This Policy must be read in conjunction with the Conflict of Interest Policy (March 2020)
This is a summary of DNB Markets’ allocation principles regarding equity and fixed income offerings.
1. Purpose and scope
The standard procedures and principles included in this policy (the Policy) are intended to ensure that the allocation processes conducted by DNB Markets comply with the applicable legal requirements, and that commercial and reputational risks are handled properly.
This Policy is a summary of DNB Markets’ allocation principles regarding equity and fixed income offerings and must be read in conjunction with the Conflict of Interest Policy of Markets. The standard procedures and principles included herein cover primary market Equity and Fixed Income transactions originated by DNB Markets (i.e. DNB Markets is acting as an arranger/book runner or equivalent) within the EEA/EU, regardless of denomination, which market the securities are offered in and/or documentation platform. This includes among others public offerings, private placements, repair issues and rights issues.
The Policy also applies to DNB Markets' international units outside the EEA/EU to the extent permitted by local laws/ regulations/ market standards. Additional local requirements may affect DNB Markets’ operations outside the EU, in which case local legal counsel should be contacted. Non-EU branches must as a minimum always comply with this Policy in full in connection with joint placing/offerings mandates between DNB Markets units outside the EEA/EU and units within the EU.
In transactions executed in cooperation with multiple managers, this Policy shall serve as a main basis for the decisions and recommendations made by DNB Markets.
All employees of DNB Markets have an obligation to act with integrity and to ensure that they understand and comply with this Policy.
In this Policy, the term “client” refers to the relevant issuer and/or selling shareholder(s) being the client of DNB Markets in relation to the relevant transaction.
2. Allocation Principles
Before entering a mandate, DNB Markets must agree on the principles for allocation of the relevant transaction with the client. The agreed allocation principles should always aim to ensure equal treatment among subscribers or categories thereof.
The agreed allocation principle will vary from transaction to transaction. Equal treatment and allocation on pro rata basis are the superior allocation principles for all securities transactions. Further factors will depend on the particular facts and circumstances and will be the result of, inter alia, discussions with the client and DNB Markets’ exercise of professional judgment.
In an effort to ensure equal treatment among investors, DNB Markets will normally take into consideration some or all of the following allocation factors when allocating securities:
- Client preference for specific investors;
- Notable (or lack of) feedback;
- Valuation/price – to be considered in conjunction with item 4 below and pricing sensitivities ofinvestors;
- Client’s aftermarket objectives e.g. select a mix of investors to aid secondary market liquidity;
- Concentration (i.e. preferences as to size and number of large holdings, medium and/or smaller ones);
- Any minimum or maximum allocation amounts;
- Desired investor types (indication of any preference as to approximate balance between identified investor “types” – e.g. long-only, hedge funds, providers of liquidity, geography etc. and categories e.g. retail fund/tracker fund/pension fund etc.) – in each case to the extent known, reasonably assumed or deduced in hindsight from the book of demand;
- Where relevant, any “free float” or similar requirements of the relevant listing, trading or indexation regime;
- Desired geographical locations of investors (including consideration of applicable selling restrictions);
- Level and timing of engagement in transaction process: pilot fishing/market/sounding (on wallcrossed basis or otherwise)/PDIE/roadshow meetings/other (such as reverse enquiry)/one-onone/Group;
- Timing of the request for allocation, relative to final management meeting for that investor (where applicable) and size of the request for allocation;
- Existing/prior holdings/size of assets under management/interest in issuer/comparable companies oroff erings or within the relevant sector (to the extent known or reasonably assumed);
- Where relevant, participant in associated liability management exercise;
- Other considerations as appropriate.
Changes to the objectives may be made and agreed with the client and disclosed to the market as part of the closing proce dures either as a syndicate message or a stock exchange notice.
All discussions between DNB Markets and the client concerning allocation shall be the responsibility of DNB Markets’ Investment Banking personnel.
3. Allocation procedures
DNB Markets is committed to managing securities offerings, investor market soundings and investor roadshows such that our clients are treated fairly and to conducting our business with integrity and according
to proper standards. Our policy is that the pricing and allocation of private placement and bookbuilt securities offerings along with investor market soundings and investor roadshows should be transparent to the issuer or seller(s), consistent with our responsibilities to our investing clients. We will endeavour to make available to the issuer or seller(s) relevant information to make its own, independent decision with respect to the price, structure, timing, allocation, investor type selection, marketing and other terms of the offering.
When the subscription period has expired, DNB Markets/syndicate managers/ bookrunner(s) will make an assessment as to whether any subscriptions are deficient and determine whether such subscriptions shall be cancelled or adjusted. Such deficiencies may include:
- Double registrations and other registration errors
- Orders that are judged to be inflated
- Subscriptions on behalf of a company or association which are not signed by a person authorized to represent the company or association, provided the bookrunner(s) has/(have) become aware of this deficiency in the application
- Subscriptions received after the end of the subscription period.
Investors classified within the same category shall receive equal treatment, taking order and investor specific factors into consideration. No individual investor or category of investors shall be unfairly treated or discriminated. No subscriber shall be given preference on the basis of DNB Markets' client profitability or relationship to employees of DNB Markets. DNB Markets will not make allocations as an inducement for the payment of compensation in respect of unrelated services, in consideration of past or future awards of corporate finance business, or expressly or implicitly, conditional upon the receipt of other orders for investments or the purchase of other services.
Where a securities fund subscribe in an issue, DNB Markets will allocate in accordance with the subscription and does not take responsibility for any legal thresholds, neither by law nor internal procedures/articles of association or similar.
If the offering is oversubscribed, neither DNB Markets nor employees of DNB Markets may receive allocation if this reduces the allocation to clients of DNB Markets or other managers (syndicate members) of the offering. In the DNB Group, only units within DNB Asset Management can receive allocation in line with other customers in transactions that are oversubscribed.
Allocation proposals will be made subject to the objectives agreed with the issuer/seller, unless explicitly stated otherwise and the final allocations will be made in agreement with, and provided to, the issuer client/seller. Where we underwrite an offering or otherwise guarantee a price in connection with an offering, we will take into account our prudential responsibilities to manage our risk properly with regard to allocations and their manner and timing.
When the aggregate number of securities to be allocated to the group of investors having subscribed for small orders is insufficient to allocate the minimum allocation amount to each such investor, DNB Markets as the sole arranger or the syndicate group may decide to scale down the number of such investors to receive allocation. A random selection process shall be applied.
3.2. Equities specific
The client is responsible for making the relevant decisions in the allocation process based on the allocation principles agreed with the manager and communicated to investors.
3.3. Bonds specific
The bookrunner(s) is/(are) responsible for making the relevant decisions in the allocation process based on the allocation principles communicated to investors. Alternatively the bookrunner(s) may involve the client by asking for views and/or preferences with respect to investor segments, specific investors, geographic distribution and similar. The bookrunner(s) will take such preferences into consideration to the extent they are practical and not in conflict with the principles set out herein.
DNB Markets shall disclose its main allocation principles to its clients before providing any underwriting or placing services to that client – this could be at the time of the onboarding of the client, the signing of an engagement letter, the time of confirmation of appointment or another equivalent time.
DNB Markets is also required to document the following:
- DNB Market’s initial discussions with its client and the agreed proposed allocation per category of investors
- The content and timing of allocation requests received from each investor with an indication of their type
- Where relevant, any further discussion and instructions or preferences provided by the client, other members of the syndicate on the allocation process, including any emerging in light of allocation requests received from investors
- The final allocations communicated to each individual investor
- The top twenty per cent. of allocations ranked both by: (i) size of total allocation and (ii) “fill” (i.e. allocation as a proportion of the bid/order of the investor)
- Statement of or reference to the agreed client objectives and/or other allocation principles that have been used in determining allocations to those (top twenty per cent.) highlighted investors (taken as a group)
- Specific justification for any allocations to any of those highlighted investors which are inconsistent with or not clearly justifiable by reference to, those principles or where the relevant firms believe a specific further explanation would be desirable or appropriate.
DNB Markets must be able to provide a justification for the final allocation made to each investor. Ajus tification should explicitly provide detailed reasoning.
Additional records of any written instruction provided, any relevant materials provided at different stages throughout the transaction to or by the client and any specific objectives (e.g. allocations to retail clients, geographical preferences, etc.) notified by the client during discussions. Any changes to the allocation objectives must recorded and filed.