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
Angela Tan
10 October 2013
The rise and fall of Blumont Group, Asiasons Capital and other penny stocks have dominated the Singapore stock market, culminating in the Singapore Exchange (SGX) imposing restrictions on the trading of some of the stocks.
The ensuing mayhem has even prompted investor lobbyist, the Securities Investors Association (Singapore) or SIAS, to urge the authorities to “immediately” implement circuit breakers, rather than wait till year end.
The merits (and demerits) of circuit breakers have long been debated: Trading halts and price limits can stop market panic and give traders time to obtain and analyse information. Price limits can protect the clearing system by increasing the margin payments that bankrupt traders pay before they default. They also increase volatility if traders fear they will not be able to complete their trades before trading stops.
That SGX is considering the use of dynamic circuit breakers to ensure an orderly market in times of turmoil and to protect investors from excessive volatility is a step forward.
But the truth of the recent saga is this: It did not take place overnight. Neither did it emerge because there were no circuit breakers here. It took place because there was a calculated play of selected stocks over time. SGX’s relaxed approach to regulation has allowed fundamentally unsound bubbles to inflate, leaving many uninformed traders to follow a trend that actually wasn’t there in the first place.
Very often, the conditions that lead to a stock price crashing would also have created a bubble long before the crash occurs. To that extent, one can say a crash often represents the final restoration of rational pricing rather than a transitional problem in need of a correction. This is evident in the stocks that have been declared “designated securities” by the SGX.
The bubble in Blumont, a sterilisation service provider, began late last year when the stock was trading around 10 cents each and quickly doubled to 20 cents. The share price then climbed steadily to hit a high of $2.54 on Oct 1, 2013 (a 2,440 per cent spike from late last year) before crashing to a low of 13.3 cents yesterday. It was last traded at 19 cents.
A similar trend was seen in investment group Asiasons and gold miner LionGold. Asiasons was trading at around 70 cents a share late last year. Its share price then climbed non-stop to a high of $2.91 on Sept 19 this year before tumbling to as low as nine cents yesterday and ending at 16 cents. As for LionGold, it was trading in the low $1 range late last year. Its shares hit $1.755 on Aug 27, 2013, before sliding as low as 14.3 cents yesterday. It closed at 18.9 cents.
Operators, determined to carry out their strategy, will still do so if not under the watchful eyes of the regulator. Having circuit breakers merely means the execution of their plans will take place over a longer time frame. They can resume their antics with a vengeance as soon as the stipulated period is over. Having price limits merely puts a cap on how much profit can be reaped in a single day. Regulatory oversight is still paramount.
A call for change is often at its highest pitch after a major crash. The anxious investing public demands that the regulator implement something to prevent future occurrences. When the public demands action, regulators tend to act. Unfortunately, regulators risk responding with policies that have little or no actual impact. They do not want the public to blame them for exacerbating a problem, or for creating new problems.
Beyond implementing circuit breakers, SGX, as a regulator, needs to take more disciplinary action against those who profit from illegal activities by creating an artificial market. There is an obvious need to do more to deter and prevent rigging and manipulation by big players.
The SGX should also seriously relook at the lack of market depth in terms of investors and float. Who are holding these stocks? Perhaps it is time to re-examine the practice of allowing companies to list via 100 per cent placement. It has been written in this column before that apart from the obvious complaint (when it comes to good companies) that “the practice unfairly excludes retail investors and makes a mockery of a public float, anecdotal evidence from dealers is that allowing all the stock to be distributed privately facilitates rigging because the shares can be given to parties acting in concert”.
At the end of the day, strong regulatory oversight cannot be replaced by circuit breakers.