Many new applicants applying for a listing are under the misconception that the road to a successful listing begins with the preparation of a prospectus, and ends once the securities are listed on the exchange.
Subsequent to the listing, many executives find themselves struggling to adjust to the demands resulting from the new institutional environment, which the company operates in. Executives are faced with familiarising themselves with the regulations pertaining to the King Code, the JSE Listings Requirements, the Companies Act (including the Takeover Regulations), Securities Services Act (to be replaced by the Financial Markets Act), the Consumer Protection Act and the Competition Amendment Act, as well as specific legislation applicable to their particular company and industry.
Speaking at the event, Nicky Newton-King, CEO of the JSE, provided insight into the macroenvironmental factors that affect players within the Stock Exchange. Among others, Nicky cited key factors that issuers need to take into consideration such as the increased cost of regulatory compliance, the importance of making the right technological investment decisions and the increased importance of corporate accountability and sustainability.
Nick Matthews, Head of Mergers & Acquisitions in KPMG in South Africa’s Corporate Finance practice, covered market abuse and related aspects.
According to Matthews, “A key amendment in the Financial Markets Act is the removal of the insider trading defence for affected transactions. Under the Act, parties to a transaction, where all parties have the same “inside information”, and the transaction is not designed for purposes of benefiting from changes in the listed share price, have a defence. This change will provide better protection to uninformed shareholders”.
Another change is that brokers acting on behalf of an insider could be enveloped in the insider trading rules, in circumstances where they know parties are insiders.
Also addressing executives at the event, Robbie Cheadle, Associate Director in Corporate Finance at KPMG in South Africa, highlighted some recent amendments to the JSE Listings Requirements pertaining to corporate governance.
According to Cheadle, “Company secretaries now need to be vetted by the Board to ensure they have the competence, qualifications and experience”. This is a new requirement by the JSE, to ensure corporate governance standards are enhanced.
Developments in the local and international financial markets, many of which were precipitated by the global financial crisis, have resulted in wide-spread assessments of existing regulation to assess its appropriateness and effectiveness. It is a challenge for executives to keep abreast of the plethora of changes and amendments that they are being faced with as well as to address the economic and social challenges that have arisen in the wake of the global recession, and that are impacting on the financial performance of their businesses.