Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." This Bill which seeks to amend the Companies Act may, in certain of its provisions, be regarded as an extension of the philosophy that is basic to the Securities Industry Act. That is to say, that in great measure this Bill is concerned with matters involving the protection of investors. Provision has also been made in clause 4, which amends section 39, for the Registrar to exempt companies from compliance with any requirements of the Act relating to the form and content of a prospectus if, in his opinion, compliance would be unduly burdensome. This amendment is intended to make it easier for foreign companies with innumerable subsidiaries to seek listing on the Singapore Stock Exchange. The provisions that appear in clauses 9, 10, 11 and 15 are in one way or another concerned with dealing in securities by officers, agents and employees of a company, with disclosure of shareholdings held by directors or with the extension of powers to ascertain the beneficial ownership of securities where, for example, such securities are held in nominee names. They are, in short, designed to ensure that persons, by reason of their position in a company, do not take advantage of confidential knowledge of the affairs of a company by buying or selling the shares of their companies for their own profit or for other persons' profit and to the disadvantage of shareholders or investors generally, and to ensure that these persons make full disclosure of their shareholdings. The concepts involve not only the dishonest form of share trading known as insider trading but also the duty of directors of a company to make a general disclosure of their shareholdings so that the investing public are aware of what the managers of a company are doing with their shares in the company. With regard to insider trading -which may loosely be said to be the use of confidential information before a rise or even a fall in price of a share or stock - the existing section 132A has been considerably expanded in clause 9 to cover not only the dishonest use of confidential information by officers of a company (including directors) for their own financial advantage or that of other persons but also of agents of a company (such as bankers, auditors, solicitors or stockbrokers) and employees similarly misuse such confidential information for their own financial advantage or that of other persons. Equally significant, this concept that appears in subsection (1) of section 132A extends to apply to dishonest use of confidential information by such persons to gain advantage for themselves or other persons where there is a possibility of a take-over offer being made to another corporation, or where there is possibility of a substantial commercial transaction being entered into with another corporation by dealing in the securities of that other corporation on a stock exchange. Furthermore, the Minister has power under subsection (7), for the protection of investors, to restrict dealings in the securities of a corporation by an officer, agent or employee of that corporation during certain periods of a financial year of a corporation when such persons are, or are likely to be, in possession of what may be called privileged price-sensitive information regarding a company's securities. The Minister under this section may also direct a committee of a stock exchange or the committee may of its own motion investigate any dealings in securities and for this purpose may summon persons to give evidence. This power taken together with the powers that may be delegated by the Minister under section 208 (by clause 15) will enable a committee of a stock exchange to get behind nominee holdings, which is one of the methods used by insiders to acquire large and secret holdings in a company that is likely to be made the target of a take-over bid. Though we have attempted to make insider trading a specific criminal offence, it would be rash to claim that the section covers all forms of insider trading or that a successful prosecution can be launched in every case where insider trading is suspected. The section does not, for example, deal with a situation where information is acquired by third persons by improper or dishonest means, such as the bugging of company discussions. But it is not to be thought that such persons can use information acquired in this way with impunity. They could still be caught in the catch-all provision (section 87) of the Securities Industry Act which is drafted in the widest possible terms to deal with all forms of fraud or deceit used in the purchase or sale of securities. A prosecution for insider trading could he launched under that section against any person who misuses confidential information. However, it is not intended that persons who have acquired information in a perfectly proper and legitimate manner and who are not insiders should be penalized under either of these offence-creating sections. But it is the intention that if an insider deliberately benefits an outsider through the misuse of his confidential information, he will be liable under the provisions as if he had received the outsider's benefit. There are additional problems of definition in the section which are extremely difficult to cover with any degree of precision. For example, an area of uncertainty inevitably arises by the use of the words "affect materially the price of the subject matter of the dealing on a stock exchange" in relation to the non-disclosure of the confidential information. Such problems will necessarily have to be left to a court to decide, having regard to the particular circumstances of the case. Again, the section is limited to dealings in securities with an insider on a stock exchange and does not extend to dealings in securities that take place outside a stock exchange. Experience in the application of this provision will tell whether further amendments to this provision are going to be necessary. Since the proposed new section extends to employees of a company, it is doubtful if a company will be able to tell its staff that the forthcoming company results are going to be good; again where staff purchase options in shares, the time when these options are exercised could create difficulties, though the Minister could in this latter respect exempt such dealings in regulations made under subsection (7) of new section 132A. Despite these and other purely drafting problems, the Government is determined to provide and enforce a legislative framework whereby insider traders can be brought to book for it is now generally agreed that this dishonest form of trading is just as reprehensible as other forms of dishonest trading which are punishable under Part X of the Securities Industry Act. With regard to the provisions in the keeping of a register of directors' share-holdings and the general duty of directors to make disclosure of their holdings that are at present provided for in section 134 of the Act, these provisions have been substantially redrafted. The effect of the new section is to oblige a director to make disclosure to the company not only of the details of his shareholdings but also debentures and participatory interests, rights, options and contracts to which he is a party, and for the company to enter into its registers, amongst other things, the price and the date of the transaction. These details must be entered by the company in its register within three days of receiving notice from a director. The Registrar has the right to require the company to submit to him a copy of the register or any part of it. The remaining provisions are much the same as in the existing section except that the penalty for default has been considerably increased. The new section 135 is related to section 134 and obliges directors to comply with the latter section and also to advise of any change in the particulars of his holdings within 24 hours of the change. A company, however, has a period of seven days within which to advise other directors of the company of events occurring under subsection (1). Certain defences to a prosecution under this section are made available. In clause 13 the intention is, as mentioned in the Explanatory Statement, to spell out with greater particularity what are the powers and duties of auditors of companies in regard to reports or accounts and consolidated accounts. His duties are now put in a more positive form; for example, he must now form an opinion as to whether he has obtained all the information and explanations that he required rather than, as in the existing provision, state in his report that he has not obtained all the information and explanations required. Furthermore, if he is satisfied that there has been a breach or non-observance of any provision of the Act, and the matter has not been or will not be adequately dealt with in his report on the accounts or the consolidated accounts or by bringing this matter to the attention of the directors, he must forthwith report the matter in writing to the Registrar. So that an auditor may fearlessly and conscientiously carry out his duties as auditor, by a new section 174A, he is not, in the absence of malice, liable in any action for defamation. Neither shall any other person be liable who, without notice, publishes a document prepared by an auditor in the course of his duties and required to be lodged with the Registrar. The next significant feature of the Bill appears in clause 14 which amends section 179 dealing with take-overs and mergers. In July of 1971, Members might recall that I indicated in a statement in Parliament that a study would be made of the London City Panel and Code on Take-overs and Mergers to ascertain if a similar non-statutory scheme would be suitable and appropriate for introduction into Singapore, either as an alternative or supplemental means of controlling take-overs and mergers. I shall reserve for another occasion a statement on the nature of the Code and the principal functions of any body, panel or committee, and the constitution of membership thereof that may be set up to administer the Code. On this occasion I shall confine myself to giving brief reasons, based on advice tendered to me by the Securities Industry Council, why the non-statutory Code should be adopted in Singapore in addition to the statutory provisions dealing with take-overs and mergers. The great advantage of a non-statutory Code is its flexibility, a very necessary attribute when one is laying down in effect what amounts to business standards of behaviour in take-over and merger situations rather than the laying down of strict legal rules. Such a Code can be amended easily to deal with new situations that might arise or to revise existing concepts that appear in the Code. Again, the creation of a body, committee or panel, to supervise and administer take-overs and mergers that consists of persons who are conversant with the workings of the securities market, ensures that the experience and expertise of those persons can be utilised in and brought to bear upon this complex field of business. But more than anything else there is the consideration that our existing statutory provisions, standing by themselves, are inadequate to deal with the many problems likely to arise in take-over and merger situations. Although it would not be difficult to expand the existing statutory provisions to ensure greater disclosure and equality of treatment of shareholders and so on, the statutory provisions would still be unsatisfactory for, by their very rigidity, they militate against the prompt and expeditious settlement of take-over problems and can never be detailed enough to cover the wide diversity of take-over techniques, bid tactics, patterns of share ownership and control, the consideration offered, and so on, that may occur from time to time. The inevitable delay in seeking amendments to statutory provisions by way of an amending Bill with the difficulties that this may cause to a pending takeover should also be borne in mind. A more practical consideration is that, owing to the serious shortage of qualified and trained staff possessing the appropriate expertise in the Registry of Companies, it is not at the present time possible for this department effectively to administer and supervise take-overs under a purely statutory scheme. It would be some considerable time before persons of the right calibre become available and, even then, it is doubtful if they could have the same amount of expertise in matters connected with the securities industry that one would expect to find and utilize in the private sector. For these brief reasons, it is considered that a supplemental non-statutory Code is likely to be a more efficient and expeditious method of administering and controlling take-overs and mergers than non-statutory provisions. I should add, at this point, that if this amendment is passed and a body, panel or committee is constituted to administer a non-statutory Code, it is envisaged that, unlike the existing London City Code, the powers conferred upon such administering authority would be much greater than is conferred upon its London counterpart. These powers would be conferred under the Securities Industry Act and in the provisions of this Bill. The administering authority would still, as in London, however, have consultative and supervisory functions. It is also important to mention that this administering authority would work very closely with the Quotation Section of the Stock Exchange which would retain many of its existing functions with regard to companies concerned in take-overs and mergers. The Quotation Section would, for example, satisfy itself that the offer documents meet the requirements of the Code. It will, of course, be necessary for the Stock Exchange Rules to be considerably expanded in regard to its takeover and merger rules, and the Committee of the Stock Exchange are looking into this matter. In the result, section 179 has been amended to enable the Minister, in subsection (11) thereof, for the more effective administration, supervision and control of take-overs and mergers, to direct by notice if he considers it necessary in the public interest or for the protection of investors that all parties in a take-over and merger transaction shall, in addition to compliance with the Tenth Schedule, be bound to abide by such general principles and rules of a non-statutory nature as he may determine; these general principles and rules would be administered by such body, panel or committee as the Minister may specify in the notice. If the Minister decides to take action under this provision, it is envisaged that he would direct that provisions similar to the London City Code on Take-overs and Mergers would be binding on all parties to take-over and merger transactions with, of course, such modification as may be necessary to adopt this Code to local circumstances. It is also envisaged that such a Singapore Code would be administered and enforced by the Securities Industry Council, the membership of which would be enlarged to include a number of merchant bankers experienced in take-overs and mergers. In actual practice, it is thought that the Securities Industry Council would create a sub-committee to handle the take-overs and mergers aspect of the Securities Industry Council and to report its decision to the Securities Industry Council for consideration and approval. The other amendment to section 179 will ensure that the body, panel or committee (in fact, the Securities Industry Council) that will be dealing with takeovers and mergers will receive copies of all the notices and statements referred to in that section. Subsection (10) at present provides that such notices and statements should be sent only to the Registrar or a Stock Exchange. Members will also note the amendment made to the Tenth Schedule which also concerns take-overs and mergers (clause 21). The object of the amendments to section 208 (clause 15) is principally to confer upon a committee of a stock exchange, with the approval of the Minister, to make its own enquiries into nominee holdings. The nominee system does have certain advantages, namely, banks sometimes prefer to have complete control over shares lodged with them as security and therefore register the shares in their names; investment managers can buy large blocks of shares in nominee names rather than many small blocks in many names. Again, if large investors are making substantial investments in a particular company, they might not wish it to be generally known since this could have an exaggerated effect on the market price of the company concerned; certain investors do not want to be troubled personally with offer documents collecting dividends and so on, and leave these things to professional advisers acting in nominee names. But these have to be weighed against the disadvantage that nominee holdings conceal the buildup of very substantial holdings in a company and are sometimes used to conceal dishonest insider dealings. While it is not intended at the present time to abolish nominee holdings, it is the intention that greater use will in future be made of section 208 to investigate these holdings. Nevertheless, the whole subject of nominee holdings will be reviewed at a suitable time by the Securities Industry Council. The amendments proposed in clauses 16 and 17, which amend sections 217 and 218 respectively of the Companies Act, enable the Minister to petition the court in certain circumstances for the compulsory winding up of companies that carry on the business of multi-level marketing or pyramid selling. The proposed amendments are, in fact, related to the Bill which has been considered by Members and which is designed to ban pyramid selling in Singapore. The final significant feature of this Bill is concerned with investment companies and is dealt with in clause 18. Members will see from the Explanatory Statement what the effect of the amendments would be to Division I of Part XI. I need not enlarge upon this explanation. The purpose of all the amendments proposed is to relax the rigour of some of the existing restrictions with regard to the powers of investment companies to borrow, to invest in other companies and to underwrite securities, and to relieve them of certain obligations with regard to the articles and prospectuses and particulars to be attached to balance sheets. Only one investment company has been proclaimed as such up to the present time but, with the development of Singapore as a financial and investment centre, more applications will be received from companies to be proclaimed under subsection (2) of section 319. Sir, I beg to move.