Disallow transfer from SGX mainboard to Catalist: study

COMPANIES should no longer be allowed to transfer from the mainboard to Catalist, to lift the overall corporate governance standards, growth and share-price performance of listed companies here, says a new report.

The report, "Where to, Catalist?", was published on Tuesday by corporate governance advocate and NUS associate professor of accounting Mak Yuen Teen and final-year NUS accountancy honours student Mark Lai.

It studied the transfer of companies between the Singapore Exchange's (SGX) mainboard and Catalist, and examined the differences between the two boards, in terms of admission criteria and process, listing rules and the characteristics of companies listed on them.

The study found that the performance and liquidity of a substantial number of companies that transferred from the mainboard to Catalist deteriorated after their transfer.

Prof Mak said that, based on the findings in his study, he is recommending that the SGX disallow companies from transferring from the mainboard to Catalist. "If allowed, transfers should only be on an exceptional basis after a thorough review by SGX," he said.

He added that, should companies be allowed to transfer from the mainboard to Catalist, they ought to be closely monitored after their transfer. "SGX should continue to maintain direct oversight of these companies for some time after their transfer, instead of relying on continuing sponsors," he said.

The report also noted that a sizable portion of the companies that have transferred from the mainboard to Catalist have used the more liberal Catalist rules to undertake transactions they would not have been permitted to under mainboard listing rules.

Prof Mak is suggesting that transferring companies be required to continue to comply with applicable mainboard rules for a reasonable specified period.

He said that SGX should also review whether differences between the mainboard and Catalist continuing listing obligations are justified, bearing in mind the need to balance greater flexibility for growth companies and investor protection.

"SGX relies significantly on full sponsors and continuing sponsors under the sponsor-based regime of Catalist. We hope to publish a further report later this year on the sponsors and issues relating to them," he added.

In response to Tuesday's report, an SGX spokesperson said: "The study raises the question of whether Catalist should be strictly reserved for growth companies, or if the platform should also be supportive even when companies have fallen on hard times and are seeking an opportunity to rebound or recover. We believe a balance needs to be struck to take into account the long-term interests of shareholders, throughout the life cycle of a company. We will review the findings and recommendations in this light."

The full report can be found at www.governanceforstakeholders.com.