Friday, 6 February 2015

SGX issues

"Remisiers write to Tharman to resolve issues plaguing market"

Article in the Business Times (Singapore) of February 5, 2015.

Some snippets:

The issues raised and remedies proposed include separating Singapore Exchange's regulatory and commercial roles, raising the public portion of an IPO, restoring investors' trust in the local bourse, reviewing onerous rules for "high-risk" products, and listing of government-linked companies such as PSA and Changi Airports International to add breadth and depth to the market.

...some of the key recommendations contained in the letter were:
  • issuing at least 25 per cent of shares in an IPO to the public; this would avoid the farce of initial public offerings turning into initial private offerings;
  • better rules for short selling disclosure;
  • rethinking regulations for sophisticated instruments;
  • setting up truly independent committees when consulting the public on proposed policy changes;
  • raising the quality bar for CPF Trustee stocks and lifting the limit for investment in equities from 35 to 80 per cent of the CPF Ordinary Account;
  • transferring long-suspended stocks with governance issues to a high-risk third board with cash upfront trading;
  • providing the market with regular updates on investigations such as the current probe into the October 2013 crash of LionGold, Blumont and Asiasons;
  • separating SGX's regulatory and commercial roles.
I have written about quite a few of the above issues, for instance "Listing panel lacks investors", the lack of public shares in an IPO and separating regulatory and commercial roles of SGX (or Bursa for that matter).
The response came one day later:

"SGX and SIAS respond to remisiers' grouses"

Some snippets:

SGX said: "We actively engage market participants, relevant stakeholders and the public prior to introducing any new initiatives to the marketplace through public consultations. Initiatives are then introduced after approval from our regulators." It mentioned the recent reduction of the board lot size from 1,000 to 100 as an example of the result of such a public consultation.

To me, reducing the lot size without reducing the cost doesn't make sense at all, I wrote before about this subject: "High cost for small transactions on Bursa".

On other fronts, Mr Gerald agreed that better rules for short selling disclosures and a review on regulations for sophisticated instruments are needed. He concurred, too, that the market should be given regular updates on on-going investigations and that the SGX's commercial and regulatory roles should be separated. Some of these are already under review, he said.

Another article from the Straits Times (February 6, 2015):

"Prospectuses should be in plain English"

Some snippets:

SINGAPORE'S financial regulator has rolled out a set of proposals aimed at fixing a problem that has long plagued the financial industry - bad writing.

The Monetary Authority of Singapore (MAS) wants issuers of financial products to write their prospectuses in plain English, not jargon-laden gibberish.

It is urging them to present information in a clear, concise and logical manner and avoid unnecessarily lengthy sentences.

A prospectus is meant to contain all the information investors and their advisers would need to make an informed investment decision about a financial product.

However, "in recent years, MAS has observed that prospectuses have grown in length and are often drafted in a technical, convoluted or legalistic manner", the regulator noted.

"As a result, even though prospectuses may contain comprehensive disclosures, investors often find them difficult to read and understand."

Many prospectuses are long and repetitive, include unnecessary or irrelevant details and use financial or technical jargon to conceal important information, the MAS added.

They also employ vague disclosures that may not be meaningful to investors, use convoluted descriptions or explanations and include lengthy and difficult-to-understand terms and conditions.

I completely agree with this, and have written several times about the long, hardly readable brochures of IPO listings on Bursa, for instance here.

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