2242 NEW ZEALAND GAZETTE, No. 83 27 JUNE 2013

(5) If a matter specified in clause 4(4) is not applicable to the class or classes of specified futures contracts to which a disclosure document relates, the disclosure document is not required to refer to that matter, and is not required to state that the matter is not applicable.

(6) Nothing in clause 4(4) limits the information, statements or other matters that may be contained in a disclosure document.

5. Capital adequacy requirements—(1) The Company must at all times be able to pay its debts as they become due in the normal course of business.

(2) The Company must ensure that its surplus liquid funds exceeds at all times its prescribed liquid funds amount.

(3) The Company’s prescribed liquid funds amount is $1,000,000.

(4) The Company’s surplus liquid funds is the aggregate of all of its liquid assets, less any risk based reductions to its liquid assets, less its gross external liabilities.

(5) The Company’s liquid assets are:

(a) cash;

(b) cash equivalents (as defined by NZ IAS 7);

(c) trade receivables realisable within the next three months; and

(d) financial assets that have a ready market, which are valued at current market prices.

(6) In calculating the Company’s liquid assets, that calculation excludes:

(a) any client funds held by the Company;

(b) the value of any asset encumbered as a security against another person’s liability;

(c) the assets of any trust of which the Company is a trustee;

(d) subject to clause 5(7), any loans and advances to, or amounts owing by, any related party or associate (including any margins lodged with a related party); and

(e) any asset that directly or indirectly funds an investment in or loan to the Company itself.

(7) Loans and advances to, or amounts owing by, a related party or associate may be included in the Company’s liquid assets if:

(a) the amount is receivable as a result of a transaction entered into by the Company in the ordinary course of its business on standard commercial terms applicable to arms length transactions with persons that are not associated with the Company;

(b) no part of the consideration for the transaction directly or indirectly funds an investment in or loan to the Company; and

(c) the total value of all such receivables, including margins on hedging arrangements (before any discount is applied), does not exceed 20% of the total tangible assets of the Company.

(8) The Company must apply the following risk-based reductions to the calculation of its liquid assets:

(a) or any loans and advances to, or amounts owing to which clause 5(7) applies (including any margins lodged with a related party), 18% of the value of the asset;

(b) for a futures contract entered into where the client has not paid to the Company any margin due in respect of that futures contract by the second business day following the date the liability to make that margin payment arose, a reduction of 120% on that uncollected margin;

(c) for equity securities held or receivable by the Company including short positions:

(i) for leading equities (meaning NZSX listed equities or equities listed on the main board of an overseas exchange):

A. 10% for an equity ranked 1 to 50 in the leading index of the relevant exchange; or

B. 15% for all other equities quoted on the main board; and

(ii) for rights, the lesser of:

A. 100%, or

B. 10% of the combined value of rights and application monies; and

(iii) for other equity securities (including partly paid shares), 100%;

(d) for liquid assets comprising debt securities in New Zealand dollars:

Note: All rated securities must carry a rating by an agency approved by the Reserve Bank for the purposes of section 80 of the Reserve Bank of New Zealand Act 1989.