SECURITIES AND FUTURES BILL

Order for Second Reading read. 12.45 pm

The Deputy Prime Minister (BG Lee Hsien Loong): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Rationale

Capital markets have become increasingly sophisticated, as a result of technological advances giving rise to competition and globalisation. In Singapore, we have seen the demutualisation and merger of the securities and futures exchanges, a proliferation of electronic business models, and a diversity of new products. Cross-selling has blurred sectoral boundaries whilst financial innovation has blurred product lines. Institutions no longer confine themselves to their domestic markets or their immediate hinterland, but reach out to pools of liquidity in other countries as well. The liberalisation of the capital markets and increased competition has catalysed these processes.

This fluid and rapidly-evolving financial landscape poses new demands on regulators. It is important that we create a sound and transparent legal framework within which players can operate. The framework must balance prudential concerns with market development. Moreover, it should be sufficiently flexible to allow, and even facilitate innovation.

Quite apart from these developments, there is a need to recast the existing legal framework in view of the shift in MAS' regulatory philosophy since the enactment of the Securities Industry Act (Chapter 289) (SIA). The SIA was drafted and enacted in the wake of the Pan-El crisis. The intention then was to tighten supervision of the then Stock Exchange of Singapore and the securities industry. However, MAS has, since 1997, embraced a different regulatory philosophy. We have moved from a merit-based regulation where the regulator decides what comes to the market to a disclosure-based regime which empowers investors to make informed decisions. We have also instituted a fundamental shift in emphasis away from "one-size-fits-all" regulation of institutions to risk-focused supervision.

The Securities and Futures Bill (SF Bill) responds to all these developments. It sets out, in a single rulebook, the legislative framework governing the securities and futures industry by consolidating the provisions in the SIA, the Futures Trading Act (FTA) (Chapter 116), as well as certain provisions in the Exchanges (Demutualisation and Merger) Act (Chapter 99B) and the Companies Act (Chapter 50).

The impetus for the SF Bill can be broadly described as follows:

To redraft and update legislation to keep abreast of the many developments that have taken place in the capital markets since the enactment of the SIA and FTA;

To create a flexible regulatory framework for intermediaries, to enhance competition and to reduce compliance cost;

To enhance the regulatory framework for clearing and settlement activities, and to provide an exception to laws of insolvency for clearing and settlement activities to minimise any systemic risk to our clearing and settlement system;

To provide a comprehensive rulebook on capital markets activities;

To facilitate the development of a disclosure-based regime;

To provide an enhanced market enforcement regime, which supports a disclosure-based regime; and

To streamline the appeal process.

In preparing the SF Bill, MAS has conducted a public consultation of an earlier draft of the Bill. The public has been supportive of the policies introduced by the Bill, and has provided many comments. MAS has studied and incorporated some of these comments in the Bill.

Mr Speaker, Sir, I will now go through the major policy reforms in the SF Bill:

Updating Legislation to Cater to Developments in Capital Markets

Recognised Trading System Providers (Part II); Redefinition of "Markets" (First Schedule) and "Dealing in Securities/Trading in Futures" (Second Schedule); Extra-Territorial Jurisdiction (Section 339)

Globalisation and advances in telecommunication technology have led to more cross-border trade, especially in the electronic realm. Connectivity to overseas markets no longer requires the manual intervention by broker-dealers - it can instead be provided by passive Alternative Trading Systems (ATS). New electronic financial services also deconstruct traditional value chains, allowing market participants to offer services along specific segments of the value chains, and blurring the time-honoured concepts of either "operating a market" or "acting as an intermediary".

The SIA and the FTA - the two old Acts - were not drafted with these new business models in mind. The arrival of these business models calls for greater clarification as to how these businesses would be regulated, ie, whether as "markets" or "intermediaries". MAS' policy intent is to only regulate as markets, facilities which bring together many buyers and many sellers, and allow the posting of sufficient information to result in a transaction taking place. The redefinitions of markets in the First Schedule of the SF Bill would provide clarity on this issue. We have refined the definition of markets to refer to a place or facility where offers to sell, purchase or exchange securities or futures contract are made "on a centralised basis". Places or facilities which are used by one person to provide such offers are excluded from the definition of markets.

The present regulatory framework in the SIA and FTA only allows for market operators to operate in Singapore as either approved exchanges, or exempt markets. Neither is appropriate for the regulation of the majority of markets maintained by ATS, for which the imposition of a full gamut of exchange requirements is inappropriate, but for which MAS still wishes to retain a reasonable extent of regulatory oversight. The SF Bill will introduce a new recognition regime for such markets. ATS operators who operate facilities which are predominantly providing market-like services will require authorisation to operate in Singapore as Recognised Trading System Providers (ReTS Providers). This is found in Part II, Division 4 of the Bill. The regulatory requirements to be imposed on ReTS Providers, to be spelt out in Regulations, would commensurate with the nature and scale of risks posed by these market models.

To facilitate the regulation of cross-border financial services that target or are made accessible to Singaporeans, clause 339 of the Bill will introduce an extra-territorial jurisdiction provision for offences. This is a codification of judicial pronouncements in common law jurisdictions that a foreign act is justiciable in a country if it has an effect in that country. This is the practice in other major financial centres. Clause 339 will confer jurisdiction on acts outside Singapore that have substantial and reasonably foreseeable effects in Singapore.

Creating a Flexible Regulatory Framework for Intermediaries, to Enhance Competition and to Reduce Compliance Cost

Single Licensing Framework for Securities and Futures Market Intermediaries (Part IV)

The existing licensing framework under the SIA and the FTA is characterised by the issuance of multiple licences to market intermediaries according to their business activities within the securities, futures and asset management industry. With the blurring of boundaries between securities and futures products, and the breaking down of the value chain in the financial services industry, such multiple licensing structure has increasingly become less flexible in meeting the business needs of intermediaries.

To keep pace with market developments and to better accommodate changes in the business models of market intermediaries, the SF Bill will introduce a single modular licensing framework for the securities and futures intermediaries, to replace the current multiple licensing regime.

Part IV of the SF Bill will require an intermediary to hold only a single licence, known as a Capital Markets Services licence, to conduct one or more regulated activities. These regulated activities will include securities dealing, futures trading, leveraged foreign exchange trading, advising on corporate finance, fund management, securities financing and custodial services for securities.

The single licensing regime will reduce both capital and compliance cost, and allow our intermediaries to be competitive across a broader spectrum of financial services.

The SF Bill will provide for licensing exemptions so long as these do not compromise the standard of investor protection. Banks, merchant banks, finance companies and insurance companies are already supervised by MAS under other principal legislation. They will be exempted from licensing for any regulated securities and futures activities so long as they are not prohibited from undertaking such activities under those principal legislation. This will reduce regulatory overlap and save on compliance costs. However, to level the playing field, these institutions will be subject to the same business conduct rules and regulatory requirements, where appropriate.

Enhancing the Regulatory Framework for Clearing and Settlement Activities, Creating an Exception to Laws of Insolvency for Clearing and Settlement Activities to Minimise Systemic Risks Regulation of Clearing and Settlement Activities (Part III)

The SF Bill will introduce a legal framework for the regulation of clearing and settlement institutions in the securities and futures markets. Such institutions will require MAS' approval. Part III, Division 2 of the Bill will introduce provisions for MAS to approve and regulate clearing houses separately from exchanges.

To protect a clearing house that operates in Singapore, and thereby all the participants that utilise its facilities, the Bill in Part III, Division 3 also provides an exception to the laws of insolvency where a participant of a clearing house defaults on its obligations. By giving primacy to the default rules of the clearing house over the rules of insolvency, the SF Bill will ensure that the insolvency of a member will not disrupt the clearing and settlement of trades already executed. Such giving of priority to systemic stability is consistent with the practice in other financial centres.

Providing a Comprehensive Rulebook on Capital Markets Activities in Singapore

Migration of Capital Raising Provisions from the Companies Act - Shares and Debentures (Part XIII, Division 1)

The SF Bill migrates the capital raising provisions in the Companies Act (CA) into a comprehensive rulebook on capital markets activities in Singapore. This is to implement a recommendation of the Corporate Finance Committee.

Collective Investment Schemes (Part XIII, Division 2)

Also, as recommended by the Corporate Finance Committee, the provisions in the CA (the Companies Act) relating to public offers of "interests other than shares and debentures" are migrated to the SF Bill. The SF Bill has replaced the concept of "interests" under the CA, which governs unit trusts, and replaced it with that of "collective investment schemes". The SF Bill requires all collective investment schemes to be approved by MAS before they can be offered to the public. MAS is empowered to suspend or revoke schemes detrimental to the public interest even after their approval. The SF Bill provides an additional option for foreign funds to be offered directly to the public, instead of only through feeder funds, which entail additional costs.

The SF Bill provides for the offer of collective investment schemes to sophisticated investors without prospectuses, as is the case for shares and debentures. The criteria for approval of such schemes are less stringent than that for retail schemes, as sophisticated investors are in a better position to fend for themselves.

Under the SF Bill, trustees for collective investment schemes will be approved on a one-off basis, instead of the current cumbersome practice of fund-by-fund approvals. MAS will be given the power to inspect such trustees, to check that they perform their statutory duties properly and safeguard the interests of investors.

MAS will also introduce an industry Code setting out investment and operational requirements for collective investment schemes. Examples are the investment guidelines for various types of funds, rules governing soft commission practices and disclosures, and contents of semi-annual reports to investors.

Facilitating the Development of a Disclosure-based Regime

The SF Bill seeks to create a legal framework that facilitates the development of a disclosure-based capital markets regime in Singapore. To this end, several reforms have been put in place.

Enhancement in Prospectus Regime (Part XIII, Division 1)

First amongst these are the refinements made to the prospectus regime. To deter inadequate or misleading disclosures and material omissions from prospectuses, issuers and their advisers will be subject to greater accountability for prospectus disclosure.

The procedures for registering prospectuses have been refined. Prospectuses lodged with MAS will be subject to a two-week holding period, during which MAS will conduct the necessary review for compliance with the prospectus law. At the same time, the lodged prospectuses will be put on the MAS website and made accessible to the public. The public can scrutinise and give comments on the lodged prospectuses to MAS. MAS may refuse to register a prospectus if it is not in compliance with statutory disclosure requirements or if its registration is not in the public interest.

Where a registered prospectus is later found to be misleading or deficient, MAS is empowered to serve a stop order to prevent the issuance or sale of securities to the public.

The SF Bill will provide for the return of monies to investors who have bought or subscribed for securities, after a stop order has been served or the issuer has lodged a supplementary or replacement document. This is also the practice in Australia. These legal remedies are necessary to protect the investing public in the few instances where serious breaches of the law occur.

To enhance regulatory transparency, the SF Bill will clarify that preliminary prospectuses, used for book-building to ascertain the level of market interest in securities, can be distributed only to sophisticated and institutional investors. In addition, the SF Bill will allow issuers and their advisers to conduct roadshow presentations to sophisticated and institutional investors before registering a prospectus.

Continuing Disclosure Requirements by Listed Companies (Clause 203)

The SF Bill will give legal teeth to the continuous disclosure of material information by listed corporations. Presently, listed corporations are required to make disclosure of material information, on a continuous basis, under the Singapore Exchange's Listing Manual. Clause 203 of the Bill will make this continuous disclosure requirement a statutory one. Failure by companies to make disclosure of material information could render it liable to the payment of civil fines or criminal prosecution (where the failure is intentional or reckless).

Notification of Substantial Shareholding in Listed Companies (Clause 137)

In line with international practice, clause 137 of the SF Bill will require persons to disclose their shareholdings to the securities exchange within two days of their becoming substantial shareholders of listed companies and subsequent changes in their shareholdings. This will improve on the current two-stage process where substantial shareholders disclose their ownership interests to the listed company (as required by the Companies Act), which in turn relays the information to the Singapore Exchange, as required by the Exchange's rules.

Takeovers (Part VIII)

The provisions in the Companies Act governing company take-overs and mergers are migrated to the SF Bill and rationalised. Part VIII of the Bill will empower MAS to promulgate, and the Securities Industry Council to administer, the Singapore Code on Take-overs and Mergers. The SF Bill also makes false or reckless take-over announcements, criminal offences.

Enhancing Market Enforcement

A disclosure-based regime demands an effective market enforcement regime. Any transgressions must be swiftly and firmly dealt with, in order to preserve investor confidence in Singapore's capital markets. The SF Bill therefore introduces provisions that enhance market enforcement. Review of Insider Trading Provisions (Part XII Div 3)

The SF Bill redefines the laws on insider trading. The present provisions are based on the defendant's connection with the company and make only the insider and the tippee (a person acting in concert with the insider) liable for insider trading.

To prove a case against tippees, the Prosecution has to, firstly, show that the tippee has received information from an insider. Secondly, it has to show that the tippee had an arrangement or association with the insider. Thirdly, the tippee must be aware that the insider himself is precluded from dealing. The balance is tilted too much in favour of tippees to the detriment of other market participants.

Furthermore, there is difficulty in extending liability to others who are further down the information chain. Where the tippee himself does not trade but communicates price-sensitive information to another person (the secondary tippee), who then trades in securities, it may be difficult to prove any "arrangement" or "association" with the insider. This is unsatisfactory, as the secondary tippee (or other persons further down the information chain) would have traded with an unfair information advantage.

A person who receives inside information from sources other than a connected person is also not caught under the present approach, which requires the tracing of information back to the connected person. This needs to be remedied.

At the core, the mischief of insider trading lies in tilting the playing field unfairly against other market participants. Those who knowingly have inside information should be prohibited from trading, whether or not they are connected with the company. The intent is to address the core evil of trading while in possession of undisclosed market sensitive information, instead of having liability depend on a person's connection with the company.

The new insider trading provisions in Part XII, Division 3 of the SF Bill will no longer depend on the proof of a person's connection with the company. The test will instead shift to the core of the offence, ie, trading while in possession of undisclosed price-sensitive information by the defendant. The new provisions will also tighten the mens rea (or mental intent) test for directors and connected persons. Clause 218(4) creates a rebuttable presumption that connected persons with possession of inside information, are deemed to know that the information is undisclosed and is price-sensitive. This will introduce greater discipline for those in fiduciary positions.

The present section 103 of the Securities Industry Act (SIA) is silent on any mental intent or mens rea requirement. The High Court in Public Prosecutor v. Ng Chee Kheong & Tang Siu Shing (in June 1999) imposed a 3-tier mens rea test for insider trading, requiring the Prosecution to show that the Accused: firstly, knew that the information was price-sensitive; secondly, knew that the information was undisclosed; and thirdly, intended to use the information.

When section 103 of the SIA was introduced in 1986, it was meant to remedy the shortcomings of section 158 of the Companies Act [Reprint of the Companies Act (Chapter 50),

1985 Revised Edition]. Dr Richard Hu, in the Second Reading of the Securities Industry Bill 1986, stated that this was the mischief that section 103 of the SIA was meant to address, and I quote:

"Part IX of the Bill contains revised provisions dealing with trading in securities. The significant feature of this Part is the new provision for dealing in securities by insiders, ie, persons with access to price-sensitive information. A notable difference under the new provision is that an offence is committed whether or not the dealing is undertaken with the intention of using information to gain an advantage; the purpose of dealing is irrelevant."

The decision in Public Prosecution v Ng Chee Kheong, by introducing the "intent to use" test, effectively brings our insider trading laws to the position in the repealed section 158 of the Companies Act. This interpretation of section 103 of the Securities Industry Act negates the very intent it was meant to remedy. The requirement of proof of "intent to use" information by the Prosecution makes it too onerous and reduces the effectiveness of our insider trading laws.

Clause 220 of the Securities and Futures Bill therefore makes it clear that it is not necessary to prove any intent to use inside information by the defendant.

The insider trading provisions will also be extended to cover futures and options contracts on stocks and stock indices which are extensions of the underlying product. This approach is consistent with international best practice.

Extension of Civil Fines/Civil Remedies to Other Forms of Market Misconduct (Part XII Div 4)

The SF Bill will extend the civil fine/civil remedy regime (presently available only for insider trading) to other forms of market misconduct found in Part XII - eg, market rigging, market manipulation, the publishing of false or misleading information, and the employment of fraud and deceit in dealing. The advantage of a civil remedy regime lies in its lower burden of proof. The extension of the civil remedy regime to all forms of market misconduct will complement the present framework of criminal offences for such misconduct.

MAS will be empowered to bring an action in court against a defendant for a civil penalty. The offender will also be liable for civil damages to investors who suffer losses as a result of the contravening act.

Enforcement Powers for MAS Officers (Part IX Div 3)

The SF Bill provides enhanced investigative powers for MAS officers to enforce the civil penalty regime for market misconduct. MAS will be given powers to compel the production of relevant documents and records, to conduct search and seizure with a warrant from the court and to record statements.

Fines for Offences

The penalties for non-compliance with provisions of the SIA and FTA have remained largely unchanged since their enactment - except for penalties relating to market misconduct offences, which were increased in March 2000 by a factor of five. There is a need to revise the fines for other offences under the SF Bill in order to provide a deterrent effect.

The SF Bill will therefore update and align the penalties for offences. It will introduce penalties for continuing offences, where appropriate. The fines in most cases (except for Part XII offences) will be raised by a factor of five while those for continuing offences will be 10% of that for the main offences. Clause 333 of the Bill introduces higher fines for corporations - a maximum of twice the amount imposed for individuals.

Extra-Territorial Jurisdiction Clause for Market Misconduct

Other than clause 339, clauses 196, 205 and 213 of Part XII (Market Misconduct) will specifically confer jurisdiction over conduct within Singapore in relation to securities or futures contracts listed and traded overseas; and conduct outside Singapore in relation to securities or futures contracts listed or traded in Singapore.

The first limb will deter perpetrators of market misconduct from using Singapore as a "haven" for their illegal activities. The second aspect will confer on our courts extra-territorial jurisdiction over foreign acts that affect the integrity of Singapore's markets. The enforcement of these provisions will be facilitated by various regulatory Memoranda of Understanding entered between MAS and foreign regulators. Streamlining Appeal Processes

Rationalization of Appeal Processes (Part XIV)

Next, streamlining of appeal processes. There are some inconsistencies, under the SIA and FTA, in the provisions relating to appeals (by licensees, exchanges or aggrieved persons) against decisions made by MAS. Under the present SIA and FTA, most appeals are heard by the Minister. However, in the revocation of a dealer's licence under the SIA, an appeal to the High Court is allowed.

The SF Bill streamlines the appeal processes by having the appeals heard by the Minister. The SF Bill creates an independent advisory panel, comprising industry representatives and lawyers, to advise the Minister. This new approach allows MAS to tap on the expertise of practitioners to evaluate MAS' decisions objectively and impartially, before presenting their recommendations to the Minister.

Sir, I beg to move.

Question proposed.

Mr Leong Horn Kee (Bishan-Toa Payoh): Mr Speaker, Sir, I wish to speak in support of this Bill. The introduction of the Securities and Futures Bill serves to update the legislation to keep in pace with the changes and advancement in the capital markets. It sets out the new regulatory framework for the securities and futures market and put it all into a single piece of legislation under the SF Bill.

Sir, I would like to make a few comments on this Bill.

First, areas of conflict in SGX as a securities industry regulator. As I see it, one of the essential operational differences with the SF Bill is that several regulatory functions of SGX are removed and put under MAS. I feel that this is a correct move in the right direction. Currently, SGX itself is listed on the Singapore mainboard. There may well be instances of conflict of interest when SGX has to function as both the regulator as well as the player in the securities industry. However, I note that, with the changes, SGX will still retain some regulatory functions, especially on listing functions. I would like to ask the Deputy Prime Minister what is the rationale for doing so, and how are the regulatory functions divided between MAS and SGX under this new SF Bill, such that it will minimise the avenues of conflict of interest on the part of SGX.

Next, effectiveness of the extra-territorial jurisdiction. Clause 339 of the SF Bill confers the power of extra-territorial jurisdiction on acts of having substantial or reasonably foreseeable effects in Singapore. Here, I would like to ask the Deputy Prime Minister how we can be effective in policing and curbing undesirable securities and futures trading activities that occur in foreign jurisdictions. For example, if a foreign syndicate tries to play and corner certain local stocks from overseas, how do we control and penalise them? Similarly, if a foreign-based Internet company offers securities advisory services without an approved licence to Singapore residents, how do we ensure that they are giving competent advice and complying with Singapore's listing, take-over and other securities rules and code?

On enhanced rules on insider trading, Part XII, Div 3 of the SF Bill deals with a new change in the treatment of insider trading rules. As I understand it, it has shifted from person-connected to information-connected rule. In principle, I am in agreement with this change, as it gives greater clarity and intent on insider trading. However, I am unclear on the actual implementation of this change. Will the "person-connected" approach be withdrawn such that only "information-connected" rule will apply? For example, during the restricted buying period when a company was about to announce its financial results, for "person-connected" parties or persons who have no access or have no information of the company's results, could they then trade in the shares of the company during the restricted buying period? I would like to ask the Deputy Prime Minister to explain further on how this new ruling operates.

Mr Speaker, Sir, I wish to express my appreciation to MAS for being responsive to market changes by introducing so speedily this new legislation to regulate the capital markets.

Mr Ong Kian Min (Pasir Ris): Mr Speaker, Sir, I rise to speak in support of the Bill.

Over the years, many important developments have taken place in all the major financial centres of the world, and we must keep pace by supporting progressive changes in our capital markets and the financial industry with laws and regulations that are up-to-date and relevant.

With the consolidation of several of the existing legislation into the Securities and Futures Act (SFA), the regulatory roles will, henceforth, be concentrated on and undertaken by the Monetary Authority of Singapore. Until a few years ago, I must say the MAS is a key institution that is little known to the public. Even today, the MAS is regarded with much respect and a fair amount of awe by the industry. It has a solid reputation as a credible and competent financial regulator. It acts decisively and carries a heavy punch, as witnessed by some people who dared to speculate against the Singapore dollar and those who were adventurous in trying to circumvent the rules on mandatory takeovers. But, much has been done over the last few years to soften that image by being more consultative, open and receptive. I know a few market participants who were pleasantly surprised to receive invitations to just drop by the MAS anytime to talk about their future plans and on-going developments. In this respect, I would like to ask DPM whether a Securities and Futures Commission will be set up within the MAS to undertake its new function under the SFA.

In this fast-changing world, to maintain our position as a premier financial centre, we must adopt fresh approaches to regulate and develop our financial sector. The SF Bill will be a comprehensive attempt to update our laws relating to securities and futures.

Looking at the provisions of the SF Bill, this consolidation and centralisation of functions should lead to a speedier and more certain timeframe for capital fund raising. Clear time limits for registration of prospectuses, after they are lodged, are set out in the Bill. Situations under which the Authority will refuse registration are also spelt out. This is intended to provide much needed certainty in terms of when an issue can be launched, which is critical in fast-moving capital markets, to capture the window of opportunity. This will be of great help to corporations as they will now have a better idea of when the funds will come in for their business expansion.

I hope this outcome will be achieved in practice and its benefits realised. My fear, that it may not turn out this way, stems from a number of factors. Prior to the SF Bill, prospectuses were scrutinised by the SGX. Comments and queries for clarification might have resulted in delays at times. But, ultimately, the issuer can proceed to issue the prospectus once the SGX is satisfied that the investing public is sufficiently protected. If any of its contents is subsequently found to be misleading or untrue, the issuer can be taken to task in a court of law or by the regulators. But, now, the prospectuses will be open for public scrutiny and criticism. Is our investing public sufficiently sophisticated?

Members of the public and, probably, competitors who are out to cause trouble, can ask for unnecessary information under the guise that this additional information is required for them to make an informed assessment of the matters. Disclosure of certain information, such as confidential details about margins and pricing, although nice for the investing public to know, may, in fact, be detrimental to the business of the company. And the people who are most interested to know are usually the competitors. In addition to that, imagine poison-pen letters coming in to the MAS one after another from business rivals or personal rivals. This may lead to even more delays before the prospectus is finally allowed to be registered, and can even derail the entire exercise. I hope the MAS will be firm in deciding what is and what is not reasonable request for clarification, and will dedicate adequate trained and competent resources to carry out the intent of the Act.

I would like to ask the DPM whether such a comprehensive revamp of the legal framework is overwhelming, especially at this present time when it is already so difficult for companies to raise funds from the market. Are we too ambitious in trying to do too much now under this present economic environment? Valuations and pricing of new issues have come down drastically. Onerous responsibility imposed on merchant bankers, lawyers, accountants, valuers and other professionals involved in the corporate fund raising exercise has led to a substantial increase in fees. For a small and medium enterprise (SME) to raise $3-4 million, the expenses involved can be in excess of $1 million. My fear is that SMEs can no longer afford to raise funds here and will have no choice but to turn to other regional markets.

I mentioned earlier that I hope we get to reap the benefits of this revamp that is intended to increase transparency and improve the quality of the issues. But have these efforts produced rewards? To a listed company and its shareholders, the cost of a new listing and continuing that listing has gone up, but they are still waiting to enjoy the benefits in terms of better valuations, higher trading volume, closer analyst coverage and more sophisticated investors. Perhaps, the lethargy is due to the present market conditions. Perhaps, the lack of interest is due to inadequate investor relations by the listed company. But, it is certainly hoped that the revamp will not merely be something that looks good for the record, but will translate into real and tangible benefits, whether now or when the economic situation improves.

Sir, I would now like to turn to certain provisions of the Bill which relate to "Market Conduct".

The SF Bill provides three types of punishment for the person who has acted in contravention of any of the provisions of Part XII of the Bill which relates to "Market Conduct". Offences included in this Part range from false trading, market rigging, disseminating false or misleading information, bucketing to insider trading. The contravening person faces civil penalty under clause 232, civil liability under clause 234 and, of course, criminal penalties.

I am happy to note that individual investors who have suffered loss in respect of a contravention need not commence an action, either individually or as a class, to try to recover their loss, but can rely on the outcome of the proceedings commenced by the Authority. The relevant court may, after the conviction or the imposition of the civil penalty, invite all claimants to file and prove their claims for compensation.

I would like to ask the DPM: what if the Authority decides to settle the contravention with the contravening person? Clause 232(5) provides that nothing in clause 232 shall prevent the Authority from entering into an agreement with any person to pay, with or without admission of liability, a civil penalty. And, clause 236(1) implies that if a consent order is made by the Authority against the contravening person, with or without admission of contravention, the court will not be involved and, therefore, other aggrieved persons will not be invited to file their claims. Under the settlement agreement with the Authority, the civil penalty, if any, imposed by clause 232 will be payable to the Authority. How about the losses of the individual claimants? Would they have to commence proceedings separately against the offender? This may not be easy, as they will be disadvantaged by the difficulty of gathering evidence and by the lack of resources.

I would like to ask the DPM, whether in the interest of the investing public, we should set out the types of cases which the Authority should not settle bilaterally but should, if there is sufficient evidence, bring the proceedings into open court. The guidelines on whether the case can be settled by agreement need not be based on the type of offence, but could be based on criteria, such as the number of people aggrieved or the amount involved.

Further, in the event the Authority enters into an agreement for civil penalty to be paid, it should disclose to a bona fide claimant the grounds for its decision, the results of its investigation and the evidence collated, so as to assist the potential claimant in deciding whether to pursue the case separately against the contravening person.

Mrs Lim Hwee Hua (Marine Parade): Mr Speaker, Sir, I rise in support of the Bill, as the new legislation is a fitting enabling legal framework for all the structural reforms and initiatives that the Government has undertaken.

The effort to consolidate the provisions in the various pieces of legislation is commendable and will go a long way towards facilitating further development of our capital markets. As a consequence of the amalgamation, the provisions cover a wide range of issues. I shall, therefore, limit my comments and questions to the following three areas, ie, the specific issues of developing a disclosure-based regime and market misconduct, and the general issue of public education.

Firstly, developing a disclosure-based regime. The shift from a prescriptive to a disclosure-based approach is timely. It is consistent with the increasing emphasis on transparency and information disclosure. Essentially, market participants should no longer rely solely on prospectuses or offers that have made the grade, ie, endorsed by the stock exchange, to make their investment decisions. Instead, they should now carefully examine the substance of the offers. Whilst this may be a departure from the previous mindset that an approved public offer equals a good investment opportunity, it will cause investors to be more discriminating and savvy over time.

Several provisions deal with enhancing market accountability and raising the standard of corporate disclosure. For example, draft prospectuses would be allowed exposure prior to a proposed offer although they may not be registered finally. Therefore, investors, especially non-institutional investors, need to comprehend the implications of the posting of such drafts. My colleague, Mr Ong Kian Min, has already elaborated on the preparedness of the investing public at large.

At the same time, the SF Bill seeks to give legal teeth to the disclosure-based regime by making the continuous disclosure requirement a statutory one. Sir, at this juncture, I would like to raise the notion of "fair disclosure" even though it is not specifically mentioned in the Bill. I would like to ask the Deputy Prime Minister to comment on the Authority's stand on the extent to which fair disclosure would be a feature of this statutory requirement.

Sir, let me elaborate. I would like to know how listed companies would be deemed to have complied with this statutory requirement. Would a filing with the Singapore Exchange, for example through MASNET, be sufficient? If so, the extent of dissemination to investors must be relevant in order for the primary objective to be met, hence my reference to the notion of fair disclosure.

Sir, in the US, compliance with the spirit of Regulation Fair Disclosure takes the form of more press releases, more Form 8K filings and more webcasts of earning calls. This is accompanied by greater discomfort for listed companies when dealing with analysts and professional investors and a lot more care, if not paranoia, in providing earnings guidance, if at all.

Sir, fair disclosure is a noble goal as it seeks to level the playing field for all investors, small retail and large institutions alike. However, in deciding on how compliance will be assessed, I seek the DPM's assurance that listed companies in Singapore would not find this onerous and be reduced to saying the very minimum, leading to an "equal misery" scenario for all investors.

Secondly, market misconduct and insider trading. Sir, the shift from focusing on a "person-connected" to "information-connected" definition is significant and takes cognisance of the reality that price-sensitive information per se drives trading, without necessarily involving a connection with the company. This enlargement of the net is justifiable, but it also imposes greater discipline on those in fiduciary positions. Ultimately, without the need to prove any intent, a balance has to be struck so that it would not be too onerous for operators, especially non-executive directors.

On a related note, the power to be vested in the MAS to bring an action in court against perpetrators of market misconduct, such as rigging and manipulation, is much welcome, especially by the retail investors. Once again, I would like to urge the DPM to strike a balance when executing this power, especially in terms of undertaking investigations.

Thirdly, public education. Many of these provisions will pave the way for further development of our capital markets. However, I would like to urge the DPM to ensure that sufficient resources are devoted to public education so that the desired end-states are achieved. For example, many might mistakenly think that draft prospectuses are actual offers or that participating in a friendly scheme to make a killing out of an illiquid stock is being astute.

Many changes arising from the reforms over the past few years have made visible improvements to the operation and integrity of our capital markets. I would like to seek the assurance of the DPM that market participants, especially the retail, individual investors, would be brought up to speed as best as we can.

On that note, Sir, I support the Bill.

Mr Sin Boon Ann (Tampines): Mr Speaker, Sir, before I speak in support of the Bill, I wish to state at the outset that, as a solicitor, I may have an interest in the subject matter.

The Bill before this House is a bold attempt by the Government in reforming our legislative framework to bring our capital market in line with the best practices of capital markets elsewhere. This reform is, indeed, part of our enduring effort to make Singapore the financial hub in the region.

While the Bill is in part a consolidation of the various pieces of legislation, it has nonetheless taken the opportunity to introduce new changes and policies. These changes take into account, amongst other things, advances in technologies that allow for new and innovative methods of trading, convergence in the financial products and instruments and the way in which these products and instruments are sold or delivered by intermediaries.

The Bill in itself is massive, running into 344 clauses, many of which are rather important in the way in which they underpin the capital market. One regret, Sir, is that there is not enough time between the last sitting and the present sitting for us to digest and analyse the Bill and its implications. I hope that there would be other occasions where, with the fullness of time, we will be able to digest and debate this Bill in a more comprehensive manner. Be that as it may, a number of comments and queries came to mind as I went through the Bill.

First, the issue of overseas trading systems and exchanges which are targeted at Singaporeans. With the advent of the Internet, what has become obvious is that Singaporeans now have alternative trading systems. These services can provide trading platforms that do not fit traditional descriptions of market trading and dealing. What is critical is that these alternative trading systems can be cross-border in nature. The MAS recognises that increasingly, Singaporeans are beginning to trade on overseas exchanges and, as a consequence, there is a need to bring this new development into the fold of regulation. Apart from either approving these exchanges in which case, these exchanges would come under the entire gamut of laws in Singapore, or exempting these exchanges from the application of relevant legislation here, the Bill seeks to provide for extra-territorial reach in our legislation in order to regulate these exchanges that do not operate within our jurisdiction. In this regard, the Bill deals with the situation by providing that if the act was partly committed in Singapore and partly committed outside Singapore, or if that act, committed outside Singapore, has a substantial and reasonably foreseeable effect in Singapore, and if that act is an offence if it is committed in Singapore, that person who committed the act would be guilty of an offence.

Sir, while I appreciate the policy intent behind the extra-territorial reach of the Bill, I would say that the clause in its present form is weak. First, the Bill is not clear as to the extent, whether partial or otherwise, to which it must be committed in Singapore, or the extent to which it must go before it has a substantial effect in Singapore. I suppose this should be left to the courts, although I think it would help if legislation could provide some guidance here.

Secondly, the Bill is not clear as to who the person should be. For instance, what happens if that person is a company incorporated say, in Vanuatu. In all probability, it would be a company that would be set up by the operator if they are intent on breaking the law here. The question which I have is: does the law seek to catch the company or the agents operating behind the veil of these companies, and how would you enforce our laws against these people? This is the same point raised by my colleague, Mr Leong Horn Kee.

I suppose, Sir, the way forward is to strengthen our international network by getting the cooperation of as many countries as possible in our bid to regulate these cross-border activities. The truth of the matter is that the veil of protection that we seek to give ourselves through legislation is bound to be punctured with holes as foreign operators can operate almost with impunity, notwithstanding provisions in our legislation that say otherwise. Unless we get the cooperation of the other countries, I doubt very much if the cross-border provisions in the Bill are going to work effectively. In this regard, I would like to ask the Deputy Prime Minister whether we are negotiating with other countries and, if so, how many, to deal with these issues, and whether we ought to promote an international legal framework to regulate these activities.

Next, the question of a single licensing framework for securities and market intermediaries. As proposed, a singular modular framework allows for a range of regulated activities that are better differentiated to accommodate the business needs of the intermediaries. Accordingly, market intermediaries would only be required to hold a single modular licence instead of multiple licences to engage in the activities listed in the Second Schedule. These activities set out in the Second Schedule include, for instance, dealing with securities, providing custodial services to securities, engaging in the business of advising on corporate finance, and so on and so forth. What this actually means is that a person holding a capital market licence can engage in any of these activities provided he is suitably qualified. For the intermediaries and professionals engaged in capital market services, this is indeed good news as they no longer have to chase up different legislation to get the necessary permits.

My concern here, Sir, is one of detail. I would like to ask the Deputy Prime Minister whether the application process for the licence could be made easier for the boutique firms or individuals who intend to provide e-services but who are not in the same league as the banks and financial institutions. I say this, Sir, because of late, we see in the industry, a fair number of ex-bankers or employees of financial institutions providing services, particularly in the area of corporate finance. No doubt these consultants and professionals would now have to be regulated under this Bill, I hope that the conditions to be set up by the Authority would not be so onerous as to effectively prevent them from undertaking this task. These consultants perform a very useful function by providing advice and services to the SMEs and to clients who may not have the wherewithal to engage the services of merchant bankers or other financial institutions. It would be helpful if the Minister could further elaborate on this issue and perhaps provide some assurance to the smaller players in the market.

Thirdly, providing a comprehensive rule book of capital market activities. I do appreciate the intention on the part of the Government to migrate the fund-raising provision of the Companies Act into a more comprehensive rule book on capital market activities in Singapore. I have no comments on this migration, save for some particulars of details. First of all, I was hoping that in migrating this provision, the Government would take the opportunity to spell out the activities that would constitute an offer to the public. This phrase "an offer to the public" is indeed, in many cases, key to the question of whether or not a prospectus is necessary. This is the question which has vexed many lawyers, with the consequence that some take the view that an offer of securities to five or 10 members of the public is not a public offer ostensibly because the size is not large enough. And in the other extreme, there are some who have taken the view that an offer of securities to even one member of the public, if that offer was indiscriminately made, would constitute a public offer. Very often, a judgement call would have to be made by the offerer or the professional adviser on whether or not a particular offer, when made, is made to the public. Even until recently, the industry was not even sure whether or not shares of the employees constitute an offer to the public.

Sir, it may be unfair to place such a responsibility on offerers and professional advisers to make such a judgement call. I believe our policy would be better served if legislation can perhaps provide clearer guidelines as to what constitute an offer to the public. At this moment, Sir, the Bill does not offer any guideline and I would appreciate it if the Deputy Prime Minister can give us a clarification on this point.

Clause 243 sets out broadly the content requirements of prospectuses. Clause 243(3)(c) additionally seems to suggest that the person making the offer of shares or debentures, if the person controls the corporation whose shares and debentures underlie the offer of invitation, must provide information on assets, liabilities, profits, losses and financial position in respect of that corporation. Typically, in a prospectus, information on a group is provided on a consolidated basis. If, as the provision seems to suggest, the listing company is now required to set up details of individual companies in the group, then I am afraid that the prospectus may get rather unwieldy and cumbersome. This may not serve any better purpose than a consolidated group account is now able to provide and, in this regard, I would be grateful if the Deputy Prime Minister could also elaborate on this.

Fourthly, collective investment schemes. The Securities and Futures Bill seeks to replace the term "interest other than shares" with collective investment schemes. Ostensibly, the approach seeks to plug a gap in our present legislation which on the surface does not include investments in actual property. For instance, it seems that investments in ostrich eggs are not covered by our current legislation because promoters of such investments were able to sell the actual commodity or property such as the egg and not the interest in the investment itself. Because it is an investment into the actual property, such schemes are not caught by our current legislation and hence it would seem that the new provisions in the Securities and Futures Bill would be able to deal with such a lacuna in law. This, Sir, is a development that is most welcomed indeed.

Unfortunately, the Bill in its present form, does not clarify the ambiguities surrounding listed unit trusts in the Singapore Exchange. Under its present definition, securities means any unit in a collective investment scheme. However, in the definition of the collective investment scheme, it is expressly stated that the scheme does not include closed-end funds constituted in Singapore. Such closed-end funds, Sir, are funds that are non-redeemable. In the case of unit trusts, they are normally constituted in a manner which is non-redeemable and therefore are typically regarded as closed-end. It would appear therefore that any listed unit trust constituted in Singapore would not be considered a collective investment scheme under the Securities and Futures Bill. A listed unit trust will not be deemed as a security for the purposes of the Bill and if that was so, Sir, I think it would have grave ramification in relation to the listing of unit trusts in our Exchange. This is because, based on the book entry system, it does not appear that the provisions in our law relating to book entry securities apply to listed unit trusts.

Presently, section 130G of the Companies Act provides that a transfer of securities by the depository by way of book entry to the depositor under the Act shall be valid and shall not be challenged in any court of law on the ground that the transfer is not accompanied by an appropriate instrument of transfer or that the transfer was not made in writing. This is a provision, Sir, to deal with any doubt that may arise under the Civil Law Act which requires such transfers ordinarily to be made in writing. Under the Companies Act, the definition of securities does not appear to include unit trusts as well. The implication of this, Sir, is that unit trusts may not have the benefit of a book entry system of trading. Accordingly, any transfer arguably would have to be governed by an instrument in writing and it would appear therefore, Sir, if unit trusts are cleared through the depository via a book entry system, it may be open to legal challenge.

Sir, my concern is shared by some in the industry who seem to have taken the view that the present legislation does not cover unit trusts constituted in Singapore under the book entry system. And indeed in some prospectuses, the fact that the book entry system does not cover unit trusts has been raised as a risk factor in the prospectuses. I would like to ask the Deputy Prime Minister for a clarification in this regard.

Fifthly, facilitating the development of a disclosure-based regime. The present Bill seeks to create a legal framework which seeks to facilitate the development of a disclosure-based capital market in Singapore. This development is in line with practices elsewhere, especially in the West which encourages participants in the industry to disclose as much information as possible in order to allow investors to make a more informed choice. In order to deal with this process, the Bill seeks to give legal teeth to the disclosure regime by making obligation to disclose a statutory one rather than one that is based on an obligation to the Exchange pursuant to the rules under the listing manual. While it is understandable why a regime of disclosure is encouraged in the marketplace, the drawback is often one of uncertainty on the part of the listed company. One would expect that under the regime, particularly now that the disclosure obligation is required by statute, there is a likelihood of anxiety on the part of the listed entities to want to disclose, and disclose as much information as possible, in order not to run foul of the law.

Sir, one has to have a certain balance in the whole regime. Arguably, it may be said that to require a complete disclosure of all material information without much guidance would be rather onerous on the listed entity itself. I would therefore like to ask the Deputy Prime Minister whether the Authority would help to give better guidance as to the type and quality of information to be disclosed in order to help the listed companies in the process.

Apart from the above comments, Sir, I support the Bill.

BG Lee Hsien Loong: Mr Speaker, Sir, I thank the Members who have supported the Bill. Let me address some of the points which they have raised.

First, Mr Leong Horn Kee has asked about conflict of interest in SGX between MAS' and SGX's role. This is an issue which arose when we first demutualised SGX because, once it was demutualised and focused more on the bottomline, this may reduce SGX's commitment and resources to fulfil its regulatory responsibilities. MAS' view overall is that SGX's interests are more aligned than divergent with the public interest as represented by the users of the Exchange, because to sustain its business of success, SGX needs a fair, transparent and efficiently regulated market and a market which falls into bad reputation is not going to do SGX any good.

Nonetheless, to mitigate any potential conflicts arising from SGX's self-listing, MAS has assumed the role of listing authority for SGX's own listing, conducts surveillance of trading in its shares and has the power to issue directives to SGX to resolve any conflict of interest arising from its self-listing. At the same time, MAS has defined more clearly its regulatory relationship with SGX. As the statutory regulator, MAS will administer the corpus of laws regulating the capital markets. It will also have oversight over SGX's regulatory functions to assure that SGX is performing its regulatory functions competently and responsibly, and that there are no gaps in the overall regulatory framework. It inspects SGX. It carries out regulatory oversight of SGX's listing and business rules, and it conducts market surveillance.

SGX retains the front-line responsibility of regulating the securities and futures markets and its market participants, and ensuring compliance with its rules. SGX has also appointed a Conflicts Committee to deal with issues of potential conflicts of interest, with MAS as the approving authority for the composition of the Committee. These were issues which were largely addressed in the Exchanges (Demutualisation and Merger) Act which was passed in 1999, when SGX was demutualised. This Act does not change the situation because we have just imported those sections from the Exchanges (Demutualisation and Merger) Act into the new SF Bill.

Secondly, Mr Leong asked about enforcement of extra-territorial jurisdiction, given that the players are overseas, and Mr Sin Boon Ann also highlighted this problem. They are right. It is not straightforward. You can pass the legislation, but to actually have the reach to enforce it and put things right, there will be holes in the armour. The extra-territorial jurisdiction provisions in clause 339 of the Bill will make clear that acts outside Singapore, which target Singapore investors, would be subject to our regulatory reach. Without such a clause, we may not even have a legal reach against operators of such businesses. Having created that legal reach, Part X of the SF Bill relates to provisions relating to assistance to foreign regulatory authorities. Apart from this, MAS has also entered into several memoranda of understanding with regulators from major financial centres. These MOUs and mutual assistance provisions facilitate the procuring of assistance from overseas regulators and would facilitate enforcement processes. It is not easy to do but you need a memorandum of understanding, and you need a cooperative regulator on the other side. In some cases, it will be helpful to have a mutual legal assistance treaty. [MLAT negotiations are multi-agency-led, coordinated by AGC.] We passed legislation to enable this a couple of years ago, and Singapore is in the process of negotiating several such mutual legal assistance treaties, although none of them are ready yet.

Thirdly, Mr Leong Horn Kee asked about insider trading - how the information-connected approach works, and what happens to the person-connected criterion, eg, trading during a restricted period [in SGX-ST's Best Practices Guide on Dealing in Securities] by relatives of a person. First, may I explain that whether or not a trade violates the insider trading rules does not depend on the restriction period. It depends on whether or not you have sensitive inside information at the time of trading. It can be outside the restricted period. But if you have some information, you know something is going to happen, you trade on it, you have violated the rule. And when we say it is information-connected rather than person-connected, we mean that it goes down the chain - I told you, he told the next person, and so on. It is information-connected. Whereas under the old person-connected rule, you had to have a direct contact. If it went to the next person, then we had to establish that there was some joint activity amongst those three persons in order to establish that this was an insider trading offence. So it is not whether you are a member of the family or not, or whether you are trading within the restricted period. It is to do with whether there was information which was passed from the insider to the tippee, and from the tippee onwards to another person.

Next, Mr Ong Kian Min asked whether we will be setting up a Securities and Futures Commission. The answer is no, but we will be beefing up significantly MAS' department in charge of securities and futures. We have appointed a Deputy Managing Director in charge of this. It is a big function. In countries like Malaysia or Hong Kong, it is a separate entity. But in other countries like Britain and now Japan, the trend is to bring together the regulation under one consolidated financial supervisory authority. In Singapore, MAS has a consolidated supervisor. We have derived some economies of scale and it has worked well for us. So I think we will build up the securities and futures function within MAS, but it does need to be built up substantially.

Next, Mr Ong asked whether the benefits of the disclosure-based regime will be realised in practice. This is something which we will have to work out. I think, in principle, we have to move to a disclosure-based regime. The old regime where the authorities exercise merit supervision and guided what companies were fit to be listed and what companies really should not be allowed to raise funds because it is too dangerous, is not an approach which we can sustain. So we have to go forward and we have to derive it. And if, in the process of working the disclosure regime, we run into difficulties, we have to overcome those difficulties.

One of the uncertainties which Mr Ong raised was that when an exposure copy of a prospectus is posted, there will be unreasonable requests for information. This will really be up to MAS to administer, and MAS will have to be firm in deciding what information is needed. It is not an unprecedented arrangement. The Australians have a very similar scheme, and it has worked for them. I think we can make it work for us.

As for the new corporate finance provisions making fund raising prohibitively expensive for SMEs, I would say, firstly, that the new provisions apply only to offers of securities to the public on the stock market. Many SMEs are more likely to raise private equity from venture capital firms, business angels and family friends. It is not our intention to make things onerous for them. In fact, we have a committee presently led by the private sector on company legislation and regulatory framework, which is studying ways to make fund raising easier and less costly for the SMEs.

Mr Ong said that it will cost $1 million in fees in order to do an IPO for a listing on SGX. This probably includes both professional and underwriting fees. If you are making a public offer of unlisted securities, the cost should be much lower. It should be noted that, in fact, our IPO fees in Singapore are much lower than IPO fees in many other countries. For example, in the US, to list a company, the underwriting fees alone will amount to 7% of the funds raised. So a million dollars is a lot if you are a small company, but that is the expense which is involved going through the processes.

To keep the fund raising cost down, the Bill provides for certain exemptions from the prospectus requirements. For example, when securities are being offered to institutional or sophisticated investors, a company would not be required to prepare a prospectus.

Mr Ong also asked about civil actions - what will happen if MAS decides to settle a civil action instead of going to court? Our intent when we introduced the civil penalties and civil remedies for insider trading in the Securities Industry (Amendment) Act last year, we wanted the civil remedies to be filed as an independent course of action by investors who had traded contemporaneously with the defendant. We have applied the same approach in this Bill. We have not changed the approach.

When a civil fine action is initiated by MAS or where criminal prosecution is commenced against the defendant, the civil proceedings will be stayed. When a defendant is eventually convicted in a criminal proceeding or found liable to pay a civil penalty in a civil action initiated by MAS, clause 236 allows contemporaneous investors to ride on the coat-tail of such criminal proceedings or of civil fine action. This is because it would be a waste of resources for a court to rehear the entire action for the civil action based on the same set of facts. So you have to see clauses 234 and 236 of the Bill in that context. The civil remedies have always been intended to constitute an independent action.

In out-of-court settlements - they occur, they are not unusual - it is a practice of securities regulators in other financial centres. MAS will exercise any discretion it has to enter into a settlement judiciously, having regard to all the facts and circumstances of the case and the seriousness of the transgression. MAS will have to obtain the consent of the Attorney-General, and in exercising its discretion, MAS will take into account the impact of that settlement on civil claims. But that factor in itself, the possibility that there are other civil claims, cannot determine whether or not an out-of-court settlement is entered. Civil compensation is not barred by an out-of-court settlement with the Authority, under clause 232(5) of the Bill. Even where there is an out-of-court settlement, the claimants of civil compensation are not worse off than plaintiffs in other types of civil claims. Because, even if MAS settles out of court, it does not stop other plaintiffs from pursuing their own claims independently. Nor are these plaintiffs worse off than claimants in situations in which neither criminal nor civil penalty proceedings are commenced. Under the rules of court which will be promulgated under the Securities and Futures Bill, claimants will have available to them discovery and interrogatories. However, we do not think that it is desirable nor is it practicable to set guidelines as to the types of cases that the Authority should not settle. There are many variables that determine whether or not a case should be settled, the potential number of claimants or the amounts involved cannot be used to determine the issue, and the civil claim regime is meant to operate independently of anything which anybody else may wish to pursue his claim in a civil action.

Where there is a settlement, MAS may, where it is appropriate, disclose the fact of the settlement and a brief description of the transgression. However, it would not be in the public interest for MAS to disclose its investigative methods, the results of its investigations and the source of its information. No prosecution or investigative authority does that. As a parallel, criminal authorities do not disclose the evidence that they uncover in the course of investigations to facilitate civil claims.

Mrs Lim Hwee Hua talked about the disclosure-based regime and asked about fair disclosure, and to what extent we require fair disclosure as part of this regime. The SF Bill requires listed companies to disclose information required by the rules of the Exchange on a continuous basis. The Exchange has a system in place to ensure prompt and wide dissemination of such information to the public. Listed companies issue public announcements via MASNet which is a financial network connecting listed companies, SGX, banks, financial institutions as well as news agencies. Such announcements will be uploaded simultaneously onto SGX's website, which is fully accessible to the public at no charge. These arrangements ensure that the public and all market participants have equal and immediate access to material information disclosed by listed companies.

Mrs Lim also asked about investor education. Investor education is a collective effort by all players in the securities industry. Local players have been doing their bit in recent years, eg, Singapore Exchange organises public talks and exhibitions on share investments and trading regularly. There is an Investment Management Association of Singapore that has sponsored radio talks and contributed articles to the press on investments in various financial products. The Securities Investors Association of Singapore has taken its investor education programme to neighbourhood community centres. This is a continuing effort. MAS supports and encourages these initiatives in investor education. We will be open to helping out with co-funding from the financial sector development fund for specific projects. In addition, MAS will play a coordinating role, identifying gaps and filling them where it is necessary. And we will put general investor education materials on our MAS website.

The shift to disclosure-based regulation makes investor education more important, because companies now no longer require MAS' approval to launch new investment products or schemes, provided that basic requirements are met and all relevant information is disclosed to investors.

The public will be reminded time and again that the primary responsibility for making investment decisions lies with themselves and, over time, they will be able to learn to be able to look out for their own interest. There is no alternative. We have to shift. We cannot go on the basis that the regulator, or MAS, or the Exchange will make sure that every investment is safe and sure to make money. If you want to invest, you have to make your own judgement, find out your own information and make your own decisions.

Finally, Mr Sin Boon Ann has raised several points in his speech, many of them have to do with the implementation and operation of the legislation. This is a new piece of legislation, it is complicated. We have tried our best to address all the uncertainties and lacuna by exposing it to the industry for public comments, taking in comments and then going several rounds of consultations. We think that what we have is workable but it is complicated and I would not be surprised that as we operate the scheme over the next years, we will find problems or parts which need to be changed or fixed, and we will come back and have those parts amended by Parliament.

I would just like to address one point which Mr Sin raised, which is the issue of boutique firms or individuals who are small and who want to become market intermediaries. It is not our intention to make it difficult for ex-bankers and employees of financial institutions to start up on their own and enter corporate finance or other activities. So we will have a level playing field. And if they are able to do it and if they have the expertise, I think the framework will enable them to do so.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [BG Lee Hsien Loong].

Bill considered in Committee; reported without amendment; read a Third time and passed.