SGX chief regulator on its new openness

ALMOST a year into his appointment as the Singapore Exchange's (SGX) chief regulatory officer, Tan Boon Gin has embraced communications as a regulatory tool in a field that has traditionally been notoriously tight- lipped.

The new openness by SGX is no public relations gimmick. If SGX wants help from the market's other stakeholders to maintain a robust marketplace - and it does - then it cannot afford to be selfish with information, Mr Tan told The Business Times in an interview. "The evolution of our regulatory philosophy, the next step, is to not just have SGX as the primary gatekeeper, but to have the entire industry as the primary gatekeeper," he said.

Mr Tan likes to describe himself as having come from "downstream" in the regulatory value chain, having led the Police's Commercial Affairs Department before moving to his current role at SGX in June 2015; prior to that he also served in the legal service and led regulation of corporate finance at the Monetary Authority of Singapore.

Over the years, Mr Tan grew to appreciate the need to prevent misconduct before it gets to the enforcement stage. The consequences of that conviction guide Mr Tan's hand today: If SGX wants effective prevention, it must get all stakeholders to buy in; to get buy-in, it must engage with the stakeholders; and engagement means being transparent to others as well as being a good listener.

"We are in a disclosure-based regime, right?" Mr Tan said. "So what underpins a disclosure-based regime is transparency. This is not just transparency in terms of corporate disclosures, I feel, but also in terms of the regulatory framework in which these companies operate and what investors should be expecting. Hence the drive towards greater transparency on the regulatory side."

That greater transparency has led to some stark differences. Trade- with-caution alerts by SGX now come with information such as the concentration of trades among a certain number of accounts. SGX has also just introduced half-yearly reports on companies that have been suspended for at least a year, sharing information on what the exchange knows about the status of those companies.

Those kinds of details had never been shared by SGX before Mr Tan came on board. But he changed the equation when he married his belief in prevention with his trust in transparency.

By Mr Tan's calculations, the benefits that can be gained from giving investors key information outweighed the costs.

"There are two things that always guide us," he said. "No 1 is whether or not the information will help the investor make a decision, and No 2 is whether or not it's something that will prejudice investigations."

The communications are not just one-way. SGX is also trying to listen better to investors as well as to the issuers. New proposed rules on sustainability reporting, for example, aim to balance investor demand for sustainability information and issuers' compliance burdens by starting off on a rather flexible comply-or-explain basis.

"The best way to get people to buy in to whatever it is we're trying to do, you don't start off with very hard rules," he said. "You can start off with best practices, and if necessary evolve them into rules once they gain acceptance or because the reality is if you don't harden and crystallise it into rules then these particular best practices won't be followed."

Mr Tan's approach has won him considerable goodwill on the street.

"This is a refreshing position of the exchange," corporate lawyer Robson Lee said. "He knows enough to share details so that all practitioners have a better idea of what's happening, the reason that SGX is doing certain things and what to expect in the future. I think he understands his role very well."

The job is hardly done. Mr Tan is in the midst of exploring new products that can sate investors' thirst for better returns. He also plans to reach out to industry to address concerns about information leakage that can lead to insider trading.

Mr Tan is ultimately focused on "persuading everyone that we have a common goal and common purpose".

"Trust is something that, once you lose it, it's something that's very, very difficult to get back," he said. "One thing that we have learned is that we're not going to sacrifice for short-term gains the element of trust."

This article was first published on May 19, 2016.
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