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
14 February 2014
If anyone wanted an example of a stockmarket incident that perfectly highlights the deficiencies in existing surveillance arrangements and one that is crying out for greater official scrutiny all rolled into one, they need look no further than the crash in Ocean Sky International (OSI) shares on Wednesday.
Retail brokers and small investors are up in arms at the handling of this affair, and although these parties are not averse to occasional exaggeration, a close and objective examination of the sequence of events indicates their concerns this time are justified.
Offshore marine company Ezion Holdings had announced its intention to take over civil engineering/ property management firm OSI last September at 10.8 cents per share - an announcement that sent OSI’s shares shooting up from around 20 cents the month before the announcement to a high of 45 cents shortly after.
There were several updates since then, the most recent of which was on Jan 30 to the effect that the parties were in the process of finalising the conditions necessary for the takeover, including preparation of a circular to shareholders.
This week, OSI’s shares traded around 30 cents and started on Wednesday at 29 cents. Mid-morning that day, they suddenly came under tremendous pressure in high volume, quite naturally drawing a query from the Singapore Exchange (SGX). This was duly dispatched at 1.36pm.
This is all well and good, and would be familiar ground for most market observers. The problem is that - incredibly - SGX sent its standard template asking OSI to explain the substantial increase in its share price when it should have asked about the decrease.
Sixteen minutes later, at 1.52pm, possibly because it realised its error (though this is not explicitly stated), SGX issued a notice to ignore the previous query but did not mention anything else.
At 2pm, after the shares had collapsed nine cents or 31 per cent to 20 cents, OSI requested a trading halt pending release of an announcement.
At 2.07pm, seven minutes after the shares were suspended and 15 minutes after withdrawing its earlier query, SGX sent off its standard query template but with “decrease” mentioned in place of “increase”. Some seven hours later, at 9.04pm, Ezion said in a filing that the deal had been terminated. This was followed a minute later by OSI filing the same announcement.
SGX’s queries, including its blunder, raise questions over just how vigilant its surveillance really is, and highlights how far behind the curve it operates. Even if it had asked the right questions at 1.36pm, thus satisfying its brief as mainly a signaller of caution to the market, it would have made almost no difference - OSI’s shares, at 21.5 cents at that time, had already crashed spectacularly.
Furthermore, the correctly worded query was issued seven minutes after the company suspended trading. So it carried no signalling or informational value whatsoever because nobody could have acted on it even if they had wanted to.
It is therefore difficult to refute the widely held belief that the exchange’s archaic querying process as it stands today is weak and ineffective. Fortunately, the process is currently under review and proposals to raise the surveillance and querying bar were issued for public consultation last week.
If the exchange and regulators wish to redeem themselves, they should embark on a thorough investigation of the hurried sales which hit the market on Wednesday during the five hours of trading from 9am to 2pm.
Hopefully, when this is actually done, the findings will be divulged quickly. Wait too long and the incident will slip quietly into the annals of the local market’s history - which is teeming with similar cases over the years that appear to have escaped official scrutiny.