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"There's a new sheriff in town!''
I attended the opening ceremony of SIAS' Corporate Governance Week this morning. SGX's new chief regulatory officer Tan Boon Gin made a particularly interesting speech which to me sounded like a stern warning to listed companies to get their act together, or else.
The most relevant part of Mr Tan's speech was that SGX has hired KPMG to review how companies abide by "comply or explain'' with regards to the Code of Corporate Governance. Mr Tan said in his 3 months on the job, he found that people think adherence to the Code is voluntary when in fact under SGX's new listing rules, companies that don't comply and don't explain why they don't comply can be subject to disciplinary action under the exchange's new enforcement rules.
As SGX said in news release today: "The review will cover annual reports of over 550 Mainboard companies released in the 12 months to 30 June 2015. SGX intends to make findings of the review public and engage with relevant companies to ensure short-comings identified are addressed. The review will capture all aspects of the CG Code and focus on the areas specified in the SGX Disclosure Guidance document. Examples of key CG Code principles covered in the review include board composition, risk management and internal controls and disclosure on remuneration''.
Mr Tan also highlighted the SGX's unprecedented step of issuing regulatory warnings for the trading of CEFC and IHC as examples of how the regime is being toughened to ensure better price discovery which in turn should lead investors to make better decisions. These warnings in my view are so much better than the previous practice of issuing public reprimands or keeping quiet for months upon end until concrete action can be taken. In some cases, manipulation has gone on for years which is just not on for a market that recently was ranked first in Asia in corporate governance. Much better to act now with a warning about what is already known rather than delay indefinitely and cause more misery for the innocent public.
Clearly, the exchange is getting serious about its enforcement role and in my view, these moves are (if you'll pardon me borrowing from the title of my blog) right on the money. With a new boss at the helm of the frontline regulator, I think the market had better stay on its toes.