Bursa Malaysia Berhad ('the Exchange') released Consultation Paper No. 3/2021 to seek feedback on the Proposed Amendments to the Main Market Listing Requirements in Relation to the Enhanced Adviser Framework, Submission of Corporate Proposals and Other Amendments ('CP No. 3/2021') on 11 August 2021.
The proposed amendments apply only to the Main Market Listing Requirements ('MMLR') and focus primarily on the following:
- Aligning the provisions of the MMLR with the recognised principal adviser ('RPA') framework under the Licensing Handbook ('Licensing Handbook') and Guidelines on Submission of Corporate and Capital Market Product Proposals ('Submission Guidelines') issued by the Securities Commission Malaysia ('SC'); and
- Strengthening the role of a Recognised Principal Adviser and its key officers in the discharge of its duties under the MMLR.
Some of the key proposals in CP No. 3/2021 are as follows:
Aligning the Principal Adviser framework under the MMLR with the RPA framework
The Exchange proposes to replace the Principal Adviser framework under the MMLR with the RPA framework. To this end, the MMLR will be amended in the following manner:
- the term "Recognised Principal Adviser" will be introduced to replace the term "Principal Adviser" in the MMLR; and
- "Recognised Principal Adviser" will be defined to mean a recognised principal adviser under the Licensing Handbook, thus, aligning the requirements under the MMLR with the RPA framework.
Paragraph 7A.04(2) of the Licensing Handbook provides that a recognised principal adviser must be a principal adviser set out in First Column of Table 121 of paragraph 7A.03 of the Licensing Handbook (other than a licensed bank or a special scheme broker) that has:
- written policies and control procedures relating to the submission of specific proposals;
- at least one employee who satisfies the criteria to be a Qualified Person ('QP'), as set out in paragraph 7A.04(3) of the Licensing Handbook; and
- been granted recognition as a recognised principal adviser pursuant to paragraph 7A.04(7) of the Licensing Handbook.
Aligning the principal adviser framework with the RPA framework is aimed to enhance capacity building as well as making available a wider pool of qualified corporate finance advisers to act as a Recognised Principal Advisor on the Main Market.
Strengthening the role of a Recognised Principal Adviser
The Exchange has proposed that greater supervision and oversight be exercised by a Recognised Principal Adviser and its key officers (namely its QP and senior officer2 ('SO')) to safeguard the interests of securities holder and investor for significant proposals that may have material impact or pose higher risk to the market.
For the aforementioned purpose, a significant proposal refers to any of the following ('Specific Proposal'):
- an initial listing application to the Exchange in relation to an Initial Public Offer (IPO) on the Main Market (other than applications relating to corporate bonds or sukuk under Chapter 4B of the MMLR and exchange-traded funds);
- a listing application to the Exchange in relation to a Reverse Take Over (RTO) on the Main Market;
- a listing application in relation to a transfer of listing from the ACE Market to the Main Market; and
- a Major Disposal3 under paragraph 10.11A of the MMLR.
The Specific Proposals mentioned in paragraphs (a) to (c) above are adopted from the Submission Guidelines whereas the proposal in paragraph (d) is an additional proposal by the Exchange.
To ensure that submissions of Specific Proposals to the Exchange are of quality and are in line with the SC's approach for submission of specific proposals under the Submission Guidelines, the Exchange has proposed that the MMLR be amended as follows:
- requiring the Recognised Principal Adviser to:
- be primarily responsible for the Specific Proposal;
- assign and identify at least one QP and SO for each Specific Proposal;
- have clear and effective reporting lines so that decisions on critical matters are made by the SO, its management committee or board of directors in accordance with its policies and procedures; and
- notify the Exchange of any change(s) to the QP or SO before completion of the Specific Proposal;
- stipulating that the SO is responsible for the
supervision and management of a Specific Proposal which
- allocating adequate number of persons with appropriate and relevant levels of knowledge, skill and experience to each Specific Proposal, taking into account the volume, size, complexity and nature of the Specific Proposal;
- reviewing the performance of the QP and the team; and
- deciding on or escalating critical matters in accordance with the policies and procedures of the Recognised Principal Adviser;
- requiring a QP to:
- be in charge of the supervision of the team until the Specific Proposal is implemented or cessation of engagement;
- determine the scope and extent of due diligence required for the Specific Proposal including enlarging or varying its scope if the QP becomes aware of any new information or development;
- critically assess the results of the due diligence and overall assessment of the adequacy of the due diligence review;
- identify key risks related to the Specific Proposal and undertake adequate measures to address those risks;
- ensure that the application meets the relevant provisions of the MMLR and securities laws;
- be fully familiar and knowledgeable with key issues, deal promptly with all queries and concerns raised by the Exchange in relation to the Specific Proposal, and ensure responses to queries are complete and concerns raised are resolved in an effective manner; and
- be responsible for the requirements set out above until the Specific Proposal has been implemented.
The proposed amendments also provide that:
- where there is more than one Recognised Principal Adviser for a Specific Proposal, all Recognised Principal Advisers are jointly and severally responsible for the Specific Proposal; and
- where there is more than one SO or QP assigned to a Specific Proposal, all the SOs or QPs will be jointly and severally responsible for the Specific Proposal.
Removal of prescriptive approach on due diligence involving new securities issuance
The Exchange also proposes to remove the existing prescriptive approach in the MMLR that requires due diligence to be conducted in accordance with the SC's Guidelines on Due Diligence Conduct for Corporate Proposals when submitting additional listing applications for new issue of securities. The MMLR will be amended to require due diligence to be conducted by the relevant parties in accordance with industry best practices. However, the Exchange will still require the relevant parties to make due and careful enquiries and comply with the equivalent obligations and standards imposed under the Submission Guidelines.
Enhancing accountability of Recognised Principal Adviser
In line with the proposal of strengthening the role of Recognised Principal Advisor, its QP and SO, the Exchange also proposes that its regulatory ambit and enforcement regime under the MMLR to be extended. One of the proposed amendments to the MMLR will be to expand the definition of "adviser" to include the QP and SO assigned to undertake a Specific Proposal, so that the relevant provisions relating to enforcement of the MMLR that are applicable to an adviser will also apply to the QP and SO.
The deadline for submitting comments to the Exchange is 14 September 2021.
1 Column 1 of Table 12 sets out seven categories of principal advisers. Excluding licensed banks and special scheme brokers, the categories are: (i) investment banks and universal brokers; (ii) 1+1 brokers; (iii) Islamic banks; (iv) KAF Investment Bank Berhad; and (v) Bank Pembangunan Malaysia Berhad.
2 A "senior officer" is defined in Chapter 4 of the Submission Guidelines to mean an individual of higher authority or ranking than the QP or a committee duly constituted assigned to a specific proposal and identified by the party submitting the proposal.
3 A "Major Disposal" is defined in paragraph 10.02(eA) of the MMLR to mean a disposal of all or substantially all of a listed issuer's assets which may result in the listed issuer being no longer suitable for continued listing on the Official List.
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.