Stricter policies necessary to ensure confidence in markets’ integrity

Published June 12, 2015

First published in Business Times on May 26, 2015


I REFER to the report “Xpress and its former chairman broke listing rules in 2014: SGX” (BT, May 22).

It is good that Singapore Exchange has taken some form of enforcement action by issuing warnings to the company and the former chairman for the tardy disclosures in relation to creditors’ winding-up applications. The enforcement action is for a breach of Listing Rule 704(20), which specifically requires such information to be disclosed. However, this may not be the end of the problems for the company.

Section 203 of the Securities and Futures Act (SFA) imposes liability for breaches of the continuous disclosure requirement in the listing rules, if the breach is intentional, reckless or due to negligence.

In my letter “Closer scrutiny of Xpress may be warranted” (BT, July 25, 2014), I had raised questions about the company’s response to SGX’s query about unusual volume movements and subsequent disclosures about the legal proceedings, winding-up petitions and proposed placement of new shares.

The enforcement action so far does not address SGX’s query on July 1 about unusual volume movements – the number of shares traded that day was 184 million compared to the daily average of a few million shares. Did someone know of the impending winding-up application and trade on non-public information? In that letter, I had also pointed out that the former chairman’s deemed interest had decreased through a disposal of 29 million shares (which amounted to 23 per cent of his total direct and deemed interest in the company) on July 2, based on an SGXNet announcement on July 4.

Therefore, in addition to a possible breach of the continuous disclosure rule in the SFA, there are questions surrounding possible insider trading in the company’s shares. It remains to be seen if further enforcement action will be taken by other regulators, although SGX did not mention in its announcement that it has referred the case to other regulators.

As discussed in my commentary “Tighten insider trading restrictions” (BT, Nov 1, 2010), SGX should consider requiring issuers to adopt stricter policies restricting insider trading outside of “blackout periods”. Companies such as Micro-Mechanics, Qian Hu and Singtel and have already put in place policies requiring their directors to seek board approval or consult designated persons, such as the company secretary or CEO, before they trade in the issuer’s securities.

This is consistent with rules and practices in countries such as the UK and Australia. Stricter policies on dealing in securities by directors and other key officers, and strong enforcement of insider trading and other rules, are necessary for ensuring confidence in the integrity of our markets.

Mak Yuen Teen


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