The Channel Islands Stock Exchange ('CISX' or the 'Exchange') offers:
- a fast document turnaround time (often same day);
- competitive pricing (initial CISX listing fee of £3,600 for a standalone issue with no annual fee);
- international standards of issuer regulation; and
- a pragmatic approach to disclosure requirements.
Designation by both the UK authorities and international organisations is a strong endorsement of the status of the Channel Islands as a significant financial centre.
The Exchange commenced operations on 27 October 1998 with the intention of providing recognised facilities for the listing and trading of a broad range of debt securities. Current listings on the Exchange include equity-linked notes, convertible notes, PIK notes, Eurobonds and warrants. As at 1 January 2008, there are over 2,500 listings on the Exchange with a market capitalisation of approximately US$60,000,000,000.
The CISX is authorised 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.
In December 2002 the CISX was designated by the UK Inland Revenue as a recognised stock exchange under Section 841 of the UK Income and Corporation Taxes Act 1988 ('ICTA'). This designation is significant because qualifying debt securities listed on the CISX are now eligible for the 'Quoted Eurobond Exemption'. This allows an issuer within the UK tax net to make payments of interest on the listed securities gross without deduction for tax.
In designating the CISX as a recognised stock exchange under section 841 of ICTA it was necessary for the UK Inland Revenue to determine that:
- the CISX is a stock exchange undertaking the normal business of a stock exchange and is regulated as an investment exchange in a major economy, or in a significant financial centre; and
- the Channel Islands have proper and effective arrangements for financial regulation which meet internationally accepted modern standards in this area.
It is important to note that the legislation introduced by the Finance Bill 2007 in no way alters the position of the CISX as a recognised stock exchange.
The CISX has been designated by the US Securities and Exchange Commission as a Designated Offshore Securities Market under Regulation S of the US Securities Act 1933 and has also been classified as a 'designated investment exchange' by the Financial Services Authority in the UK. This classification facilitates trading by UK authorised firms by providing a more favourable regulatory environment for transactions effected on the CISX and also allows UK authorised firms to sell investments listed on the CISX to clients in the USA.
The CISX is also recognised by the Australian Stock Exchange, is registered with the International Federation of Stock Exchanges ('FIBV') as a corresponding market and is an associate member of the International Securities Market Association. In addition, the CISX is a member of the European Securitisation Forum (an organisation sponsored by the US Bond Market Association), an affiliate member of International Organisation of Securities Commissions ('IOSCO') and an associate member of the International Capital Market Services Association ('ICMSA').
A technical advantage that the Exchange has over other stock exchanges is that the CISX is more flexible in its accounting requirements and does not insist on the adoption of International Accounting Standards / International Financial Reporting Standards for debt securities, provided that an appropriate accounting standard is used. Under IAS / IFRS financial liability derivatives must be accounted for at 'fair value' rather than at historic cost. This can result in an issuer incurring technical losses or profits, which in turn may produce unpredictable tax liabilities.
The CISX operates in a remote environment within an electronic trading system which it monitors centrally. All CISX listing and trading information can be accessed from the CISX's dedicated pages on Reuters Triarch screen-based trading platform and on its Internet Website at www.cisx.com. Trading Members of the Exchange may display orders for listed securities by sending their prices via Reuters to the CISX and these prices are then disseminated to all Reuters users (access via CISX's Reuters pages CISXINDEX).
Unlike other European stock exchanges, the CISX is not bound by any European Union Listing Directives and, as a result, is able to be considerably more flexible in its approach. The CISX does not require an issuer to appoint a local paying agent in the Channel Islands and is generally more flexible on local presence requirements compared to stock exchanges established in the EU. The CISX is aware of the time constraints, which affect issuers and their professional advisors, and is committed to meeting an agreed transaction timetable. The fees levied by the CISX for listing debt securities are competitive with other Eurobond exchanges.
Appointment of Sponsor
In order to proceed with a listing a proposed issuer must appoint a sponsor to assist in relation to the listing procedure. The sponsor will be responsible for all communications and dealings with the Exchange (including seeking 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 addition, a sponsor is able to apply to the Exchange for derogations in the formal disclosure requirements applicable to the contents of the Listing Document.
Services Offered by Ogier Corporate Finance Limited
Ogier Corporate Finance Limited is a full listing member of the Channel Islands Stock Exchange, wholly owned by Ogier, and is able to act as a sponsor for listing purposes. It is the leading sponsor on the Channel Islands Stock Exchange. Ogier and its associate companies are experienced in the provision of high quality and cost effective professional services in relation to special purpose vehicles. We have experience in all aspects of structuring and documenting debt issuance transactions, from initial design to public offerings and listings of debt securities.
Full details of the services provided by Ogier Corporate Finance Limited are available on request.
Listing by a Special Purpose Vehicle
Many institutional investors are constrained by their internal investment policies to investing in securities which are listed on a recognised stock exchange. The CISX has been established for the purpose of providing, among other services, a recognised stock exchange listing facility for specialised debt securities. 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 first class finance centres. The CISX has developed listing rules which place a premium on clarity and an appropriate level of corporate governance. Fast track listing procedures have also been developed to facilitate the listing of structured debt instruments. This enables the Exchange to provide arrangers of debt issuance transactions with a fast, efficient and cost-effective listing facility.
This briefing document provides a summary of the requirements for the admission of asset-backed and other specialist debt securities issued by a special purpose vehicle to a listing on the Exchange.
(Within the meaning of the Listing Rules, a 'special purpose vehicle' is any 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.)
Client Briefings on Establishing Special Purpose Vehicles, Duties of Directors of issuing companies and on other aspects of Channel Islands company law have been prepared by Ogier and are available on request.
The Exchange's Approach to Listing
The Exchange recognises that structured debt securities issued by special purpose vehicles tend to be purchased and traded by a limited number of sophisticated and institutional investors. 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 debt securities required to be included in a prospectus (the 'Listing Document'). Disclosure requirements have been set at a level which are 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 debt securities for which a listing is sought as specified in Schedule 1. Where any such information would not be applicable or appropriate to a particular issue an application for derogation from the formal 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 on the financial position, activities, management and prospects of an issuer and of the rights (and any liabilities) attached to the debt securities for which a listing is sought.
General Principles for Listing on the Exchange
The rules for the listing of debt securities on the Exchange (the 'Listing Rules') are designed to ensure that investors have and maintain confidence in the securities market. In particular, that in relation to the issuer and the debt securities for which application for listing has been made:
- the securities are suitable for listing;
- investors are given sufficient information to enable them to make an informed assessment of the issuer and the debt securities;
- the issue and any trading of the debt securities is conducted in a fair and orderly manner;
- all holders of listed debt 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 debt securities.)
The CISX 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 Debt Securities
The following special requirements apply to listing debt securities on the Exchange issued by a special purpose vehicle:
The debt securities to be listed must be eligible for deposit in a clearing and settlement system acceptable to the Exchange (such as Euroclear, Clearstream) or cash settlement via the sponsor.
A security trustee (or other appropriate independent representative) should be appointed to represent the interests of the holders of asset-backed debt securities. The representative should also have rights of access to appropriate information relating to the underlying assets.
The debt securities to be listed must be freely transferable (except to the extent that any restrictions on transfer are approved by the Exchange) and tradeable and fully paid securities must be free from all lien.
The Listing Document should contain the information referred to in Schedule 1 (or an appropriate derogation from such disclosure should be obtained).
The issuer must appoint two authorised representatives resident in the Channel Islands to act as the issuer's principal channel of communication with the Exchange on an ongoing basis. The authorised representatives must be either directors of the issuer, the secretary of the issuer, or other persons acceptable to the Exchange (such as officers of the sponsor).
THE LISTING PROCESS
Stage 1: Satisfy Listing Conditions
An issuer seeking a listing for debt securities on the Exchange must satisfy all the conditions for listing. The Applicant's professional advisors and the Listing Member sponsoring the application are encouraged to discuss the suitability of the listing proposals with the Exchange prior to making any formal application.
Stage 2: Preparation of Draft Documentation
The Listing Member, in conjunction with the Applicant's professional advisors, will prepare drafts of the formal listing documentation for review and comment by the Listing Department of the Exchange.
The application documents are likely to include 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;
- trust instrument, fiscal agency agreement or the document constituting or securing the debt securities;
- if necessary, application for derogation from any formal listing requirements;
- formal listing notices setting out the material terms of the proposed issue;
- application form to subscribe or purchase the debt securities;
- where appropriate, form of global and/or definitive notes or certificates in respect of the debt securities;
- 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;
- authorising resolutions;
- financial statements or capitalisation table;
- accountants' report (if any);
- 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 Market Authority together with a recommendation as to the suitability of the listing proposal.
Stage 4: Listing
If the Market Authority approves the application, the listing documentation is then filed and the securities are admitted to the Official List. The securities are allocated an ISIN reference and the issuer may then issue the Listing Document and dealings commence.
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 debt securities.
A summary of the detailed continuing obligation requirements is set out in Schedule 2.
The initial application fee for the listing of specialist debt securities is £3,600. No annual fee is charged in respect of listing such securities.
The purpose of this briefing is to highlight the principal requirements and key issues to be considered when considering the listing of structured debt securities by special purpose vehicles on the CISX.
If you would like further information about the Exchange and the services that we are able to provide, please speak to one of the contacts listed at the end of this briefing or your usual contact at Ogier.
Listing Document Disclosure Requirements
The Listing Document for specialist debt securities should contain the following information: (all paragraph references are to Appendix IX, Part D of the CISX Listing Rules)
General information about the Issuer
The full name, registered number (where applicable) and registered office address of the issuer.
The date and country of incorporation or other establishment of the issuer, the authority under which the issuer was incorporated or otherwise established and (if not indefinite) the length of life of the issuer.
Information about the Issuer's management and operations
The full name and residential or business address of every director or proposed director.
The names and addresses of the issuer's principal bankers, sponsor, legal advisers, registrars and custodians (if any), legal advisers to the issue, reporting accountants and any other expert to whom a statement or report included in the Listing Document has been attributed.
The names, addresses and professional qualifications of the current auditors and, if applicable, the auditors who have audited the issuer's annual accounts in accordance with the relevant applicable law for the last three financial years.
Information relating to the preparation of the Listing Document
A statement as follows:
"Subject as set out below, the issuer accepts responsibility for the information contained in this Listing Document and to the best of the knowledge and belief of the issuer (which has taken all reasonable care to ensure that such is the case) the information contained in this Listing Document is in accordance with the facts and does not omit anything likely to affect the import of such information."
Also in relation to the issue of convertible securities or where otherwise applicable:
"The information relating to [name of issuer of the shares], its subsidiaries and the [shares] has been accurately reproduced from information published by [name of issuer of the shares]. So far as the issuer is aware and/or is able to ascertain from information published by [name of issuer of the shares], no facts have been omitted which would render the reproduced information misleading."
Details of other exchanges (if any) where admission to listing is being or will be sought and the names of the exchanges (if any) on which securities of the same class are already listed.
Where the Listing Document includes a statement purporting to be made by an expert, a statement:
- specifying the qualifications of such expert and whether such expert has any financial interest in the issuer;
- that the expert has given and has not withdrawn his written consent to the issue of the Listing Document with the expert's statement included in the form and context in which it is included; and
- the date on which the expert's statement was made and whether or not it was made by the expert for the purpose of incorporation in the Listing Document.
Information about the debt securities for which listing is sought
A statement that application has been made to the Exchange for the listing of, and permission to deal in, the debt securities.
(a) The nominal amount of the issue or if this amount is not fixed, a statement to that effect, the nature and number of the debt securities and their denominations.
(b) A summary of the rights conferred upon holders of the debt securities and particulars of the security.
(c) Except in the case of continuous issues, the redemption price and the nominal interest rate and, if floating, its mode of calculation (in the case of convertible securities the issue price should also be given).
(d) An indication of the conditions for changes in the interest rate.
(e) Details of the method of payment of the issue or offer price (as the case may be) including a description of any instalment arrangement.
(f) A statement detailing the rate, if any, of withholding tax withheld at source on the debt securities and an indication as to whether the issuer assumes responsibility for the withholding of tax at source and any redemption option in the event of a withholding tax being introduced on or in respect of payments under the debt securities.
(g) Details of the arrangements for the amortisation or early redemption of the issue, including procedures to be adopted.
(h) The names and addresses of the paying agent(s) and any registrar and transfer agent(s) for the debt securities.
(i) Details of the arrangement for transfer of the securities (if not in bearer form) including details of any fee payable in relation to transfers or other documents relating to or affecting the title to or registration of the securities.
(j) The currency of the issue. If the issue is payable in any currency other than the currency of issue, this fact should also be disclosed.
(i) The final repayment date and early repayment dates, specifying, whether early repayment is exercisable at the option of the issuer or the holders of the debt securities.
(ii) The date from which interest accrues and the interest payment dates.
(iii) Prescription period for claims for payment of interest and repayment of principal.
(iv) Procedures and time limits for delivery of the debt securities, whether there will be temporary documents of title and, if so, the procedures for the delivery and exchange of documents.
(l) Except in the case of a continuous issue, an indication of yield and a brief description of the method of calculation of the yield.
(a) A description of any subordination of the issue to any other debt of the issuer already incurred or expected to be incurred.
(b) An indication of any legislation under which the debt securities have been created, the governing law and of the competent courts in the event of litigation.
(c) An indication of whether the debt securities are in registered or bearer form.
(d) Details of any legal restrictions on the free transferability of the debt securities.
(e) An indication of whether it is possible to split the debt securities.
Details of any selling or marketing restrictions relevant to the debt securities.
(a) Except in the case of continuous issues, the period of the opening of the issue or offer and any possibilities of early closure.
(b) A reference, if necessary, to the fact that subscriptions may be reduced.
Documents for inspection
Details of where annual or any interim reports are available and how often interim reports are published.
Details of the location and where, for a reasonable period of time (not being less than 14 days), the following documents may be inspected:
(a) the memorandum and articles of association of the issuer (or equivalent constitutive documents);
(b) any trust deed, fiscal agency agreement or other document constituting the debt securities;
(c) all reports, letters and other documents, balance sheets, valuations and statements by any expert any part of which is extracted or referred to in the Listing Document;
(d) where an accountants' report is included in the Listing Document, a written statement signed by the reporting accountants or auditors of the issuer setting out the adjustments made by them in arriving at the figures shown in their report or audit and stating their reasoning; and
(e) the audited accounts of the issuer (if any) or, in the case of a group, the consolidated audited accounts of the issuer and its subsidiaries (if any) for the last financial year immediately preceding the issue of the Listing Document.
Where any of the documents listed in paragraph 21 are not in the English language, translations into English must be available for inspection. In the case of any document mentioned in paragraph 21 a translation of a summary of such document may be made available if the Exchange so agrees.
A statement as follows:
"Neither the admission of the (notes/units/warrants) to the Official List nor the approval of the Listing Document pursuant to the listing requirements of the Exchange shall constitute a warranty or representation by the Exchange as to the competence of the service providers to or any other party connected with the issuer, the adequacy and accuracy of information contained in the Listing Document or the suitability of the issuer for investment or for any other purpose."
Listing Documents relating to convertible debt securities should contain the following additional information:
The terms and conditions of and procedures for conversion, exchange, subscription or purchase and details of the circumstances for or in which they may be amended, including the following information:
(a) the total number of equity securities subject to such rights;
(b) the period during which such rights may be exercised and the date when these rights commence;
(c) the amount payable on the exercise of such rights;
(d) the arrangements for transfer or transmission of such rights;
(e) the rights of the holders on liquidation of the issuer the equity securities of which are subject to such rights; and
(f) the arrangements for the variation in the subscription or exercise price or number of equity securities or other property to take account of alterations to the share capital of the issuer, the equity securities of which are subject to such rights.
Details of the fixed date(s) (if any) on which entitlement to dividend arises, and particulars of any arrangement under which future dividends are waived or agreed to be waived.
Listing Documents describing Asset-backed Securities should contain the following additional information:
With respect to the underlying assets the Listing Document must include the following information set out in Appendix IX, Part E.
(a) The geographical location or legal jurisdiction of the financial assets.
(b) The pool size and any specified minimum or maximum.
(c) The types of financial assets.
(d) The maturity of financial assets.
(e) The size of financial assets.
(f) Where the financial assets in the pool are themselves secured or backed by other assets, if available, the loan to value ratio at origination.
(g) The principal lending criteria and extent to which financial assets may be included which do not meet these criteria.
(h) A description of any significant representations and warranties given to the issuer relating to the financial assets.
(i) The method of origination.
(j) Any collateral substitution rights.
(k) Any rights or obligations to make further advances.
(l) The principal insurance policies (if any), including the names and (where appropriate) the addresses and a brief description of the providers and, where concentration with one insurer is material to the transaction, this should be disclosed.
A description of the method and a statement of the date of the sale, transfer or other assignment of the financial assets or of any rights in the financial assets to the issuer.
A description of the structure of the transaction and a full explanation of the flow of funds including:
(a) how the cash flow from the financial assets is expected to meet the issuer's obligations to holders of the listed debt securities and, in particular, information on any credit enhancements, an indication of where material liquidity shortfalls are expected to occur and the availability of any liquidity supports and indication of provisions to cover interest shortfall risks;
(b) the investment policy for the investment of any temporary fund surpluses;
(c) how payments are collected from the borrowers of the financial assets in the pool;
(d) the order of priority of payments made by the issuer (where relevant) to the holders of the class of debt securities in question;
(e) any fees or other charges payable by the issuer out of cash flows received;
(f) the details of any other arrangements upon which payments of interest and principal on the listed debt securities are dependent;
(g) information on whether or not there is any intention to accumulate surpluses in the issuer; and
(h) the details of any subordinated debt financing.
The name, address and brief description of any originator of the financial assets backing the issue.
The name, address and sufficient information to demonstrate the suitability of the person or entity which will hold any of the underlying financial assets or have custody, possession or control of any funds flowing from them to the issuer or the holders of the debt securities together with a summary of the responsibilities of the manager or administrator of the issuer and a summary of the provisions relating to termination of the appointment of the manager or administrator and how a replacement will be appointed.
The names and addresses and brief description of any swap counterparties and any providers of material forms of credit enhancement and the banks with which the main accounts relating to the transaction are held.
Continuing Obligation Disclosure Requirements
As a condition to maintaining a listing on the Exchange, an issuer must undertake to comply with the following specific continuing obligations:
It is a prerequisite of listing that an issuer executes a Listing Undertaking, undertaking to comply with the Listing Rules and, in particular, with all relevant continuing obligations. Observance of the continuing obligations is essential to the maintenance of an orderly market in securities and to ensure that all users of the market have simultaneous access to the same information. Failure to comply with any applicable continuing obligation may result in the Exchange taking enforcement actions.
An issuer is required to keep the public, the Exchange, the holders of the securities of the issuer and other holders of its listed debt securities informed as soon as reasonably practicable of any information relating to the issuer which:
- is necessary to enable investors and the public to appraise the financial position of the issuer;
- is necessary to avoid the establishment of a false market in its securities; and
- to inform investors of developments which might reasonably be expected materially to affect market activity in and the price of its debt securities.
An issuer whose securities are listed on the Exchange and on any other exchange must ensure that equivalent information is made available at the same time to the Exchange and such other exchanges.
As soon as practicable following the publication of the annual report, relevant annual accounts or interim financial statements, the issuer shall send two copies of such annual report, relevant annual accounts or interim financial statements to the Exchange or refer the Exchange to publicly available information placed on the internet or central depositary.
The issuer shall immediately disclose to the Exchange:
(a) Any change in the rights, powers or privileges of any class of listed debt securities, including any change in the rate of interest, and any change in any of the rights, powers and privileges of any class of securities into which the listed debt securities are convertible or for which they are exchangeable.
(b) Any decision to call, purchase, redeem or cancel any of the listed debt securities by the issuer. The information must also state the amount of the debt securities to be called, purchased, redeemed or cancelled and the amount of debt securities to be outstanding after the transaction or series of transactions is completed. Such transactions in listed debt securities may be aggregated so that no report need be made until five per cent of the outstanding amount has been subject to such transactions (or a decision made to enter into such transactions for five per cent or more of the outstanding of listed debt securities) but once that threshold has been crossed, each additional one per cent of the amount of outstanding debt securities must be reported.
(c) Any proposed changes in the constitution or capital structure of the issuer.
If the listed debt securities may be converted into or exchanged for securities of another company, or are guaranteed by another company, the issuer must ensure that adequate information is at all times available to the Exchange concerning:
(a) the business and affairs of the other company; and
(b) the rights, powers and privileges of those securities into which the listed securities are convertible or for which they are exchangeable.
As a minimum, the information required to satisfy the requirements of Rule 8.5.7(a) above must include the annual report and accounts of the company, any interim financial accounts, and all other information necessary for a realistic valuation of the listed debt securities to be made.
The issuer shall submit to the Exchange, for review, copies of the drafts before they are issued of any announcements or advertisements, the subject matter of which involves a change in or relates to or affects arrangements regarding trading in the listed debt securities on the Exchange, including suspensions or cancellations of listings.
The issuer or other body on behalf of the issuer shall file with the Exchange copies of all shareholder resolutions of the issuer in respect of the listed issue, any document relating to a take-over of merger by or offer to purchase the issuer, notices of meetings in relation to the listed issue forms of proxy in relation to the listed issue; reports, announcements or other similar documents, as soon as practicable after they are issued.
The issuer shall submit two copies to the Exchange of any document sent by the issuer (or on its behalf) to holders of the issuer's listed issue as soon as practical after such documents are issued.
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.