Bursa Malaysia Berhad ('the Exchange') issued a media release on 23 February 2021 to announce amendments to the Main Market Listing Requirements ('Main LR') and the ACE Market Listing Requirements ('Ace LR') (collectively 'LR') in relation to applications for a lower public security holding spread. These amendments to the LR will take effect on 1 March 2021.
The LR require a listed issuer to have at least 25% of its listed securities in the hands of the public ('public spread'). This requirement was not cast in stone as the Exchange had in exceptional cases allowed listed issuers with large market capitalisation to have a lower public spread, ranging between 15% and 25%, if such lower public spread is sufficient for liquidity in the listed issuers' securities. To enhance transparency and provide regulatory clarity, the Exchange has now amended the LR to codify the policy considerations for the acceptance of a lower public spread based on a balanced assessment of both objective and subjective criteria and on matters incidental to a lower public spread.
The objective criterion
A listed issuer may seek approval of the Exchange for a lower public spread based on the market capitalisation thresholds set out below:
| Market capitalisation | Minimum acceptable lower public spread |
| RM1 billion or more but less than RM3 billion | 20% |
| RM3 billion or more | 15% |
If the application for a lower public spread is made prior to admission, the market capitalisation will be based on the expected market capitalisation of the applicant as at the date of the listing application.
If the application is made after the securities are listed, the market capitalisation will be based on the average market capitalisation (based on the daily closing price) of the listed issuer's securities during the 12-month period preceding the application to the Exchange.
The subjective criteria
In addition, the Exchange must be satisfied that the following subjective criteria have been satisfied:
- there is, or will be, sufficient liquid market in the relevant securities;
- there is, or will be, orderly and fair trading in the relevant securities;
- the applicant or listed issuer and its directors have satisfactory corporate governance conduct and compliance record with the LR or securities laws; and
- there is reasonable justification necessitating the lower public spread.
The Questions and Answers issued by the Exchange in relation to the amendments above ('Q&As') provide guidance on factors that the Exchange will consider in determining whether the subjective criteria have been satisfied. These factors are set out below.
Sufficient liquid market
- The concentration of security holdings in the applicant or the listed issuer;
- The number of securities in issue in the applicant or the listed issuer; and
- The spread between the bid and ask price and trading volume of the securities of the listed issuer.
Orderly and fair trading
- Whether any queries have been issued by the Exchange to the listed issuer relating to unusual market activities; and
- Whether there are any circumstances indicating manipulative activities or any market alerts issued in respect of the securities of the applicant or the listed issuer.
Reasonable justification necessitating the lower public spread
- All relevant facts and circumstances that warrant a lower public spread such as actual non-compliance of the required public spread; and
- Where the circumstance is that of actual non-compliance of the required public spread, whether the non-compliance is beyond the reasonable control of the listed issuer, its controlling shareholders or its directors.
Information requirements
The information to be provided in support of an application for a lower public spread is set out in paragraph 2.3 of Practice Note 19 of the Main LR and Guidance Note 13 of the Ace LR. The following new requirements have been introduced:
- information on any enforcement action taken, or investigation or enforcement proceedings commenced against the listed issuer and its directors by the relevant regulatory authority in the last three years pertaining to their corporate governance conduct and compliance with the LR or securities laws; and
- the reason for non-compliance with the requisite public spread and justification for the lower public spread.
Events requiring immediate notification
A listed issuer which has been granted approval for a lower public spread must immediately notify the Exchange when it becomes aware of any of the following:
- any decrease in its issued share or unit holders capital;
- any decrease in its public security holding spread below its approved lower public spread; and
- any decrease of its average market capitalisation for the preceding 12 months to below the applicable threshold set out in the table above,
In this regard, the Q&As clarify that a listed issuer is deemed to be aware of any Specified Decrease in the following situations:
- when it requests for a copy of the Record of Depositors from Bursa Malaysia Depository Sdn Bhd;
- during the preparation of its semi-annual returns or annual reports; or
- when it undertakes a corporate exercise or corporate proposal.
Notwithstanding the above, the Q&As further clarify that a listed issuer is also required to immediately notify the Exchange when it becomes aware of any Specified Decrease in any other circumstances.
Right to review
The Exchange will have the right to review its decision for a lower public spread at any time if the listed issuer no longer meets the objective or subjective criteria prescribed for a lower public spread.
Comment
The amendments to the public security spread requirements in the LR generally adopt the proposed amendments set out in Consultation Paper No. 2/2020 issued by the Exchange on 23 July 2020. Our summary of those proposals can be read here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
