Robson Lee, a partner in the legal firm of Shook Lin & Bok LLP, contributed this article to NextInsight. (2016 update: Robson Lee is presently a partner in Gibson Dunn & Crutcher LLP) 

INTRODUCTION 

The Singapore Exchange (“SGX”) has published a consultation paper introducing a set of proposals to enhance Singapore’s securities market. The consultation paper details proposals to establish three new independent committees, and to widen SGX’s administrative and enforcement powers. These proposals are further discussed below in this article. 

I.              LISTINGS ADVISORY COMMITTEE (“LAC”)

The LAC will be an independent body comprising 15 members appointed by SGX in consultation with the Monetary Authority of Singapore (“MAS”). Members will have diverse practitioner experience and represent the investment community. This provides a broad base of expertise which SGX may tap on, enhancing the quality of listing decisions on SGX. Conflicts arising from SGX’s dual role as both regulatory and operator will also be reduced.

The LAC will review and provide advice on listing policy issues and initial public offer (“IPO”) and reverse takeover (“RTO”) applications which meet certain criteria. This includes identifying gaps or weaknesses in listing proposals and formulating listing policies. 

II.              LISTINGS DISCIPLINARY COMMITTEE (“LDC”)

robson3_6.14Robson Lee specialises in corporate finance and capital markets transactions. He advises public listed companies on securities transactions, cross-border mergers and acquisitions and foreign joint ventures. NextInsight file photo.The LDC will comprise members of the existing SGX disciplinary committee, as well as new members with relevant listings-related experience.

The LDC will hear charges against parties that breach listing rules. The LDC is empowered to impose regulatory sanctions should the charges be made out.

The LDC will have wider enforcement powers, both in terms of scope and extent. The additional enforcement powers will extend to the directors, executive officers, issue managers (advising on IPO and RTO applications) and financial advisers (advising on RTO applications) of issuers.

In addition to having all the enforcement powers of SGX, the LDC will have the following powers against issuers, directors, executive officers and issue managers (“Relevant Persons”):

(a)   issuing public reprimands to Relevant Persons;

(b)   imposing fines against issuers not exceeding $250,000 per breach, subject to a maximum of $1,000,000 per hearing for multiple breaches;

(c)   issuing an order for the denial of market facilities against issuers;

(d)   issuing an order for the prohibition of issue managers from participating in specific listing applications for up to 3 years;

(e)   issuing an order for the revocation of accreditation of an issue manager;

(f)    requiring the resignation of directors or executive officers from an existing position with any issuer on SGX;

(g)   issuing an order prohibiting any issuer, for a period not exceeding 3 years, from appointing or reappointing an individual director or executive officer, as director or executive officer, or both; and

(h)   issuing orders of costs. 

III.           LISTINGS APPEALS COMMITTEE (“LApC”)

The LApC will comprise existing members of the SGX appeals committees, as well as new members with relevant listings-related experience.

The LApC will have the power to review decisions by the LDC which were made unfairly, or based on misinterpretation of the listing rules. It will hear appeals from companies subject to sanctions by the LDC, and from issuers which are subject to certain SGX regulatory decisions.

The LApC may also consider appeals from sponsors and registered professionals against SGX’s decisions in respect of the following:

(a)     suspension or restriction of activities undertaken by a sponsor or registered professional; and

(b)     revocation of the authorisation of a sponsor or cancellation of the registration of a registered professional.

The proposed committees serve to enhance the transparency of SGX’s disciplinary process and ensure fair and independent administration of sanctions. SGX, in consultation with MAS, aims to appoint the committees by the first quarter of 2015.  

IV.           STRENGTHENING ADMINISTRATIVE AND ENFORCEMENT POWERS

Given the multitude of possible breaches of listing rules, a greater range of sanctions which commensurate with the severity of the breach is required. Consequently, SGX proposes to expand its enforcement powers against issuers that breach its listing rules. The enforcement powers will also be extended over Catalist issuers, directors and executive officers. The objective is to boost market discipline and ensure greater responsibility and accountability.

The table below lists the proposed additional powers of SGX:

Proposed additional administrative and enforcement powers
of SGX against issuers

Administrative and enforcement powers

·        Require issuers to obtain prior approval of SGX, for a period not exceeding 3 years, for the appointments of directors or executive officers in specified circumstances

·        Require the appointment of special auditors and compliance advisers to include appointment of other independent professionals including legal advisers

·        Offer composition sums not exceeding $10,000 per breach, subject to a maximum of $100,000 per offer for multiple breaches

·        Require the implementation of an effective education or compliance programme

·        Require the appointment of independent advisers to minority shareholders

·       Require an issuer to undertake an independent review of internal controls and processes

·        Require the performance of other remedial action

SGX also proposes to be empowered to impose regulatory sanctions against issuers, directors, executive officers and issue managers (together with Catalist sponsors and registered professionals) in connection with breaches of listing rules.

The table below lists the proposed regulatory sanctions against such regulated persons:

Directors and executive officers

·           Issue a private warning

·           Require the individuals to undertake a mandatory education or training programme

·           Object to the appointments of individual directors or executive officers in any issuer in specified circumstances for a period not exceeding 3 years

·           Require issuers to procure and submit to SGX an undertaking from each of its directors and executive officers to comply with the Listing Rules

·           Impose any other requirements

Issue managers

·           Issue a private warning

·           Impose conditions on the accreditation of an issue manager

·           Suspend or restrict the activities of an issue manager if the integrity of the market may be adversely affected or if SGX thinks it necessary in the interests of the public or for the protection of investors. SGX will refer the matter to the LDC within 14 days from the date of suspension or restriction.

Financial advisers

·           Subject financial advisers advising on RTO applications to the same accreditation process for issue managers

·           Impose against financial advisers advising on RTO applications, the same types of sanctions available against issue managers

Catalist sponsors and registered professionals

·           Make an offer of composition to sponsors and registered professionals, where fines are imposed for breaches, that (i) do not constitute breaches of the SFA, and (ii) are relatively minor, and (iii) are administrative or technical in nature

·           Make an offer for

(i)         composition sums not exceeding $10,000 per breach, subject to a maximum of $100,000 per offer for multiple breaches by sponsors; and

(ii)        composition sums not exceeding $5000 per breach, subject to a maximum of $50,000 per offer for multiple breaches by registered professionals.

 

CONCLUSION

A well-functioning securities market remains the cornerstone of the local financial industry. The proposals, when effected, will go a long way to ensure that the securities market remains fair, orderly and transparent. The enhanced regulatory powers will also enable SGX to maintain proper oversight over all issuers and market participants.

SGX’s public consultation phase for the proposed regulatory changes ended on 16 October 2014.  


The Chinese version of this article is here

Recent story: ROBSON LEE: On SGX’s Proposals On The Introduction Of Minimum Trading Price, Codification Of Regulatory Tools

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