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Financial Markets Conduct Act 2013

Governance of financial products - Governance of managed investment products - Related party transactions

173: General prohibition on transactions giving related party benefits

You could also call this:

"No favours: scheme managers can't do deals that unfairly benefit friends or family."

Illustration for Financial Markets Conduct Act 2013

If you are a manager of a registered scheme, you must not do a transaction that gives a benefit to a related party. You can do the transaction if you tell the supervisor about it and they agree, or if section 174 applies and you say so. The supervisor will only agree if the transaction is in the best interests of the scheme participants or if the participants agree to it.

If the scheme does not have a supervisor, you can still do the transaction if it is in the best interests of the participants, or if section 174 applies, or if the participants agree to it. You must get the consent of the licensed independent trustee before you can say the transaction meets these conditions. If you do not follow these rules, the transaction is still valid, unless a court says otherwise under Part 8.

You should also look at section 126 of the KiwiSaver Act 2006 for more information about loans and financial assistance to members of KiwiSaver schemes with fewer than 20 members.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM4091175.

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172: Definition of related party benefit, or

"What is a related party benefit in a scheme, and who gets it?"

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174: Certain related party benefits permitted, or

"Some benefits can be given to family or friends if the deal is fair and follows the rules"

Part 4Governance of financial products
Governance of managed investment products: Related party transactions

173General prohibition on transactions giving related party benefits

  1. A manager of a registered scheme (and any investment manager, administration manager, or other person to whom the manager has contracted out some or all of its functions as a manager) must not enter into a transaction that provides for a related party benefit to be given.

  2. However, subsection (1) does not apply to a transaction or series of transactions if the manager notifies the supervisor of the transaction or transactions, including the related party benefits given under the transaction or transactions, and the key terms of the transaction or transactions and either—

  3. the manager obtains the supervisor's consent to the transaction or transactions; or
    1. section 174 applies to the transaction or transactions or all related party benefits to be given and the manager certifies to that effect.

      1. The supervisor must not consent to a transaction or transactions under this section unless 1 of the following applies and the supervisor certifies to that effect:

      2. the supervisor considers that the transaction or transactions are in the best interests of the scheme participants; or
        1. the transaction or transactions are approved by, or contingent on approval by, a special resolution of the class of scheme participants affected, or potentially affected, by the transaction or transactions.

          1. However, if the registered scheme does not have a supervisor, subsection (1) does not apply to a transaction or series of transactions if 1 of the following applies and the manager certifies to that effect:

          2. the transaction or transactions are in the best interests of the scheme participants; or
            1. section 174 applies to the transaction or transactions or all related party benefits to be given; or
              1. the transaction or transactions are approved by, or contingent on approval by, a special resolution of the class of scheme participants affected, or potentially affected, by the transaction or transactions.

                1. The manager may not certify under subsection (4) unless the licensed independent trustee has consented to the certification.

                2. However, a failure to comply with this section does not affect the validity of any transaction (subject to any court order under Part 8).

                3. See also section 126 of the KiwiSaver Act 2006 for an additional prohibition on loans and financial assistance to members of KiwiSaver schemes that have fewer than 20 members.

                Notes
                • Section 173(4): amended, on , by section 59 of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).