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Sias marks 20 years with funding still a key question

Sustainable funding model seen critical to help it stay independent and objective

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Sias chief patron Dr Tony Tan (centre) with CEO David Gerald and honorary chairman Daniel Teo at the 20th anniversary celebration of the investor grouping.

Singapore

AS the Security Investors Association (Singapore), or Sias, marks 20 years of shareholder activism, the question of funding and independence is being raised as a key issue.

Sias needs to find a new means of funding itself, said Sias chief patron Dr Tony Tan Keng Yam plainly.

While acknowledging Sias' achievements, he said "finance has been a constant struggle over the past twenty years", in his speech at Sias' 20th anniversary celebration on Wednesday.

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Finding a sustainable funding model would also "address sceptics who claim that the present arrangement does not allow Sias to be properly objective," said Dr Tan, who has served as chief patron since August 2017, soon after stepping down as President of Singapore.

Over the years, Sias' reliance on corporate funding has opened it to criticism that it cannot be truly independent in its work to protect minority investors, something not lost on market observers.

"One possibility is for them to be funded by an endowment-type or multi-year grant from the Financial Sector Development Fund (FSDF)," said National University of Singapore associate professor and corporate-governance advocate Mak Yuen Teen.

However, Prof Mak also said that Sias would have to diversify even its non-corporate funding, so as to maintain its independence from regulatory bodies like the Monetary Authority of Singapore, which administers the FSDF.

Sias is a recognised charity and became an Institution of Public Character (IPC) in 2015.

In FY 2018, about S$1.53 million of its S$2.35 million income came from sponsorships and a total of 42 donations.

The remaining income was derived chiefly from rendering services like seminars and events like the Investors' Choice awards and hosting shareholder communications on Sias platforms.

Sias also received S$103,221 in government grants. Total expenditure was S$2.35 million for the year.

"But the discussion on objectivity does not start and end at the question of funding," said TSMP Law Corporation joint managing partner Stefanie Yuen-Thio.

For example, objectivity also extends to the appointment and remuneration of executives, she pointed out.

Similarly, Prof Mak pointed out that giving companies awards may make it challenging to also take companies to task. If Sias can satisfy a thorough, holistic review of its governance, authorities should consider providing it sustainable funding, he added.

For Sias, the issue of objectivity "is an existential one," said Ms Yuen-Thio, as the "hard-won credibility and the platform built by the founding team can be easily eroded."

The funding issue is also tied up with the issue of succession. In his address to Sias, Dr Tan also said that it needs to install a suitable succession plan for CEO, president and founder David Gerald, who has now led Sias for 20 years.

After the anniversary celebrations, Mr Gerald also remarked on the seriousness of the funding question.

The three "willing and eligible" candidates to succeed him are reluctant to replace him until Sias can settle on more independent funding. Sias intends to pursue funding possibilities with authorities "in time to come", he said.

Sias' constitution requires two terms - four years - of service on the management committee before a candidate is eligible for presidency. Mr Gerald suggested that if his health remained stable, he might stay on for another three to five years.

His discussion of Sias' succession plan also indicated that the organisation remains committed to its current conciliatory, "boardroom not the courtroom" approach. "Although many investors want me to go around fighting for this fighting for that, it doesn't work. I employ a strategy that helps bring returns... no matter how much you talk or shout at the chairman at the meetings, what do you get? You go home with empty pockets. We sit down in the boardroom and we discuss."

Concern for the retail investor will also be a prime consideration come time to select a successor, he said. "The most important thing is they (candidates) must be able to feel for the small man... you have to merge their interests with your interests."

Both Dr Tan and Mr Gerald emphasised that to serve minority shareholders in the coming years, Sias would have to adapt to how technology is transforming the investor landscape. "The advent of sophisticated artificial intelligence algorithms and robo-advisors has implications for investment advice and the way that financial planning will be conducted in the future," said Dr Tan. "New capital structures are creating governance issues for regulators and will pose challenges for companies and organisations like Sias."

Mr Gerald said Sias must prepare investors to leverage technology so they can be well-informed about the structured and unlisted products entering the market.

Sias was born during the Clob saga during the Asian Financial Crisis, when thousands of Singapore investors found themselves stranded in Malaysian stocks. This led Mr Gerald to form Sias to fight for their interests. Since then, it has focused on minority shareholder interests, as well as investor education.