Friday 29 Mar 2024
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SINGAPORE (April 27): Lawyer Tan Cheng Han once described the Singapore Exchange (SGX) “tyrannous in the use of its strength”.

Now, the former law dean at the National University of Singapore (NUS) will soon be chairing a unit of the organisation he once duked with in court.

Back in 2012, Tan was representing Yeap Wai Kong, a former independent director of SGX-listed China Sky Chemical Fibre, in a case brought before the Singapore High Court.

The company had been publicly reprimanded by SGX, and Tan’s client was upset that he had been publicly rebuked alongside the other directors.

The board had rejected SGX’s directive to appoint a special auditor to clear up questionable transactions that arose before Yeap’s appointment. And Tan’s attempt to seek judicial review of SGX’sactions on behalf of his client was dismissed.

This August, SGX will formally carve out its regulatory functions into a separate entity, Singapore Exchange Regulation Pte Ltd (SGX Regco).

Tan will be the chairman of SGX Regco, which is estimated to have a headcount of around 100.

This reorganisation will help free up the conflicting interests between the exchange’s profit-oriented business and market development teams on one hand, and its surveillance and regulatory team on the other.

At a media briefing this morning, Tan says the new SGX Regco board will bring along a “fresh set of eyes” to look at what further refinements should be made on existing regulations.

However, he is quick to qualify: “We are starting off with the presumption that our existing framework is a good framework. The question is: how can we improve?” 

The SGX Regco board will consist of five members, including Tan Boon Gin, SGX’s chief regulatory officer, who will be re-designated as CEO of SGX Regco.

Tan also revealed that he is planning to get a “strategic review” going – although he won’t commit himself into giving a timeline as he doesn’t want to rush things.

Items that will be up for review include the much-criticised minimum-trading-price, and also the requirement for quarterly reporting, which many companies say are unnecessary costs.

More will follow as the market and the environment evolves. “We will start having a proper process of engaging the market, on what we need to look at as well,” says Tan.

The way he sees it, it is easy to add new rules, but difficult to remove them.

He says no one really wants to run the risk of lifting certain regulations, only to encounter problems that manifest as a result of the exploitation of loopholes that arise from the removal of rules.

Having said that, Tan points out that the best set of regulations are not necessarily the ones with the thickest rulebooks, which might end up stifling innovation. “Does it really make sense, or, are we just chasing shadows?” he asked.

Tan believes the role of a regulator is not simply to have a rule book, nor by flexing strong enforcement muscles. “The real role is to be a facilitator, to create a framework for the market and society to operate orderly,” he says.

To ensure his full independence from SGX, he will be relinquishing all his existing directorships of listed entities — Chuan Hup Holdings, Keppel REIT, Global Yellow Pages and Anwell Technologies. He is also stepping down from posts held in ST Marine, the wholly-owned subsidiary of listed entity ST Engineering, as well as his role as the deputy chairman of the SGX Listings Advisory Committee.

To take the step of transparency and independence one step further, Tan also says he is happy to disclose shares – especially Singapore-listed shares – that he owns, if SGX Regco deems it necessary.

SGX Regco, besides operating independently from other SGX divisions, will have its own budget, and no profit & loss responsibility.

Having been on “both sides of the house”, Tan believes that the different perspectives he has at different points in time is a constant reminder for him to make sure that the rules are appropriate to the market, instead of a constraint.

“But this doesn’t mean I will agree with the market participants. Sometimes I will say ‘I hear you, but I disagree’. However, I want the (SGX Regco) board, management, and all of us, to be very sensitive of what the market is saying, to really take what they are saying with an open mind,” he says.

Then, SGX Regco will “apply our own thought processes, keep in mind the other objectives that we think a good market should have, put all of that in a basket, and then say look, what is the best balance? I hope as long as we can remain open to the market, and honest to ourselves, on the whole our judgement will be correct,” says Tan.

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