Speech by Mr Tharman Shanmugaratnam, Minister for Finance at the SIAS 10th Anniversary Dinner Celebrations on 7 October 2009, 8.30pm at Raffles City Convention Centre07 Oct 2009
1. It gives me great pleasure to join you this evening to celebrate the 10th anniversary of the Securities Investors Association ("SIAS").
2. SIAS was founded in less than propitious circumstances in June 1999, to pursue the legitimate rights of investors in the CLOB market. Because of the efforts of the public-spirited Singaporeans who rose to the challenge, CLOB investors were assured of their legal position and knew that they could resist offers that were being made on greatly unfavourable terms. Eight months after SIAS was formed, they were able to obtain terms of settlement which, although unpleasant, most investors found acceptable in the circumstances. The agreement was signed between SGX and KLSE, but things would have been different without SIAS.
3. Till today, SIAS remains the foremost proponent of investors’ rights. It has also expanded its work beyond promoting investors’ interest, to promoting corporate governance and spearheading initiatives to educate the general public on financial matters. Today it has about 70,000 members. It is not surprising that David Gerald, its President since inception, was among six outstanding individuals and organisations that received a Special Achievements Award from the Singapore Exchange (SGX) just a month ago when it commemorated its own 10th anniversary.
4. SIAS has provided steadfast and independent representation of investors’ interests. Its approach has been to engage in firm, measured and constructive discussions with relevant stakeholders to resolve issues. In the recent matter concerning defaulted structured products, SIAS played an active role by organising forums and providing information to aggrieved investors through its answers to 'frequently asked questions'.
5. There is much more work ahead in retail education - both in reaching more investors, and deepening their knowledge. Not everyone will need to master the different techniques for evaluating the fair value of a stock or any other investment. But every investor should be guided by the simple and universal principles of investing. Most fundamentally, by the fact that financial markets offer no free lunches, and that if anyone is promised higher returns it will almost always mean that he is being exposed to higher risks. This is also why it is incumbent on financial institutions and advisors to make the downside risks perfectly clear and simple to the retail investor when selling any investment product.
6. Another key area of focus for SIAS has been corporate governance. We know that’s critical. Strong corporate governance standards and practices are one of the fundamentals upon which Singapore's reputation as a trusted and competitive international financial centre is built. We are consistently ranked highly in corporate governance in various comparative studies, but here too there is ample room for improvement.
7. As we learnt during the Asian financial crisis and the recent global financial crisis, it is the companies with robust standards of corporate governance that are better placed to keep the loyalty of investors when the flight to safety occurs. I am given to understand that preliminary research by the recently established Centre for Corporate and Investor Responsibility at SMU shows that this is indeed the case for Singapore firms as well. The Centre developed the Singapore Corporate Governance Index to assess corporate governance standards in Singapore firms, and found positive correlation between the index and firms’ performance. This will enhance the proposition for companies to embrace good corporate governance as a tool for sustained corporate performance.
8. The recent crisis has also highlighted various weaknesses in corporate governance arrangements in the business of finance especially in the advanced economies. In many instances, the combination of accounting standards based on fair market value, market competition and internal remuneration structures had the effect of rewarding risk-taking aimed at short-term returns. Discussions are underway globally to address these issues, and refocus the banks on the long term interests of their clients. We did not suffer excesses on anything like the same scale in Singapore. But we must take in the important lessons to be learnt from this global crisis and keep up the momentum in our efforts to enhance corporate governance.
9. Improving corporate governance is a collective responsibility. In this regard, I would also like to recognize the SIAS partners from academia, professional institutes, industry associations and the media who have contributed to the SIAS Investors’ Choice awards tonight.
10. This has been an eventful decade. SIAS has spared no efforts to promote corporate governance, to actively empower retail investors and champion their interests. I urge you to continue to keep up your tradition of firm, independent and constructive representation and to do more on the investor education front, so that you continue to stay effective and relevant to retail investors.