ICAS - AFin > Module 9 > Flashcards

Module 9 Flashcards

(52 cards)

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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

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A

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

22
Q

Sponsor

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A

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

23
Q

Sponsor needed when (4)

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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)

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A
  • Must be on the FCA’s qualified list
  • Satisfy the FCA they are competent
  • Be independent of the company
25
Responsibilities of the sponsor (5)
- 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
Conditions for listing - company (4)
- 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
Rules for premium listed companies with controlling shareholder (3)
- 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
Prospectus =
Formal disclosure document that provides details relating to a financial instrument that is being offered for sale to the public
29
Prospectus must be published where
Company's securities are admitted to an EU-regulated market
30
Standard listing prospectus contains section explaining
Shareholders have a lower level of regulatory protection than premium listing
31
Passport
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
Director responsibilities > prospectus
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
Prospectus must contain (3)
- Summary - Registration Document - Securities note
34
Content of prospectus summary (8)
- 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
Persons responsible
Directors names, auditors, bankers, legal advisors, sponsor, reporting accountants, experts
36
Issuer and its capital (5)
- Registered office/ head office - Date and country of incorporation - Principle investments - Share capital - Material contracts
37
Issuer's assets, liabilities, financial position, profits and losses (3)
- 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
Issuer's management and board practices (3)
- Full details of senior management - Names of audit and remuneration committee members - Statement of compliance with UK corporate governance requirements
39
Long form report
Detailed report on the company's past performance, current net asset position and the reliability of its forecasts
40
Prospectus Rules > Profit forecast
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
Short form report required if (3)
- 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
The Disclosure rules apply to
Premium and standard listing on Main Market (Not AIM)
43
Disclosure rules > inside information
Must be announced publicly and kept on company website for full year
44
Ongoing obligations of listed company (4)
- Interim accounts - Specific events - Transactions in shares (class test) - Related party transactions
45
Exemption to related party transactions rule
Revenue transactions in the normal course of business
46
Class 2 =
Any percentage ratio is 5% or more, but each is less than 25%
47
Class 2 classification of transaction
Company must notify the RIS of full particulars
48
Class 1 =
Any percentage ratio is 25% or more, but each is less than 100%
49
Class 1 classification of transaction
Same as class 2, but must also obtain shareholder approval
50
Reverse takeover =
Any percentage ratio is 100% or more or would result in fundamental change in the business
51
Reverse takeover classification of transaction
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
Dark pool exchange
Private forum for trading shares (reduce market efficiency)
ICAS - AFin
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