SGX needs to rethink listing rules

Published June 26, 2014

First published on June 26, 2014

Letter to the EditorĀ 

I REFER to the consultation paper issued by Singapore Exchange (SGX) on June 4 on the proposed regulatory framework for secondary listings.

SGX should be commended for proposing a clear regulatory framework for secondary listings and greater transparency regarding secondary listings.

I had in two previous letters to The Business Times expressed my concerns about SGX treating a standard listing on the London Stock Exchange (LSE) as being equivalent to a primary listing, with specific reference to the Jardine group of companies downgrading its listing on the LSE from a premium listing to a standard listing.

As I have pointed out in my letters, the standard listing on the LSE is intended to be a replacement for what used to be a secondary listing. This is supported both by the information on the LSE website and a number of commentaries published by advisory firms in the UK.

I am puzzled by SGX’s continued insistence in the consultation paper that a standard listing is a primary listing in the UK. Most standard listings are likely to be companies incorporated overseas with a primary listing elsewhere, rather than UK-based or UK-incorporated companies – even though UK companies are not precluded from applying for a standard listing.

In the consultation paper, SGX has indicated that it will not accept a listing on a second board in a developed market – such as GEM (Growth Enterprise Market) in Hong Kong and Mothers (Market of the high-growth and emerging stocks) in Japan – as meeting the requirements for exemption from SGX listing rules, unlike listings on the main board of a developed market.

While I agree with this, I would also point out the continuing listing obligations for a second-board listing are often equivalent to those for a main-board listing – often, only the admission requirements (such as track record) are lower for second-board listings.

This is in fact the case for Catalist listings on SGX, where most of the continuing listing obligations are the same as for main-board listings.

There are a number of commentaries in the UK which have pointed out that the continuing listing obligations for standard listings are actually lower than those that apply to AIM (Alternative Investment Market) listings – they have pointed out that companies may choose a standard listing rather than an AIM listing in order to be subject to lower regulatory requirements.

It is therefore inconsistent for SGX to allow standard listings on the LSE an easier route to a secondary listing on SGX, compared to second-board listings in developed markets, if SGX is truly concerned about corporate governance standards and investor protection for secondary listings.

I believe that SGX’s treatment of a standard listing on the LSE as being equivalent to a primary listing from a developed market, and therefore exempted from SGX’s listing rules, is flawed.

While SGX has proposed certain exception cases under paras 3.9 and 3.10 of the consultation paper, I suggest that SGX should admit only standard listings on the LSE as secondary listings here on a case-by-case basis after a stringent regulatory review.

I would also point out that under the proposed regulatory framework for secondary listings, we are likely to see companies with highly questionable corporate governance standards from developed markets such as the United States admitted as secondary listings here. I hope the secondary listings do not become the source of our next wave of corporate governance scandals

Mak Yuen Teen




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