Speech by Mr. Louis Ng Kok Kwang, MP for Nee Soon GRC at the Second Reading of the Securities and Futures (Amendment) Bill [Bill No. 35/2016]
Madam, I applaud the amendments proposed in this Bill as it contributes to a higher level of transparency and enhanced protection for retail investors. That said, I would like to seek a few clarifications.
Education required for the protection of retail investors
Firstly, with the rapid ascent of technology, the financial industry has witnessed a transformation in the development and delivery of financial products. Today, a retail investor can access and trade various financial products such as stocks, bonds, futures and options through voice or electronic trading.
However, this ease of access and wide range of financial products could bring about unintended consequences, especially for retail investors. Recently, there has been a sharp rise in scams involving online trading in binary options with more than 30 reports of such scams lodged to date (as of 14th Dec) and investors losing more than S$1 million to unregulated binary options trading platforms. The complexities of such derivative products may not be fully understood by a retail investor who lacks access to professional advisory services.
While an investor with the privilege of a private banker’s advisory may be well-hedged against such risks, I remain concerned for retail investors.
We must always strengthen our regulatory framework to ensure the average retail investor is protected, as they remain exposed to an increasing range of investible products, in particular, financial derivatives.
Asymmetrical information generally contributes to false triggers and lead to costly investment decision.
As such, educating retail investors should and must always remain a key focus of financial market regulation. Can the Minister share how the Ministry intends to do this?
Declaration of short-selling positions
Secondly, excessive short-selling distorts the fundamental function of a financial market – which is the signalling effect of price. By requiring market participants to declare their short-selling positions, as prescribed in Clause 74 (which inserts the new Part VIIA), it will go a long way to ensure responsible trading.
Most importantly, it would deter excessive short selling by syndicates at the expense of retail participants.
Strengthening the enforcement regime against market misconduct
Thirdly, I am heartened to read about the stiffer penalties for people who flout disclosure requirements, referring to Section 137ZJ and 137ZK. However, will the Ministry consider imposing a 2-year trading ban instead of just fines, for those who fail to meet disclosure requirements, or for those who present information which gravely affects the movement of prices, thereby distorting efficient trading activities?
What is at stake is the credibility of our financial markets, something which should not be taken for granted.
Madam, the relevant bodies should continue to ensure that Singapore’s capital markets keep pace with key developments and standards in the international market.
But in this pursuit, we should also ensure that retail investors understand the complicated risks involved in the various classes of investment products and the penalties of misconduct. That said, Madam, I stand in support of this Bill.