On 23 May 2007, the Singapore Exchange (the “SGX”) released a public consultation paper on changes to its listing rules and its two boards. The proposal is to transform SESDAQ into a sponsor-supervised regime, introducing a model similar to London’s Alternative Investment Market, which has met with significant success. This change is aimed at promoting investor confidence and attracting smaller and fast-growing companies, local as well as foreign, to list on the SGX. Besides the proposed changes to SESDAQ, the SGX will also revise the entry criteria to the Main Board which will focus on the larger and more established companies, creating a clear delineation between the two boards. This is emphasized by a market capitalization limit of S$150 million at the point of the initial public offering (“IPO”) of the listing applicants for the new board.
Under the new board, there is neither a requirement for an operational track record nor any financial entry criteria for all listing aspirants. They will instead be supervised by independent sponsors which will be corporate finance firms or investment banks. These sponsors will decide on the suitability of the company for listing and will review the entire admission and IPO process. Market quality will be maintained by the SGX’s direct regulation over the sponsors via stringent admission and on-going obligatory rules. The additional requirement of continual sponsorship post-listing will help ensure that the companies have guidance in their early years and maintain minimum standards throughout listing.
Another significant change for the new board is that listing aspirants will no longer have to issue a prospectus. Instead, the companies will have to produce an Offer Document, which, as proposed by the SGX, will not have to be registered with the Monetary Authority of Singapore (the “MAS”). In a mirror of the lodgement process for prospectuses with the MAS, the Offer Document will be publicly posted on the SGX website two weeks prior to the listing, for public comment. The disclosure requirements for an Offer Document are proposed to be that of the same as that currently applicable, and the contemplation is for prospectus liability under current securities laws to apply to the Offer Document. The expectation is that this would shorten the listing process and facilitate new IPOs for the new board. It is also believed that handing the admission and IPO process over to sponsors will reduce costs for the IPO aspirant and also minimize the risk of an IPO being aborted.
For existing SESDAQ companies, there will be a transition period of at least two years for them to appoint sponsors and comply with the new rules. The SGX also intends to waive listing fees for three years commencing from the adoption of the new rules by existing SESDAQ companies as an added incentive.
We believe that the new changes signify a bold new direction for the old SESDAQ. We are greatly excited about the potential of this new board and will be looking to actively participate in the development of this new market. The consultation paper is available on www.sgx.com from 23 May 2007 to 20 June 2007.
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