The Channel Islands Securities Exchange Authority Limited (the Exchange) commenced operations on 27 October 1998 and is licensed to operate as an investment exchange under the Protection of Investors (Bailiwick of Guernsey) Law 1997 and is regulated and supervised by the Guernsey Financial Services Commission.
As at 28 June 2016, there are over 2,200 listings on the Exchange.
In December 2002 the Channel Islands Stock Exchange (the CISX) (the name of the previous exchange prior to the restructuring that occurred at the end of 2013) was first designated by the UK Inland Revenue as a recognised exchange under Section 841 of the UK Income and Corporation Taxes Act 1988 (ICTA).
In addition, in December 2013, the Exchange:
- was approved as an Affiliate Member of the International Organisation of Securities Commissions (IOSCO);
- became an Associate Member of the International Capital Market Services Association (ICMSA); and
- was officially recognised by the Australian Securities Exchange.
While complying with international standards for recognised stock exchanges, the Exchange has adopted a flexible and pragmatic approach to regulation. This business oriented approach is similar to that which has contributed to the development of the Channel Islands as a top tier finance centre. The Exchange has developed listing rules (the Listing Rules) which place a premium on clarity and an appropriate level of corporate governance.
Unlike European stock exchanges, the Exchange is not bound or subject to any European Union Directives and, as a result, it is able to be considerably more flexible in its approach.
All Exchange listing and trading information can be accessed from the Exchange's dedicated pages via the Exchange's "Market Data Management Service" (MDMS) and on its website at www.thecise.com. Trading Members of the Exchange may display orders for listed securities by sending their prices via MDMS and these prices are then disseminated to all Reuters users (access via the Exchange's MDMS background information platform pages).
Appointment of Sponsor and Representatives
In order to proceed with a listing, a proposed issuer must appoint a member of the Exchange to act as sponsor (Sponsor) to assist in relation to the listing procedure. The Sponsor will be responsible for all communications and dealings with the Exchange (including the seeking of approval of the Exchange for the form and content of the Listing Document and for the preparation and filing with the Exchange of the formal listing application and supporting documentation). In particular, a Sponsor should be able to assist in making application to the Exchange for any appropriate relaxations in the formal disclosure requirements regarding the contents of the Listing Document. Details of the services provided by Ogier Corporate Finance Limited (a Sponsor wholly owned by Ogier) are available on request.
The Issuer must appoint two authorised representatives based in the Channel Islands to act as the issuer's principal channel of communication with the Exchange on an ongoing basis. The authorised representatives may be directors of the issuer or other persons acceptable to the Exchange (such as a Sponsor), (Rule 4.9.1). In addition, a sponsor is able to apply to the Exchange for derogations in the formal disclosure requirements applicable to the contents of the prospectus (the Listing Document).
The Exchange's approach to listing
The Exchange recognises that securities issued by investment funds may be purchased and traded by a limited number of sophisticated institutional investors or may be exposed to wider market. The Exchange endeavours to adopt a pragmatic approach to regulation. It is flexible in its requirements regarding the detailed information describing the issuer and its securities required to be included in the Listing Document.
Disclosure requirements have been set at a level which is intended to provide investors with sufficient information to enable them to make an informed investment decision regarding the listed securities but without imposing unnecessarily onerous demands on an issuer. A Listing Document should disclose such information relating to the issuer and the securities for which a listing is sought as set out in the Listing Rules of the Exchange. The nature of the information required to be disclosed varies depending on whether the fund is to be open-ended or closed-ended. Where any such information would not be applicable or appropriate to a particular issue the sponsor may determine that the requirement be dispensed with and an application for derogation from such requirements may be made to the Exchange. The Exchange may authorise the omission of certain information from the Listing Document where it considers such information not to be applicable or is of minor importance.
Derogation may also be permitted if disclosure would be seriously detrimental to the issuer or contrary to the public interest. As a general approach, however, the Exchange would normally expect a Listing Document to disclose all such information as may be necessary to enable an investor to make an informed assessment of the activities, assets and liabilities, financial position, management and prospects and the profits and losses of a proposed issuer and of the rights (and any liabilities) attached to the securities for which a listing is sought.
General principles for listing on the Exchange
The Listing Rules are designed to ensure that investors have and maintain confidence in the securities market. In particular, in relation to the issuer and the securities for which application for listing has been made, that:
- the securities are suitable for listing;
- the issuer is suitable for listing - this is also an assessment Ogier Corporate Finance Limited will make in its capacity as Sponsor;
- investors are given sufficient information to enable them to make an informed assessment of the issuer and the securities;
- the issue and trading (if any) of the securities is conducted in a fair and orderly manner;
- all holders of listed securities of the same class are treated fairly and equally; and
- following a listing, there is sufficient disclosure of information to investors to ensure that they are kept fully informed of all factors which might affect their interests. (In particular, immediate disclosure should be made of any information which might reasonably be expected to have a material effect on market activity and prices of the listed securities.)
The Exchange encourages prospective issuers and their Sponsors to contact the Exchange at an early stage to seek informal and confidential guidance as to the eligibility of a proposed listing application.
Special Requirements for Listing of Securities by an Investment Fund
Set out below is a summary of the special requirements which apply to a listing on the Exchange of securities issued by an investment fund:
(a) to be eligible for listing as an investment fund, a fund must be an authorised fund; or be duly incorporated or otherwise validly established and regulated in a jurisdiction recognised for the purpose by the Exchange; or be otherwise acceptable to the Exchange (Rule 126.96.36.199.1(a)). An "authorised fund" is defined as an investment fund authorised or registered by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended); or recognised or certified by the Jersey Financial Services Commission under the Collective Investment Funds (Jersey) Law 1988 (as amended). For the position in relation to unregulated funds, please see below;
(b) the issuer must satisfy the Exchange that its directors together with its appointed investment manager have sufficient and satisfactory experience in the management of investments of the type in which the issuer proposes to invest (Rule 188.8.131.52.1 (b));
(c) the board of directors or equivalent body of the issuer must be able to demonstrate its ability to act independently of any appointed investment manager of the issuer (Rule 184.108.40.206.1 (c));
(d) the assets of the issuer must be invested with the aim of spreading investment risk (Rule 220.127.116.11.1 (d)); and
(e) the issuer must make arrangements acceptable to the Exchange for the safe custody of its assets (Rule 18.104.22.168.1 (e)).
The Listing Rules within Chapter 7 are designed primarily to enable the listing of regulated funds (Guernsey or Jersey authorised funds and funds established and regulated in recognised jurisdictions).
The Listing and Membership Committee has issued guidance in relation to Chapter 7 of the Listing Rules to clarify circumstances in which an unregulated closed-ended investment fund will be "otherwise acceptable to the Exchange" for the purposes of Listing Rule 22.214.171.124.1(a). The requirements are:
(a) the fund is incorporated in a jurisdiction recognised by the Exchange;
(b) the fund has a separate investment manager which is regulated in a jurisdiction recognised by the Exchange with a minimum of two years track record achieved whilst being regulated; and
(c) reviews carried out as part of the application process on the principals of the fund (including the investment manager) are satisfactory.
The Listing and Membership Committee will review unregulated, closed ended, self-managed funds that have no regulated investment manager on a case by case basis.
It should be noted that unregulated open-ended funds are not acceptable to the Listing and Membership Committee.
The issuer must prepare and publish audited consolidated accounts prepared in accordance with the Issuer's national law and UK Accounting Standards, US Accounting Standards or International Accounting Standards and independently audited in accordance with the auditing standards required in the UK or USA or International Standards on Auditing Standards (Rule 126.96.36.199).
The securities listed must be freely transferable, except to the extent that any restrictions are approved by the Exchange (Rule 188.8.131.52).
Securities in public hands
On the listing of securities of a class issued by a closed-ended investment fund, at least 25% of that class (excluding shares held in treasury) must be in the hands of the public unless the Exchange is satisfied that a sufficient number of the securities are in issue to create a market (Rule 184.108.40.206).
Whole class to be listed
The application to list must relate to all securities of the class issued or proposed to be issued (Rule 220.127.116.11).
The expected aggregate market value of the securities to be listed must be at least £500,000 or the foreign currency equivalent (Rule 18.104.22.168).
Units to be listed
For a closed-ended investment fund, units (i.e. securities issued by an investment fund representing the rights of participants in the assets of the investment fund) may not be issued at less than the net asset value per unit of the class unless authorised by a majority of the unitholders of the class or offered first on a pre-emptive basis (Rule 22.214.171.124).
Change to investment objectives
An applicant for listing may not change its principal investment objectives and policies as set out in its Listing Document for a minimum of three years from listing other than with the consent of a majority of unitholders (Rule 126.96.36.199).
a) no director may be an entity with limited liability, except where permitted by the law of the domicile of the issuer. Where the issuer does have corporate directors, a majority of the board of the issuer should be natural persons (Rule 188.8.131.52.1);
b) the directors of the issuer who are natural persons and the directors of a corporate director who are natural persons (whom the Exchange would expect to be a majority) are responsible for the information in the Listing Document and must state such responsibility in the Listing Document (Rule 184.108.40.206.2);
c) where an investment fund is a company, other than an open-ended investment fund, there must be a minimum of three directors of which two must be independent of any appointed investment manager, any appointed investment adviser and / or their affiliated companies (Rule 220.127.116.11.3);
d) a custodian or auditor of the issuer may not act as a director of the issuer (Rule 18.104.22.168.4).
The Listing Process
Stage 1: Satisfy Listing Conditions
An issuer seeking a listing for securities on the Exchange must satisfy all the conditions for listing. The issuer, its professional advisers and the Sponsor are encouraged to discuss the suitability of the listing proposals prior to making any formal application.
Stage 2: Preparation of Draft Documentation
The Sponsor in conjunction with the prospective issuer's professional advisers will prepare drafts of the formal listing documentation for review and comment by the Listing Department. The application documents will include all or some of the following:
- formal application for listing;
- sponsor's declaration;
- listing undertaking;
- directors' declaration and undertaking;
- Listing Document, signed by or on behalf of the directors of the issuer;
- copies of the certificate of incorporation, memorandum and articles of association of the issuer (or equivalent constitutive documents), marked-up as appropriate to indicate compliance with the listing requirements;
- if necessary, application for derogation from formal listing requirements;
- formal listing notices setting out the material terms of the proposed issue;
- application form to subscribe for or purchase securities;
- any documents of title;
- authorising resolutions;
- financial statements;
- accountants' report and any statement of adjustments;
- letters of consent to any statements made by experts being
included in the Listing Document;
payment of listing fees; and
- such additional documentation as may be required by the Exchange.
Stage 3: Approval
All applications for listing will be processed by the Exchange's Head of Listing and the Staff of the Listing Department. Once the Listing Department is satisfied with an application it will prepare a response to the Exchange's Listing and Membership Committee together with a recommendation as to the suitability of the listing proposal.
Stage 4: Listing
If the Listing and Membership Committee approves the application the listing documentation is then filed and the securities are admitted to the Official List.
Once a listing has occurred an issuer must comply with the continuing obligations specified in the Listing Rules. The continuing obligations are intended to ensure that all market users have simultaneous access to the same information and to maintain an orderly market in the listed securities. This Client Briefing should be read in conjunction with our briefing entitled: "Channel Islands Securities Exchange Authority Limited (the Exchange) - Continuing Obligations for issuers with listed Investment Fund Securities", which contains a detailed summary of the continuing obligations.
The initial application fee for the listing of securities issued by investment funds varies based upon several factors including whether the applicant is open-ended or closed-ended and single or multi-class. Annual fees are charged in respect of listing such securities. Initial listing fees currently range from £5,000 - £10,000 whereas annual fees range from £1,500 - £2,000. All fees are subject to periodic review and are published on the Exchange's website.
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.