By Gabriel Chen

INDUSTRY players have given a guarded thumbs-up to new measures proposed by the Singapore Exchange (SGX) to beef up standards of corporate governance for listed companies.

But they also warn that fine-tuning would be needed to ensure listing costs do not become onerous.

SGX chief executive Hsieh Fu Hua announced on Saturday that chief financial officers (CFOs) and independent directors should be appointed at least six months prior to an initial public offering (IPO) submission, so they have enough time to perform due diligence on an IPO candidate.

He also said newly listed companies should appoint 'governance advisers' - most likely corporate lawyers or issue managers - for an initial period of two years post-IPO to help firms put in place robust frameworks for reporting, accountability and internal control.

The planned changes - for which no firm timetable has yet been announced - were supported by most of those contacting by The Straits Times, many of whom suggested further points of consideration for the SGX.

Mr Alan Yong, former CFO of Labroy Marine and now finance director of Beng Kuang Marine, said SGX's spelling out of minimum timeframes was a good idea.

However, he thought CFOs should come on board much earlier than the proposed six months, as they have a critical role to play in the drawing up of cash flows and other financials. Mr Yong's suggestion comes despite him knowing that - unlike directors - CFOs are not personally responsible for the IPO prospectus.

Mr Ding Hock Chai, co-head of Kim Eng corporate finance, said having independent directors appointed six months before the IPO submission did not make any sense if they were doing nothing at the firm.

'We should be asking how much they are doing within the time they are there before IPO submission, rather than how long they have been there,' he said.

While beneficial to investors, some fear that the measures could saddle firms with additional costs. And, if promising companies find the listing process too costly and cumbersome, Singapore's attractiveness as an important IPO hub could be put at risk.

Mr Robson Lee, a partner at Shook Lin & Bok, estimates that if the SGX plan is implemented, firms looking to list may have to cough up an additional $235,000 for the first year, over and above typical IPO fees of $1.5 million.

He arrived at these figures by factoring in the cost of hiring one CFO and three independent directors for six months, then adding the estimated cost of appointing governance advisers for a year. The SGX has proposed that they be hired for two years post-IPO.

'I think one has to take a balanced approach to this,' said CIMB-GK Securities chief executive Carol Fong.

'If we place too many restrictions on the CFOs and independent directors, the ready pool of qualified professionals may shrink as they may find the (proposed measures) too onerous.

'With the right balance, I believe Singapore will still be attractive as a listing hub.'

The SGX initiative comes at a time when there have been a slew of accounting irregularities that have emerged at numerous China-based firms listed here, causing investors to suffer considerable losses.

Currently, there are no rules specifying the exact duration by which companies must appoint CFOs and independent directors before the listing applications are submitted to SGX.

The rule of thumb is to appoint them several months before IPO submissions, though there are cases when appointments are made after IPO submissions, said a corporate lawyer.

This article was first published in The Straits Times.