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ICAS - AFin > Module 9 > Flashcards

Module 9 Flashcards

1
Q

Reasons for listing (2)

A
  • Free trading of shares

- Raise future finance

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2
Q

Alternative Investment Market AIM

A

LSE’s market for smaller, growing companies

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3
Q

AIM offers similar benefits to full listing without full burden of Main Market eg (3)

A
  • Companies do not need three-year track record
  • No requirement for 25% of shares to be in hands of general public
  • AIM has more flexible regulatory regime
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4
Q

AIM is seen as

A

Stepping stone to full listing on the main market

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5
Q

Main Market Abuse Regulation (MAR) requirements (4)

A
  • Additional rules around the disclosure of inside information
  • Extensive record keeping requirements
  • Maintenance of insider lists
  • Introduction of ‘closed period’ prior to financial statements issue during which directors cannot deal in shares
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6
Q

Standard listing only subject to

A

Minimum European requirements

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7
Q

Companies required to make clear whether

A

Premium or standard listing on Regulatory Information Services (RIS) announcements

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8
Q

Premium vs Standard listing > Able to appoint sponsor

A

Premium: Yes
Standard: No

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9
Q

Premium vs Standard listing > Applicable indices

A

Premium: FTSE UK series where eligible
Standard: None

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10
Q

Premium vs Standard listing > Audited historical financial information

A

Premium: Three years
Standard: Three years or as long as issuer has been in operation

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11
Q

Premium vs Standard listing > Three year trading record and control over majority of assets over three year period

A

Premium: Yes
Standard: No

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12
Q

Premium vs Standard listing > Corporate governance requirements

A

Premium: UK Corporate Governance Code
Standard: Corporate Governance statements

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13
Q

Premium vs Standard listing > Share dealing rules

A

Premium: Market Abuse Regulation
Standard: None

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14
Q

Premium vs Standard listing > Rules on significant transactions

A 
Premium: Yes - class test
Standard: No
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15
Q

Premium vs Standard listing > Related party transactions

A

Premium: Yes
Standard: No

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16
Q

Premium vs Standard listing > Shareholder approval required for transfer between listing categories/ cancellation of listing

A

Premium: Yes - 75% shareholder approval
Standard: No

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17
Q

Concerns of standard listing option (2)

A
  • Insufficient liquidity in the market for shares in companies with standard listings
  • Lower corporate governance requirements > more open to abuse
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18
Q

Types of companies who use standard listings (4)

A
  • UK incorporated acquisition vehicles
  • Companies that have moved from other markets
  • Companies that have stepped down from premium listing
  • Smaller, cost sensitive companies
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19
Q

To be able to list shares on the Main Market of the LSE, company must satisfy (2)

A
  • FCA Listing Rules - Admission to listing

- London Stock Exchange rules - Admission to trading

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20
Q

The Listing Rules are split into three

A
  • The Listing Rules
  • The Prospectus Rules
  • The Disclosure Rules
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21
Q

The Listing Rules contain

A

The eligibility criteria for listing, the duties of sponsors and continuing obligations of listed companies.

22
Q

Sponsor

A

Approved by the FCA, sponsor provides assistance and assurance in the process of listing a security

23
Q

Sponsor needed when (4)

A
  • Company seeks an initial premium listing on the Main Market
  • Premium listed company issues more shares
  • Class 1 or reverse takeover transaction takes place
  • Company enters into related party transaction
24
Q

Qualifications of the sponsor (3)

A
  • Must be on the FCA’s qualified list
  • Satisfy the FCA they are competent
  • Be independent of the company
25
Q

Responsibilities of the sponsor (5)

A
  • If sponsor resigns/ is dismissed, company must inform FCA immediately
  • Ensure necessary documents have been submitted to FCA
  • Independent expert
  • Notify FCA of all areas where rules have been breached
  • Specific assurances
26
Q

Conditions for listing - company (4)

A
  • Incorporated for both standard and premium listings
  • Published audited accounts which cover at least three years
  • Revenue generating business
  • Sufficient working capital for at least next 12 months
27
Q

Rules for premium listed companies with controlling shareholder (3)

A
  • Relationship management agreement be drawn up
  • Transactions between company and controlling shareholder must be at arm’s length
  • Robust disclosures to be made in the annual report
28
Q

Prospectus =

A

Formal disclosure document that provides details relating to a financial instrument that is being offered for sale to the public

29
Q

Prospectus must be published where

A

Company’s securities are admitted to an EU-regulated market

30
Q

Standard listing prospectus contains section explaining

A

Shareholders have a lower level of regulatory protection than premium listing

31
Q

Passport

A

If prospectus issues and approved by a member state of the EU, it can be taken to any other member state provided a summary statement in local language is supplied

32
Q

Director responsibilities > prospectus

A

Must sign certificate (makes them personally liable) confirming prospectus includes sufficient information such that investors can understand:

  • Issuers assets, liabilities, financial position and prospects
  • Rights attaching to the securities to which listing particulars relate
33
Q

Prospectus must contain (3)

A
  • Summary
  • Registration Document
  • Securities note
34
Q

Content of prospectus summary (8)

A
  • The persons responsible
  • Issuer and its capital
  • Risk factors
  • Group’s activities
  • Issuer’s assets, liabilities, financial position, profits and losses
  • Issuer’s management and board practices
  • Trend information
  • Related party transactions
35
Q

Persons responsible

A

Directors names, auditors, bankers, legal advisors, sponsor, reporting accountants, experts

36
Q

Issuer and its capital (5)

A
  • Registered office/ head office
  • Date and country of incorporation
  • Principle investments
  • Share capital
  • Material contracts
37
Q

Issuer’s assets, liabilities, financial position, profits and losses (3)

A
  • Accounting information for last three years
  • Disclosure of the total amount of loan capital, borrowings and contingent liabilities
  • Statement that group’s working capital is sufficient to meet present requirements
38
Q

Issuer’s management and board practices (3)

A
  • Full details of senior management
  • Names of audit and remuneration committee members
  • Statement of compliance with UK corporate governance requirements
39
Q

Long form report

A

Detailed report on the company’s past performance, current net asset position and the reliability of its forecasts

40
Q

Prospectus Rules > Profit forecast

A

Reporting accountant must report on forecast to confirm:

  • Presented on a basis consistent with the accounting policies of the entity
  • Properly compiled on basis stated
41
Q

Short form report required if (3)

A
  • Material change to the group structure or businesses during past three years/ since publication of most recent financial statements
  • Material change to company’s accounting policies
  • Qualified audit report or disclaimer during past three years
42
Q

The Disclosure rules apply to

A

Premium and standard listing on Main Market (Not AIM)

43
Q

Disclosure rules > inside information

A

Must be announced publicly and kept on company website for full year

44
Q

Ongoing obligations of listed company (4)

A
  • Interim accounts
  • Specific events
  • Transactions in shares (class test)
  • Related party transactions
45
Q

Exemption to related party transactions rule

A

Revenue transactions in the normal course of business

46
Q

Class 2 =

A

Any percentage ratio is 5% or more, but each is less than 25%

47
Q

Class 2 classification of transaction

A

Company must notify the RIS of full particulars

48
Q

Class 1 =

A

Any percentage ratio is 25% or more, but each is less than 100%

49
Q

Class 1 classification of transaction

A

Same as class 2, but must also obtain shareholder approval

50
Q

Reverse takeover =

A

Any percentage ratio is 100% or more or would result in fundamental change in the business

51
Q

Reverse takeover classification of transaction

A

Requirements same as for class 1 transaction. FCA and LSE will suspend the company’s listing and trading in their shares and the company will have to prepare a prospectus as if it were a new applicant

52
Q

Dark pool exchange

A

Private forum for trading shares (reduce market efficiency)

ICAS - AFin (21 decks)

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