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More boxes to tick for bankers taking firms public

Tougher SGX due-diligence guidelines will require more and deeper prodding and digging

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Banks will have to raise their due-diligence standards in bringing listings to the Singapore market, under tightened guidelines set by the Association of Banks in Singapore (ABS) on Friday.

Singapore

BANKS will have to raise their due-diligence standards in bringing listings to the Singapore market, under tightened guidelines set by the Association of Banks in Singapore (ABS) on Friday.

This comes as the Singapore Exchange (SGX) moves to boost oversight of companies listed on the bourse, with its fresh-faced chief regulatory officer saying that more improvements are ahead.

“It is at the point of admission that we have the most control,” said Tan Boon Gin at a joint media briefing with ABS.

Emphasising Singapore’s disclosure- based regime, he said that issue managers are relied on to ensure that companies are disclosing accurate information to investors.

Taking immediate effect, the guidelines steer investment bankers towards checking off listing aspirants by probing the quality of the board and management, the fiscal and liquidity position, as well as the corporate structure.

The 33 pages of guidelines are not legally binding, but reflect trends that SGX has observed when reviewing listings; over nine months, it has also collected feedback from auditors, lawyers, banks and corporate-finance firms.

ABS director Ong-Ang Ai Boon said: “The improvements made to the guidelines will help Singapore draw more quality listings, and grow investors’ trust and participation in our market.”

One guideline says that the scope of checks by bankers should extend beyond on-site visits to examining inventory and biological assets such as livestock and crops; this is relevant to Singapore as a listing venue for Asean companies with agricultural businesses. This would address “an area of vulnerability” that SGX has noted, said SGX’s Mr Tan.

Bankers should also check on reasons behind recent resignations of management and directors, as well as reasons for restrictions on cash remittances from the potential issuer’s overseas subsidiaries to the holding firm.

And amid greater global scrutiny over loopholes for tax evasion and money laundering, the listing guidelines hold IPO (initial public offering) bankers to ensuring that taxable revenue declared in tax filings are checked against the issuer’s audited financial statements; they are also to question “unnecessarily complex group structures”.

Senior OCBC banker Tay Toh Sin, speaking as the chairman of the ABS listing due-diligence committee, said the stricter guidelines take into account that more companies are dealing with cross-border transactions as well.

SGX is considering ways to put out details on rejected listings – without naming the companies.

Mr Tan declined to detail the average number of IPO aspirants that are rejected when they reach SGX, but pledged greater transparency to boost oversight of listed companies. “You will see more measures. But at this point in time, I can only tell you to watch this space.”

Gail Ong, head of WongPartnership’s equity capital markets practice, said the amendments are timely, as the guidelines are in line with recent developments of the listing framework: “The key changes introduced formalise due-diligence considerations which many issue managers and underwriters already contemplate and undertake as appropriate in the course of the listing process.”

Last year, SGX set up three independent committees to advise the market regulator on listing, disciplinary and appeal matters.

Tan Jeh Wuan, head of capital markets at DBS, said the guidelines will help raise the standard of due diligence for IPOs in Singapore, and increase investors’ confidence in the quality of these IPOs.

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