Before 2015, oversight of unit trusts in Papua New Guinea sat with a Securities Commission that was a division of the Investment Promotion Authority. Two Acts passed that year created a stand-alone statutory regulator and gave it the detailed rulebook it now enforces. This article maps the regulators an investor, trustee or fund manager will meet.
The Securities Commission
The Securities Commission Act 2015 establishes the Securities Commission of Papua New Guinea as a body corporate (section 4) and makes it independent of direction by any other person (section 6). Its objectives include ensuring “the orderly administration of the capital markets” and, in collaboration with the Bank of Papua New Guinea, “the soundness and stability of the financial system” (section 7). Its functions in section 8 include administering the securities Acts, licensing and supervising market participants, issuing rules, guidelines and class orders, investigating “illegal, dishonourable and improper practices”, and taking “measures for the better protection of investors”. Section 38 gives it all powers reasonably necessary for those functions, including the power to issue rules and set fees. Since the Securities Commission (Amendment) Act 2023 the Commission is governed by a seven-member Board chaired by a Minister-appointed Chairman, with a Chief Executive Officer running it day to day. See how the Commission is governed.
For unit trusts specifically, the Capital Market Act 2015 gives the Commission these jobs.
| Function | Provision |
|---|---|
| Licensing the trustee and fund manager (fund management is a regulated activity) | ss 34, 37, 189; Schedule 2 |
| Registering the scheme within 21 days of a compliant application | ss 185, 186 |
| Approving and registering the trust deed and any supplementary deed | ss 208, 211 |
| Approving and registering the prospectus before units are offered to the public | ss 128, 129 |
| Surveillance checks on the trustee’s compliance with the deed and the Act | s 196 |
| Appointing an interim trustee when the office falls vacant | s 202 |
| Revoking or suspending the trustee’s licence, or restricting its activities | s 48 |
| Deregistering a scheme; receiving unclaimed money on winding up | ss 270, 272 |
| Exempting persons from Part V or modifying its application | s 274 |
The Commission “shall act independently in performing its statutory functions and duties and exercising its statutory powers under (a) this Act; and (b) the Capital Market Act 2015; and (c) the Central Depositories Act 2015; and (d) any other Act that expressly provides for the functions, powers or duties of the Commission”.
The Commission used these powers against the Pacific Balance Fund’s trustee, Melanesian Trustee Services Ltd, revoking its licence under section 48 in August 2023 and appointing an interim trustee; the trustee’s appeal is discussed in the 2023 licence revocation case. For the Commission’s wider toolkit see what powers the Commission has.
The Bank of Papua New Guinea
The central bank does not regulate unit trusts directly, but it regulates many of the institutions around them. Banks and licensed financial institutions are supervised under the Banks and Financial Institutions Act 2000, and superannuation funds, their trustees and fund managers are licensed under the Superannuation (General Provisions) Act 2000. Where a super fund such as Nasfund invests in a unit trust, the Bank supervises the super fund’s decision and the Commission supervises the unit trust. The Bank also authorises certain swaps and forward contracts that are carved out of the definition of “derivative” in section 2 of the Capital Market Act.
PNGX Markets
Papua New Guinea’s stock exchange, PNGX Markets Ltd (formerly the Port Moresby Stock Exchange), is approved by the Commission under section 9 of the Capital Market Act. If a trustee wants units quoted on the exchange, section 116(1)(b) requires the Commission’s approval of “the listing or quotation of … units of a unit trust on a stock market”, and the exchange’s own listing rules then apply. A listed unit trust also becomes subject to the substantial holding disclosure rules in Part XII. See listing units on PNGX.
The Registrar of Companies
The Registrar, appointed under the Companies Act 1997, keeps a public record rather than making regulatory decisions. Section 209 of the Capital Market Act requires the trustee to lodge the trust deed with the Registrar within seven days after the Commission approves and registers it, and section 130 requires the issuer to lodge a copy of the approved prospectus and application form before the prospectus is issued. Because the trustee must be a corporation (section 189(2)), its own directors, accounts and annual returns are also governed by the Companies Act and filed with the Registrar.
The Internal Revenue Commission and others
The Income Tax Act 1959 assesses the trustee on the net income of a unit trust at a rate set in the Rates Act. The Internal Revenue Commission administers this, and investors should confirm their own position with the IRC or a tax adviser; see tax on distributions. Trustees and fund managers must also consider the customer identification duties in the Anti-Money Laundering and Counter Terrorist Financing Act 2015, which is why a new unit holder is asked for identification.
Complaints about a trustee go first to the complaints procedure the trust deed must contain (section 210(1)(c)) and then to the Securities Commission. The Bank of Papua New Guinea cannot help with a unit trust complaint unless the trustee is also a licensed financial institution. See how to complain.
Sources
- Securities Commission Act 2015 — ss 4, 6, 7, 8, 38 (as amended by the Securities Commission (Amendment) Act 2023)
- Capital Market Act 2015 — ss 2(1), 9, 34, 37, 48, 116, 128–130, 185–189, 196, 202, 208–211, 270–274; Schedule 2
- Companies Act 1997; Superannuation (General Provisions) Act 2000; Banks and Financial Institutions Act 2000; Anti-Money Laundering and Counter Terrorist Financing Act 2015
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.