Market misconduct tribunal may be less helpful in Singapore context: Panel

A MARKET misconduct tribunal similar to what Hong Kong has may not be as suitable for Singapore, said speakers during a webinar organised by the Securities Investors Association (Singapore) (Sias) on Monday evening.

The panellists, who were discussing the topic of investor rights when a company gets into trouble, noted that there could be complexities that may limit the effectiveness of such a tribunal in practice.

Sias president David Gerald, who moderated the session, raised the question on whether having such a tribunal when investors believe something is going wrong, could cut the time taken to investigate market misconduct. He noted that investigations may sometimes be protracted and small investors also may not have the resources to hire lawyers to help with their challenges.

June Sim, head of listing compliance at Singapore Exchange Regulation (SGX RegCo), said investigations require regulators to go through voluminous data and information to establish non-compliance. In addition, investigations also may involve interviewing relevant parties, gathering evidence from abroad and consulting subject matter experts, which can result in time being taken.

Sim highlighted that tribunals may not be that helpful in Singapore as issues relating to disclosure or misleading statements already have statutory backing under the Securities and Futures Act (SFA).

"It's not just a breach of listing rules, so there's no need to go to the tribunal in the Singapore context if there are disclosure breaches," she said, adding that SGX RegCo as frontline regulator would pick that up and channel it to the authorities.

"From that perspective, I didn't think that it is necessary given how the SFA is currently crafted," she said, adding that topics such as insider trading and market manipulation are also covered.

Alex Tan, chief executive of Zico Capital - a sponsor for catalist companies - also said he was not sure what a tribunal would bring to the table as Singapore has SGX RegCo and MAS as regulators and there are also other agencies such as the Commercial Affairs Department present.

Tan noted that determining the nature of issues is a detailed process that could stretch over long periods as the tribunal would need to identify if it was fraud, mismanagement or simply bad luck and timing of the economic cycle.

"I'm doubtful of the usefulness but it's a conversation where the industry and regulators have to decide as well," he said. He noted that having an investor body such as Sias has already played a part in helping give smaller investors a voice.

Kala Anandarajah, head of competition, antitrust and trade at Rajah & Tann, noted that it may be possible for such tribunals to exist but it would be difficult and would likely only be suitable for the most straightforward cases.

She highlighted that it would be more complex than employment tribunals where the amount to be claimed is clearer and those cases also do not normally relate to the topics of fraud, corruption or fiduciary duties.

"With shareholder rights, it's not just about the shareholder rights, he's unfortunately caught in this bigger issue of the company," she said, adding that there are many other stakeholders involved as well with others also in the pecking order that ranks higher such as secured creditors and other creditors.

The panellists noted that there are mechanisms and rules in the market that allow for monitoring of companies' compliance and action can be taken against executives and directors for serious breaches.

However, they emphasised it is critical for shareholders to do their due diligence when investing.

Sias' Gerald noted that the investor body asks questions on companies' annual reports and investors can also go to annual general meetings to ask questions. "If you invest, then you must follow your investments," he said.

Zico's Tan noted that it is difficult to nail down a single factor that investors should pay attention to. He said investors need to know what the company is doing and look at annual reports, announcements as well as internet sources to look for adverse information.

For instance, studying companies' balance sheets can show signs of those that may have taken on too much debt which could put them in financial difficulties down the line, he noted.

"It's sometimes distressing to hear some of my peers or contemporaries, when they ask questions like what is a good stock to buy and they expect a very simple, straightforward answer," he said. He added that investors need to tailor their investments to their own risk appetite and for those who want to take a more aggressive position would need to be aware they could lose part or all of their investment.

Meanwhile, SGX RegCo's Sim also highlighted that investors need to continuously monitor disclosures.

"As an investor, if you're not monitoring disclosures, nobody can help you," she said, adding that investors should pay attention to the questions that SGX RegCo and Sias are asking companies in relation to their financial statements.

Sim said: "When we ask the questions on financial statements, it is intended to alert investors. So you look at the response to the questions and then you make an informed decision."