SINGAPORE STOCK EXCHANGE (Publication of Ferris Report)

Mr Hwang Soo Jin asked the Minister for Finance (a) whether he will publish the report by Mr George M. Ferris Jr, of the International Executive Service Corps on his study of the securities market in Singapore; (b) whether and what useful recommendations aimed at providing greater protection for the public have been accepted by his Ministry; and (c) when the recommendations will be implemented.

The Minister for Finance (Dr Goh Keng Swee): Sir, the report of Mr George M. Ferris Jr, will be published in about ten days' time, after discussions which have been going on with Bank Negara Malaysia have been concluded. Mr Ferris arrived in Singapore on 20th October, 1969, in response to an application by my Ministry for an expert on Stock Exchange problems to the International Executive Service Corps on 13th June, 1969. He reported on 11th November, 1969.

As will be apparent when the report is published, Mr Ferris has made a penetrating study of the Stock Exchange in Singapore and Malaysia, despite the shortness of his stay.

He has made a large number of recommendations and has undoubtedly uncovered the weakness of trading practices in the local stock exchange. As a measure designed to dampen speculation, he has recommended the imposition of margins and a higher rate of commission on delayed dealings. In order to strengthen the financial position of brokerage firms, he has recommended the incorporation of partnerships as companies and the institution of a system of surprise audits by a special pool of auditors approved by the Exchange and agreed to by the Government, as well as regular inspections by a trained inspectorate employed by the Exchange. The report contains recommendations aimed at improving the educational standard and technical competence of brokers, remisers and dealers. The Ferris Report also proposes various measures aimed at disciplining the directors of listed companies and reducing the advantage that "insiders" might have over the investing public.

I have distributed copies of the report to the Stock Exchange Committee and have held several discussions both with the Committee as well as members of the larger brokerage firms.

While discussions were in progress, trouble broke out in the Stock Exchange over Federal Paper. This was the result of weaknesses which the Ferris Report had pin-pointed, in particular the practice of allowing delayed transactions to be conducted without requiring a cash deposit to cover a part of the value of contracts. This practice, known as "free-riding", undoubtedly contributed to the ease with which speculative attacks can be mounted in the Exchange. Mr Ferris recommended the abolition of free-riding, but members of the Exchange with whom I discussed this subject were then reluctant to agree to this particular recommendation.

The approach of the Ferris Report in regard to Stock Exchange reforms was to give the Stock Exchange the option to improve its performance as a self-regulating body, as is the practice in several countries, and only fall hack on direct Government control through legislation if the Stock Exchange proved itself incapable or unwilling to carry out the necessary reforms effectively.

In the event that direct Government control is necessary, my Ministry is carrying out studies of legislation in other countries. This is a large and complex matter, as Members will doubtless agree, and it will be some time before a final decision can be made one way or the other.