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SGX swings regulatory hammer left, right and centre

The Edge Singapore
The Edge Singapore4/9/2018 08:00 AM GMT+08  • 5 min read
SGX swings regulatory hammer left, right and centre
SINGAPORE (Apr 9): Expectations were not especially high when Singapore Exchange Regulation formally began operations last September, headed by Tan Boon Gin, a former director of the Commercial Affairs Department (CAD) and a one-time District Judge of th
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SINGAPORE (Apr 9): Expectations were not especially high when Singapore Exchange Regulation formally began operations last September, headed by Tan Boon Gin, a former director of the Commercial Affairs Department (CAD) and a one-time District Judge of the Subordinate Courts. The Singapore Exchange had long been accused of having business interests that conflicted with its regulatory role, and it was unclear at the time how independent Tan and SGX RegCo would be in ensuring that the 746 locally listed companies played by the rules. If the past week is anything to go by, however, it does appear that the tone of market regulation is becoming more proactive and high-profile.

Within a matter of days, SGX RegCo has effectively booted out the chairman of a public- listed company mired in a financial scandal, threatened the board of another public-listed company with fines and jail time for appointing an independent reviewer with a conflict of interest, referred a separate public-listed company to CAD after it made gross errors in its financial reports, and rubbished a controversial restructuring plan mooted by yet another company. For the boards and senior officers of locally listed companies, these moves are a warning that any wrongdoing on their part will have swift and severe consequences.

The most remarkable of SGX RegCo’s recent moves came on April 2, when it banned Chen Wei Ping, executive chairman of Midas Holdings, from his position and from serving as a director of any other Singapore-listed company for the next three years. While people have been banned from sitting on boards of companies before, this is said to be the first time such action has been taken so publicly — it was disclosed in an announcement on SGXNet.

This move came after a series of devastating announcements by Midas, beginning on Feb 8, that it was on the hook for unauthorised loans linked to Chen. According to the announcements, creditors in China are attempting to recover some RMB452.2 million ($94.3 million) from operating subsidiaries of Midas. This sum includes unauthorised loans taken by the units themselves as well as unauthorised guarantees for loans taken by entities linked to Chen. Among these entities were companies owned by Chen’s nephew.

On March 22, Midas CEO Patrick Chew resigned. According to the company, Chew’s legal stamp in China had been used to approve a whole series of transactions and agreements that he claims he knew nothing about. Now, Midas appears to be having difficulty directing the officers of its subsidiaries to do its bidding. On March 29, Midas said its subsidiaries had refused to hand over a sum of US$30 million ($39.5 million), which is needed to redeem a bond.

There are now only three non-executive directors left on Midas’ board. Two of them, Xu Wei Dong and Tong Din Eu, with expertise in law and finance respectively, have taken on executive roles. The remaining director, Chan Soo Sen, a former minister of state, has taken on the role of chairman. They are looking for new independent directors to join the board. The company has also made a report to CAD.

Another company to have recently attracted the wrath of SGX RegCo is Datapulse Technology. The company saw a change in controlling ownership recently at an eyebrow-raising price. More questions were raised when an acquisition was pushed through four days after a new board, led by chairman Low Beng Tin, was appointed.

On March 11, as instructed by SGX, Datapulse appointed an independent reviewer, law firm RHTLaw Taylor Wessing, to look through the processes and sequence of events that had taken place. SGX subsequently flagged that RHT Capital, the capital markets adviser linked to the law firm, has acted as the sponsor for OEL Holdings, a Catalist company, since 2012. And, Low is the founder of OEL and had been its executive director for more than 30 years, which puts RHTLaw Taylor Wessing in conflict.

On April 3, in a letter to the board of Datapulse, SGX RegCo warned that providing false or misleading information could lead to penalties that include a fine of $50,000 and a jail term of two years. SGX RegCo also demanded that the company appoint a new independent reviewer by April 11.

Meanwhile, Yuuzoo Corp recently discovered the limits of the regulator’s patience with its announcements that were riddled with errors and discrepancies. SGX RegCo had queried several of Yuuzoo’s announcements over the past few months. On April 2, the regulator finally referred the company to CAD. On April 5, Yuuzoo said CAD had seized computers, documents and even chargers and adapters from the company.

Also on April 5, SGX RegCo took a swing at Noble Group, the once-high-flying commodities trader that is now trying to restructure its crippling debts. Under a restructuring agreement with senior creditors, almost all of Noble’s assets will be put into a new entity in which existing shareholders will own only a 10% stake. “SGX RegCo will not hesitate to register its concerns about the [restructuring] — in its current form — with the relevant administrator to be appointed, should Noble Group be placed in administration,” the regulator stated. “SGX RegCo urges senior creditors to reconsider the proposal to ensure parity in the treatment of all shareholders.”

It looks like the market needs to get used to a more active regulator.

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