Disclosure-based regulatory system and investor protection ‘not mutually exclusive’: Chee Hong Tat

THE move towards a more disclosure-based regulatory system for Singapore’s equity market does not mean that protection for investors will be relaxed, said Chee Hong Tat, the Second Minister for Finance, on Friday (Feb 21).

“I think the two are not mutually exclusive, and they can be achieved together,” said Chee, who was speaking at a media briefing to provide a full update on the first set of measures proposed by the Monetary Authority of Singapore’s (MAS) equities market review group to boost Singapore’s equity market.

A second set of measures is expected to be announced by the end of this year, he added.

The review group announced its first set of measures last week (Feb 13) to catalyse investor interest and boost the supply of quality listings, as well as streamline the regulatory process for initial public offerings. The announcement followed the review group’s consultations with stakeholders over the past few months.

The proposed measures include consolidating the listing suitability and prospectus disclosure review functions in Singapore Exchange Regulation (SGX RegCo), as well as streamlining the prospectus requirements and listing processes.

Chee said that the changes were in response to feedback that the listing process – which currently involves both SGX RegCo and MAS – lengthens the time to market for prospective issuers and increases uncertainty for them.

Responding to concerns that the proposed changes might lower regulation standards and increase risk for investors, Chee pointed out that excessive regulation does not necessarily translate to improved protection for investors.

“In the extreme case, you have cases where (companies) just provide a lot of information, but it doesn’t mean that investors will have greater clarity on the risk,” said Chee, who is also a board member of MAS.

He added that the review committee, which comprises private-sector and public-sector representatives, will consider how to reduce compliance costs and speed up the listing process for companies on the Singapore Exchange (SGX) while maintaining high corporate governance standards.

Loh Boon Chye, SGX group CEO, said that market discipline – in which market participants monitor risks – will “play a bigger role going forward” if the proposed regulatory changes are enacted. He added that SGX will work closely with MAS to prepare for these changes.

Loh said that the proposed measures represent a “milestone”, and will strengthen the local equity market’s competitiveness.

He noted: “The initiatives announced thus far will jump-start more capital into the capital markets ecosystem and stimulate interest in local stocks and listings.”

Neil Parekh, a member of the review group and deputy chairman at the Global Finance & Technology Network (GFTN), described the regulatory measures as highly significant in an interview with The Business Times.

“I would put equal emphasis on regulation, and in my view, there are already plenty of good growth companies to consider,” he said.

He highlighted that many of these companies are in the tech sector, particularly fintech, consumer tech, and health tech, especially with the recent investments in artificial intelligence.

Commenting further on the first set of measures, Parekh pointed out that they were “not piecemeal”, but “sizeable”, and are being implemented collectively by a single review committee.

He said that focusing solely on regulation while overlooking other aspects would miss a crucial element. Similarly, while he sees demand as the most important factor, neglecting regulation would be a mistake.

David Gerald, chief executive of the Securities Investors Association (Singapore), or Sias, said that whether the proposed measures will lead to the launch of funds with substantial investments will only be known in time to come. “We know that funds will invest in investments which give good returns, so it is too early to make predictions,” he added.

Dilhan Pillay, the CEO of Temasek Holdings, said that the proposals put forth by the review group represent the “most significant changes” made to the Singapore securities market since reforms in the late 1990s. At the time, the reforms culminated in the Securities Futures Act 2001, a broad legislation which governs Singapore’s capital markets and financial sector.

“The changes will need to be phased in, given that the review will need to balance a forward-looking approach with the requisite investor protection. The key is to remain a trusted jurisdiction for all participants in the Singapore securities markets,” said Pillay, who is also a member of the review committee.