SGX RegCo introduces more flexible listing rules, removes financial watch list
The regulator also seeks feedback on proposed mainboard rule changes to consolidate listing review functions
[SINGAPORE] Companies looking to make their trading debut on the Singapore Exchange (SGX) mainboard will now face a lower profit test threshold for admission. It has been reduced to S$10 million from S$30 million under revised quantitative admission criteria.
Besides broadening the diversity of companies listed on the bourse, the move is expected to give investors a wider range of high-quality investment options.
Effective from Wednesday (Oct 29), the revision is one of the new measures introduced by SGX Regulation (SGX RegCo), following a public consultation in May this year.
The other changes include limiting trading suspensions to situations with clear evidence of going-concern issues; removing the financial watch list; and amending admission requirements for life science companies.
They follow recommendations made by the Monetary Authority of Singapore (MAS) equities market review group, and aim to advance Singapore towards a more disclosure-based regulatory regime “aligned with major developed markets”, SGX RegCo said in a statement on Wednesday. It added that the revisions have received strong industry support.
Tan Boon Gin, chief executive officer of SGX RegCo, told The Business Times: “Today’s announcement is aimed at reducing time to market and creating more regulatory certainty.”
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The new post-listing measures will remove regulatory friction from trading, enhancing efficiency and price discovery, he said. At the same time, institutional investors will play a greater role in strengthening market discipline and stewardship.
“Overall, these and other review group measures will help Singapore become a more attractive market for fundraising and investing,” he added.
Market participants have generally welcomed the new measures. Stefanie Yuen Thio, joint managing partner at TSMP Law, told BT that the changes balance “a more sophisticated market with some high risk areas still getting closer regulatory oversight”.
Luke Lim, managing director at Phillip Securities and chairman of the Securities Association of Singapore, called for the measures to be “seen and implemented holistically” to strengthen the Republic’s position as a competitive capital market.
Terence Quek, CEO of Singapore Institute of Directors (SID), added that the streamlined listing process reflects some of the ideas shared with SGX by SID members through various engagement exercises.
Meanwhile, PwC Singapore partner Tham Tuck Seng noted that the real challenge lies in how regulators, such as SGX and MAS – alongside capital market stakeholders like banks, lawyers and accountants – will balance these new “regulatory efficiencies” with safeguarding investors’ interests.
David Gerald, president of the Securities Investors Association (Singapore), said that “regulatory measures may be viewed favourably by investors, but (their) impact has not always been positive on their investments”.
Mainboard listings
SGX RegCo noted that most of the consultation respondents agreed that a profit test threshold of S$10 million would be “appropriate”, and also in closer alignment with that of other major exchanges.
The profit test requires prospective issuers on the SGX mainboard to report a minimum consolidated pre-tax profit of at least S$10 million for the latest financial year, with an operating track record of at least three years.
The new profit requirement will not “erode the distinction” between mainboard and Catalist listings, the regulator said, noting that the Catalist board is being reviewed separately. It clarified that the mainboard generally caters to more established issuers, while the Catalist board is for growth companies.
SGX RegCo also noted industry suggestions to consider an issuer’s cumulative profit over several years rather than a single year. It confirmed that the revised profit test threshold will apply to an issuer’s latest financial year.
Additionally, it acknowledged that “pre-revenue companies with strong growth potential in emerging industries may be suitable for mainboard listing, even if they may not meet traditional financial criteria due to the unique circumstances of their industries”.
Artificial intelligence, green tech and quantum tech firms are examples of such companies, Tan told BT.
Companies not covered by existing rules can also engage with SGX RegCo on possible listing pathways. Reflecting this, the admission requirements for pre-revenue life science firms have been updated to take into account their unique industry circumstances.
Issuers which have already submitted mainboard listing applications can choose to follow the revised admission criteria, the regulator said.
As for qualitative criteria, it said it will retain key requirements to ensure that only issuers with strong governance and financial health are listed. These include mandating unmodified audit opinions to ensure compliance with financial reporting standards, as well as resolving or mitigating any conflicts of interest before listing for real estate investment trusts and business trusts.
Removal of financial watch list
SGX RegCo said it has received broad support for the post-listing regulatory changes, and will implement them as consulted.
The removal of the financial watch list is a key development, with all issuers currently on the list automatically removed from it.
While the regulator acknowledged feedback that the watch list “may prompt issuers with financial weakness to improve their financial position”, it also said it can hinder funding and customer acquisition, as well as depress share prices and limit investor exit opportunities.
“Delisting such issuers may not benefit investors, as it could limit their opportunity to exit subsequently and prevent them from participating in any potential turnaround of these businesses,” it added.
Issuers will still be required to disclose their third and subsequent consecutive financial years of losses. They are also encouraged, where appropriate, to communicate their plans and actions to improve their financial performance.
The majority of respondents also supported the move to limit trading suspensions to cases with clear evidence of going-concern issues, SGX RegCo said.
If unusual trading is detected and the market appears unfair, disorderly or non-transparent, the regulator will issue trade-with-caution alerts – valid for two weeks – with new alerts issued as needed.
“This change is viewed positively as it aims to reduce unnecessary market disruptions and ensures that trading suspensions are only applied when there is a significant risk to the issuer’s viability,” said SGX RegCo.
It added that issuers that are currently suspended from trading, but are not undergoing formal insolvency or restructuring and can continue as a going concern, may apply to resume trading immediately.
Consolidating listing review functions
SGX RegCo is also seeking feedback on suggested mainboard rule changes to implement MAS’ proposal to consolidate listing review functions. This consultation is open until Nov 29.
In tandem with SGX RegCo, MAS is seeking feedback on its proposal with a view to streamline the listing process. Comments on its consultation paper may be submitted through FormSG until Nov 29.
The revisions would allow prospective issuers to deal solely with SGX RegCo for both listing suitability and prospectus reviews, instead of engaging separately with MAS to register their prospectus – as per the current regime.
Separately, MAS’ review group has recommended that listing applications no longer undergo the Listings Advisory Committee process. SGX RegCo is thus requesting feedback on standing down this committee.
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