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
Comments
R Sivanithy
07 February 2013
The challenge that stock market regulators confront every day is how to maintain an orderly market while ensuring a level playing field for all investors, big and small.
So it is that when companies make important announcements, all attempts are made to disseminate the information in such a way that everyone has a fair shot at making money (or losing it, as the case may be) - trading has to be halted before the announcement is made and sufficient time has to pass for all investors to digest the details before trading can resume.
This much is clear, and though practices in different markets might differ slightly, all have fixed rules on how to handle the release of material corporate news.
There is, however, a trading curb of a different sort which falls into a regulatory grey area for which no clear rules - or even answers - are as yet available. We're referring here to controls on trading imposed by broking houses when they think speculative punting in particular stocks have exceeded prudent limits and may have led to the houses being dangerously overexposed.
These measures are almost always imposed on penny stocks and invariably hit "contra" players who may have been tempted to try their luck after observing that volume and momentum had started to build in the low-priced segment.
When this happens, the most common method used to limit clients' exposure to a speculative stock or segment is to require full cash payment for purchases instead of permitting the usual three days or more credit that forms the basis of contra trading.
Experience has shown that when a local house with a large retail investor base decides to suspend contra trading and demand cash upfront, the affected stock usually collapses as the speculative, contra-based flame that inflated it is quickly extinguished.
Not only that, there is also often a spillover impact on the entire segment as sentiment is dampened and punters start to speculate what stocks might be next.
Put differently, even though curbs are the prerogative of brokerages, their sudden imposition, whether by one house or several in agreement, can have a profound effect on not just one but often many stocks. Their introduction should, therefore, be viewed as a material, market-moving event and since advance knowledge could benefit those who were in the know, this is an area which would benefit from a spot of regulatory scrutiny.
However, to come up with appropriate rules isn't something straightforward. Speculative bubbles can inflate very rapidly, thus necessitating prompt action by the houses involved so any new rules governing the announcement of trading curbs would have to balance the need for broking houses to respond swiftly to manage their risks and the need to maintain a fair and orderly market so that no parties can gain an unfair advantage.
A possible idea is to mandate that if brokers wish to curb trading, they can announce this only at least an hour before the start of trading and not during the day. This would then severely restrict the intra-day short-selling opportunities for those who knew that curbs were to be announced soon.
Whatever the case, with the market currently firmly in the grip of penny stock mania - the average value per unit traded per day for the past few weeks has been below 40 cents and, often, all the top 10 actives are under 10 cents - it might be only a matter of time before broker-imposed trading curbs make an appearance.
Since trading curbs have the potential to influence sentiment and affect many stocks simultaneously, it would also be a good idea to figure out how best to handle such announcements. They are, after all, as material as company announcements but are thus far unregulated.