International Listing – Corporate Funding and Listings in Stock Exchanges Important Questions
Question 1.
Write down the criteria to get listed on Singapore Exchange Ltd. (SGX).
Answer:
The criteria for getting listed on Singapore Exchange Ltd. (SGX) main board are as follows:
1. Meeting With Accredited Issue Managers: Meeting with accredited Issue Managers for the purpose of sharing company’s plans and learn how to get listed.
2. Appoint An Accredited Issue Manager The Issue Manager will manage the listing application of the company (including recommendations on the appointment of other professionals required).
3. Assessment Period:
- Issue Manager work closely with the company to decide on a suitable structure and method of offering of your company’s securities.
- Issue Manager will guide you in preparing the listing application of company.
4. Stage 1: Submission of Section (A) of the Listing Ad-missions Pack :
- The preparation for the listing application begins.
- At this stage, the company may want to familiarise yourself with the Mainboard Rules available online.
5. Stage 2: Submission of Section (B) of the Listing Ad-missions Pack:
After SGX has informed the Issue Manager that it may proceed with Stage 2 of the application, the Issue Manager can submit Section (B) of the Listing Admissions Pack together with the full listing application (including the relevant undertakings and confirmations required under the Mainboard Listing Manual and the prospectus /shareholders’ circular).
Time Frame for Response: SGX is committed to provide response within four weeks from the commencement of Stage 2.
6. Approval: Validity of ETL Letter: Once the submission is approved, SGX will issue an ETL letter which is valid for three months.
7. Lodgement of Documents & Public Exposure: The company can now lodge the preliminary prospectus on
- MAS website, the Offers and
- Prospectuses Electronic Repository and Access (OPERA) for public feedback for at least a week.
8. Registration of Documents & Launch of Offer (IPO): The company can now register the final prospectus on OPERA pending public feedback or changes and approval from MAS.
9. Confirmation of Allotment & Trading Commences:
- After closure of Offer Period: Allocation of the subscriptions will commence and company’s securities will be allotted and credited to successful investors.
- Welcome Ceremony: A welcome ceremony will be held at SGX to commemorate the listing of company’s securities, culminating in a countdown to the first trades of company’s securities
Question 2.
Briefly explain the concept of market segmentation.
Answer:
- In simple language, “Market segmentation” is the practice of dividing a large market into segments with similar needs.
- International listing enables firms to divide foreign investor markets into segments which are easy to access.
- Companies seek to list internationally because they anticipate gaining from a lower cost of capital because of greater availability of their stocks to foreign investors as well as accessibility to these stocks may be restricted due to international investment barrier.
- The market Segmentation facilitates firms to bifurcate the different foreign investor markets into segments for easy accessibility resulting in fetching investors providing capital at the lower cost in comparison to domestic market.
- The concept of “Market Segmentation” plays an important role in segregation of large market into small parts having similar require-ments/needs.
Question 3.
Explain briefly the Professional Securities Market and the provisions relating to listing of Depository Receipts thereon.
Answer:
Professional Securities Market (PSM):
- Professional Securities Market is an innovative, specialised market designed to suit the specific needs of issuers.
- Professional Securities Market facilitates the raising of capital through the issue of specialist debt securities or depositary receipts (DRs) to professional investors.
- Professional Securities Market enables issuers to enjoy the benefits of a flexible and pragmatic approach to regulatory requirements.
Provisions relating to Listing of Depository Receipts on PSM:
- Depository Receipts are typically held in US dollars.
- Depository Receipts issued by a depository bank.
- Several forms of Depository Receipts can be listed and traded in London including Global Depositary Receipts (GDRs) and American Depository Receipts (ADRs).
The admission of Depository Receipts to the PSM involves a two-step simultaneous process:
A company submits its ‘Listing Particulars’ to the UK Listing Authority while also applying to the Exchange for admission of its Depository Receipts to trading on PSM i.e. creation of trading platform.
Trading platform: All DRs admitted to the PSM are traded on the International Order Book (IOB), the world’s leading electronic order book for DRs.
Question 4.
Explain the requirements and process for listing of Shares/GDRs on the Euro MTF.
Answer:
Listing Requirements: In order to list on the Euro MTF, a security must fulfil the following criteria among other things:
- Minimum capital of € 1,000,000 or equivalent value in other currencies.
- Minimum public free float of 25%
- Securities should be eligible for clearing and settlement.
- Securities should be freely negotiable and fungible.
Listing Process:
File a prospectus: To begin the listing process, the following documents to be sent to LuxSE:
- A copy of your prospectus.
- Application form.
- Undertaking letter.
- Articles of association.
- Existing agreements/conventions.
- The last three annual financial reports (if published).
Prospectus Review: A first set of comments on a complete draft prospectus will be sent to you within a maximum period of three business days from the date of receipt of the filed application. Additional comments following submission of an updated draft prospectus will be provided within a maximum of two business days after submission.
Final submission: Listing can take place after receipt of the following items:
- Final version of the prospectus.
- First listing price.
Fees:
- All fees are to be paid to Luxembourg Stock Exchange (LuxSE) and are priced in Euros.
- The fee structure will vary depending on whether or not you are a “recently established company”, i e. a company that has not published or registered annual accounts for the three previous financial years.
Continuing Obligations:
After listing and admission to trading, issuers must fulfil specific reporting obligations.
For example, issuers must file information and scheduled corporate events with LuxSE.
LEI Code: The LuxSE is obliged to collect a ‘Legal Entity Identifier’ (LEI) code from any issuer operating on its regulated market (Bourse de Luxembourg) and on its Multilateral Trading Facility (Euro MTF) and communicate it to the relevant supervisory authorities.
Question5.
Bring out the differences between Bourse de Luxembourg (BdL Market) and Euro MTF Market.
Answer:
Following are difference between Bourse de Luxembourg (BdL Mar-ket) and Euro MTF Market:
Question 6.
Explain the role of “Nomads.”
Answer:
“Nomads” are corporate finance advisers approved by the London Stock Exchange to act in this capacity.
To obtain approval as Nomad, a firm must meet the eligibility criteria set out in the Alternative Investment Market (AIM) Rules for Nominated Advisers.
“Nomad” is responsible for
- advising and guiding a company on its responsibilities in relation to its admission to Alternative Investment Market (AIM).
- its continuing obligations once on market.
To accomplish this role, the “Nomad” will:
- Undertake extensive due diligence to ensure a company is suitable for Alternative Investment Market (AIM).
- Provide guidance throughout the flotation process.
- Prepare the company for being on a public market.
- Help prepare the Alternative Investment Market (AIM) admission document.
- a Confirm appropriateness of the company to the Exchange.
- a Act as the primary regulator throughout a company’s time on Alternative Investment Market (AIM).
The Nominated Adviser (Nomad), broker and other advisers play a central role in a company’s admission to Alternative Investment Market (AIM). It is important that a company is confident that it can establish a good working relationship with the appointed Nomad as they will be working closely together at admission and on an ongoing basis.
Question 7.
Explain the benefits to a company from listing its security on an international stock exchange.
Answer:
Following are the benefits to a company from listing its security on an International Stock Exchange as discussed below:
1. Increased Market Liquidity: Cross-border listing enables companies to trade its shares in numerous time zones and multiple currencies results in increase in issuing company’s liquidity and develop more ability to raise capital.
2. Market Segmentation: Market segmentation is the practice of dividing a large market into clear segments with similar needs. International listing enables firms to divide foreign investor markets into segments which are easy to access.
3. Capital needs and growth opportunities: Companies in emerging markets need to use international listing to raise capital to continue to grow beyond their home market.
4. Wider share-holder base :
- International listing provides access to a larger pool of potential investors (both retail and institutional).
- Wider shareholder base are less risky.
5. Secure Clearing: A stock exchange provides a reliable and secure clearing mechanism. Listing on a foreign stock exchange is possible only after creating robust and advance clearing system.
6. Better Investor Protection:
- Companies need to comply with the provisions of all the regulatory aspects of the listing of those countries where sought to be listed.
- In nutshell, Investors will find themselves more protected and comfortable to invest in these companies.
Question 8.
Discuss two listing processes at Singapore Exchange Limited (SGX)?
Answer:
Following are two listing processes at Singapore Exchange Limited (SGX):
1. Mainboard Listing Process:
- Mainboard Listing process caters to the needs of established enterprises.
- Mainboard Listed companies enjoy the prestige of an established market place and access to the widest range of institutional and retail investors.
2. Catalist Listing Process:
- Catalist Listing process caters to the needs of fast-growing enterprises.
- Companies seeking a primary listing on the Catalist must be brought to list by authorised sponsors via an Initial Public Offering (IPO) and reverse takeover.
Note: There are various conditions in respect of Market Capitalisation, Pre-tax profit, Offer size, Public float etc. which need to be fulfilled by the company desirous to listed at SGX.
Question 9.
What are four segments that cater for a range of businesses and securities in the main market of London Stock Exchange?
Answer:
The Main Market has four segments that cater for a range of businesses | and securities:
1. Standard: Subject to EU minimum standards and part of the Official List open to shares and debt securities.
2. Specialist Fund Segment: Specialist Fund Segment designed for highly specialised investment entities that wish to target institutional, highly knowledgeable investors or professionally advised investors only.
3. Premium:
- The Part of the FCA’s (Financial Conduct Authority’s) is a financial regulatory body in the United Kingdom) Official List.
- This segment is home to some of the world’s largest corporations that are subj ect to the highest standards of regulation and governance.
4. High Growth Segment: High Growth segment is designed for equity securities of high growth, revenue generating businesses that are over time seeking to become Premium listed companies.
Question 10.
Write Short note on: “Professional Securities Market (PSM)”.
Answer:
“Professional Securities Market (PSM)”:
- Professional Securities Market (PSM) is an innovative and specialised market designed to suit the specific needs of issuers.
- Professional Securities Market (PSM) facilitates the raising of capital through the issue of specialist debt securities or depositary receipts (DRs) to professional investors.
- Professional Securities Market (PSM) help companies to raise capital without the additional cost of following a retail equity regime.
- Professional Securities Market (PSM) enables issuers to enjoy the benefits of a flexible and pragmatic approach to regulatory require-ments, as a listed exchange-regulated market.
Question 11.
List the laws that govern the Securities Industry in US.
Answer:
Following are list of laws governing the Securities Industry in US
- Securities Act of 1933.
- Securities Exchange Act of 1934.
- Trust Indenture Act of 1939.
- Investment Company Act of 1940.
- Investment Advisers Act of 1940.
- Sarbanes-Oxley Act of 2002.
- Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
- Jumpstart Our Business Start-ups Act of 2012.
- Rules and Regulations.
Question 12.
Write Short Note On: “US Securities and Exchange Commission”.
Answer:
“US Securities and Exchange Commission”:
- The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.
- SEC oversees the key participants in the securities world, including securities exchanges, securities brokers and dealers, investment advisors, and mutual funds.
- SEC is concerned primarily with promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud.
- The Chairman of the SEC represents the agency as a member of the Financial Stability Oversight Council (FSOC).
- SEC requires public companies to disclose meaningful financial and other information to the public.
- SEC works closely with many other institutions including Congress,
other federal departments and agencies, the self-regulatory organizations, state securities regulators, and various private sector organizations.