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17 March 2016
This update highlights the principal requirements and key issues to be considered when listing debt securities on the Channel Islands Securities Exchange Authority Limited (CISEA).
The CISEA commenced operations on October 27 1998 with the intention of providing recognised facilities for the listing and trading of a broad range of debt securities. Current listings on the CISEA include equity-linked notes, convertible notes, payment-in-kind notes, eurobonds and warrants.
As of February 15 2016 there are over 2,100 listings on the CISEA.
The CISEA 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.
In December 2002 the Channel Islands Stock Exchange (the name of the previous exchange before the restructuring that occurred at the end of 2013) was designated by the UK Inland Revenue as a recognised exchange under Section 841 of the UK Income and Corporation Taxes Act 1988. This designation was significant because qualifying debt securities listed on the CISEA are eligible for the quoted eurobond exemption. This allows an issuer within the UK tax net to make interest payments on listed securities gross without deducting for tax.
In addition, in December 2013 the CISEA:
While complying with international standards for recognised stock exchanges, the CISEA 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 CISEA 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 CISEA is not bound by or subject to any EU directives and, as a result, can be considerably more flexible in its approach. The CISEA does not require an issuer to appoint a local paying agent in the Channel Islands and does not typically require securities to be entered into a clearing system. In certain circumstances it may also list an issuer without audited accounts. The fees levied by the CISEA for listing debt securities are competitive with other EU eurobond exchanges.
All CISEA listing and trading information can be accessed from the CISEA's dedicated pages via the CISEA's Market Data Management Service (MDMS) and on its website.(1) Trading members of the CISEA may display orders for listed securities by sending their prices via MDMS. These prices are then disseminated to all Reuters users via the CISEA's MDMS background information platform pages.
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 CISEA (including seeking the CISEA's approval for the form and content of the listing document and preparation and filing with the CISEA of the formal listing application and supporting documentation, including the director's declarations). In addition, a sponsor can apply to the CISEA for derogations in the formal disclosure requirements applicable to the contents of the listing document.
Approach to listing
The CISEA recognises that debt securities issued by special purpose vehicles and intra-group holding companies tend to be purchased and traded by a limited number of sophisticated, intragroup and institutional investors. The CISEA endeavours to adopt a pragmatic approach to regulation. It is flexible in its requirement regarding the detailed information that must be included in a prospectus in relation to the issuer and the debt securities; therefore prospectuses are relatively short.
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 without imposing unnecessarily onerous demands on the issuer. A listing document should disclose information relating to the issuer and the debt securities for which a listing is sought as specified in Schedule 1. Where such information is inapplicable or inappropriate to a particular issue, an application for derogation from the formal requirements may be made to the CISEA. The CISEA may authorise the omission of certain information from the listing document where it considers such information to be inapplicable or of minor importance.
Derogation may also be permitted if disclosure would be seriously detrimental to the issuer or contrary to public interest. However, in general, the CISEA would expect a listing document to disclose all information 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.
As set out in the Listing Rules, a 'special purpose vehicle' is defined as 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.
General principles for listing on CISEA
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 debt securities for which application for listing has been made, that:
The CISEA encourages prospective issuers and their sponsors to contact it at an early stage to seek informal and confidential guidance as to the eligibility of a proposed listing application. However, the CISEA will charge a £1,000 fee for this service (see section entitled "Listing fees").
Special requirements for listing of debt securities
The following requirements apply to listing debt securities on the CISEA:
Accounts (continuing obligations post-listing)
Please see Schedule 2, Part B for the CISEA's continuing obligations requirements in relation to accounts.
Stage 1: satisfying listing conditions
An issuer seeking a listing of debt securities on the CISEA must satisfy all the conditions for listing, including the provision of the following documents/information:
The issuer's professional advisers and the listing sponsor to the application are encouraged to discuss the suitability of the listing proposals with the CISEA before making any formal application (see the section entitled "Listing fees" below).
Stage 2: preparation of draft documentation
The listing sponsor, in conjunction with the issuer's professional advisers, will prepare drafts of the formal listing documentation for review and comment by the CISEA.
The application documents include the following:
Stage 3: initial application
Once the application documents are in a substantially agreed form and the documents and background information have been provided, the sponsor will make the initial application on the issuer's behalf. The CISEA will then issue its initial listing invoice. Once the CISEA has reviewed the initial application, it will provide comments to the sponsor. The sponsor will then discuss the comments with the CISEA and amend the documents if necessary.
The CISEA will not release its comments on the initial application until its initial fee (referred to below) has been paid.
Stage 4: listing
If the Listing and Membership Committee approves the application and they have no further comments on the initial application, the listing documentation is then signed (where applicable) and filed and the debt securities are admitted to the CISEA's Official List.
Once a listing has occurred, issuers must comply with the Chapter 8 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 (for further details please see "Continuing obligations for issuers with listed investment fund securities").
The CISEA fees for the listing of debt securities under Chapter 8 of the Listing Rules are as follows:
The initial and first annual listing fees above are payable in advance by the issuer.
The following fees may also be charged:
Listing document disclosure requirements
The listing document for debt securities should contain the following information (all paragraph references are to Appendix IX, Part D of the Listing Rules).
General information about issuer
The following information must be provided about the issuer:
Issuer's advisers and management
The following information must be provided in relation to the issuer's advisers and management:
Preparation of listing document
Information regarding the preparation of the listing document must include as follows:
The following information must be provided for debt securities for which listing is sought:
Documents for inspection
The following documents must be available for inspection:
Trading companies issuing debt securities
In accordance with Paragraph 25, where the issuer is a trading company, the following must be included in the listing document or, if the information can be found in the issuer's group accounts, a link to where these are available may be included:
Convertible debt securities
In accordance with Paragraph 23, listing documents for convertible debt securities should contain terms, conditions and procedures for converting, exchanging, subscribing or purchasing and details of the circumstances in which they may be amended, including the following information:
With respect to the underlying assets, the listing document must include the following information, as set out in Appendix IX, Part E:
Part A – Rule 8.2.2 (Accounts)
In accordance with Rule 18.104.22.168 – except as provided in Listing Rule 22.214.171.124 – an issuer of debt securities that is not already listed on the CISEA must have published audited accounts that:
In accordance with Rule 126.96.36.199 in relation to Listing Rule 188.8.131.52(a), the CISEA may waive, in whole or in part, the requirement for three years of audited accounts in the following circumstances:
Rule 184.108.40.206 states that where an issuer is not required to produce audited accounts under the law of the country of incorporation, the CISEA may require unaudited financial information or statements or consolidated audited group accounts of a quality acceptable to the CISEA to be submitted to the CISEA.
According to Rule 220.127.116.11 – notwithstanding whether an issuer's accounts are qualified or modified – the issuer may still be suitable for listing if a qualification or modification does not relate to a matter that is significant to investors. Any qualification or modification of the audited accounts in the previous three years of an applicant's operations should be brought to the CISEA's attention. The CISEA will require any such qualification to be suitably resolved and have no effect on the suitability of an applicant for listing.
Under Rule 18.104.22.168, the auditors must be independent of the applicant and comply with guidelines on independence issued by their relevant accounting body.
Finally, under Rule 22.214.171.124, unless otherwise agreed with the CISEA, where the issuer's debt securities are guaranteed, the guarantor must also provide copies of its latest independently audited accounts to the CISEA.
Part B – Rule 8.5.3 (Accounts)
In accordance with Rule 126.96.36.199, unless otherwise agreed with the CISEA, the issuer must, within six months of the end of the period to which the audited annual accounts or unaudited financial statements relate:
Rule 188.8.131.52 states that unless the issuer is exempted from publishing audited accounts under the law of the country of incorporation or as otherwise agreed with the CISEA, the annual report and accounts must:
For further information on this topic please contact Peter Longstaffe at Ogier by telephone (+44 1534 514 000) or email (email@example.com). The Ogier website can be accessed at www.ogier.com.
(1) See www.cisx.com.
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