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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Frankie Hoe, The Edge Singapore
21 October 2013
More than a week after the Oct 4 crash involving Blumont Group, Asiasons Capital and LionGold Corp, remisiers and securities houses are still counting their losses. Broking firms contacted by The Edge Singapore say their contra losses on the three counters are manageable, but the situation on the ground for other houses, as their traders tell it, is a lot messier.
The Singapore Exchange suspended trading in the three stocks on Oct 4 when their prices crashed shortly after the opening bell. Trading resumed on Oct 7, but not before SGX declared the counters designated securities, meaning short-selling and contra trading are prohibited. Anyone who buys these stocks has to pay cash upfront now and can sell the shares only four trading days after the day of purchase.
“CIMB has very few contra losses. They are really very small,” says Carol Fong, CEO of CIMB Securities (Singapore). Losses at her firm are also spread out among “quite a number” of clients and “not concentrated” among a few, she adds.
Still, a better indication of the outstanding amounts due from affected clients will come only two or three weeks later, says Fong. “The way it works in the industry is that clients are always given time to pay up. We have clients who have paid up, so the contra losses continue to come down.”
At DMG & Partners, CEO Robert Huray says the contra losses incurred by clients are manageable and within expectations. “There will be no significant impact on DMG’s business, operations and financials. We have always reviewed our daily positions and net exposures not only to these three designated counters but also to other counters.”
Huray adds that he is not aware of any clients with contra positions who have been unable to pay up after the shares of Blumont, Asiasons and Lion Gold collapsed earlier this month. “In the unlikely event that clients are not able to bear the losses, we will work with the remisiers and dealers to find a solution for all parties,” he says.
He also dismisses rumours that one senior dealer on his company’s payroll had chalked up contra losses of more than $10 million. “We are not aware of any dealers at DMG who have incurred such a loss. All outstanding positions have either been picked up or closed. So far, no one has been let go because of the recent events.”
DBS Vickers declines to comment, but a remisier from the firm says its exposure to the designated stocks is “very minimal”, as precautionary measures were already in place before the recent collapse. “Remisiers who wanted to buy many [lots] would have had to call the credit risk department, which would assess their clients. Even if clients had the money, the house would restrict the size of their purchase. It is very conservative on these three counters.”
An executive at UOB Kay Hian says the broking house, too, is coping well with the fallout. “As far as I know, there’s hardly anything to worry about,” he says, declining to be named. UOB had trading restrictions on the three stocks and dozens more before the Oct 4 sell-down. The curbs are still in place. “We did this very early on. We monitor stocks with a lot of heavy volume and try to see what’s really happening. These three stocks have been on our high-alert radar for quite a while,” says the executive.
On the other hand, AmFraser Securities and Phillip Securities – both rumoured to have large contra positions in Blumont, Asiasons and LionGold – are keeping silent. Repeated attempts to contact AmFraser, a Singapore unit of AmInvestment Bank, were not successful. Freddie Lacorte Jr, an assistant marketing communications manager at Phillip Securities, says the firm prefers not to comment.
Insiders say, however, that the losses by these firms are expected to be substantial. “Our house has a big exposure to the designated counters. It’s in the double-digit millions,” says a trader.
US broker reveals losses
So, just how much losses could securities firms in Singapore be staring at? At least one broking house has detailed its exposure and losses. Nasdaq listed Interactive Brokers Group, a US electronic discount broker and market maker, says it has about 70 accounts with substantial exposure – ranging from more than US$10 million ($12.4 million) to as much as US$200 million – to the designated securities.
“The accounts were margined and we were able to liquidate only a small part of the position. The accounts are currently in deficit to the extent of approximately US$68 million,” said Thomas Peterffy, chairman and CEO of Interactive Brokers, during the firm’s quarterly earnings conference call on Oct 15.
“We believe the customers have substantial assets independent of the companies involved and we are currently organising our legal team to collect on these debts,” Peterffy said. “At this point, it’s too early for us to tell how much we can recover soon.” Interactive Brokers expects its earnings for the current quarter to be hit by the fallout.
Forced sales, aborted deals
Investors and broking houses are not the only ones reeling from the events surrounding the three companies. More board directors and substantial shareholders at Blumont have had their stakes in the company cut as a result of bankloan recalls and forced selling in the wake of the collapse in the share price.
According to its most recent filings with SGX, Blumont executive director James Hong had two million shares force-sold for $249,360 on Oct 16. That works out to about 12.5 cents a share, a far cry from Blumont’s year-to-date high of $2.45 set just days before the crash. On the same day, independent director Ng Su Ling’s holding was trimmed to 2.41% after 2.3 million of her shares were force-sold for $269,560. Substantial shareholder Ooi Cheu Kok had his shares force-sold over several trading sessions, paring his stake in Blumont to 5.07% as at Oct 16, from almost 10% a few days earlier.
Neo Kim Hock, Blurnont’s chairman, also saw his holding whittled down in recent days. As at Oct 16, he owned 4.51% of the diversified business group, which is seeking to become a dedicated owner and operator of natural-resource assets across the globe.
Neo is slated to become Blumont’s deputy chairman in November, when Alexander Molyneux formally takes the helm. Molyneux, who lost his job as CEO of coal miner SouthGobi Resources last September, has agreed to take a 5.2% stake in Blumont by buying shares from Neo and an unidentified investor at an indicative price of 40 cents apiece. The acquisition is expected to be completed by Nov 6.
For their part, the affected companies have had to call off or reassess some deals as a result of their depressed share prices. The latest to do so is Asiasons, which announced on Oct 17 that SGX said the company did not have a strong enough mandate to carry out a $218-million share placement to fund its proposed acquisition of a 27.5% stake in US-based Black Elk Energy, an upstream oil and gas producer.
The planned placement and acquisition were announced in September, when Asiasons’ share price traded at more than $2, compared with less than 20 cents currently. The alternative asset investment firm is reviewing the terms and conditions of the acquisition.
On Oct 11, Lion Gold said it would terminate a proposed $202 million placement and warrant sale announced in August. Just a day earlier, it called off plans to buy a stake in Minera IRL, a gold miner listed in Toronto, London and Lima. Over the last two years, Lion Gold had bought a bunch of gold mining assets worldwide, paying for them using shares and proceeds from equitybased cash calls.
“The exchange is taking valid action, but it’s not starting any investigation into the company,” Blumont’s Molyneux tells The Edge Singapore. “If there has been any funny trading going on, that has nothing to do with the company.”