On 27 October 2015, the Singapore Exchange ("SGX") announced certain amendments to Practice Note 7.2 of the SGX Listing Manual. These amendments to Practice Note 7.2 will take effect on 1 December 2015.

Please click here for a copy of the said SGX news release and click here to see the specific amendments to Practice Note 7.2.

Cessation of Private Notification Regime

Current Practice Note 7.2

Practice Note 7.2 currently requires an issuer to privately notify SGX Market Surveillance without delay if the issuer's Board is:

  1. made aware of discussions or negotiations on a potential proposal; or
  2. in discussion or negotiation on an agreement or document (whether binding or non-binding),

that is likely to result in any of the following transactions ("Selected Transactions"):

  • a takeover of the issuer (which includes a scheme of arrangement or delisting);
  • a reverse takeover of the issuer; or
  • a  very  substantial  acquisition  by  the  issuer  for  the purposes of Chapter 10 of the SGX Listing Manual.

Similarly, where discussions or negotiations are carried out by a controlling shareholder of the issuer without the Board’s knowledge, the controlling shareholder is also required to privately notify SGX Market Surveillance.

There is also a corresponding requirement for the issuer and/or the controlling shareholder to notify SGX if such discussions or negotiations cease.

Private notifications no longer required

The above requirements have been deleted from Practice Note 7.2 (with effect from 1 December 2015) and Boards and controlling shareholders will no longer have to privately notify SGX of such transactions prior to a public announcement of such transactions, or to update SGX if the deal falls through.

In the news release, SGX explained that it decided to cease the private  notification  regime  after  assessing  market  feedback following a public consultation exercise in 2014. You may wish to read about the public consultation by clicking here. SGX is of the view that the cessation of the private notification regime will not have an impact on investor interest.

Expansion of Privy Persons List

Current Practice Note 7.2

Practice Note 7.2 currently also requires an issuer to concurrently maintain a list of the persons who were privy to a Selected Transaction (a "privy persons list"). The privy persons list must be in the prescribed format set out in Practice Note 7.2 and furnished to SGX upon request.

Expansion of scope of privy persons lists to cover all material transactions

With effect from 1 December 2015, the privy persons list requirement in Practice Note will apply to all material transactions, not just the Selected Transactions. A material transaction refers to a transaction which an issuer would have been required to announce pursuant to Rule 703(1) of the SGX Listing Manual, but which it has decided to temporarily withhold from public disclosure in reliance on the exception under Rule 703(3) of the SGX Listing Manual. One of the conditions for invoking the said exception is that the issuer must maintain the strictest confidentiality of such material information at all times.

In the news release, SGX explained that, in such a scenario, the issuer must be able to keep track of all persons who gained access to the confidential information, which may include internal staff or external advisers of the issuer, as this will aid in the control of information flow as well as assist in investigations in case of information "leaks". Where the SGX observes unusual trading activity in the issuer’s securities, which suggest possible information "leaks", SGX may request for the issuer to submit the privy persons list for its investigations.

No prescribed format for privy persons list

With effect from 1 December 2015, Practice Note 7.2  will be amended to remove the prescribed format for the privy persons list.

SGX has explained that issuers will be given the flexibility to decide what information the privy list will contain, having regard to personal data privacy concerns. However,  amended Practice Note 7.2 will provide that the privy persons list should typically include information on the identity of the privy persons, the circumstances under which these persons gained access to the information (i.e. became aware or involved in the transaction), and the  dates  on  which  these  persons  first  gained  access  to  the information. SGX has also reserved the right to ask for additional information reasonably required for the proper discharge of its regulatory function.

Proper procedures for maintenance and provision of privy persons list

Issuers must have proper procedures in place to provide the privy persons list expeditiously to SGX upon request, and such procedures may include the maintenance of the privy persons list from the date the issuer first started withholding information under Rule 703(3).

Recommendations

For this reason, we recommend that all issuers consider putting in place a robust system to keep proper records of all staff and external advisers who are involved in any actual or potential material transaction as early as possible, bearing in mind that the list should  be systematically updated as the  transaction team evolves during the course of the transaction.

Issuers should also monitor trading activity in its securities and media and analysts' reports on it and its securities regularly on a daily basis, as this will enable the issuer to anticipate and respond quickly to any queries issued by SGX, as well as to provide an up- to-date privy persons list to SGX without delay.