The Singapore Exchange (SGX) is studying ways to encourage institutional investors to be more engaged, and to move towards cutting down the number of company disclosures while giving them greater value.
SGX chief regulatory officer Tan Boon Gin said the push towards "low volume/high value" disclosures was part of moves to strengthen the regulatory regime here.
Speaking at the Thomson Reuters Asean Regulatory Summit yesterday, Mr Tan noted that Singapore has proportionately more retail investors than the United States, home to the principles of disclosure-based regulatory regimes.
"In order for the disclosure-based regime to work in Singapore, we have had to make certain adjustments," Mr Tan noted.
For example, "if company filings are too voluminous, the danger is that investors will not even look at the disclosure documents".
So to move towards low volume but high-value disclosures, the SGX is studying the way it issues alerts to investors.
When a company is queried on unusual trading activity in its shares and replies that it is unaware of any reason for the activity, the SGX will issue a "Trade with Caution" (TWC) alert on the counter.
There has been some debate over whether this alert has lost its efficacy because it has become perceived as "high volume/low value" information, Mr Tan said.
"Hence, we have recently started to increase the value quotient by supplementing our TWCs with additional detailed announcements containing information we have gathered from our surveillance or review of trading activities.
"We are now looking into how such announcements will co-exist with the TWC process."
Mr Tan added that if the SGX notices any unusual and troubling trends, it will draw attention to the practice, to warn investors and put companies on notice.
Just last week, he noted, the SGX drew attention to Singapore-listed Chinese companies reporting sudden adverse financial changes.
The SGX is also "always looking for ways to encourage institutional investors to proactively engage their investee companies as well as exercise their voting rights appropriately to foster sustainable growth and value creation that will be in the common interest of shareholders", Mr Tan said.
This is because institutional investors have the clout and resources to push for change and improve governance.
In the US, the disclosure-based regime works well because institutional investors dominate the market, Mr Tan noted.
"We cannot increase the percentage of institutional investors overnight. But we can increase the level of shareholder activism by institutional investors."
