Greater efficiencies in fund raising with final phase of DBR

The market will enjoy significant improvements in the efficiency of the fund-raising process with the implementation of the final phase of disclosure-based regulation (DBR). The Securities Commission (SC) will be implementing the final phase of its DBR programme in March 2003 with the release of several revised guidelines governing fund raisings.

“The market can expect faster approvals by the SC as well as more business-friendly rules,” said the SC Chairman, Datuk Ali Abdul Kadir.

He said that the measures to improve market efficiencies fully support the government’s efforts to stimulate the economy.

Datuk Ali said at the same time, protection of investors would be upheld, if not further strengthened.

“Investor protection is always a key priority for us and is an area that we will continue to focus upon in the process of building a business-friendly market environment. To this end, the SC has taken on a more strategic approach in its enforcement and surveillance work,” said Datuk Ali.

The final phase of DBR will see major changes in how the SC reviews corporate proposals and prospectuses. This will translate into significant advantages for the market such as shorter regulatory approval time for issuers, shorter exposure periods for investors and, generally, a more cost-effective fund-raising process.

“The market will benefit in many ways, one of which will be the shorter time for processing of corporate proposals. In general, consideration for most corporate proposals by the SC would be improved by up to 50%, premised on submission of complete information. For instance, issuers can expect their rights issues to be approved within 21 market days as opposed to the current one to three months.

(Refer to attached table “Examples of Expected Improvements in the Fund-Raising Process“)

“Thereafter, the abridged prospectus can be registered within seven market days, as opposed to 45 days presently. As for renewal of unit trust fund prospectuses, the registration and lodgment process by the SC would be brought down to seven market days from the current requirement of one month before the date of issue of such prospectuses,” said Datuk Ali.

He added “going forward, a company can get listed within 15 market days once the prospectus has been registered, as opposed to more than 25 market days presently”.

In addition, existing rules have been amended to, among others, promote the listing of companies with large market capitalisation and further facilitate the issuance of unit trust products, private debt securities and call warrants. In the case of unit trust schemes, focus has also been on enhancement of a strong compliance culture within the unit trust industry to complement the final phase of DBR.

The following SC guidelines have been reviewed and will be issued in March 2003 to effect the implementation of the final phase of DBR and move the fund-raising framework forward:

  • Policies and Guidelines on Issue/Offer of Securities;
  • Guidelines on Asset Valuations;
  • Prospectus Guidelines;
  • Guidelines on the Offering of Private Debt Securities;
  • Guidelines on the Offering of Asset-Backed Securities;
  • Guidelines for the Issue of Call Warrants; and
  • Guidelines on Unit Trust Funds.

The SC has had extensive consultations with the relevant industry groups and stakeholders. Datuk Ali said that such consultation is important because “everybody has a vital role to play in DBR to realise greater efficiency in the market”.

“Advisers and issuers especially, must ensure that their submissions of corporate proposals are up-to-the mark and meet the required standards. Investors on their part, should only invest with their eyes open and ensure that they continuously keep abreast with developments in their investments,” said Datuk Ali.

DBR is a market-based approach to regulation which focuses on the quality of information disclosed by issuers when they issue, offer or list securities so as to enable investors to make informed investment decisions.

The SC had progressively implemented DBR since 1996 under a three-phased programme whereby the assessment process of corporate proposals for the issue, offer and listing of securities had gradually been liberalised while maintaining regulatory standards.

Market readiness surveys carried out by the SC in 1999 and 2002 revealed that the market is, in general, supportive of DBR.

Examples of Expected Improvements in the Fund-Raising Process

Area of Improvement Current Under Final Phase of DBR
Approval of rights issues One to three months 21 market days
Registration of abridged prospectuses* 45 days Seven market days
Registration and lodgment of renewal of unit trust prospectuses* One month Seven market days

N/B: Up to 50% improvement in processing times for other corporate proposals could be expected.

* Inclusive of vetting and clearance of the prospectuses.

14 February 2003