Executive summary

The Channel Islands Securities Exchange Authority Limited (the Exchange) offers:

  • competitive pricing

(initial Exchange listing fee of £4,000 or £5,000 (depending on whether or not the issuer is suitable to list as a "special purpose vehicle" (as defined under the listing rules of the Exchange (the Listing Rules)) plus £500 per tranche or class for a stand-alone issue plus an annual fee of £1,000 per tranche or class of debt securities listed);

  • recognised stock exchange status for "quoted Eurobond" and other purposes; and
  • a pragmatic approach to disclosure requirements.

Introduction

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 31 July 2014, there are over 2,300 listings on the Exchange.

The Exchange 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.

International recognition

In December 2002 the Channel Islands Stock Exchange (the CISX) was designated by the UK Inland Revenue as a recognised exchange under Section 841 of the UK Income and Corporation Taxes Act 1988 (ICTA). This designation was significant because qualifying debt securities listed on the CISX is eligible for the 'Quoted Eurobond Exemption'. This allows an issuer within the UK tax net to make payments of interest on listed securities gross without deduction for tax.

In addition, in December 2013, the Exchange:

  • was approved as an Affiliate Member of the International Organisation of Securities Commissions (IOSCO);
  • became an Associate Member of the International Capital Market Services Association (ICMSA); and
  • was officially recognised by the Australian Securities Exchange.

While complying with international standards for recognised stock exchanges, the CISE 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 Exchange has developed listing rules which place a premium on clarity and an appropriate level of corporate governance.

Unlike European stock exchanges, the Exchange is not bound by or subject to any European Union Directives and, as a result, is able to be considerably more flexible in its approach. The Exchange 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 Exchange for listing debt securities are competitive with other Eurobond exchanges based in the EU.

All Exchange listing and trading information can be accessed from the Exchange's dedicated pages via the Exchange's "Market Data Management Service" (MDMS) 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 MDMS Exchange and these prices are then disseminated to all Reuters users (access via Exchange'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 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 including director's declaration and director 'KYC'). 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.

The Exchange's approach to listing

The Exchange recognises that structured 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/or 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) which is therefore a relatively short form document.

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 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.

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.

General principles for listing 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;
  • the issuer is suitable for listing - this is also an assessment OCFL will make;
  • investors are given sufficient information to enable them to make an informed assessment of the issuer and the debt securities;
  • the issue and trading (if any) 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 Exchange 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 requirements apply to listing debt securities on the Exchange:

Rule 8.2.2 (Accounts): please see Schedule 2, part A for the Exchange's requirements in relation to accounts and possible waivers from such requirements.

Rule 8.2.3 (Clearing and Settlement): the debt securities to be listed must be eligible for deposit in a clearing and settlement system acceptable to the Exchange (such as Euroclear or Clearstream) or cash settlement via the sponsor. This requirement can usually be derogated from as debt securities notes are usually cleared through the issuer.

Rule 8.2.4 (Rights of Access to Information - Asset Backed Debt Securities): 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.

Rule 8.2.5 (Transferability): 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.

Rule 8.4.0 (Contents of Listing Documents): the Listing Document should contain the information referred to in Schedule 1 (or an appropriate derogation from such disclosure should be obtained).

Financial information

Please see Schedule 2, part B for the Exchange's requirements in relation to financial information.

The listing process

Stage 1: satisfying listing conditions (including the Exchange's 'KYC' requirements)

An issuer seeking a listing for debt securities on the Exchange must satisfy all the conditions for listing, including the provision of the following documents/information (amongst other things):

  • director's declarations, 10 year employment histories and verification of identity and residential address for each of the directors;
  • additional background information on the issuer and the transaction including for eg, a structure chart showing the issuer, its parent, the noteholder(s) and funds flow;
  • rationale for listing and who set up the structure; and
  • information on the noteholder(s).

The issuer's professional advisors and the listing sponsor to 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 sponsor, in conjunction with the issuer's professional advisors, will prepare drafts of the formal listing documentation for review and comment by the Exchange.

The application documents include the following:

  • formal application for listing;
  • sponsor's declaration;
  • listing undertaking;
  • issuer's declaration and undertaking to listing sponsor;
  • Listing Document, signed by or on behalf of all the directors of the issuer;
  • the document constituting the debt securities (for eg, the loan note instrument);
  • if necessary, application for derogation from any formal listing requirements;
  • formal listing notices setting out the material terms of the proposed issue;
  • certified true copies of the certificate of incorporation and memorandum and articles of association of the issuer (or equivalent constitutive documents);
  • certified true copies of the authorising resolutions; and
  • such additional documentation as may be required by the Exchange.

Stage 3: initial application

Once the application documents are in substantially agreed form and the documents and background information have been provided, the sponsor will make the initial application on behalf of the issuer. Once the Exchange has reviewed the initial application it will provide comments to the sponsor. The sponsor will then discuss the comments with the Exchange and amend the documents if necessary.

Please note that Exchange will not release its comments on the initial application until the Exchange's initial fee referred to below have 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 Official List of the Exchange.

Continuing obligations

Once a listing has occurred an issuer 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 more information on continuing obligations, please refer to our client briefing entitled "Channel Islands Securities Exchange Authority Limited (the Exchange): Continuing Obligations - Chapter 8 Special Categories of Securities".

Listing fees

The Exchange fees for the listing of debt securities under Chapter 8 of the Listing Rules are as follows:

  • £4,000 plus £500 per tranche (special purpose vehicles and asset-backed securities);
  • £5,000 plus £500 per tranche (individual corporate debt); and
  • an annual fee of £1,000 per tranche/class of debt securities.

The initial and first annual listing fees referred to above are payable in advance by the issuer.

An additional fee of £2,000 may be applied in more complex cases/applications.

The purpose of this briefing is to highlight the principal requirements and key issues to be considered when considering the listing of debt securities on the Exchange.

Services offered by Ogier Corporate Finance Limited/Ogier Legal

Ogier Corporate Finance Limited (OCFL) is a full listing member of the Exchange, wholly owned by Ogier Legal, and is able to act as a sponsor for listing purposes. It is the market leader in providing sponsor services on the Exchange.

Ogier Legal is experienced in the provision of high quality and cost effective professional legal 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 OCFL/Ogier Legal are available on request.

Client briefings on establishing special purpose vehicles and on other aspects of Channel Islands company law have been prepared by Ogier Legal and are available on request.

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 Legal.

Schedule 1

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 Exchange Listing Rules).

General information about the Issuer

Para. 1: the full name, registered number (where applicable) and registered office address of the issuer.

Para. 5: 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.

Para. 3: 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.

Para. 4: 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.

Para. 19: the full name and residential or business address of every director or proposed director.

Information relating to the preparation of the Listing Document

Para. 2: 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."

Para. 6: 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.

Para. 7: 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.

Information about the debt securities for which listing is sought

Para. 8: a statement that application has been made to the Exchange for the listing of, and permission to deal in, the debt securities.

Para. 9: a description of or the text of the terms and conditions of the issue containing:

  • 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;
  • a summary of the rights conferred upon holders of the debt securities and particulars of the security;
  • 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);
  • an indication of the conditions for changes in the interest rate;
  • details of the method of payment of the issue or offer price (as the case may be) including a description of any instalment arrangement;
  • 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;
  • details of the arrangements for the amortisation or early redemption of the issue, including procedures to be adopted;
  • the names and addresses of the paying agent(s) and any registrar and transfer agent(s) for the debt securities;
  • 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;
  • 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;
  • details of the following time limits:
    • 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;
    • the date from which interest accrues and the interest payment dates;
    • prescription period for claims for payment of Interest and repayment of principal;
    • 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; and
    • except in the case of a continuous issue, an indication of yield and a brief description of the method of calculation of the yield.

Para. 10: the following legal information:

  • the nature and scope of the guarantees, securities and commitments intended to ensure that the issue will be duly serviced with regard to both the principal of and the interest on the debt securities and an indication of the places where the public may have access to copies of such guarantees, securities and commitments;
  • details of the custodian, if any, fiscal agent or of any other representative for the debt securities holders as a whole, the name and function or description and head office of such representative of the debt securities holders, the conditions under which the representative may be replaced together with an indication of where the public may inspect copies of the documents detailing how the representative is to act;
  • a description of any subordination of the issue to any other debt of the issuer already incurred or expected to be incurred.
  • 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;
  • an indication of whether the debt securities are in registered or bearer form;
  • details of any legal restrictions on the free transferability of the debt securities; and
  • an indication of whether it is possible to split the debt securities.

Para. 11: details of any selling or marketing restrictions relevant to the debt securities.

Para. 12: the following additional information concerning the issue:

  • the method of payment of the issue or offer price;
  • except in the case of continuous issues, the period of the opening of the issue or offer and any possibilities of early closure; and
  • a reference, if necessary, to the fact that subscriptions may be reduced.

Para. 15: in respect of every company the whole, or a substantial proportion, of whose capital is held or intended to be held (either directly or indirectly) by the issuer, or whose profits or assets make or will make a contribution to the figure in the accountants' report or the next published accounts, particulars of the name, date and country of incorporation or other establishment, general nature of business, issued capital and the proportion of capital held or intended to be held.

We can often obtain a derogation from this requirement where there are a large number of indirect subsidiaries.

Documents for inspection

Para. 20: details of where annual or any interim reports are available and how often interim reports are published.

Para. 21:details of the location and where, for 14 days following a listing, the following documents may be inspected:

  • the memorandum and articles of association of the issuer (or equivalent constitutive documents);
  • any trust deed, fiscal agency agreement or other document constituting the debt securities;
  • 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;
  • 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
  • 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.

Para. 22: 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.

Rule 8.4.2: 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

Para. 13: 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:

  • the total number of equity securities subject to such rights;
  • the period during which such rights may be exercised and the date when these rights commence;
  • the amount payable on the exercise of such rights;
  • the arrangements for transfer or transmission of such rights;
  • the rights of the holders on liquidation of the issuer the equity securities of which are subject to such rights; and
  • 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.

Para. 14: 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.

Para. 1:

  • The geographical location or legal jurisdiction of the financial assets.
  • The pool size and any specified minimum or maximum.
  • The types of financial assets.
  • The maturity of financial assets.
  • The size of financial assets.
  • Where the financial assets in the pool are themselves secured or backed by other assets, if available, the loan to value ratio at origination.
  • The principal lending criteria and extent to which financial assets may be included which do not meet these criteria.
  • A description of any significant representations and warranties given to the issuer relating to the financial assets.
  • The method of origination.
  • Any collateral substitution rights.
  • Any rights or obligations to make further advances.
  • 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.

Para. 2: 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.

Para. 3: a description of the structure of the transaction and a full explanation of the flow of funds including:

  • 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;
  • the investment policy for the investment of any temporary fund surpluses;
  • how payments are collected from the borrowers of the financial assets in the pool;
  • the order of priority of payments made by the issuer (where relevant) to the holders of the class of debt securities in question;
  • any fees or other charges payable by the issuer out of cash flows received;
  • the details of any other arrangements upon which payments of interest and principal on the listed debt securities are dependent;
  • information on whether or not there is any intention to accumulate surpluses in the issuer; and
  • the details of any subordinated debt financing.

Para. 4: the name, address and brief description of any originator of the financial assets backing the issue.

Para. 5: 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.

Para. 6: 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.

Schedule 2

Part A

Rule 8.2.2 (Accounts)

Rule 8.2.2.1: except as provided in Listing Rule 8.2.2.2, an issuer of debt securities, which is not already listed on the Exchange, must have published audited accounts, that:

  • must cover at least three years and the period to which the accounts relate must not end more that 12 months prior to the date of the listing document;
  • are produced for the issuer and consolidated in respect of the applicant and all its subsidiaries. In exceptional circumstances, and upon application to the Exchange, an applicant may be relieved of the obligation to produce consolidated accounts (e.g. where consolidated accounts would be misleading for investors in relation to the securities for which listing is sought);
  • have been prepared in accordance with the applicant's national law and, in all material respects, with United Kingdom Accounting Standards, United States Accounting Standards or International Accounting Standards or other accounting standards acceptable to the Exchange;
  • have been independently audited in accordance with the auditing standards required in the United Kingdom or the United States or International Standards on Auditing Standards or other auditing standards acceptable to the Exchange; and
  • subject to Listing Rule 8.2.2.3, have been reported on by the auditors without qualification or modification.

Rule 8.2.2.2: in relation to Listing Rule 8.2.2.1 the Exchange may waive, in whole or in part, the requirement for three years of audited accounts:

  • if the Exchange is satisfied that the acceptance of accounts covering a shorter period is desirable in the interests of the new applicant or of investors and investors have the necessary information available to make an informed judgement concerning the new applicant and the securities for which listing is sought; or
  • where the issuer has been established for a period of less than three years but more than twelve months, in which case the audited accounts (if any) must cover the period since the issuer was established; or
  • where the issuer has been established for a period of less than twelve months, in which case the Exchange may instead require the publication of an audited six monthly statement where the issuer has undertaken any trading or significant transactions; or
  • where the issuer is exempted from publishing audited accounts under the law of the country of incorporation in which case unaudited financial statements of a quality acceptable to the Exchange must be submitted.

Rule 8.2.2.3: notwithstanding that an issuer's accounts are qualified or modified the issuer may still be suitable for listing if the qualification or modification does not relate to a matter of significance for investors. Any qualification or modification in the audited accounts in the previous three years of an applicant's operations should be brought to the attention of the Exchange. The Exchange will require to be satisfied that any such qualification has been suitably resolved and has no impact on the suitability of an applicant for listing.

Rule 8.2.2.4: the auditors must be independent of the applicant and comply with guidelines on independence issued by their relevant accounting body.

Rule 8.2.2.5: where an issuer is guaranteed the guarantor of the issuer must also provide copies of its latest independently audited accounts to the Exchange

Part B

Rule 8.5 (Financial Information)

Rule 8.5.1.1 provides that an issuer must issue an annual report and accounts and, as soon as practicable following the publication of the annual report and accounts, the issuer shall send one copy of the annual report and accounts to the Exchange and publish a copy on the Exchange's website or refer the Exchange to publicly available information placed on the internet.

Rule 8.5.1.2 provides that, unless the issuer is exempted from publishing audited accounts under the law of the country of incorporation or as otherwise agreed with the Exchange, the annual report and accounts must:

  • have been prepared in accordance with the issuer's relevant applicable law and, in all material respects, with United Kingdom Accounting Standards or United States Accounting Standards or IAS;
  • have been independently audited, and reported on, in accordance with the United Kingdom Auditing Standards, United States Auditing Standards or International Standards on Auditing;
  • be in respect of the issuer and be in consolidated form if the issuer has subsidiaries, unless the Exchange otherwise agrees; and
  • if they do not give a true and fair view of the state of affairs, profit or loss and cash flows of the issuer, provide more detailed and additional information