posted 10 Aug 2007 in Volume 10 Issue 3

The growing attraction of the CISX

By Andrew Weaver, partner, Appleby Group

The Channel Islands Stock Exchange (CISX) provides recognised facilities for listing and trading of debt instruments and securities issued by companies and other forms of investment vehicles. Operating since 1998, it was developed to compliment the corporate services provided by local finance businesses, allowing these to diversify and create a market for local and international trading companies, investment funds and debt securities.

The CISX’s structure and approach are unique within the Euro zone. As such, there is a clear differentiation between this and other regulated and non-regulated exchanges in Europe. Its efficient
and personalised approach continues to attract new issuers and promoters, and it has listed over 2,000 securities since 1998. Special-listing procedures have been put in place to address the needs of fund promoters and participants in the international debt market, enabling a speedy and efficient listing service.

The instruments that can be listed include:

Shares, units or other interests in investment funds;
Debt instruments;
Equities;
Warrants;
Depository receipts.

In addition to the competitively-low listing fees, further cost savings may arise as, under the Listing Rules of the CISX, existing documentation can be utilised to form part of the listing document. Furthermore, being outside the EU, the impact of the Prospectus Directive is minimised.

The Listing Rules are easy to understand and, in keeping with the existing high standards that have been imposed by the CISX’s regulatory authority, comply with international standards. Market data and prices are distributed worldwide through the CISX’s Reuters pages.

International recognition

The CISX continues to attract international recognition.

The CISX has been approved by the UK’s Financial Services Authority (FSA) as a designated investment exchange. Many potential investors recognise this as a seal of approval from the FSA as to the effectiveness of the CISX’s rules and its internal regulatory environment, as well as the operation of the CISX; supervision; membership; price information; and clearing and compliance arrangements.

As a designated investment exchange, FSA-authorised firms are allowed to treat transactions on the CISX in much the same way as if they were trading on the UK’s recognised investment exchanges.

As a consequence, investment by an FSA firm in a CISX-listed security will now incur a significantly lower-position risk requirement, which in turn reduces overall transaction costs.

On 10 December 2002, the UK Inland Revenue designated the CISX as a Recognised Stock Exchange under Section 841 of the Income and Corporation Taxes Act (1988) (ICTA). Shares listed on the CISX are therefore “qualifying investments” within an ISA, PEP or SIPP and, as a result, an increasing number of closed-ended funds are listed on the CISX.

The tax treatment of Eurobonds is also positively enhanced by the CISX’s status as a Recognised Stock Exchange under ICTA. Interest paid on a qualifying quoted Eurobond does not have to be withheld for tax purposes if it is listed on the CISX.

The listing process for specialised debt securities

The CISX approaches the listing of SPVs in a very pragmatic way and treats such securities as being targeted at sophisticated investors. There are certain minimum conditions to be met such as transferability; however, the CISX is not prescriptive with respect to the Listing Document.

The CISX has developed a fast track ‘equivalence approach’ into the processing of applications for specialist securities. This means an application may be processed on the understanding that the security to be listed has the associated documentation prepared under the relevant guidelines of a jurisdiction of a stock exchange recognised by the CISX and that there has been no material change in the information originally contained within the documents to be submitted.

EU Prospectus Directive

Since the introduction of the EU Prospectus Directive, the listing of convertible securities, preference shares and ABS securities on European exchanges have been subject to a less flexible disclosure and approval regime. The CISX is not subject to the EU Prospectus Directive and so it remains possible to list such securities on the CISX and fall within marketing exemptions under the Prospectus Directive, thereby achieving the tax and marketing benefit of a listing on an internationally-recognised exchange without over burdensome and bureaucratic compliance requirements.

Appleby

Appleby Securities (Jersey) Limited is a full listing member of the CISX, wholly owned by the Appleby Group, and can act as a sponsor for listing purposes. Appleby Securities (Jersey) Limited working together with Appleby law firm are able to provide high-quality and cost-effective professional services in all aspects of structuring and documenting debt and equity issues, from initial inception to public offerings and listings.

Notes
This publication is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice.

Andrew Weaver is a partner within the corporate & commercial group in Jersey. He can be contacted by telephone on +44 (0)1534 818 230 or at aweaver@applebyglobal.com