PSE Proposes Eased SME Listing Rules to Attract More Companies to Capital Market

 

PSE Moves to Loosen SME Listing Rules, Lowering Barriers for Potential Sponsors

The Philippine Stock Exchange Inc. is preparing to make its SME Board more accessible to companies seeking to raise capital, with proposed rule changes aimed at bringing more startups and high-growth businesses into the public market.

At the center of the proposal is a significant overhaul of the requirements imposed on listing sponsors. The PSE has opened the amendments for public comment as it seeks to make the sponsor model more practical for firms that may lack the conventional operating history or stockholders’ equity normally expected of listed companies.

Under the sponsor model, businesses that do not satisfy the required track record of profitable operations or stockholders’ equity can still pursue an SME Board listing if they receive a favorable endorsement from a PSE-accredited listing sponsor.

The proposed changes would broaden the pool of organizations capable of serving in that role.

PSE Targets Sponsor Experience Requirement

One of the most notable changes involves the professional experience required for sponsor accreditation.

Under the existing framework, a prospective sponsor must have at least five years of experience in a leading role involving initial public offerings or significant corporate finance transactions. A shorter three-year firm-level experience may be accepted when at least two key personnel have individually accumulated five years of relevant experience.

The PSE now wants to eliminate the three-year firm-level experience requirement.

The rationale is straightforward. A company may not have a long institutional history in IPOs or major corporate finance transactions, yet still possess personnel with substantial expertise. Removing the firm-level threshold would allow those organizations to participate when their key professionals have the necessary capabilities.

In effect, the exchange is shifting greater emphasis from the age and transaction history of the sponsoring firm toward the competence of the people responsible for the work.

Lower Costs Could Encourage More Sponsors

The PSE is also proposing the removal of the mandatory professional indemnity insurance requirement.

The change is intended to reduce the upfront financial burden for potential sponsors, making participation in the SME listing program less costly. However, eliminating the insurance requirement would not eliminate the sponsor’s responsibilities.

Sponsors would continue to share accountability with listing applicants for false, inaccurate or misleading information submitted in connection with a listing.

The exchange said sponsors would still have the option to secure professional indemnity insurance as a risk-management measure.

That distinction is important. The proposed framework seeks to lower the cost of entering the sponsor business without weakening the responsibility attached to endorsing a company for public listing.

Accreditation Could Become Perpetual

Another proposed reform would replace the current three-year accreditation period with perpetual accreditation subject to annual review.

At present, sponsor accreditation expires three years after approval. Under the proposed system, accreditation would remain in force as long as the sponsor continues to satisfy the PSE’s requirements through annual review and pays the applicable annual fees.

The PSE pointed to established international markets where sponsor accreditation operates on a similar continuing basis, including Bursa Malaysia, Singapore Exchange, London Stock Exchange, Hong Kong Exchanges and Japan Exchange Group.

The proposed approach could reduce administrative friction for established sponsors while allowing the exchange to conduct regular oversight of their continued suitability.

Three-Year Post-Listing Sponsorship May Be Scrapped

The exchange is also reconsidering what happens after a sponsored company becomes publicly listed.

Potential sponsors have reportedly indicated that the obligation to provide continuing sponsorship services for three years following a listing is too burdensome.

In response, the PSE is proposing to eliminate that continuing sponsorship requirement and instead require listed companies to engage a compliance advisor after listing.

The original sponsor could continue serving as the compliance advisor if it chooses. If it declines, however, the sponsor would be responsible for ensuring that the newly listed company has another qualified compliance advisor in place.

The proposed change would also remove the existing restriction on the amount of post-listing ownership a sponsor may hold in the sponsored company.

Together, these measures are designed to make the sponsor model less restrictive while preserving a formal compliance mechanism once a company enters the public market.

New Fee Structure Proposed

The PSE is further considering changes to the financial structure surrounding sponsored listings.

Under the proposed arrangement, the initial admission fee would be reduced, potentially lowering the immediate cost for companies entering the SME Board. Sponsors, however, would pay a fixed fee for every company they endorse for listing.

This would effectively redistribute part of the cost structure, making the initial listing hurdle lighter while establishing a more predictable fee obligation for sponsors.

For smaller companies, the distinction could matter considerably. Lower entry costs can improve the feasibility of going public, particularly for businesses that are still expanding and have limited access to traditional financing.

PSE Seeks Public Feedback

The proposed amendments form part of the exchange’s broader effort to make the SME Board more attractive to smaller and emerging businesses that may not yet meet the financial or operating standards traditionally associated with public companies.

The sponsor model is intended to bridge that gap by allowing experienced market professionals to provide an additional layer of assessment and accountability for businesses with significant growth potential.

The PSE is accepting comments on the proposed amendments until September 7.

If adopted, the changes could reshape how prospective sponsors participate in the SME market while giving more startups and high-growth companies a pathway toward accessing public capital.