TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issu...
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By VEN SREENIVASAN
03 March 2011
Should small investors be left holding the proverbial baby for a seeming eternity when a company’s stock is suspended following the discovery of some irregularities?
That is the question David Gerald, president of the Securities Investors Association (Singapore), raised this week in the wake of the suspensions of China Hong- xing and Hongwei Technologies after their auditors refused to sign off on their accounts.
The two companies shocked the market when news broke over the weekend that their auditors (Ernst & Young in both cases) could not finalise the audit for the financial year ended Dec 31, 2010, as they could not confirm the cash and bank balances in the companies.
The stocks were promptly suspended.
These two are just the latest in a string of S-chips which have hit the rocks over the past three years due to a variety of serious issues. Most remain suspended, and some have been ultimately delisted. And in the process, thousands of shareholders - the majority of whom are retail investors - have lost huge bundles of money.
Mr. Gerald reckons the sudden suspension of Hongxing and Hongwei has left some 14,000 minority shareholders in a quandary. And given the precedents set by previous suspensions of other S-chips under similar circumstances, there is a high likelihood that these two counters will remain suspended for months, if not years.
Being the advocate of the retail investor that he is, Mr. Gerald also suggested that trading of the shares be allowed to continue, but under certain restrictions.
He has a point.
One can debate endlessly about the merits of trusting S-chips, and the principle of investors taking responsibility for their own actions.
But the fact remains that these are companies which were listed and traded on the local stock market, where they are accessible to all variety of investors, be they sophisticated ones or the ‘moms and pops’. And all become equal victims when irregularities are detected and the shares are frozen for an indefinite period.
The Singapore Exchange (SGX) is perfectly correct when it says that allowing trading of shares in China Hongxing and Hongwei right away would be more detrimental to shareholders and throw the fairness and transparency of the market into question. Of course, investigations have to be done, and transparency has to be restored.
But surely there is some room for a solution to address the concerns of innocent shareholders who are being punished for a mess which is not of their doing.
Suspension means just that: no trading, no price discovery and no market value for the security.
One solution may be for the authorities to set a timeline for the investigations, and thus the suspension. This timeline - say, six months - would not only enable special auditors to come up with a preliminary report which would provide more information to the market, but also provide a cooling-off period.
Once this period is over, there could be restricted trading in the stock. Investors would have at least some facts with which to make informed decisions.
The controls can be as tough as necessary, with restrictions such as cash-only trades, a total ban on short-selling, and barring all insiders or company officials from trading their stock - whatever is necessary to ensure an orderly market.
The point is to allow the market to price the stock and, more importantly, to give minority shareholders a viable exit strategy.
Hongxing, for example, was among the most actively traded stocks on the market for weeks, if not months. Its market cap was some $500 million a week before the suspension. This value now remains trapped.
Of course, the price will likely collapse on resumption of trading. But even if it drops to, say, 3 cents, this would be better than the imputed zero-value as it remains suspended.
The whole process enables price discovery and provide transparency. It also gives hope to the thousands of small investors who have collectively invested millions of dollars in the company.
Not quite the perfect solution, but far better than the black hole many innocent minority shareholders find themselves in.