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Singapore Introduces New Corporate Disclosure Regime

Wednesday, October 10, 2012

From November 19, 2012, the Monetary Authority of Singapore will introduce a new disclosure of interests (DOI) regulatory regime to streamline and enhance the existing requirements for disclosure by directors and substantial shareholders of listed entities.

Currently, directors and substantial shareholders of any listed company are required to report their interests, and changes in interests, in securities to the company under the Companies Act, and to the Singapore Exchange Limited (SGX) under the Securities and Futures Act (SFA). Reporting requirements for business trusts and real estate investment trusts (REITs) are found in the Business Trusts Act and the SFA respectively. Separately, the listed entity is required to announce such information to the market under the SGX Listing Rules.

Under the new regime, all DOI notification requirements in respect of interests in listed entities (corporations, business trusts and REITs) will be streamlined and consolidated in the SFA.

Furthermore, directors and substantial shareholders will no longer be required to separately report their interests, and changes in interests, in securities to the SGX. This is intended to simplify the reporting process and reduce the compliance burden on directors and substantial shareholders. As listed entities will be required to disclose the relevant information to investors, this change to the reporting process will not reduce market transparency.

In addition, only the holding company will be required to aggregate the interests of every related corporation for its reporting purposes. For each subsidiary, it will need only to report its own interests. This will cut down the volume of reporting by large corporate groups and reduce compliance costs.

To ensure that investors are kept informed of any changes in holdings of directors and substantial shareholders on a timely basis, it will also be made a legal requirement for listed entities to notify investors of interests or changes in interests as soon as possible and no later than the end of the following business day.

The notification requirements applicable to directors will be extended to CEOs who are not directors. Even if the CEO is not a director, he is a key decision maker in respect of operating and financial policies of the listed entity, and information on his dealings in the entity’s securities is thought to be relevant to investors.

Importantly, the legal obligations for directors and substantial shareholders to report their interests or changes in interests, which currently apply only to Singapore-incorporated listed companies, will be extended to foreign-incorporated corporations with a primary listing on the SGX. This should level the playing field between local and foreign listed companies and enhance investors’ protection.

For business trusts (BTs) and REITs where business and assets are externally managed by the manager, and where investors are likely to be concerned with the identity of the persons controlling the manager, a shareholder of the manager of a BT or REIT will be required to give notification when his shareholdings in the manager reaches, crosses or falls below the strategic levels of 15%, 30%, 50% and 75%. Any acquisition or disposal of interest in the securities of the BT or REIT by the manager must also be disclosed.

The MAS will introduce a stiffer penalty of up to SGD250,000 (USD200,000) and/or imprisonment for a term not exceeding two years for material contraventions which are committed intentionally or recklessly. Civil penalties may also be imposed for such flagrant breaches of the law. This will enable MAS to take enforcement action proportionate to the seriousness of the offence.

The MAS has also developed electronic notification forms for use by directors, CEOs and substantial shareholders. This removes the need for manual entries by the listed entity and increases the efficiency of the reporting process. The requirement to use prescribed notification forms also standardizes the information disclosed to the market.

In formulating all of the amendments, the MAS has confirmed that it has carefully considered all feedback received from various rounds of public consultations. Over the next few weeks, the MAS will work with industry participants and their professional organizations to familiarize relevant stakeholders with the new notification requirements (including the new electronic notification forms).