Report of Corporate Finance Committee: The Securities Market Final Recommendations
The Corporate Finance Committee ("the Committee") was formed by the Financial Sector Review Group to make recommendations with the view of making Singapore a key financial centre for international corporate fundraising activity.
On 26 May 1998, the Committee issued a Consultative Paper outlining its preliminary views and sought comments on these views. Over 30 responses were received. The Committee issued a summary of the main concerns raised by these respondents on 26 August 1998. The Committee wishes to thank all those who responded to its Consultative Paper and for the high quality and rigour of the views and analyses. In making its final recommendations, the Committee has taken into account these views.
The Committee also acknowledges the assistance and views provided by various market practitioners, including banks, merchant banks, fund managers, venture capitalists, company registrars, lawyers and accountants.
Terms Of Reference
The terms of reference of the Committee are:-
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To recommend an appropriate framework of rules, regulations and administrative guidelines governing corporate fund-raising that will:-
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Support steady and sustainable growth of corporations in Singapore;
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Foster innovation and entrepreneurship;
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Make Singapore an attractive centre for international corporate fund-raising activity.
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To recommend ways to improve the efficiency of the fund-raising process, as well as standards of corporate disclosure.
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To recommend new or enhanced industry capabilities to better meet the financing needs of corporations, e.g. debt financing, covered warrants, new board for start-ups; and a framework of rules and regulations to promote these activities.
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To recommend for Government's consideration suitable respective roles for the Stock Exchange of Singapore ("SES"), the Monetary Authority of Singapore ("MAS") and the Registry of Companies and Businesses ("RCB"), as well as other government agencies as appropriate.
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The review should include, but need not be limited to, relevant parts of the Securities Industry Act, SES Listing Manual and the Companies Act.
New Opportunities
Singapore is already a capital centre for Asian Dollar Market, loan syndication, foreign currency trading, G7 equity and bond futures trading on the Singapore International Monetary Exchange ("SIMEX"). Fast changing technology, sound market infrastructure, and the need for a well regulated market, provide new opportunities. We believe that Singapore can become an important international capital centre in the same way that it has made itself into a hub for shipping and for air transport by being more efficient and providing better services. Indeed, without a large domestic economic base, it is imperative that we service both the regional and global market.
The continuing financial crisis set back many economies in Asia and threatens to spread further afield. However, when the crisis passes, there will again be a need to rebuild economies and their businesses. The need for capital will be huge.
Overview
Singapore has a market friendly environment, an open economy which allows free flow of capital, augmented by high standards of integrity and sound financial management. In order to become an international capital centre, Singapore should deepen its integration with the international financial system. We must continue to maintain an open financial system, foster an efficient and market friendly environment that caters to the needs of the market. Our rules and practices must be consistent with those in the major markets so as to facilitate cross-border transactions
To plug into the international financial system, we must play by the rules of the international financial system. We must build a market driven securities market with greater transparency and a high standard of disclosure, a market friendly regulatory regime, strong and reliable remedies and providing a level playing field for all players.
The market place should allow innovation, entrepreneurship, efficiency and business flexibility. Abuse and manipulation must be checked to protect the integrity of the market place and to maintain investor confidence. The disclosure based philosophy of regulation best reconciles this by encouraging transactions and activities, innovative products and structures to thrive. However, this must be supported by a strong regulatory framework of enforceable rules that must be enforced to protect the integrity of the market place. Where rules are transparent, certain and reliable, and disclosure standards high, the playing field between companies, market intermediaries and investors will be levelled. Players will have the freedom and confidence to maximise business and investment opportunities, knowing that the disclosure is reliable and transactions are enforceable. Investors will be better able to judge the merits of their investments.
In such an environment, there is less need for rules that set limits on what can or cannot be done. Whether a corporate transaction should or should not be carried out should be determined by the market. Rules and regulations should be liberalised in order to allow the market to drive transactions more fully.
This will be the context in which Singapore can play an important role as a hub in mobilising capital to meet the needs of businesses, whether in the immediate region or beyond. Apart from promoting and developing Singapore-based securities market activities (e.g. local and foreign initial public offerings in Singapore), it is equally important to develop regional corporate financing activities done in regional securities markets by professionals based in Singapore, and to develop a regional private venture capital market. We must also attract more foreign institutional investors. This will give the market depth and liquidity and in the process also help to raise the standard of disclosure and corporate governance.
Other Committees
The Corporate Finance Committee was formed together with the Banking Disclosure Committee and the SES Review Committee. In May 1998 the Banking Disclosure Committee made recommendations on the standards and practices of Singapore banks with a view to attaining the standard of disclosure in developed countries. In July 1998 the SES Review Committee made recommendations on, among other things, membership and brokerage commissions, operations of SES member companies and the rules and regulations affecting these companies, and scope of activities that can be undertaken in the securities industry. The Committee agrees with and supports the recommendations of those committees, which would raise the standard of disclosure, encourage more international participation, and promote depth and breadth in our market.
To read the summary of the recommendations, click here.
The full report can also be downloaded in PDF format and can be viewed and printed with Adobe's Acrobat(TM)Reader.
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