Singapore, Hong Kong take steps to remove conflict of interest

Thu Jul 21, 2016 6:15am EDT
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By Michelle Price and Anshuman Daga

HONG KONG(Reuters) - Hong Kong and Singapore are taking steps to curb the regulatory powers of their local bourses to remove a perceived conflict of interest and improve the quality of listed companies.

In Hong Kong and Singapore local exchanges act as front-line regulators, meaning they police the same companies that pay their revenues and shareholder dividends.

This conflicting role has led Singapore Exchange (SGX) and Hong Kong Exchanges & Clearing (HKEX) open to the trading of companies that later got embroiled in several accounting scandals.

To address the issue SGX and HKEX have unveiled radical shake-ups.

SGX announced this week it was spinning off its regulatory functions into an independently governed subsidiary. HKEX proposed last month to remove CEO Charles Li from the listing decision-making process, handing more power to the local securities watchdog.

"It's definitely a positive for investors. There has been a lot of concern that for-profit exchanges are not able to independently regulate the companies that list on their markets," said Jamie Allen, secretary general of the Asian Corporate Governance Association.

Governments globally have been slow to strip exchanges of legacy regulatory powers.

Even in the United States, usually at the forefront of best corporate governance practice, some exchanges have held onto statutory immunities afforded as part of their regulatory function. As such arrangements persist in the U.S., some have questioned whether the latest moves in Hong Kong and Singapore will successfully stamp-out conflicts.   Continued...

A Singapore Exchange logo sits outside their head office in Singapore April 22, 2015.   REUTERS/Edgar Su/File Photo