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
24 October 2014
For much of this year, it has been fashionable to heap blame on Singapore Exchange (SGX) for the local stock market’s twin woes of poor liquidity and low volatility. Granted, markets all over the world have experienced a drop in equity trading volume because central banks have reduced their monetary stimulus, but it is claimed that the problem here is aggravated by a loss of confidence originating from the penny stock crash of a year ago which has driven a sizeable portion of the retail public away from stocks and many big speculators to ply their trade in other markets.
This is the conventional wisdom as it stands today and its adherents believe it to be an accurate portrayal of existing conditions; for example, one commonly heard criticism is that SGX’s new rules which emerged from the penny crash wreckage are an over-reaction and the market is now dulled by too many regulations from an exchange that is out of touch with the ground.
Maybe so and we could debate endlessly the merits of those new regulations and the notion that the exchange could knowingly undertake actions that would damage its own rice bowl.
Instead, a better way forward might be to ask: is confidence and the health of the market the sole responsibility of SGX and the authorities, or do broking houses, trading representatives and even investors have a part to play?
When looking at SGX-specific criticism, a certain amount of hypocrisy is evident - it is okay for the exchange to stand aside and allow stocks to appreciate 50-60 times without fundamentals because people are making money, but the moment SGX decides to intervene because it thinks a false or disorderly market exists, it gets blamed either for not intervening earlier or for unwanted interference that has led to a crash and loss of confidence.
Conveniently forgotten in the eagerness to criticise is that broking houses should have also been monitoring unaccountable rises in the shares of loss-making companies in the first place, especially when gains were gradual and occurred over many months as there would then have been ample time to correlate price rises with news and fundamentals.
It is hard to believe that if stocks were being systematically manipulated over years that this would have escaped the notice of backroom or compliance staff.
It is also hard to believe that if indeed the crash came because some stocks were cornered and manipulated, banks are also without responsibility since funds needed to corner and ramp one set of stocks usually come from loans obtained using another set of cornered/ramped shares pledged as collateral.
It is entirely in order to ask searching questions about the loan/due diligence processes at lenders if the pledged shares were from companies with no fundamentals but whose share prices were at all-time highs. Or are we to accept that such lending is a purely commercial decision without any fiduciary or public interest considerations?
And what of the retail public itself who presumably is happy with massive outperformance on the upside - unjustified though it may be - but is quick to complain when action is taken to ensure a fair, orderly and fundamentals-driven market that unfortunately but unavoidably results in significant downside?
Should exchange action be only uni-directional, that is, it pushes share prices up, or should it be directionally neutral?
This is not to say thst SGX and officialdom are free from criticism. The affair was clumsily handled and investigations have stretched beyond one year now - surely too long to leave investors wondering.
There are also too many companies whose shares have been suspended for many years, leaving their shareholders in limbo. Moreover, the quality of many SGX entrants has been questionable over the years, suggesting that there has been over-reliance on “caveat emptor” as a guiding market axiom.
SGX may be a significant player in the market’s ecosystem but there are many other constituents who also have a role - and the sooner everyone acknowledges this uncomfortable truth, the better.
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