Recent research has found that issuers using the trans-Tasman mutual recognition of securities offerings regime have saved on compliance costs for offering securities in the host country by up to 95 percent in some cases.

The regime allows issuers to offer securities in both Australia and New Zealand using home jurisdiction offer documents.

The research, conducted by the Australian Securities and Investment Commission (ASIC) in consultation with the New Zealand Securities Commission (NZSC), found that the regime has reduced additional legal and documentation costs for some issuers by between approximately 55 and 95 percent. The time to go to market was also significantly reduced – in one case by 25 percent.

Jane Diplock, Chairman of the (NZSC) said the findings were encouraging.

“This is a world-class example of how regulation can facilitate business,” she said.

“Mutual recognition is intended to aid Trans-Tasman business by giving investors more choice, and giving issuers deeper markets without higher issuing costs. The research confirms that this is the experience.”

Since its establishment in June 2008, the regime has been used by New Zealand companies seven times for capital raising in Australia. Australian companies have used it 253 times, predominantly for offering managed funds in New Zealand.

ASIC Chairman Tony D’Aloisio said: “The results of this research demonstrate that mutual recognition arrangements can reduce industry costs. At the same time, if agreed with appropriate partner jurisdictions, these arrangements can maintain high levels of investor protection and promote a ‘race to the top’ in regulatory standards internationally.”

The research was conducted via interviews with key management and staff of 10 issuers in Australia and New Zealand of varying size. Most participants who have relied on the mutual recognition arrangement said the regime was straightforward, transition had been relatively easy, and had not led to additional ongoing compliance costs.

The research found broad support for developing similar mutual recognition arrangements with other sophisticated jurisdictions.

About the Trans-Tasman regime for mutual recognition of securities offerings

Issuers lawfully offering securities or interests in managed or collective investment schemes in one country can extend the offerings to the other country without the need for complying with most host country fundraising requirements.

This means:

• Australian issuers can offer securities (including shares and debentures) or interests in managed investment schemes in New Zealand using an Australian prospectus or product disclosure statement.
• New Zealand issuers can offer securities in Australia using a New Zealand prospectus and investment statement. Securities here refers to equity or debt securities, interests in collective investment schemes, and any interest in, or option to acquire these securities.

Initial conditions:

• The issuer must be incorporated or established in either New Zealand or Australia (or be a registered foreign company in Australia) and the issuer or any person concerned in the management of the issuer must not be disqualified or banned.
• The offer must be open to investors in both jurisdictions.
• The offer must include a warning statement.
• The issuer must notify the regulator in the host jurisdiction and lodge key documents (e.g. offer documents, constitution and details of any exemptions from home country laws) before making the offer. The issuer is also required to notify the home regulator of its intention to make an offer under the mutual recognition regime.

Ongoing conditions:

• The issuer must ensure the offer continues to comply with the requirements of its home jurisdiction.
• The issuer must notify the host regulator of certain circumstances (e.g. changes to offer document or enforcement action taken) within certain time frames.

A Protocol between ASIC, the NZSC and the New Zealand Companies Office provides a framework for cooperation and sharing information.

Joint Regulatory Guide 190: Offering securities in New Zealand and Australia under mutual recognition, provides users of the mutual recognition arrangement with guidance on how the regime works.

Download report Effects of the Australia–New Zealand mutual recognition regime for securities offerings (REP 174)