Reviving the SGX: Prospectus disclosures to be streamlined to draw more IPOs

SINGAPORE – Disclosure requirements for companies considering initial public offerings (IPOs) here could be simplified to make the listing process easier and help firms provide more relevant information to investors.

The Monetary Authority of Singapore (MAS) said on May 15 that it is consulting the public on proposed amendments to regulations under the Securities and Futures Act.

The exchange regulator, Singapore Exchange Regulation (SGX RegCo), is also conducting a concurrent public consultation on the relevant amendments to listing rules.

The moves come after an MAS-led review group

announced new measures in February

aimed at reviving trading on the SGX.

These include getting selected fund managers to invest at least $5 billion of seed capital in promising non-index SGX stocks, and requiring family offices here to also invest in the stock market.

The proposed regulatory changes towards a less prescriptive and more disclosure-based system for IPOs are part of these measures.

Streamlining disclosures for primary and mainboard listings

Companies seeking a primary listing on the SGX will be required to disclose information that is most relevant to investors.

For example, the issuer is now required to disclose the list of all entities owned by the company’s directors or controlling shareholder that operate in the same business as the issuer. This generates excessive details about these entities.

“The existing requirement will be streamlined to require issuers to provide clear disclosure on the core substance of conflicts faced, instead of purely factual information about the entities,” noted the MAS consultation paper.

There are also proposals to ensure that the time and costs needed to compile the information are commensurate with the informational value to investors.

For example, companies have to get an outside expert to confirm their profit predictions when they list on the stock market.

The MAS is proposing to remove the requirement for such a third-party expert to confirm an issuer’s profit forecasts, citing challenges in obtaining such endorsements due to the judgment involved.

Instead, the issuer’s board should be responsible for ensuring the forecasts are prepared in line with accounting policies and based on reasonable assumptions.

This aligns with practices in the European Union and Britain.

Meanwhile, interim financial statements may be required in a prospectus only if the most recent full-year financials are more than nine months old at the time the offer document is lodged.

This change would give issuers a longer window to launch their IPOs without having to prepare interim statements, a process which usually takes several months.

“A longer launch window is especially important in times of high market volatility,” the MAS said.

There are also proposals to reduce the scope of disclosures required of past events or historical details where these are less relevant to investors.

SGX RegCo is also consulting the public on easing the criteria for mainboard listings, while upholding the quality of applicants.

SGX RegCo chief executive Tan Boon Gin noted that the regulator plans to retain a prescriptive approach in critical areas such as financial health, the track record of directors, management and controlling shareholders.

However, for other aspects, the focus will shift towards enabling issuers to ensure clear and robust disclosures that allow investors to make well-informed decisions, without the regulator mandating how specific issues must be addressed.

Simplifying process for secondary listings

The MAS is looking to align Singapore’s disclosure requirements for secondary listings with international standards.

Issuers that want a secondary listing in Singapore and to offer shares to retail investors are now required to comply with the same prospectus disclosure requirements as issuers seeking a primary listing here. A proposed amendment will allow companies already listed overseas to use their existing prospectus with minimal adjustments when seeking a secondary listing on the SGX.

Industry experts have welcomed the proposals.

Ms Stefanie Yuen Thio, joint managing partner at TSMP Law Corporation, noted that the granularity with which IPO prospectuses are reviewed, with multiple rounds of comments and questions, has been a longstanding grouse in the market. “It’s good the new proposals will centre on financial and management integrity,” she said. 

“IPO aspirants will still need to make full disclosure – that has not changed – but a lot of friction will be taken out of the process.” 

She noted that under the new regime, investors will have to make more informed and considered decisions and must be prepared to seek recourse in the event of inadequate or wrongful disclosure.

“This also means the law must change to give investors more easy access to information and improved levers to enforce against bad companies.”

Investor protection avenues are expected to be addressed in the next round of measures to be announced by the review group later in 2025. 

Mr Robson Lee, a partner at Kennedys Legal Solutions, noted that shifting from a hybrid prescriptive-disclosure based regime to one where issuers take more responsibility for their disclosures is a move in the right direction, one that will draw more IPOs and secondary listings without compromising standards.

“The spirit of a disclosure-based regime entails the directors of the issuer bearing full responsibility for the statutory and regulatory compliance requirements,” Mr Lee said.

It also fosters more market discipline through the principle of caveat emptor, or buyer beware, as investors take personal responsibility for their investment and securities trading decisions, he added.

Deloitte South-east Asia accounting and reporting assurance leader Tay Hwee Ling agreed, noting that the shift towards a disclosure-based regime places stronger emphasis on the timeliness, consistency and materiality of information disclosed.

Material information is anything that a reasonable investor would want to know before buying or selling a security, as it could affect the company’s stock price or the investor’s view of the company.

“This empowers investors to make better-informed decisions while requiring issuers to present clear, accurate and comprehensive disclosures – especially in how their financials support their growth narrative and long-term value proposition.”