SGX drops private notification plan for significant deals
But privy lists that companies need to maintain widened to
include all material transactions
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But privy lists that companies need to maintain widened to include all material transactions
Listed firms and their controlling shareholders will no longer need to privately tell the Singapore Exchange (SGX) about a significant transaction before the deal is made public, after a fresh bourse rule change that some market watchers saw as essentially euthanising a toothless tiger.
Backing down on an earlier proposal to codify the practice of private notifications to the bourse, the SGX said in a press release on Tuesday evening that feedback via a public consultation “showed an overall lack of consensus on the right timing for such private notifications by companies and/or controlling shareholders”.
The exchange added that it will remove that private notification rule altogether, saying that it would “stop requiring the notifications” prior to the public announcement of any significant transactions. “The notifications are made privately to SGX, thus not requiring them should not impact investor interest,” it said.
Market watchers said that the removal of the private notification rule would help to marginally shrink the pile of paperwork that listed companies here have to deal with. They also noted that the rule was likely to be difficult for the bourse to enforce in the first place, particularly when it came to getting controlling shareholders to comply.
The rule “was one additional administrative compliance step that didn’t necessarily help companies fulfil their compliance in a substantive way”, said Stefanie Yuen Thio, joint managing director of TSMP Law Corporation. “The regulatory burden on listed companies is still heavy. Some companies may be paying more attention to the technical form of compliance, than applying themselves to substance of the issues.”
Corporate lawyer Adrian Chan also pointed to a bourse directive to directors earlier this month which said that issuers must procure undertakings from all their directors and executive officers to comply with SGX listing rules.
“In practice, we understand that compliance is patchy and uneven. So it’s welcome that they’re taking the rule away, especially because of the new undertaking that regulators require from directors and executive officers.”
SGX’s requirement for individual undertakings from listed companies’ directors and executive officers could potentially make it easier for the bourse to go after individuals in cases of corporate lapses.
Mr Chan said that one of the key criticisms of the private notification rule was that “you can’t catch major shareholders who breach this rule”, adding: “It was a weak thing - no teeth, no bite”.
He added: “Even with the SGX’s new enforcement powers, they wouldn’t be able to enforce the rule for major shareholders. So why have this in place when some of the main culprits can get away scot free?”
Lean Min-tze, a principal at the corporate and securities practice group at Baker & McKenzie, said: “The private notification regime did not seem to be very effective, given some unusual share trading patterns still went unexplained.”
Apart from doing away with private notifications, the other change that SGX rolled out on Tuesday was to widen the scope of its rule on “privy” lists - that is, a list that contains details of parties privy to a transaction. Regulators can check this list when investigating insider trading, for instance.
The bourse said that it would require listed firms to keep a privy list for “all material transactions”. This was an expansion of its current rule, which requires companies to maintain privy lists only for certain significant transactions such as takeovers, reverse takeovers and very substantial acquisitions.
Market watchers saw the expansion of the privy list rule as positive, saying that it would help to instill best practices among issuers.
Both rule changes will take effect on Dec 1, 2015.