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Warsaw Stock Exchange Continues NewConnect Reform In Partnership With The Market

Date 29/04/2013

  • The Warsaw Stock Exchange introduces major amendments to the ATS Rules concerning the conditions of introduction of financial instruments to trading and the scope of the information document, and strengthens disclosure obligations of companies and requirements for Authorised Advisers.
  • The amendments, which derive from analytical work carried out by the WSE, external experts and representatives of the capital market community, are part of a project designed to reform the Alternative Trading System and take effect as of 1 June 2013.
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The Warsaw Stock Exchange has decided to introduce major amendments to the Alternative Trading System (ATS) Rules and to take additional measures necessary to improve market quality and safety. The reform takes into account numerous opinions of the investor community and other market participants communicated to the Exchange on the WSE’s request in the past months. The final form of the amendments has been influenced in particular by proposals of investor organisations and groupings (Association of Individual Investors, portal StockWatch.pl) as well as comments of Authorised Advisers. An important starting point for the in-depth reform of the ATS was provided by a NewConnect report drawn up by researchers of the Wrocław University of Economics and the resulting conclusions.

 

The main amendments focus on four main areas: (1) requirements for the introduction of financial instruments to the ATS and the scope of an information document, (2) disclosure obligations of companies, (3) transparency of non-public offerings, (4) policy towards Authorised Advisers.

 

(1)   The WSE has decided to raise significantly the requirements for companies seeking introduction of financial instruments to trading on NewConnect by imposing the following:

  1. a criterion of minimum own capital of a company at PLN 500 thousand;
  2. an unconditional obligation to present audited financial statement for the last financial year (elimination of the option to introduce to trading shares or allotment certificates of an issuer who has pursued activities for a period shorter than that required to present financial statement for the first financial year);
  3. restrictions on the possibility of introduction to the ATS of shares with a price preference, i.e., acquired at a price which is significantly lower than the price of the other issues under the application for introduction or than the price of shares already listed;
  4. an obligation to present a broader scope of information which companies are required to include in an information document (professional CVs of members of the management board and the supervisory board, the auditor’s opinion from an audit of the value of non-cash contributions made in the last two financial years and, for start-ups, a description of planned investments and a detailed timetable of such investments).

 

(2)   With respect to disclosure obligations, companies will be required to report a much broader scope of financial data and information published in quarterly reports:

  1. a quarterly report will contain condensed financial statement including at least the following: the balance sheet, the profit and loss account, the cash flow statement, the statement of changes in own capital;
  2. issuers will be required to provide more detailed comments in a quarterly report on the factors and events impacting the generated financial results, especially unusual ones; quarterly reports will also contain information on the number of employees of the company as well as the issuer’s comments about the status of implementation of planned activities and investments and their timetable, if such information is contained in the information document.

 

(3)   With a view to improving the transparency of non-public offerings and protect interests of investors, the WSE has expanded the scope of information which an Authorised Adviser should provide to investors participating in a non-public offering of a company seeking introduction of shares to the ATS to include the following:

  1. a statement of additional risk factors related to investment made within the framework of the offering, including the risk of non-introduction of the issuer’s shares to the ATS;
  2. informing investors of the possibility, or lack thereof, of signing an agreement with the issuer or Authorised Advisor providing for the buy-back of shares in the offering if such shares are not introduced to the ATS on NewConnect.

 

(4)   In view of the role of Authorised Advisers on the NewConnect market and their impact on safety of trading, the Exchange has raised requirements for entities seeking an entry in the register of Authorised Advisers. The new regulations require the following:

  1. at least 2 years of experience in conducting advisory activities on the capital market,
  2. no relations with any other Authorised Adviser.

Furthermore, in its assessment of Authorised Advisers, the Exchange will pay special attention to the quality of services provided by Authorised Advisers, their financial standing and integrity.

The above amendments and other detailed changes are being introduced as part of the WSE’s continued efforts to make the NewConnect market more attractive to investors and to ensure the highest standards on the Polish capital market.

 

“NewConnect is an important tool of supporting Polish entrepreneurship. After several years of operation, we can see its undisputed advantages as well as some shortcomings. We have asked market participants to present their opinions and proposed changes several months ago. We have also commissioned an independent research study. The amendments we are introducing are a result of this work and an expression of shared concern with the safety and comfort of trading participants on the NewConnect market. I would like to thank all creatively engaged groups, in particular the Association of Individual Investors, for their joint work on the new shape of the market. I do believe that the amendments will prove effective and quickly advance the attractiveness and maturity of the market. As I have emphasised, it is not only quantity but quality that will be crucial to further success of NewConnect,” said Adam Maciejewski, President of the Management Board of the WSE.

 

The amendments take effect on 1 June 2013 with the exception of the changes concerning quarterly report, which will apply to quarterly reports prepared after 30 September 2013.

 

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