In the wake of the Asian financial crisis of 1997, the Association of South-East Asian Nations (‘ASEAN’) worked towards setting up the ASEAN Economic Community (‘AEC’) to establish ASEAN as a single market and production base, and securities market integration was identified as one of the goals. Prior to the formal establishment of the ASEAN Economic Community, in 2009, with a view towards achieving the objective of securities integration, Singapore, Malaysia and Thailand adopted the ASEAN Disclosure Standards, a set of harmonised minimum disclosure standards for issuers making cross-border initial public offerings (‘IPOs’). These participating member states also entered into a framework for the expedited review of cross-listings. However, more than five years later, there is no documented use of the ASEAN Disclosure Standards, and cross-border IPOs and cross-listings remain rare.
In a recent paper ‘Cross-border Public Offering of Securities in Fostering an Integrated ASEAN Securities market: The Experiences of Singapore, Malaysia and Thailand’, I conduct a study of cross-border IPOs of issuers in, and cross-listings within, the participating member states during the 2010-2014 period, with a view to obtaining insights on how issuers access capital markets both domestically and internationally. I find that while there is substantial fund-raising internationally by a small number of large issuers, these issuers do not make retail offerings (for which prospectuses are required) but instead utilise the exemptions to retail offerings (for which prospectuses are not required), such as offerings to institutional and sophisticated investors. I further identify the impediments to achieving greater regulatory convergence in cross-border equity offerings. In particular, host countries in the participating states continue to have responsibility for the oversight of the prospectuses (and may impose their own domestic requirements). Further, the current framework does not centralise the interpretation, application, supervision and enforcement of the ASEAN Disclosure Standards, which remain fragmented across the member states. These insights are relevant to the broader questions about the long-term viability of ASEAN’s regulatory policies of promoting integration through harmonisation of minimum standards along with limited mutual recognition.
The paper then compares the ASEAN approach with two other methods of harmonising the disclosure framework in connection with offerings of securities, which are the European Union (‘EU’) Prospectus Directive in the EU and the Trans-Tasman Mutual Offering Framework (‘MRSO’) in Australia and New Zealand. The former is a fully harmonised securities framework, while the latter adopts a full mutual recognition framework. The Prospectus Directive, which adopts a fully harmonised framework, offers lessons on the global institutions that are required in order to support a truly genuine single market. The MRSO Scheme, which adopts a full mutual recognition framework, offers another model of economic integration that is more modest in nature but which has benefited the issuers and investors.
Finally, the paper argues that to move to a truly pan-ASEAN equity offering, there needs to be, at a minimum, a greater supervisory and enforcement convergence.
Wai Yee Wan is Associate Professor at the School of Law of the Singapore Management University.