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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R Sivanithy
21 May 2014
Under the existing regulatory regime, the Singapore Exchange’s (SGX) role is mainly to signal caution to the market when it deems this necessary. This is accomplished via various mechanisms, the most familiar being the standard query that is despatched to a company when there is unusual trading in that company’s shares.
Of course, how unusual is unusual can be debated, but most of the time SGX’s queries do appear justified, at least to neutral market observers because the movements are clearly odd and deserve explaining. The problem is that most of the time, companies simply shrug their shoulders and nothing more is heard.
Then again, every once in a while, we encounter a welcome departure from the norm - a reply where the company discloses information that could explain the sudden interest in its shares. One might then assume that the system is working well but, on the contrary, questions are still possible.
The most recent example of an answer that might explain the unusual price and volume movements of shares came from semiconductor group STATS ChipPAC, whose share price has surged by more than half over just a few trading sessions since an unusual surge last Thursday.
On Thursday last week, STATS’ shares opened half a cent higher at 34 cents, then crept up slowly throughout the morning session before touching 37 cents by early afternoon. The day’s high of 39 cents was reached at 4.30pm, and at the close, the stock settled at 38.5 cents - a rise of five cents or 15 per cent on the day, and one that came with 8.9 million shares traded.
This volume was more than nine times the 953,000 shares done on Wednesday, by itself a sufficient cause to fire off a query. The Singapore Exchange query that came a few minutes before trading closed at 5pm severely limited the cautionary value since the market would have had only a few minutes to react.
Still, at least there was a query, even if it came close to the end of the session. We say this because some observers have rightly wondered why STATS had to be queried in the first place before offering the information that a third-party had expressed interest to acquire the company. Its response came the next day before the market started trading.
When its shares started to move in elevated volume on Thursday, why did the company not take the initiative to suspend trading immediately and follow up with an announcement of the third party’s interest, even if non-binding, to acquire all its shares?
Much of course would depend on when STATS received the offer; if it was late in the day, then not saying anything is probably excusable. But if it was early in the day, or even before Thursday, you’d have to ask why the company waited for the exchange’s query before volunteering the information.
Note that STATS’ shares have continued to run since then, closing at 51 cents yesterday even after a pullback of 1.5 cents. Given the unusual share price and volume movements on Thursday, one can’t rule out the possibility that news of a possible takeover had leaked.
The STATS incident is ongoing since the company has not said anything more about the offer. It does, however, raise a general question on how the exchange should deal with instances when companies disclose material information after a query.
Specifically, should the exchange pursue the matter if there was no suspension, the company reveals material information and the shares continue rising thereafter?