Cross-referenced from Rule 703(4)
Part I Introduction
1 This Appendix sets out the Exchange's corporate disclosure policy.
2 Rule 703
(4)(a) obligates an issuer to provide timely disclosure of material information in accordance with this policy. The Exchange regards disclosure as fundamentally important to the operation of a fair and efficient market for the trading of securities.
Part II Issuers' Obligations Under Rule 703
3 Under Rule 703
, an issuer must disclose information:—
(a) necessary to avoid the establishment of a false market in its securities. A false market may exist if information is not made available that would, or would be likely to, influence persons who commonly invest in securities in deciding whether or not to subscribe for, or buy or sell the securities. For this reason, an issuer may be required to clarify or confirm a rumour (see "Clarification or Confirmation of Rumours or Reports" below); or
(b) that would be likely to have a material effect on the price or value of securities of that issuer.
4 Material information includes information, known to the issuer, concerning the issuer's property, assets, business, financial condition and prospects; mergers and acquisitions; and dealings with employees, suppliers and customers; material contracts or development projects, whether entered into in the ordinary course of business or otherwise; as well as information concerning a significant change in ownership of the issuer's securities owned by insiders, or a change in effective or voting control of the issuer, and any developments that affect materially the present or potential rights or interests of the issuer's shareholders.
5 The fact that information is generally available is not a reason for failing to disclose under Rule 703
. For example, if an issuer releases material information to the media but did not announce it to the market via SGXNET, the issuer is in breach of Rule 703
. Rule 702
requires an issuer to make announcements via SGXNET, unless specified otherwise.
6 It is the responsibility of each issuer to disclose material information in its possession as required by the listing rules.
7 Information must not be divulged to any person (outside of the issuer and its advisers) in such a way as to place in a privileged dealing position any person. Information must not be released in such a way that transactions in the issuer's listed securities (whether on market or off market) may be entered into at prices which do not reflect the latest publicly available information.
8 Some Events Requiring Disclosure Under Rule 703
Under Rule 703
, the following events, while not comprising a complete list of all the situations which may require disclosure, are likely to require immediate disclosure:—
(a) A joint venture, merger or acquisition;
(b) The declaration or omission of dividends or the determination of earnings;
(c) Firm evidence of significant improvement or deterioration in near-term earnings prospects;
(d) A subdivision of shares or stock dividends;
(e) The acquisition or loss of a significant contract;
(f) The purchase or sale of a significant asset;
(g) A significant new product or discovery;
(h) The public or private sale of a significant amount of additional securities of the issuer;
(i) A change in effective control or a significant change in management;
(j) A call of securities for redemption;
(k) The borrowing of a significant amount of funds;
(l) Occurrence of an event of default under debt or other securities or financing or sale agreements;
(m) Significant litigation;
(n) A significant change in capital investment plans. Examples include building of factories, increasing plant and machinery, and increasing production lines;
(o) A significant dispute or disputes with sub-contractors, customers or suppliers, or with any parties;
(p) A tender offer for another company's securities; and
(q) A valuation of the real assets of the group that has a significant impact on the group's financial position and/or performance. A copy of the valuation report must be made available for inspection at the issuer's registered office during normal business hours for 3 months from the date of the announcement.
Part III Exception to Rule 703
9 Rule 703
includes two exceptions from the requirement to make immediate disclosure. One allows information not to be disclosed if to do so breaches the law (Rule 703
(2)). The other allows an issuer to temporarily refrain from publicly disclosing particular information, provided that the information is of a certain type, a reasonable person would not expect it to be disclosed and the information is kept confidential (Rule 703
10 An issuer can rely on the exception under Rule 703
(3) while each of the three conditions is satisfied. Should any of the conditions cease to be satisfied, the exception will similarly cease to be available, and the issuer must disclose the information immediately. The three conditions are:—
Condition 1: A reasonable person would not expect the information to be disclosed
(a) A reasonable person would not expect information to be disclosed if such disclosure would prejudice the ability of the issuer to pursue its corporate objective. Also, a reasonable person would not expect the disclosure of an inordinate amount of detail.
(b) If conditions 2 and 3 are satisfied but a reasonable person would expect the information to be disclosed, the exception is not available. In considering if this condition is satisfied, the Exchange will balance the needs of the market and the interests of the issuer while having regard to the principle on which the listing rule is based.
Condition 2: The information is confidential
Generally, information may be regarded as confidential if the issuer has control of the use that can be made of the information. Confidentiality also means that no one in possession of the information is entitled to trade in that issuer's listed securities. In this regard, unusual activity in the issuer's securities may suggest that the information is no longer confidential. If so, this condition is not met. (See also "Confidentiality")
Condition 3: The information is of the type in one of the listed categories.
If the information is not of the type in one of the listed categories, or if it loses that character, then the condition is not satisfied.
Part IV Examples of the Operation of Rule 703
11 The following examples explain in more detail the operation of Rule 703
. They illustrate the general principles only and do not affect the operation of the listing rule.
(a) Example (1): Information concerning an incomplete proposal or negotiation
In the course of a successful negotiation for the acquisition of another company, for example, the only information known to each party at the outset may be the willingness of the other to hold discussions. Shortly thereafter, it may become apparent to the parties that it is likely an agreement can be reached. Finally, agreement in-principle may be reached on specific terms. In such circumstances, an issuer need not issue a public announcement at each stage of the negotiations, describing the current state of constantly changing facts but may await agreement in-principle on specific terms. If, on the other hand, progress in the negotiations should stabilise at some other point, disclosure should then be made if the information is material.
(b) Example (2): Information generated for internal management purposes
Disclosure of an issuer's internal estimates or projections of its earnings or of other data relating to its affairs is not necessary. If such estimates or projections are released, they should be prepared carefully, be soundly based and should be realistic. The estimates or projections should be qualified, if necessary, to ensure that they are properly understood. Should subsequent developments indicate that performance will not match earlier estimates or projections, this too should be reported promptly and the variances adequately explained.
Part V Confidentiality
12 Where an issuer relies on Rule 703
(3) to temporarily withhold material information, the strictest confidentiality must be maintained. Access to the information should be restricted, to the extent possible, to the highest possible levels of management and should be disclosed to officers, employees and others only on a need-to-know basis. Distribution of paperwork and other data should be kept to a minimum.
13 It may be appropriate to require each person who gains access to the information to report to the issuer, any transaction which he effects in the issuer's securities.
14 During this period, the issuer should keep a close watch on the trading activity of its securities and be prepared to make an immediate public announcement if necessary.
Part VI Clarification or Confirmation of Rumours or Reports
15 Public circulation of information, whether by an article published in a newspaper, by a broker's market letter, or by word-of-mouth, either correct or false, which has not been substantiated by the issuer and which is likely to have, or has had, an effect on the price of the issuer's listed securities or would be likely to have a bearing on investment decisions must be clarified or confirmed promptly.
16 If rumours indicate that material information has been leaked, a frank and explicit announcement is required. If rumours are in fact false or inaccurate, they should be promptly denied or clarified. A statement to the effect that the issuer knows of no corporate developments that could account for the unusual market activity can have a salutary effect. In addition, a reasonable effort should be made to bring the announcement to the attention of the party that initially distributed the information (in the case of an erroneous newspaper article, for example, by sending a copy of the announcement to the newspaper's financial editor, or in the case of an erroneous market letter, by sending a copy to the broker responsible for the letter). If rumours are correct or there are developments, an immediate statement to the public as to the state of negotiations or corporate plans in the rumoured area must be made. Such statements are essential despite the business inconvenience which may result, even if the matter had yet to be presented to the issuer's board of directors for consideration.
17 In the case of a rumour or report predicting future sales, earnings or other data, no response from the issuer is ordinarily required. However, the issuer must make a prompt announcement so that the market remains properly informed if the rumour or report is materially incorrect and may mislead investors, or is specific enough to suggest that information came from an inside source, or the market moves in a way that appears to be referable to the rumour or report.
Part VII Unusual Trading Activity
18 Where unusual trading activity in an issuer's securities occurs without any apparent publicly available information which could account for the activity, it may signify trading by persons who are acting on unannounced material information or on a rumour or report, whether true or false. Unusual market activity may not be traceable either to insider trading or to a rumour or report. Nevertheless, the market activity itself may be misleading to investors, who may assume that a sudden and appreciable change in the price of the issuer's securities reflects a corresponding change in its business or prospects.
19 Similarly, unusual trading volume, even when not accompanied by a significant change in price, tends to encourage rumours and give rise to excessive speculative trading activity which may be unrelated to actual developments in the issuer's affairs.
20 In such situations, the issuer should undertake a review to seek the causes of the unusual trading activity in its securities. The issuer should consider whether any information about its affairs, which would account for the activity, has recently been publicly disclosed, whether there is any material information that has not been publicly disclosed (in which case, the unusual trading activity may signify that a "leak" has occurred), and whether the issuer is the subject of a rumour or report. The issuer should respond promptly to any enquiries made by the Exchange concerning the unusual trading activity and may be guided by the following:—
(a) If the issuer determines that the unusual trading activity results from material information that has been publicly disseminated via SGXNET, generally no further announcement is required. However, if the market activity indicates that such information may have been misinterpreted, it may be helpful, after discussion with the Exchange, to issue an announcement to clarify the matter;
(b) If the unusual trading activity results from the "leak" of material information, the information in question must be announced promptly. If the unusual trading activity results from a false rumour or report, the Exchange's policy on correction of such rumours and reports, (discussed in "Clarification or Confirmation of Rumours or Reports") should be observed; and
(c) If the issuer is unable to determine the cause of the unusual trading activity, the Exchange may suggest that the issuer makes a public announcement to the effect that there have been no undisclosed recent developments affecting the issuer or its affairs which would account for the unusual trading activity.
Part VIII Policy on Thorough Public Dissemination
21 Material information must be disclosed when it arises, even if during trading hours. The Exchange will expect the issuer to request a trading halt to facilitate the dissemination of the material information during trading hours. As a guide, a trading halt requested for dissemination of material information will last at least half an hour after the release of the material information, or such other period as the Exchange considers it appropriate. The issuer may request a temporary suspension if it is unable to release the material information by the end of the trading halt. Otherwise, the Exchange will consider whether a temporary suspension in trading of the issuer's securities is necessary to enable the material information to be properly disseminated. As a guide, the temporary suspension may last half an hour after the announcement has been released to the Exchange.
22 Public disclosure of material information must be made by an announcement released to the Exchange via SGXNET. To facilitate the dissemination of information, copies of the announcement may be provided simultaneously to newspapers and newswire services.
23 The Exchange recommends that issuers observe an "open door" policy in dealing with analysts, journalists, stockholders and others. However, under no circumstances should disclosure of material information be made on an individual or selective basis to analysts, stockholders, or other persons unless such information has previously been fully disclosed and disseminated to the public. If material information is inadvertently disclosed at meetings with analysts or others, it must be publicly disseminated as promptly as possible by the means described in this Part.
24 The Exchange recognizes that there may be limited instances where selective disclosure is necessary. One example is the pursuit of the issuer's business or corporate objectives, such as when the issuer is undertaking a major corporate exercise. Another example is due diligence when the issuer is the subject of an acquisition. In these circumstances, selective disclosure may be required to facilitate the exercise. However, such disclosure should be made on a need to know basis and subject to appropriate confidentiality restraints.
Part IX Content and Preparation of Public Announcement
25 The content of a press release or other public announcement is as important as its timing. Each announcement should:—
(a) be factual, clear and succinct;
(b) contain sufficient quantitative information to allow investors to evaluate its relative importance to the activities of the issuer;
(c) be balanced and fair. Thus, the announcement should avoid:—
(i) omission of important unfavourable facts, or the slighting of such facts (for example by "burying" them at the end of a press release);
(ii) presentation of favourable possibilities as certain, or as more probable than is actually the case;
(iii) presentation of projections without sufficient qualification or without sufficient factual basis;
(iv) negative statements phrased to create a positive implication, for example, "The company cannot now predict whether the development will have a materially favourable effect on its earnings," (implying that the effect will be favourable even if not materially favourable), or "The company expects that the development will not have a materially favourable effect on earnings in the immediate future," (implying that the development will eventually have a materially favourable effect); and
(v) use of promotional jargon calculated to excite rather than to inform;
(d) avoid over-technical language, and should be expressed to the extent possible in language comprehensible to the layman; and
(e) explain the consequences or effects of the information on the issuer's future prospects. If the consequences or effects cannot be assessed, explain why.
26 The following guidelines for the preparation of press releases and other public announcements should help issuers ensure that the content of such announcements meet the principles discussed in paragraph 25:—
(a) Every announcement should be prepared or reviewed by (i) an official of the issuer familiar with the matters to be disclosed, and (ii) an official of the issuer familiar with the requirements of the Exchange and any applicable requirements of securities laws;
(b) Since skill and experience are important to the preparation and editing of accurate, fair and balanced public announcements, the Exchange recommends that a limited group of individuals within the issuer be given this assignment on a continuing basis; and
(c) Review of press releases and other public announcements by legal counsel is often desirable or necessary, depending on the importance and complexity of the announcement.
Part X Policy on Insider Trading
27 Issuers and parties who may be regarded as insiders should be fully aware of the provisions in any applicable legislation on insider trading.
28 Persons who come into possession of material information, before its public release, are considered insiders for the purposes of the Exchange's corporate disclosure policies. Such persons include substantial shareholders, directors, executive officers and other employees, and frequently also include the issuer's lawyers, accountants, bankers, investment bankers, public relations consultants, advertising agencies, consultants, valuers and other third parties. The associates (as defined in "Definitions and Interpretation") of, and those under the control of, insiders may also be regarded as insiders. Where an issuer is involved in the negotiation of an acquisition or transaction, the other parties to the negotiation may also be regarded as insiders.
29 Issuers should make insiders (and others who have access to material information on the issuer before it is publicly disclosed) aware that trading in the issuer's securities while in possession of undisclosed material information or tipping such information is an offence under Singapore's securities laws and may also give rise to civil liability. Issuers are advised to refer to the Best Practices Guide which provides guidance on the principles and best practices with regard to dealings by the directors and employees of the issuers in their respective issuer's securities.
30 Issuers should establish, publish and enforce effective procedures applicable to the purchase and sale of the securities of the issuer and listed members of its group by officers, directors, employees and other insiders. The procedures should be designed not only to prevent improper trading, but also to avoid any question of the propriety of insider purchases or sales.
Part XI Role of Market Surveillance
31 An issuer should monitor the trading in its securities to detect any unusual trading activity. Where such unusual trading activity is observed, issuers should note Part VII above. The Exchange also monitors trading of listed securities. Where there is unusual trading activity in a listed security, and it appears to the Exchange that the unusual trading activity cannot be explained by known factors, the Exchange may require the issuer to make an announcement. The announcement should, inter alia, state whether the issuer and its directors are aware of the reasons for the unusual trading activity and whether there is any material information which has not been publicly disclosed. If the issuer or its directors are aware of any matters concerning the substantial shareholders that may account for the unusual trading activity, they must take this into consideration when responding to any query by the Exchange.