January 9, 2014 / 6:16 AM / in 4 years

Singapore to consider tougher stock market rules

SINGAPORE, Jan 9 (Reuters) - Regulators in Singapore are planning to issue a consultation paper that will propose tighter rules for companies looking to list in the city-state, months after the stock exchange was hit by a penny stock scandal.

The Monetary Authority of Singapore (MAS) and Singapore Exchange Ltd are exploring various proposals including an independent listing committee to vet some IPO applications, stronger enforcement powers for SGX and tighter rules on stocks that fall below a certain price according to a source familiar with the review.

Singapore is one of Asia's leading financial centres, but its stock market has struggled recently, with a drop in trading volumes and "ultra penny stocks", which trade for as little at S$0.001, becoming some of the most actively traded shares.

That's prompted a string of commentary in local media calling for an overhaul of the city's market structure.

"Is it befitting for a stock market aspiring to be the Asian Gateway for investors to have shares trading for as little as 0.1 cent?," Goh Eng Yeow wrote in a column in The Straits Times newspaper late last month.

Singapore Exchange was already looking at changes to its rulebook before shares in Blumont Group Ltd, LionGold Corp and Asiasons Ltd crashed in October, wiping out around S$8 billion ($6.30 billion)in value after huge-run ups in their share price. However issues raised by the crash are now being looked at by SGX and MAS and will be incorporated into the review.

"The review is ongoing and we will consult the market on any proposed changes in due course," said Richard Teng, Singapore Exchange's chief regulatory officer, declining to provide further details.

MAS did not comment.

Details of the consultation were first reported by The Business Times.

Committee Changes

Listing applications in Singapore are currently vetted by an internal committee at the exchange, unlike rival financial market Hong Kong which has a panel of external people decide on whether to allow IPO applicants on to the market.

Lawyers in Singapore say having an independent committee would help improve the market's credibility.

"The proposal to have an independent listings committee should be seriously considered," said Sin Boon Ann, head of law firm Drew & Napier's Capital Markets Group.

"It will strengthen the public perception of a rigorous listing vetting process particularly if the committee also include experienced representatives from reputable institutions which are keen to maintain the good reputation of the Singapore stock market," he added.

Another possible change to Singapore's market framework would be to set up an over-the-counter market, as used in the United States, for stocks that consistently fall below a certain price.

SGX could also be handed tougher enforcement powers.

In the penny stock scandal it came in for criticism that it did not take action early enough against the stocks involved when they had already attracted the concerns of local brokerages due to the rise in their share prices.

SGX said in its defence that it had issued queries to the companies involved, but that prompted some calls that it should be able to investigate more closely the reasons behind unusual trading patterns.

($1 = 1.2708 Singapore dollars)

Reporting by Rachel Armstrong; Editing by Matt Driskill

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