Pursuant to section 38 of the Securities Markets Act 1988, the Financial Markets Authority gives the following notice.
N o t i c e
1. Title, commencement, and expiry-(1) This notice is the Authorised Futures Dealers (Strategic Capital Management Limited) Notice 2011.
(2) This notice comes into force on 1 October 2011.
(3) This notice expires on the close of 30 September 2014.
2. Interpretation-(1) In this notice, unless the context otherwise requires:
Act means the Securities Markets Act 1988.
agreed upon procedures engagement terms means a written agreement between the compliance reporter and the Company to perform specific procedures with respect to the Company’s compliance with rules contained in the Company’s compliance procedures.
bankruptcy or insolvency event means liquidation, receivership, administration, bankruptcy, admission to the no asset procedure under Part 5 of the Insolvency Act 2006, statutory management, or any similar event, whether occurring in
New Zealand or in any other jurisdiction.
Company means Strategic Capital Management Limited.
compliance reporter means a qualified auditor who has entered into agreed upon procedures engagement terms with the Company.
discretionary investment management service has the meaning given to that term by section 12 of the Financial Advisers Act 2008.
generally accepted accounting practice has the meaning given to that term by section 3 of the Financial Reporting Act 1993, as if the Company was a reporting entity for the purposes of that that section.
net tangible assets means the amount of the total tangible assets of the Company less its total liabilities as shown in a balance sheet for the Company which has been prepared in accordance with generally accepted accounting practice.
offence of dishonesty means:
(a) an offence described in any of sections 104, 105B, 108 to 117, and 217 to 266 of the Crimes Act 1961;
(b) an offence described in any of sections 15 to 20 of the Summary Offences Act 1981; or
(c) an offence under the laws of another jurisdiction which is equivalent to an offence referred to in paragraphs (a) or (b).
qualified auditor has the same meaning as in section 2C of the Securities Act 1978.
Regulations means the Futures Industry (Client Funds) Regulations 1990.
remuneration means any commission, fee or other benefit, whether pecuniary or non-pecuniary, and whether direct or indirect; but in the case of an adviser, does not include wages or salary which are of a fixed amount.
(2) Any term or expression that is defined in the Act or the Regulations and used, but not defined, in this notice has the same meaning as in the Act or the Regulations.
3. Authorisation-(1) The Company is authorised to carry on the business of dealing in futures contracts generally.
(2) The authorisation is subject to the conditions that:
(a) the Company does not enter into futures contracts with any person other than a person who has entered into a written agreement with the Company, and then only in accordance with the terms of that agreement;
(b) the Company does not hold money or client property in connection with dealing in futures contracts;
(c) any Company document that states the Company has been authorised by the Financial Markets Authority to carry on the business of dealing in futures contracts includes a statement to the effect that:
(i) the Financial Markets Authority’s role in authorising futures dealers is limited and does not imply approval or endorsement of the business, trading or solvency of the Company; and
(ii) the Financial Markets Authority has not approved any agreements or any disclosure documents of the Company;
(d) before the Company carries on the business of dealing in futures contracts on behalf of any person, the Company has provided that person with copies of the following:
(i) a document that clearly describes, for the prudent but non-expert investor, the risks associated with trading in futures contracts, including any specific risk factors that apply to trading in any of the particular contracts or classes of contracts dealt with by the Company;
(ii) one or more documents that clearly describe, for the prudent but non-expert investor, the class or classes of futures contracts in which the Company intends to deal on behalf of that person;
(iii) a disclosure statement which clearly sets out the following information:
A. the name and contact details of the Company;
B. a statement to the effect that the advice on futures contracts is regulated under the Company’s authorisation
as a futures dealer and is not regulated under the Financial Advisers Act 2008;
C. a description of how the Company and its advisers are remunerated for futures dealing services;
D. a description of any other factors which may materially influence the advice given by the Company or its advisers;
E. the types of products the Company deals in, and if advice on any product is only provided by some advisers, which advisers can provide advice on each product;
F. details of any bankruptcy or insolvency event occurring in the past five years in respect of the Company or one of its advisers;
G. details of any disciplinary or criminal proceedings resulting in an adverse finding in the past five years in respect of the Company or one of its advisers;
H. details of any conviction for an offence of dishonesty against any of the Company’s advisers;
I. a description of the internal and external disputes resolution schemes available to the client, and an explanation of how to make a complaint; and
J. a description of the Financial Markets Authority’s role in authorising futures dealers, and details of how to contact the Financial Markets Authority; and
(iv) any document containing supplementary disclosure necessary to update matters covered, or required to be covered, in any of the documents referred to in subparagraph (i) to (iii) above;
(e) any acquisition or disposal of a futures contract is effected through a person who:
(i) is authorised or licensed by the laws of the country in which it operates to deal in futures contracts on behalf of that client and to hold client money for that purpose;
(ii) has entered into a written client agreement with that client detailing the terms and conditions of dealing in futures contracts and the handling of client money; and
(iii) in the case of a futures contract which is made on or effected through a recognised exchange, is a member or authorised participant of that recognised exchange;
(f) the Company, and its directors, employees and agents do not advise a client to enter into any futures which the Company or that adviser knows, or ought to know, is offered in breach of New Zealand law or the laws of the any overseas jurisdiction, or which is offered to a limited class of persons for which the client does not qualify;
(g) the Company must at all times ensure that each director, employee or agent of the Company understands, and may reasonably be expected to comply with, all laws and Regulations which are applicable to the Company, including all requirements of this authorisation;
(h) the Company must at all times ensure that each director, employee or agent of the Company who provides advice or discretionary investment management services in relation to futures contracts:
(i) exercises the care, diligence and skill that a reasonable adviser would exercise in the same circumstances;
(ii) has the competence, knowledge and skills to provide advice or discretionary investment management services to that client, and in respect of that product;
(iii) acts in the best interests of the client;
(iv) ensures that the client has sufficient information, in a form which enables the client to understand that information, to make an informed decision;
(v) ensures that the client understands whether or not any advice given takes into account the personal circumstances of the client; and
(vi) does not act in any way, or make any omission, which would bring the financial services profession, or any part of it, into disrepute;
(i) the Company has an appropriate compliance manual, and a copy of which has been lodged with the Financial Markets Authority;
(j) the Company has appointed a compliance reporter and entered into agreed upon procedures engagement terms with that compliance reporter, a copy of which has been lodged with the Financial Markets Authority;
(k) the agreed upon procedures engagement terms provide for (without limitation):
(i) the Company to provide the compliance reporter, within 10 days of the end of each month, a completed monthly internal compliance reports and monthly financial statements in the form approved by the Financial Markets Authority that have been certified as true and correct by the directors;
(ii) the compliance reporter to notify the Financial Markets Authority if the monthly report is not provided to it within the timeframe required by subparagraph (i) above, or shows non-compliance with any term of this authorisation, or any other adverse matter;
(iii) the review of, and reporting on, the dealing practices and systems of the Company against the practices and procedures set out in the Company’s compliance manual by the compliance reporter (including on-site inspections of the Company’s records and procedures), such review and reporting to be undertaken at least once in every six months;
(iv) a copy of the compliance reporter’s semi-annual reports to be sent to the Financial Markets Authority by the compliance reporter; and
(v) the compliance reporter to give notice to the Financial Markets Authority before, or immediately upon, it resigning or retiring from its position as compliance reporter;
(l) the Company maintains adequate professional indemnity insurance for its business at all times;
(m) the Company must at all times be able to pay its debts as they become due in the normal course of business;
(n) the Company must at all times maintain net tangible assets of $50,000.00;
(o) the Company maintains proper accounting records, which are adequate to explain all transactions entered into by the Company and to enable the Company to prepare financial statements in accordance with generally acceptable accounting practice;
(p) the Company’s financial statements are prepared in accordance with generally accepted accounting practice and are audited at least once a year by a qualified auditor under the Financial Reporting Act 1993;
(q) the Company sends a copy of its audited financial statements to the Financial Markets Authority not more than three months after the end of each financial year;
(r) the Company maintains proper records of dealing in futures contracts on behalf of clients, including the nature of any advice given to a client;
(s) the Company keeps its business records, including those referred to in clauses 3(2)(o) and (r), up to date, and in a form which enables those records to be made available for inspection by the Financial Markets Authority or the compliance reporter promptly on request; and
(t) the Company immediately notifies the Financial Markets Authority in writing of any material matter concerning the Company’s authorisation as a futures dealer, including the following events:
(i) the insolvency of the Company or the bankruptcy of any of its directors;
(ii) where the Company has failed to comply, or believes it will fail to comply, with the financial requirements set out in clause 3(2)(m) or (n);
(iii) where a receiver, provisional liquidator, liquidator or a similar officer is appointed, or any resolution is passed or order made for the liquidation or dissolution of the Company;
(iv) if the Company, or any of its directors, is convicted of an indictable offence;
(v) any regulatory action taken against the Company, or any of its directors or senior management whether in
New Zealand or elsewhere;
(vi) if there is any material change to the nature of the business activities undertaken by the Company;
(vii) if there is any change to the shareholding, or ultimate beneficial ownership, of the Company; and
(viii) if any director or member of the senior management leaves the Company or if any new director or member of senior management is appointed to the Company.
Dated at Wellington this 28th day of September 2011.
ELAINE CAMPBELL, Head of Compliance Monitoring, Financial Markets Authority.