Good afternoon and thank you for joining me today (6 aUGUST, 2019).
1. I shared in January this year some of SGX RegCo’s initiatives for FY2019. And now that 6 months have passed, I thought it would be timely to talk about what is next on our plate for the current six months to end of 2019. I intend to do this regularly from now on, to give everyone a preview of what is to come every half year.
2. As you may recall, I talked about enhancing trust and collaboration within the eco-system back then. More than ever, it has become apparent that these two objectives are of absolute importance today. The delisting rules which we announced on 11 July was one of the first pieces of these efforts. Upcoming in the next few months will be 3 fairly large sets of initiatives, 2 of which are built around addressing the trust issue while the 3rd is aimed at supporting market development.
3. First, we are looking to increase our regulatory presence in order to strengthen investor confidence and deter wrongdoing. On the enforcement front, as of August, we have commenced hearings against 3 companies before the independent Listings Disciplinary Committee. Enforcement actions are important for 2 reasons. One, is that wrong-doing must be punished and seen to be punished otherwise confidence in the market will be eroded. Two, the penalties meted out also serve as a deterrent for others which may be minded to commit any breaches of the Listing Rules.
4. These hearings could result in the first enforcement actions and penalties under the more robust disciplinary action process that was introduced in October 2015. After these 3 companies, you can expect more to come. Let me emphasise that that the LDC process is akin to a court procedure where extensive documents have to be prepared, the hearing is carried out normally in the presence of lawyers, and formal Grounds of Decision have to be written and issued publicly by the Committee. The due process is robust and of a very high standard commensurate with the enhanced penalties the Listings Disciplinary Committee can impose. In other words, the procedure and the conclusion will take more time in order for justice to be done.
5. As I mentioned at the regulatory symposium in June, we are also establishing a dedicated whistle-blowing office. 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 received 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.
6. Now thus far, when we encounter companies with problems, the immediate regulatory response has focused on the company, in the form of disclosure queries or in the form of Notices of Compliance. Going forward, when it comes to Catalist companies, we will be looking to the Sponsors for immediate answers, because Sponsors are the first line of defence for Catalist companies in terms of governance and oversight. 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. And such inspections will span work at the IPO stage all the way to the company’s continuous listing obligations.
7. In addition, we will be consulting on a more robust regulatory regime for property valuations. This is especially important for a market recognized as an international center for REITs. This will include proposals to ensure property valuers are qualified by professional bodies and that valuation reports meet the standards which are at least equivalent to the Singapore Institute of Surveyors and Valuers (SISV).
8. I have said this before but it bears repeating, that it is at the point of listing that SGX RegCo has the most control over the quality of companies. Because the Issue Managers’ role is so crucial in conducting due diligence on the companies they bring to list on the exchange, we have proposed in the case of IMs, to expand how we regulate them to include how they conduct their due diligence and how we can take them to task if they fall short of the standards that we are setting for them. We have consulted on this and the market can expect the new rules to be announced in the coming months.
9. Second, we are focused on raising standards across the different stakeholders. We have previously mentioned our intention of increasing the accountability of auditors. So you can expect over the next few months our public consultation on requiring a second auditor in certain exceptional cases, and the appointment of a Singapore-based auditor for listed companies in order to increase regulatory traction.
10. A new and related development is that we will be starting work with the Association of Banks in Singapore to refresh its Listings Due Diligence Guidelines. You may recall we last enhanced the guidelines in 2016 and it is timely that we consider further improvements especially in the area of internal controls and financial forecasts and projections.
11. We have also said when we announced the new delisting rules last month that we are going to work with Independent Financial Advisors on guidance and standards in respect of their opinions on exit offers. In particular, we will focus on standardising the methodologies for IFAs to determine whether an exit offer is “fair and reasonable”, and where an Interested-Party Transaction is concerned, if it is on “normal commercial terms”. By doing this, we hope to achieve greater clarity and consistency for IFA opinions in general.
12. Sustainability reporting was mandated for listed companies from the financial year ended 31 December 2017 and we have seen nearly 100% of companies producing their sustainability reports. This is a good achievement and we have commissioned a review of the sustainability reports to see what areas can be improved, particularly where it comes to linking business strategy with sustainability reporting.
13. Finally, we are reviewing our policies in order to calibrate our rules for efficiency and effectiveness. As you know, we have consulted the market on quarterly reporting. To give some explanation on this, our starting point was to focus on companies with higher market cap because they are the ones with the resources for QR. But the feedback that has since came back made us think that rather than just looking at market capitalisation of companies to determine what they should do about QR, we should instead consider a more a risk-based approach and that is what we will be doing. The framework is currently awaiting regulatory approval and we target to announce it by the end of 2019.
14. We are also reviewing the Minimum Trading Price (MTP) policy because of feedback that since the introduction of MTP, we have actually developed other tools that are more direct, more effective and more surgical than MTP in addressing the risk of manipulation. Some examples include the enhanced Trade with Caution alerts, the Members’ Trading Guides and the Members’ Surveillance Dashboards. 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 expect to receive a wide range of feedback to any consultations what we do on MTP, and we are prepared to go as far as to remove the policy, if based on the feedback, we feel this is the best way forward.
15. 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. For example, we will look at how investors can better organise themselves, provide more clarity on the role of the trustee which is required for retail bonds, and in the context of defaults, to see how investors can better exercise their rights. A public consultation will follow.
16. All these show that as our chairman (Tan) Cheng Han said in 2017 when SGX RegCo was first set up, there are no sacred cows where policy is concerned. So on that note, I am open to questions. But first, lunch! Thank you.
