What Rules Apply To Foreign Listings: The Case Of Secondary Listings

Published September 21, 2017

By Mak Yuen Teen

Note: This is part 3 of a series of posts explaining foreign listings on SGX and certain risks that investors should be aware of.

According to the monthly market statistics report of SGX, there are 753 issuers listed on SGX as of August 2017. It is useful for investors to understand the regulatory framework that governs different issuers. Even though our regulators are hesitant about having a different regulatory regime for Singapore and overseas/foreign listings, in actual fact, separate regulatory regimes are already operating as I will explain in this and the following articles.

Of the 753 issuers, 36 are secondary listings and the other 717 are primary listings. All the secondary listings are overseas companies. This year, Chew Yi Hong and I published volume 3 of our annual shareholder meetings report where we analysed the country of incorporation of the 703 primary-listed issuers covered. Of these 703 issuers, we found that 84% are incorporated in Singapore, 8% in Bermuda, 4% in Cayman Islands, and the remaining 4% in various other overseas countries.  One can find information on country of incorporation from the “Corporate Information” link on the SGX website. For instance, in the case of YuuZoo Corporation, we can see that it is incorporated in Bermuda from here:


If we apply the above percentages on country of incorporation to the 717 primary listings, we can estimate that 602 are incorporated in Singapore and the remaining 115 are incorporated overseas, with Bermuda being the most popular overseas country of incorporation. From the SGX report, we know that there are 238 overseas companies with a primary listing here. Therefore, we can estimate that 115 out of 238 overseas companies with a primary SGX listing, or 48%, are incorporated overseas and 52% are incorporated here.

When I discuss the topic of the regulatory framework for foreign listings with my students, I classify these listings into the 3 groups based on my analysis above, as follows:

  1. Secondary listings
  2. Primary listings incorporated overseas
  3. Primary listings incorporated in Singapore

I will focus on four main sources of corporate governance rules in Singapore: Companies Act, Securities and Futures Act, Listing Rules and the Code of Corporate Governance.

Secondary listings

A secondary listing is an issuer with a primary listing on another home exchange. SGX provides a list of the secondary listings here: http://www.sgx.com/wps/portal/sgxweb/home/company_disclosure/secondary_listings

In 2015, SGX introduced a secondary listings framework whereby the home markets of these secondary listings are classified as either developed or developing. Those that are from developed markets have broad exemption from compliance with SGX listing rules (with minor exceptions of rules 217 and 751 which deal with issues such as issuers confirming compliance with home exchange rules and simultaneous announcement on SGX when announcements are made on the home exchange). For all intents and purposes, those from developed markets do not have to comply with SGX listing rules.

Those from developing markets are assessed on a case-by-case basis, although SGX “grandfathered” existing issuers when it introduced the secondary listings framework. From the SGX list, we can see that only one secondary listing, Pan Ocean, which has a primary listing on the Korea Stock Exchange, have to comply with additional SGX rules – specifically chapters 9, 10 and 13 dealing with “Interested Person Transactions”, “Acquisitions and Realisations” and “ Trading Halt, Suspension and Delisting”. Enforcement of listing rules for secondary listings are generally dependent on the home exchange.

Since the requirement to “comply or explain” against the Singapore Code of Corporate Governance is in the listing rules (rule 710) and all the secondary listings are exempted from chapter 7, they do not have to comply with the Singapore Code. However, they would have to comply with the corporate governance code/rules required by the home exchange.

As secondary listings have shares traded on SGX, they are subject to the Securities and Futures Act (SFA), which deals with issues such as continuous disclosure, insider trading and market manipulation. Breaches of SFA provisions can lead to investigations and enforcement actions by the Monetary Authority of Singapore (MAS) and Commercial Affairs Department (CAD). Of course, cross-border enforcement is always a challenge, as I will discuss further in later articles.

Unlike the SFA which is not dependent on country of incorporation, companies legislation follows the country of incorporation. As secondary listings are incorporated overseas, they are only required to comply with the companies legislation where they are incorporated, and not with the Singapore Companies Act.  Core corporate governance requirements such as duties and liabilities of directors and shareholders’ rights are mostly contained in companies legislation. If these companies breach corporate governance requirements in the Companies Act, for example, directors did not act in the best interest of the company, enforcement actions are up to the foreign authorities responsible for administering and enforcing the companies legislation.

That being said, secondary listings are generally relatively non-contentious because they tend to be large companies (they are only listed on the Mainboard) and are subject to regulation and oversight in the home market where they have their primary listing. I do not recall a secondary listing being involved in any accounting or corporate governance scandal as such, although a few years ago, I had a debate with SGX on the Jardine group of companies downgrading their listing on the London Stock Exchange from a premium listing to standard listing which is subject to less stringent corporate governance and other listing requirements.

In summary, for secondary listings, many Singapore rules don’t apply, but the corporate governance risks are somewhat mitigated by the factors I discussed above.

In the next article, I will discuss the other two groups of foreign listings, where things can get a lot more “interesting” in terms of regulation, enforcement and unique corporate governance challenges.

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