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front and back.indd 115/12/2014 12:49FORUM FOR US SECURITIES LAWYERS IN LONDON International Capital Markets Glossary by The Forum for US Securities Lawyers in London 20152 International Capital Markets GlossaryInternational Capital Markets Glossary 3 Introductory Letter Dear all, Welcome to the first edition of the International Capital Markets Glossary, prepared by the Forum for US Securities Lawyers in London. The Forum is a trade association representing over 1,500 US-qualified lawyers practicing at a number of law firms and financial institutions in the London capital markets, as well as market participants including securities exchanges, settlement systems and registrars. Founded in 2006, the Forum is an independent, self-funded organization dedicated to addressing issues of, application of and compliance with, US securities laws in the London and international capital markets. This Glossary is the product of many years of hard work, with contributions from various lawyers and market participants. Based on feedback from clients and market participants, we saw a gap in the market and decided to create an International Capital Markets Glossary, which is intended to act as an essential reference tool for every lawyer, client and market participant, especially those at more junior levels. This Glossary is available in hard copy (printing was generously sponsored by RR Donnelley), as a PDF document, or as a mobile app – it will be easily accessible no matter where you go! We always welcome ideas for new projects for the Forum and welcome any comments, suggestions or amplifications to the Glossary. This Glossary is intended to be a living document which will be modified on an ongoing basis. Kindly send any suggestions to info@tffuslil.com. Best regards, Daniel Winterfeldt Edward Bibko Head of International Capital Markets Head of Capital Markets, EMEA CMS Cameron McKenna LLP Baker & McKenzie LLP Founder and Co-Chair of the Forum Co-Chair of the Forum This Glossary is generously sponsored by RR D onnelley This Glossary has also been supported by4 International Capital Markets Glossary Credits The creation of this Glossary would not have been possible without the generous contribution of many lawyers and market participants. In particular, the following individuals contributed to the preparation of this Glossary: Jennifer Pence, Jennifer Poon, Trish O’Donnell and Mathias Strasser, as well as Paula Ade, Rhiannon Ballinger, Peter Bateman, Nick Earles, Henriika Hara, Ahmad Khokher, Sahar Kianfar, Jack Ryan and Max Weaver. In addition, we extend a very special thanks to Hilary Winter (Orrick) for going above and beyond in her assistance with this project. The mobile app for this Glossary was created by WallStreetDocs Ltd. This Glossary was typeset and printed by RR Donnelley. About the Forum for US Securities Lawyers in London: The Forum is a trade association representing US-qualified lawyers and participants in the London capital markets. Membership stands at over 1,500 people and includes US-qualified lawyers practicing at over 45 law firms and 30 financial institutions in the London capital markets, as well as market participants including securities exchanges, settlement systems and registrars. Founded in 2006 by Daniel Winterfeldt, Head of International Capital Markets, CMS Cameron McKenna and co-chaired by Edward Bibko, Head of European Capital Markets, Baker & McKenzie, the Forum is an independent, self-funded organization dedicated to addressing issues of the application of and compliance with US securities laws in London and international capital markets. In recent years, the Forum has been particularly active in publishing legal updates, facilitating roundtables about legal issues affecting the London capital markets, writing SEC comment letters in response to various rule proposals and creating legal procedures to reflect market practice in the London capital markets. For more information, please visit http://tffuslil.com. International Capital Markets Glossary 5 Introductory Note The defined terms and related definitions contained in this Glossary provide an introduction to terms commonly used in US securities practices outside the United States – in particular, London. Although primarily focused on US securities concepts, some UK related concepts have also been included. The terms and definitions involve complex legal concepts on which, in the context of a transaction, legal advice will be required. The terms and definitions are also subject to change as applicable laws and regulations are amended and as customary practice evolves. Most defined terms in this Glossary have been capitalized where they appear in a definition. However, for ease of reading, we have kept the more common terms lower case when they appear in a definition. These terms include: bidder(s), bond(s), dividend(s), debt offering(s), exemption(s), initial purchaser(s), issuance(s), issuer, issuer’s counsel, issue(s), lender(s), offering(s), offering document(s), ordinary share(s), share(s), security(ies), stock, underwriter(s) and underwriter’s counsel. This Glossary is intended to be a living document which will be modified periodically. We therefore welcome any comments, suggestions or amplifications to the Glossary. Kindly send any suggestions to info@tffuslil.com. TermDefinition 10b-5 Letter A disclosure letter from issuer’s counsel, and often also underwriters’ counsel, addressed to the underwriters confirming the undertaking of Due Diligence procedures regarding the preparation of an offering document. The letter states that, based on counsel’s Due Diligence procedures, there is no reason to believe such offering document contains any untrue statements of Material facts or omits to state any Material facts that are necessary in order to make the statements in the offering document, in the light of the circumstances under which they were made, not misleading. This letter forms the foundation for the underwriters’ Due Diligence Defense. Technically, this document is not an “opinion” and is referred to as a “disclosure letter.” A 10b-5 Letter is also referred to as a Negative Assurance Letter. 10b-5 Representation A representation by the issuer in an Underwriting Agreement confirming that there is no untrue statement of a Material fact and no omission to state a Material fact that is necessary in order to make the statements in the offering document, in the light of the circumstances under which they were made, not misleading. ’33 Act US Securities Act of 1933, as amended. A federal law passed by the US Congress in the aftermath of the 1929 stock market crash, governing and prohibiting the offer or sale of securities (aside from certain exempt securities or transactions) in the Primary Market unless the securities have been registered with the SEC. It is based on the belief that all investors should be provided with full and accurate disclosure of information at the time of making investment decisions, which is sometimes called the “sunlight” (or sunshine) theory of regulation. Also referred to as the Securities Act. ’34 Act US Securities Exchange Act of 1934, as amended. A federal law passed by the US Congress, which established the SEC and governs the trading of securities in the Secondary Market and includes periodic disclosure requirements, antifraud provisions, and the regulation of Broker- Dealers, Tender Offers and US securities exchanges. Also referred to as the Exchange Act. 135-Day Rule Accounting guidance under SAS 72 that permits Negative Assurance to be provided by an accounting firm in its Comfort Letter in connection with an offering. This type of comfort must be delivered no more than 135 days from the end of the most recent period for which the accounting firm has performed its audit or review. 144A for Life Offering A Rule 144A Offering in which the issuer is not required to become a Reporting Company under the Exchange Act and where such offering does not provide investors with Registration Rights. 144A Offering A Private Placement of securities where the securities are sold only to QIBs pursuant to the exemption provisions of Rule 144A.6 International Capital Markets Glossary TermDefinition A/B Exchange OfferAn offer by an issuer to exchange previously issued Restricted Securities (i.e., securities issued in a Private Placement) for new registered securities, which are ordinarily on the same terms as the old securities. The effect of the offer is to allow the issuer to provide securities on an accelerated timetable without registration and then, at a later date, to provide holders with registered and freely tradable securities. A/B Exchange Offers were authorized in the No-Action Letter Exxon Capital Holding Corp, 1988 SEC No – Act LEXIS 682. Also referred to as an Exxon Capital Exchange Offer. ABLSee Asset-Based Lending. ABS See Asset-Backed Security. Accelerated Bookbuild An offering of shares over a short time period, with little or no promotion, and generally used in conjunction with a Placing or Private Placement. An Accelerated Bookbuild is often used when a company is in immediate need of financing and debt financing is not an option (this can be the case when a company is looking to make an offer to acquire another company). In addition, Accelerated Bookbuilds are sometimes used for Block Trades. Accelerated Filer As defined in Rule 12b-2 and generally including a Public Company that: (i) has a Market Capitalization of between US$75 million and US$700 million at the end of its second fiscal quarter; (ii) has been subject to certain reporting requirements under the Exchange Act for at least 12 months; and (iii) has filed at least one Annual Report under the Exchange Act. Accelerated Filers are required to file their Annual Reports (Form 10-K) and Quarterly Reports (Form 10-Q) under the Exchange Act and their Section 404 attestation reports under the Sarbanes-Oxley Act within deadlines that are shorter than those applicable to Non-Accelerated Filers, although longer than those applicable to Large Accelerated Filers. The SEC divides Reporting Companies into three categories: Non-Accelerated Filers, Accelerated Filers and Large Accelerated Filers. See also Non-Accelerated Filer and Large Accelerated Filer. Acceleration Request A form of written request filed by a Registrant requesting that its Registration Statement be effective at a particular date and time (at least two days after the date of the request). The aim of the request is to “accelerate” the effective time of the Registration Statement (which is normally at least 20 days after the date of filing in the absence of such acceleration). Accounting Circle-UpSee Circle-Up. Accounting Principles Board The predecessor of the Financial Accounting Standards Board (FASB), the former authoritative US accounting body that issued pronouncements on accounting principles known as “APB opinions”. Also referred to as “APB”. Note that the UK Auditing Practices Board is also referred to as the APB and is unrelated to the Accounting Principles Board. Accredited Institutional Investor See Institutional Accredited Investor. International Capital Markets Glossary 7 TermDefinition Accredited InvestorAs defined in Rule 501(a) of Regulation D. Accredited Investors includes several categories of entities and individuals who are financially sophisticated enough or have a close enough relationship with the issuer to have a reduced need for the protections provided by the Securities Act and therefore may be offered securities pursuant to certain Private Placement exemptions provided in Regulation D. An individual qualifying as an Accredited Investor must have a net worth of at least US$1 million (not including the value of their primary residence) or have had an income of at least US$200,000 each year for the last two years (US$300,000 with his or her spouse, if married) and have the expectation of making the same amount in the current year. Major categories of other Accredited Investors include: (1) any director, Executive Officer, or general partner of the issuer; (2) any bank, savings and loan association, employee benefit plan, registered broker or dealer and insurance company; and (3) any Investment Company registered under the Investment Company Act. Accreted ValueAn accounting term referring to the present value at any given point in time, including principal and interest accrued, of a bond or other investment. Acquisition Agreement An agreement governing the merger or acquisition of two or more companies. Actively Traded Securities Securities issued by a company with a Public Float of Common Stock of at least US$150 million with an Average Daily Trading Volume (ADTV) of at least US$1 million. Adjusted EBITDA An accounting term referring to EBITDA, excluding the effects of generally nonrecurring items of revenue/gain or expense/loss. See also EBITDA. Administrative Agent The financial institution that acts as the agent for a Syndicate of lenders in administrating the loan facility with the borrower under a loan agreement. Payments and communications between the borrower and the lenders are made through the Administrative Agent during the life of the loan agreement. Also referred to as a Facility Agent. ADRs See American Depositary Receipts. ADSsSee American Depositary Shares. ADTV See Average Daily Trading Volume. AffiliateDefined in Rule 405 of the Securities Act as a person or entity who controls, is controlled by, or is under common control with, an issuer. Whereas foreign securities laws often provide strict guidelines for determining Affiliate status, the Securities Act requires such determination to be made on a case-by-case basis according to the specific facts and circumstances. The SEC has stated that, generally, Affiliates of a Registrant would include Executive Officers, directors, and shareholders who hold 10% or more of the total shares, as well as their Affiliates. Affiliates generally have some control over the company and therefore are deemed to have access to Insider Information; hence, they are often subject to trading restrictions on securities of the issuer due to potential Insider Trading concerns. In determining whether someone is acting as an underwriter, the Securities Act takes into account purchases from an Affiliate of the issuer. Affiliate Transactions Covenant A Negative Covenant found primarily in debt agreements that restricts transactions between the borrower and its Affiliates so that transactions are at arm’s length. Transactions prohibited by such clauses include payments of large management fees to Sponsors, selling assets to shareholders for less than their Fair Market Value or overpaying shareholders/employees by way of excessive dividends/salaries. 8 International Capital Markets Glossary TermDefinition Affirmative Covenant A promise or contract that actively requires a party to do something that typically is found in agreements relating to standard actions such as the payment of fees, repayment of principal or compliance with regulations. AftermarketSee Secondary Market. Agency Fee A fee paid to an Administrative Agent for administering a Credit Facility. See also Administrative Agent. Agent In equity capital markets transactions, an Agent for the issuer may be acting as Depository (holding securities deposited by the issuer), Paying Agent (distributing dividends to shareholders) or Transfer Agent (tracking ownership and managing transfers in ownership of physical certificates). In reporting and compliance, an Agent for the issuer may be acting as Proxy Agent (sending out Proxy materials), or Mailing Agent (mailing the company’s quarterly, annual and other reports). In debt capital markets transactions, an Agent for the issuer may be acting as Administrative Agent (managing payments between borrower and a Syndicate of lenders), Collateral Agent or Security Agent (holding collateral for a loan on behalf of a Syndicate of lenders), Documentation Agent (negotiating the loan agreements), Syndication Agent (lender with no or nominal duties), Paying Agent (distributing payments to bondholders) or Registrar (tracking ownership and managing transfers in ownership). See also Depository, Paying Agent, Transfer Agent, Proxy Agent, Mailing Agent, Administrative Agent, Collateral Agent, Security Agent, Documentation Agent, Syndication Agent and Registrar. AGMSee Annual General Meeting. Agreement Among Underwriters (AAU) or Agreement Among Managers (AAM) An agreement, prepared by the underwriters’ counsel, governing the relationship between members of the underwriting Syndicate on a securities transaction. Among other things, it appoints and mandates the Lead Manager, defines each member’s proportionate liability and authorizes the Lead Manager to allocate units to the relevant underwriter. Also known as a Syndicate Agreement. AICPA See American Institute of Certified Public Accountants. AIM The London Stock Exchange’s global market for smaller and growing companies. AIM is not an EEA Regulated Market and AIM issuers are subject to rules that are less stringent than the Main Market. Formerly known as the Alternative Investment Market. All (or Substantially All) A term used in various contexts in Capital Markets with no concrete definition. The concept has steadily evolved through various decisions and rulings. The Internal Revenue Service defines “Substantially All” of a company as at least 90% of the Fair Market Value of all of a company’s assets less liabilities and at least 70% of the Fair Market Value of a company’s assets disregarding liabilities. All-Hands MeetingA meeting at the start of an offering involving all transaction parties (i.e., the issuer and its counsel, the underwriters and their counsel and the issuer’s independent accountants) at which the parties outline the major issues and transaction timetable in broad terms and agree to a general approach to transaction management. Also referred to as an All-Parties Meeting, Kick-Off Meeting or Organizational Meeting. All-Holders Rule An SEC Tender Offer rule (aimed to protect existing securities holders in the context of a third- party acquisition) set out in Rule 13e-4 of the Exchange Act. It states that unless an issuer receives a determination from the SEC to the contrary, no issuers may make a Tender Offer unless it is “open to all holders of the class of securities subject to the Tender Offer.” In addition, as set forth in Rule 14d-10 of the Exchange Act, the consideration paid to any one security holder must be the highest consideration paid to any other security holder. All-Parties MeetingSee All-Hands Meeting.Next >