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1. Good afternoon and Happy New Year!
2. You may recall that when I first joined SGX, I spoke about what the ideal market should look like from the regulator’s perspective.
3. I said then, and this view remains till today, that as a market regulator, the end goal is to eventually shape a marketplace where the regulator’s presence is hardly felt or necessary. This means the market and participants are effectively self-governing.
4. So that has been our aim – to make SGX a better quality, more mature market. This is important because a market needs to be innovative in order to remain attractive and vibrant. We want new jurisdictions and new products to be introduced on our platform, and to do so, the market community must also be ready to handle the associated risks.
5. SGX has built up over the years a presence as an international exchange with international products. Our equity market has about 40% of its listings originating from outside Singapore.
6. Despite the international flavour of our markets, we need to remember that they are relatively young compared to other markets such as the Western markets. What we at RegCo have been trying to do and will continue to try to do is to speed up the learning process to reach experience levels in other markets that took a longer period of time. When I first joined, and even now, I sense an unevenness in the maturity of our market.
7. So, how do we get there?
8. Well, first, we need to raise standards generally. This is why, in the past few years, we have emphasized a community approach. This is all part of the journey to build a more mature marketplace. We have reached out to the various actors in the community to get them to commit to certain minimum standards.
9. Examples include our public consultation to strengthen auditors’ rules, our tie-ups with the Institute of Valuers and Appraisers Singapore (IVAS) on business valuations and Singapore Institute of Surveyors and Valuers (SISV) on property valuers to improve valuation standards, best practice guides on confidential information and for Singapore lawyers, and most recently, revisions to the ABS due diligence guidelines for issue managers and sponsors.
10. Second, as we move forward towards a more mature market, we recognize there will be a need for us to intervene specifically, especially in areas where we have less experience. These can be areas to do with new products, or new situations or new developments, where we might have to be more prescriptive in the beginning. With time, some of these more prescriptive measure will evolve into more general principles. And this is a necessary evolution because our rules simply cannot legislate for everything and everyone. Otherwise, our regulatory framework will be too stifling and leave no room for new growth. There must always be space for the market to develop and innovate.
11. For example, we have recently tightened our listing rules to focus on areas of high investor interest, and loosened certain blunt tools like the minimum trading price and quarterly reporting in favour of more targeted and risk-based policies. We also provide specific guidance in the form of regulator’s columns, best practice guides and listing decisions. Over time, we hope that these will set the standard for new norms in a more mature market.
12. Finally for a more mature market overall, we need credible deterrence. That is why we have consulted on enhancements to our enforcement framework in August 2020. You may have also noticed that we have been working more closely with the statutory authorities like MAS, ACRA and CAD, as well as industry bodies such as the Law Society of Singapore.
13. You can expect us to come up with our responses to the public consultation feedback on the enhancements to our enforcement framework within this quarter. We are now in the midst of finalising the changes.
14. As the marketplace matures, there will be greater scrutiny from investors and higher expectations. Behavior will be assessed against the spirit, rather than the letter of the rules. SGX RegCo will move to a different phase which is to focus on shaping culture. Building blocks have already been put in place in some areas.Mandatory sustainability reporting with the flexibility on which sustainability components to describe on a “comply or explain” basis[1], and the new principles-based approach in the Code of Corporate Governance are 2 examples.
15. In this respect, we will also be looking internally to see how our rules should be changed to reflect this. For the coming half year, our focus will be on the framework around sustainability reporting. Reporting on ESG has become more than just about pushing out data. Calls for standardization and ways to improve comparability have increased. We must respond to these. As part of our preparations for making the necessary changes, we are currently finalizing a survey of institutional investors on their views of companies’ ESG reporting andwe will then complete a second review of listed companies’ sustainability reports probably in the current quarter.
16. The findings will shape what we need to do to make disclosures more meaningful, useful and impactful especially in relation to climate-related disclosures. We are targeting to consult the market on proposed changes by the end of our current financial year.
17. Singapore has introduced the new Insolvency, Restructuring and Dissolution Act 2018 (IRDA for short). The new law is aimed at helping to make company restructuring easier and to position Singapore as an international restructuring hub. We would be looking at our Listing Rules to see how they can be supportive of, or aligned with, the intentions of the IRDA and these proposals can also be expected by the end of June 2021.
18. Another development of interest are Special Purpose Acquisition Company (SPAC) listings. Like all of you, we have noticed the popularity of SPAC listings in other markets. We have received enquiries and expressions of interest to do so with such a structure. Should SGX also enable SPAC listings? We consulted on this back in 2010. We are now thinking given the current popularity of such a listing structure, whether to revive that consultation.
19. Finally, we had previously said that we will look at rules governing retail bonds. We expect to consult on proposed changes in the next few months.
[1] http://rulebook.sgx.com/rulebook/practice-note-76-sustainability-reporting-guide?force_isolation=true
