More support for retail investors in bond defaults

The regulatory arm of the Singapore Exchange (SGX) will look at ways to improve disclosure of information to investors and what options they have when things go belly up.
The regulatory arm of the Singapore Exchange (SGX) will look at ways to improve disclosure of information to investors and what options they have when things go belly up.PHOTO: ST FILE

Retail investors could get more support when issuers of retail bonds default.

The regulatory arm of the Singapore Exchange (SGX) will look at ways to improve disclosure of information to investors and what options they have when things go belly up.

SGX Regulation (SGX RegCo) chief executive Tan Boon Gin announced the initiative during an update on the organisation's measures. He said: "The default by issuers of retail bonds has been an issue of public concern. We acknowledge this.

"We will put together in the next few months a working group comprising industry professionals, investors and SGX RegCo, to review and see what is needed to improve disclosures and make clearer what happens in a default."

The group will look at how investors can better organise themselves and how they can better exercise their rights in the event of a default. It will also explore how more clarity can be provided on the role of the trustee, which is required for retail bonds.

Better ways to disclose financial ratios will be examined so that retail investors can get a better idea of the health of any given company. Mr Tan added that a public consultation will follow.

The moves come amid the ongoing problems at debt-laden Hyflux that have hit retail investors.

 
 
 

Associate Professor Lawrence Loh of the National University of Singapore said: "While the current initiative is not directly linked to Hyflux, there are many lessons to be learnt in terms of disclosure and default management."

Securities Investors Association (Singapore) president David Gerald added: "The recent bond defaults... have highlighted the difficulties encountered by bond holders in organising themselves, taking collective decisions, negotiating for better terms of restructuring, being able to obtain the requisite legal or financial advice and enforcing their rights under the bonds documentation."

Prof Loh said SGX RegCo's move to strengthen disclosures is a necessary step in the right direction.

"It is critical that the right... information gets to the retail investors in a timely manner. It is also important that these investors know how to interpret and use the information, particularly so for the risk aspects," he added.

"The basic need is for retail investors to understand their rights and priority of claims in the event of defaults. These should even be made clear at the onset, which is the point of purchase."

A version of this article appeared in the print edition of The Straits Times on August 08, 2019, with the headline 'More support for retail investors in bond defaults'. Print Edition | Subscribe