4.39 Research and Corporate Finance Activities
Permissible Activities(a) A Trading Member must inform SGX-ST at least 14 days before engaging in research or corporate finance activities.(b) The research department of a Trading Member may engage only in the following types of activities:(i) research and analysis on securities or futures contracts (including recommendations, if any); or(ii) such other activities as SGX-ST approves.(c) The corporate finance department of a Trading Member may engage only in the following types of activities:(i) management, underwriting and placement of initial public offering or rights issues of securities;(ii) advice on acquisition and disposal of securities and assets;(iii) advice on corporate or debt restructuring; or(iv) advice on take-over offers, if the Trading Member has relevant expertise and experience; or(v) any other activity as SGX-ST may approve.(d) A Trading Member and its staff undertaking research or corporate finance activities must procure and maintain any applicable licences and notify SGX-ST prior to engaging in the relevant activities, and shall maintain such licences while undertaking those activities, unless otherwise exempt from licensing.(e) SGX-ST may limit the scope, or direct the cessation, of the Trading Member's research or corporate finance activities if the Trading Member fails to comply with this Rule 4.39 or if, in SGX-ST's opinion, the relevant activities are detrimental to the financial integrity, reputation or interests of, or organised markets established or operated by, SGX-ST. The Trading Member may, within 14 days of being notified of SGX-ST's decision, appeal in writing to the SGX RegCo Board, whose decision will be final.(f) A Trading Member must supply SGX-ST with any information that SGX-ST requires regarding its research or corporate finance activities.
Supervision of Staff(a) A Trading Member must:(i) supervise its staff undertaking research or corporate finance activities;(ii) implement written supervisory procedures to ensure that its staff undertaking research or corporate finance activities comply with this Rule 4.39; and(iii) implement any procedure or recommendation issued by SGX-ST.(b) A Trading Member shall be responsible for the acts or omissions of its staff undertaking the relevant activities.(c) SGX-ST may limit the scope of activity of a staff member undertaking research or corporate finance activities or direct a Trading Member to replace the staff member if the person:(i) causes the Trading Member to breach the Rules;(ii) engages in conduct detrimental to the financial integrity, reputation or interests of SGX-ST, or organised markets established or operated by SGX-ST;(iii) is convicted of an offence involving fraud or dishonesty or is found by a court of law to have acted fraudulently or dishonestly, in each case whether in or out of Singapore; or(iv) is the subject of an investigation involving fraud or dishonesty whether in or out of Singapore.(d) A Trading Member may, within 14 days after it is directed by SGX-ST to replace a staff member, appeal in writing to the SGX RegCo Board whose decision will be final.
Effective Controls and Segregation of Duties(a) A Trading Member must ensure effective controls and segregation of duties and separation between its research department and its corporate finance department and between each of them and its dealing and back office departments. Separation between departments means at least having the following:(i) separate reporting lines in place for each of the different departments;(ii) adequate restriction of communication and information flow, particularly non-public information, between the different departments;(iii) adequate processes and procedures to identify, avoid, minimise, manage or mitigate any conflict of interest or potential conflict of interest between the different departments;(iv) bonus, salary or other forms of compensation to a research staff member not being based on any corporate finance or dealing transaction; and(v) access into the corporate finance department being restricted only to corporate finance staff members and any other authorised staff member.(b) SGX-ST may require the Trading Member to implement controls and procedures to ensure proper segregation under Rule 4.39.4.
A Trading Member shall ensure that its staff undertaking the research or corporate finance activities have an adequate headcount and possess relevant expertise and experience.
Setting of Limits
A Trading Member's underwriting commitment limits must be set by its senior management staff independent of the corporate finance and dealing departments.
A Trading Member and its staff undertaking research activities must:(a) have an adequate basis, supported by research, for making an investment recommendation;(b) maintain independence and objectivity in producing a research report or making an investment recommendation; and(c) not issue a research report or make an investment recommendation that is not consistent with its relevant staff's actual views regarding a subject company.
A Trading Member must maintain records of its research report or investment recommendation for seven years.
A Trading Member and its staff undertaking research activities must disclose:(a) any interest at the date of the dissemination of the research report or investment recommendation in the subject of the report or recommendation. "Interest" includes direct or indirect ownership of securities or futures contracts (excluding the amount of securities or futures contracts owned), directorships, trustee positions, customer of the Trading Member or any other relationship that may be regarded as creating a potential conflict of interest with the Trading Member's responsibility under Rule 4.39.7(b); and(b) any monetary compensation (excluding salary and bonuses) or other benefits receivable in respect of the research report or investment recommendation.
Trade Restrictions for Trading Member Undertaking Research
A Trading Member and its staff undertaking research activities must not:(a) knowingly buy or sell a security or futures contract if the Trading Member or its staff has material information not generally available to the public in relation to the security or futures contract;(b) except on instructions from a customer, knowingly buy or sell a security or futures contract if the transaction may create a conflict of interest in relation to the Trading Member's duty to its customers;(c) procure any person to buy or sell a security or futures contract if the Trading Member or its staff is prohibited under Rules 4.39.10(a) or (b) from doing so; and(d) buy or sell a security or futures contract contrary to the most recent research report published by the Trading Member, unless sufficient time has passed since the report's publication for the market to react to the information. This trading restriction does not apply:(i) to the Trading Member if the Trading Member is acting on a customer's express instructions;(ii) to the Trading Member and its staff undertaking research activities if significant news is announced that would change the research report or investment recommendation; or(iii) to a staff member undertaking research activities if the staff member is in financial difficulty and must sell the security or futures contract. The Trading Member must maintain documentation of the staff member's financial condition;(iv) to the Trading Member if the proprietary desk of the Trading Member had no knowledge of the report and its contents before it was issued.
Trade Restrictions for Trading Member Undertaking Corporate Finance(a) A Trading Member undertaking corporate finance activities must maintain a restricted list of securities on which its corporate finance department is working.(b) A security must be moved onto the restricted list no later than the date the deal is mandated.(c) If circulated, the restricted list may be circulated to only the following persons:(i) corporate finance staff and the person to whom the head of corporate finance reports; and(ii) Trading Representatives who are authorised to deal for the Trading Member's accounts and the head to whom these Trading Representatives report.(d) Staff who are privy to the restricted list must not deal in securities listed therein, or in any derivative of such securities, either for the Trading Member's account, their own accounts or accounts over which they have control and influence.