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 issue manager
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By R SIVANITHY
01 April 2011
When a stock moves in an unusual manner, eyebrows are raised and observers wonder if the Singapore Exchange (SGX) is taking a closer look because it implies the possible leak of price-sensitive information.
When the Straits Times Index (STI) jumps, as it often does at the end of each quarter, it’s attributed to ‘window-dressing’ and even though some eyebrows are raised and everyone acknowledges that there’s more than a whiff of a false market present, no one seriously expects a probe.
For example, in yesterday’s session, all three bank stocks were pushed up in the final few seconds, thus enabling the STI to cross the 3,100 mark at the end of the first quarter. Was it genuine demand? One stock, maybe - but all three from the same sector at the same time?
More to the point, why the difference in the way individual stock movements are viewed versus the index’s? Surely all unusual rises and falls should be treated equally, particularly the index’s because of the significant influence it exerts on sentiment?
Some of the time, for suspicious stock price rises or falls, a query is despatched by the exchange; most of the time, the reply is a metaphorical shoulder shrug and claimed ignorance of reasons behind the unusual movement. All of the time, the incidents are then quickly forgotten.
As for large jumps in the index in the days before the end of important reporting periods, the public usually doesn’t know if the exchange is studying the transactions and motives behind the move because investigations are not publicised.
So it is that with this ignorance comes the assumption that large movements before the end of quarters are necessary market blemishes that everyone has to learn to live with, a sort of quiet resignation that has become part of the market’s collective consciousness and conditioned reflexes.
Is there a need for tighter procedures surrounding such incidents? Yes - no one would deny that tougher action dealing with price-sensitive leaks and index rigging would be welcome, otherwise the market runs the risk of falling into long-term disrepute because investors might come to believe the odds tend to favour insiders and market manipulators.
Few would also deny that the present arrangement of movement-query-denial-silence (when it does occur) is not ideal and that tighter rules, heftier penalties and greater disclosure of ongoing investigations would surely benefit investor confidence. The issue takes on even greater significance with the advent of high-frequency trading via computerised systems which stretch our understanding of manipulation and front-running to new heights - or lows, if you prefer.
What can be done? Other markets offer useful pointers. The UK, for example, has pondered a four-stage plan on dealing with price leaks, a plan that among other extreme measures included escalating penalties for repeat offences. Among the proposals was that if the regulator’s computers flagged a movement as suspicious, the exchange would designate that stock with an ‘indicative’ status while investigations were launched. This alerted the market that the stock was under surveillance and that there was a risk of further action; in effect, the signal was ‘trade at your own risk’.
If the evidence suggested that there was a price leak, trading could be halted for 24 hours to allow the company whose shares are involved to make an announcement. If no announcement was forthcoming but the exchange was of the view that something fishy is going on, a full suspension could then be imposed. Also studied was whether to reverse transactions that were believed to have been made with the benefit of information not available to others and also to publish the names of brokers who frequently deal in suspect shares.
In both the UK and Australia, many regulatory discussion papers were circulated in recent years, among them controversial - but not necessarily lacking in merit - proposals on whether to regulate rumours and how best to delegate the responsibility to brokers of sifting out false rumours from those that have a grain of truth.
Not surprisingly, given the burden this would place on broking firms, these proposals did not enjoy positive feedback but it has to be said that if measures are formulated with popularity in mind, then they are unlikely to be effective in protecting the public interest. The correct approach should be that the more unpopular the rules, the more effective they should prove to be. They also have to be uniform, and applied consistently to all forms of manipulation and rigging - including those involving the index at the end of significant reporting periods.