This letter was submitted to ST Forum on 27 June 2012 but was not published.
I read with concern the proposal by SGX to introduce new listing rules for exploration companies in the mineral, oil and gas industry. (“SGX to ease listing rules for energy, metals firms” ; 21 June 2012)
Exploration companies come with a high level of risk and many do not succeed. No matter how stringent our listing requirements might be, eventually we are going to see some failures.
While SGX has in recent times conducted seminars to educate the public about this industry, most retail investors will not be in a position to evaluate such companies properly.
Unfortunately, they might end up facing a total loss of their capital when the companies fail to deliver on their exploration.
Much progress have been made by MAS in the past year with the implementation of the Customer Knowledge Assessment (CKA) and Specified Investment Products (SIP) in order to protect retail investors.
I hope SGX and MAS will consider the business needs of listing the exploration companies against the interests of retail investors carefully. One way is to restrict such investments to only institutional and accredited investors.