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Financial Markets Conduct Act 2013

Licensing and other regulation of market services - Additional regulation of discretionary investment management services - Related party transactions

440: General prohibition on transactions giving related party benefits

You could also call this:

"No favours: don't make deals that unfairly help people you're connected to, unless it's best for investors."

Illustration for Financial Markets Conduct Act 2013

If you are a DIMS licensee, or you act on behalf of one, you must not enter into a transaction that gives a related party benefit. You are not allowed to do this because it could be unfair to investors. However, there are some exceptions to this rule.

If a transaction is in the best interests of the investors, then it might be allowed. This means the transaction must be good for the people using the service, whether it is one person or a group of people. You must certify that the transaction meets this condition.

There is another exception if section 441 applies to the transaction. You should check if this section applies to your situation.

If you do not follow this rule, the transaction is still valid, unless a court says otherwise under Part 8. This means the transaction will still happen, but you might get in trouble for not following the rules. You must make sure you follow the rules to avoid any problems.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM4091647.

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Part 6Licensing and other regulation of market services
Additional regulation of discretionary investment management services: Related party transactions

440General prohibition on transactions giving related party benefits

  1. A DIMS licensee (or any person acting on behalf of the DIMS licensee) 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 one of the following applies and the DIMS licensee certifies to that effect:

  3. the transaction or transactions are,—
    1. if the service is provided to a class of investors, in the best interests of the investors using the service; or
      1. if the service is provided to only 1 investor, in the best interests of the particular investor affected; or
      2. section 441 applies to the transaction or transactions or all related party benefits to be given.

        1. A failure to comply with this section does not affect the validity of any transaction (subject to any court order under Part 8).