ABS, SGX raise due diligence standards for issue managers and sponsors

The updated ABS Listings Due Diligence Guidelines was launched on Nov 13 with immediate effect.
The updated ABS Listings Due Diligence Guidelines was launched on Nov 13 with immediate effect.PHOTO: ST FILE

SINGAPORE - The Association of Banks in Singapore (ABS), working with Singapore Exchange Regulation (SGX RegCo), has enhanced guidelines that will raise the standards of due diligence conducted on companies planning to list here.

The updated ABS Listings Due Diligence Guidelines was launched on Friday (Nov 13) with immediate effect. The guidelines were last revised in 2016.

Issue managers and full sponsors will have to meet the higher standards resulting from the updated guidelines when they conduct due diligence work during an initial public offer (IPO), reverse takeover or listing process.

ABS director Ong-Ang Ai Boon said regular updates are necessary to ensure that the guidelines continue to be relevant to the constantly-changing economic climate.

"With the increase in issuers from more nascent sectors such as technology that are seeking equity capital, it becomes especially important for issue managers, full sponsors and their professionals to adapt due diligence practices that address the particular needs of the new market environment," she said.

Key changes in the revised guidelines include:

• An increased focus on the assessment of the adequacy and effectiveness of the issuer's internal controls to meet its business needs and challenges as a listed company

• The assessment of the sustainability and viability of the issuer's business, taking into consideration, in particular, the challenges posed by the prevailing economic climate

• Targeted guidelines for due diligence on issuers operating in specialised, restricted or niche industries, and/or in higher risk jurisdictions

In January, SGX RegCo said issue managers will have to comply with the ABS due diligence guidelines, and that these would be incorporated into the mainboard listing rules, following feedback to a public consultation in late 2018.

Tan Boon Gin, SGX RegCo CEO, told The Business Times, changes to the due diligence guidelines were prompted by cases seen, but declined to elaborate.

He said in a media release: "Issue managers and full sponsors are our fellow frontline gatekeepers to our market. That is their first and foremost role and responsibility. They must therefore emphasise substance over form and exhibit a healthy dose of professional scepticism when conducting listings due diligence.

"Where due diligence is robust and of a high standard, increased investor confidence and quality listings will follow."