Malaysia Unveils New IPO Framework For Market Listing
The Securities Commission of Malaysia has introduced and passed the Guidelines on Submission of Corporate and Market Product Proposals (‘Guidelines’) which detail an enhanced IPO framework. Effective from January 1, 2021, the new mechanism is an attempt to reform the process of submission of an IPO and Reverse Takeover (‘RTO’) application for listing on the Main and ACE (‘Access, Certainty, Efficiency’ formerly known as ‘MESDAQ’) Market. Replacing the Guidelines on Due Diligence Conduct for Corporate Proposals, 2008, the regulations being introduced provide a more liberal regime with healthy oversight and greater shared responsibility among all entities involved.
The new regulatory requirements accompanying the Guidelines are substantially more comprehensive and complex. Below is a brief overview of the key takeaways from the new guidelines:
- ACE Market IPO System to be regulated by Bursa Malaysia
Potentially the most significant proposal within the Guidelines is the movement of the ACE Market architecture under the aegis of Bursa Malaysia. Discussions are currently ongoing, and it is expected that the move will take place in the first 6 months of 2021. This would mean that the entire framework, and all processes involved, including the registration of prospectus would be managed by Bursa Malaysia. The SC has stated that it would work closely with Bursa to help it take on the new responsibility. In addition, there is talk of also reforming the current regulatory framework of the ACE Market.
- A longer exposure period for a draft prospectus
The new exposure period for a company’s draft prospectus will be extended from the current 15 market days. With a lengthier exposure period, a company has more time to engage with the public and the market to receive feedback on their draft prospectus. This allows companies to be more prepared before the official registration of their prospectus.
- More flexible appointee provisions
The Guidelines come hand in hand with a revision of Chapter 7A of the Licensing Handbook. Chapter 7A sets out the eligibility criteria for the Principal Adviser, Recognised Principal Adviser (‘RPA’), Qualified Person (‘QSP’) and the Senior Officer (‘SO’). The RPA and QP will replace the Approved Principal Adviser (‘APA’) and Qualified Senior Personnel (‘QSP’) positions present under the 2008 guidelines. The newly created position of Senior Officer refers to an individual of higher authority or ranking than the QP or a committee duly constituted. Each company submitting its application (‘Submitting Party’) to be listed, must appoint at least 1 SO for each specific proposal. This includes the allocation of sufficient persons with appropriate levels of knowledge, skills and experience to each specific proposal, and reviewing of the performance of the QP.
- The introduction of a ‘mandatory pre-submission holistic consultation process
The new consultation process involves all the important stakeholders associated with the Submitting Party including the applicant, principal advisors, lawyers, reporting accountants and valuers. The consultation mechanism under the Guidelines will help address any important concerns and questions prior to the submission of an application.
- Revised Licensing Handbook
The revision of the Licensing Handbook is an important step towards improving the standard of submissions to the SC. The new procedures bring in intermediaries to ensure the completeness, accuracy, validity and consistency of information in all documents provided to the SC. Several provisions also encourage and introduce a self-checking system for the company to verify its own information before submission.
The Guidelines were published during a great year for Bursa Malaysia, recording its best half-year performance since its listing in 2005. Due to COVID-19, 2020 will only have 25 IPOs launched, far from the earlier target of 40. With several IPOs deferred to next year, 2021 will potentially see more listings than many of the previous years. Combined with the new framework, which emphasises on quality through greater accountability, shared responsibility and a more concrete due diligence programme, the coming year looks to be an exciting year for Malaysia after what has and continues to be a difficult 2020.
Want to improve how you manage compliance risk? As a digital assistant, MICA makes it easier to get regulations right. Compliance teams in banking and financial services now have a powerful solution to improve how they measure, monitor, manage and report on key compliance risks. To go digital, meet MICA today.
