FSCA approves JSE’s plans to divide its main board into two segments

The Financial Sector Conduct Authority (FSCA) has approved amendments to the JSE’s listings requirements dealing with market segmentation, which will come into effect on September 23. 

The market segmentation project repositions the JSE’s main board into two segments, the prime and the general segment. This new structure aims to offer a suitable and efficient level of regulation tailored to the size and liquidity of issuers on the main board, while continuing to uphold investor confidence in the market.

The general segment will afford issuers on the main board listing with different application of certain provisions of the listings requirements. The effective launch date of the general segment has not yet been announced.

Issuers seeking to apply for the general segment can submit an application to the JSE from September 23.

Once approved, the issuer will be classified under the general segment. The general segment is meant to provide meaningful regulatory relief to issuers while maintaining transparency and disclosure.

Some of the benefits include more enabling capital raising measures, significant cost savings, more efficient and cost-effective financial reporting and greater flexibility for the boards to manage the business.

“We welcome the FSCA’s approval of the amendments to the JSE’s listing requirements in relation to the market segmentation project as we believe it will create a flexible and enabling environment for certain companies listed on the main board to raise capital and undertake corporate actions within an appropriate and relevant regulatory framework,” JSE issuer regulation director Andre Visser said on September 3.

The general segment offers an automatic yearly rolling general authority to issue shares for cash without shareholder approval, representing up to 10% of the issuer’s issued share capital.

It also provides a general repurchase authority not requiring shareholder approval, not exceeding 20% in any one financial year.

In addition, the general segment allows specific repurchase authority without shareholder approval, as long as it does not involve related parties and does not exceed 20% in any one financial year.

The general segment also removes fairness opinions for related party corporate actions and transactions, with more focus being placed on governance arrangements and transparency, where agreements are open for inspection, and exclusion from voting for related parties and associates.

Another feature is the removal of the requirement to release results announcements within three months. Issuers will only be required to prepare a yearly report within four months.

There is also the removal of the preparation of formal financial information in favour of inclusion of a detailed narrative on the impact of the transaction or corporate action on the financial statements.

Further, the general segment will increase the category one percentage ratio to 50% or more from the current 30%, which increases the category two threshold accordingly.

The general segment will also only require two-year audited historical financial information for the subject of a category one transaction. The current requirement is three years of audited historical information.

There will also be an increase of the small related party transaction percentage ratio to 3% from 2.5% and less than or equal to 10%, up from 5%.

The general segment will also increase the classification of a material shareholder from 10% to 20%.

Classification into the general segment is only available to main board issuers who are not included in the FTSE/JSE All Share Index.

The JSE said it remains committed to creating an enabling environment for listed companies and consequently continually assesses its listing requirements to ensure they are relevant and applicable to the ever-evolving needs of the market.

Further to the approval of the market segmentation reforms, the JSE announced the expansion of its secondary listings framework and has added Tadawul, as well as all the Euronext exchanges, including Amsterdam, Brussels, Dublin, Paris, Milan, Lisbon and Oslo, to its list of approved and accredited exchanges.

Tadawul and Euronext exchanges are now included in the group of global exchanges recognised for the fast-track process, including the LSE, ASX, NYSE, TSX, SGX and HKEX. The aim of this initiative is to improve accessibility and efficiency for international companies, the JSE said.