14 | December 2014
BUSINESS BRIEF | JON MOULTON AND THE CISE
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Why use offshore exchanges?
The key reasons for listing a company on an
offshore stock exchange are in principle the
same as those of listing a company on an
onshore exchange – to raise capital or to give
existing shareholders an opportunity to sell
their shares to unknown third parties in a
Both the CISE and the Cayman Stock Exchange (CSX) are
exchanges recognised by HMRC. Under the Individual
Savings Account (ISA) rules, investors are permitted to invest
in securities listed on a recognised exchange and therefore
both CISE and CSX listings of securities make them eligible
investments for those investors.
Some jurisdictions have in place restrictions whereby residents
are only able to invest in instruments which are listed on
a recognised exchange. A number of investment funds in
particular have utilised CISE or CSX listings at the request
of investors in order to overcome these restrictions, allowing
investors from these countries the ability to invest, thereby
increasing the pool of potential investors.
The internationally-recognised levels of regulation that each
exchange has and the requirements they place on their listed
issuers in terms of notifications and other requirements
provide investors with some comfort that listed issuers (and
their directors) are conducting their affairs to high standards
of corporate governance and transparency. Traditionally debt
listings have been attracted to listing on the CISE largely to
take advantage of the quoted Eurobond exemption, a scheme
introduced by the UK Government to stimulate capital
investment into the UK economy. We are also seeing new
debt investment structures being listed to enable sophisticated
investors to hold these assets in products such as ISAs.
What sort of securities are listed on the exchanges?
A wide variety of entities seek to list their securities on
offshore exchanges. Both debt and equity instruments can be
listed and these relate to investment funds and normal trading
companies as well as specialist companies which are involved
Offshore stock exchanges
– why and how
Joe Truelove, head of fund services at Carey Group in Guernsey, was on the panel
for the Offshore Alert debate. He explains here how offshore stock exchanges, and
particularly the Channel Islands Securities Exchange, carries on its business
December 2014 | 15
BUSINESS BRIEF | JON MOULTON AND THE CISE
We believe in lasting relationships.
For us it’s all about simplifying the
process – we know it’s not easy but we
do everything in our power to make it
simple and enjoyable for our clients.
Big enough to be trusted,
small enough to be flexible…
in mining. The CISE has a number of local trading companies
listed on it. Mining or extractive industries is a growth area
and while many funds are also listed the bulk of listings on the
CISE in particular are debt and debt structure. Unlike other
exchanges limited partnership interests and units in unit trusts
can also be listed on the CISE.
How does that differ with onshore exchanges?
The key difference perhaps between onshore and offshore
exchanges is the cost of a listing and the time required to make
an application. This is the key driver behind the popularity of
One criticism of offshore exchanges is that there is limited
liquidity in the market – there is not a ready market to buy and
sell shares. This is clearly an area which exchanges are seeking
How popular is CISE and how many securities listed on CISE
are actively traded?
CISE has admitted more than 5,000 securities since inception,
of which fewer than 50 are actively traded on the CISE. The
CISE website states that there were £76m. of trades during
2013. The CISE has only three market makers but is keen to
If there is hardly any liquidity available on the offshore
exchanges, why are so many securities listed on them?
In some cases there is no need for liquidity and this is not
the primary purpose of the listing. These are referred to as
Why would anyone bother with a technical listing?
With respect to a debt listing this will be to take advantage of
the Eurobond exemption. This allows a company owning the
debt of another company to set off the interest paid in respect
of that debt as a tax-deductible interest payment. The practice
was covered extensively by the Independent newspaper in the
autumn of 2013, with a series of articles aimed at exposing
companies which appeared to be legally avoiding tax in this
In the case of debt listings and debt structures, there has also
been a recent drive for them to be listed by investors wishing
to hold the security in their ISA, and for this to happen, that
security is required to be listed on a recognised exchange such
as the CISE.
What does it cost to list a security on either exchange?
Fees for listing a security are extremely competitive,
irrespective of the exchange, but vary depending upon the
type of security being listed. Our fees as listing sponsor also
vary depending upon the complexity of the listing. Expect the
upfront fees of a listing to be between £10,000 and £20,000,
including sponsor fees and exchange listing fees. Annual fees
are also extremely competitive. Issuers can expect to pay
between £5,000 and £20,000 per annum to cover listing
sponsor and the exchange fees in most circumstances.
The CISE has flat rate fees that are not based on market
capitalisation, making them very easy to account and budget
for as you can easily calculate the fees due over the life of a
From a listing sponsor’s perspective the work levels are driven
by the volumes of announcements and changes to the listing
which can include issues of further shares, additional classes
of shares, share buy backs, trading in shares by directors
of the fund or company, dividend announcements and the
publication of net asset valuations (which can be up to daily in
What are the requirements to achieve an offshore listing –
preliminary due diligence and continuing obligations?
It is a pretty straightforward process. Due diligence is required
for all clients and we as sponsor need to review the documents
and provide guidance with respect to whether the security can
The CISE, in obtaining its international recognitions, have in
place prescribed minimum listing requirements which must
be met, along with suitable and robust continuing obligations
regimes to ensure transparency and make sure that market
data and information is available to investors and the public.
Its listing rules are similar in composition and requirements to
the old LSE Yellow Book.
What do you get for your money?
Listing a security can assist with the marketability of
that security. The listing rules need to be followed and
announcements made which will give investors additional
comfort that they have access to pertinent information.
Potential investors can find information about the security
through the fact that this information is published on a public
website increasing levels of transparency, which is a greater
and greater requirement by investors in today’s markets.
Listing on an offshore exchange can be regarded as a
cost-effective forerunner of an onshore listing. The CISE
provides cost-effective listings on a recognised exchange