PSE to relax SME listing sponsorship rules

The Philippine Stock Exchange Inc. (PSE) is seeking to ease requirements for listing sponsors as part of efforts to encourage more small, medium and emerging (SME) companies to tap the stock market.

In a consultation paper, the bourse outlined seven proposed changes covering sponsor accreditation, continuing sponsorship, ownership limits and fees.

Comments will be accepted until Sept. 7.

Among the key changes is the removal of the three-year firm-level track record requirement for certain sponsor applicants.

Under the proposal, an applicant may qualify either by having at least five years of experience in a leading role in initial public offerings or significant corporate finance transactions or by having at least two key officers with such experience.

The PSE said the change would open the program to firms that may lack the required corporate track record but employ sufficiently experienced personnel.

“The main objective for the removal of the professional indemnity insurance requirement is to reduce the upfront costs for potential sponsors,” the PSE said.

Big fee reduction

Sponsors, however, remain responsible with the listing applicant for false, inaccurate or misleading information submitted to the exchange.

The PSE also proposed cutting the initial admission fee to P50,000 from the current P3.5 million. In exchange, sponsors will pay a fixed P250,000 endorsement fee for every applicant they endorse for listing.

The local bourse also wants to remove the existing safe harbor exception to increase sponsor accountability, strengthen market integrity and protect investors.

Perpetual accreditation

Another proposal is to make sponsor accreditation perpetual, subject to annual review and continuing compliance with qualification and reportorial requirements. Accreditation currently lasts three years.

The PSE noted that sponsor accreditation in Bursa Malaysia, Singapore Exchange, London Stock Exchange, Hong Kong Exchanges and Japan Exchange Group is perpetual in nature and just subject to annual review and fees.

Meanwhile, the PSE wants to remove the requirement for sponsors to provide continuing sponsorship services for three years after a company’s listing, an obligation that potential sponsors described as “too onerous.”

The exchange is likewise proposing to remove the current 5-percent limit on a sponsor’s ownership in the sponsored company after listing.

The 20-percent threshold at the time of filing the listing application will remain.

Failure to sponsor or endorse at least one company within five years of initial accreditation could also become a ground for regulatory action, subject to an exception when the sponsor can show it had evaluated prospective applicants but found them unsuitable after due diligence.