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Saturday, 4 July 2009

Wheelock chief urges separate listing regulator

David Lawrence takes a critical view of safeguards offered by Chinese walls

By KALPANA RASHIWALA

WHEELOCK Properties (Singapore) CEO David Lawrence has joined the ranks of those calling for a separate authority to regulate listed companies in Singapore as the existing authority, Singapore Exchange, faces an inherent conflict of interest as it is a listed company.

'I think what is needed is a separate regulatory authority in Singapore. Not the MAS, but a separate regulatory authority for the listing of companies in Singapore. So that Singapore can maintain its international reputation and integrity.
'It is better to expand slowly with better companies than to expand quickly with nonsense companies with directors you can't trust,' Mr Lawrence said in a recent interview with BT.
Being a listed company, SGX, its CEO and directors have a duty to make money for their shareholders and expand the business, he added. 'The SGX is competing with me for investors' capital. Why should a competitor regulate me? Maybe I should regulate them!' he quipped.
Mr Lawrence observed that the same problem exists in Hong Kong, where a discussion has been raging on the topic for years.
Mr Lawrence debunked the notion of Chinese walls. 'SGX will probably say, like all the investment bankers have been saying to me for the last 10 to 20 years, 'Well, we have Chinese walls between departments.


'I've been saying to these investment bankers for 20 years, 'Have you ever walked along (the Great Wall of China)?' No, they haven't. I have, and I can tell you there are more holes than there are actual built walls.'
Market watchers note there's been a long-standing discussion on the potential conflict facing the SGX because of its dual role as a commercial entity and markets regulator. Some have criticised the SGX for not taking a tougher regulatory stand against errant companies listed on the bourse here, arguing that SGX may see tough actions as working against its attractiveness as a listing platform. Critics also point out that SGX's earnings and losses are shared by both the regulatory and listing departments.
The race to attract China companies or S-Chips to list here in the past may have led to SGX pulling in some poor-quality issuers whose share prices have been punished by the market. Those monitoring the real estate investment trust market also wonder how some Reits that don't have any raison d'être ever got listed in Singapore.
Observers also point out that SGX's top regulator, Yeo Lian Sim, receives performance shares from the company, which could potentially create conflict.
Agreeing, Mak Yuen Teen, co-director of the Corporate Governance and Financial Reporting Centre, said: 'I hold the view that those involved with managing risk, internal audit or regulatory functions should not have variable pay tied to the bottomline or stock price of the organisation. The company has to think of other ways of measuring their performance and rewarding them.'
SGX has maintained that it has a robust framework of checks and balances to ensure that its regulatory and commercial goals are not divergent.
For instance, a Regulatory Conflicts Committee comprising SGX's independent directors oversees the handling of regulatory conflicts within SGX. The committee in turn accounts for its actions to MAS.

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