Tay Partners

InsiderTAPS (June 2006)

Insider TAPS Issue 001 - Beefing Up Malaysia's Listing Rules

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In 2 separate announcements within 1 business day of each other, on 5 May 2006 and 8 May 2006, Bursa Malaysia Securities Berhad (“Bursa Securities”) announced amendments to the Main & Second Board Listing Requirement (“LR”) and to the MESDAQ Market Listing Requirements (“MMLR”), respectively. These amendments were viewed positively by the market as further demonstrations of Bursa Securities’ seriousness to enhance the quality of Malaysian PLCs and to strengthen investor protection and promote investor confidence. With the exception of certain provisions, almost all the amendments took effect immediately upon the date of their announcements.

While the LR amendments are focused and are akin to the fine tuning of listing rules relating to a PLC’s financial condition and level of operations, the MMLR amendments are more broad-based and represent a significant milestone for the MESDAQ market. This is the first major revamp of the MMLR since its inception in 1997.

The LR amendments expanded the categories of financially distressed PLCs and those with inadequate levels of operations. Thresholds and financial ratios were lowered resulting in a wider net cast to capture such recalcitrant PLCs (NB: as at 15 May 2006, 34 companies have announced that they are PLCs affected by the revised LR). Significantly, the affected PLCs must now submit a restructuring plan within 8 months and must also obtain the Securities Commission’s approval of their plans. These amendments are aimed at expediting the restructuring efforts expeditiously before the affected PLC’s condition worsen. Information flow from the PLCs is also emphasized with enhanced measures to ensure that investors are kept informed of the affected PLC’s restructuring plans on a timely basis.

Ever since its formation, the MESDAQ market has always been for young technology-based and high-growth companies. To cater to such companies, the MMLR had less stringent requirements than those applicable to Main and Second Board PLCs. The MMLR revamp is implicitly an acknowledgement by Bursa Securities that investors expect the same high standards of MESDAQ companies as they do of Main and Second Board PLCs. As such, it is telling that the revamped MMLR emphasizes on transparency, corporate governance, quality of PLCs and investor protection matters.

It is hoped that the amendments will increase investor confidence in Bursa Securities by according greater investor protection and overall improving standards to be on par with other similar markets.