Last year was a good one for the Channel Islands Securities Exchange (CISE). It welcomed 423 new companies in 2015, 8% ahead of the previous year, including the first issuer with a Chinese parent – China Cinda Finance (2014) II. The growth has accelerated this year, with 103 new listings in the first quarter of 2016, an increase of 13% on last year.
423
How many new companies listed on CISE in 2015
Fiona Le Poidevin, the CISE’s Chief Executive Officer, is pleased but not surprised. She cites a long list of factors that make the CISE an attractive place for companies to list: responsiveness to users’ needs; high service levels; cost-effectiveness compared with other exchanges; a position within the European timezone but outside the EU; and global standards of regulation, which are applied proportionately based on a robust analysis of risk.
Modernisation Since Le Poidevin took office at the start of 2015, the exchange has rebranded, launched a marketing campaign and improved its website to provide better information for those who sponsor listings. “We wanted to create the image of a modern and innovative exchange,” she explained.

The rise in listings also reflects a period of recovery from a traumatic time in its history that saw it investigated by its regulator, the Guernsey Financial Services Commission, and resulted in a record fine and a restructuring to separate the commercial and regulatory aspects of the business. Last year’s rebranding was aimed partly at demonstrating that these events are firmly in the past.  

It also comes amid a sea change in attitude to offshore financial centres, sparked by events such as the leak of the Panama Papers, which documented widespread international tax avoidance and money laundering in offshore havens such as Panama, the Cayman Islands and the British Virgin Islands. Paradoxically, however, Le Poidevin believes the Channel Islands may have benefited from what she sees as a “flight to quality” after “the Panama Papers leak brought all offshore investment into the spotlight”.

Le Poidevin said: “We have seen a number of vehicles migrate from territories such as the British Virgin Islands and the Cayman Islands, reflecting a greater interest in places with more regulation and higher standards.” She points out that Guernsey and Jersey top the list for regulatory and supervisory standards anywhere in the world, beating countries such as the UK, France, Luxembourg and the US, according to assessments by the Financial Action Task Force (FATF), on anti-money laundering compliance. “Sophisticated investors understand the Channel Islands and are clear about the financial services standards we have,” she said.

This is borne out by Dominic Wheatley, Chief Executive of Guernsey Finance – the promotional agency for the island’s finance industry internationally. “The Panama Papers highlighted in stark detail the risks associated with conducting business where modern standards of transparency and regulation are not in place,” he said. “Being a financial centre of the future is about more than being low cost and easy – it is about proactively anticipating and responding to the changing world in which we live and being a full member of the international community. 
“Sophisticated investors understand the Channel Islands and are clear about the financial services standards we have”“Guernsey therefore fully supports international initiatives on beneficial ownership [because] in many ways we are already ahead of the curve and would welcome other jurisdictions enhancing their own regimes.”

Geoff Cook, CEO of Jersey Finance, adds that, while the Panama Paper revelations were initially unwelcome because of the “lack of discrimination” among commentators between offshore regimes, “it gave us an opportunity to explain why these problems do not occur here”. Jersey Finance did this by highlighting the level of transparency which it already has by, for example, insisting on the disclosure of the true, beneficial ownership of any company which incorporates on the island.

He adds that Jersey is seeing a “commercial dividend” because of the reputational work it has done in areas such as tax transparency and information exchange. “While that can make us more expensive than our peer group, everyone is becoming more conscious of reputation as a cost of doing business,” he explained. This is reflected in statistics for the first quarter of the year, which show increases in everything from the number of companies registered to regulated funds and banking deposits, with Guernsey also reporting a healthy increase in funds under management on the island over the same period. 

Both Wheatley and Cook pay tribute to the CISE’s role in enhancing the status of the Channel Islands to investors. “The listing growth at the CISE is very encouraging,” said Wheatley. “The CISE has become a key part of the financial services infrastructure in Guernsey and enables groups with locally listed vehicles to demonstrate additional substance in the island. The fact that the CISE is a fully regulated marketplace and has [received international recognition] from the likes of the International Organization of Securities Commissions and the World Federation of Exchanges also adds to Guernsey’s appeal as a finance centre.”

Cook adds that, while the exchange’s activities are dwarfed by Jersey’s strengths as a centre for private wealth management, and Guernsey’s in captive insurance, “it is an important part of the brand value” of the islands.
Local listings 13%
The number of new listings on the CISE during the first quarter of 2016 The CISE’s listings are dominated by investment funds, although one of Le Poidevin’s targets is to increase the number of indigenous Channel Islands companies listing on the exchange – a recent success is Raven Russia, which specialises in commercial real estate in Russia, and is registered in Guernsey. Indeed, the CISE has just set an example for others by listing itself on its own exchange. In May, Raven Russia added a CISE listing to its existing London quotation. While the relatively small size of the exchange may deter trading companies, Le Poidevin believes it can actually be an advantage with the CISE acting as an “incubator exchange”, allowing small companies to get a taste of the requirements of a public listing before going on to a larger market such as London. “They can establish a track record of being on a regulated exchange before leapfrogging to somewhere like the London Stock Exchange (LSE). They can list here earlier than they may be able to elsewhere, and get used to the listing and corporate governance requirements, making the CISE a stepping stone to a larger exchange.” 

In fact, Le Poidevin sees London as a partner, rather than a competitor. Rivals for listing business include Luxembourg and Dublin for debt vehicles, and the LSE’s Specialist Fund Segment for highly sophisticated investment vehicles.

One area driving the increase in listings is specialist debt vehicles, while real estate investment trusts (REITs) and single asset vehicles are also key strengths. In addition, last year, it drew up new rules for listing Special Purpose Acquisition Companies – cash shells that raise money for specific objectives. 

Referring to last year’s Chinese listing, she said:  “The message is that we are open to global business; we are a global exchange.”

She adds that the pipeline of listings is encouraging, with healthy interest from areas the exchange has been promoting, such as insurance linked securities (ILS), fintech and Islamic finance. One of its listing managers has just completed the CISI’s Islamic Finance Qualification, helping the exchange’s promotion of itself as accepting Islamic finance vehicles.
“The message is that we are open to global business; we are a global exchange” The CISE is also promoting itself within the introducer community in London, as well as liaising closely with its members who act as listing sponsors. These sponsors currently have to have an office in the Channel Islands, but it is consulting on opening this to non-Channel Islands sponsors and an announcement is expected later in the year.

Good relationships with these sponsors are key. “Sponsors bring companies to the market so they are promoting the exchange through their work. They are our ambassadors; they do a lot of our marketing for us.”