The Financial Markets Authority (the FMA) has recently released a consultation paper (28 September 2015) seeking views on whether corporate vehicles set up by property developers to manage the costs associated with communal facilities in real property (such as access ways, lifts, or common garden areas), should be regulated under the FMC Act.

The FMA’s view is that companies that set up to manage costs in real property developments should not be regulated under the FMC Act.  This is because, according to the FMA, interests in these companies are not “financial market” activities.  The FMA proposes to designate shares in these companies as “outside of the scope” of the FMC Act.  The exemption will only apply to companies who meet the following characteristics:

  • the company’s main purpose is to manage the costs of common facilities in real property;
  • there should be no expectation of a financial return of holding shares;
  • lot owners must retain a controlling interest in the company, such as ensuring appropriate maintenance; and
  • shares must pass with the ownership of lots.

The FMA seeks comments from interested parties by 6 November 2015.