SGX Seeks To Enhance Standards Of Governance And Listings

The Singapore Exchange Ltd (SGX) plans to enhance its listing rules and processes in order to raise corporate governance standards and promote good regulatory practices. This is part of an annual review of SGX's regulatory framework and processes. In this regard, a Public Consultation Paper will be issued on 30 May 2005 to seek public feedback on proposals for specific rule changes.

The proposed amendments to the listing rules are focused on two key areas - enhancing corporate governance and extending the role of intermediaries.

"As the market evolves, we continue to uphold the principles that can be applied consistently to regulate and promote an open and informed market. The rules underlying these principles need to be constantly sharpened to ensure their relevance and effectiveness in meeting market needs, yet taking care not to be overly prescriptive," said Mr Hsieh Fu Hua, CEO of SGX.

Enhancing corporate governance

Among the proposed enhancements, SGX seeks to:

1. Strengthen board composition by requiring the provision of two independent directors on a continuous basis, and not just at listing.

2. Increase the participation of resident directors in foreign listed companies. The Board must have at least two independent resident directors on a continuing basis; and one of the following:

§ a qualified person in Singapore to advise the issuer on Singapore laws and assist directors with company information, or
§ another director resident in Singapore (in addition to the two independent resident directors) ; or
§ an officer in executive capacity resident in Singapore.

The proposed rules, if adopted, will apply to new issuers on a continuing basis. Existing listed issuers will be given two years to comply with the new rules.

3. Require, for interim results, a "negative assurance" confirmation from the Board that, to the best of their knowledge, nothing has come to the attention of the Board of directors, that may render the financial results to be false or misleading;

4. Require an annual confirmation from the Board and CEO that:-

a) responsibilities for staffing internal control functions are explicitly assigned;

b) procedures exist for assessing the effectiveness of the company's internal controls;

c) channels for reporting significant risk and internal control matters to the Board and CEO are clearly specified; and

d) nothing has come to the attention of the Board and CEO with regards to internal controls that would have a materially adverse effect on the company.

This confirmation would not require an audit obligation.

5. Require listing applicants to confirm that they have obtained all necessary approvals, and comply with laws and regulations, that would materially affect the business operations.

Extending the role of intermediaries

The issue manager plays a crucial role in preparing new issuers for their responsibility as a listed company. In this regard, the proposed rules seek to:

6. Increase the sponsorship disclosure requirement (badging) for issue managers from one to two years;

7. Enable, at the discretion of SGX, the appointment of a Compliance Adviser to facilitate the company's transition to become a listed entity.

8. Require the issue manager to confirm that the directors of an applicant have been informed of their obligations under the listing rules as well as the relevant Singapore laws and regulations.

Other enhancements

In addition, SGX will:

9. Increase directors' awareness of listing obligations through on-going orientation programmes.

10. Improve transparency and disclosure by encouraging issuers to adopt best practices set out in the Operating and Financial Review (OFR) Guide and to follow the Guide when preparing the operating and financial review in their annual reports.

11. SGX is also studying the provisions on shareholder rights accorded by law, in relation to listing applicants incorporated abroad.

The Consultation Paper which sets out the proposed enhancements to the listing rules will be made available to the public from 30 May to 1 July 2005 to seek their comments. The Consultation Paper will be posted on the SGX website at www.sgx.com.

The enhancements will be implemented following public feedback and the necessary approvals.

Click here to download the Consultation Paper.