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Amendments to Main Market Listing Requirements: the Enhanced Adviser Framework, Submission of Corporate Proposals and Other Amendments

28 December 2021

Further to the issuance of Consultation Paper No. 3/2021 in August 2021, Bursa Malaysia Berhad (‘the Exchange’) announced on 20 December 2021 amendments to the Main Market Listing Requirements (‘MMLR’) in relation to the Enhanced Adviser Framework, Submission of Corporate Proposals and Other Amendments to take effect from 1 January 2022.
 
The amendments to the MMLR focus primarily on the following: 

  1. Aligning the provisions of the MMLR with the recognised principal adviser (‘RPA’) framework under the Licensing Handbook (‘Licensing Handbook’) and Guidelines on Submission of Corporate and Capital Market Product Proposals (‘Submission Guidelines’) issued by the Securities Commission Malaysia (‘SC’); 

  2. Strengthening the role of a RPA and its key officers in the discharge of its duties under the MMLR; and 

  3. Other amendments to clarify and enhance certain provisions in the MMLR. 
Some of the key amendments are as follows:
 
Aligning the Principal Adviser framework under the MMLR with the RPA framework
 
The Principal Adviser framework under the MMLR is replaced by the RPA framework. To this end, the term “Principal Adviser” in the MMLR is replaced by “Recognised Principal Adviser” which refers to a recognised principal adviser under the Licensing Handbook, thus aligning the requirements under the MMLR with the RPA framework.  
 
Paragraph 7A.04(2) of the Licensing Handbook provides that a RPA must be a principal adviser set out in First Column of Table 121 of paragraph 7A.03 of the Licensing Handbook (other than a licensed bank or a special scheme broker) that has: 

  1. written policies and control procedures relating to the submission of specific proposals; 

  2. at least one employee who satisfies the criteria to be a Qualified Person (‘QP’), as set out in paragraph 7A.04(3) of the Licensing Handbook; and 

  3. been granted recognition as a RPA pursuant to paragraph 7A.04(7) of the Licensing Handbook. 
According to the Exchange, the alignment of the Principal Adviser framework under the MMLR with the RPA framework will strengthen the accountability of the advisers and their key officers involved in submitting significant proposals to the Exchange, enhance the enforcement ambit in relation to advisers, as well as promote a more effective adviser regime under the MMLR.
 
Strengthening the role of a RPA
 
The amendments require a RPA and its key officers (namely its QP and senior officer2 (‘SO’)) to safeguard the interests of securities holder and investor by exercising greater supervision and oversight in respect of the following proposals (‘Specific Proposal’):   

  1. an initial listing application to the Exchange in relation to an Initial Public Offering (IPO) on the Main Market (other than applications relating to corporate bonds or sukuk under Chapter 4B of the MMLR and applications relating to exchange-traded funds); 

  2. a Major Disposal3 under paragraph 10.11A of the MMLR (‘Major Disposal’); 

  3. a listing application for a corporate proposal or transaction which results in a significant change in the business direction or policy4 of a listed issuer; or 

  4. a listing application for a transfer of listing from the ACE Market to the Main Market. 
To ensure that submissions of Specific Proposals to the Exchange are of quality and in line with the SC’s approach for submission of specific proposals under the Submission Guidelines, the MMLR is amended to: 

  1. require the RPA to: 
  • be primarily responsible for the Specific Proposal; 

  • assign and identify at least one QP and SO for each Specific Proposal;

  • have clear and effective reporting lines so that decisions on critical matters are made by the SO, its management committee or the board of directors in accordance with its policies and procedures; and

  • notify the Exchange of any change(s) to the QP or SO before completion of the Specific Proposal; 
  1. stipulate that the SO is responsible to supervise and manage a Specific Proposal, including: 
  • allocating an adequate number of persons with appropriate and relevant levels of knowledge, skill and experience to each Specific Proposal, taking into account the volume, size, complexity and nature of such proposal;

  • reviewing the performance of the QP and the team; and

  • deciding on or escalating critical matters in accordance with the policies and procedures of the RPA; 
  1. require a QP to: 
  • be in charge of the supervision of the team until the Specific Proposal is implemented or the cessation of the engagement;

  • determine the scope and extent of due diligence required for the Specific Proposal including enlarging or varying its scope if the QP becomes aware of any new information or development;

  • critically assess the results of the due diligence and overall assessment of the adequacy of the due diligence review;

  • identify the key risks related to the Specific Proposal and undertake adequate measures to address such risks;

  • ensure that the application meets the relevant provisions of the MMLR and securities laws;

  • be fully familiar and knowledgeable with key issues, deal promptly with all queries and concerns raised by the Exchange in relation to the Specific Proposal, and ensure responses to queries are complete and concerns raised are resolved in an effective manner; and

  • be responsible for the requirements set out above until the Specific Proposal has been implemented. 
The MMLR is also amended to impose joint and several liability on all RPAs where there is more than one of them involved in a Specific Proposal. Similarly, all SOs or QPs will be jointly and severally responsible for a Specific Proposal where more than one of them is assigned to a Specific Proposal.
 
Removal of prescriptive approach on due diligence involving new securities issuance
 
The existing prescriptive approach in the MMLR for due diligence to be conducted in accordance with the SC’s Guidelines on Due Diligence Conduct for Corporate Proposals for proposals relating to additional listing applications for new issue of securities will be removed. Instead, the MMLR will require due diligence to be conducted in accordance with industry best practices. However, the relevant parties will still be required to make due and careful enquiries and comply with the equivalent obligations and standards imposed under the Submission Guidelines.
 
Enhancing accountability of QP and SO  
 
To strengthen the regulatory ambit and enforcement regime under the MMLR: 

  1. a QP and SO will be required to execute an undertaking addressed to the Exchange to comply with the provisions of the MMLR which are applicable to them; and 

  2. the definition of “adviser” will be expanded to include the QP and SO assigned to undertake a Specific Proposal, so that the relevant provisions relating to enforcement of the MMLR that are applicable to an adviser will likewise apply to the QP and SO.   
Other amendments
 
Other noteworthy amendments include the following: 

  1. clarifying that an independent adviser for a Major Disposal and voluntary withdrawal of listing by a listed issuer must be a person with is appropriate to give competent independent advice under the Malaysian Code on Take-Overs and Mergers 2016 and the Rules on Take-Overs, Mergers and Compulsory Acquisitions; 

  2. in relation to a listing application, the requirement for a director to complete his training under the Mandatory Accreditation Programme within four months from the date of listing has been enhanced and such director will now be required to complete the training prior to date of listing of the applicant; 

  3. clarifying that securities holders whose securities are under moratorium pursuant to the SC’s Equity Guidelines are to be excluded from the public shareholding spread of an applicant or a listed issuer; 

  4. introducing a new provision empowering the Exchange to return any listing or quotation application submitted to the Exchange when the quality is deemed unsatisfactory or does not comply with the MMLR; and 

  5. introducing a new provision that the return or rejection of an application is without prejudice to the right of the Exchange to take enforcement actions for breaches of the MMLR. 
Details of the amendments can be accessed here.
 
Article by Fariz Abdul Aziz (Partner), Kok Chee Kheong (Partner) and Tan Wei Xian (Senior Associate) of the Corporate Practice of Skrine. 
 
1 Column 1 of Table 12 sets out seven categories of principal advisers. Excluding licensed banks and special scheme brokers, the categories are: (i) investment banks and universal brokers; (ii) 1+1 brokers; (iii) Islamic banks; (iv) KAF Investment Bank Berhad; and (v) Bank Pembangunan Malaysia Berhad.
2 A “senior officer” is defined in Chapter 4 of the Submission Guidelines to mean an individual of higher authority or ranking than the QP or a committee duly constituted assigned to a specific proposal and identified by the party submitting the proposal.
3 A “Major Disposal” is defined in paragraph 10.02(eA) of the MMLR to mean a disposal of all or substantially all of a listed issuer’s assets which may result in the listed issuer being no longer suitable for continued listing on the Official List.
4 The expression “significant change in the business direction or policy” is defined in the MMLR, and (a) in relation to a corporation, has the meaning given in the SC’s Equity Guidelines; and in relation to a business trust, has the meaning given in the SC’s Business Trust Guidelines.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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