DETAILS OF SUPPORTING DOCUMENTATION REQUIRED TO BECOME AN FSM PARTICIPANT
REQUIREMENT / DOCUMENTATION / PARTICIPANT COMMENTS / NZXR COMMENTSApplication Form: / FSM Participant / RMA Provider Application Form (Appendix 12A)
Insurance Details:
(Rule 3.26) / Please provide the following information:
a) A certificate of currency for each of the following:
(i) Professional Indemnity Insurance; and
(ii) Directors’ and Officers’ Liability Insurance.
b) What, if any, amendments will be made to your insurance cover as a result of becoming an FSM Participant?
c) Does your agreement with Fonterra (where relevant – e.g. if applying for RVP or RMA) specify any insurance requirements that you must have in place? Please provide evidence of any such requirements.
Compliance Policies / Risk Management Procedures:
(Rule 22.11) / Please provide updated Compliance Policies and Risk Management Procedures that contain the following required information:
a) Arrangements to ensure that Fonterra shares are not held at the end of each day;
b) The transfer of shares to a Custodian temporarily, when they cannot be delivered to clients;
c) Arrangements for pre-trade and post trade monitoring; and
d) Execution of Exchange Orders.
Client Agreements:
(Rule 9.12) / Please provide the following information:
a) What is your process for signing up new clients?
b) Does your client agreement provide details in relation to confidentiality when you are providing information to Fonterra?
Business Continuity Plan:
(Rule 8.15.2) / Please provide an updated BCP to incorporate your FSM Participation.
Operations Manual:
Rule 22.6.1
Rule 22.6.2
Rule 22.6.4
Rule 22.7.11
Rule 22.8.2
Rule 22.8.3
Rule 22.11.1
Rule 22.11.2
Rule 22.11.3
Rule 22.12.2
Rule 22.8.4
Rule 22.12.3 / Please provide operational procedures relating to the FSM, including:
a) Conducting Shareholder Balance Enquiries prior to entering an order, in order to confirm that the client is entitled to buy or sell FSM Shares, and that the client meets the holding requirement as a result of the transaction.
b) Ensuring that no order may be entered if the Shareholder Balance Enquiry indicates that the client is not entitled to receive FSM Shares; or does not meet the holding requirement as a result of the transaction.
c) Ensuring that the instruction details in relation to any Order in respect of FSM Shares includes the CSN for the client to whom the Order relates, regardless of whether or not that client is a Retail Client or Institutional Client.
d) Ensuring Non-Disclosure of the Quantity of Securities Quoted on the FSM:
(i) When entering / submitting an Order the price and quantity of the Securities quoted must be specified (unless the Order exceeds $100,000 or any such amount as prescribed by NZX).
(ii) NZX may from time to time prescribe a Trading Day or period, or periods of time on a Trading Day on which FSM Participants may elect to disclose the quantity of the Securities quoted.
e) Completing a Shareholder Balance Enquiry prior to entry of any Exchange Order to:
(i) Confirm the client is entitled to sell FSM Shares;
(ii) Confirm the client is entitled to convert those FSM Shares into FSF Units; and
(iii) Confirm the client will comply with any maximum or minimum holding requirement as a result of the transaction.
f) Ensuring that no Order may be entered if the Shareholder Balance Enquiry indicates that the client is not permitted to sell those FSM Shares and convert them into FSF Units; or the client will fail to meet the holding requirement as a result of the transaction.
g) Ensuring that legal title:
(i) Is not held other than for the sole purpose of settlement or when effecting an Exchange Order for the purpose of effecting an FSF Redemption;
(ii) Is not held overnight;
(iii) Is held by the Custodian appointed by Fonterra; and
(iv) If held at any time, must be transferred immediately to the Custodian.
h) Ensuring that, if delivery of FSM shares has not been completed within the prescribed time, the client or their estate shall be liable for any deficiency and be entitled to any surplus.
i) Ensuring that a Shareholder Balance Enquiry must be completed prior to effecting an FSF Redemption, in order to confirm the client is entitled to receive the FSM Shares and that they will comply with the holding requirements as a result of the transaction.
j) Ensuring that a Stock Reservation for the FSM Shares is entered and a reason for the Stock Reservation is selected prior to instructing a Legal Title Transfer to submit a Client Inward Transfer for the purposes of settlement of an Exchange Order.
k) Ensuring that no FSF Redemption may be effected if the Shareholder Balance Enquiry indicates that the client is entitled to receive the FSM Shares or the client will fail to meet the holding requirements.
Financial Information: / a) Please provide relevant calculations illustrating the impact that becoming an FSM Participant will have on your balance sheet and / or capital adequacy; and
b) Please confirm that you have assessed your Capital Adequacy requirements appropriately in relation to becoming an FSM Participant.
Technology:
(Rule 22.2.3) / a) Please provide details of the systems you intend to use which are specific to your accreditation as an FSM Participant; and
b) Please confirm that testing has been undertaken by the NZX Securities and Clearing Systems Team.
Fonterra Agreements RMA and RVP (if applicable)
(Rule 22.4.4) / Please review agreements for any specific requirements that must exist in relation to your function as an RMA / RVP provider (if applicable).
December 2015