Hyflux Approval of securities for sale to retail investors
In 2016, Hyflux issued $500 million in perpetual securities that were offered to non-savvy retail investors. 

A 197 page prospectus were lodged with the Monetary Authority of Singapore and with the Singapore Exchange for the sale of these securities.

There was a statement in the prospectus that MAS does not make any opinion of the suitability of the securities. However, this statement was probably not noticed by most investors.  In any case, the investors would accept that this is a routine statement.

The investors were allowed to buy the perpetual securities using the ATM machines provided by the banks.

The prospectus contained a lot of information that would probably not make any sense to the retail investors, if they bothered to read its 197 pages. Most likely, few did.

I could not find in the 197 pages any hint that Hyflux was in financial trouble at the time of the issue of the prospectus. The astute analyst might have noticed that Hyflux suffered a drop in profit in 2015, but it could be due to the nature of the contracting business that Hyflux was involved in.

There was no mention in the prospectus of the severe loss that was being incurred by the Tuaspring integrated water and power plant.

If the actual financial position of Hyflux was stated at that time, it is likely that many investors would have avoided the perpetual securities. Most of them are likely to be risk averse.

I wish to make the following suggestions on how the disclosure can be improved for future securities that are being offered to retail investors:

a) Ask the issuer to give provide a summary, of not more than five pages, to describe the key financial aspect and risk of the securities. Make the board of directors responsible for this summary.

b) Ask the issuer to pay a prescribed fee to the regulator. This regulator can use this fee to appoint an independent financial adviser to study the security and make a recommendation to the prospective buyers. The adviser should be appointed by the regulator, and not the issuer.

These measures will probably prevent questionable securities from being offered to the retail investors in the future. 

I hope that the Monetary Authority of Singapore and the Singapore Exchange will consider these measures.

Tan Kin Lian

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