Jersey: Listing Special Securities On The Channel Islands Stock Exchange

Last Updated: 21 November 2006
Article by Alan Stevens (Jersey/London)

Background

The Channel Islands Stock Exchange (CISX) commenced operations in October 1998. It is based in St. Peter Port, Guernsey and provides a listing facility and screen-based trading. It is within an OECD jurisdiction and in the European time zone. The CISX’s mission is to be the premier offshore stock exchange in the European time zone and the exchange of choice for the listing of investment funds, debt instruments and the shares of companies.

The CISX has concentrated on the following core products:

specialist securities, including Eurobonds, structured debt and warrants;

investment funds;

primary and secondary listings of securities and shares issued by Channel Islands and overseas companies; and

Channel Islands Depository Receipts.

In due course the CISX plans to expand its products and services to include, for example, the listing and trading of products such as insurance-related instruments.

Since the CISX commenced operations it has grown rapidly with nearly 800 listings having been approved as at 31 May 2005 and with a total market capitalisation of approximately US$28 billion as at 31 December 2004. The CISX offers a personalised approach and fast track processing of listing applications within a highly regulated and innovative marketplace.

The CISX provides high visibility for its listed securities and sponsors through its website www.cisx.com. This service is in addition to the market data and price quotations distributed world-wide through the CISX’s Reuters pages.

With the implementation in EU member states in 2005 of the EU Prospectus and Marketing Abuse Directives there has been increased interest in the listing of securities on the CISX. The Channel Islands are not within the EU and so the CISX is not a regulated market for the purpose of the Directives, which do not apply by reason only of a listing on the CISX.

The Advantages Of A CISX Listing:

competitive pricing, including a one-off listing fee and no annual fees for specialist securities;

a commitment to speedy turnaround and consistency of approach – the CISX aims to comment within 48 hours on initial documentation, but frequently comments on the same day;

a responsive and approachable Market Authority that meets daily to consider listing applications; international standards of issuer regulation;

a pragmatic approach to disclosure requirements;

enhanced marketability of securities;

value added service such as timely and efficient document review and special listing procedures for the international debt market;

a willingness to work with the issuer and its advisors to accommodate innovative structures;

concurrent trading times with London;

a streamlined listing process for specialist debt securities;

within Europe and the OECD but not an EU regulated market; and

International Accounting Standards (IAS) or other recognised standards acceptable for financial statements. There is no obligation to use IAS.

International Recognitions

The CISX has a significant number of international recognitions including the following:

the CISX is regulated by the Guernsey Financial Services Commission, which is a member of the International Organisation of Securities Commissions (IOSCO);

the CISX is a recognised stock exchange under Section 841 of the UK Income and Corporation Taxes Act 1988. Accordingly, debt securities listed on the CISX may qualify as quoted eurobonds for UK tax purposes, enabling interest on them to be paid gross;

the UK Financial Services Authority has approved the CISX as a Designated Investment Exchange within the meaning of the Financial Services and Markets Act 2000;

the CISX is an affiliate member of IOSCO;

the CISX is designated by the US Securities and Exchange Commission as a Designated Offshore Securities Market, within the meaning of Rule 902(b) under Regulation S of the Securities Act of 1933;

the CISX is officially recognised by the Australian Stock Exchange;

the CISX is registered with the World Federation of Exchanges as a ‘corresponding market’; and

the CISX is a member of the European Securitisation Forum.

Carey Olsen Corporate Finance Limited

Before making an application for listing, the CISX requires the applicant to appoint a sponsor through which the listing process will be conducted. The sponsor must be a member of the CISX. Carey Olsen Corporate Finance Limited (COCFL), a member of the

Carey Olsen Group, is a category 1 member of the CISX and can act as the sponsor for listing purposes.

The principals of COCFL are a multi disciplinary team drawn from various members of the Carey Olsen Group and are dedicated and experienced professionals with an in depth knowledge of the CISX rules and procedures. They will take responsibility for liaising with the CISX and handle all aspects of the listing.

The Carey Olsen Group provides a full range of legal, corporate administration and listing services in the Channel Islands.

A team with specialist expertise in all these areas is available as necessary to provide a co-ordinated service covering legal advice, company administration and listing sponsorship across both Jersey and Guernsey. This "one stop shop" can reduce overall costs of the transaction.

Listing Of Specialist Securities

The CISX has a favourable listing regime for specialist securities (securities which, because of their nature, are normally bought and traded by a limited number of investors who are particularly knowledgeable in investment matters) (other than equity securities) issued by specialist categories of issuer, including public issuers, special purpose vehicles (SPVs), issuers whose securities are guaranteed by other entities, Channel Islands Depositary Receipts and other categories of specialist securities approved by the CISX’s market authority. These are set out in Chapter VIII of the CISX’s Listing Rules, which are available on its website www.cisx.com.

Scope The issuer may be either a public issuer (i.e. a public international body recognised by the CISX, a government, or a governmental agency whose obligations are guaranteed by a government) or a private issuer, which may include a special purpose vehicle (a company, unit trust or limited partnership formed for the specific purpose of issuing one or more classes or series of debt securities or asset-backed securities), company, partnership, unit trust or other entity acceptable to the CISX.

Incorporation The issuer must be duly incorporated or otherwise established in its place of establishment and operating in conformity with its constitutional documents.

Audited Accounts With the exception of securities issued by an SPV, a private issuer of debt securities must have produced independently audited accounts for the two financial years prior to the listing, though in exceptional cases the CISX may accept a shorter period.

Clearing and Settlement Securities for which listing is sought must be eligible for deposit in a clearing and settlement system acceptable to the CISX, including Euroclear and Clearstream.

Access to information There must be a trustee or other appropriate independent party representing the interests of the holders of asset-backed debt securities must have the right to access appropriate information relating to the assets.

Transferability The securities must be freely transferable and tradeable, subject to limited exceptions.

Listing Document The issuer must publish a listing document that complies with the CISX Listing Rules. There is a maximum of 22 straightforward disclosure requirements for specialist securities (other than equity securities) which are set out in Part D of Appendix IX to the Listing Rules, though there are certain additional information requirements in relation to the assets underlying asset-backed securities which are set out in Part E of Appendix IX.

Non resident paying agents allowed The CISX does not require that a paying agent in the Channel Islands be appointed.

Application Process

The CISX has developed a fast track "equivalence approach" to the processing of applications for specialist securities. This means an application may be processed using a listing document for the securities prepared under the relevant guidelines of a jurisdiction or stock exchange recognised by the CISX provided that there has been no material change to the information contained in such listing document.

The CISX should be contacted at the earliest opportunity to determine whether the "equivalence approach" may be applied.

In terms of the CISX approach to the processing of applications for listing of specialist securities, the Market Authority is very aware that the nature of an issue of specialist securities and the requirements of professional investors mean that a rapid listing may be required. The CISX is able to respond to that expectation so that, if necessary, application and admission to the Official List can take place on the same day.

The application process is straightforward and is carried out in four stages:

Stage 1 The sponsor prepares, in consultation with the issuer, and submits the initial application documents, including a draft listing document. The CISX usually takes a flexible approach if particular disclosure requirements cannot be met due to the particular circumstances of the issuer. For secondary listings, existing listing documents for the primary exchange may be used.

Stage 2 The CISX reviews the initial application documents (which usually takes not more than 48 hours). The sponsor, in consultation with the issuer, responds to comments (if any) of the CISX.

Stage 3 The sponsor submits the final application documents which are considered by the Market Authority (which meets every day to consider listing applications).

Stage 4 Following the approval by the Market Authority the listing documents are filed and the securities are admitted to the official list. Formal details of the listing are published by the CISX in a formal notice and dealings commence.

Subject to the availability of documentation, it is generally possible to proceed through all four stages, from initial application to listing, in 10 days, though the CISX is receptive to an even faster listing process if commercial considerations so require.

Documents to be submitted to the CISX

Certain documentation is required to be submitted to the CISX at various stages of the application. COCFL, as sponsor, will assist the issuer in the preparation of these documents, submit them to the CISX and liaise with the CISX in relation to any queries it has.

Initial Documents

The documents required to be filed at Stage 1 of the application process include:

two copies of the draft listing document marked in the margin (by COCFL) to indicate compliance with the applicable disclosure requirements of the Listing Rules. The CISX provides a checklist of its documentary requirements to allow compliance to be easily determined;

a draft of the trust deed or other instrument securing or constituting debt securities;

payment of the listing fee;

a draft formal notice (COCFL will prepare this);

non-applicability letter (from COCFL) setting out the disclosure requirements which are not applicable; and omitted information letter (from COCFL) setting out information omitted from the listing document (which omission the CISX may authorise on specified grounds).

Final Documents

The above documents in final form, together with the following documents, are required to be filed at Stage 3 of the application process:

formal application for listing signed by a duly authorised officer of the issuer;

sponsor’s declaration signed by the sponsor;

listing undertaking signed by the issuer; certified copy board resolutions approving the issue and the listing; and any further documents required by the CISX.

A copy of the formal notice to be published by the CISX (by attachment to its Daily Official List) must be lodged with the CISX as soon as practicable after publication of the listing document but before dealings commence.

Continuing Obligations

It is a prerequisite of listing that an issuer executes a listing undertaking in the prescribed form, undertaking to comply with the Listing Rules and, in particular, with all relevant continuing obligations.

Generally, and apart from compliance with the specific requirements of the Listing Rules, the issuer is obliged to keep the public, the CISX and the holders of its securities informed as soon as reasonably practicable of any information relating to the issuer (including information on any major new developments in the issuer’s sphere of activity which is not public knowledge) which:

(a) is necessary to enable them and the public to appraise the position of the issuer;

(b) is necessary to avoid the establishment of a false market in its securities; and

(c) might reasonably be expected materially to affect market activity in and the price of its securities.

The issuer must send to the CISX two copies of its annual report, annual accounts or interim financial statements, or refer the CISX to publicly available information on the internet or with a central depository. It must immediately disclose to the CISX any change in the rights of its listed debt securities, or any decision to redeem them, or any proposed changes in the constitution or capital structure of the issuer. It must submit to the CISX for review before issue copies of announcements relating to listed debt securities. It must also send to the CISX, as soon as practicable after issue, copies of reports, announcements and similar documents.

Listing fees

For debt securities, the CISX currently charges an up front listing fee of £3,000.

No annual or further fee is payable, although for issues by SPVs and asset-backed securities an additional £500 per issue is payable and for a debt programme an additional £1,000 per issue is payable. There is also a fee of £100 for publication of the formal notice.

Up to date details of the fees can be obtained from the CISX website, www.cisx.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Alan Stevens (Jersey/London)
 
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