The admission of securities of NewGold Issuer Limited (RF)
(NewGold) on the Official List of the Stock
Exchange of Mauritius (SEM) on 26th July 2013 was
hailed as a milestone in the internationalization of the SEM.
NewGold, an Exchange Traded Fund (ETF) established
in South Africa and listed on the Johannesburg Stock Exchange
(JSE), became the first ETF to be listed in
NewGold is designed to track the price of gold and creates an
investment tool enabling investors to invest in a listed security
that is fully backed by gold. In this instance, BLC assisted Absa
CIB (formerly known as Absa Capital) in this secondary listing of
NewGold securities, and in parallel advised on the legal and
regulatory regime which would be applicable to the listing of the
ETF. BLC further assisted in the drafting of the amendment of
the SEM Listing Rules to pave the way for the admission of ETFs on
ETFs have been known to investors across developed capital
markets for some time now but are new in the Mauritian market. In
its pursuit of internationalizing the Mauritian capital market, the
SEM, a member of World Federation of Exchanges, has amended its
Listing Rules for the Official Market to allow for the listing and
trading of ETFs by including Chapter 21 to the Listing Rules.
Further, to enable the listing of ETFs, the definition of
securities under the Securities Act 2005 was broadened by the
Securities (Instruments) Regulations 2013 to include "Exchange
ETFs are open-ended passive investment products that track the
performance of an index, a commodity or a basket of assets like an
index fund but trades like a stock on an exchange. The introduction
of ETFs, as product available for trading on the Official List of
the SEM, is an important addition to the Mauritian capital market
as it allows investors a way to gain broad exposure to asset
classes, sectors, stock markets. ETFs are among the most
dynamically developing investment tools owing to their low cost for
both investors and issuers and also because of their
ETF securities cannot generally be bought or sold back to the
ETF directly like shares in regular funds. The issue or
redemption of ETF Securities by an ETF is possible when investors
meet certain conditions which usually relate to a large number, or
a block, of securities being redeemed or issued, or investors being
able to contribute in specie for the issuance. Investors who want
to sell their ETF securities can either sell the securities to
other investors on the secondary market, or where such investor
holds a block of securities, redeem with the ETF such block of
securities. Investors redeeming their block of ETF Securities with
the ETF usually have the option of obtaining instead of cash, the
equivalent underlying asset and in the case of NewGold and
subject to certain conditions, the equivalent physical gold.
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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