Singapore waits on regulatory review

Singapore's financial authorities yesterday said it would be "premature" to make regulatory changes in response to the derivatives scandal at local-listed China Aviation Oil as they responded to mounting criticism about corporate governance in the city-state.
But the Monetary Authority of Singapore, the main financial regulator, said it would review corporate governance rules once investigations were completed.
The case, in which CAO failed to disclose US$550m in losses on oil derivatives trading, has triggered a debate in Singapore, normally touted as one of the best-regulated financial markets in Asia.
Issues being discussed include whether the Singapore Exchange should tighten listing requirements and the effectiveness of independent directors in supervising companies.
Critics say SGX's decision several years ago to relax entry rules by switching from a merit system to a disclosure-based regime has resulted in financial scandals among listed companies, including local ones.
The SGX's adoption of the principle that listed companies should bear the onus of responsibility for disclosure was part of a liberalisation plan to make Singapore competitive against other regional centres such as Hong Kong and Tokyo.
Attracting more foreign listings was seen as essential for the SGX's growth because of Singapore's small corporate base. The SGX has focused on wooing mid-sized Chinese companies, such as
CAO, that might be ignored in bigger bourses.
The SGX said that the CAO scandal would not prevent it from seeking more foreign listings.
"Without compromising our listing standards, the developments at CAO should not deter efforts to build Singapore as an international venue for listings," said Hsieh Fu Hua, SGX chief executive.
The MAS said rules for disclosure and accounting were strengthened in 2002 to match other leading financial centres.
But investor groups say disclosure is still weak despite efforts to improve governance codes.
Analysts have often noted odd price movements ahead of important announcements, although regulators usually are unable to find evidence of wrong-doing.
There have been calls for authorities to impose tougher penalties for those who violate disclosure rules.
"However, no amount of regulation or enforcement can guarantee that companies will always comply with disclosure rules and corporate governance standards, whether in Singapore or any other financial centre," said Shane Tregillis, head of market conduct at the MAS.