Requirements for Offering Securities

The Capital Markets Development Authority (CMDA) regulates the raising of equity and debt capital in the public markets. The regulatory framework is designed to ensure that intending investors are provided with adequate information and are free from sales pressure.

Under the Capital Markets Development Authority Act, 1996 there are two basic requirements that must be complied with before making a public offering of securities and/or listing on a securities exchange.


Prospectuses

Under the CMDA Act, a person may not offer for subscription or issue invitations to subscribe for securities unless a prospectus, which complies with the requirements of the CMDA Act and the draft CMDA (Securities Issues) Regulations, has been authorised by the CMDA and registered by the Registrar of Companies. There are also prospectus provisions in the Companies Act, which must be complied with.

The draft CMDA (Securities Issues) Regulations outline the specific disclosure requirements for the prospectus. The Authority is required to examine the draft prospectus and determine whether it complies with the requirements of the CMDA Act and these Regulations.

After the prospectus has been registered, the company is then permitted to announce the opening of the offer period and advise the public where prospectuses may be obtained. The prospectuses must contain the application form on which investors may apply for the shares. It should be noted that the CMDA also regulates the advertisements accompanying the public offering.

Investors are invited to subscribe for the shares by completing the application form and returning it to the issue manager or company with payment for the shares being applied for. After the offer period closes, the company allots the shares and issues the share certificates to the successful investors.

Listing a public company on the stock exchange

If a public company seeks to list on a stock exchange (without making an offering and issuing shares to the public) it must:

1. Submit a proposal to list on a stock exchange, to the CMDA in keeping with the provisions of Section 48(2)(a)(v) of the CMDA Act, 1996. The CMDA has the power to authorise such proposals on such terms and conditions, as it deems fit. The CMDA's decision will be conveyed to the company within 15 working days.

2. At the same time, the company submits an application for listing to the South Pacific Stock Exchange (SPSE) for its Board's evaluation and decision. The SPSE Board's decision will be conveyed to the company within 14 market days.

The CMDA will typically require that the listing of the company on the stock exchange be accompanied by an issue of an information memorandum disclosing all material information on the following aspects of the company:

* Company background and core activities;
* Management of the company including details of the company directors;
* Rights and liabilities attaching to the shares being quoted;
* A five year historical financial summary of company;
* A statement about the future prospects of the company, and
* Other material information that an investor may require to make a decision to invest.

The company will be required to submit a copy of the draft information memorandum to the CMDA for its review and authorisation before listing.