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The following excerpts are from the New Zealand's Financial Markets Authority (FMA).

Fair Dealing​

Full guidance: https://www.fma.govt.nz/business/legislation/fair-dealing/

Introduction to Fair Dealing​

Conduct is at the core of the Financial Markets Conduct Act 2013 (FMC Act). Underpinning the breadth of the FMC Act are the fair dealing provisions, which set out the core standards of behaviour that those operating in the financial markets must comply with.

Part 2 of the FMC Act requires “fair dealing” in relation to financial products and services. The fair dealing requirements are broad principles that prohibit:

  • misleading or deceptive conduct, including conduct which is likely to mislead or deceive;

  • false, misleading or unsubstantiated representations;

  • offers of financial products in the course of unsolicited meetings.

In addition to the fair dealing provisions are the stop order provisions, found in Part 8 of the FMC Act. A stop order is a regulatory tool that the FMA can use to stop or prevent advertising or disclosure that confuses, or is likely to confuse consumers or investors, on matters that influence their investment decision. For example, the FMA could issue a stop order to require an issuer to cease offering financial products, if the FMA was satisfied that content in the product disclosure statement is ‘likely to confuse’ investors.

The FMA can issue a stop order without any need to go to court. More information about stop orders is set out below.

A key difference between the fair dealing provisions and the stop order provisions is the reference to disclosure that is ‘likely to confuse’ – this is a lower threshold than ‘likely to mislead’.

Key Principles​

We expect all providers of financial products and services to develop and embed the principles underpinning the fair dealing and stop order provisions into their risk management processes – consider what processes need to be in place to ensure that customers are not liable to be confused or misled and to ensure that all representations have a sound basis in fact. In addition, we encourage directors, senior managers and those involved with providing financial products and services to also consider how their conduct can help investors and consumers make appropriate financial decisions taking into account their particular circumstances (such as vulnerable customers).

It is the overall impression that counts

Whether conduct or disclosure is likely to mislead or confuse depends on the overall impression created as perceived by the investor or consumer. This means that:

  • Conduct and disclosure which is likely to mislead or confuse, without actually being misleading or confusing, is sufficient to breach the fair dealing or stop order provisions.
  • Intention to mislead or confuse is irrelevant.
  • Relatively more complex financial products or services are more likely to confuse and mislead compared to standard “vanilla” or simpler financial products and services.
  • An audience who is vulnerable due to their personal circumstances is more susceptible to being misled or confused.
  • Representations that are true and verifiable in isolation may nonetheless be capable, when viewed holistically, of leaving a confusing or misleading impression overall. This may be the case where material information or qualifications to the representation (e.g. risks or downsides to a product or service) is in fine print.

Omissions can be confusing or misleading

Confusing or misleading conduct extends beyond positive actions or positive statements – it also includes omissions. The omission can be either deliberate or inadvertent. Therefore, it is not a defence to “do or say nothing” if silence or partial disclosure (e.g. cherry picking) is likely to leave an overall misleading or confusing impression on the consumer.

Substantiate your claims

The fair dealing provisions generally require representations to be substantiated, although some exceptions exist (such as for representations in a disclosure document or a register entry). Substantiation requires having a reasonable basis at the time the representation is made. Anecdotal evidence, unsupported opinions and assumptions do not constitute a reasonable basis. We are particularly interested in representations regarding the nature, suitability and characteristics of a financial product or service.

A representation remains unsubstantiated at the time it was made, even if the representation turns out to be true or is subsequently substantiated.

Other​

Excerpts from: https://www.fma.govt.nz/business/services/cryptocurrencies/

If you provide a ‘financial service’ related to cryptoassets, you must comply with the fair dealing provisions in Part 2 of the FMC Act. These are broad principles that prohibit you from engaging in misleading conduct or making false, deceptive or unsubstantiated statements.

If the overall impression on your website, social media sites and promotional material is misleading, it will be in breach of the fair dealing requirements. You must ensure messaging about risks and rewards of buying or trading cryptoassets is balanced. Do not cherry-pick or omit key information, or bury key messages about risk in the fine print.

Even if you are not providing a financial service or financial product, ‘fair dealing’ requirements still apply to white papers and other communications about your ICO under the Fair Trading Act 1986. See our fair dealing and ICOs guidance for more information.

Token classificiation​

Full guidance: https://www.fma.govt.nz/business/services/cryptocurrencies/

Utility tokens​

What are utility tokens?

Utility tokens (sometimes called “application tokens”) typically give investors the right to access and/or use a company’s platform, product or service. They often grant holders rights similar to pre-payment vouchers.

Are utility tokens financial products?

While each ICO must be looked at on an individual basis, utility tokens are not considered managed investment products simply because they can be traded on a cryptoasset exchange or other secondary market. This is because any profits an investor receives by trading those utility tokens on a cryptoasset exchange are not ‘rights to receive a financial benefit’ under a managed investment scheme.

Do utility token ICOs involve financial services?

When you offer utility tokens through an ICO, or provide financial services in relation to utility tokens, you may be providing the financial service of ‘operating a value transfer service’, depending on the specific features of your offering. We encourage you to seek legal advice if you are unsure of your obligations.

Asset backed tokens​

What are asset backed tokens?

Asset backed tokens are a type of cryptoasset that typically give investors an ownership right to an underlying tangible or intangible asset, like gold or real estate, where the distributed ledger is used as a record of ownership. Investors usually have the right to redeem the token in exchange for the underlying asset – exchanging one token for one gram of gold for example.

Are cryptoassets backed by assets financial products?

While each ICO must be looked at on an individual basis, cryptoassets that give investors a right to redeem the token in exchange for the asset are not considered debt securities (unless the asset is cash). This is because the cryptoasset does not give an investor the right to be repaid ‘money’.

Do asset backed token ICOs involve financial services?

When you offer asset backed tokens through an ICO, you are providing the financial service of ‘operating a value transfer service’. You may also be providing the financial service of ‘issuing and managing a means of payment’ – where tokens can be used to obtain products or services otherwise acquired using legal tender (such as NZ dollars). These services are regulated by us.

How do I comply?

If your asset backed token ICO is providing a financial service, you must comply with the fair dealing provisions in Part 2 of the FMC Act. These provisions prohibit you from making misleading, deceptive or unsubstantiated statements, for example about the extent to which the tokens are backed by the asset. So if you state in a white paper that an asset backed token is ‘100% gold backed’ there must be enough gold available (at an official mint, for example) to allow all investors to redeem their tokens.

For more information, see our guidance on ICOs and financial services, and fair dealing and ICOs.

Equity securities​

A cryptoasset is an equity security if investors buy, or have the option to buy, for example, a share in a New Zealand incorporated company or a body corporate incorporated outside New Zealand. A cryptoasset that provides an option to buy a share is an offer of both the cryptoasset and the equity share.

If you make a regulated offer of equity securities, you must:

  • register a product disclosure statement (PDS)
  • meet fair dealing requirements
  • meet financial reporting obligations.

Investor interests and rights will be set out in the company’s constitution. This means a trust deed is not required.