Draft regulations governing the practice of crowdfunding suggest such offers should be limited by a "principal purpose" test to ensure crowdfunding services match issues with investors who have small amounts to invest.

The proposal is one of hundreds of draft regulations released for consultation and submissions by December 5 to give effect to the new Financial Markets Conduct Act.

The Act represents a total rewrite of financial market conduct rules, simultaneously seeking to tighten investor protections while removing barriers and costs of raising capital for businesses seeking to grow.

On crowdfunding, a discussion paper on the regulations says limiting crowdfunding offers through a principal purposes test "decreases the risk that these licences can be misused for wider offer scenarios."


"This approach would prevent, for example, banks, pay day lenders, and others from setting up services to refinance their loans. We also consider it would exclude other schemes where loans are pre-funded by the intermediary," the Ministry of Business, Innovation and Employment says.

Also covered are the disclosure obligations required of issuers engaged in initial public offerings, and a host of other areas of financial market conduct and disclosure.

"This is an exciting opportunity to shape the future of New Zealand's financial regulatory framework," said Commerce Minister Craig Foss of the regulation setting process. "It is ... central to building vibrant financial markets that work for all market participants."

The Act will be implemented in two phases, the first coming into effect on April 1 next year the second next December.