With effect from today, 15 January 2014 (Board Note 259 of 2013 as published in Government GazetteNo. 37162), the JSE Limited (the "JSE”) has amended its JSE Debt Listings Requirements (the “DLRs”). Although all issuers wishing to list debt securities on the JSE will now have to comply with the revised DLRs, the amendments made are largely formal with only a few substantive changes having been made to the requirements themselves. The update was necessitated by the promulgation of the Financial Markets Act, 2012 (the “FMA”) which replaced the Securities Services Act, 2004 (which regulated securities exchanges, central securities depositories, clearing houses and their respective members from 2005) (the “SSA”) in its entirety when it took effect on 3 June 2013. In addition to aligning the terminology used in the DLRs with that in the FMA, the JSE has used this opportunity to delete references to outdated legislation (such as the Companies Act, 1973, which was replaced by the Companies Act, 2008 (the “Companies Act”) in 2011) as well as to the erstwhile Bond Exchange of South Africa (or BESA) which ceased to exist when it merged with the JSE in 2009.
Noteworthy amendments to the substantive requirements include (i) the amendment of the definition of “Debt Listings Requirements” to clarify that section headings, paragraph headings and the introductory text to sections do not form part of the listing requirements and are not to be construed as affecting the substance or interpretation of the listing requirements; (ii) the amendment of section 1 (General Powers of the JSE) to specifically provide that the JSE has the power to refuse a listing of a debt security or the registration of a Programme Memorandum; (iii) the replacement of all references to “terminating” the listing of a debt security or Programme Memorandum with the term “removing” in line with the FMA (this change appears to have been made to clarify the fact that an issuer’s obligations under listed debt securities will continue (i.e. will not necessarily terminate) notwithstanding a decision by the JSE to remove such securities from the exchange); (vi) the revision of section 8.3(h) such that applicant issuers now need to submit confirmation from the central securities depository that they have been “authorised as a participant” (rather than simply “admitted”) in order to list debt securities; and (v) the revision of the censure and penalties provisions such that the JSE may now impose a fine not exceeding the amount stipulated in the FMA (the amount was previously capped in the DLRs at R5 million) and/or may issue any other penalty that is appropriate in the circumstances (where it was previously only permitted to order payment of compensation to any person prejudiced by a contravention of the DLRs). Rather than going to a fund established to further the objectives set out in the SSA, fines paid over to the JSE will now be appropriated, inter alia, to settle any future costs which the JSE may incur in enforcing the DLRs.
Sections 1.7 and 1.12 of the DLRs, which respectively deal with the representations an issuer may make when a listing of its debt securities is under threat of suspension or removal, have also been amended such that issuers are now required to make written representations as to why the suspension or removal, as the case may be, should not be effected, rather than in support of the continued listing of the debt security.
Previously the JSE was permitted to remove a listing if, inter alia, it was of the opinion that doing so would be in the public interest (a subjective yardstick). Section 1.11 of the DLRs has been amended to permit the JSE to remove a listing, inter alia, if doing so would further one or more of the objects contained in section 2 of the FMA (the promotion of a fair, efficient and transparent financial market, protection of regulated persons, clients and investors, reduction of systemic risk, promotion of the international and domestic competitiveness of the South African financial markets, etcetera), which objectives may also include being in the public interest.
Future amendments of the DLRs are now specifically regulated in new sections 1.30 and 1.31 of the DLRs. The new sections provide for a public consultation process whereby proposed amendments will be published on SENS for public comment for a month, whereafter the amendments, the reasons therefor and the concerns raised during the public consultation process will be submitted by the JSE to the Registrar of Securities Services for approval. Section 1.30 provides that “[s]ubject to the provisions of the FMA, the JSE may amend the Debt Listings Requirements through a public consultation process”, and it is therefore not clear whether following the public consultation process is mandatory, or rather one avenue by way of which the DLRs may be amended.
It is understood that further amendments to the DLRs are expected in the coming months to, inter alia, align the style and formatting of the DLRs with the JSE Listings Requirements, remove all references to private companies which, under the Companies Act, are no longer permitted to list their securities, and introduce new requirements for listings of debt securities by the South African Government.
Bulletin 1 of 2014 in which the amendments are set out can be accessed by clicking on the following link: please click here. A redline version of the DLRs which shows the amended text can be accessed by clicking on the following link: please click here.