1. Thank you for joining us today.
Recap of major global developments since 2019
2. Much has happened since this forum was last convened in 2019. I will just touch on three global developments that have significantly influenced our work in the past 18 to 24 months.
3. The pandemic is of course top of mind. For more than a year now, we have had to change how we work and interact. Global supply chains were fractured. All forms of travel ground to a halt – both domestically and internationally. Business activity, especially in aviation, tourism and hospitality, suffered tremendously.
4. Unsurprisingly, markets worldwide experienced massive uncertainty and volatility. Regulators, listed companies, brokers and investors alike grappled with the rapidly changing environment, and adapting to the constraints imposed by the pandemic. In some markets, measures were taken to curb short-selling or even to halt trading during periods of great volatility.
5. Another wave sweeping across major markets is the growing emphasis on having sustainable mindsets and behaviour. The newfound commitment in staying the course for the long term has come amid growing preference for sustainable solutions in a plethora of contexts including financial reporting, transport, food and lifestyle in general. We have also seen a much sharper interest in climate change and its impact on the world, with an urgency for action to be taken.
6. A third development I want to highlight is the marked increase in retail interest in financial markets. It is no coincidence that the reemergence of SPACs listings and digital assets have surfaced around this period. At the same time, trust in institutions such as the auditing fraternity has been eroded by scandals involving fairly large companies in developed jurisdictions.
What has SGX RegCo done amid these developments?
7. With all these unfolding around us, our first priority has always been to ensure that the proper functioning of the market remains unimpeded. Safeguards we had put in before the pandemic, such as our circuit breakers and the review of our opening and closing auction routine trades should there be a price dislocation, stood us in good stead during this period. They helped us assure the continued orderliness of trading, amidst the heightened volatility and uncertainty during the unfolding crisis.
8. We intensified our supervisory communications with our market participants during this period. This was to ensure that any potential systemic concerns were surfaced as early as possible. To alleviate uncertainty in the market, we worked closely with listed companies to give greater clarity on the impact of the pandemic on their businesses. At the same time, leeway was given in areas such as the extension of financial reporting timelines, and higher limits for share issuances, to help them in navigating the difficult business environment. Throughout this period, we proactively issued guidance on key issues such as disclosure expectations and managing of general meetings, to provide directional transparency to the whole market.
9. At this point, I need to record our thanks to all the various stakeholders for the incredible amount of work put in during this crisis. The quick, proactive and considered feedback we received from all parts of the market, through both formal and informal channels, was invaluable. It helped us and the statutory authorities identify priority concerns and work out effective solutions. This close communication between us, the market and the statutory authorities was crucial. It enabled the passage of regulatory guidance and legislative instruments allowing for virtual general meetings and how they should be conducted. This allowed a balance between shareholder interests and health and safety concerns to be struck. Numerous updates of the guidance in this regard have been issued, and we remain vigilant to the need for quick adaptation should the environment change further.
10. In early 2020, we made a fundamental change in our disclosure regime. This was the removal of mandatory Quarterly Reporting for the majority of our companies. Companies of concern will still be required to carry out QR, thereby giving investors the assurance of regular disclosures on the state of affairs in these companies.
11. One of the reasons for the removal of QR was to shift focus from short-term financial results to longer term aspects. These include how a company is run, how it is managing its opportunities and risks, and how it can thrive in a fast-changing world. Investors and financial institutions also want to know how companies are dealing with climate change, for instance, their plans to reduce carbon emissions.
12. Regulators around the world are taking a serious look at the issue. SGX RegCo is no different. We are reviewing the scope of the sustainability reports that SGX-listed companies are required to disclose. In the coming months, we shall be launching a public consultation on changes to our sustainability reporting rules with a focus on climate-related disclosures.
13. Applying the lens of sustainability on our marketplace, an incontrovertible fact is that no market can thrive without meeting the needs of its constituents. Regulators must facilitate market development which can address these needs, while instituting frameworks that appropriately protect investors and preserve market integrity.
14. Currently, SPACs listings are enjoying a great revival in the US. We have also recently consulted on a framework for SPACs. The model proposed comes about after in-depth studies of the model in other jurisdictions, with modifications for safeguarding the interests of investors in our market. You can expect our response to the public consultation in the coming months, which will, as always, take into consideration the feedback from our market.
15. A thriving marketplace also needs the trust of its participants. A key facet of a trusted marketplace is good regulation, both in perception and in fact. Our regulatory ethos is on strengthening the regulatory culture by progressively increasing standards throughout the community. We recognise that improving trust and confidence must be a collaborative process and in partnership with our participants.
16. Many of the initiatives we spoke of in 2019 have already been implemented. Together with the Association of Banks (ABS), we have revised the due diligence standards for issue managers and sponsors in an IPO. New rules on issue manager accountability, shaped with the help of feedback from the professional community, have also been introduced.
17. Requirements concerning auditors and valuers have also been put in place. These include a requirement that listed companies must appoint an auditor registered with ACRA for their statutory audits. SGX RegCo will also have the power to require a second auditor to be appointed should there be serious regulatory concerns over the financial statements. For valuers, we have set out experience and accreditation criteria for property valuers, and are looking into releasing best practice guidance for IFAs.
Looking behind to move ahead
18. We will build on our experiences over the past year in formulating our regulatory initiatives going forward. We believe in proportionality with respect to our regulatory frameworks. We constantly reexamine our toolkits. Where possible, we refine, or discard, blunt instruments in favour of targeted, proportionate responses - for instance, the removal of the Minimum Trading Price framework (MTP) was done after the enhancement of our toolkits with other, more targeted tools to address the risks of manipulation.
19. With market activity at multiyear highs, it is imperative for us to ensure that regulatory attention continues to be directed accurately.
20. Since March this year, we have put in place a technology solution to provide early warning signs of potential financial distress and irregularities. It does so by computation of financial risk indicators and will better equip us to take pre-emptive action if need be. We have also introduced AI enhancements in our market surveillance. We want these to be melded with our real-time trade monitoring system. This allows us to generate higher quality alerts and increase efficiencies for the market.
21. We will continue to leverage on the channels of communication honed over the years with the market as well as the statutory authorities, in finding and addressing matters of concerns. This include tipoffs we receive through the Whistleblowing Office established last year. The change in our enforcement regime, which we have already consulted on last year, will enable us to more quickly deliver enforcement outcomes.
22. What the past year has keenly illustrated, though, is the speed at which market needs to develop. Low yield environments could persist and investor needs for new channels to allocate capital will magnify. The pandemic has also accelerated interest on sustainable investing, with a growing crowd of investors who seek sustainable causes, companies, and financial instruments.
23. It is as clear to us as it ever was, that our work must guide a continued maturing of the market community and investors. No regulatory framework can remain immutable in a fast-changing environment. We will continue to refine our regime. Where necessary, we will introduce bespoke measures in preference to broad marketwide regimes which could be overly blunt.
Conclusion
24. There are many challenges ahead of us as we work towards maturing the market. Today’s symposium is just one of many pitstops on this journey. On that note, thank you and I wish you a fruitful and engaging session ahead.
