The reforms are aimed at allowing efficient access to capital and investments, as well as making Bursa Malaysia a more attractive platform for Malaysian and foreign companies. Minister of Finance II, YB Dato’ Seri Ahmad Husni Hanadzlah, unveiled the new equity fund-raising framework and board structure at a ceremony at SC today.
The new framework also entails the merging of Bursa Malaysia’s Main Board and Second Board into a single board for established corporations. In addition, it involves transforming the current MESDAQ Market into an alternative market open to companies of all sizes and from all economic sectors.
The merged Main Board and Second Board are now known as the “Main Market” while the MESDAQ Market as the “ACE Market”. The two new Markets will come on-stream on 3 August 2009.
Along with the new structure, there is also a significant shift in the regulatory approach with regards to listings and equity fund-raisings. SC Chairman Dato’ Sri Zarinah Anwar said the shift to a more market-based regulatory approach is to ensure greater efficiency and competitiveness without compromising on investor protection.
“This is by far the most robust process that we have undertaken in reviewing our regulatory approach,” Dato’ Sri Zarinah said in her speech at the launching ceremony. In reviewing the framework, the SC and Bursa Malaysia held extensive consultations with the industry and the public by holding more than 300 brainstorming sessions and focus group discussions.
Chairman of Bursa Malaysia, Tun Mohamed Dzaiddin Haji Abdullah, said in his speech the change in the board structure reflected the evolving landscape of the capital market. “More importantly, this move is poised to bring Bursa Malaysia in line with international markets in positioning us as a conducive capital-raising destination.”
Key Changes in the New FrameworkUnder the new framework, rules and processes for equity fund-raising have been streamlined in order to provide greater certainty, shorter time-to-market and lower regulatory costs.
Currently, the SC assesses suitability of corporate proposals based on their viability. Under the new framework, the SC’s review of corporate proposals will focus on the following:
- Compliance with minimum requirements;
- Standards of corporate governance;
- Resolution of conflicts of interest;
- Preservation of public interest; and
- Adequacy of disclosures to enable investors to make informed investment decisions.
SC’s approval under section 212 of the Capital Market Services Act 2007 (CMSA) would only be required for the following substantive corporate proposals in the Main Market:
- Initial Public Offerings (IPOs);
- Acquisitions resulting in a significant change in business direction or policy of a listed corporation (Reverse take-overs and back-door listings);
- Secondary listings and cross listings; and
- Transfer of listings from the ACE Market to the Main Market.
All other equity-based corporate proposals such as acquisitions (other than reverse take-overs and back-door listings), disposals, placements of securities, rights offerings and issuance of warrants would no longer require SC’s approval. The SC would continue to vet and register prospectuses to ensure adequate and meaningful disclosures to investors. Bursa Malaysia will take on a more active role as the frontline regulator for secondary equity fund-raisings.
“We believe that the capital market participants in Malaysia are ready for a more broad market-based regulatory approach,” said Dato’ Sri Zarinah. “The shift in the regulatory approach does not compromise investor protection standards.” Enabling blocks have been put in place to enhance the standards of due diligence, disclosures and corporate governance – essential features of which the SC and Bursa Malaysia will continue to advocate.
Another key reform to the ACE Market is, apart from it now being sponsor-driven and open to companies of all sizes and from all sectors, there will be no prescribed minimum operating history or profit track record requirements for entry to the alternative market, as the sponsors will be empowered to assess the suitability of listing applicants. The current system of requiring the services of a sponsor for a period of at least three years by the listed issuer is maintained.
As part of our effort to inject both breadth and depth to the Malaysian capital market, the SC and Bursa Malaysia are also introducing the listing of Special Purpose Acquisition Companies (SPACs), shell companies without operations that goes public with the intention of merging with or acquiring operating companies or businesses with the proceeds of their IPO. The listing of SPACs will promote private equity activity, spurring corporate transformation and encouraging mergers and acquisitions.
In order to further spur the number and types of structured warrants in our market, Bursa Malaysia will provide a fee incentive scheme for listing of structured warrants in terms of waiver of initial and annual listing fee.
New Guidelines & Listing RequirementsA total of five guidelines are published to give effect to the new regulatory approach. They are the Equity Guidelines, Principal Adviser Guidelines, Prospectus Guidelines, Asset Valuation Guidelines; and Structured Warrants Guidelines. In conjunction with this, Bursa Malaysia has also revamped its listing requirements for the Main Market and ACE Market.
Except for the Structured Warrants Guidelines and the related structured warrant prospectus requirements which take effect immediately, the new guidelines and the revamped listing requirements will take effect on 3 August 2009, giving industry participants ample time to familiarise themselves with the new equity fund-raising framework.
The guidelines and related FAQs as well as the revamped listing requirements are now available on the websites of the SC and Bursa Malaysia at www.sc.com.my and www.bursamalaysia.com respectively.
