Measures Towards A More Market-Oriented Disclosure-Based Regime
MAS allows fund managers more than 5% stake in SGX, subject to 10% cap New prospectus registration regime proposed MAS clarifies SGX's regulatory role
Singapore, 16 Feb 2001. The Monetary Authority of Singapore (MAS) announced today that it will allow fund managers to hold shares in the Singapore Exchange (SGX) beyond the current 5% limit, but up to a cap of 10% and subject to the approval of MAS. MAS also proposed a new prospectus registration regime, as it will be taking over from the Registry of Companies and Businesses (RCB) as statutory regulator for prospectus registration, when the fund-raising provisions in the Companies Act are transferred to the new Securities and Futures Act (SFA) later this year. In addition, MAS clarified the role of the SGX as the frontline regulator and its relationship with the MAS as the statutory regulator.
2 These announcements were made in a speech by Mr Tharman Shanmugaratnam, MAS' Deputy Managing Director, at the fifth annual Investment Fund Awards event this evening, organised by Standard Chartered Bank, Reuters and Business Times.
Approval of Substantial Shareholdings in the SGX
3 The Exchanges (Demutualisation and Merger) Act requires anyone who wishes to acquire 5% or more of SGX to seek prior approval from MAS. This provision recognises the unique and important role of SGX in providing the infrastructure and marketplace for the trading, clearing and settlement of securities and futures in Singapore.
4 MAS will allow suitable strategic investors who can promote SGX's growth and development to acquire substantial stakes of 5% or more in SGX. The size of their permitted stakes will depend on what these strategic investors can contribute to the business and infrastructure of the Exchange.
5 MAS will also generally allow fund managers who invest pools of customer funds to hold SGX's shares beyond the 5% limit. The combined holdings of a fund manager who receives such an approval will be capped at 10%. This is a result of feedback from fund managers that they would like to hold larger absolute stakes in SGX than the 5% limit allows. As key institutional players on the buy-side of the capital markets, the presence of fund managers would ensure a broader shareholder base for the SGX and add to the diverse range of groups with an interest in the Exchange.
Proposed Changes to the Prospectus Registration Regime
6 Under the proposed prospectus registration regime, MAS will register a prospectus not earlier than 14 days and not later than 28 days after an issuer has lodged its prospectus with the Authority. This period is to allow for both regulatory review by MAS and SGX, and public scrutiny and comment. (Currently, there is no public scrutiny before a prospectus is registered.) The lodged prospectus will be published on the Internet, to give investors the opportunity to comment and raise any issues of concern on the prospectus prior to its distribution. MAS and SGX will no longer vet prospectuses to determine if they contain inaccuracies in information or factual errors, but only to ensure that they comply with the laws and SGX listing rules on prospectus disclosure.
7 After a prospectus has been registered, it is proposed that MAS be empowered to stop the public offer and prevent further issues of securities if a prospectus is found to contain misleading or incorrect statements, or has omitted material information. Investors who have subscribed for securities based on the deficient prospectus can withdraw their applications and have their monies refunded.
8 The proposed changes to the prospectus registration regime would place greater responsibility on issuers and their advisers, to meet the high standards of disclosure necessary for a more mature capital market environment, based on market discipline. MAS will be seeking feedback from the public and the industry on the proposed regime shortly, as part of its public consultation on the new SFA.
Credibility in Regulation - a Vital Commercial Asset for the SGX
9 Mr Shanmugaratnam also clarified the roles of the SGX as a demutualised, listed exchange and the MAS in regulating the securities markets. The SGX has direct and frontline regulatory responsibilities of the securities and futures markets, and over the brokers who trade on the Exchange. MAS, as the statutory regulator, will administer the corpus of the statutory law that regulates the capital markets, as well as maintain oversight of SGX's exercise of its regulatory responsibilities. MAS can issue directives to SGX to ensure fair and orderly securities and futures markets and proper management of systemic risks. Further details of the respective roles of the MAS and SGX are found in Table 1 attached.
10 MAS believes that the interests of the SGX are more aligned than divergent with the public interest as represented by users of the Exchange. Mr Shanmugaratnam noted that a fair, transparent and well-regulated market is indispensible to the vibrancy and sustained business success of SGX. Without internationally-accepted rules and effective enforcement, the SGX, like any other exchange, would not be able to attract issuers and investors to the market. Mr Shanmugaratnam added that SGX's board and management recognise fully that credibility in regulation is a vital commercial asset for the Exchange. Should potential conflicts of interest become real however, MAS has the authority, under the provisions of the 1999 Exchanges Act, to put things right.
11 "We believe that the current arrangements for the regulation and supervision of the securities markets between the MAS and SGX, with an enhanced oversight responsibility for the MAS and powers to pursue civil prosecution, will prove robust. But we will continually review the arrangement, keep in touch with international practices, and re-calibrate the relative roles of MAS and SGX where necessary, to ensure effective oversight of the local (capital) markets," said Mr Shanmugaratnam.