FMA guidance on improving financial information in an equity PDS

Following consultation last year, the Financial Markets Authority (FMA) has now finalised and published guidance for issuers to improve their financial information in an equity Product Disclosure Statement (PDS).

The guidance is designed to assist issuers (and their professional advisers) to understand the FMA’s expectations on certain aspects of the financial information section of the equity PDS, and in particular to help:

  • understand the FMA’s views on particular rules set out in Clause 39 of Schedule 3 of the Financial Markets Conduct Regulations 2014 (FMC Regulations); and
  • present the financial information section in a clear, concise and effective manner.

All issuers and their professional advisers should read the guidance note.

Application of specific rules

Clause 39 of Schedule 3 of the FMC Regulations includes rules for when issuers can make changes to the information presented in the financial tables of the equity PDS. The FMA has provided guidance on:

  • Adding other financial measures and non-financial information (clause 39(e)) – in general, the FMA expects issuers to be selective and focus on the most useful measures or information for investors.
  • Substituting another GAAP or non-GAAP financial measure for EBITDA or debt (clause 39(f)) – the FMA suggests issuers consider common investment metrics for companies in the same industry.
  • Making adjustments to non-GAAP financial measures – the FMA expects issuers to adopt an approach to making adjustments that focuses on material adjustments, is balanced (considering both revenue and expenses) and is in line with the FMA’s guidance note on Disclosing non-GAAP Financial Information. The FMA also sets out its view on more frequently proposed adjustments.
  • Presenting non-GAAP financial measures – the FMA notes that non-GAAP financial measures can vary between issuers and what is appropriate for one issuer may not be appropriate for another. Amongst other things, the FMA recommends that issuers make available a copy of their non-GAAP financial measures policy on their website.
  • Pro-forma financial information (clause 39(l)) – the FMA provides its views on when and how pro-forma financial information can be provided, and when it should not be provided.

Clearing the clutter

The guidance note also includes the FMA’s views on presenting the financial information section to ensure it is presented in a clear, concise and effective manner. In general, the FMA suggests providing an outline, providing plain English commentary, ‘clearing the clutter’ (eg reducing footnotes), and being consistent (both throughout the equity PDS, and as between the equity PDS and the Disclose Register).

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If you have any questions on financial information in an equity PDS, or any other questions relating to an equity PDS generally, please contact one of our experts.

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