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Regulatory Functions of the SEM


The regulatory functions of the SEM include:


Issuer Regulation


Review of listing applications and monitoring on-going compliance of listed issuers with the listing requirements of the Exchange.


Supervision of Market Participants


How are market participants regulated?


In addition to monitoring the trading activities of Market Participants, SEM also conducts on-site inspections of Market Participants to ensure their compliance with the rules and requirements of the exchange. The SEM may inspect the books, records and accounts of Market Participants and to take such action as it deems appropriate after such inspections.


Where it appears that a Market Participant may have failed to comply with any of the provisions of the law or the Rules of the Exchange, the Compliance Department of the SEM shall immediately notify the Market Participant concerned of such failure and request an explanation. Depending on the seriousness of the breach, SEM may require the Participant to take remedial action within a specified delay or take such disciplinary action as permitted under the rules.


SEM also monitors on an on-going basis the financial health of Market Participants to ensure that they have adequate capital for their operations in accordance with the Stock Exchange (Financial Reporting of Investment Dealers) Rules 2010 (Rules on Capital Adequacy). Participants must file financial reports with the SEM periodically. In addition, they are also required to lodge with the SEM, their annual audited accounts.




Market Participants


Section 13(2)(d) of the Securities Act 2005 provides that a securities exchange may make rules, not inconsistent with the Act, any regulations made under the Act or any FSC Rules, with regard to enforcement and disciplinary procedures and sanctions to be applied.


Where the SEM suspects a breach of the rules of the Exchange by a Market Participant or any of its directors, employees or ATS Operators, SEM shall enquire into the alleged misconduct. The breaching party may be requested to take appropriate remedial action or disciplinary action may be initiated depending on the seriousness of the breach. The matter will also be reported by SEM to the FSC.


Listed Issuers


If the SEM considers that an issuer has contravened the Listing Rules it may do one or more of the following:


- censure the issuer, which may include a formal written notice of censure being served upon the issuer and the requirement that the issuer provide a written explanation of its actions to the SEM and an undertaking to rectify the breach immediately;

- publish the fact that the issuer has been censured for failing to comply with the Listing Rules;

- refer the matter to the FSC for appropriate action; and

- where applicable, suspend or withdraw a company from the Official List of the SEM.


Similar sanctions apply to DEM companies for contravention of the Rules for the Development & Enterprise Market (DEM Rules).