SGX RegCo proposes removing financial watch list, avoiding public queries on listed firms

The watch list of loss-making mainboard companies could be scrapped, while public queries to firms displaying unusual trading activity may be avoided in favour of private engagement.

These are among proposed amendments to Singapore Exchange (SGX) listing rules aimed at reducing regulatory friction and encouraging better price discovery and overall market efficiency.

The proposed changes are expected to strike a more proportionate balance in facilitating market discipline and achieving investor protection, said the Singapore Exchange Regulation (SGX RegCo) on May 15.

The regulator is consulting the public on removing the financial watch list after feedback that it has unintended negative effects on business confidence and access to financing.

SGX RegCo adds a mainboard-listed issuer to the watch list if it has pre-tax losses for three consecutive years and an average daily market capitalisation below $40 million over the preceding six months.

The proposed changes will see the list removed, although issuers will still have to announce if they incur losses for three straight years.

SGX RegCo will also suspend half-yearly reviews for adding companies to the watch list, and affected issuers will remain listed regardless of whether they meet exit criteria.

The proposed changes are part of a shift towards a less prescriptive and more disclosure-based system for companies that want to list in Singapore.

They come after a review group announced new measures in February aimed at reviving trading on the SGX.

Alongside the proposed listing rule changes, SGX RegCo also plans to take a more targeted approach when querying firms on unusual trading activity.

This reflects market concerns that issuing public queries without regard to materiality can unnecessarily alarm investors.

Instead, it plans to shift its approach to privately engaging a company when unusual trading is detected.

The regulator also proposes to limit the validity period of trade-with-caution alerts to an initial period of two weeks, implying that the alert will be active for only that timeframe.

These alerts signal that there is unusual or potentially concerning trading activity in a particular stock, and serve as a warning to investors to be mindful of potential risks.

However, these alerts can stay up indefinitely even after the issue has passed. By limiting them to two weeks, the SGX can reduce market uncertainty and prevent unnecessary long-term impact on a company’s trading activity.

SGX RegCo also wants to refine its approach to the suspension of issuers, although it did not elaborate on this.

More than 40 listed companies were suspended from trading as at March 31, 2024, noted an SGX report. The report also showed that the nine companies seeking share trading resumptions have been suspended for an average of 3.2 years.

SGX RegCo chief executive Tan Boon Gin noted that “the effectiveness of such a market-driven approach rests on a foundation of rules and standards that assure market participants that the information on which they base their decisions is accurate and accessible, and that the market is fair”.

He added that SGX RegCo will continue to “ensure that regulatory oversight of both corporate disclosures and trading activity remains rigorous, even as we refine the manner in which such oversight is conducted and communicated, to ensure relevant and material information for investors is disclosed”.

The regulator’s practices for other market surveillance activities will remain unchanged.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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