Key proposed changes include amendments to introduce dual-class shares for applicants seeking a listing on the main board. This amendment will be accompanied by appropriate safeguards to afford the necessary investor protection and will allow the JSE to remain competitive and to attract new listings. 

Chris Logan, veteran investor and owner of Opportune Investments, says the JSE’s stance on dual-class shares is supported by leading research. 

A Harvard research article noted as far back as 2017 that even those who believe dual class structures are, in many cases, efficient at the time of the initial public offering, should recognise the substantial risk that their efficiency may decline and disappear over time. 

Going forward, the debate should focus on the permissibility of finite-term dual class structures – that is, structures that sunset after a fixed period of time. 

“There is a clear link between the health of the stock exchange and the economy, as a robust exchange brings new companies and new investment opportunities. 

“However, not all blame lies with the JSE. A negative political environment is a huge hamstring. Although the proposed changes are a step forward, these are a small component after about eight years of steady delistings. 

“An independent assessment would go a long way – the London Stock Exchange did this and saw some good recommendations out of the process,” Logan says. 

Onerous financial reporting disclosures have also been reviewed and, as part of its endeavours to cut red tape, the JSE is proposing that companies will no longer need to produce an abridged report if they have published their audited annual financial statements on the company’s website. 

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The JSE is also proposing simplification of the financial reporting requirements and removing provisions that do not provide regulatory value. These changes will save time and costs for companies.

Andre Visser, head of issuer regulation at the JSE, says that both the UK and EU have reconsidered the level of free float required on new listings, which has been identified as a listing deterrent. 

In line with these developments, the JSE is proposing amendments to reduce the 20% free float threshold to 10%. 

Currently, any holdings of 10% or more in the securities of a listed company do not qualify as free float on listing, irrespective of the shareholder’s relationship with the company. 

The proposed amendments will remove the 10% holdings free float exclusion, while introducing a minimum number of shareholders and introducing a more appropriate exclusion for controlling shareholders, to align with certain peer exchanges.

Visser points out that during 2020 and 2021, the pandemic raised volatility levels, making traditional listings riskier. This resulted in a Special-Purpose Acquisition Company (SPAC) boom, especially in the US, although interest may have tapered recently.

“The JSE’s current SPAC offering is accessible and flexible, but the JSE is proposing amendments to align with international leading markets to ensure the attractiveness and competitiveness of SPACs to issuers and investors,” he says. 

“It is our ongoing objective to create an enabling environment for listing on the JSE, as we take into account international best practices as we evolve our listing requirements,” says Visser, adding that the proposed amendments should go a long way towards providing a conducive and internationally competitive environment for capital-raising on the JSE, with appropriate safeguards to ensure investor protection and to attract new listings. 

Earlier this month, as reported by Moonstone, the JSE’s head of public policy and regulatory affairs, Anne Clayton, told Parliament’s Standing Committee on Finance that the stock exchange had serious concerns about amendments to the Companies Act under the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill. 

The committee heard that the proposed amendments, related to beneficial owner disclosure, were not aligned to transparency and disclosure practices in developed markets, and, if implemented, could discourage companies from raising capital on a South African exchange.

Clayton told the committee that the proposed amendments (to the Companies Act) could result in listed companies moving their primary listing from South Africa to jurisdictions “with sensible, practical and effective disclosure requirements”. BM/DM