Sias working on new initiatives to stay relevant to investors

STAYING relevant to the investor community has been a focus for the Securities Investors Association (Singapore) (Sias) over the years, said its founder and president David Gerald.

"From 1999 until now, we have been changing, and we have been providing information and services that are relevant," he told The Business Times in an interview.

Two initiatives that Sias intends to provide investor support for relate to the topic of sustainability and the introduction of special purpose acquisition companies (SPACs).

Sias this year incorporated sustainability as a criteria in its annual Singapore Corporate Governance Award.

It also intends to provide research on SPAC transactions to help guide investors interested in these new instruments.

Relevant initiatives

The investor group's incorporation of sustainability as a key criteria into its Singapore Corporate Governance Award for the first time comes amid a growing focus on environmental, social and governance (ESG) topics by investors globally, meaning that such items can no longer be ignored by companies.

"Companies that incorporate sustainable practices and business models are not only able to improve operation efficiency and lower costs, they are also in a better position to mitigate risks, retain talents as well as capture opportunities and growth," Gerald said, adding that benefits include business resilience and long-term value creation for all stakeholders.

This makes the topic important for retail investors to think about, and he believes that retail investors are already making use of non-financial information to make financial decisions on their investments.

"However, the challenge is in the use of boilerplate disclosures by companies that render such information ineffective in making useful investment decisions," Gerald noted.

He added that a good sustainability report generates reliable, relevant and standardised information that enables assessment of opportunities and risks, allowing for informed decision-making.

"Reporting on sustainability targets, implementation, impacts and achievements helps to motivate staff, build reputation and trust, and engage customers and other stakeholders."

Beyond sustainability and governance, Sias has also announced initiatives that signal an interest in taking on a larger role in the investment ecosystem.

Last month, the Singapore Exchange rolled out its framework for SPACs, and Sias announced that it would appoint independent research teams to look at business combinations or de-SPAC transactions.

Gerald observed that retail investors also have a tendency to flock to where there are new investments, and they therefore need guidance.

"We wanted to be involved because we are fully aware of the failures and criticisms arising from SPACs in the US. Not all SPACs succeed, in fact most of them don't succeed," he said.

One risk comes from SPAC sponsors, who would raise the money and propose a relevant target company to investors for a business combination, to which Gerald said: "He decides everything right?"

In the past, Sias had raised the issue of inherent conflicts of interest arising from companies appointing financial advisors to advise their independent directors on major corporate actions.

Independent research is one way to guide investors to make informed decisions, Gerald noted, and having an independent body appoint an independent research firm to guide retail investors "will raise the independence and transparency of the process while providing the necessary guidance".

Even so, retail investors would still need to take responsibility for their investments, he said. "Do your homework, get your knowledge and don't be reckless."

Gerald added that such initiatives are not exactly new to Sias. They were previously involved in appointing legal and financial advisors in several corporate restructurings to help retail investors, and also to push for better terms.

"We are more than prepared to play the larger role in the ecosystem," he said. "There's never a dull day at Sias. We are working very hard for the small investor."

Conciliatory not contentious

When Sias needs to step in, Gerald noted that they have "a culture of conciliatory approach, not a contentious approach to issues".

Some have questioned why they choose to work with boards and management, but Gerald noted the approach has its merits over simply criticising.

"You upset the board or the senior managers, they freeze, they vote against you. You go home with nothing," he said. "Whereas you sip tea and you shake hands, you get what you want... or at least something; don't get zero."

This is in line with their mission to work out solutions suitable for retail investors, he said, adding that boards have now come to accept that Sias is a credible organisation that will be fair to both sides.

While they prefer an amicable resolution of issues with companies, Gerald emphasised that they will "not hesitate to take the company to task, if it refuses to engage with us".

He said: "We will not compromise (on) our duty to the shareholders. We will ask the hard questions. We will press for answers."

Gerald has been helming Sias - which operates as a charity - since its founding and remains passionate for the investor group's mission.

"When I drive to work, I always think of what can we do now... what else can we do for investors (so) that they will get a better understanding of the issue," he said.

"We are fortunate that our worry about funding has largely been now settled," he added, noting that operating expenses are covered by grants.

"But we have to show the community that we are relevant, that we are serving the community."

Succession planning is something he thinks about, although he said he was not ready to share details at present.

"I will make sure that whoever takes over, continues this journey with the same objective, to be contemporaneously relevant and protect and serve the retail investing community," Gerald emphasised.

"We've got to protect them, we've got to educate them, we've got to guide them, we've got to help them."