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The new version of the Rules of Listing, Admission to Placement and Trading of Securities on the MICEX SE, registered on 15 June 2006 by the Federal Financial Markets Service of Russia, contains a number of important amendments.
The new version of the Rules establishes the procedure and the requirements for admission of securities to placement and trading in the Innovative and Growth Companies Sector (IGC Sector).
The IGC Sector has been established to help small and medium-sized companies to attract investments to the fast-growing innovation sector, create appropriate conditions for mass IPOs of these companies and solve the problems of venture financing.
The new version of the Rules of Listing makes the IGC Sector a special segment within the structure of the existing list of traded securities. It is intended that securities will be placed in the IGC Sector and put on the Quotation List or the Index of securities admitted to unlisted trading in the IGC Sector.
The Rules of Listing establish the criteria relating an issuer to the IGC Sector:
- a considerable part of the issuer’s income comes from activities connected with innovations and high technologies; the issuer’s capitalization amounts to at least 100 million rubles but not more than 5 billion rubles.
The MICEX SE’s Advisory Committee, comprised of specialists experienced in working with high-tech companies, determines whether the issuer satisfies the first criterion. Preference is given to:
- companies working in the spheres of telecommunications, Internet business or software development and installation; developers and manufacturers of devices based on semiconductors; companies working in the sphere of biotechnologies; R&D companies; manufacturers of high-tech products for machine building and transportation sectors; companies and sectors dealing with the realization of national projects initiated by the Government;
- companies with annual income growth amounting to at least 20%.
The Sector will set higher transparency standards. Besides the usual set of documents and data, that have to be submitted for quotation lists or the Index of securities admitted to unlisted trading, a company will have to provide investors (via the Exchange) with a number of additional documents:
- an investment memorandum. As different from the strict standards of the issue prospectus and the decision on issue, the investment memorandum gives more extensive information on the company’s financial and economic activities, presenting it in a less formal way. The investment memorandum is submitted when a company places its securities in the Sector.
- a corporate calendar, presenting the list of corporate events which have taken place during the year.
To improve the transparency of companies of the IGC Sector, the MICEX SE has introduced the institute of listing agents. A listing agent is an organization which has signed an agreement with an issuer (management company) to render services related to preparing documents necessary for the admission of the issuer’s securities to placement and trading in the IGC Sector. A listing agent may also act as financial advisor or ensure the disclosure of information by the issuer whose security is traded in the IGC Sector. To be a listing agent, a company must satisfy the requirements of the MICEX SE. Listing agents are expected to provide the appropriate level of protection of investors’ rights and minimize the risk of dissemination of false information or data.
The new version of the Rules of Listing stipulates the introduction of Quotation List «B». To be put on Quotation List «B», issuers and their securities must satisfy certain additional requirements. Also, there are certain special rules of trading provided for such securities. Putting equities on Quotation List «B» enables the issuer to use the advising procedure of summing up the results of placement of equities. Instead of registering a report on the results of the issue, the issuer sends to the FFMS a notification of the results of the issue.
Quotation List «B» is for issuers who make their IPO by open subscription with the help of a broker and issuers who offer their securities for public trading for the first time via the Exchange or involving a broker. Quotation List «B» is used to effect transactions aimed at alienating equities.
The main feature of Quotation List «B» is the absence of required minimum monthly value of transactions in securities for the last three months. Besides, equities are put on Quotation List «B» for a period not exceeding three months from the date of placement of equities on the Stock Exchange. After this period, equities must be transferred to another quotation list (or the Index of securities admitted to unlisted trading), provided the equities and the issuer satisfy the requirement for putting equities on the corresponding quotation list (or the Index of securities admitted to unlisted trading).
