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The arrival of dual listing

Dual listing of shares has been recently implemented in Colombia. Colombian regulations now allow for a foreign issuer to list its shares in the Colombian Stock Exchange (CSE) either (i) by dual listing procedure, or (ii) by registering with the Securities Trading System for Foreign Securities (Sic).

Dual listing provides a company with liquidity for its securities and allows it to expand its shareholder base to foreign institutional and retail investors. If an issuer has substantial operations in the country of its secondary listing, such presence and activities may also facilitate efforts to raise capital. In Colombia, recent reforms to securities law, a favourable business and investment environment and a growing economy (including a forthcoming trade agreement with the US) make a secondary listing of stock a viable and attractive option for foreign companies, specifically those with business in Colombia.

Following registration with the Colombian National Securities and Issuers Registry (RNVE) and authorisation from the Finance Superintendence of Colombia (Sof), a foreign company may publicly offer securities and register its shares with the CSE in order to trade or issue on that exchange. In this case, a foreign company is subject to local regulations governing listings and securities offerings by foreign issuers, including those set by the Sof, the BVC, and the Central Depository System (Deceval). Negotiation in the secondary market is subject to compliance with the Colombian foreign exchange regulations and therefore, transfers of funds for the initial acquisition should be made in compliance with the foreign exchange market rules and regulations. Typically, a local depository agent will be appointed to control shareholder records and dividend payments.

On the other hand, recent legislation authorised the creation of the Sic, which will allow the securities of foreign companies to be listed and traded on qualifying Colombian systems without prior RNVE registration or Sof approval. However, public offerings require prior RNVE registration and only institutional investors have access to such market. Additionally, the listing application may only be filed by a sponsoring local broker/dealer, which will be subject to various disclosure duties to the system administrator and to investors. As of yet there have been no Sic listings in Colombia.

In December 2009, Pacific Rubiales Energy (Pre), the largest independent oil explorer and producer in South America, was the first foreign company to list and trade on Colombia Stock Exchange (BVC). Citivalores and Brigard & Urrutia advised on Pre's secondary listing. Although no new securities were offered, Pre issued and outstanding shares may be traded on the BVC in Colombian pesos. In the first month of trading, its shares traded between $25,000 and $30,000 pesos (Approx $60). During the last month, the price has hovered between $40,000 and 45,000 pesos (Approx $90). Currently, Canacol Energy and Greystar Resources, also Canadian energy companies, are in the process of applying for secondary listings on the RNVE and BVC.

The Colombian government is keen to increasingly facilitate the dual listing process, so following the registration of Pacific Rubiales, it has issued further rules, such as the ones relating to liberalise deregistration.

Volume negotiated - PREC in the CSE (BVC)
Source: Colombian Stock Exchange

Carlos Fradique Méndez and Laura Villaveces Hollmann

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