Question No. 974 Notice Paper No. 55 of 2009 For Oral Answer
Date: For Parliament Sitting On or after 24 March 2009
Name and Constituency of Member of Parliament Ho Geok Choo, MP for West Coast GRC
To ask the Senior Minister in view of the Minibonds saga where many investors lost money through investing in risky financial products, whether it is socially prudent for the Singapore Exchange (SGX) to have introduced a new ruling in January 2009 that makes it easier for companies to raise funds from their shareholders through shareholder rights issues.
Mr Lim Hng Kiang, Minister for Trade and Industry and Deputy Chairman: 1. The main objective for companies seeking listings on stock exchanges is to facilitate fund raising to finance their operations and expansion. Other than equity fund raising, companies can seek debt financing. In the current global environment of reduced credit availability, SGX has responded to market feedback and in consultation with MAS, has introduced measures to facilitate additional equity fund raising by listed companies. This is necessary to help listed companies stay viable amidst the present crisis, preserve jobs and prevent further worsening of the economy. The new measures will be in effect until 31 December 2010 and their effectiveness will be reviewed at that time.
2. In undertaking an equity fund raising exercise, directors of a company have to ensure that the exercise is in the best interest of the company and its shareholders. SGX is mindful that any measure to grant greater flexibility for equity fund raising should not be at the expense of shareholders’ interest and good corporate governance practices. For instance, concerns over dilution of shareholders’ interests from rights issues are addressed by only facilitating the issuance of pro-rata renounceable rights issue. Shareholders have equal opportunities to participate and can sell their rights entitlements for cash if they do not wish to subscribe for their rights shares. Listed companies are also required to provide adequate disclosure to the market, particularly the reasons for the rights issue and updates on the use of proceeds as and when the funds are materially disbursed.
3. Recent losses suffered by investors in structured notes, on the other hand, raise a different set of issues, relating to the sale and marketing of these products. MAS has conducted a review of the regulatory regime for unlisted investment products and has issued a consultation paper on proposals to further safeguard consumers’ interests and promote higher industry standards.