Proposed amendments to the laws governing Papua New Guinea’s capital markets aim to open up the market to more ways of raising capital and strengthen governance in the sector.

Credit: pixabay

The Security Commission’s James Joshua.

Part of Asian Development Bank-supported market reforms, the Capital Markets Modernisation Bill 2023, once implemented, will pave the way for new investment options in PNG, including a small offers market, unit trusts, peer-to-peer lending and equity crowdfunding.

It also aims to strengthen governance at regulator the Securities Commission of PNG (SCPNG) and at PNGX, PNG’s stock exchange.

Acting Chairman of PNG’s Securities Commission, James Joshua, tells Business Advantage PNG he expects the proposed Bill, which will update the existing Capital Markets Act 2015, to go before Parliament later this year.

Second-tier capital raising

To remove excessive compliance costs associated with traditional prospectus offerings, the proposed Bill contains new low-cost avenues for companies with net assets under K5 million to raise equity and debt capital.

After preparing and filing a short Basic Information Package, Joshua explains, SMEs will have access to alternative finance platforms, including equity crowdfunding and peer-to peer lending.

He expects SMEs in the agritech and commodities sectors to be early seekers of capital raising via second-tier avenues.

‘This is a positive development which has the potential to build a pipeline of new listings for the PNGX in due course,’ notes PNGX’s Chairman David Lawrence.

PNGX’s David Lawrence

Governance

The draft Bill also outlines changes to the way PNG’s Securities Commission is run, separating governance and oversight from executive power, which is currently vested in one person.

‘The governance and oversight will sit with the whole Board of Commissioners, while the management role will sit with the CEO,’ explains Joshua.

While most other amendments impact the operation of PNGX, some also impact listed companies; these include the reduction of the ‘control’ threshold for takeovers from 33 to 20 per cent (section 276).

Amendments to section 375 require CEOs and directors of listed companies to provide written disclosure of interests in securities within five days, while amendments to section 75 lifts the previous ban on short selling.