As was widely expected in the market, London’s ICAP Securities & Derivatives Exchange (ISDX) issued a consultation on 22 January 2015 proposing to overhaul its admissions criteria for companies applying for admission to the ISDX Growth Market as well as other changes to its Rules for Issuers and Corporate Adviser Handbook. Responses are due by 20 February 2015.

The consultation follows less than two years after ISDX launched new admissions criteria for ISDX growth companies. It coincides with the expiry of the 18 month period after the current Rules came into force at which time existing issuers on the ISDX Growth Market were supposed to be assessed against the existing Rules and, if found to be non-compliant, their securities would have been withdrawn from the market. On 12 January 2015 the exchange announced that they would not proceed with the assessment of issuers’ compliance and that non-compliant issuers would not be withdrawn from trading pending the review of the ISDX Rules. The draft Rules for Issuers published in the consultation now propose to remove the requirement for such an assessment entirely.

ISDX is further proposing to remove the prescriptive ‘eligibility matrix’ for entry from the existing Rules and to replace it with the following admissions criteria:

  • A minimum one year’s trading history;
  • 10% free float of shares; and
  • One year’s working capital.

The exchange is given discretion where an issuer does not meet the 10% free float requirement and may grant a derogation from the requirement to publish or file audited financial statements covering a 12 month period demonstrating the minimum one year’s trading history.

As part of the consultation ISDX is also proposing to amend the Corporate Adviser Handbook. In relation to due diligence, the exchange is planning to replace the current prescriptive regime with a draft practice note on due diligence providing guidance for corporate advisers as regards due diligence on admission, legal and financial due diligence and due diligence of directors.

The proposed move away from a prescriptive to a risk-based approach, especially in relation to due diligence will be more suitable for companies looking to access the ISDX Growth Market and avoids the risk of it becoming a box-ticking exercise for companies and advisers.

By Marlies Braun