Module 7 The Stock Exchange

Question 1

4 Reasons for joining a stock exchange

Answer 1

• Rasing finance
• Enhanced status
• Higher profile
• Exit route

Question 2

4 disadvantages of joining a stock exchange

Answer 2

• Cost
• Public scrutiny
• Dilution
• Ongoing responsibilities

Question 3

Main Market - Premium listing

Answer 3

• Open to equity securities only
• Most stringent rules

Question 4

Main Market - Standard listing

Answer 4

• Both equity and debt securities can be listed
• EU minimum requirement

Question 5

Main Market - High growth segment

Answer 5

• Fast-growing revenue-generating business
• Looking to progress to premium listing

Question 6

Main Market - Specialist fund segment

Answer 6

• Highly specialised investment entities
• Targeting insitutional or highly knowledgeable investors

Question 7

Alternative investment market

Answer 7

• For small young and growing companies
• Est. June 1995
• Allows businesses to raise equity finance with less strict rules than main market
• Steppingstone for some companies
• Other companies remain because it is cheaper

Question 8

What is NOMAD?

Answer 8

• Required for listing on AIM
• Responsible for advising company on listing and continuing obligations
• Investment banks, corporate finance or accountancy firms approved by LSE

Question 9

NOMAD’s Roles

Answer 9

• Carry out due diligence, are company directors suitable for AIM listing
• Preperation of documents for listing
• Ensure company understands the rules
• Provide corporate finance advice

Question 10

Entry Requirements

Main Market: Premium Listing

Answer 10

• Sponsor at admission
• 25% minimum share held by public
• £700,000 minimum market capitalisation of equity issue
• 3 Years audited financial statments

Question 11

Entry Requirements

Main Market: Standard Listing

Answer 11

• 25% minimum share held by public
• £700,000 minimum market capitalisation of equity issue
• 3 Years audited financial statments

Question 12

Entry Requirements

AIM

Answer 12

• Nominated advisor at all times (NOMAD)

Question 13

Premium listing Admission

Answer 13

• Prospectus prepared
• FCA Listing rules met

Question 14

Standard listing Admission

Answer 14

• Prospectus prepared

Question 15

AIM listing Admission

Answer 15

• NOMAD declares suitability

Question 16

Premium Listing Trading

Answer 16

• Signigicant transactions - class tests per listing rules
• Indices - FTSE UK series

Question 17

AIM Listing Trading

Answer 17

• Significant transactions - Class test per AIM rules
• Indices - FTSE AIM series

Question 18

Premium listing ongoing obligations

Answer 18

• UK corporate governance code
• Disclosure and transparency rules
• 75% shareholder approval cancellation

Question 19

Standard listing ongoing obligations

Answer 19

• Corporate governance statement
• Disclosure and transparency rules
• No shareholder approval for cancellation

Question 20

AIM listing ongoing obligations

Answer 20

• Guidance from NOMAD
• AIM rules
• 75% shareholder approval cancellation

Question 21

A prospectus must contain

Answer 21

• A registration document containing the detailed information on the issue
• • A securities note containing a description of the securities for which listing is being sought
• • A summary detailing the directors, advisers, key financial information, reasons for the offer, risks and prospect

Question 22

The sponsor will ask the reporting accountant for what duing a premium listing?

Answer 22

long form report but it is not a requirement

Question 23

typical long-form report

Answer 23

• Company history and business
• Summary of past results
• Net asset position
• Future prospects
• Major functional areas of management
• Management structure and remuneration policies
• Quality of the company’s financial and management accounting information systems

Question 24

FCA Company Requirement for listing

Answer 24

• must be a public limited company
• must have published accounts for the past three years
• revenue generating company with sufficient working capital for at least the next 12 months

Question 25

FCA requirements for the securities becoming listed

Answer 25

• The whole class of securities must be listed and admitted to trading
• Shares must be freely transferable
• The market capitalisation of shares issued must exceed £700,000 (£200,000 for debt)
• At least 25% of the shares must be in public hands
• Warrants or options to subscribe for shares must not exceed 20% of the issued equity
• Convertible securities must be convertible into securities which are listed or capable or being listed
• Shares must be eligible for electronic settlement

Question 26

FCA contiuing obligations

Answer 26

• Listed companies are required to publish both annual and half-yearly financial statements each year
• Transactions between the company and a related party. Related parties include directors and shareholders who own or control more than 10% of the company’s votes
• Transactions in shares (such as takeovers).