Listing on the Irish Stock Exchange
The primary reasons for obtaining a listing on the Irish Stock Exchange ("the Exchange") for an investment fund are to facilitate the marketing of the fund to specific categories of investors and to provide investors with the comfort that a bureaucratic institution (the Exchange) has reviewed the offering documentation / listings particulars in the context of the Exchange's regulations. A stock exchange listing can be particularly important where a fund is to be marketed to institutional investors, whose own rules may prohibit or restrict investment in unquoted securities or where an institution needs to "mark to market". A listing does not mean that the Exchange regulates the fund nor does it ensure liquidity.
The Exchange has developed a set of detailed requirements for investment funds seeking a listing. These requirements are contained and published in "Investment Funds - Listing Requirements and Procedures of The Irish Stock Exchange", which is more commonly referred to as the "Code" (most recently updated in September 2009).
A fund must publish listing particulars (the "Listing Particulars"), which must be approved in advance by the Exchange and the Listing Particulars must comply with Code and include all the information which is relevant and necessary to allow an investor or potential investor to make an informed assessment for the purpose of investment in the fund.
When a draft copy of the Listing Particulars is submitted to the Exchange, it constitutes a formal application for listing. The Exchange will try and respond with its comments on the draft document within one week. Custom House and the client will then work together with a view to resolving any issues the Exchange may have raised and proceed to submit further draft copies of the Listing Particulars until such time as all parties are satisfied with the contents thereof.
The Exchange requires that all listing applications must be submitted by a sponsoring member firm. Historically, such sponsors were limited to member firms of the Stock Exchange, although recently, some firms who are not stockbrokers have been approved as sponsors for the Stock Exchange. Custom House has good working relationships with a number of sponsoring member firms.
A fund may be constituted as a unit trust, an investment company, a SICAV, or a limited partnership, depending on its location. A fund may be open-ended or closed ended and may be structured as a feeder fund, a multi-manager fund or a Fund of Funds.
All of the directors, present or proposed, must accept responsibility, collectively and individually, for the content of the Listing Particulars. The directors' responsibility for third party information contained in the Listing Particulars relating to countries into which the fund may invest and sourced statistical information may be confined to proper extraction of such information.
Each of the directors must be free from conflicts between duties to the fund and duties owed by them to third parties and other interests, unless it can be demonstrated that suitable arrangements are in place to avoid detriment to the fund's interests or to its unitholders as a whole.
Once a fund has been admitted to the Official List of the Exchange, the directors' must comply with certain ongoing requirements of the Exchange defined as the "Continuing Obligations", the most recent version of which can be found on the Exchange’s website www.ise.ie.
The Investment Manager
An investment manager must have sufficient experience in the management of investments of the type in which the fund invests.
Where the investment manager has less than US$100 million in third party (i.e. non proprietary) funds under discretionary management, the Exchange will require to be satisfied, normally by way of submission in advance of the Listing Particulars, as to the suitability of the investment manager to manage the applicant.
The specific guidelines relating to the appointment of a suitable investment manager are laid out in the Code.
In addition, the investment manager must be free of conflicts between duties to the fund and duties owed to other clients, unless it can be demonstrated that arrangements are in place to avoid detriment to the fund's interests. In particular, the investment manager must allocate all investment opportunities between its clients, its own account and the fund in a fair and equitable manner.
A suitable custodian must be appointed to all funds seeking a listing on the Exchange which is charged with responsibility for the safekeeping and custody of the assets of the fund and for compliance with the specific requirements outlined in the Code. Any such custodian should have no decision-making role in relation to the assets of the fund and must be a separate legal entity to the investment manager and any investment adviser. However, it is permissible that the aforementioned service providers be affiliated companies.
Furthermore, such custodian must not be responsible for the determination and calculation of the net asset value of the fund.
The Code sets out specific requirements in relation to adequate custody arrangements that must be place for multi manager funds and fund of funds in respect of each investment manager and/or each fund to which the assets of the fund have been allocated.
A fund must appoint an entity, which must be a separate legal entity to any custodian, sub-custodian, broker or prime broker, to act as Administrator. The Administrator will be responsible for the determination and calculation of the net asset value of the fund and notifying that value to the Exchange immediately upon calculation. The Administrator may delegate its functions to a third party, but will still be responsible for the performance of the said third party. It is permissible that this entity be affiliated to any custodian, sub-custodian, broker or prime broker appointed.
A fund must appoint an independent auditor to carry out the audit of the fund's financial statements in accordance with auditing standards acceptable to the Exchange.
Disclosure Of Interests
Details of units held, directly or indirectly, by the fund's directors or investment manager must be disclosed in the fund's Listing Particulars. Closed ended funds must also disclose holdings of voting units that represent 30% or more of the outstanding capital of the fund.
If any service provider to the fund is in receipt of any benefits from third parties by virtue of providing services to the fund and those benefits do not accrue to the fund a statement of that fact must be included in the fund's Listing Particulars.
Furthermore, all potential conflicts of interest must be disclosed. Any conflict of interest considered to be particularly serious should also be highlighted in the "Risk Warnings" section of the fund's Listing Particulars.
Investment Objective And Policy
A fund's Listing Particulars must contain a comprehensive description of the investment objective and polices which the fund intends to pursue. This should include a summary of the types of instruments and whether they will be quoted or unquoted, geographical areas and, where relevant, the industry sector or market capitalisation, credit ratings or investment grades of the securities in which the fund will primarily invest.
The Listing Particulars must also contain a description of all material risks, as far as they are known at the date of the Listing Particulars, associated with investing in the fund.
The Code sets out in detail the specific requirements in this regard and is regularly updated by the Exchange.
Retail V. Sophisticated
A fund must confine the sale of its units to sophisticated investors where the fund is not domiciled and regulated in a European Union member state, Hong Kong, the Isle of Man, Jersey, Guernsey or Bermuda. Where a fund is not domiciled in any of the above jurisdictions, the Exchange will accept that a fund need not confine the sale of its units to sophisticated investors, provided that it can be demonstrated that the fund is, and will continue to be, subject to the same regulatory supervision in any of the above jurisdictions as if the fund were so domiciled.
Notwithstanding the above, where the suitability of an investment manager who manages less than $100 million of discretionary third party funds and is assessed in advance as being suitable by the Exchange (see under "Investment Manager"), the Exchange will normally require that the sale of units in the fund be confined to sophisticated investors.
Funds that transact with principal and/or prime brokers are required to confine the sale of units in the fund to investors who, in addition to being sophisticated investors, meet certain other criteria as set out in the Code.
The minimum subscriptions set out above are those imposed by the Exchange. It may be the case that certain types of funds domiciled in certain jurisdictions may be required, under local regulations, to adhere to a higher minimum subscription and/or satisfy other criteria.
Open-Ended vs. Closed-Ended Funds
An open-ended fund is defined as a fund, the object of which is the collective investment of capital provided by the public and which operates on the principle of risk spreading, and the units of which are, at the holders’ request, repurchased or redeemed, directly or indirectly, out of the assets of the fund. Action taken by such a fund to ensure that the exchange price of its units does not significantly vary from its net asset value shall be regarded as equivalent to such repurchase or redemption.
A closed-ended fund is a fund, which does not permit the redemption of its units at the holder’s request. Action taken by a fund to ensure that the stock exchange value of its units does not significantly vary from its net asset value shall be regarded as equivalent to such redemption.
The Code sets out the specific requirements and guidelines in respect of both open-ended and closed-ended funds.
Restrictions On Transfer And Compulsory Redemptions
The units of the fund must be freely transferable and tradeable. Restrictions on transfer and compulsorily redemptions are acceptable; (i) where the holding of units by a particular shareholder may result in regulatory, pecuniary, legal, taxation or administrative disadvantage to the fund or its shareholders as a whole; or (ii) to maintain a minimum holding per shareholder, as specified in the fund's Listing Particulars; or (iii) in the case of partly paid units where there is an unpaid call on those units.
A listed fund will be required to observe the Exchange's Continuing Obligations as set out in the Code. Observance of these Continuing Obligations is essential to maintain an orderly market and to ensure that holders of listed units and potential investors have simultaneous access to the same information and are kept informed of developments in the nature and conduct of the activities of a listed fund. Details can be found on the Exchange's website www.ise.ie
Further information in relation to each of the subjects briefly outlined above, as well as all other subjects pertinent to a listing on the Exchange is available from either the Exchange’s website, or through Custom House.
The above is designed only to give a brief outline of the requirements for a listing on the Exchange and in no way indicates that the above includes details on every aspect of the procedures to be followed in order to obtain a listing on the Exchange, which are shown on the Exchange's website (see link below).
Custom House will gladly provide further information upon request.
Irish Stock Exchange: www.ise.ie