SGX RegCo publishes observations of Catalist sponsors to increase transparency, accountability

THE Singapore Exchange Regulation (SGX RegCo) on Wednesday released an inaugural publication, Findings and Recommendations on Continuing Sponsorship Work, which aims to highlight areas for improvement following its observations of reviews and inspections of sponsors on the Catalist board. 

The bourse regulator said the publication is part of a slate of initiatives to provide transparency on its expectations, as well as to raise standards across the market community. It believes this move will also result in greater accountability within the Catalist regime. 

SGX RegCo's other efforts with sponsors include an annual dialogue on initial public offerings (IPOs), as well as continuing sponsorship activities and one-on-one engagements with certain sponsors to address key concerns and issues.

Tan Boon Gin, CEO of SGX RegCo, said: "Sponsors are the linchpin in ensuring the Catalist regime continues to serve both investors and issuers. SGX RegCo regularly reviews the work of those we regulate, including continuing sponsors, and this publication encapsulates some of our observations and lessons learnt."

The publication focuses on four areas of continuing sponsorship work: due diligence standards for continuing sponsorship work; assessment of suitability of board and key management of sponsored issuers; continuous monitoring of sponsored issuers as well as the conflict of interest and sponsor independence. 

The Catalist regime has two types of sponsors - full sponsors which generally conduct "introducing activities" such as preparing companies for an IPO listing, as well as continuing sponsors who work with companies on continuing listing obligations. Following the listing of a Catalist issuer, the full sponsor will also be retained as the continuing sponsor for a period of at least three years.

Unlike a mainboard listing, which is subject to review and approval by the SGX and the Monetary Authority of Singapore (MAS), a Catalist listing is supervised and approved by its appointed sponsor. Sponsors are answerable to the SGX under the Catalist rules, and are subject to SGX reviews.

SGX RegCo noted that a total of 20 sponsors are currently qualified to perform continuing sponsorship work. Sixteen of these sponsors can also conduct introducing work. 

However, SGX RegCo said, this list is not exhaustive and merely serves to provide guidance and expectations in relation to the topics. The regulator will also publish common observations on other topics arising from inspections and ongoing reviews of sponsors. 

The publication comes shortly after a study observed that more than half of Catalist-listed companies incurred financial losses for fiscal year 2019, with those having been listed longer being more likely to underperform. Out of 214 companies, 56.5 per cent or 121 companies booked losses for FY 2019, with those listed for over seven years constituting 71 per cent of these loss-making companies. 

The study, which also examined all 20 Catalist sponsors, urged a review of the Catalist board, citing concerns over the conflicts of interest in the sponsors regime.

Associate Professor Mak Yuen Teen of the National University of Singapore (NUS) Business School, who co-authored the study, told The Business Times that it is time to relook the 12-year old Catalist, citing "questions over the quality of Catalist listings" due to accounting and corporate-governance issues emerging soon after listing.