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[South Africa] Johannesburg Stock Exchange proposes amendments to listing requirements
As part of its continued commitment to creating an enabling environment for listed companies, the Johannesburg Stock Exchange , JSE, has announced the proposed amendments to its Listings Requirements to introduce the Market Segmentation Project aimed at the smaller issuers on the Main Board of the exchange.
In May 2022, the JSE sought the input of stakeholders through a consultation paper that proposed various strategic initiatives, including the Market Segmentation Project. The feedback then – and the feedback in June 2023 when an independent survey was conducted to obtain input on specific segmentation proposals – was resoundingly positive and supported the repositioning of the JSE’s Main Board into two distinct segments.
The exchange currently has a two-tiered equities market, the Main Board and AltX. The proposed segmentation of the Main Board into the Prime Segment and General Segment aims to provide an effective and appropriate level of regulation depending on the size and liquidity of Main Board companies, whilst also maintaining investor confidence in our market.
“The Market Segmentation Project is set to redefine the regulatory landscape for smaller listed companies on the Main Board. By introducing segmentation, we are proposing measures that will support the ease of raising capital and undertaking corporate actions by smaller companies whilst maintaining investor confidence through disclosure and appropriate safeguards,” says Andre Visser, Director: Issuer Regulation at the JSE.
Some of the reforms proposed (but not limited to) for the General Segment, include:
Introducing more flexibility through a general authority to issue shares for cash without shareholders’ approval, which may serve as a catalyst for capital raisings, subject to a prescribed limit and other safeguards like pricing parameters;
Removing fairness opinions for related party transactions/corporate actions with more emphasis being placed on shareholders’ approval, disclosure and the corporate governance processes applied;
Removing of the preparation of pro forma financial information with more emphasis being placed on a detailed narrative explaining the impact on the transaction/corporate action on the financial statements;
Introducing larger percentage ratios for category one transactions;
Introducing larger percentage ratios for small related party transactions with more emphasis being placed on disclosure and the corporate governance processes applied;
Introducing more flexibility to undertake repurchases of securities; and
Introducing more flexibility on financial reporting by removing the preparation of either (i) condensed financial statements or (ii) annual financial statements/summary financial statements within three months. Listed companies will only be required to prepare an annual report within four months.
Whilst maintaining investor confidence and appropriate safeguards, the reforms propose meaningful relief from a regulation, cost and resources perspective for smaller companies on the Main Board that would fall into the General Segment, whilst also supporting capital raisings and general financial markets activity for such issuers.
“As Africa’s largest stock exchange, it is crucial for us to take all necessary measures to encourage inbound investment and boost confidence among local and international investors. Through this project, we are optimising the regulatory conditions which facilitate easier business operations, foster growth and ultimately, invigorate investor engagement. This restructured environment will likely attract more investment and retain current listings, enhancing the overall health of our capital market,” said Visser.
This initiative is part of a broader set of reforms to cut red tape and compliments the Simplification Project, which aims to simplify the Listings Requirements using plain language to record concise regulatory objectives, allowing better understanding and application of the requirements by listed companies, sponsors, and investors.
Together, these projects demonstrate the JSE’s proactive approach to regulatory innovation and its dedication to enhancing the attractiveness and effectiveness of the South African capital market.
