How Do I Apply for a Capital Market Licence in Papua New Guinea?

A company that wants to act as trustee or fund manager of a unit trust, run a stockbroking business or give investment advice in Papua New Guinea must obtain a capital market licence from the Securities Commission under Division 1 of Part III of the Capital Market Act 2015. This article walks through the process. See who needs a licence.

The application: section 36

The Act leaves the form, the fee and the detailed criteria to the Commission and the regulations. In practice applicants should expect to provide a business plan, financial statements, compliance arrangements, and personal information for every director, chief executive, senior manager and controller (a holder of 15 percent or more of the votes, or equivalent control, under section 36(7)). See directors and chief executives.

Section 42 adds a further inquiry power: the Commission may examine any securities dealings by the applicant or its senior officers in the twelve months before the application for “dishonest, unfair or unethical devices or trading practices”. Failing to give the information is itself a ground for rejection (section 42(3)).

Grant, conditions and fees

Under section 37, the Commission “may” grant or renew a licence; there is no entitlement even where no refusal ground exists. When it does, it may specify and describe the regulated activity covered, and impose “any condition or restriction of the licence as the Commission thinks necessary”. Section 38 allows those conditions to be varied or added to at any time while the licence is in force. Breaching a condition is an offence under section 37(3), and since no penalty is stated, the general penalty in section 461 of up to K10,000,000 or ten years applies.

Section 39 requires a licensed person to pay the prescribed licence fee “in respect of each regulated activity on a yearly basis”. Late payment attracts a daily late fee, recoverable as a debt, and fees go into the Commission’s fund under section 38 of the Securities Commission Act 2015.

Capital, deposit and insurance

Section 43 forbids a licence holder from carrying on any regulated activity, without the Commission’s written consent, if it does not meet the minimum financial requirements the Commission specifies or the rules of a stock exchange provide. The amounts are set by the Commission, not the Act.

The deposit must be in cash or another form the Commission allows, and regulations may set different amounts for different classes of licensee (section 46(2), (4)). For a trustee managing a large scheme these figures are modest; the Commission can require more through section 43 and licence conditions.

Term and renewal

Section 44 provides that a licence “shall expire 12 months after the date of issue or on such later date as may be specified by the Commission in writing”. The renewal application is due at least 30 days before expiry (section 36(1)(b)). An application lodged late but before expiry may attract a late renewal fee for every day of delay (section 36(5)). An application lodged after expiry is not a renewal at all; the holder is then unlicensed and section 48(11) makes continuing to trade an offence. In ANZ Banking Group (PNG) Ltd v Melanesian Trustee Services Ltd [2019] PGNC 100, the Court refused a trustee relief over its frozen bank accounts partly because, under section 44, it had to prove it held a current licence and had not done so.

False statements and the register

Section 47 makes it an offence, in connection with an application for the grant or variation of a licence, to make a statement that is false or misleading in a material particular knowing it to be so, or wilfully to omit something without which the application is misleading. The penalty is a fine of up to K10,000,000 or ten years’ imprisonment, or both. False information is also a ground for refusal under section 40(1)(c) and for later revocation under section 48(2).

Once granted, the licence appears on the public register under section 53, which records the holder’s name, directors and secretary, place of business and trading name. Section 55 requires the Commission to publish a list of all licence holders at least once a year, and changes in particulars must be notified within 14 days under section 54.