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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Daniel Ren in Shanghai
31 March 2011
A recent scandal involving fraud in a company’s A-share listing has sounded another wake-up call for mainland regulators and investors.
Yunnan Green-Land Biological Technology, a company traded on the SME board on the Shenzhen Stock Exchange, announced recently that chairman He Xuekui was detained by police for alleged cheating in the firm’s initial public offering three years ago. Details of any fraud in the IPO have yet to be made public.
The chairman is the first company executive to have been arrested by police due to misbehaviour in a listing process.
The Green-Land case spooked investors, who fear that a series of similar scandals could be unearthed as the authorities step up investigations into questionable listed companies.
“It could result in another crisis of confidence, though it would not be as severe as the Guangxia scandal years ago,” said Guotai Junan Securities analyst Shi Weixiang.
“At the least, however, the case will trigger a collapse in certain sectors.”
Some analysts have likened the Green-Land events to what happened in the case of the fraud by Guangxia (Yinchuan) Industry, the discovery of which triggered an across-the-market collapse in 2002 when it was found to have falsified earnings in previous years.
At the time, Guangxia was synonymous with China’s Enron, and after its unethical behaviour was exposed to the public, the mainland stock market underwent a four-year bearish run during which investors lost confidence in listed firms.
The China Securities Regulatory Commission (CSRC) has since intensified efforts to clean up the market, including with a tightened IPO review procedure and a stepped-up crackdown on insider trading.
“Retail investors had taken it for granted that the regulator’s efforts had paid off,” said West China Securities trader Wei Wei. “The Green-Land scandal showed that the regulator, analysts and investors might have been too optimistic.”
Green-Land received CSRC approval to launch an IPO on the SME board in late 2007.
The detention of chairman He by Yunnan police also represented an embarrassment to the CSRC, as analysts have cast doubt on its role of regulation and supervision.
“When the Guangxia scandal was made public, investors believed that it was not just a single case, and the regulator lost its credibility,” Shi said. “This time, investors might not totally lose confidence in the regulator.”
The benchmark Shanghai Composite Index plunged 14.3 per cent last year amid Beijing’s monetary tightening, becoming the world’s third-worst-performing indicator. Trading remained sluggish this year as investors were spooked by fears of further austerity measures.
On the mainland, a company is not allowed to seek a listing on the main or the SME board unless it has produced profits for the previous three years. The CSRC’s IPO review committee has a final say in a company’s listing plan, and will grant an approval to a company’s listing after a hearing.
The Green-Land scandal also put pressure on the CSRC to accelerate its proposed delisting mechanism, under which unethical and badly performing companies can be expelled from the exchanges promptly.
Few companies have been delisted from mainland markets in the past two decades, as Beijing has encouraged them to restructure assets to avoid such a censure.
The parents of loss makers normally inject profitable assets into the listed shell or introduce other investors to revamp the underachievers so that the companies can maintain their listed status.
There were increasing calls to establish a delisting system soon after dozens of firms listed on Shenzhen’s Nasdaq-style ChiNext posted profit declines just one year after they debuted on the start-up board.
A CSRC official said it would take time before a real delisting system took shape.