advertisements:
“Provided that paragraphs (a) to (c) of this section shall not apply in respect of an advertisement relating only to securities exempted from certain provisions of this Act by virtue of subsections (2) to (4) of section 5 of this Act”.
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