Moscow Exchange listing reform: results of the first phase
OREANDA-NEWS. January 23, 2017. Moscow Exchange announces an update to the Exchange"s quotation lists following completion of the first phase of the listing reform. Changes to the lists adopted on 20 January 2017 will come into effect on 31 January 2017.
Alexander Afanasiev, Chief Executive Officer of Moscow Exchange, said:
"The listing reform has already resulted in significant strengthening of corporate governance at Russian public companies as well as improved transparency and attractiveness of the Russian equity market as a whole. A key aim of the reform is better protection of the rights of individual and institutional investors. Our issuers have made great efforts to implement best corporate governance and reporting practices and boost the trust of investors".
Since the reform process began in June 2014, issuers have had the opportunity to bring their corporate governance practices up to the new standards for each listing level. The more stringent corporate governance standards are based on the Corporate Governance Code approved by the Bank of Russia. Upon completion of assessments of issuers and securities, Moscow Exchange has made the following determinations:
- Seven issuers will be moved from the Level 1 List to the Level 2 List: Inter-regional Distribution Grid Company (IDGC) of Urals (MRKU), IDGC of Volga (MRKV), IDGC of the North-West (MRKZ), IDGC of IDGC of Center and Volga Region (MRKP), MOESK (MSRS), WTC (WTCM) and Vozrozhdenie Bank (VZRZ).
- Two issuers will be moved from the Level 1 List to the Level 3 List: IDGC of the Center (MRKC) and Irkutskenergo (IRGZ).
- Nine issuers will be moved from the Level 2 List to the Level 3 List: Avtovaz (AVAZ, AVAZP), Gaz-Tek (GAZT), Gaz-Servis (GAZS), Gazcon (GAZC), TGC-2 (TGKB), Hals-Development (HALS), United Credit Systems (UCSS), RBC (RBCM) and Lenenergo (LSNG, LSNGP).
- Ten issuers in the course of the reforms have been downgraded from the Level 1 and Level 2 Lists based on their own requests.
Thus, the Level 1 List will consist of 60 shares issued by 52 companies, and the Level 2 List will consist of 35 shares issued by 33 companies.
Corporate bonds have been listed under new more stringent requirements since June 2014, while bonds admitted to trading prior to the launch of the reform will mature in due course. Therefore, no changes to bonds lists are announced today.
Increased requirements for Mutual funds took effect from 9 June 2014 with 141 mutual funds subsequently delisted on 17 June 2014.
Key innovations and results of the listing reform include:
- The Exchange"s lists have been restructured to bring them into line with international standards. The previous six listing levels were reduced to three listing levels.
- New criteria was introduced for issuers to qualify for the Level 1 or Level 2 Lists: available free float replaced stakes held by one person or a group of affiliated parties.
- New criteria was introduced for equities and bonds: the issuer must have in place accounting statements in accordance with IFRS for the last three years to qualified for the Level 1 List and for one year to be qualified for the Level 2 List.
- To be admitted to the Level 1 List, an issuer must have non-executive directors accounting for at least 20% (at least three persons) of the Board of Directors (up to now, there was not the percentage requirement for non-executive directors). To be admitted to the Level 2 List, an issuer must have two non-executive directors in the board.
- The Board of Directors must have committees on Audit, Remuneration and Nominations (Human Resources and Appointments) that are comprised of a majority of independent directors.
- An issuer must appoint a corporate secretary or a division functioning as the corporate secretary, reporting directly to the Board of Directors.
- An issuer must have in place a dividend policy adopted by the Board of Directors.
- An issuer must have a specific corporate unit responsible for internal audit with its head reporting directly to the Board of Directors.
The Exchange will announce results of the second (final) phase of the listing reform in January 2018. That phase will focus on the independence criteria for directors (regarding their relations with a shareholder, issuer, competitor, counterparty or the government) as well as functions of the corporate secretary.