Singapore Exchange Enhances Governance

by Mary Swire, for LawAndTax-News.com, Hong Kong

13 June 2006

The Singapore Stock Exchange (SGX) last week announced changes to its listing rules, which will take effect from 1 September 2006.

The changes follows a public consultation by SGX last year on proposed enhancements to its listing rules and processes in order to raise corporate governance standards and promote good regulatory practices.

"We received a lot of constructive feedback from the public during this consultation exercise. After much review and deliberation, we have fine-tuned the amendments to the listing rules to ensure that they are effective and relevant to market needs. We believe that adherence to high regulatory standards builds a robust and enduring marketplace and promotes investor confidence," said Ms Yeo Lian Sim, EVP and Head of Risk Management and Regulation Group of SGX.

Following the public consultation and feedback received, the key changes made to the proposed enhancements in the consultation paper are as follows:

• Foreign issuers are required to have at least two independent directors who are Singapore residents on the Board. Foreign issuers will not be required to have another Singapore resident director, a Singapore resident executive or a compliance adviser as earlier proposed in the public consultation.
• Foreign issuers will be required to have at least two independent directors who are Singapore residents on a continuing basis, and not just at listing. Existing issuers have up to 1 January 2008 to comply with this rule.
• The proposal of requiring an annual confirmation from the Board and CEO with regards to internal control matters will not be included in the listing rules. This is currently addressed within the guidelines stipulated under the revised Code of Corporate Governance 2005 which was only introduced in July 2005.

The other significant enhancements to the listing rules are as follows:

• 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;
• 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.
• Increase the sponsorship disclosure requirement (badging) for issue managers from one to two years;
• Enable SGX to require the appointment of a Compliance Adviser to facilitate the company's transition to become a listed entity.
• 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 include a plan to increase directors' awareness of listing obligations through on-going orientation programmes. Issuers are required to announce the directors' prior experience or training in the prospectus or via SGXNet. Similar announcements on SGXNet are also required on an on-going basis for the appointment of new directors.

Transparency and disclosure will be improved by encouraging issuers to adopt best practices set out in the Operating and Financial Review (OFR) Guide. Issuers are to follow the Guide when preparing the operating and financial review in their annual reports. This will be effective for all AGMs held on or after 1 January 2007.

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