Commentary – With lighter touch rules, the market must now live up to its end of the bargain

Date: November 11, 2025

First published in Straits Times on 10 November 2025

For years, Singapore’s capital market participants have called for less regulatory burden and more flexibility.

In recent years, these calls have grown in intensity. The key takeaway from a May consultation paper was that industry players wanted a less prescriptive market, as many believed Singapore had matured enough to operate under a full disclosure-based regime, one where investors, armed with timely and accurate information, could make informed decisions without the need for heavy-handed rules.

In October, the Singapore Exchange and regulators signalled their confidence to move in this direction.

The financial watch list, long seen as a stigma that hampered struggling but possibly viable companies from raising much-needed capital, will be scrapped.

Listing rules will be simplified and placed under one regulator instead of two, requirements rationalised, and red tape trimmed in an effort to make the market more vibrant and business-friendly.

It is, in essence, what the industry had been asking for: less prescription and more reliance on market discipline.

But this freedom comes with a price: responsibility. If regulators are stepping back, the market must step up.

This is because a disclosure-based regime rests on a simple principle: Companies should be free to operate and raise capital as they see fit, so long as they provide full, fair and timely information about their activities.

The onus then falls on investors to assess that information and make their own judgments. This approach has long been favoured in several other markets, and it was one favoured by the local authorities when deregulation kicked in some 25 years ago.

However, systems based on the maxim of “caveat emptor” or “buyer beware” work only if the disclosures themselves are proper, meaningful and transparent.

In this regard, it is disappointing to note that a recent survey by the Stewardship Asia Centre (SAC) found that only 18 per cent of investors rate SGX-listed firms as “very transparent”, while 69 per cent said companies are only “somewhat transparent”, indicating room for improvement.

Importantly, 90 per cent agreed that engagement affects valuation and 95 per cent said they were willing to tolerate short-term underperformance if companies communicate a clear and credible long-term strategy.

In other words, the vast majority of investors prioritise transparency above other considerations.

The report also noted that “companies engage with investors for varied reasons – some see it as a channel to raise capital, others as a way to enhance branding and visibility, and still others treat it as a compliance obligation with little strategic intent”.

If this remains the case, and the majority of companies continue to favour opacity over transparency, then SGX’s latest reforms will not work as intended.

The reality that corporate Singapore, sponsors and all financial intermediaries have to recognise is that with lighter rules, there is no longer any excuse for poor or perfunctory disclosure.

This means viewing disclosure not as a box-ticking exercise, but as a vital communication channel with shareholders and the market.

Financial statements are currently typically accompanied by dense, technical language that obscures more than it informs. Explanations for significant changes in performance are sometimes perfunctory, and the “use of proceeds” from fund-raising exercises is often buried deep inside prospectuses and couched in broad, generic terms.

This has to change. If the watch list is gone and listing maintenance is made easier, companies must take the initiative to explain their performance, prospects, and risks with candour and clarity.

They must also be proactive in disclosing material developments and not wait for rumours or regulator prompts.

Good disclosure does not mean giving away trade secrets or competitive information. It means providing investors with sufficient insight into how management is making decisions, what assumptions underpin their strategies and all attendant risks.

For Catalist companies, sponsors will have to up their game as they are instrumental in serving as a bridge between companies and the market.

Investors, too, have to play their part. If companies are expected to be more transparent, investors must also take the time to read, question and interpret the information provided. More retail investors should also take the time to attend corporate meetings and engage senior management.

At the same time, analysts, fund managers and financial media have an important role to play in interpreting corporate information and holding companies accountable.

Regulators too will have to play their part by coming down hard when the rules are broken in order to strengthen trust that the system will look after the interests of investors.

SGX has done its part by modernising the rulebook and signalling faith in market discipline. The ball is now firmly in the court of listed companies, intermediaries and investors. In short, the market has got what it wanted. It must now prove it deserves it.

• The writer is Mr David Gerald, Founder, President and CEO of the Securities Investors Association (Singapore)