The Firm provides placing services for issuer clients, and therefore is subject to Article 40 of the MiFID II Delegated Regulation which requires the Firm to establish, implement and maintain effective arrangements to prevent recommendations on placing from being inappropriately influenced by any existing or future relationships.
The purpose of this statement is to set out the Firm’s policy and procedures when placing financial instruments in relation to the fair allocation of orders.
In undertaking marketing and investor selection, including in organising market sounding, arranging roadshows and in allocation, the Firm is committed to managing its conflicts of interests appropriately and conducting its processes in a fair and orderly manner that is transparent to the issuer client.
Our main principle is to achieve the best price available to the issuer client within the limits of the agreed timing of the offering.
Pricing and timing
To establish the price of an offering, the Firm will consider the relevant factors including the credit risk of the issuer and credit rating (if applicable), known investor demand, size of stake to be sold in relation to the size and liquidity of the issuer and its securities, current price, internal views on fair value and market conditions, price trend, volatility, and the pricing of previous or similar offerings.
To establish a well substantiated view of pricing, the Firm may suggest that market sounding is undertaken. The Firm will update the issuer client as necessary with regard to pricing throughout the offering process.
The Firm will also share its views with issuer clients on the best timing for an offering. Views will be based on client requirements, market conduct factors and current and expected market conditions.
The Firm will provide the issuer with a current copy of this allocation policy before the commencement of the bookbuilding process. The Firm will have initial discussions with the issuer and agree the proposed allocation per type of investment client.
The investor selection for market soundings, roadshows and allocations may include the consideration of any one or more of the following:
- client preference for specific investors;
- the nature and level of interest shown by the investor in the transaction (e.g. involvement in market sounding, roadshow meetings, provision of feedback to management);
- the investor’s interest in, and past dealings in, issuances generally or other securities of the issuer and/or sector;
- the extent to which the investor’s expressed interest and the size of order appears consistent with the investor’s past investment strategy in comparable securities or the issuer’s industry/ product sector in the primary and/or secondary markets;
- any indication, evidence or belief that the investor has exaggerated the true extent of its interest in the expectation of being scaled back;
- the timing of the investor’s interest and size of order, especially if interest is expressed at a late stage;
- degree of oversubscription;
- the investor’s anticipated holding time horizon;
- the client’s aftermarket objectives, e.g. a mix of investors to aid secondary market liquidity;
- any applicable selling restrictions in jurisdictions with which the investor is connected;
- any “free float” or similar requirements of any relevant listing, trading or indexation regime;
- concentration (i.e. preferences as to size and number of large holdings, medium and/ or smaller ones);
- avoiding allocations in inconvenient or uneconomic amounts.
The Firm shall not make agreements or quid pro quo arrangements of any kind with investors in return for allocations. Allocations will not be made on the basis of any of the following:
- profit-sharing agreement with the investor, relating to the trading of new issue securities;
- agreements with the investor to direct future business to the Firm or its affiliates;
- incentivisation via payment of a large amount of fees for unrelated services provided by the Firm (‘laddering’);
- ‘spinning’ – allocations to senior executives or corporate officers of an existing or potential issuer client in consideration for future or past award of corporate finance business;
- understandings that the allocation is made as compensation for customer complaints and/or prior losses suffered by the investor customer;
- soliciting or accepting secondary market orders from investors prior to completion (i.e. breaking syndicate) of the distribution of the offering;
- agreements to consider the investor for future allocations in return for subscription to a current offering;
- soliciting at what prices and in what quantities investors will purchase securities in the immediate aftermarket;
- agreements to purchase securities in the aftermarket at escalating prices.
The Firm may agree with distributors to pay them a distribution fee on the placing of securities, which shall be paid from the arrangement fee that the Firm shall receive from the issuer client. This may give rise to a conflict of interest for the Firm which would be managed in accordance with applicable laws and regulations and our policies and procedures.
The Firm will not receive any commission or other revenues from its investment clients for allocating securities to them.
Records of allocations
In order to be able to demonstrate how the Firm meets its obligations to the issuer client when providing placing services, as well as its obligation to manage conflicts of interest between different clients or groups of clients, the Firm will record allocation decisions at material stages in the allocation process.
Records of allocations decisions should include:
- the Firm’s overarching allocation policy in force at the time of the commencement of the service;
- the Firm’s initial discussion with the issuer client and the agreed proposed allocation per type of investment client;
- the content and timing of allocation requests received from each investment client with an indication of their type;
- where relevant, any further discussion and instructions or preferences provided by the issuer client, other members of the syndicate, or the Firm itself, on the allocation process, including any emerging in light of allocation requests received from investment clients;
- the final allocations registered in each individual investment client’s account.
The Firm must be able to justify the final allocation made to each investment client. For this purpose, a justification should explicitly provide detailed reasoning behind the final allocation unless the Firm can evidence that such detail has been provided through records maintained in the allocation process.
Particular care should be given to justifications to any investment clients that appear in either of the following two rankings of the final allocation:
- investors that receive a final allocation in the top 20% of the total allocation ranked by investor in descending order of size of allocation to each investor; or
- investors that receive a final allocation in the top 20% of the total allocation ranked by investor in descending order of the percentage allocation granted to each investor divided by the percentage bid by each investor (i.e. the relative extent to which each investor has their order reduced in the final allocation.
Final allocations will be confirmed with the issuer on completion of the bookbuilding. Where a number of bookrunners are acting for an issuer, we will only owe them duties relating to pricing and allocation if we are responsible for the pricing and allocation of the offering.