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Company Compliance and Administration - CGI Qualifying Programme > 8. Securities Exchange listing regime > Flashcards

8. Securities Exchange listing regime Flashcards

1
Q

Which organisation is a “competent authority” and what are its powers?

A

FCA is the competent authority. It exercises its power under 3 EU directives (Prospectus Directive, Transparency Directive and Disclosure and Transparency Rules), MAR and FSMA 2000 (LR, Prospectus rules and DTR).
FCA establishes listing rules for admission of securities to listing, the continuing obligation of issuers of the securities and the enforcement of the continuing obligations.

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2
Q

What are the Listing criteria applicable to standard and premium listings?

A

Transferability - shares must be fully paid and freely transferrable (both premium and standard)
Market capitalisation on listing - minimum capitalisation of $700,000 - (both premium and standard)
Prospectus or listing particulars required - these must be approved by FCA and FSMA (both premium and standard)
Financial information to be provided in prospectus - Premium listing - Must have published or filed accounts that cover at least the last 3 years, ending no more than 6 months before the date of prospectus, having been independently audited and reported by auditors (unmodified). Standard listing - audited info that cover the last 2 fin years and audit report for each year.
Trading record requirement - At least 75% of the business must be supported by historic revenue earning record, covering the period for which the audited accounts are required. SL - No trading record requirement
Control of assets requirement - Premium listing - The issuer must control the majority of its assets (at least for the period for which audited accounts are required. Standard listing - No control of assets requirement
Independent business requirement - PL - The issuer must carry on an independent business. SL - A listed co must carry on an independent business at all times.
Controlling shareholder - The issuer must demonstrate that it can carry on an independent business as its main activity.

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3
Q

What is transferability in listing criteria requirement?

A

Shares must be fully paid and freely transferrable (both premium and standard)

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4
Q

What is the requirement for market capitalisation on listing?

A

Minimum capitalisation is $700,000 (both premium and standard)

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5
Q

What is Prospectus and listing particulars requirement?

A

The Prospectus or listing particulars must be approved by FCA and FSMA

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6
Q

What financial information is be provided in prospectus/listing document?

A

Premium listing - Must have published or filed accounts that cover at least the last 3 years, ending no more than 6 months before the date of prospectus, having been independently audited and reported by auditors (unmodified).
Standard listing - audited info that cover the last 2 fin years and audit report for each year.

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7
Q

What is Trading record requirement?

A

Premium listing - At least 75% of the business must be supported by historic revenue earning record, covering the period for which the audited accounts are required.
Standard listing - no trading record requirement

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8
Q

What is Control of assets requirement?

A

Premium listing - The issuer must control the majority of its assets and have done so for at least for the period of for which audited accounts are required.
Standard listing - No control of assets requirement

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9
Q

What is Independent business requirement?

A

Premium listing - The issuer must carry on an independent business as its main activity
Standard listing - A listed co must carry on an independent business at all times

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10
Q

What is Controlling shareholder criteria?

A

The issuer with a controlling shareholder must demonstrate that it can carry on an independent business as its main activity and must have a controlling shareholder agreement in place

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11
Q

What is Control of business criteria?

A

The issuer must demonstrate that it exercises operational control over the business it carries out as its main activity

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12
Q

What is Working capital statement criteria?

A

Clean working capital statement requirement

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13
Q

Which is Constitution criteria to provide for pre-emption rights?

A

Premium listing - Shareholders must have pre-emption rights

Standard listing - No pre-emp right requirement

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14
Q

What is Restriction on amount of warrants or options criteria?

A

Warrants or options to subscribe for equity shares must not exceed 20% of the issued equity share cap at the time of issue of the warrants or options, excluding employee share schemes

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15
Q

What is Free float requirement criteria?

A

25% minimum free float for each class of shares

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16
Q

What is Adviser requirement?

A

Premium listing - advisor required

Standard listing - no advisor requirement

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17
Q

Listing process - which documents need to be submitted to the issuer management team at the FCA?

A

Application for Admission of Securities to the Official List;
One of:
- prospectus or listing particulars approved by the FCA;
- prospectus approved by another EAA state;
- a circular published in connection with the
application;
- supplemental prospectus or supplemental listing
particulars.
Written confirmation of the number of shares to be allotted;
If a prospectus or listing particular are not required, a copy of announcement detailing the number of shares to be issued and circumstances of their issue.

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18
Q

Listing process - what documents are required to be submitted on the day of the application hearing?

A 
Shareholder statement if the class of shares is to be listed for the first time, or
Completed pricing statement where an issue of new shares comprising a placing, open offer, vendor consideration placing, offer for subscription or an issue out of treasury.
19
Q

What types of public issue are known by which securities may be floated?

A 
Capitalisation issues
Exchange and conversions
Exercise of options or warrants
Intermediaries offers
Introductions
Offers for sale of subscription
Open offers
Placings
Rights issue
Vendor consideration issues
Other issues
Underwriting
20
Q

What is a listed company?

A

A company whose shares have been admitted to the Official list, maintained by the FCA/admitted to trading on a public market

21
Q

What is a premium listed company?

A

Premium listed company = for equity shares issued by trading companies and investment entities. Companies with a premium listing are required to meet the UK highest standards of regulation and corporate governance, which are higher than the EU standards.

Premium listing – available for companies that meeting the full requirements set out in the Listing Rules for a premium listing.

22
Q

What is a standard listed company?

A

The Standard segment is open to issuance of equity shares, GDR, debt securities that are required to meet EU minimum requirements.

23
Q

What are the general listing principles applicable to all listed companies

A

2 principles applicable to all companies:

  1. An LC must have adequate procedures, systems and controls to comply with its obligations
  2. An LC must deal with the FCA in an open and cooperative manner
24
Q

What are the additional principles applicable to premium listed companies only?

A

6 principles appliable to premium listed companies only

The Directors of a PLC must understand their responsibilities and obligations

A PLC must act with integrity towards holders and potential holders of securities

All equity shares carry an equal no of votes on any shareholder vote

Aggregate voting rights of the securities in each voting class should be proportionate to the relative interests of those classes in the company’s equity

A PLC must treat all holders of securities equally in terms of their rights

A PLC must avoid the creation of continuation of a false market in premium listed securities and listed equity shares

25
Q

What are the two market functions provided by the London Stock Exchange?

A

Primary market – to raise capital

Secondary market – for investors to buy and sell shares

26
Q

Why are applications to both the UKLA and LSE required to list on the Main Market?

A

Applications for listing are made to the UKLA

Admission for trading is made to the LSE

The main market is the only market where listed shares can be admitted and traded.

27
Q

What is regulated activity?

A

Regulated activities are defined in FSMA2000 and include giving any form of investment promotion and advice and investment management, as well as undertaking securities transactions as broker/dealer and/or principal.

28
Q

Types of public issue

A

Capitalisation – where shares are allotted free of charge to existing shareholders

Exchanges and conversions – existing securities can be exchanged or converted into new securities

Introductions – when existing securities are listed for the first time

Exercise of options or warrants – some securities carry rights/options for further securities e.g. employee share schemes have options

Offers for sale or subscription – when the securities are issued directly to the applicant. An offer for sale relates to new or existing securities that are first acquired by an issuing house that then offers them to the public. An offer for subscription – new securities issued directly by the company to the applicants.

Open offers – same as a rights issue, but the benefit of the right is not permitted to be traded. Allows existing shareholders to access shares

Rights issue – new shares are offered to existing shareholders in proportion to the no of share they already hold (pre-emption rights)

Placings – where securities are purchased by stock brokers or an issuing house and “placed” with investment clients with a proportion being sold through the market

Vendor consideration issues – a company that acquires a business may issue securities to the vendor instead of or in addition to cash.

Other issues – this relates to securities issued in other ways e.g. through employee share schemes

29
Q

What is a Prospectus and what is required for its approval?

A

A prospectus is a legal document for the public describing the company’s securities that are to be traded, invitation to the public to subscribe for purchase of company’s shares or debentures.

30
Q

Describe listing process

A

Final version of the application must be submitted 48 hours prior to proposed listing date.
2 business days prior to application date the following must be submitted:
1. Application for Admission of Securities to the Official List.
2. One of:
- listing particular
-approved prospectus
-circular
-supplemental prospectus.
3. Written confirmation of the number of shares to be allotted
On the day of the announcement:
- Shareholder statement if the class of shares is to be listed for the first time;
- Completed pricing statement where an issue of new shares comprising a placing, open offer, vendor consideration placing, offer for subscription or an issue out of treasury.

31
Q

Prospectus Rules

A

PR derive form EU law and implement Prospectus Directive.
PR came into force in 2005, cover the format and detailed content of the prospectus, its period of validity and a manner in which it should be published.
PR reinforce the rule, that offer of securities to the public cannot be made unless prospectus has been prepared , approved by the FCA and published.

32
Q

What is an offer to the public?

A

Under the Prospectus Rules, there is an offer to the public if there is a communication to any person on the transferable securities to be offered and on the terms on which they are offered to enable an investor to decide to buy or subscribe for the securities.
The communication can be in any form, and includes placing through intermediaries.

33
Q

Exemptions to publish under the prospectus regime:

A

Offers to under 150 people;
Offers to qualified investors only (institutions)
Offers to persons outside UK
Minimum subscription offer is at least 100,000 euros
Where the denomination is at least 100,000 euros
Offers under 8mln in any period of 12 months.

34
Q

Prospectus contents

A 
Either a single doc, or three part prospectus, containing:
details of the issuer,, a securities note containing details of the shares being offered and a summary of the document. 
Contents must be verified, directors are personally liable for false or misleading info. 
Contents:
table of contents
1. summary (health warning) - key information:
 (5 mandatory sections):
introduction and warnings
issuer and guarator
securities
risks
other
2. Specific info on the issuer: (registration documents)
details of who is responsible for the doc
business overview
property plant and equipment
operating and financial review
capital resources
employees, major shareholders
related party transactions
fin info covering the three previous fin years
RD, patent and licences
3. Share security note
risk factors specific to the securities
working capital statement
reasons for offer
details of securities 
terms and conditions
dilution
35
Q

What does the MAR set out?

A

Disclosure regime for listed companies

36
Q

What is one of the main Listing Principles?

A

All listed companies are required to ensure that they have adequate procedures, systems and controls to enable them to comply with their obligations.

37
Q

What additional reporting, disclosure and other obligations do the listed companies have under the Act, LR, DTR and MAR?

A
  1. Financial (annual report, directors report, auditors report, rem report, dividends, fin statements)
  2. Issue of securities (new securities/emp share plans -
    block listing - every 6 months,
  3. Constitutional changes - appointment, resignation and removal of directors or auditors; change of co name; results of resolutions at the members’ meeting; any material change to the Co tradig process
  4. Disclosure of insider info (publish as soon as possible, keep for 5 years;
  5. PDMR/PCA dealing
  6. Major shareholder dealing disclosure requirements
38
Q

In which cases disclosure of II may be delayed?

A
  • Immediate disclosure is likely to prejudice the co’s legitimate interests;
  • Delayed dislosure is unlikely to mislead the public;
  • The Co can ensure that the info remains confidential until it is disclosed.
39
Q

What is inside information

A

Information that is precise, has not been made public, relates directly or indirectly to the co and if made public is likely to have significant effect on the share price.

40
Q

How should a Co control inside information?

A

Co should have a framework to for the control of inside info. maintain insider list, which can be deal specific or event based and may have a DPMR list and must be retained for 5 years.
Insiders must acknowledge in writing their legal and regulatory duties;
There must be a Disclosure Co

41
Q

Disclosure of PDMR share transactions

A

Under MAR19, PDMRs are required to notify any transactions in shares: notify company and FCA.
Via prescribed template on FCA website.
* within 3 working days
*by the PDMR or PCA to the company and the FCA;
*the Co to the market via RIS
Co must wrte to PDMRs to notify of their obligations, keep a PDMR list;
PDMR must notify their PCA in writing, keep notification
- Notifications must be made if the aggregate of all transactions in a calendar year exceeds 5.000 euros, however notifications for transactions below this liit can still be made on voluntary basis.

42
Q

Major shareholders dealing requirement

A

This is set out in DTR 5, the general principle of which is to identify who is controlling the way in which voting rights are exercised and to disclose this to the market
Notification threshholds:

43
Q

Major shareholders dealing requirement

A

This is set out in DTR 5, the general principle of which is to identify who is controlling the way in which voting rights are exercised and to disclose this to the market
Notification thresholds:

44
Q

What notification thresholds are there for major shareholders?

A

If the percentage of voting rights (held directly or indirectly) reaches, exceeds of falls below:

  • 3,4,5,6,7,8,9 and over 10% abd each 1% thereafter (UK issuers)
  • 5,10,15,20,25,30,50 and 75% (for non-UK issuer)

Company Compliance and Administration - CGI Qualifying Programme (16 decks)

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