China Sky Chemical Fibre

[hyom]

Anyone who imagines that SGX will adequately protect investors, when doing so will hurt their profits, is being naive. Think about SMRT/SBS/Comfort - if they truly put customer service first, their profits will be hurt. Any monopoly will seek first to maximize profits. Service is delivered only to meet regulatory requirements.

This illustrates why state-owned monopolies that serve a social purpose should not be privatized. Once privatized, management cannot be blamed for putting profits (shareholders) ahead of service (customers). They have a fiduciary duty and personal interest to look after shareholders' interests first. But does this sound right? How can the needs of a few thousand shareholders outweigh the needs of society at large? How can the needs of thousands of SMRT shareholders outweigh the needs of millions of Singaporean commuters? It is simply unconscionable.

[brattzz]

To be fair, SMRT was running along fine until recently... and i dun think it's entirely SMRT fault, LTA will also have to be responisble...

LTA appears to be solely the technical dept of SMRT,

SMRT is just the hand and leg operators and estate manager of the MRT stations and their shop spaces!

Of cos i may be wrong... so let's wait for the BOI's enquiry!

[sgd]

PRC people CAN be rather loud, how lian and also display combativeness to challenge authority.

PRC smell blood and goes in for the kill and tries to bully the small official.

will sgx try to cool the situation placate and back down or will they set an example.

very interesting to see how our mighty SGX going to handle this.

[Stocker]

SGX will find an excuse to back out, balless one la. They will apologise behind.

[Qiaofeng]

Sad to say, very few independent directors want to be so hands-on that they are in charge of releasing cash. These directors are "non-executive" directors for a reason - usually they are just there to collect their fees. It is a quid pro quo - they sit on their friend's board and say that everything is fine, and in return they get some pocket money and their picture in the annual report.

That said, disbursement can be controlled by passing the money through an escrow account held by a law firm in Singapore. That way the law firm is liable if they release the money improperly. Of course, this will raise costs tremendously since the law firm must do its checks before releasing the money.

Basically, this type of escrow requirement will mean that NOBODY will list on SGX.

3) Extradition - the status quo is that the perpetrators of fraud gets away scot free.
But this cannot be said to be an acceptable norm of biz mode or the "rule of law" type of exchange that SGX aspires to be. Surely, it is not sustainable!
Is there no incentive for SGX to lobby for changes to protect investors (aka customers) who uses the exchange platform from whom SGX derives revenues and incomes ?

A) Financial fraudsters getting away scot free is the norm everywhere in the world. Even in the case of Enron nobody went to jail. Welcome to the world of finance. Invest at your own peril.

The SGX is paid directly by listed companies (listing fees) and the stockbrokers (clearing fees). To increase revenue, it can:

1. Increase the number of listings.

We see this with the introduction of ADRs as well as the proliferation of S-chips.

2. Encourage trading.

We see this in the $300m invested to accomodate high-frequency trading, plus the introduction of covered warrants and extended settlement contracts. All these are clearly to encourage trading.

Notice that "protecting investors" does not produce any visible short-term benefit to revenues. In fact it reduces the number of listings (and thus listing fees) since the dubious companies are prevented from listing. Therefore SGX has no incentive to protect investors, but it has millions of incentives to increase the number of listings and to promote churning.

B) Anyone who imagines that SGX will adequately protect investors, when doing so will hurt their profits, is being naive. Think about SMRT/SBS/Comfort - if they truly put customer service first, their profits will be hurt. Any monopoly will seek first to maximize profits. Service is delivered only to meet regulatory requirements.

As usual, YMMV.

For A) Enron Case
Jeffrey Skilling did serve prison terms. Originally sentenced to 24 years and 4 months and fined $45 million USD. The appeal pending re-sentencing is more to do with the justice system than the fact whether "rule of law" applies.
Andrew Fastow also served six years, followed by two years of probation. He was released pre-Christmas, 2011.
Kenneth Lay- was indicted. He is presumably dead---- unless U believe the Bush-related conspiracy theories.

So the fraudsters were punished.


For B) , SGX.....

U take a very pessimistic and cynical view of their regulatory efforts. But, remember they have NOT only a profit objective but also a regulatory and fiduciary duty housed within the same entity.
In other words, they are duty bound by their constitution/set-up to protect investors.
A more mercantile-type biz view, would be that anything that is short term and not sustainable in the long term would be detrimental to SGX own long term survival. Encouraging trading and more listings is in SGX long term interests. Indiscriminate promotion of listing of "rogue" companies will ruin SGX long term interests, since good companies would not want to be lumped together and bad corporate governance would scare away intelligent and discriminating investors. So there is alignment of interests which incentivices SGX to do something to clean up the mess.

Investment approach
Our views may differ.
U may have stated the facts (Enron) wrongly.
But, I respect the approach, U adopt to investing------ It is a dog-eat-dog world (No punt intended). Nobody owes U a free meal.
Assume the worst, most cynical case.

[d.o.g.]

For A) Enron Case
...
So the fraudsters were punished.

I stand corrected. It's been a long time since I checked on Enron. I remember watching the movie about it - The Smartest Guys in the Room. At the time the movie was made (2005), nobody had gone to jail yet. That's probably how the "bad guys get away" idea got stuck in my head.

For B), SGX.....

U take a very pessimistic and cynical view of their regulatory efforts. But, remember they have NOT only a profit objective but also a regulatory and fiduciary duty housed within the same entity.

I plead guilty to being a cynic, if only because I have seen so much good money thrown after bad ideas, and obvious conflicts of interest. SGX has a regulatory duty i.e. ensure all its listings adhere to the listing rules. It does not have a fiduciary duty i.e. warning you away from bad investments.

Judging from the S-chip debacle many people would say that SGX has not done its regulatory duty properly, or at all. And I would point out one case in which a Temasek-linked company treated minority shareholders unfairly and was not censured:

Capitamall Trust did a rights issue in Feb 2009. In this rights issue, controlling shareholder Capitaland was paid a sub-underwriting fee in exchange for agreeing to underwrite a portion of the rights issue. Now, it is not wrong to be paid to underwrite a rights issue, to avoid undersubscription. But Capitaland received an underwriting fee even for its pro-rata share of the rights shares! Capitaland effectively received a discount on its pro-rata entitlement, which other shareholders did not get.

For underwriting part of the excess rights, Capitaland was paid 2.25% of the rights issue price. For underwriting its own pro-rata share of the rights, Capitaland was paid 1.75% of the rights issue price i.e. it got a 1.75% discount.

Was this unfair? You bet. Did SGX do anything? No. This is just one of the many reasons I am a cynic. I think it helps me stay alive in the financial markets. Assuming everyone is there to help you make money is a sure route to disaster.

[Temperament]

Hi, i like to share a quotation now:-
"In investing, what separate the victims from the victors is Discipline and Skepticism".
i think we have to be a skeptic to survive in the investment world.
my simple 2 cents.

[Qiaofeng]

It does not have a fiduciary duty ....

SGX administer the CDP. As a depository agent, the duties should be strictly custodial in nature. It should not take part in activities that promote rights issues, takeovers---in short------- corporate actions that will enrich its coffers which as is; they do not.
However, by offering the SBL ( Securities Borrowing and Lending) facility and earning fees ( in effect competing with brokerages who also offer this services); SGX (or CDP) is in effect promoting hedging ( or shorting) activities to earn extra fees. That IMHO, contradicts the trustee type custodial services that the CDP offers. It is the legal duty of a fiduciary to act in the best interests of the beneficiary----- the CDP is a "defacto" trustee account for investors who trade on SGX; including foreign held shareholdings and should not participate in such promotion of hedging activities. CDP should desist offering the SBL.

Judging from the S-chip debacle many people would say that SGX has not done its regulatory duty properly, or at all. And I would point out one case in which a Temasek-linked company treated minority shareholders unfairly and was not censured:

Capitamall Trust did a rights issue in Feb 2009. In this rights issue, controlling shareholder Capitaland was paid a sub-underwriting fee in exchange for agreeing to underwrite a portion of the rights issue. Now, it is not wrong to be paid to underwrite a rights issue, to avoid undersubscription. But Capitaland received an underwriting fee even for its pro-rata share of the rights shares! Capitaland effectively received a discount on its pro-rata entitlement, which other shareholders did not get.

For underwriting part of the excess rights, Capitaland was paid 2.25% of the rights issue price. For underwriting its own pro-rata share of the rights, Capitaland was paid 1.75% of the rights issue price i.e. it got a 1.75% discount.

Was this unfair? You bet. Did SGX do anything? No. This is just one of the many reasons I am a cynic. I think it helps me stay alive in the financial markets. Assuming everyone is there to help you make money is a sure route to disaster.

The recent Reits saga highlights such conflicts of interest-----there are gaps and grey areas in the corporate governance which MAS must address. It has promised to look into the issues and offer new directives.
Let's hope something positive comes out of it.

[freedom]

most depository agents and trustees would offer SBL service with the consent of the share depositors, just like banks offer loan service using depositors' money. I don't see any wrongdoings with CDP offering such service.

[Qiaofeng]

most depository agents and trustees would offer SBL service with the consent of the share depositors, just like banks offer loan service using depositors' money. I don't see any wrongdoings with CDP offering such service.

Consider this.....
SGX censures CSCF ( that fictitious China Sea Chemical Fibre which we alluded to earlier).
It makes an announcment that is negative to CSCF (assume not suspended).
The next day a shortist (hedgefund say) borrows a big chunk out of the CDP thru the SBL facility and shorts CSCF shares and makes a big pile.

So we have one arm of SGX ( regulatory) acting in a way that could allow another arm of SGX (fiduciary/CDP) to earn fees from it.

In effect, CSCF shareholders get screwed becos they had allowed their shares thru CDP to be loaned (i.e. CDP has acted in a way contradictory to the legal duty to protect the interests of the beneficiary).

Debatable on intent and SGX would probably cite "Chinese walls". But why allow such potential conflicts of interest from arising?

Btw that is how I felt, when I consented to SBL and saw the massive shorting of many blue chips during the last GFC----- why is SGX profitting on one hand and yet appearing to be concerned by publishing the list of Buy-in of securities daily------ hence, I cancelled the consent to SBL.

Shorting/hedging serves a useful purpose and is the very reason for undervalued shares (a gift to value investors!!)----- but remember the topic is on SGX and the potential conflicts of interest.