(Aug 7): Singapore Exchange Regulation (SGX RegCo) will become operational relatively soon, and I would like to share some personal thoughts on what this new independent regulatory company means for companies listed on the SGX and investors.
Firstly, this is an opportune time for SGX RegCo, as a new entity, to undertake a review of some of the existing rules. If a rule is necessary, it should be in force, even if it is a pain point. If it is not, let us not hesitate to modify or remove it.
This does not mean that such a rule was wrongly introduced in the first place. The circumstances may have been different at the time and even if we should change anything, it should not be taken as disapprobation of what the regulator of the day did previously. For example, while I appreciate why quarterly reporting was introduced 14 years ago, developments since then should prompt us to re-evaluate its usefulness today. I am not saying that it should be removed. But given widespread views that it adds little value today and adds to significant compliance cost, we ought to study the matter carefully.
My second point relates to the importance of openness and transparency, which naturally touches on the quality of disclosures.
Singapore’s disclosure-based regime is still a work-in-progress, but no doubt we must be among the more developed markets in terms of the thickness of our public offer documents. According to my regulatory colleagues, some shareholder circulars contain language so technical and convoluted that you need dictionaries containing both legal and financial terms to plough through them.
It is therefore time for us all to do some soul-searching, as far as the drafting of disclosures is concerned. SGX RegCo, in its focus on “openness and transparency”, would like to see the quality of disclosures improve so that they are kept clear and concise, and in plain and simple language.
My next point relates to the issue of regulatory approach, and I think we can all agree that no regulator — statutory or front-line — can be everywhere, all the time.
At the same time, we must not lose sight of the fact that this is an ecosystem and everyone has a stake and role to play. This means investors who are informed and prepared to vote with their feet or wallets, insiders who are prepared to be whistle-blowers and market professionals who know what compliance standards are, and who are prepared to take action if they know that something is wrong.
My final point is that SGX RegCo will continue to explore innovative ideas that will help develop the market. Almost 15 years ago, the REIT structure was first launched to not much fanfare. Who would have imagined then that REITs and business trusts would today contribute almost 10% of the value of the entire Singapore stock market! In the last 18 to 24 months, REITs and business trusts have contributed to the bulk of the IPOs in the Singapore market.
So I ask this — and I hope it is not too provocative a question: Could a dual-class share (DCS) structure help the market even if it never becomes as large as REITs and business trusts? SGX has concluded its public consultation on whether to introduce the structure and this is a subject that engenders a great deal of debate. In due course, SGX RegCo CEO Tan Boon Gin and his team will announce SGX RegCo’s views on this matter and I hope to be briefed by them.
On my part, I remain open-minded about this initiative. To me, it seems that if DCS is implemented, it could lead to the enlargement of choice for investors, with DCS companies available only to those who want shares in such companies. Our retail investors also may already be investing in companies with such structures and could therefore be familiar with this structure. However, I have not had an opportunity to be briefed on all the views the market has given. When that takes place, we will look at it and come to what, I hope, will ultimately be a view that the market finds useful.
Lastly, we at SGX RegCo should constantly remind ourselves to be humble. We are by no means omniscient and will no doubt make mistakes. When we do, I hope the marketplace will understand that we are only human. We will also strive to be a learning organisation by learning from our mistakes and improving. Even though we may not necessarily be in agreement with each other all the time, any views that you provide will be internalised and analysed carefully. From my personal experience, even when I disagree with another perspective, that perspective nevertheless adds something valuable in the entire thinking process and in the policies ultimately formulated.
Tan Cheng Han is Chairman of Singapore Exchange Regulation or SGX Regco
