The Singapore Exchange (SGX) can and will put mechanisms in place to raise the standard of governance, but over-regulating may also cause more harm than good, said its chief executive Loh Boon Chye yesterday.
Mr Loh preferred that people take personal responsibility in a disclosure-based market.
He was speaking at a conference on the future of investing held by the Securities Investors Association (Singapore) at the Suntec Singapore Convention and Exhibition centre.
Mr Loh said there have been calls for more rules and tighter regulation as new developments like technology cause changes in the way consumers behave, supply chains work and businesses are run.
But he did not think more rules will make a better market, because regulation is not the answer to everything that happens to it.
"When it comes to rules, quality is more important than quantity," he said.
A marketplace's purpose, he added, is to make it easier for people to buy and sell assets and ideas and, in the process, for economies to flourish.
"It is the job of the exchange to do this efficiently on a trusted platform. It is in this context that regulation plays a role."
An efficient marketplace, however, requires both self-discipline and market discipline, Mr Loh said.
"In this regard, everyone needs to contribute - regulators, market professionals, intermediaries, commentators, investors as well as the media.
"What will ensure a sustainable ecosystem is a shared understanding among stakeholders who recognise that their actions, or non-actions, can have ripple effects in the ecosystem."
Shareholders also have a part to play in ensuring their companies remain responsible and are taken to task, he added.
"They need to be fully conversant with their investments. They have to make an effort to understand the companies they have invested in, and the industries they operate in.
"When controversial proposals are presented by their companies, they should hold their boards to task and raise the right questions at shareholder meetings."
While governance frameworks are essential, it ultimately boils down to directors remembering their basic duty, Mr Loh said.
"They have been tasked to look after the interests of the companies under their watch, as well as the interests of the public who have provided the capital to these companies.
"Hence, boards should be held accountable to shareholders, if they have not carried out their duties responsibly."