Industry Classification Benchmark (Equity) : Ground Rules
Industry Classification Benchmark (Equity) : Ground Rules
Industry Classification Benchmark (Equity) : Ground Rules
Introduction
1.0 Introduction
1.1 The Industry Classification Benchmark (ICB) is a detailed and comprehensive structure for sector
and industry analysis, facilitating the comparison of companies across four levels of classification
and national boundaries. The classification system allocates companies to the Subsector whose
definition closely describes the nature of its business as determined from the source of its revenue
or the source of the majority of its revenue where available, as detailed in Rule 4.2.1.
The structure and definitions of all Subsectors of ICB are available in Section 6.
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Global Debt Capital Markets Limited (and its subsidiaries FTSE Global Debt Capital Markets Inc.
and MTSNext Limited), Mergent, Inc., FTSE Fixed Income LLC and The Yield Book Inc.
Management Responsibilities
2.0 Management Responsibilities
2.1 FTSE Russell
2.1.1 FTSE Russell is responsible for maintaining ICB, and for the classification of all companies within
ICB.
2.1.2 FTSE Russell will maintain a record of all changes in the classification of companies and is
responsible for ensuring the timely publication of all company classification changes.
2.1.3 FTSE Russell will monitor corporate events, which occur between quarterly meetings, that may
affect the industrial classification of a company.
2.2.1 The FTSE Russell Industry Classification Advisory Committee has been established by FTSE
Russell. The Committee may recommend changes to the ICB Ground Rules and the ICB structure,
for approval by the FTSE Russell Governance Board.
2.2.2 The Terms of Reference of the FTSE Russell Industry Classification Advisory Committee are set out
on the FTSE Russell website and can be accessed using the following link:
FTSE_Russell_Industry_Classification_Advisory_Committee.pdf
2.3.1 The FTSE Russell Policy Advisory Board, whose membership is representative of users of FTSE
Russell Indexes, has been established by FTSE Russell as an independent committee. The FTSE
Russell Policy Advisory Board provides strategic advice to FTSE Russell on the construction and
maintenance of agreed indexes (as stipulated in their terms of reference) and to oversee the
practitioner committees established by FTSE Russell to assist in the management of the indexes.
The FTSE Russell Policy Advisory Board terms of reference also include the provision of strategic
advice on the construction and maintenance of ICB.
2.3.2 The Terms of Reference of the FTSE Russell Policy Advisory Board are set out on the FTSE Russell
website and can be accessed using the following link:
FTSE_Russell_Policy_Advisory_Board.pdf
FTSE Russell’s complaints procedure can be accessed using the following link:
3.2.1 Details of FTSE Russell’s policy for making benchmark methodology changes can be accessed
using the following link:
Policy_for_Benchmark_Methodology_Changes.pdf
Classification Guidelines
4.0 Classification Guidelines
4.1 Basis of Decisions
4.1.1 FTSE Russell will at all times approach decisions affecting the industry classification of companies
with reference to these guidelines.
4.2.2 Segmental reporting normally discloses revenue before tax, minority interests, extraordinary items
and interest earned or incurred. Unless there is audited evidence that any of these items is
specifically attributable to a class of business for which revenue is disclosed, it will be disregarded in
assessing the sources of revenue. Where any part of the company's business is to earn interest or
incur interest, or interest expenses are central to the business, then such interest shall be taken into
account in determining the company's business.
4.2.3 A company which has businesses in two or more Subsectors is allocated to that Subsector which
provides the largest part of the revenue as indicated by the latest available report and accounts,
subject to Rule 4.2.2.
A company engaged in businesses in three or more Subsectors, but within a specific Industry, will be
classified as General Mining, Diversified Industrials, Multi-utilities or Specialty Finance.
A company engaged in three or more classes of business within the Industrials Industry that differ
substantially from each other, no one of which contributes 50% or more of revenue nor less than
10%, will be classified as Diversified Industrials. If there is a contribution of over 50% from any other
one Industry group, the Subsector of that Industry group with the highest revenue will be assigned to
the company.
4.2.4 Companies which are classified as ICB Subsectors 8985 (Equity Investment Instruments) and 8995
(Non-equity Investment Instruments) are classified based on their structure and not the source of the
company’s revenue.
4.2.5 FTSE Russell will seek to maintain stability in the classification of companies by disregarding what
its considers to be temporary fluctuations in the fortunes of individual businesses.
4.2.6 In exceptional circumstances, the classification may reflect other factors, if the FTSE Russell
Industry Classification Advisory Committee considers that ignoring these factors may result in a
misleading classification.
For example, FTSE Russell may, in consultation with the FTSE Russell Industry Classification
Advisory Committee, classify companies on the basis of either the immediate end use of their
product or the industrial process used.
4.3.1 Where a significant change takes place in a company's structure as a result of a corporate event
(such as a merger or demerger), its ICB classification will be reassessed on the basis of financial
data formally published by the company. The ICB classification will be allocated in line with Rule
4.2.1.
4.3.2 Any adjustment resulting from a change in a company’s classification under Rule 4.3.1 will be
implemented at the same time as the corporate event is completed.
4.3.3 A company's classification may also be reviewed by FTSE Russell either at its discretion or at the
request of the company or professional advisors acting on the company’s behalf.
Any adjustment resulting from a change in a company’s classification will be effective on the Monday
after the third Friday of March, June, September and December. The cut-off date for the receipt of
data or other justification relating to any such change is the second Friday of February, May, August
and November.
Please note: in circumstances where an incorrect ICB classification has been assigned to a
company at IPO, FTSE Russell reserves the right to update the ICB classification with a minimum
T+2 notice.
4.4.1 FTSE Russell will seek to avoid the maintenance of Sectors or Subsectors containing a single
company.
Periodic Reviews
5.0 Periodic Reviews
5.1 The classification of all companies in the ICB global universe will be reviewed following receipt of
their annual report.
5.1.1 The cut-off dates for the receipt of data for consideration at periodic reviews and the corresponding
implementation dates are shown below:
5.1.2 Review Procedures: the industrial classification of each company will be determined by analysing
the financial reports based on the rules under Section 4 of these Classification Guidelines.
5.1.3 Implementation: periodic changes to the industry classification of a company will be implemented
after the close on the third Friday of March, June, September and December.
8670 Real Estate 8671 Industrial & Office Real estate investment trusts or
Investment Trusts REITs corporations (REITs) or listed property
trusts (LPTs) that primarily invest in office,
industrial and flex properties.
8672 Retail REITs Real estate investment trusts or
corporations (REITs) or listed property
trusts (LPTs) that primarily invest in retail
properties. Includes malls, shopping
centers, strip centers and factory outlets.
8700 Financial 8770 Financial 8771 Asset Managers Companies that provide custodial, trustee
Services Services and other related fiduciary services.
Includes mutual fund management
companies.
8773 Consumer Finance Credit card companies and providers of
personal finance services such as
personal loans and check cashing
companies.
8775 Specialty Finance Companies engaged in financial activities
not specified elsewhere. Includes
companies not classified under Equity
Investment Instruments or Nonequity
Investment Instruments engaged primarily
in owning stakes in a diversified range of
companies.
8777 Investment Companies providing a range of
Services specialized financial services, including
securities brokers and dealers, online
brokers and security or commodity
exchanges.
8779 Mortgage Finance Companies that provide mortgages,
mortgage insurance and other related
services.
8980 Equity 8985 Equity Investment Corporate closed-ended investment
Investment Instruments entities identified under distinguishing
Instruments legislation, such as investment trusts and
venture capital trusts.
8990 Nonequity 8995 Nonequity Cash shells, Special Purpose Acquisition
Investment Investment Instruments Company (SPACs), Non corporate, open-
Instruments ended investment instruments such as
open-ended investment companies and
funds, unit trusts, ETFs and currency
funds and split capital trusts.
A Glossary of Terms used in FTSE Russell’s Ground Rule documents can be found using the following link:
Glossary.pdf
Further information on the Industry Classification Benchmark is available from FTSE Russell.
For contact details please visit the FTSE Russell website or contact FTSE Russell client services at
info@ftserussell.com.
Website: www.ftserussell.com
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