On Regulatory Standards and Reforms
The CAO incident has raised questions on whether there is a need to strengthen SGX's regulatory standards. The CAO case brings to focus such issues as internal and risk management controls and corporate governance practices of a listed company. What these issues are will only be fully known when PwC (PricewaterhouseCoopers) and CAD investigations are completed. It is thus premature to discuss the regulatory changes that should be made. SGX will work with relevant authorities to review the need for further regulatory enhancements upon the completion of the investigations.
SGX's regulatory standards continue to be applied in a stringent manner to all listed companies and those seeking a listing on its bourse, be they local or foreign companies. The listing rules have been increasingly strengthened for market relevance and effectiveness.
In the past two years, SGX introduced additional measures to enhance the quality of intermediaries and listings on its bourse. These include greater guidance on matters requiring disclosure, quarterly instead of half-yearly reporting of results, the use of corporate investigations, where necessary, for evaluating listing applicants. We also increased the responsibility of issue managers over their listees, such as the responsibility to exercise due diligence over listing applications and requiring issue managers to be associated with their listee for 12 months beyond their listing. The details could be found in SGX-ST Listing Manual 705, Practice Notes 1.2, 2.1 and 7.3.
On Enforcement
CAO announced huge trading losses on 30 November 2004. SGX took immediate action and directed the company to appoint a special auditor, PwC, to investigate and report on its findings. SGX also acted quickly to secure the co-operation of CAOHC, the parent company of CAO, and its President, Mr Jia Changbin, which included assistance to get Mr Chen Jiulin, the CEO of CAO, to return to Singapore to participate in the investigations.
SGX also kept MAS closely involved, and CAD is undertaking criminal investigations. The MAS, CAD and SGX take a serious view of the incident and are working closely together to get to the bottom of the matter.
SGX as an international listings venue
Since the incident, questions have been raised whether SGX should slow down its efforts to get non-Singapore based companies to list on our Exchange.
"As part of an international financial centre, SGX is an international market place. It is not just a domestic exchange. Without compromising our listing standards, the developments at CAO should not deter efforts to build Singapore as an international venue for listings," said Hsieh Fu Hua, Chief Executive Officer of SGX.
In evaluating companies for potential listing, SGX remains vigilant in screening listing applicants, both local and foreign.