This list is not all inclusive and does cover many different topics. We welcome additional questions if the topic is not covered in enough detail. We have updated this Q&A from the previous version dated 6 February 2020 for additional clarifications based on feedback received.
Q: PLEASE EXPLAIN THE RATIONALE FOR MOVING TRADING FROM ESTONIAN TO SINGAPORE MARKETPLACE.
A: Until now, Fundy trading service relied on Estonian and European regulatory exemptions. This helped us to launch our initial services and supported us in understanding how and if the business model works, thereby providing proof of concept, but unfortunately regulatory exemptions do not provide enough security to scale.
Starting in 2017, Fundy commenced significant research, and identified Singapore’s regulatory environment as ideal for securing a proper marketplace to serve private companies. Singapore’s Recognised Market Operator regime enables us to offer the best legal set-up to serve our growing international customer base, whereas in Europe the alternative would have been a Multilateral Trading Facility. Although Europe has been thinking about more liberalisation or clear exemptions, no major moves have been made so far.
Our ambition to be the world’s marketplace for tradable private companies means we wish to start attracting larger volumes including more mature companies and professional investors. This should enable more growth to all of our companies and access to a wider range of tradable investments for investors. The licence is a critical factor in making this possible, as they won’t come to an unregulated marketplace.
Q: Part of what attracted companies to Fundy in the first place was that they would not be treated like fully public / listed companies and would not need to comply with full securities laws. Will this change?
A: Being part of the marketplace that is run under the Recognised Market Operator (RMO) regime does not mean companies have suddenly become public or subject to the same stringent level of requirements as public companies are.
Fundy understands why startups come to us rather than, say, one of the smaller European stock exchanges. We try to make ourselves continuously easy and straightforward to work with, and to adopt rules that are clear, fair, make sense and work for everyone. We position ourselves as an alternative to public fundraisings and we are keen to continue to offer that solution for start-ups.
The amount of regulation distinguishes a regulated marketplace operated by a Recognised Market Operator (such as Fundy), versus an approved exchange. Typically, a company that is listed and traded on a public exchange, is bound by extensive and prescriptive requirements: listing rules, transparency rules, corporate governance rules, prospectus rules and admission and disclosure standards. These can span hundreds of pages (and require professional legal advice to interpret).
Fundy allows companies’ securities to be listed and traded on the Marketplace, but with significantly less administrative and regulatory obligations. Fundy as a Recognised Market Operator, has set rules for its marketplace, the majority of which are based on our existing marketplace rules. We have also made the Marketplace rules more understandable based on our experience and feedback received, plus added some tweaks to comply with Singapore’s regulatory requirements.
Q: What are the key changes between the previous and new Marketplace Rules?
A: The key changes to the existing Marketplace Rules relate to the admission set-up for direct listing of companies, trading rules (removal of priority rights, setting the requirement for pre-funded wallets), reinforcing the stance on prohibition of market abuse (including requiring that companies keep Insider Lists be kept up-to-date), and clarification on the information disclosure requirements which companies have raised with us and asked us to determine better (including helping Issuers to determine what the relevant and meaningful KPIs for disclosure are). We note that in the case of market abuse, this was already prohibited in principle in the existing Rules. There were no other substantive changes made to the existing Marketplace Rules (which all trading Issuers have currently agreed to on the platform). Our summary of changes made to the Marketplace Rules can be found here (PDF), and we have offered all issuers the chance to participate in online training sessions covering changes to the Marketplace Rules and regulatory obligations. We are also happy of course to address any individual queries about the Rules that we receive.
Q: It is not clear which Singapore regulations apply to companies, directors and investors. Do companies become subject to the Securities and Futures Act of Singapore?
A: The Securities and Futures Act (SFA) regulates Fundy as Singapore’s marketplace operator, and places obligations on Fundy to manage any risks associated with its business and to adopt a suitable form of rules to govern trading, which are set out in the Marketplace Rules. Our Marketplace Rules reflect the relevant provisions of the Securities and Futures Act.
Accordingly, it is the Marketplace Rules that apply to Issuers directly, not the SFA. We would also like to state clearly that the Marketplace Rules will be interpreted and imposed by Fundy, and it is the relationship between companies and Fundy that is paramount. We fully believe our team will be able to apply the Rules with the benefit of their experience and in a fair and pragmatic way. This is why the MAS have seen fit to grant Fundy this licence – they trust us to operate our marketplace fairly and according to the rules that govern it.
Q: Must companies now report all director and employee transactions on Fundy within 3 days?
A: The original version of the Marketplace Rules contained a requirement for director and employee transactions to be reported within 3 days (in section 2.4.3).
We listened to feedback from companies on what would be required from them in terms of administration and reporting, versus the principle that we were trying to achieve, and decided that we were able to update the Rule.
Section 2.4.3 now specifies that companies are required to keep their Insider Lists updated within the 3-day timeframe instead. “Insiders” are only those who have access to material insider information relating to the company. We believe that this strikes the right balance in maintaining trust on the platform whilst providing a workable rule from the company perspective.