In risk-based regulation, brokers and investors should play their part

EVER since the Singapore Exchange (SGX) first announced in a Practice Note in February 2004 that it is shifting to risk-based regulation, its regulatory efforts have been largely focused on areas it considers "high risk''.

At the time, the exchange said this meant it would no longer vet routine company documents which require straightforward disclosures and would instead reallocate its resources to more important issues. This was - and still is - wholly in line with the requirements of a disclosure-based regime where the regulator intervenes only occasionally and the primary responsibility for good governance and the preparation of documents for public dissemination rests on companies themselves.

Such is the approach in most developed markets such as the US and UK, where companies have to adhere to stringent reporting requirements and finance professionals follow strict ethical guidelines. Properly administered, such a system offers many benefits. For example, studies have shown that companies that conduct their affairs openly and transparently will, over time, gain the market's trust and should therefore find capital raising that much easier.