Regulators, stockbrokers and customers all must play their part to maintain market integrity

I refer to your editorial “Broking firms should play a bigger role in preserving market integrity” (BT, May 24, 2022). 

The roles of stock brokerages have evolved over the years : From dealers and trading representatives (TRs) simply executing trades on clients’ behalf to now giving clients the autonomy and flexibility to execute trades on their  own. 

Since the Blumont, Asiasons and LionGold (BAL) crash that happened almost a decade ago, the capital market services landscape has changed significantly. There are tighter controls, stronger risk culture and early detection measures practised by brokers.  

To prevent any BAL recurrence, regulators and stockbroking firms are now guiding investors to be educated  and assessed on knowledge of the investment products before they trade. Even when clients trade online, the  brokers here provide dealers and remisiers’ contacts for clients to reach out to if they have queries or doubts, or need expert advice.  

E-learning portals on listed and unlisted financial products have sprouted even before the BAL debacle. SGX,  the Association of Banks in Singapore, and the Securities Association of Singapore have developed such portals  to enable more investors to learn the various financial product features and risks. 

Stock brokerages on their part provide training webinars for customers to improve their investment skills and  product awareness. 

SGX RegCo worked closely with stockbrokers to continuously improve market surveillance. It has provided  surveillance tools and periodic surveillance reports to brokers and trained scores of stockbroking staff. 

Complementing the surveillance tools and reports, stockbrokers conduct regular reviews to minimise market risk of misconduct. Dealers and TRs are trained to spot and detect any potential market misconduct deeds. 

SGX has recently developed an ESG metrics and data portal specifically for research analysts to analyse the  current reporting landscape. 

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Research analysts will be trained on how to use this portal by using key ESG indicators as guidance on listed companies in Singapore for their reports. This is in addition to the Centre for Governance and Sustainability’s Governance and Transparency Index (GTI) scores and the SIAS Corporate Governance SCGA Scorecard framework. 

While the SGX and stockbrokers may invest in the most sophisticated systems and tools and set up rules to preserve market integrity, any would-be perpetrators with an aim to game the system could resort to all means and methods to circumvent them. 

Regulators, stockbrokers and customers all have a part to play to maintain market integrity. It will be a never-ending challenge as one must stay three steps ahead to pre-empt these bad hats. 

Luke Lim 

Chairman, Securities Association of Singapore