Capital Markets in Jersey: Regulatory Overview

1. What are the main public securities markets/exchanges in your jurisdiction? Outline the main market activity
and deals (for both equity and debt) in the past year

Main Securities Markets/Exchanges

The International Stock Exchange (TISE) is headquartered in Guernsey, but also has staff operating across the international finance centres of Dublin, the Isle of Man, Jersey, and London.

TISE was established in 1998 and is licensed by the Guernsey Financial Services Commission (GFSC) to operate an investment exchange under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (POI Law). The International Stock Exchange Group Limited (TISEG) is also listed on the TISE Official List (Official List).

The advantages to listing with TISE include:

• The TISE Guarantee, under which TISE guarantees “3+1” review timelines, meaning reviewing initial listing applications within three business days of first submission and within one business day of subsequent submission(s)

• Competitive pricing, with fees varying according to product type (rather than market capitalisation)

TISE is a regulated market specialising in listing bond issuances aimed at professional investors

Approximate total issuance on each market

TISE is a major European professional bond market and is among the leading venues in Europe for listing high yield bonds, and debt securities issued as part of UK private equity acquisition structuring. It is currently also experiencing strong growth in structured finance and securitisation transactions.

TISE also has a pool of domestic equities and a significant share of the market for listed UK real estate investment trusts (REITs), as well as hosting a comprehensive sustainable market segment, TISE Sustainable.

Issuers choose TISE because the products are provided through an efficient and cost-effective service from a venue which is internationally recognised and operates to global standards.

During the first half of 2024, TISE retained its position as one of the leading European venues for listing high yield bonds. There were 64 high yield bonds newly listed on TISE in the first half of 2024, almost three times more than in the same period last year, as borrowers refinance (or repay) their outstanding debts and new issuers come to the market.

TISE has also seen strong growth in securitisation business. There were 62 securitisation bonds newly listed during the first half of 2024, which is more than double the number listed in the previous year.

Trading system

TISE has launched its new trading system, NOVA TISE Trading System (NOVA). Auctions on NOVA have been held, with a trading member of TISE facilitating the order book entries for auctions in the TISE listed securities of a number of issuers.

The auction model is designed to benefit market participants through the concentration of liquidity into specific events. Auctions can be held at an issuer’s discretion, for example, daily, weekly, or monthly, providing maximum flexibility.

Transparency is provided to the market through full visibility of the order-book build with the TISE website displaying buy and sell orders and the indicative price and volume, as well as full trade history.

NOVA’s underlying algorithm operates on the principle of best execution and trades are output for onward settlement processing, through Euroclear (CREST and CREST Residual), Clearstream, or otherwise as agreed by TISE, streamlining the process and maximising efficiencies, and providing necessary trade reporting for TISE trading members.

Market Activity and Deals

Equity. TISE now has more than 4,300 listed securities on the Official List with a total market value of more than GBP700 billion, both of which are record highs in the history of TISE. TISE listed 444 securities in the first half of 2024.

In the first six months of 2024, TISE built on its position as the second largest market for listed UK REITs after the London Stock Exchange (LSE).

Increasingly, Jersey companies are being used as listing vehicles to effect listings on major world markets. In particular, Jersey holding companies have been listed on:

•  The New York Stock Exchange (NYSE)
• The Hong Kong Stock Exchange (HKEX)
• The Main Market of the LSE

Jersey has been particularly successful in attracting companies seeking a listing on the LSE (whether on the Main Market or the Alternative Investment Market (AIM)). Jersey company shares settle in the same way as UK shares on the London market (either through the paperless CREST system or through stock transfer forms).

Jersey companies are governed by the UK’s City Code on Takeovers and Mergers (Takeover Code), which makes them highly attractive to some investors.

Jersey company law is flexible enough to largely reflect the market standards that UK and US investors would expect to see in a company listed in London or New York.

Debt

A number of Jersey incorporated issuers have been active in the past year, and many issuers have listed debt securities on TISE.

2. What are the main regulators and legislation that apply to capital markets in your jurisdiction?

Regulatory Bodies

The main regulatory bodies of the equity and debt capital markets are:

•  The Jersey Financial Serviced Commission (JFSC)
•  TISE

Legislative Framework

The relevant legislative framework in Jersey is contained in the:

• Companies (General Provisions) (Jersey) Order 2002 (GPO)
• Control of Borrowing (Jersey) Order 1958 (COBO)
• Companies (Jersey) Law 1991, as amended (Companies Law)
• Companies (Amendment of Law) (No. 2) (Jersey) Order 2021

Under the COBO, an issuer requires the consent of the JFSC to issue securities if:

• The issuer is incorporated under Jersey law, or the securities are to be registered in Jersey
• The issue is of either:
  – bearer securities that are capable of being held by more than ten persons;
  – non-bearer securities where the number of persons in whose name the securities are to be registered is in excess of ten.

This consent is called a “COBO Consent” and must be obtained before the securities are issued. The Guidance Note: Securities Issues by Jersey Companies published by the JFSC then applies. However, if the holder thresholds are not met, a COBO Consent is not required (see Question 1).

3. When is a prospectus (or other main offering document) required? What are the main publication, regulatoryfiling or delivery requirements for an offering?

Prospectus (or Other Main Offering Document) Required

Equity. A prospectus for Jersey law purposes is an invitation to the public to become a member of a company or to acquire or apply for its securities. The prospectus must contain certain prescribed minimum information and have the prior approval of the Registrar of Companies in Jersey before it is circulated. The Companies Law provides that it is a criminal offence for a director to knowingly include an untrue or misleading material statement in a prospectus. A company and its directors can also be held liable to pay compensation to its members for any loss due to an investment based on misleading or untrue statements.

The Jersey Registrar’s consent is required to circulate a prospectus to more than 50 people. Regulatory consent is required to circulate a prospectus for a regulated fund in Jersey.

It is important to consider:

• Whether a “prospectus” is being issued by a Jersey issuer and the consequences of this
• Whether the Jersey issuer will require a COBO Consent (see Question 2) and the consequences of this
• The Jersey requirements in relation to the preparation of audited accounts for vehicles issuing debt securities

Whether a prospectus is issued determines whether or not the Jersey issuer will be public or private. A “prospectus” is defined under the Companies Law as an invitation to the public to become a member of a company or to acquire or apply for any securities, for which purposes an invitation is made to the public and not addressed exclusively to a restricted circle of persons.

An invitation is not considered to be addressed to a restricted circle of persons unless:

• The invitation is addressed to an identifiable category of persons to whom it is directly communicated by the inviter or the inviter’s agent
• The members of that category are the only persons who can accept the offer and they are in possession of sufficient information to be able to make a reasonable evaluation of the invitation
• The number of persons in the island or elsewhere to whom the invitation is so communicated does not exceed 50

Whether a prospectus is issued determines whether or not the Jersey issuer will be public or private. If a prospectus is issued, the issuer is (or is treated as) a public company (as opposed to a private company), meaning that:

• It can have more than 30 members. If a private company has more than 30 members, it is deemed to be a public company
• It can issue a prospectus (subject to consent under the GPO). If a private company issues a prospectus, it is a criminal offence
• It must audit its accounts, whereas this is only required for a private company if its articles require it or if required by a shareholders’ resolution or the noteholders
• An auditor’s report must be filed with the Jersey Registrar within seven months of its financial year-end. For a private company, the accounts need only be held available for shareholders within ten months of its financial year-end.

If a prospectus is not issued, the Jersey issuer can be a private company and none of the consequences of being public apply.

Debt. A “prospectus” is defined under the Companies Law as an invitation to the public to become a member of a company or to acquire or apply for securities. In October 2021, the definition of a “prospectus” under Jersey company law was narrowed by the introduction of a number of new exclusions that make it easier for Jersey companies to raise funds from sophisticated investors.

Accordingly, an invitation will not be considered to be made to the public if one or more of the following applies:

• The invitation is addressed to either or both:
  – qualified investors as defined in the EU Prospectus Regulation (Regulation 2017/1129), as amended; or
  – professional investors as defined in the Financial Services (Investment Business (Special Purpose Investment Business – Exemption)) (Jersey) Order 2001
• The number of persons (other than qualified investors and professional investors) to whom the invitation is addressed does not exceed 50 in Jersey and 150 elsewhere
• The minimum consideration to be paid or given by a person for securities to be acquired by that person is at least EUR100,000 (or an equivalent amount in another currency)
• The securities to be acquired or applied for are denominated in amounts of at least EUR100,000 (or an equivalent amount in another currency)
• The invitation relates to the issue of shares or other securities by a company to its members in satisfaction, in whole or in part, of a distribution to be made by that company
• The invitation relates to a scheme specified in Article 3(2)(c) of the GPO (see Question 2, Legislative Framework)

The circulation in Jersey of offers for subscription, sale, or exchange of securities (including units in a unit trust) originating outside Jersey is governed by the COBO. The COBO restricts the circulation of prospectuses in Jersey without the consent of the JFSC. However, the COBO does provide for wide exceptions. If the criteria for the exceptions are met, prior permission for the circulation of prospectuses is not required, although the information requirements still apply. If the criteria are not met, the prior consent of the JFSC must be obtained.

The prospectus must contain certain prescribed minimum information and have the prior approval of the Registrar of Companies in Jersey before it is circulated. It is a criminal offence for a director to knowingly include in a prospectus a material statement that is untrue or misleading. A company and its directors can also be held liable to pay compensation to its members for any loss due to an investment based on misleading or untrue statements.

The Jersey Registrar’s consent is required to circulate a prospectus to more than 50 people and regulatory consent is required to circulate a prospectus for a regulated fund in Jersey.

It is important to consider:

• Whether a “prospectus” is being issued by a Jersey issuer and the consequences of this
• Whether the Jersey issuer will require a COBO Consent (see Question 26) and the consequences of this
• The Jersey requirements in relation to the preparation of audited accounts for vehicles issuing debt securities

Whether a prospectus is issued determines whether or not the Jersey issuer will be public or private. If a prospectus is issued, the issuer is (or is treated as) a public company (as opposed to a private company), meaning that:

• It can have more than 30 members. If a private company has more than 30 members, it is deemed to be a public company
• It can issue a prospectus (subject to consent under the relevant legislation). If a private company issues a prospectus, it is a criminal offence
• It must audit its accounts, whereas this is only required for a private company if its articles require it or if required by a shareholders’ resolution or the noteholders
• An auditor’s report must be filed with the Jersey Registrar within seven months of its financial year-end. For a private company, the accounts need only be held available for shareholders within ten months of its financial year-end

If a prospectus is not issued, the Jersey issuer can be a private company and none of the consequences of being public apply.

Main Publication, Regulatory Filing or Delivery Requirements

The circulation in Jersey of offers for subscription, sale, or exchange of securities (including units in a unit trust) originating outside Jersey is governed by the COBO.

Generally, the COBO restricts the circulation of prospectuses in Jersey without the consent of the JFSC, but the COBO does provide wide exceptions. If the criteria for the exceptions are met, there is no need to obtain any permission for the circulation of such prospectuses. If they are not, the prior consent of the JFSC must be obtained.

The circulation of prospectuses may also be subject to Article 14 (Prospectuses) of the Collective Investment Funds (Jersey) Law 1988. Under Article 14(1), the JFSC can prohibit, restrict or control the promotion by, or on behalf of, any person, of collective investment funds, or any class of such funds. The only Order the JFSC has made in this regard to date is the Collective Investment Funds (Certified Funds – Prospectuses) (Jersey) Order 2012 (Prospectus Order)

4. Are there any circumstances in which reduced disclosure obligations apply in respect of the prospectus (or
other main offering document)?

See Question 5

5. What are the main exemptions from the requirements for publication or delivery of a prospectus (or other
main offering document) for an offering?

Equity
Article 8 of the COBO prohibits, other than with the consent of the JFSC, the circulation in Jersey of any offer for subscription, sale, or exchange of:

•  Government securities, other than securities issued by the UK Government or the States of any of the Channel Islands
• Securities of corporate bodies not incorporated under the law of Jersey
• Units under any unit trust scheme not governed by the law of Jersey

Article 10(1)(c) of the COBO contains a similar prohibition on the circulation of offers relating to partnership interests created under a limited partnership not established under Jersey laws.

Exemptions from the requirements under Article 8 are available for:

• Government securities (other than those of the UK Government or the States of any of the Channel Islands), if the offer:
  – does not constitute an offer to the public;
  – is valid in the UK or Guernsey
• Securities of companies not incorporated under the law of Jersey and units under a unit trust scheme not governed by the law of Jersey, if the offer:
  – does not constitute an offer to the public;
  – is valid in the UK or Guernsey and is circulated in Jersey only to persons similar to those to whom (and in a manner similar to that in which) it is circulated in the UK or Guernsey

Definitions of what constitute offers to the public and valid offers in the UK and Guernsey are set out in Article 8.

These exemptions are disallowed if there is a “relevant connection” with Jersey. A relevant connection arises if, for example:

• The management or administration of the company or of the unit trust, or a distributor or trustee of the unit trust, exists in Jersey
• Control of the company is exercised from within Jersey
• One or more of every three members of the board of directors of the company is a resident in Jersey
• The company has entered into, or is about to enter into, an agreement that is material to the offer with a person resident in Jersey
• A business that is material to the offer is carried on directly (or indirectly) in or from within Jersey
• The offer is an offer for an exchange of securities for securities of a company incorporated under the law of Jersey, or for units of a unit trust scheme, if either the scheme is governed by the law of Jersey or the units are to be registered in Jersey.

At present there are no exemptions from the requirements of Article 10(1)(c)

Debt

There are no full exemptions from the requirement to deliver a listing document or prospectus to TISE. However, in August 2021, TISE introduced a pan-European fast-track listing service available for those bond programmes already approved by a national competent authority within the EEA or UK.

What are the main content or disclosure requirements for a prospectus (or other main offering document) for an offering? What main categories of information are included?

Equity

Chapter 2 of the TISE Equity Market Listing Rules set out the disclosure requirements for listing documents for all equity issuers. In particular, the rules provide that:

• Where the listing document includes any financial information, including pictures, tables, or graphs, the source of these should be clearly disclosed. Where such information is reproduced from a third-party source, there must be a statement that such information has been accurately reproduced and, so far as the issuer is aware, does not omit information so as to render it misleading or inaccurate
• The documents must include a statement by the issuer’s directors that in their opinion the working capital available to the issuer is sufficient for at least 12 months from the date of listing or, if not (in exceptional circumstances), details of a proposed provision of additional working capital
• The documents must include a statement by the issuer’s directors of any material adverse change in the financial or trading position of the issuer and its group, where applicable, since the last published audited annual accounts or subsequent half-yearly reports, or since incorporation if the issuer has been incorporated for less than 12 months (or an appropriate negative statement)
• If more than ten months have elapsed since the end of the financial year to which the last published audited annual accounts relate, the documents included in or appended to the listing document must include a half-yearly report covering at least the first six months following the end of the financial year. If the half-yearly report is unaudited, that fact must be stated. If an issuer prepares consolidated audited annual accounts, the half-yearly report must either be a consolidated statement or include a statement that, in the opinion of the issuer’s directors, the half-yearly report enables investors to make an informed assessment of the results and activities of the group for the period
• If estimated figures or financial projections are included in the listing document, adequate prominent risk wording must also be included stating that such figures are estimations, cannot be guaranteed, and should not be relied on.

Where expert statements have been included in the listing document, the listing document must disclose:

• The qualifications of the expert, and whether that expert (or any associate of that expert) holds any securities in any member of the group or any associate of the group, or the right to subscribe for (or to nominate persons to subscribe for) securities in any member of the group or associate of the group, and, if so, a full description of those facts.
• The date on which the expert’s statement was made and confirmation as to whether or not it was made by the expert for incorporation in the listing document.

The financial information provided must be prepared according to a recognised international standard (such as UK or US Generally Accepted Accounting Principles or International Accounting Standards) or in line with what is commonly accepted for the jurisdiction in which it is based, clearly disclosing the basis for preparation.

Debt

A prospectus must contain certain prescribed minimum information and have the prior approval of the Registrar of Companies in Jersey before it is circulated.

Information to be specified in prospectus includes details relating to:

• The offer, including:
  – the names, occupations, and addresses of the offerors or vendors, any promoter of the securities or membership of the company;
  – the terms applicable to the acquiring of the securities or membership of the company, and (if those terms include a price that is payable) the method, time, and place of payment;
  – the opening and closing dates and times of the offer;
  – the minimum amount required to be raised by the offer;
  – when and how moneys will be returned in the event of the offer not being completed or any securities applied for not being allotted;
  – the anticipated date and forecast amount of the first dividend or interest payment on the securities that are the subject of the offer;
  – general particulars of any property that is to be acquired with the proceeds of the offer; and
  – in the case of any business that is to be acquired with the proceeds of the offer, the length of time for which that business has been carried on (if more than two years from the date of issue of the prospectus)
• The company’s capital, including:
  – in the case of a par value company, particulars of the nominal, issued, and paid-up share capital;
  – in the case of a no-par value company, particulars of the stated capital;
  – in the case of an offer of securities, particulars of the securities that are the subject of the offer;
  – in the case of an invitation to become a guarantor member, particulars of the amount of the guarantee;
  – details of any existing issued securities that are not part of the offer
• Goodwill, preliminary expenses, and benefits, including particulars of any amounts to be written off or provided for in respect of goodwill or preliminary expenses, or of any benefit given to a promoter
• Contracts, including the dates of, parties to, and general nature of every material contract, other than those entered into
  – in the ordinary course of the business carried on, or intended to be carried on, by the company; or
  – more than two years before the date of issue of the prospectus
• Directors’ interests, including:
  – full particulars of the nature and extent of the direct or indirect interest in the offer (if any) of every director of the company;
  – where the interest of a partner consists of being a partner in a firm, full particulars of the nature and extent of the interest of the firm; and
  – details of all sums paid, or agreed to be paid, to any such director or firm in cash or shares or otherwise by any person to induce that director to become or to qualify as a director, or otherwise for services rendered by the director or by the firm in connection with the promotion or formation of the company
• Debentures and loans, including details of any subscriptions, allotments, or options to be given, or already existing, in respect of any other securities of the company, including any that have a prior right over the securities covered by the offer to a distribution of the company’s profits
• Accounts and reports, including:
  – a copy of the company’s latest accounts accompanied by a report by the company’s auditors; and
  – any other reports of a specialist nature by any person who could be described as an expert on any aspect of the
  company’s business, identifying any unusual element of risk to the investor
• The address of the company’s registered office and (if different) the address at which its register of members is kept
• The location and nature of the company’s principal operating establishments
• The names, business occupations (if any), and addresses of the directors or proposed directors of the company
• The name, qualifications (if any), and address of the secretary of the company
• The name and address of the company’s auditors, legal advisers, and principal bankers
• Any other material information that an investor (including a person who cannot be expected to have any special knowledge of investments of the nature being offered) would reasonably require to enable them to make an informed judgement about the merits of investing in the securities offered in the prospectus
• The date of issue of the prospectus

The prospectus must include the following statements:

• “A copy of this document has been delivered to the registrar of companies in accordance with Article 5 of the GPO, and the registrar has given, and has not withdrawn, consent to its circulation.”
• “The Jersey Financial Services Commission has given, and has not withdrawn, its consent under Article 2 of the Control of Borrowing (Jersey) Order 1958 to the issue of securities in the company.”
• “It must be distinctly understood that, in giving these consents, neither the registrar of companies nor the Jersey Financial Services Commission takes any responsibility for the financial soundness of the company or for the correctness of any statements made, or opinions expressed, with regard to it.”
• “If you are in any doubt about the contents of this document you should consult your stockbroker, bank manager, solicitor, accountant, or other financial adviser.”
• “The directors of the company have taken all reasonable care to ensure that the facts stated in this document are true and accurate in all material respects, and that there are no other facts the omission of which would make misleading any statement in the document, whether of facts or of opinion. All the directors accept responsibility accordingly.”

If the prospectus is in respect of the issue of securities, the following statement must also be included: “It should be remembered that the price of securities and the income from them can go down as well as up.”

7. How is the prospectus (or other main offering document) prepared for an offering? Who is responsible or may be liable for its contents, and what is the nature of liability in respect of the prospectus (or other main
offering document)?

Equity
A prospectus will be prepared by the issuer’s legal advisers, with input from their other advisers (including the listing sponsor).

The Companies Law provides that it is a criminal offence for a director to include knowingly in a prospectus a material statement that is untrue or misleading (see Question 3). A company and its directors can also be held liable to pay compensation to its members for any loss due to investment based on misleading or untrue statements.

Debt

A law firm will draft the prospectus. The Companies Law provides that it is a criminal offence for a director to include knowingly in a prospectus a material statement that is untrue or misleading. A company and its directors can also be held liable to pay compensation to its members for any loss due to an investment based on misleading or untrue statements.

8. What are the main requirements for a primary listing on the main public equity markets/exchanges?

Main Requirements

The main requirements for listing on TISE include that:

• The issuer must be duly incorporated or otherwise validly established according to the relevant laws of its jurisdiction of incorporation or establishment
• The issuer must not materially change its investment policy or business strategy as set out in the listing document (see below) within two years of listing, other than with the consent or approval of a majority of the holders of the securities
• The equity securities must be freely transferable and tradeable. However, securities may be subject to transfer restrictions or compulsory redemption:
  – where the holding of the securities may result in a regulatory, pecuniary, legal, taxation, or material administrative disadvantages for the applicant or holders of its securities;
  – to maintain a minimum holding per holder, as specified in the listing document; or
  – as otherwise agreed with TISE
• A listing application must relate to all securities of that class, whether already issued or proposed to be issued
• The issue and marketing of the securities must be made to the appropriate persons and conducted in accordance with any applicable laws, rules, and regulations to which the issuer is subject
• A listed class of securities cannot be converted into a different class without the approval of a majority of the holders of that listed class of securities, except where the conversion is provided for and explained fully in the listing document
• Fully paid shares must be free from all liens

There are additional conditions for listing where the issuer is an investment vehicle or a special purpose acquisition vehicle, as further set out in Chapter 1 of the TISE Equity Market Listing Rules.

An issuer must produce a listing document in relation to the application that complies with the requirements relating to listing documents set out in Chapter 2 of the TISE Equity Market Listing Rules. The listing document must contain such information as is necessary for investors to make an informed assessment of the issuer’s:

• Activities
• Assets and liabilities
• Financial position
• Management
• Prospects
• Profits and losses

In addition, it must set out the securities’ terms and conditions.

TISE may require that prominence be given in the listing document to important information, in such a manner as it considers appropriate. The listing document must also contain any additional information as required by TISE and may incorporate in whole or in part previously issued offer documents.

To view and customise comparison charts on securities exchanges initial listing standards (available to PL Dynamic subscribers), see Quick Compare Charts:

• Securities Exchanges Initial Listing Standards – Operating History and Ownership Structure
• Securities Exchanges Initial Listing Standards – Financial Performance
• Securities Exchanges Initial Listing Standards – Liquidity

Minimum Financial Requirements

Unless otherwise agreed with TISE, the expected market capitalisation of securities to be listed must be at least GBP1 million (or equivalent in a foreign currency) and be maintained at or above that amount, or equivalent amount, for the duration of the listing.

Trading Record and Accounts

Unless otherwise agreed with TISE, an issuer must provide TISE with the following financial information:

• Audited annual accounts (that have been consolidated in respect of the issuer any subsidiaries)
• Any other financial information provided to investors relating to the securities to be listed informing security holders of the issuer’s business activities, financial position, and performance, including for example:
  – unaudited annual accounts;
  – monthly or quarterly reports; or
  – management accounts

An issuer must provide financial information for the previous three years unless it either:

• Has been established for less than three years but more than 12 months, in which case the financial information provided must cover the period since the issuer was incorporated
• Was incorporated within the 12 months preceding the date of the listing application and has not commenced any activities before the date of listing

For further resources on international accounting standards, see Practice Note, International Financial Reporting Standards.

Minimum Shares in Public Hands (Free Float)

Where an application for listing has been made for a class of equity securities, at least 25% of that class must be in the hands of the public (whether directly or indirectly) no later than the date on which dealings commence, and in such proportions as to satisfy TISE that there will be an adequate market in the securities.

Please do read the full article here: Capital Markets in Jersey: Regulatory Overview | Practical Law

If you have any questions, please do reach out to your usual Appleby contact.