By Mak Yuen Teen
According to the OECD Principles on Corporate Governance, having an effective regulatory framework and enforcement is fundamental to good corporate governance in a market. In fact, this is the first of the six OECD principles of corporate governance. Without effective enforcement, market players like directors, officers and other intermediaries will not take their responsibilities seriously and investors will not be adequately protected. Effective enforcement requires that regulators be well resourced and that enforcement is transparent, consistent and timely.
In this regard, I have been rather impressed with the Hong Kong and Malaysia markets. Both the securities regulator and stock exchange in these markets disclose detailed enforcement statistics, including information about the types of breaches for which enforcement action is taken and in some cases, even statistics on investigations that are being initiated or in progress. I think this kind of transparency builds confidence among investors in the integrity of a market and also sends an important signal to directors, officers and other market players about the lack of tolerance for various types of misconduct.
There is a lot of research which shows the relationship between enforcement and development of a capital market. The approach taken by Hong Kong and Malaysia augurs well for the future of these markets.
Readers may wish to refer to the following links to find out more.
Hong Kong
Securities and Futures Commission: http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/enforcement-news/
Hong Kong Exchange: https://www.hkex.com.hk/Listing/Rules-and-Guidance/Disciplinary-and-Enforcement/Enforcement-Statistics?sc_lang=en
Malaysia
Securities Commission: https://www.sc.com.my/enforcement/enforcement-statistics/
Bursa Malaysia: http://www.bursamalaysia.com/market/regulation/enforcement/enforcement-statistics/
