FOR those who keep complaining non-stop about the Government’s failure to listen to their gripes, it must come as a surprise to find that a proposed change in the Income Tax Act on property sales gains has been scrapped, following public feedback.

As the ST editorial points out this morning, the odd feature about the whole exercise was asking the public feedback in the first place. No living person on earth would say "Tax me some more".

What Finance Ministry was actually planning to with the proposed tax change was to make it clearer to individuals on the type of circumstances that they would not be taxed if they sell a property.

But it conceded that there was merit in the feedback given by respondents who pointed out that it might create 'inadvertent uncertainty for individuals who sell more than one property within any four years', even though it had stressed that there would be no change to the current income tax treatment for such cases.

Public consultation on subjects relating to listed firms and the stock market has become a regular feature for those of us in the investment community as well.

Take the latest move to provide additional safeguards in the proposal to require overseas controlling shareholders of listed firms to custodise their shares in Singapore, and to disclose any financial arrangements which might trigger a change of share ownership in the firm.

These proposals do not come by chance.

In March, there was a series of accounting scandals involving S-chips. Even though I have been following the markets for a quarter of century, I was surprised to find myself getting worked up over them. They could easily have been prevented.

As I pointed out in two columns headlined "Bank players from pawning shares" and "SGX to beef up its gatekeeper role", the SGX should have devised ways to make errant bosses of overseas firms accountable, rather than tiptoe around the problem.

As an investor myself, I applaud SGX’s efforts to make itself the "Asian Gateway", offering us a wide variety of investment choices by attracting overseas firms to list here.

But most of us are used to the way local firms and their bosses conduct themselves, and it is natural for us to assume that overseas-based ones will play by the same ground rules.

Few of us even know that there are few leverages over these overseas bosses if irregularities occur. They spend the bulk of their time outside Singapore and own few assets here. Some don’t even bother to turn up for their company’s AGMs here.

To make matters worse, investors don’t even get the protection of the Singapore Companies Act. Even though their listed firms are traded here, they are incorporated in Bermudas or Cayman Islands.

They also have a host of professionals to defend their interests.

Some of them are quite patronising, dismissing me as being naïve for asking for such measures.

Pledging of shares is a common business practice and asking for these disclosures is an intrusion of privacy. How many people would like others to know their financial arrangements, like the loans they took from banks?

But let’s not kid ourselves. Why do these businessmen come to list their firms in Singapore in the first place?

One of the merchant bank’s best selling points to these businessmen is that this enables them to "monetise", or give a value to the business they own, if the company is listed.

Bankers are practical people. If a businessman in a privately-owned company wants to borrow money from them, they want to know the tangible assets which can be pledged as collaterals – buildings, machineries and etc.

However, if the businessman owns a listed firm, they are happy to take the listed shares as a collateral for the loan, since they can sell these shares if anything goes wrong.

For these businessmen, it could not have been a more wonderful arrangement. They can get rid of any personal guarantees that they extend over company’s borrowings. At the same time, they also get a fresh line of credit, pawning their shares.

And since they are running the firm, only they are in total possession of all the information – their own personal loans, and the company’s borrowings.

It is well and good when the economy is humming along fine, and everyone is making money.

But bankers are not stupid. Sure, they are lending to the listed firm, but they are doing so, only because these businessmen are running the business. As a precaution, they always slip in a clause to reserve the right to be repaid in full, if there is a ownership change.

If the economy hits a rough patch like it did this year, suddenly, the businessmen found themselves tripped over by a mountain of debts – personally and on the company side.

It is very sad that each time such a disaster happens and the share price nose-dives, thousands of small-time investors find part of their life-savings wiped out too.

I will not be fobbed off by legalities thrown up by the professionals that these businessmen had no choice because their lenders insist on a confidentiality clause in the loan agreements.

This seems like a flimsy argument. Which lender will not want to know whether his borrower has other financial arrangements, if only to make sure that he is not over-stretched?

When their firms become listed, it becomes public property and any actions taken by these businessmen have to be scrutinised carefully, because public money is involved.

I am sorry if some of these businessmen meet with financial mishaps, but steps should be taken to ensure that they do not bring down innocent small-time shareholders with them.

It has taken five months for the SGX to come around to the proposals first mooted in my two Cai Jin columns in March. In its efforts to build an "Asian Gateway", SGX should at least make sure that our small investors' interests are well-served too.