In this issue:-

  • Admission Of Irish ETFs To Trading On The London Stock Exchange
  • Changes To Irish Stock Exchange Continuing Obligation Requirements

ADMISSION OF IRISH ETFs TO TRADING ON THE LONDON STOCK EXCHANGE

One of the main objectives in structuring Exchange Traded Funds (ETFs) is accessing large capital markets. Many ETFs consider a main market listing on the London Stock Exchange (LSE) as the best means of accessing liquidity and increasing their profile. However an LSE listing involves significant time and financial considerations.

There is now an alternative way to access the Main Market of the LSE, reducing costs and time significantly.

The introduction of EU Directives has resulted in a distinction between the concepts of being "listed" and "admitted to trading". A security that is "listed" on an exchange has been vetted by the relevant exchange and is compliant with the suitability standards and conditions for listing laid down by that exchange. A security that is "admitted to trading" has been approved by a competent authority in another EU jurisdiction and must be recognised by the "host" exchange, with the relevant securities being allowed to trade on the host exchange.

In a recent change, securities which have been "admitted to trading" by the LSE may be traded on their Main Market trading platform. Therefore it is now possible to access the LSE Main Market without an LSE listing. This eliminates the requirement to appoint UK listing advisors, reduces the approval timescale and involves significant cost efficiencies.

In order to have an ETF admitted to trading on the Main Market of the LSE the fund must be approved for listing on the Irish Stock Exchange (ISE). An ISE listing is a straightforward process for any Irish regulated fund, which can be undertaken by Dillon Eustace during the regulatory approval process, with no timing implications. The cost of an ISE listing is small. A further requirement of admission to trading is that the ETF complies with the provisions of UCITS III.

Admission to trading enables an ETF to have its securities traded on the Main Market of the LSE, without the additional requirements and costs associated with seeking a full LSE listing.

The application for admission to trading may be made by the ETF itself or by Dillon Eustace, without the need to appoint a separate UK listing sponsor.

The admission is contingent on the ETF registering for and obtaining recognition from the FSA for admission and marketing into the UK.

The approval process is straightforward, involving the filing of the following with the LSE:

  • Admission forms
  • Certificate of UCITS compliance from the Irish Financial Regulator
  • Evidence of FSA recognition status
  • Prospectus, and
  • Listing Particulars stamped by the ISE

The ISE approval listing is obtained within the regulatory approval timeframe.

Following approval of the listing document, the admission documentation is filed with the LSE 11 business days prior to the proposed admission date.

For most funds the ISE listing and LSE admission can be finalised within the initial offer period.

An ETF listed on the ISE and admitted to trading on the LSE may trade on both exchanges. The market for ETFs is an order driven environment facilitated through a market maker(s) appointed by the ETF. Trades are settled through CREST.

CHANGES TO THE IRISH STOCK EXCHANGE CONTINUING OBLIGATIONS REQUIREMENTS

The Irish Stock Exchange has issued an updated set of requirements which include specific amendments to the reporting obligations imposed on listed open ended funds. These changes are positive and reflect market practice, incorporate legislative changes and clarify anomalies between the previous guidelines and evolved practice. The changes affect Chapter 5 - "Financial Information" and Chapter 8 – "Continuing Obligations" of the Listing Requirements and Procedures rulebook for open ended funds.

Summary Of Changes To Interim Reports

  • The interim report must include a condensed balance sheet or statement of net assets (including a statement of realised gains and losses) instead of an income statement.
  • The interim report must include details of the net asset value per unit at the period end.
  • Existing requirements for interims to include an explanatory report on the results in the period, special factors and an outlook for the current financial year remain unchanged.
  • Comparative figures for the interim period are no longer required.
  • The requirement for consistency of accounting policy and presentation for interim and annual reports has been removed.
  • Funds authorised by the Irish Financial Regulator (the "Financial Regulator") are deemed to have complied with the content requirements for interim reports.

Summary Of Changes To Annual Reports

  • The commentary on the results and performance may be provided by either the directors or the investment manager.
  • The requirement to disclose directors' fees has been removed.
  • The requirement to name any subsidiaries has been removed.
  • The requirements to disclose fee or dividend waivers have been removed.
  • The requirement to disclose material contracts has been removed.
  • The requirement to disclose small related party transactions has been removed.
  • The requirement to disclose service contracts with directors has been removed.
  • Provisions relating to closed ended funds have been removed.
  • Other existing requirements remain unchanged.

Summary Of Changes To Financial Information

  • Annual and Interim accounts may be circulated to shareholders and the ISE electronically. Where prudent due to the size of the attachment, this notification may include a link to where the report is available on the Issuers website. The ISE must continue to receive all reports as attachments to electronic communications or in hard copy.
  • In the case of an umbrella fund - where a sub-fund benefits from a legal segregation of liability within the umbrella, the accounts of the listed sub-funds alone may be published.
  • Where a fund has subsidiaries, the annual reports and accounts may be prepared in single or consolidated form, at the funds discretion, or both where one form contains significant additional information.
  • References to qualified auditors reports and associated requirements have been removed.
  • Provisions relating to closed ended funds have been removed.

Summary Of Changes In Reporting Requirements

  • Circulars may now be circulated to Unitholders 10 business days, or such shorter period as allowed under the fund's constitutive documents, prior to the date of the proposed vote. This replaces the previous 15 business day timeline.
  • References to the Market Abuse Directive, and resulting amendments to directors' dealings provisions have been included. Further details on the specific requirements are set out in Dillon Eustace's Market Abuse publication.
  • Clarifications and guidance have been included in relation to the equal treatment of Unitholders and the use of fee rebates and side letters.
  • Material changes in a funds trading strategy require prior ISE approval and announcement.
  • Proposed changes or appointments of prime brokers require prior ISE approval and announcement.
  • Proposed delistings require prior ISE approval.
  • In specific circumstances the ISE may require prior shareholder approval for a proposed delisting where the delisting may lead to a substantial change in the nature or substance of the listed fund.
  • Changes in a funds redemption policy must be announced.
  • Announcements relating to changes in directors must state whether the relevant director acts in an independent capacity.
  • Any change in the name of a fund, sub-fund or class must be announced.
  • Provisions relating to closed ended funds have been removed.

The changes were effected on the 23rd September 2009, with the exception of the changes to the content of interim reports which is effective for funds with financial years after 1st October 2009.

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.