Regulatory enforcement: Then and now…..

Published January 17, 2018

By Mak Yuen Teen

Yesterday, five men were charged with intentionally failing to disclose material information to the SGX. The news report can be found here:

I will not comment on the case but will only add that I have written about this company many years ago.

The alleged offences were committed between 2007 and 2010.  Therefore, it took more than 7 years for the charges to be laid. I went back to look at an OECD/World Bank paper which I co-wrote and  presented at an OECD Asian Corporate Governance Roundtable in 2006. One of the themes of the roundtable was the implementation and enforcement of rules and our paper was about the Singapore experience at that time.

For those who are interested in what it was like more than 10 years ago, I have posted the article below. Just a note that certain things in the paper are outdated, such as the lack of statutory derivative action for listed companies in Singapore which is no longer the case. The paper looked  at various types of regulatory actions and made some proposals for changes.

Some of the higher profile scandals at that time occurred at ACCS, Auston International, Citiraya, Informatics, China Aviation Oil and NKF. In terms of criminal action for these commercial misconduct cases, the following is a quote from the paper:

“In most cases, the defendants pleaded guilty to the charges. Few defendants contested the charges, and the cases which have concluded resulted in successful convictions. Thus far, all the concluded cases have resulted in convictions. In the cases reviewed, the time taken for offenders to be charged after the scandal first came to light ranged from 5 months to 19 months. The convictions and sentencing occurred 1 day to 10 months after the charges were first filed. Therefore, enforcement actions have generally been prompt.”

It is always better late than never, but enforcement actions that are timely would be far more effective, both as a deterrent and as a preventive measure. If enforcement action is too slow, those who have committed misconduct can continue to do so with impunity until they are arrested. In the meantime, they could cause considerable harm to other companies.

Therefore, I always believe that there must be a range of regulatory sanctions available. Criminal cases, especially complex ones, may understandably take a while. However, administrative actions such as reprimands, which can result in individuals being barred from being involved in the governance and management of companies, can be taken more swiftly. Reprimands and disqualification may be sufficient in some cases. Other actions can follow for more serious breaches.

It may be time for me to write another paper on this subject again and to review our enforcement of rules. However, I am not sure if my conclusion will still be that “enforcement actions have generally been prompt”.


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