The regulation of capital markets in Papua New Guinea will be substantially amended and strengthened under new legislation that has come into force. Partner Sarah Kuman looks at the key areas businesses should be aware of.
The PNG Capital Markets Act 2015 commenced operation on 15 December 2017. The Act is part of a package of legislation that also includes the Securities Commission Act 2015 and the Central Depositories Act 2015.
We have previously examined the combined effect of the Capital Markets Act (CMA), the Securities Commission Act and the Central Depositories Act (see our Focus: PNG securities laws rewrite). But, to date, only the CMA has commenced operation.
- A person in the business of dealing in securities, trading in derivatives, funds management, provision of corporate finance or investment advice, or financial planning must hold a capital market licence. (Limited exceptions apply to entities already licensed under the Banks & Financial Institutions Act 2000, and for activities incidental to the professional practice of people such as accountants, valuers and receivers.)
- Separate licensing requirements apply to those people acting as representatives of a capital market licence holder.
- The conduct of a capital market business will be affected by substantial compliance obligations relating to maintenance of registers of interest in securities, recommendations to clients, giving priority to client orders, holding client funds separate from other funds, and annual audits.
- The licensing system imposes minimum capital requirements for licence holders, fit and proper person requirements for directors and executives, and the establishment of detailed compliance systems. The lead time and work involved in obtaining a licence should not be underestimated.
- Not all of the infrastructure necessary to implement the provisions of the CMA is currently in place, which may cause confusion.
The CMA provides that regulations may, among other things, provide for forms for the CMA, as well as fees to be paid for the purposes of the Act. However, regulations for the CMA are still in the process of being drafted and are not presently in operation.
In addition, while the CMA, the Securities Commission Act and the Central Depositories Act are inter-linked and contain interdependent provisions, both the Securities Commission Act and the Central Depositories Act are yet to come into operation.
It is unclear when the regulations will commence operation or when the Securities Commission Act or the Central Depositories Act will commence.
We have been advised that the Securities Commission proposes to issue a media statement to clarify the application of the CMA during this time.
It is important that businesses have scoped their potential exposure under the CMA, and have policies and processes in place to apply for and maintain the relevant licences and approvals.
If you would like to discuss the new law or its impact on your business or operations, please contact one of the people below.
We will monitor the status of the commencement of the regulations issued under the CMA, the Securities Act and the Central Depositories Act and keep our clients informed.