Originally published in Longtail's A Guide to International Finance Centres, What Chinese Investors Need to Know, March 2011
Tony Link, Managing Director of Richmond Corporate Limited, takes a closer look at the regulatory requirements of one of Guernsey's most important financial institutions.
The Channel Islands Stock Exchange, LBG. (CISX) was established in March 1998 and commenced operations in October of that year. 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 a 'leading international stock exchange serving Channel Islands' businesses.'
The CISX has traditionally concentrated on listing equities, specialist securities (these include Eurobonds, structured debt and warrants) and investment funds. 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 its launch, the Exchange has grown rapidly and has already listed in excess of 3,500 securities. The Exchange has over 50 members who are able to sponsor the listing of securities. There are also three trading members who act as market makers. Whilst the CISX is an electronic screen-based exchange, with no active dealing floor, trading volumes have increased steadily since inception.
The board of the CISX has delegated many of its powers relating to listings and the continuing obligations of Issuers to its Market Authority. The Market Authority meets daily to approve, inter alia, new listings. Such frequency ensures a quick and efficient service and has been a primary reason for the Exchange's success.
The management of the CISX has worked tirelessly to increase the Exchange's international profile and the Exchange has been recognised by the UK Financial Services Authority, the US Securities and Exchange Commission and the Australian Stock Exchange, among other authorities.
Conditions for listing
As with most other international exchanges, the CISX has basic requirements that a security must meet before it is considered acceptable for listing and whilst it remains listed. The listing rules set out the conditions for each category of security and such conditions are generally aimed at creating and ensuring that there is a fair market in the securities and that all investors, and potential investors, are treated equally. Subject to a few limited exceptions, in connection with transfer restrictions or compulsory redemptions, any security must be freely transferable, tradable and free from all lien. There is a minimum market capitalisation of £500,000, or currency equivalent, per security in respect of investment funds.
Prior to making an application for listing, an issuer must appoint a sponsor that will act during the application and for as long as the security remains listed. The sponsor will ensure that the security meets the conditions for listing and will assist the issuer in fulfilling its responsibilities to comply with the continuing obligations. A sponsor must be a member of the CISX. Category 1 sponsors are able to act in respect of all types of listing applications, and Category 2 sponsors may only act in respect of the listing of investment funds.
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 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 listing rules set out the precise requirements for each class of security. Broadly speaking, these cover material changes to the facts required to be disclosed at listing, as well as market news, corporate actions and directors' decisions. Certain corporate actions will also require prior approval by the Exchange. All publications and notices are published electronically to the CISX website via the Exchange's Market Data Management System. The Exchange's policy with regard to the publication of market data, including price sensitive information and other corporate actions, is that the issuer must ensure that everything that is necessary to be released to the market is done so and to the market as a whole.
The advantages of listing on the CISX
So, what sets the Channel Islands' Stock Exchange apart and makes it an exchange of choice?
1. The CISX offers a personalised, flexible and pragmatic approach to listing; a willingness to work with issuers and their sponsors and other advisers to accommodate innovative structures. Its fast-track application process, coupled with a responsive and approachable Market Authority, enables issuers to meet increasingly tight commercial deadlines. When coupled with international standards of issuer regulation and a highly competitive fee tariff, you have an excellent facility with worldwide appeal.
2. There is also high visibility for listed securities and sponsors through the Exchange's website: www.cisx.com. This service supplements the market data and price quotations distributed worldwide through the CISX's Reuters pages.
3. Finally, the location of the Exchange. The Channel Islands are stable and highly regulated International Financial Centres: outside of the Euro-zone, yet conveniently positioned for all leading European Centres.
The listing application process
The application process is straightforward and is carried out in four stages:
1. The sponsor prepares, in consultation with the issuer and its advisers, and submits the initial application documents. These will include a draft of the listing document that is 'marked up' to show where the document meets the Exchange's disclosure requirements.
2. The CISX's application team will then review the initial application documents and will usually respond with any comments within 72 hours. The sponsor, in consultation with the issuer, then responds to these comments (if any) and proceeds to finalise the application documents.
3. As soon as all documentation is finalised, the sponsor submits the final application documents to the Exchange's Market Authority.
4. Following approval by the Market Authority, the listing documents are filed and the securities are admitted to the Exchange's Official List. A formal notice is published by the CISX on its website and then dealings in the securities are able to commence.
Whilst the Exchange requires originals of all application documents, in the case of documents that are not immediately available – for instance, those signed overseas – an electronic copy will be acceptable as an interim measure, provided a suitable undertaking is given to file the original within 14 days. In certain circumstances, and particularly for secondary listings, the CISX adopts an 'equivalence' approach, which means that existing listing documents, prepared under the relevant guidelines of a jurisdiction or stock exchange recognised by the CISX, may be used. Any additional information required by the Exchange can be included in a wrap-around document.
For more information about Guernsey's finance industry please visit www.guernseyfinance.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.