[SINGAPORE] Right-sizing regulation to boost Singapore’s equities market is crucial but not at the expense of investor protection, which is important for retail and institutional investment, noted an investor rights study.
The report by the Securities Investors Association (Singapore), or Sias, was written in collaboration with the Singapore Institute of Technology (SIT) and Singapore University of Social Sciences (SUSS).
It comes amid a wide-ranging review of the country’s equities market by the Monetary Authority of Singapore (MAS) review group, which has proposed shifting towards a more disclosure-based regime, among other measures.
“While Singapore is a well-regulated and stable market, investors face several challenges that impact liquidity, returns and corporate governance,” pointed out David Gerald, Sias founder, president and chief executive, at a corporate governance roundtable on Friday (Mar 14).
Falling short
A survey conducted by Sias, SUSS and SIT found that 37 per cent of investors faced difficulties in exercising their rights as shareholders. This suggested that existing investor protection mechanisms may not fully address all investors’ needs.
Among those who encountered difficulties, 41 per cent felt their voices were not adequately heard in corporate decision-making. Additionally, 24 per cent struggled to access company financial reports and disclosures, while 22 per cent faced challenges voting at shareholder meetings due to unclear procedures and insufficient information.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Dr Kevin Ow Yong, associate professor of accounting at SIT, said that 80 per cent of respondents were Sias members, while 20 per cent were non-members, with a well-balanced distribution across age groups and income levels.
Looking to the future
The study recommended several investor protection reforms, including strengthening public enforcement for investor compensation, as seen in Hong Kong and Australia.
To further empower minority shareholders, it also suggested lowering shareholding thresholds for them to requisition an extraordinary general meeting and propose resolutions.
Other recommendations include introducing requirements for companies to explain actions taken in the event of significant shareholder dissent, enhancing shareholders’ rights to access information and reconsidering two-tier shareholders’ vote to approve independent directors.
These proposals align with broader discussions on investor rights, which were a key focus during the roundtable. Participants explored potential areas for the MAS review group to address, particularly in strengthening legal avenues for minority shareholders.
Robson Lee, assistant honorary secretary at Sias and partner at Kennedys Law, noted that Singapore’s Companies Act already provides avenues for minority shareholders to sue over unfair or prejudicial actions. It also allows shareholders to seek court approval to take legal action against directors on the company’s behalf.
“There could be certain legislative changes to make it easier but there are laws that have to be coordinated in this process,” he added.
Expanding on this, fellow panellist Lance Ang, a lecturer at SUSS’ School of Law, highlighted that statutory derivative actions – legal procedures allowing shareholders to sue on behalf of a company – are rarely pursued, even in jurisdictions like the UK.
He pointed out that since the 2016 amendments to Singapore’s Companies Act, no successful statutory derivative actions have been recorded for public companies. The key issue, the lecturer argued, is cost.
Ang said: “One option would be to commit third-party funding and contingency fee arrangements which are currently only limited to arbitration and related proceedings to broader civil actions. The other will be a greater role for public enforcement, where the MAS gets into dispute compensation on behalf of investors.”
These two approaches, he suggested, could enhance investor recourse and address existing challenges in shareholder litigation.
The final version of the report will be released in May 2025.
