NSE Out with Guidelines for Listing of Closed-End-Funds

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By JEROME USHAKANG

The Nigerian Stock Exchange (NSE) has released rules that would guide the investors on how to list Closed-Ended Funds (CEF) on the Exchange.

The NSE in a statement said that an application for listing shall be made to t he NS E by a Managing Company duly licensed by the Securities and Exchange Commission (SEC).SEC will also duly register t he CEF and its securities.

The registered CEF shall have a Board of Directors which shall exclude the employees of any Fund Manager appointed to manage the Fund’s investments. At least one director shall be an Independent Director.

The minimum fund size shall be at least ₦3 billion with at least 200 unit holders and a minimum free float of 15 percent with more than 50 percent of its shares held by five or fewer persons.

To retain its listing on The Exchange, each CEF shall comply with the continuing obligations stipulated by t he NS E. An existing listed class of equity shares of the CEF shall not be converted into a new class or an unlisted class unless prior approval has been given by the shareholders of th e existing class in the CEF.

It stressed that w hen calculating the net asset value per share, treasury shares held by the CEF shall not be taken into account.

It added that e very listed CEF shall immediately notify t he NSE in writing of any transaction involving the issuance or potential issuance of any securities other than unlisted, non-voting, or non-participating securities.

A gain, a CEF shall not proceed with any transaction under this Rule unless approved by t he NSE.Failure to comply with this provision may result in the suspension and/or delisting of the listed Issuer’s securities.

The Issuer shall release a Circular relating to a resolution proposing to give the Issuer authority to purchase units of its own securities, and the Circular shall indicate:

( a)If the authority sought is a general one, a statement of the Board of Directors’ or trustees intentions about using the authority;

( b)The method by which the Issuer intends to acquire the units and the number to be acquired in that manner; (c) A statement of whether the company intends to cancel the units or hold them in treasury;

( d)If the authority sought is related to a proposal to purchase from specific parties, in which case, a statement setting forth the names of the persons from whom units are to be acquired together with all material terms of the proposal shall be provided;

( e)Details of the price, or the maximum and minimum price, to be paid. This should be no less than the CEF’s NAV determined as of the specified date;

( f) An explanation of the potential impact of the proposed buyback, including whether control of the CEF may be concentrated following the proposed transaction.

The Issuer may be allowed to repurchase between five percent and 15 percent of its outstanding units pursuant to a general authorisation by the unit holders that such repurchase shall be carried out by way of a tender offer to all unit holders of that class.

Notwithstanding any of the foregoing provisions, no share buy-back shall result in a breach of the 15 percent free float requirement. A Closed-End Fund shall only be liquidated as stipulated in its prospectus .The above are the general requirements for the listing of CEF.

A CEF is a security that offers its shareholders partial ownership in an underlying portfolio of assets. CEFs are publicly traded and initially raise capital through an initial public offering, the proceeds of which are invested in a basket of securities.

CEFs are closed to new investors wishing to purchase shares from the company once the initial shares are issued. However, existing investors can trade CEFs at market prices on the floor of The Exchange. A unit holder who wants to redeem his unit(s) for cash will have to do so through his stockbroker.


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