Regulations should focus on safeguarding investors

The continuing coverage of individuals suffering massive losses owing to poor investments is a grim reminder of the diminishing credibility of Singapore's capital markets ("Rickmers note holders join forces to get payment"; last Thursday).

I strongly urge a reset of our financial regulatory mandate to focus on investor protection.

The requirements to be an accredited investor should be redefined, and include a minimum level of investment education and training, instead of merely looking at net worth and income.

Individual investors, such as retirees, often hold bonds till maturity because of a lack of expertise and resources in evaluating their investments.

Without proper guidance, their purchases of such investments are often driven by greed or fear, and not sound principles of risk profiles, diversification and wealth protection.

There should be a limit on how much they can invest in one product, for instance, up to 5 per cent of their liquid assets.

The objective is to indirectly compel them to diversify their investment portfolio and to look at other types of products.

Those who want to invest greater amounts can engage the services of certified investment advisers to advise and guide them.

This would make it necessary to expand the pool of investment advisers. With a greater number of retirees armed with substantial Central Provident Fund (CPF) balances, there is a demand for such services.

The authorities could allow CPF monies to be used to purchase bonds of fundamentally cash-rich multinational corporations such as Apple, Facebook and Google, other than local companies' securities.

The issuance of bonds should also be restricted to cash-rich companies that are using the funds for expansion purposes, and not for operational purposes such as paying wages and settling debts.

Weak companies should focus on cost cutting, selling assets and seeking mergers or buyouts, instead of conveniently issuing bonds or shares to raise funds.

It is imperative that Singapore strengthens its hand in investor protection to prevent unnecessary decimation of individuals' wealth.

Frankie Mao

A version of this article appeared in the print edition of The Straits Times on October 04, 2016, with the headline 'Regulations should focus on safeguarding investors'. Print Edition | Subscribe