The Singapore Exchange (“SGX”) announced that it commenced a new regulatory framework for secondary listings and secondary-listed companies effective 3 November 2014. This change follows an earlier consultation carried out by the SGX on 4 June 2014.
In brief, under the new framework all companies that have a secondary listing on the SGX or that apply for such a listing (“secondary listed companies”) will be categorised as being primary listed either on a “Developed Market” or a “Developing Market”. The classification will impact the continuing listing obligations under the SGX Listing Manual that will apply to them.
This Update takes a look at the new framework.
Classification of Markets/Countries
List of Developed Markets
As noted, the new framework regulates secondary listed companies on the SGX based on whether the market of their home jurisdiction is classified as a “Developed Market” or as a “Developing Market”.
In determining whether a market/country is classified as “Developed” or “Developing”, the SGX will rely on the market/country classification developed by two international leading index providers, MSCI and FTSE. The SGX will also have regard to whether the securities regulator of the company’s home exchange is a signatory to Annex A of the IOSCO Multilateral Memorandum of Understanding. Based on this, the SGX has announced the following foreign jurisdictions as Developed Markets:
- Hong Kong;
- the Netherlands;
- New Zealand;
- the United Kingdom; and
- the United States of America
Additional principles for market classification
The SGX will also apply the following additional principles in determining market classification:
- The “Developed Market” classification will only apply to companies with a primary listing on the main board or main market (and not the junior board) of the home exchange.
- Companies listed on the main boards of stock exchanges within the European Union which are subject to common listing criteria prescribed by the European Union will be classified as having their place of primary listing in a Developed Market only if the home exchange falls under the list of Developed Markets.
- Where the home exchange’s main board or main market in a Developed Market may have more than one listing segment, the listing applicant will be classified as having its place of primary listing in a Developed Market regardless of which listing segment it is in.
In certain exceptional cases, the SGX may review whether it is (or remains) appropriate for a company that is primary listed in a home jurisdiction that is classified as being a “Developed Market” to continue to be treated as such. The exceptions are:
- Where the company has a presence in multiple jurisdictions (having regard to its place of primary listing, dominant operations, and incorporation); or
- The company’s place of primary listing is on the index providers’ Watchlist/Review List, such that it may be downgraded from a “Developed Market”.
Criteria for assessment
In such cases, a regulatory assessment will be undertaken based on responses of the company and its professional advisers as to whether the company’s home jurisdiction should still be classified as a Developed Market. In carrying out this assessment, the SGX will consider factors including but not limited to:
- The level of shareholder protection available (such as whether there is fair and equitable treatment of all shareholders, matters requiring shareholders’ approval, availability of proxy voting etc.);
- The enforceability of Singapore court orders in the place of dominant operations/place of incorporation; and
- The presence of extradition treaties or arrangements between Singapore and the company’s place of dominant operations/place of incorporation.
Impact on Existing Secondary Listed Companies
New Rule 751
The SGX Listing Manual was amended to include a new Rule 751. This expressly requires secondary listed companies to comply with the following on a continuing basis:
- They must maintain a primary listing on their home exchange;
- They must be subject to all the applicable listing rules of their home exchange (unless a waiver has been obtained for any non-compliance); and
- They must provide an annual certification that they have complied with the applicable continuing listing obligations under the SGX Listing Manual imposed on them.
Continuing Listing Obligations
Except in the exceptional cases discussed above where a review is being conducted, the SGX will not impose additional continuing listing obligations (except for Rule 217 and Rule 751) on secondary listed companies with a primary listing on a market classified as “Developed”. Secondary listed companies with a primary listing on a market classified as “Developing” may be required by the SGX to comply with the continuing listing obligations set out in Chapters 9, 10, and 13 of the SGX Listing Manual.
For existing secondary listed companies, the framework will apply as follows:
Click here to view table.