Alternatives to Listing on a U'S' Stock Exchange

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Alternatives to Listing on a U.S. Stock Exchange

• Tod Ackerly
• September 30, 2009

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orWhat Globalization Can Do For You
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Globalization of International Securities Markets

• Investors (especially Institutional Investors)
  have Easy Access to Markets Worldwide
• Brokerage Level Consolidation, Correspondent
  Relationships, Global
  Electronic Trading Systems
• Market Level Consolidation, Alliances
• Plumbing Level Consolidation,
  Inter-Connectivity
• Information Level Internet, Multiple News
  Services
• As a Result
• Investors are able to Learn about Foreign
  companies Place trades in their securities and
  Complete the transactions, all with increasing
  ease and decreasing cost.
• Companies are able to list on Foreign exchanges
  and obtain favorable results in secondary
  trading.

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Good Reasons Not to do IPO in U.S.

• The SEC Registration Process
• Is Time-Consuming and Expensive
• Difficult to Plan Offering Schedule, Money
  Availability
• The SEC On-Going Requirements
• Reporting, e.g., 8-Ks, Reg. S-K Disclosure Items
• Sarbanes-Oxley
• Listing Standards can be Tough
• Need to be Checked Carefully
• Possibility of Being De-Listed
• Easy to Get Lost in the Crowd

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Considerations in Choosing an Offshore Market

• Each Companys Circumstances are Different
• One Size Does Not Fit All
• Regulatory Requirements in Local Market
• E.g., Nomads on AIM in London
• Is a full-blown EU Prospectus required?
• Access to Potential Investors
• Will Analysts Follow your Stock?
• Secondary Market Liquidity

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U.S. Regulatory Requirements -- Regulation S

• General Requirements -- Offer and Sale Must be
  Made Outside the U.S.
• No Directed Selling Efforts in the U.S.
• Offshore Transaction
• Three Levels (Categories) of Requirements,
  Based Generally on Likely U.S. Market Interest
• Equities of U.S. Companies in Category 3 -- the
  Most Onerous Requirements

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U.S. Regulatory Requirements -- Regulation S

• The Category 3 Requirements
• Securities Must contain a Legend.
• Bylaws Must Contain Provision Refusing
  Registration of any Transfer Not Made per U.S.
  Securities Laws.
• Securities Remain Restricted for One Year.
• Each Purchaser during First Year Must (a) Certify
  that it is Not a U.S. Person, and (b) Agree to
  Resell only in accordance with U.S. Securities
  Laws.

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Difficulty of Complying with the Certify/Agree
Requirement

• How is it Possible to Comply with this
  Requirement When Securities are Listed on a
  Modern, Electronic Market?
• Some Markets Are Trying to Establish Compliant
  Systems.
• Few Have Succeeded, but Reg. S Friendly
  Markets do Exist.

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Going Public without SEC Registration

• It is Possible for a U.S. Company to Go Public
  without ever Registering with the SEC.
• Dual Tranche Offering Offering to QIBs in US
  under Rule 144A, plus an Offshore Offering under
  Reg. S.
• A Single Pool of Liquidity can be Created, IF the
  Plumbing is in place so that U.S. QIBs can Buy
  and Sell Easily on the Offshore Market In the
  Past this Capability has been Difficult.
• After One Year, the Reg. S Restrictions come off,
  and all Investors, including all U.S. Persons,
  can buy and sell the securities freely.
• The Only Limitation Trading must be on an
  Offshore Market that is Reg. S Friendly.

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Alternatives to Listing on a U.S. Stock Exchange

• Tod Ackerly
• September 30, 2009

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• Introduction to
• The BSX

Greg Wojciechowski - President CEO 2009
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BSX Snapshot

• BSX founded in 1971
• Over 650 listings
• 16 Trading Members and Listing Sponsors
• Daily trading
• Rolling T 3 Settlement
• Market Cap over 200 Billion

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The BSXs Mission

• To Develop an efficient, electronic domestic
  capital market
• To develop a listing service for investment funds
  and other international securities
• To develop a platform to assist in the
  convergence of the capital and insurance markets
• To build the infrastructure to make Bermuda the
  worlds first truly offshore, international
  capital market

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Sound Legal Framework

• Bermuda Stock Exchange Private Act - 1992, 1996,
  1997, 2002
• Financial Institution under Schedule 3 of BMA Act
  1969
• Power to Make Regulations - subject to prior
  consent of BMA

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International Recognitions

• Full Member of World Federation of Exchanges
• DOSM status from US-SEC
• Registered Organisation - LSE
• Designated Investment Exchange - UK Financial
  Services Authority
• Approved Stock Exchange Australian tax
  authorities
• Recognised Investment Exchange The BMA
• Affiliate Member IOSCO
• Recognised Stock Exchange UKs HM Revenue
  Customs
• Member Americas Central Securities Depository
  Association

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Regulatory Objectives

• Integral part of the domestic capital market
  infrastructure National stock exchange
• Investor Protection full disclosure and
  transparency
• A level playing field - equal access to all
  investors

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Regulatory Philosophy

• Suitability
• Transparency
• Disclosure
• Equality
• Corporate Governance

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Domicile Demographic
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Securities Type
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New Approved Listings
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Trading Volumes by Year
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Trading History by Value
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Trading Settlement

• Fully Electronic
• BEST - Trading System, CLOB based
• BSD - Fully integrated settlement and
  Depository system

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The Bermuda Securities Depository

• The Bermuda Securities Depository (BSD) is wholly
  owned, controlled and operated by the BSX
• BSD operates a clearing, settlement and
  depository service for the Bermuda market
• It operate in basically the same way as other
  electronic central depository systems although
  adapted to the Bermuda environment.

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Source of BSX Information

• www.bsx.com

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Jeffrey Conyers

• Chief Executive Officer/Director

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Trading Member

• The following is a concise overview of the BSX
  Membership process, complete information on the
  Trading Member role may be found in the BSX
  Trading Membership Regulations, which includes
  the full form of application, Trading and
  Settlement Regulations (and Practice Notes made
  there under), and the Code of Conduct.

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Introduction

• The BSX was established in 1971 by the three
  Bermuda banks in operation at the time and was
  formally incorporated as a for profit, limited
  liability company under the Bermuda Stock
  Exchange Act 1992.
• Today the BSX is the worlds leading fully
  electronic securities market. Domestic and
  international trading is executed on a daily
  basis, Monday to Friday on BEST, the Exchange's
  custom-designed fully electronic trading system.
• Trading Members are granted non-transferable
  licenses to trade on the Exchange and membership
  is open to both international and domestic
  brokers that meet the requirements of the BSX,
  without limitation on numbers.

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Trading Membership Requirements

• The BSX invites applications for Trading
  Membership from any company that meets the
  requirements as set out in the BSX Trading
  Membership Regulations, including
• A business plan setting out the companys plans
  to be actively engaged in trading securities on a
  full time basis
• Be a limited liability company incorporated in
  Bermuda (local 80/20 or 60/40 or exempted) i.e.
  no individual members or permit companies will be
  admitted
• Meet the Minimum Net Capital (MNC) requirements,
  both at the time of admission and on a continuous
  basis thereafter
• Have appointed an independent auditor
• Satisfy the BSXs requirements for relevant
  experience
• Install and use terminals for the BSXs BEST
  trading system
• Pay an admission fee, an annual membership fee
  and an ad valorem transaction levy
• Make annual contributions to the BSX, as
  prescribed by the BSX and approved by the Bermuda
  Monetary Authority (BMA) from time to time.

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Categories of Trading Members

• Trading Members may choose to join the BSX as
  Brokers, Broker/dealers, or Market-makers.
• A Broker may only act in an agency capacity (i.e.
  execute trades on behalf of clients) and may not
  trade on a principal basis
• A Broker/dealer may act in an agency capacity and
  trade as principal (subject to prior notification
  of the client if he/she is dealing with a
  client). A broker/dealer is subject to a higher
  Minimum Net Capital (MNC) requirement than a
  broker to reflect the higher risk involved in
  such business.
• A Market-maker is a Trading Member who agrees to
  provide continuous two way quotes, as principal
  in one or more specified securities.

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Membership Fees

• The membership fees and MNC requirements for
  Trading Members are as follows

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Sponsorship

• Trading Members may sponsor all forms of
  application to list on the BSX in addition to
  their trading privileges. Listing Sponsors, by
  comparison, do not have trading privileges and
  may not sponsor primary equity listings.