30 March 2022
On 7 March 2022, guidance titled “What SGX expects of issuers in respect of sanctions-related risks, subject or activity” by Tan Boon Gin, CEO of Singapore Exchange Regulation (“SGX RegCo”), and Michael Tang, Head of Listing Policy and Product Admission at SGX RegCo, was posted on the Singapore Exchange (“SGX”) Regulator’s Column on the SGX website www.sgx.com (“Guidance”).
This follows from the Ministry of Foreign Affairs 5 March 2022 announcement that Singapore would be imposing sanctions and restrictions against Russia in response to its invasion of Ukraine. However, the Guidance relates to sanctions-related risks generally and is not specific to Singapore’s Russian sanctions regime.
Many SGX-listed issuers have either their principal place of business outside Singapore, or have subsidiaries, assets and/or customers overseas. Any imposition of sanctions could have material adverse implications to some issuers, such as financial losses in the form of potentially severe penalties, reputational damages and disruption to business operations.
The Guidance sets out SGX’s expectations if the issuer, or any person or entity closely associated with the issuer, is exposed to sanctions-related risks. The scenarios contemplated and safeguards illustrated in the Guidance are not exhaustive. SGX may at any time suspend the trading of the issuer’s securities. The issuer’s suitability for listing may also be at issue in extreme cases and SGX may exercise its powers to remove an issuer from its Official List, such as where the exposure or nexus to sanctions-related risks has materially undermined the issuer’s business or the sanctions-related risks to its shareholders or SGX (and its related entities) are likely to be significant.
Exposure or nexus to sanctions-related risks
SGX expects issuers to have or put in place adequate safeguards to address and mitigate any financial, operating and compliance risks, including sanctions-related risks. It is also critical that issuers provide timely disclosure of all material information pursuant to Rule 703.
Issuers must assess if they have businesses that violate any applicable domestic and international sanctions law. If they do, they should immediately announce the inherent risk exposure on SGXNET in accordance with their continuing disclosure obligations.
SGX may query or require the issuer to take steps to address the sanctions-related risks including suspension of the issuer’s securities. Where the impact is material or affects the issuer’s ability to operate as a going concern, or where sanctions risks cannot be remediated within a reasonable period of time, the issuer should suspend trading in its securities.
Sanctioned subject or sanctioned activity
If an issuer is subject to sanctions (“sanctioned subject”) or engages in a sanctioned activity, it should suspend trading in its listed securities, and immediately announce all relevant information. The issuer should remain suspended until it has demonstrated to SGX that it is no longer considered a sanctioned subject, or it has ceased the sanctioned activity under the Monetary Authority of Singapore’s list of designated persons or entities.
Prohibition on fundraising
If the issuer is subject to sanctions or engages in a sanctioned activity, or if the proceeds raised are likely to be used to benefit any sanctioned subject or finance any sanctioned activity, SGX will not grant its approval. Where an issuer is exposed, or has a nexus, to any sanctions-related risks, SGX may require the issuer to undertake an independent review or obtain external auditors’ confirmation that fundraising proceeds are not used to benefit any sanctioned subject or finance any sanctioned activity.
Cessation of risk
Where the issuer is no longer exposed, nor has a nexus, to any sanctions-related risks, or where the issuer ceases to be a sanctioned subject or to be engaged in a sanctioned activity, as the case may be (“cessation”), the issuer must make an immediate announcement, including an assessment on the impact of the cessation to the issuer, such as the financial impact and the operational impact.
SGX may require that the issuer obtain and announce legal advice and confirmation from any other relevant parties in relation to whether, following the cessation, there will be any legal and financial penalties and liabilities (including contingent liabilities) imposed on the issuer.