The Singapore Exchange (SGX) has amended the Listing Rules with effect from 7 February 2020 to enhance the continuing disclosure requirements. The amendments highlight the need to consider whether information is trade-sensitive in addition to considering whether it is price-sensitive. While this is not a change to the Listing Rules as such, the SGX has clarified the test to be applied and makes clear that trade-sensitive information need not be price-sensitive as the test is broader.
Disclosure of trade-sensitive information
Appendix 7.1 (Corporate Disclosure Policy) and Practice Note 7.1 (Continuing Disclosure) expand on the existing rule under rule 703(1) of the Listing Rules, which states:
“An issuer must announce any information known to the issuer concerning it or any of its subsidiaries or associated companies which:
(a) is necessary to avoid the establishment of a false market in the issuer's securities; or
(b) would be likely to materially affect the price or value of its securities.”
The appendix and the practice note have been amended to emphasise the importance of limb (a), by explaining that what it requires is a consideration of whether information is trade-sensitive. Information is trade-sensitive if the information is expected to influence an investor who commonly invests in securities to trade in the issuer's securities in reliance on that information, if it had been known beforehand. The SGX has noted that this is a broader test than that for whether information is price-sensitive as information maybe trade-sensitive even if there is no significant market reaction to the information when disclosed.
This test is the same as the test for whether information is insider information under the Securities and Futures Act (SFA) and Practice Note 7.1 cross-refers to section 214 of the SFA and to the “Guidelines on the Interpretation of ‘Persons who Commonly Invest’ in Division 3 of Part XII of the Securities and Futures Act” (Guidelines) issued by the Monetary Authority of Singapore.
The Guidelines make it clear that retail investors are to be included among the persons who commonly invest. Such investors would have the following characteristics:
- They would be rational and economically motivated investors with at least some experience and knowledge of investing in the relevant financial product, but may not be investment professionals.
- They would be aware of the prevailing price of the relevant financial product from time to time.
- They would have knowledge of or the ability to obtain generally available information concerning the company or issuer in question, and would have the ability to draw inferences from and assess the credibility of the information in question.
Retail investors would not, however, have general professional knowledge. This would include the ability to carry out technical and fundamental analysis.
Expanded list of information likely to require immediate disclosure
Appendix 7.1 has also been amended to (among other things) expand on the list of situations that are likely to require immediate disclosure. The following matters have been added:
- The provision or receipt of a significant amount of financial assistance;
- The involuntary striking-off of the issuer's subsidiaries;
- An investigation on a director or an executive officer of the issuer;
- The loss of a major customer or a significant reduction of business with a major customer; and
- A major disruption to the supply of critical goods or services.
The express inclusion of investigations on a director or an executive officer of the issuer is noteworthy as this has the practical effect of reversing the result in Madhavan Peter v PP (2012). In that case, the High Court held that there was no breach of the requirement to disclose material information where a company had failed to make an announcement that its officers were under investigation by the Corrupt Practices Investigation Bureau. The Court did so on the grounds, among others, that the information was not materially price-sensitive. It came to this conclusion after undertaking an analysis of price movements in the shares of the company after the information became known publicly. In this regard, the Court specifically distinguished the regulatory regime for continuous disclosure from that for insider trading noting that, unlike the insider trading regime, the continuous disclosure regime did not require disclosure of trade-sensitive information.
The amended Practice Note 7.1 makes clear that while the information on investigations may not be materially price sensitive, it may be trade-sensitive. It notes that this is especially so if the officers’ passports have been impounded as occurred in that case. Should the facts of that case come up now in a similar matter, the courts might well reach a different conclusion following these amendments. It should be noted in this regard that a breach of the continuous disclosure rules will also be a breach of section 203 of the SFA, which makes its an offence to fail to disclose information required to be disclosed under the Listing Rules.
The Listing Rules have also been amended to enhance continuous disclosure obligations in respect of various specific transactions and to require quarterly financial reporting only for companies that meet specified requirements. These are covered in "Listing Rules Amended to Enhance Disclosures for Various Transactions" and "Companies to Carry Out Semi-Annual Reporting Unless Special Circumstances Exist" respectively.