Administrative and Enforcement Powers of the Singapore Exchange Regulation

16 July 2020

Foo Soon Yien and Jennifer Ang

​The far-reaching regulatory powers of Singapore Exchange Regulation (“SGXRegCo”) were recently demonstrated again in the case of Sen Yue Holdings (“Company”), who was issued a Notice of Compliance (“Compliance Notice”) on 18 June 2020.
 
The Compliance Notice was issued after the Company’s Chairman, Executive Director and controlling shareholder (“Requisitionist”) sent a requisition notice to the Company’s Board of Directors to remove the entire Board (save for one Independent Non-Executive Director) and appoint two new Independent Non-Executive Directors.

After concerns on the relationship between the Requisitionist and certain customers of the Company were raised, an independent review was commissioned and SGXRegCo swiftly issued the Compliance Notice to require the following from the Board:

(a) The current Board was to remain unchanged until completion of the independent review and satisfactory resolution of the findings;

(b) The current Board was to continue providing full assistance in connection with the independent review;

(c) The Audit Committee (“AC”) of the Company was to, when necessary, expand the scope of the independent review; and

(d) The AC of the Company to assess the findings and determine whether there had been, amongst others, a breach of the Catalist Rules.

SGXRegCo had thereby effectively put a halt to a controlling shareholder’s right to call for an Extraordinary General Meeting to replace the Board, revealing the robustness of its oversight to ensure that the market is fair, orderly and transparent to all.

This move was justified, considering SGXRegCo’s concern that changes to the Board could compromise the continuing independent oversight and completion of the ongoing independent review. The move was also consistent with the Code of Corporate Governance, which mandates that the Board must maintain a “sound system of risk management and internal controls, to safeguard the interests of the listed company (“ListCo”) and its shareholders”, and for shareholders to be given a “balanced and understandable assessment of [the ListCo’s] performance, position and prospects”.

SGXRegCo has been endowed with such broad administrative and enforcement powers pursuant to Catalist Rule 305(1). The specific powers in Catalist Rule 305(1) include SGXRegCo’s power to require a ListCo and any Relevant Persons to make disclosures, and to take over supervision (in full or in part) of a ListCo. In the above case, SGXRegCo had relied on, amongst others, the general catch-all provision in Catalist Rule 305(1)(k) that empowered it to “impose any other requirements on Relevant Person which the Exchange considers appropriate.” “Relevant Person” is defined as the ListCo and its directors, executive officers, sponsor or registered professional.
 
SGXRegCo’s powers are complemented with heavy penalties, which ranges from a private warning, public reprimand, resignation of directors, to fines up to a maximum of S$1,000,000 for multiple charges in the case of ListCo and sponsors.
 
Over the years, SGXRegCo has issued Compliance Notices to various ListCos for a myriad of regulatory concerns, including potential conflicts of interest and where there had been a lack of clarity in the ListCo’s transactions and financial reports. Given that a Compliance Notice can be issued as long as it is for the purpose of ensuring a fair, orderly and transparent market, SGXRegCo will undoubtedly continue to use Rule 305(1) as one of the tools in its arsenal to uphold the integrity of the market. All stakeholders of ListCos will therefore do well to uphold their obligations to the market and investing public in letter and spirit.

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Foo Soon Yien
Senior Director, BR Law Corporation
foosoonyien@brlawcorp.com

Jennifer Ang
Senior Associate, BR Law Corporation
jenniferang@brlawcorp.com