PSE eyes relaxed rules for SME listing sponsors

MANILA, Philippines — The Philippine Stock Exchange Inc. (PSE) plans to relax its rules for listing sponsors of companies eyeing the small, medium and emerging (SME) board in line with its efforts to attract more small and medium companies to go public.

The PSE has released for public comment its proposed amendments to the rules on SME board listing under the sponsor model, which is designed to give high growth and start-up companies access to the capital market even if they do not have the required track record of profitable operations or stockholders’ equity.

Through the framework, an applicant company which does not meet the required track record of profitable operations or stockholders’ equity may apply for listing with the favorable endorsement of a listing sponsor accredited by the PSE.

Under its proposed amendments, the PSE intends to ease the sponsor track record requirement in order to open up the program to more participants who may not meet the firm level track record requirement but have sufficiently experienced personnel.

To be eligible for accreditation as a listing sponsor, the current rule requires an applicant to have at least five years experience in a leading role with initial public offerings or significant corporate finance transactions, or three years experience, if at least two of its key personnel have at least five years experience in a leading role with IPOs or significant corporate finance transactions.

The PSE is proposing the removal of the requirement of three years firm level experience in a leading role with IPOs or significant corporate finance transactions.

The exchange is also pushing for the removal of the requirement for professional indemnity insurance in the current rule in order to reduce the upfront costs for potential sponsors.

Notwithstanding the deletion, the PSE said the sponsor will have the option to obtain such insurance for risk mitigation as it shall remain responsible, together with the listing applicant, for any false, inaccurate or misleading information.

The PSE is recommending to likewise increase sponsor accountability, strengthen market integrity and protect investors who rely on the sponsor’s endorsement.

To make the sponsor model more competitive, the PSE is suggesting that the validity of sponsor accreditation be perpetual, subject to its annual review.

At present, the PSE said the accreditation of a sponsor will be valid for a period of three years from the date of accreditation.

“However, we note that the validity period of sponsor accreditation in other markets, i.e. Bursa Malaysia, Singapore Exchange, London Stock Exchange, Hong Kong Exchanges and Japan Exchange Group, are perpetual in nature and subject to annual review and payment of annual fees,” it said.

Meanwhile, the PSE said it has received initial feedback that potential sponsors find too onerous the obligation to provide continuing sponsorship services to the sponsored company for the next three years after listing.

In consideration of the feedback, the exchange is proposing to remove the continuing sponsorship requirement and to mandate instead the engagement by the sponsored company of a compliance advisor post-listing.

The proposal suggests that a pre-listing sponsor may continue to act as compliance advisor after listing, or if it opts not to continue as such, it must ensure that the sponsored company has engaged a compliance advisor.

In line with the proposed removal of the requirement for continuing sponsorship after listing, the PSE is also recommending to remove the limit on a sponsor’s post-listing stake in the sponsored company.

Further, the exchange also wants a revised fee framework where the initial admission fee will be lower but the sponsor will pay a fixed fee for every company endorsed for listing.

The PSE is giving interested parties until Sept. 7 to submit their comments on the proposed amendments to the rule on SME board listing under the sponsor model.