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How Does The Law Help Investors In New Zealand?

Securities Commission
Securities Commission

New Zealand has laws that regulate the way investments are offered
to people. The laws are not designed to protect investors against
losing money in their investments. All investments have risk. See more
about risk.

The best protection investors can have is to be well informed about the investments they are considering.

The main purpose of securities law is to give investors some protection by requiring issuers
to disclose the information the investors need to make informed
decisions. These laws are enforced by regulators such as the Securities
Commission and the Registrar of Companies.

The law also helps investors by requiring some investments to be supervised by trustees who act in investors' interests. Registered banks are supervised by the Reserve Bank. The stock exchange is supervised by NZX and the Securities Commission.

Some requirements of the law are:

Registered prospectus - most investments must have
a prospectus which explains the details of the investment and who is
offering it. This document must not be false or misleading and it must
be registered at the Companies Office. There are criminal penalties for
directors if prospectuses are untrue. Investors must be given a copy of
the prospectus if they ask for it. Prospectuses can be viewed at
If a prospectus is misleading or deceptive the Securities Commission
can take action to have it put right or can suspend or cancel it.

Investment statement - this must explain the
investment in plain language and must be given to an investor before
they invest. It also must not be misleading or deceptive and directors
face criminal and civil penalties if it is not true.

Audit - companies and funds must be audited each
year and the auditor's report included in the prospectus and in the
annual report to investors.

Annual financial statements - all issuers
must prepare and register annual audited financial statements. Most
issuers send these to investors with their annual reports.

Share market rules - companies and funds listed on the share market must obey rules of the NZX rules, including rules that require continuous disclosure
of information that is likely to affect the price of their securities.
Trading on NZX is done by sharebrokers who must obey rules about how
they carry out their business. They are supervised by the NZX. Trading
in securities on markets that are not registered exchanges does not
have these protections.

This article was provided by the Securities Commission.

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