The regulatory arm of the Singapore Exchange (SGX) has devised a road map to tighten its oversight of the market here, which includes setting up a whistle-blowing office and increasing the accountability of auditors, sponsors and issue managers.
SGX Regulation (SGX RegCo) chief executive Tan Boon Gin announced the initiatives during an update on the organisation's measures.
They will help to increase the trust and accountability of all participants within the market community, he said, adding: "We are looking to increase our regulatory presence in order to strengthen investor confidence and deter wrongdoing."
SGX RegCo's Listings Disciplinary Committee has started hearings against three companies, to ensure that penalties will be served if there has been any wrongdoing.
It will also establish a whistle-blowing office to channel all regulation-related feedback to staff who can process these concerns.
"We want to assure the market that we take whistle-blowing seriously and that we are committed to following up on any information that we receive in accordance with a public policy that we are going to publish on our website that deals with, among other things, how we maintain the confidentiality of the information," Mr Tan said.
Sponsors for Catalist companies will also be held more accountable. SGX RegCo will go to them for immediate answers when companies have problems. Sponsors are professionals who vet offer documents and can come from banks, or law and corporate finance firms.
SGX REGCO'S UPDATES AT A GLANCE
INCREASING REGULATORY PRESENCE:
• Started Listings Disciplinary Committee hearings against three companies
• Established whistle-blowing office
• Holding sponsors more accountable
• Public consultation on regulatory regime for property valuation
• Enhancing regulation of issue managers
• Public consultation on increasing the accountability of auditors
• Refresh the Association of Banks in Singapore listings' due diligence guidelines
• Work with independent financial advisers on a best practices guide
• Review companies' sustainability reports
CALIBRATING RULES FOR EFFECTIVENESS:
• Review the minimum trading price policy
• Quarterly reporting changes
• Formation of working group to review retail bonds framework
Mr Tan noted: "Currently, we already perform regular and thematic inspections of our sponsors. However, if the answers that we receive are not satisfactory, you can expect us to go in to inspect them immediately, off-cycle, to check if there are gaps in their processes that need to be rectified."
SGX RegCo will also enhance the regulation of issue managers, who conduct due diligence on companies that are brought to list on the exchange.
Auditors will be held more accountable as well, with SGX RegCo holding public consultations over the next few months on requiring a second auditor in certain cases, and appointing a Singapore-based auditor for listed companies.
SGX RegCo will also work with independent financial advisers on standardising best practices, such as how they determine whether an exit offer is fair and reasonable.
The body will explore more robust regulations for property valuations, including proposals to ensure valuers are professionally qualified and their reports meet standards equivalent to the Singapore Institute of Surveyors and Valuers.
It is also reviewing its policies to ensure they stay effective, said Mr Tan, such as the policy of having a minimum trading price (MTP).
He said: "We have actually developed other tools that are more direct, more effective and more surgical than MTP in addressing the risk of manipulation.
"At the same time, we have observed certain unintended consequences from MTP. For example, when a company consolidates its shares, in theory its market capitalisation should remain the same.
"But in practice, once companies have actually done the consolidation, we have observed that their share price has fallen post-consolidation and their market value has further declined."
We want to assure the market that we take whistle-blowing seriously and that we are committed to following up on any information that we receive in accordance with a public policy that we are going to publish on our website that deals with, among other things, how we maintain the confidentiality of the information.
SGX REGCO CHIEF EXECUTIVE TAN BOON GIN
There will also be changes to the rules on quarterly reporting.
Mr Tan said at the launch of this year's Singapore Governance and Transparency Index yesterday that only a small minority of the 750 companies listed on the exchange are non-compliant.
"But it takes only a small minority to impact the reputation of the entire market community. Our regulatory approach is to target the non-compliant companies and to avoid burdening compliant companies unnecessarily with over-inclusive rules that apply across the board," he said.