Singapore Telling Noble They WereNaughty Sends WhatMessage?

That sum seems paltry given the scale of Nobles collapse. Last month alone, theUSSecurities and Exchange Commission fined an insurer $50 million for not properly disclosing fees to annuity investors, while the UK Financial Conduct Authority would have imposed a 37.9million($44.5 million) penalty over misleading statements leading the collapse of Carillion Plc, had the firm not already been in liquidation. Banks received about $9 billion in fines over the scandal about rigging the Libor interest-rate benchmark over the past decade, while BNP Paribas SA alone received a $9 billion penalty in 2015 for violating US sanctions.The modest sum levied against Noble ishardly likely to deter other companies on the same path, considering gross profits of more than a billion a year that it was cranking out in its pump.

Issuing false statements has no place in Singapores capital markets and risks having an adverse impact on the integrity of our capital markets, regulators and law enforcement authorities led by the Monetary Authority of Singapore said in a statement announcing the penalty.The MAS didnt respond to an email seeking comment for this article.

The official words strike the right note, but givinga light nudge to the stable door now, years after the horse has bolted, strikes a discordant tone. As early as February 2015, Iceberg Research, a short seller run by a former Noble credit analyst, was citing issues with the marketing agreements that formed the core of last weeks fine. Singapores investigation of the issue didnt begin until November 2018, at a point when shares had already been suspended and 10 months after the company announced a debt restructuring that wiped out stockholders. Noble still operates as separate industrial and trading businesses following the restructuring.

Consider in general how rare it is for commodity trading houses to be listed companies. With the exception of London-listedGlencore Plc and a few agricultural processors (including Singapores Olam International Ltd. and Wilmar International Ltd.), almost the entire sector is closely held by owner-managers and founding families.

This isn’t an accident. Traders take significant chanceswith the company balance sheet, and expect eye-watering bonuses in return. When the people putting up the risk capital are separate from thosewho benefit from a successful trade, equity investors may end upshort-changed by insiders who capture most of the upside for themselves but pass on the downside to shareholders. Nobles very existence as an exception to this rule should have been a warning.

That’s not the only sense in which Noble was an odd beast, though. In Singapore, almost all companies on the main Straits Times Index counteither the government or regional tycoons likeJardine Matheson Holdings Ltd.s Keswick family as their largest shareholders. Singapore Telecommunications Ltd., CapitaLand Investment Ltd. and Singapore Airlines Ltd., arecontrolled by state investment fund Temasek Holdings Pte., while the threebiggest companies on the index, DBS Group Holdings Ltd., Oversea-Chinese Banking Corp., and United Overseas Bank Ltd., number, respectively,Temasek and the founding Lee and Wee families as substantial shareholders.

There was a point around the time of Nobles 1997 initial public offering when it looked like that might change. Jardines itself had moved its public listings away from Hong Kong ahead of the citys handover to China.Singapore couldhave seen its share market as a foundation stone for its aspirations to be a regional financial center a common dream of fast-growing economies, even if they have little need for the capital raising and allocation services that a vibrant stock exchange can bring.

This year, its the turn of Saudi Arabia and the UAE to kid themselves thata run of major share sales can transform the fundamentals of an economy. But just as its delusional now to think that the monarchies of the Persian Gulf are going to be dominated by anything other than petroleum in the coming decade, so it was delusional two decades ago to think that shareholders rather than commodity traders could win out in Singapore . Since Shell Plc established its first fuel storage facility on Pulau Bukom island in 1891 and through the 1960s, when Prime MinisterLee Kuan Yewmade the building of oversized oil refineries a central plank of hisdevelopment strategy, the fortunes of Singapore and commodities have been intimately intertwined.

In 2001, when Nobles rise was still in its infantry, the city-state introduced itsGlobal Trader Programthat explicitly set out to turn Singaporeinto ahub to rival Chicago, London and Geneva by offering corporate tax rates of 5% or 10% for businesses thatmoved trading desks there.Its helped draw professionals from across the world: Trafigura Group Pte. abandoned its European roots to incorporate in the city when Nobles valuation was at its peak in 2012, and major mining companies set up trading arms that promptedlong-running disputes with Australias tax authorities.

Some 320,000 people are now employed in Singapore’s wholesale trade sector, contributing 17% of gross domestic product. When the Global Trader Program was set to lapse last year after an initial 20-year run, the government quietly extended it to 2026.

The country made its choice. It’s not alone. For all the energy that an active stock exchange can bring to a city, Switzerland has done perfectly well combining asomnolent equity market with discreet but lucrative businesses in commodities and private wealth. That’s the path Singapore decided to follow.

Those who feel theyve been short-changed byinvestments in Noble stock may as well make the same criticism of Singapores share market as a whole. Even investors in the Brexit-ravaged FTSE 100 index have performed better than those who bought the Straits Times index over the past decade. Hong Kongs Hang Seng index is one of the few to match Singapores lacklusterperformance but it took the destruction of the territorys long-held freedoms to achieve that dismal outcome.In terms of market capitalization, Indonesia and Thailand are bigger share markets these days, and even old rival Malaysia isn’t far behind.

Singapores population, which has gonefrom the worlds ninth-richest in terms of per capita GDP when Noble listed in 1997to second-richest now,doesnt seem to mind. Still, with the decline of Hong Kongas a financial center, the chance to become an equity market for the broader region hasnt died altogether. Singapore may have been able to toprioritizeshareholders less in the past. It shouldn’t count on always being so lucky.

More From Bloomberg Opinion:

Singapore’s Next Big Challenge Is Already Here: Daniel Moss

Commodity Traders Make Record Profits And Now Want a Bailout: Javier Blas

Singapore’s Long-Awaited Moment May Have Arrived: David Fickling

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

David Fickling is a Bloomberg Opinion columnist covering energy and commodities. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.

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