(Updated on October 5 to include the resignation of the financial controller at Reclaims Global)

By Mak Yuen Teen

Rule 703 of the SGX Rulebook for both the Mainboard and Catalist contains general principles relating to the disclosure of material information. Rule 704 requires certain specific information to be immediately announced. These rules exist for very important reasons – to avoid the establishment of a false market and to ensure that existing and potential investors have timely access to information that is likely to materially affect the price or value of a company’s securities.

If material information is withheld and individuals with access to that information trades on that information – or an issuer undertakes certain corporate actions where that information is relevant, such as share buybacks and rights issues – those individuals and issuers are trading on inside information. Granting and exercising share options while in possession of material non-public information is also insider trading.

I have written or co-written many articles pointing out numerous examples of companies that failed to disclose material information on a timely basis, including information that is specifically mentioned in the listing rules.

One category of specific information that the rules require an issuer to immediately announce is “cessation of service of key persons such as director, chief executive officer, chief financial officer, chief operating office, general manager or other executive officer of equivalent authority, company secretary, registrar or auditors of the issuer”. Issuers continue to fail to make timely announcements of cessation of such key persons.

On September 30, No Signboard Holdings announced that its CFO, Ms Voon Sze Yin, had resigned from the company. She was appointed as CFO on February 1, 2018, after joining the company as deputy CFO on December 15, 2017. The announcement said that Ms Voon had tendered her resignation on July 1 “after she accepted the offer to a new job opportunity”. Yet, the company deemed it appropriate to announce it only on the date of her departure.

The company’s explanation was that she had agreed to stay on until the independent review that the company has been directed to undertake “is substantially completed and also to ensure smooth transition and handover to the new CFO. Accordingly, the Board has now accepted her resignation and has noted that Ms Voon has served out her three months notice period in accordance with her employment contract”.

Was there really any doubt that she was going to leave the company since she had accepted a new job opportunity? Was there really any doubt that September 30 was going to be her last day at No Signboard since her employment contract contains a three-month notice period, which is exactly the period between the date she tendered her resignation and her last day?

The sponsor of No Signboard, RHT Capital, said that it had reviewed the contents of the announcement. It said that based on its enquiries, “it is satisfied that other than then as discussed in this announcement, there are no material reasons for the cessation of Ms Voon”. It did not say whether it was satisfied that the company has complied with rule 704 to make an immediate announcement of her cessation.

In my view, the company should have announced on July 1 when Ms Voon tendered her resignation especially since she had already accepted another job opportunity. Even if the effective cessation date was not known then, the company could have indicated that this would be subject to further discussions between Ms Voon and the company – although in this case, she actually left exactly on the last day of her notice period and there appears to be little doubt about her effective cessation date even on July 1.

Ms Voon was the second CFO to resign from No Signboard since its listing in November 2017. Its previous CFO, Ms Soong Wee Choo, who was appointed on May 1, 2017, resigned with effect from February 1, 2018 “to pursue personal interests” and her resignation was also announced only on the date of her departure.

The same day that No Signboard announced the resignation of its CFO, fellow Catalist company, Synagie Corporation, announced the resignation of its group financial controller (FC), Ms Jenny Tay Lee Wee. Synagie listed on Catalist in August 2018. Like No Signboard, the sponsor of Synagie is RHT Capital.

36 year-old Ms Tay was the most senior finance executive in Synagie, which does not have a CFO. She resigned “due to personal commitments and to spend time with her family”. She had joined Synagie on July 30, 2018. Exactly one year later – on July 30, 2019 – she tendered her resignation. She proceeded to serve two months’ notice and her effective cessation date was September 30, 2019. Synagie only made the cessation announcement on the day of her departure. Why was it not announced on July 30, 2019?

On October 1, Reclaims Global joined its fellow Catalist issuers in losing its top finance executive not long after listing when it announced the resignation of its financial controller, 38 year-old Mr Wu Peicong. Reclaims Global had listed less than seven months earlier. Mr Wu resigned “in pursuit of other career opportunities”. The sponsor, SAC Capital, disclosed that based on its interview with Mr Wu, there are no other material reasons for his departure and no concerns or disagreements relating to financial reporting.

SGX queried the company the following day and the company responded on October 4. In its response, the company disclosed that its next most senior finance executive after the departure of Mr Wu is on maternity leave until November 18, 2019 and the general manager will be overseeing the finance function in the meantime.

Reclaims Global disclosed that Mr Wu had tendered his resignation on July 17, and has a notice period of 3 months. On August 31, his last day of service was confirmed to be October 1. The company’s reason for not disclosing the resignation earlier was because “the initial intention was to time both the appointment and cessation announcements together to demonstrate continuity in the Financial Controller position”. This suggests that the company is aware of how the market might react to the departure of the financial controller.

The company said that it reasoned that it could delay the announcement as there were no concerns noted by the sponsor during the exit interview and there was already a new financial controller identified (although the company at the current time is still waiting for the new financial controller to confirm the date of joining). When was the exit interview done and the new financial controller identified? If the exit interview and the fact that a new financial controller had been identified took place after the previous financial controller had already tendered his resignation on July 17, they are irrelevant to the decision not to announce the resignation on the day that he tendered his resignation. Has the new financial controller accepted the offer yet?

In my view, there is no justification for not announcing the resignation on July 17.

On October 4, yet another CFO of a recent Catalist listing, Sim Leisure Group, resigned. Sim Leisure listed on February 28 this year. Its sponsor is ZICO Capital. The CFO, Mr Aw Yeong Weng Kwong, was appointed on July 3, 2017. The reason for his departure is “to pursue other career opportunities” and the effective cessation date is October 30, 2019. The company did not disclose when Mr Aw Yeong tendered his resignation. Again, the question is whether he had tendered his resignation earlier.

In this case, however, it appears that his departure was unexpected since the company said that it was appointing a corporate advisor of the group in the interim to take over the duties of Mr Aw Yeong as it searches for a replacement for Mr Aw Yeong. In the other two companies, replacements were found before the finance executives left.

In Sim Leisure’s case, the sponsor said that, after interviewing Mr Aw Yeong, it is satisfied that there are no other material reason for his departure other than what is disclosed in the announcement. The announcement also said there are no concerns with financial reporting and no disagreements with the board with regard to practices that would have an impact on the company’s financial reporting.

Beyond the issue of timeliness of announcement of the cessation of the senior finance executive, it is a concern that in the space of five days, we have seen the departure of the most senior finance executive from four recent Catalist listings. SGX should look into whether any of these cases involved the appointment of a senior finance executive on a fixed term contract, with the aim of ensuring a successful listing after which the senior finance executive will leave. Investors in these companies should certainly keep a close eye on these companies as turnover of senior finance executives is often a warning sign of trouble ahead.