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Singapore Exchange Regulator Seeks More Power to Sanction Firms

Bloomberg logoBloomberg 6/8/2020 Ishika Mookerjee
a large body of water with a city in the background: Commercial and residential buildings stand at dusk in Singapore, on Wednesday, June 13, 2018. Tourism as well as the consumer sector will likely see a lift thanks to the influx of international media at the recent DPRK-USA Summit, according to RHB Research Institute Singapore Pte. © Bloomberg Commercial and residential buildings stand at dusk in Singapore, on Wednesday, June 13, 2018. Tourism as well as the consumer sector will likely see a lift thanks to the influx of international media at the recent DPRK-USA Summit, according to RHB Research Institute Singapore Pte.

(Bloomberg) --Singapore Exchange Ltd.’s regulatory arm wants to beef up its enforcement powers, as it seeks to deter wrongdoing at a time when companies face financial pressure from the coronavirus pandemic.

Singapore Exchange Regulation has proposed changes that will allow it to quickly take on cases that call for public sanctions, according to a statement on Thursday. The regulator also wants the power to ask a director or executive officer of a listed company to resign, and to require firms under investigation to seek approval before directors can be appointed or re-appointed.

“Individuals and companies will be tempted now more than ever to commit wrongdoing in one form or another,” SGX RegCo’s Chief Executive Officer Tan Boon Gin said at a press briefing, referring to the increased challenges on the corporate sector during the pandemic. He said the regulator has to “raise standards across the entire market.”

Slow Process

Since 2015, a separate unit called the Listings Disciplinary Committee has handled cases involving public enforcement actions against people or companies breaking the exchange’s rules. The LDC has been slow to clear cases -- only three of 18 pending notices of charge have been heard -- due to a demanding case-load, Tan said.

In addition, the committee’s members sometimes have links either to the firm under investigation or to banks and other companies involved, requiring them to recuse themselves and thereby dragging out the process.

Meanwhile, SGX RegCo’s powers have mostly been exercised in private. Any of its public actions have to first be approved by the listings committee, which makes the process lengthier. The exchange last took a public disciplinary action in November 2018. One of its more high-profile notices was issued to Singapore Post Ltd. in 2017, when the firm failed to disclose a director’s interest in an acquisition.

“Even though we are exercising our enforcement powers privately, this is not visible” to the market, investors and the media, Tan said. Still, cases where fines may be imposed should still be handled by the committee as they are “the most severe of disciplinary actions,” Tan said.

The move to boost the regulator’s powers follows a number of accounting and other scandals in recent years. In June, authorities launched an investigation into troubled water treatment firm Hyflux Ltd. and its current and former directors for suspected false and misleading statements. Commodity firm Noble Group Ltd. remains mired in a controversy over its accounting and corporate governance practices.

The regulator has released a consultation paper to the market that will close for comments by Sept. 7. Any changes would be introduced in the next six months, though that timing is “indicative,” Tan said.

Here are some other proposed changes:

  • Directors under investigation should be subject to RegCo’s approval prior to their appointment or reappointment to the board of an issuer.
  • The regulator is seeking powers to require an issuer to suspend a director or executive officer for no more than three years.
  • Companies should implement and disclose arrangements to receive and investigate whistle-blowing allegations, as well as proper provisions for whistle-blower protection within the company.

“Giving the SGX powers to take swift action in cases where shareholder interests are at risk would provide better safeguards against further malfeasance while the LDC process is ongoing,” said Stefanie Yuen Thio, joint managing partner at Singapore-based legal firm TSMP Law Corp.

Other upcoming initiatives include proposals for a revised regulatory framework for retail bonds, Tan said.

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