Jersey: CISEA Listing – A Cost Effective Way To Make AIM Shares Eligible For ISAs

The Alternative Investment Market (AIM) is not designated as a "recognised stock exchange" by HM Revenue & Customs (HMRC) and therefore shares traded on AIM cannot be held in a stocks and shares Individual Savings Account (ISA). However, shares which are traded on AIM and also listed on the Official List of Channel Islands Securities Exchange Authority Limited (CISEA) will ordinarily be eligible for inclusion in a stocks and shares ISA due to the fact that the CISEA, unlike AIM, is a recognised stock exchange offering a full listing facility and not just an admission to trading. A dual listing should also provide certain other investors, who are restricted to investing in shares listed on a recognised exchange, with access to AIM quoted companies. ISA managers have shown flexibility in enabling dual listed AIM shares to be included within ISA platforms. These factors, allied to the fact that a listing on the CISEA can be achieved very quickly at a comparatively low cost, make a listing on the CISEA an attractive option for AIM quoted companies that wish to improve their liquidity and marketability, facilitate fundraising and widen their shareholder base.

The CISEA

The CISEA (formerly the CISX) commenced operations in October 1998 and has grown rapidly, with over 2,000 securities currently listed. The CISEA is recognised internationally, as demonstrated by its recognised stock exchange status and by the following:

  • The CISEA is recognised by HM Revenue & Customs.
  • The CISEA is an Affiliate Member of the International Organization of Securities Commissions.
  • The CISEA is an Affiliate Member of the World Federation of Exchanges.
  • The CISEA is officially recognised by the Australian Securities Exchange.

Listing and sponsor fees

The listing fees charged by the CISEA compare favourably with those charged by other stock exchanges worldwide. The initial listing fee for a non-Channel Islands based trading company is £5,000, while the annual fee is also £5,000. Listing fees for other categories of securities (such as those issued by investment funds) are generally lower.

In addition to the fees payable to the CISEA, fees will also be payable to the listing sponsor. Bedell Channel Islands Limited is a category 1, 2 and 3 listing member and can act as sponsor on all categories of listings. Sponsor fees are dependent on the complexity of the listing, although they are generally extremely competitive when compared with advisory fees in connection with listings on other exchanges and the sponsor will not charge a percentage based fee.

The issuer must also appoint a market maker, although there is no requirement to appoint an independent corporate advisor.

Procedure

When preparing the listing document, it is often possible to utilise the information disclosed and/or the documentation produced in connection with the admission to AIM (for example, a prospectus or offering memorandum) in conjunction with a "wrapper" document designed to ensure compliance with the CISEA disclosure rules. In many cases this will mean that it will not be necessary to prepare a new long form listing document, thereby reducing the costs and timescales associated with achieving a listing.

The application process is carried out in two stages. At stage one, draft documents are prepared on behalf of the issuer, the sponsor and the directors of the issuer and submitted to the CISEA for consideration by the Listing and Membership Committee (LMC), together with the listing fees. The LMC will usually provide comments on the draft documents within a week. Stage two simply involves the submission of final, executed documents, together with a formal notice. Once the security is approved by the LMC (usually on the same day as the final documents are submitted), a grant of listing letter is issued and the shares are admitted to the Official List. The disclosure requirements for the listing particulars of trading companies are set out in Chapter 6 of the Listing Rules, although the CISEA is responsive and approachable in the event that a particular requirement cannot be met due to circumstances.

There are various ways to apply for a listing. Clearly an AIM traded company will already have shareholders and, accordingly, it may not wish to make an offer to further investors. In these circumstances, a listing by way of introduction to the CISEA may be the most appropriate route. Bringing shares to listing by way of introduction does not involve an issue of new shares or any additional marketing of existing shares if the shares are already widely held. For these purposes, the shares will be widely held if at least 25% of the shares to be listed are in the hands of the public.

Other CISEA advantages

  • The CISEA operates outside the EU and therefore EU directives do not apply.
  • The CISEA adopts a pragmatic and commercial approach to disclosure, which focuses on issues material to an investor, without the requirement for lengthy disclosure which may be required for other stock exchanges operating under the EU Prospectus Directive.
  • The CISEA does not insist on the appointment of a local paying agent and many listings are achieved without any paying agent being appointed.
  • The CISEA is flexible in its accounting requirements provided that an appropriate accounting standard is used.
  • It is possible to pre-clear any potentially contentious issues with the CISEA.

Corporate transactions, continuing obligations and announcements

As for all stock exchanges, once the shares are listed, there is an obligation on the issuer to keep the public, the exchange and the shareholders informed of material information relating to the issuer or the shares. Due to the fact that it is a recognised stock exchange, a listing on the CISEA would be primary to the admission to AIM and the issuer would need to comply with the CISEA Listing Rules. There are certain differences between the rules governing AIM and the CISEA and we would be happy to assist in advising as to the relevant differences.

The sponsor will generally assist the issuer in complying with its disclosure obligations and is able to publish announcements directly on the CISEA 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.

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Authors
Mark Helyar
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