Mr Speaker, Sir, I support this Bill, but not in its entirety. Like the curate's egg, some parts of it are good, but not all of it. Before I proceed further, may I declare my interest as a director of a listed company. As the Minister has said, the provisions in the Bill actually fall into two distinct parts - the provisions that deal with the amendments to the Companies Act and the provisions that deal basically with the Central Depository system. It is to the latter that I will confine my observations, leaving my comments on the former to the Committee stage. The logical way to implement a scripless trading system is to first change the law and then design the system. The SES has chosen to do it the other way. They change the system first and now this House is being asked to change the law to accommodate the system. What we have is a system that is not entirely efficient because it still requires share certificates to be issued and share certificates to be registered. And the reason why this less than efficient system has been chosen is that the law was not changed first to enable a company to completely dematerialise scrip. The result is a very unsatisfactory situation - a law which has little coherence and a system which is not entirely efficient. If you look at the provisions in the Amendment Bill, you will see that they are focused entirely from the view of the SES and the Central Depository. The two groups of persons who were most intimately concerned with scripless trading are not taken care of at all. These are the listed companies whose shares are going to be traded on a scripless basis and investors who are being asked to put their money in the market. The interest of these two parties, I submit, have not been adequately taken care of. The Minister has said that the scripless trading system will improve matters, improve security for small investors. May I respectfully differ from him on this. The system has loopholes through which you could drive a double-decker bus and that invites massive fraud. What we have got is the equivalent of a current account but with shares instead of cash. I ask the hon. Members of this House to consider whether they would consider operating a current account under the following circumstances. Firstly, the bank holding your money does not have to have a cheque or written instruction to pay away your money. Secondly, the bank can debit your account on the instruction of someone who claims to be your broker. In fact, you have no choice about this because you cannot give instructions to them directly. Thirdly, they will send you a statement of account quarterly, and unless you challenge this within seven days, the statement is deemed to be conclusive. Fourthly, if the bank mistakenly pays away your money without your consent, it is not for them to prove that you have consented. It is for you to prove that you did not consent. And fifthly, if the bank pays away your money without your consent, you cannot sue them even if they did so negligently. Would any of the hon. Members consider running a current account under these circumstances? Yet this is the very system that we are being asked to approve in this Bill applying to shares, this is precisely what can be done under the present scripless trading system. Let me give the House some examples of how fraud is facilitated under the new system. I hesitate to do this in such a public forum, lest we give encouragement to crooks. But I think it has to be said. Firstly, the bent financial controller. You have a company that invests money in shares. Under the present system, the scrip is kept by a custodian. Under the scripless system, there is no custodian because there is no scrip. Let us assume the financial controller of this company is a crook. He instructs the company's broker to sell the company's entire portfolio of shares. Under the present system, this will not benefit him one jot because he has to make delivery of the shares before he would get payment. Under the scripless system, he instructs, the broker will sell. The CDP will debit the company's account, the cheque will come to the company. If you are in the position of a financial controller there are any number of ways you can get the money out of the company once it comes. How do you protect yourself against this? I have asked various people - internal auditors, external auditors, 8stock brokers - and nobody has been able to give an adequate answer, short of keeping your shares out of the scripless system. Next, the dishonest dealer. If you have a dishonest dealer or remisier. At present, a dealer or remisier cannot sell his client's shares unless he has access to his client's scrip. So you are very careful. You make sure that your dealer or remisier does not hold on to your scrip. Under the scripless system, no scrip is required. So whoever knows your CDP account number and your client number can sell your shares without your consent and without your knowledge. The cheque, of course, will be crossed in your name but I have asked brokers whether it is possible for a dealer or remisier to get money that is payable to a client and they have told me how. If anyone would like to know, I will be happy to tell them after this. But I think perhaps it would not be a good idea to make it public in this way. But it can be done. So you could wake up one day and find that your dealer or remisier has sold all your shares, taken your money, and is winging his way to Taiwan without you knowing it. Next, fraud by directors of broking firms. What can be done by a dealer or remisier will only affect a few clients. But the director of a broking firm, if he is a crook, can clean up the entire firm's clientele at one fell swoop. Can the Minister assure us that we will have no more Pan Electric-type situations and the directors of the broking firms now and forever more will be paragons of virtue? If a director of a broking firm has access to a client's numbers and client's accounts, he can instruct sale. He can do it by way of a married deal bypassing the usual safeguards. The cheque will come and, being a director of a broking firm, there will be again any number of ways he can convert the money to his own use. It only takes one crook to destroy the reputation of Singapore as a financial centre. But the problem is not only the question of fraud. The problem is that the system is also open to human error. What happens if a dealer miskeys the client's account? I am told this happens all the time. It is not unknown. He miskeys the client's account. What happens under the present system is that there is a manual reconciliation at the end of the day. The system kicks out a list. The dealer then compares the list with his own list of trades and he reconciles the two. And if there are any mistakes, the trade can be recalled within two days, I am told. What if the dealer does not do this? People are human. They are fallible. The dealer may be tired after a long day. He may want to go home to the wife and the kids. He may be off for a long week-end. He does not do his proper job. So the error creeps through. The client gets a notification. He calls the broking firm. He says, "I never told you to sell. Why did you sell?" The dealer, to save his own skin, lies. He says, "You told me to sell." His word against the broker's word. Under the present scrip system, if a client declines to make delivery, the broking firm will buy in against him and sue him. The broking firm will have the burden of proof. They will have to prove that the client gave the order. Under the scripless system, the CDP will debit the client's account. The client will then have to sue the broking firm. The client will have to prove that he did not give the order. How does one prove a negative? And when you talk about small investors, can a small investor afford to sue a broking firm? A broking firm has the resources to fight a small investor to a standstill. So the net result will be that if a mistake of this sort is made, the small investor will lose out. Your retiree who has put his life savings, your little old lady who does not know what else to do with her money, will find themselves cleaned out by mistake. It is actually worse than this. Even if the mistake is discovered, there is no provision for stopping the trade. The client cannot call CDP and say, "Look, there was a mistake. Do not debit my account." At least with a current account, you can stop the cheque. In the case of CDP, there is no such provision. The trade goes through whether or not it is a mistake and you leave the small investor to his remedy against the broking firm. As I said, the net result will be that the broking firm will get away with it and the small investor will lose out totally. What is troubling about all these examples is that they are not unknown. I raised some of these problems two years ago at a conference on regulation of the market. Since then, there has been deafening silence from the Stock Exchange. If an outsider can think of all these scams, I shudder to think what the insiders who are familiar with the system will be thinking of at present. I strongly urge the Minister not to push the amendments through until the Stock Exchange can assure the public that the problems have been addressed. We cannot pretend that the problems do not exist. It has never been this Government's style to ignore a problem until it becomes a crisis. If there is a major scandal, people will want to know why the problem was not foreseen and dealt with. It will be catastrophic for our reputation as a financial centre if the problems were foreseen but they were not dealt with because of the desire to push through a flawed system as fast as possible. SES is pushing for listed companies to go scripless by June 1993. Some companies, including INTRACO, on whose board I sit, have expressed reservations about doing so until the law is settled. A responsible company director cannot recommend changes to a company's Articles of Association until the law is clear, nor can a responsible board recommend scripless trading until they are satisfied that the shareholders' interests are fully protected. One of the major problems of the scripless system, as I have said, is that there is no written confirmation of any trade, and this is a fundamental problem. If you say we are going to have this scripless system without a written confirmation, then you must be prepared for this kind of fraud. If, on the other hand, you say we need a written confirmation like you need a cheque when a bank debits your current account, then the system will have to be revamped. And this cannot be done, I think, in one sitting today. The Bill will have to go to a Select Committee, at the very least. May I make another suggestion? May I urge the Minister to extend the stamp duty exemption for shares that are deposited with the CDP? The stamp duty exemption for deposit of shares expires in June 1993. Because of the reservations that some companies have expressed, they will not meet the 1993 deadline. The shareholders of these companies should not be penalised because their directors are taking a cautious view. Moreover, if the system goes through in its present form, ie, without requiring a written confirmation of a trade, the only way you can protect yourself adequately against fraud is to take your shares out of the system and redeposit them when you want to trade. That is why I urge the Minister to extend the stamp duty exemption for people who do want to redeposit later on, because they want to protect themselves. There are other drafting problems with the Companies (Amendment) Bill, as suggested, but I think I will reserve my comments for the Committee stage. May I, however, make two suggestions in addition to supporting the Members who spoke before me by asking that this Bill go before a Select Committee? My first suggestion is that I strongly urge the Minister to take the sections dealing with the CDP out of the Companies Act. They do not belong in the Companies Act. The vast majority of companies will never be listed, much less be traded scripless. They belong properly in something like the Securities Industry Act. Or like in Malaysia, in a separate Act of its own. The Securities Industry Act also needs revision. So may I also urge the Minister to form a Law Reform Committee to look into the question of revising the Securities Industry Act, the by-laws, the rules as well as the sections on the CDP so that they form a coherent whole? My second suggestion basically relates to the Companies Act as a whole. Our Companies Act is a legal equivalent of a platypus. It has got bits of different animals stuck together. The basic structure is copied from a British Act of 1948 which was based on a British Act of 1929. We have amended it and re-amended it, copying Australian sections, English sections, American sections and bits of our own. The wonder is not that it is flawed. The wonder is that it works at all. In the last decade, there have been four major amendments to the Companies Act. This is the fifth. This cannot be satisfactory from the point of view of businessmen and lawyers who have to live with this kind of thing from day to day. So may I suggest to the Minister that he set up a proper Company Law Reform Commission to look into a coherent revision of the Companies Act. The Australian Act has been revised. The English Act has been revised. Our Act just putters along in the 1948 form. With respect to the overworked Parliamentary Counsel in the Attorney-General's Chambers, I do not think they can do this revision themselves. You need people with practical knowledge of how the law works to do this. Company law is far too important to be left in the hands of the lawyers alone.