The Cayman Islands Stock Exchange (CSX) facilitates the trading of diverse securities, including investment funds (both open-ended and closed-ended), corporate and retail debt, eurobonds, equities (domestic and international), derivative warrants, and Segregated Portfolio Companies (SPCs). For further insights on the development of the CSX and its advantages, refer to this resource.
Why Consider Listing on CSX
The benefits of listing securities on the CSX include enhanced international recognition, a streamlined regulatory framework, and access to a broader investor base. Many institutional investors face internal restrictions that limit the proportion of unlisted securities to listed securities. A listing on the CSX may effectively address these constraints.
How to Structure Investment Funds for Listing
Investment funds domiciled in the Cayman Islands can take the form of exempted limited partnerships, stand-alone companies, segregated portfolio companies, or unit trusts. The structure selection may be determined by a variety of factors, including tax implications for both the fund and investors, regulatory considerations, set-up and operational costs.
It is possible to list the shares of a single segregated portfolio on the CSX. This arrangement is particularly favourable where a fund needs to address the specific listing requirements of that segregated portfolio without impacting other segregated portfolios.
CSX Listing Process: a Step-by-Step Guide
The process of listing investment funds on the CSX has several stages:
Step 1: Appointment of a Listing Agent
Investment funds seeking to be listed on the CSX must appoint an approved local listing agent responsible for acting as a point of contact of the investment fund with the CSX.
The listing agent will seek the CSX’s approval of the listing documents, provide proper guidance and advice to the investment fund and its directors regarding compliance with the CSX listing rules, and will complete and review all listing forms and documents.
Step 2: Fulfilment of Conditions for CSX Listing
The general conditions for funds listing on the CSX include the following:
- being incorporated in the Cayman Islands or an approved jurisdiction;
- maintaining a sufficiently liquid market, with a minimum percentage of listed securities held by the public and, for closed-ended funds, having at least twenty-five per cent (25%) of its listed securities in the hands of the public at all times;
- listing all securities of a particular class, if none are currently listed;
- having experienced and qualified management for the fund and its investment manager;
- ensuring transferability of securities (which may be subject to certain transfer restrictions if they are adequately disclosed and approved by the CSX);
- if the investment fund is expected to invest in custodial assets, appointing a regulated custodian for those assets;
- engaging an independent auditor for financial statement audits;
- demonstrating arrangements for calculating net asset value or appointing an administrator;
- calculating net asset value quarterly;
- having an ISIN and securities of a closed-ended fund being eligible for deposit in an acceptable electronic clearing and settlement system including Clearstream, Euroclear, The Depositary Trust Company or any acceptable alternative system agreed in advance with the CSX; and
- appointing a registrar and transfer agent in an acceptable financial center.
Step 3: Preparation of Listing Documents
The CSX rules require specific disclosures to be included in the offering document, demonstrating compliance with the CSX listing conditions. In general, the listing documents should contain comprehensive and timely information, enabling investors to make informed investment decisions. This information should cover, but not be limited to, the following:
- general information about the fund;
- investments held by the fund;
- dividend policy;
- risk factors;
- directors and service providers;
- material contracts;
- fees and expenses;
- conflicts of interest;
- financial information about the fund and the prospects of the investment fund;
- terms of the securities to be listed;
- statutory and general information; and
- documents available for inspection.
Special Considerations for Investment Funds
CIMA Registration: If the investment fund is registered with the Cayman Islands Monetary Authority (“CIMA”), the contents of its offering documents must also comply with CIMA’s rules on the contents of offering documents or marketing materials and other relevant rules issued by CIMA.
Listing on Other Stock Exchanges: Where a listing document has previously been approved by a recognised stock exchange, it may be used in connection with the investment fund’s application to list securities on the CSX.
Special Assets: There may be additional requirements for investment funds with “side pockets”, umbrella funds, feeder funds, funds of funds, property funds, forestry funds, exchange traded funds and retail funds. For example, where an investment fund proposes to allocate special situation or illiquid investments to a separate share class (the “S Shares”), no more than 50% of the gross assets of the investment fund may be allocated to S Shares, and the valuation of assets attributable to the S Shares must be performed by an independent administrator in accordance with the CSX Rules. The listing document must include certain required disclosures.
Step 4: Submission and Review of Listing Application
Once the listing documents are prepared, the listing agent will submit the application and the required documents to the listing department of CSX for review to ensure compliance with the listing rules. Additional information or clarification may be requested during the review process.
Once the listing department of the CSX is satisfied with an application, it will forward the application to the listing committee of the CSX for approval, following which the listing agent proceeds to lodge them with the CSX, accompanied by supporting documentation that includes declarations made by the fund, its directors, and the listing agent.
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