Rwanda
Capital Market Regulation for Issuance of Regional Fixed Income Securities
Regulation 13 of 2012
- Published in Official Gazette 53bis on 31 December 2012
- Assented to on 5 December 2012
- Commenced on 31 December 2012
- [This is the version of this document from 31 December 2012.]
Part I – General provisions
Article 1 – Purpose
The purpose of these regulations is to facilitate the investors to access long term funds through the issuance of regional bonds.Article 2 – Scope of the Regulations
These Regulations applies to all corporate bodies incorporated in East Africa or other Corporate & International Bodies Incorporated outside East Africa which meets eligibility criteria’s provided in these regulations.Part I – The requirements for issuance of regional fixed income securities
Article 3 – Approval entity
The issuer shall elect a primary jurisdiction in which it will lodge the prospectus. It shall simultaneously submit the prospectus to the regulators of the other jurisdictions in which it proposes to raise capital for approval. The procedure for approval is detailed in Appendix I.Article 4 – Fees
Each regulator approving the issue shall get an equal share of the evaluation fees fee of 0.1%. At all times, the evaluation fees shall be a maximum of USD 200,000 and a minimum of USD 20,000.Evaluation fees shall be paid at the time of application to the Primary Regulator. It shall be the duty of the Primary Regulator to transfer to the other regulators their share of the evaluation fees paid. In the event of a rejection, the issuer shall forfeit 25% of the evaluation fee paid.Article 5 – The issuer and incorporation status
The issuer shall be an entity incorporated or registered as a foreign entity in all jurisdictions where the offer is to be made.Where the issuer is not a company, then it shall be duly established under a written law or recognized under an international treaty.Article 6 – Share capital and net assets
The minimum paid-up share capital shall be the local currency equivalent of USD 850,000 and the net assets shall be the local currency equivalent of USD 1,700,000.All sovereign borrowers, quasi-sovereign borrowers and treaty organizations are exempted from this requirement.Article 7 – Financial statement disclosure
Issuers without a track record may raise capital through special purpose vehicles.Issuers without a track record shall be subjected to disclosure requirements on performance projections, risk factors and mitigations and on the availability of financial information to assess any projections made.Where an issuer has a track record, the following financial statements complying with IFRS for the three years preceding the offer shall be required—Audited accounts not more than 6 months old at the time of the offer;Where the audited accounts are more than 6 months old they shall be supported by management accounts.Management accounts shall be prepared to a date within 1 month of the date of the offerAn issuer who is not eligible for listing may be approved to issue its securities to sophisticated or institutional investors and the securities may be approved for trade on regulated Over the Counter (OTC) markets.Article 8 – Cash flow projections
An issuer shall provide proforma financial statements that shall cover a period of not less than three (3) years from the date of issue or where the bond has a shorter maturity period, the life of that bond.Article 9 – Profitability
An issuer shall be required to have reported profits in at least two of the previous three years preceding the offer.Provided that the regulatory authorities shall retain the discretion to grant a waiver in circumstances where decline in profitability is not deemed to be a consequence of the fundamentals of the company.Provided further that an issuer without a track record will be eligible for approval to make offers to institutional or sophisticated investors but not unrestricted offers to the public.Article 10 – Ratio analysis
The financial ratios applicable to national offers shall not be applicable to regional offers.Article 11 – Guarantee and credit enhancement
An issuer may seek a guarantee or credit enhancement.Provided that where credit enhancement is to be provided the following requirements shall apply:The guarantor shall be a bank, duly licensed non-bank financial institution, or recognized international financial institution;A letter of no objection shall be provided by the guarantor’s primary regulator (other than in the case of an international financial institution)The guarantor shall be required to have a valid credit ratingArticle 12 – Issue size
The minimum size of a regional fixed income security issue shall be USD $850,000.Article 13 – Credit ratings
An issuer of regional fixed income securities shall maintain a valid credit rating for so long as the issue remains outstanding.Provided that where an issuer has no track record or where the debt is to be funded from a specific project’s revenues then, the credit rating shall be in respect of the project or performance projections.Only a credit rating agency with a publicly available Code of Conduct guiding its ratings practices and which is in compliance with International Organization for Securities Commissions (IOSCO) Code of Conduct Fundamentals for Credit Rating Agencies shall be eligible to provide credit rating reports.Provided further that a credit rating agency which complies with the IOSCO CRA code shall not be required to be registered in any EAC jurisdiction.All Information Memoranda for regional offers of fixed income securities shall include a cautionary statement with words to the effect that—“A credit rating is not a recommendation to apply for the securities on offer or an assurance of performance of the offeror and investors should exercise due diligence and use the rating as only one of the considerations in making their investment decision.”Article 14 – Listing
Listing shall be mandatory for all regional offers of securities that are to be offered to the public or a section of the public.Provided that this requirement shall not apply to offers targeted at institutional or sophisticated or professional investors.However, offers targeted at institutional or sophisticated investors may trade on a regulated OTC platform.An institutional or sophisticated or professional investor means:(a)any person licensed under any securities legislation applicable in the EAC region;(b)any authorized or a recognized scheme by any securities legislation applicable in the EAC region;(c)an individual, either alone or with any of his associates on a joint account, having proven liquid assets as may be prescribed from time to time, or its equivalent in any foreign currency;(d)any company or partnership having proven liquid assets of an equivalent as may be prescribed from time to time, or its equivalent in any foreign currency;Article 15 – Trading, clearing and settlement
An issuer of regional fixed income securities shall comply with the regional requirements relating to trading, clearing and settlement.Article 16 – Professional parties
An issuer of regional fixed income securities shall comply with the following requirements relating to professional parties.Transaction arranger/ Sponsoring stockbroker/ Placing agent:
Appoint a transaction arranger/placing agent/ sponsoring stockbroker who shall be a corporate body licensed by at least one EAC Partner State regulator and has affiliates in all regional jurisdictions where the security will be issued.Accountant’s report
Appoint an accountant who shall be subject to the requirements of their professional bodies. The reporting accountant shall be a firm registered in any EAC country.Legal opinion
Appoint a legal adviser who shall be subject to the requirements of their professional bodies. The legal advisers shall be a firm registered in any EAC country with affiliates in all EAC countries.Paying and receiving bank
Appoint paying and receiving banks which shall be banks licensed in the EAC countries where funds are being raised. The issuer shall determine the number of receiving banks.Article 17 – Denomination of offer and application of funds outside jurisdiction where funds raised
An issuer may raise funds in any jurisdiction in the region without restriction on the jurisdiction where proceeds are to be used subject to disclosure of that fact in the information memorandum and subject to obtaining the necessary exemptions on exchange controls, if required.An issuer shall determine the currency or currencies for the issue.Article 18 – Eligibility to issue
An offer of fixed income securities approved for issue in more than one jurisdiction in EAC, shall be considered a regional offer of fixed income securities and shall comply with the relevant regulations, rules or guidelines attaching to issuers of securities to the public in any jurisdiction in which the issue has been madeArticle 19 – Continuous disclosure obligations
An issuer of a regional fixed income security shall be required to comply with the continuous disclosure obligations applicable to offers of fixed income securities in all jurisdictions in which it has raised capital from the public.Where the regional fixed income security is listed on one or more securities exchanges or is traded on any regulated market within the EAC region it shall comply with any and all continuous obligations imposed by that securities exchange or market.The issuer shall be obliged to avail to investors in all jurisdictions in which the issuer has raised capital all relevant information for proper appraisal of the financial position of the issuer in an effective and timely manner.The matters subject to continuous reporting shall include:1.Updates on rating reports;2.Interim financial reporting;3.Audited financial reports.Proposals on continuous disclosure obligations for issuers of regional fixed income securities to be enforced by regulators shall be those applicable in each of the jurisdiction where the offer is made.Article 20 – Penalties
An issuer who fails to comply with the continuous disclosure obligations including failure to provide any required information to all investors simultaneously shall stand liable for breach of the continuous reporting obligations in any jurisdiction in which such omission occurs and the applicable sanctions shall apply.Article 21 – Additional offers
Notwithstanding that an issuer has made a regional fixed income security offer, the issuer may at any juncture raise an additional amount in any one jurisdiction pursuant to a further pricing supplement updating the disclosures in the regional information memorandum.In all events, where a green shoe option is available it shall be made to all countries where the offer has been made available.Article 22 – Dispute resolution
The law in force in the jurisdiction where a cause of action arises shall apply in case of a dispute between an investor and an intermediary or between an issuer and an intermediary. The information memorandum shall specify the applicable law and mode of dispute resolution where a dispute involves the issuer and an investor.Article 23 – All prospectuses for regional offers of fixed income securities shall contain the following statement on its front page—
Article 24 – Repealing of inconsistent provisions
All prior regulatory provisions contrary to this regulation are hereby repealed.Article 25 – Commencement
This code shall come into force on the date of its publication in the Official Gazette of the Republic of Rwanda.History of this document
31 December 2012 this version
Commenced
05 December 2012
Assented to