Recently, the share price of Bright World(BW) came under further pressure as a result of a letter sent to its directors from the Monetary Authority of Singapore (MAS), referring to a possible breach of section 203 of the Securities and Futures Act.
What is section 203 of the Securities and Futures Act?
Section 203 (Continuous disclosure) shall apply to —
(1)(a) an entity the securities of which are listed for quotation on a securities exchange;
(b) a trustee of a business trust, where the securities of the business trust are listed for quotation on a securities exchange; or
(c) a responsible person of a collective investment scheme, where the units of the collective investment scheme are listed for quotation on a securities exchange,
if the entity, trustee or responsible person is required by the securities exchange under the listing rules or any other requirement of the securities exchange to notify the securities exchange of information on specified events or matters as they occur or arise for the purpose of the securities exchange making that information available to a securities market operated by the securities exchange.
(2) The persons specified in subsection (1) (a), (b) or (c) shall not intentionally, recklessly or negligently fail to notify the securities exchange of such information as is required to be disclosed by the securities exchange under the listing rules or any other requirement of the securities exchange.
(3) Notwithstanding section 204, a contravention of subsection (2) shall not be an offence unless the failure to notify is intentional or reckless.
Comments:
Basically, what section 203 implies is that any price sensitive information must be announced through the SGX first before going through other media channels. There must not be any news leak prior to any announcement so that no parties can gain an advantage by making use of the price sensitive information.
Personally, i believe MAS is interested to know why there is a spike in trading volume 1 week before the takeover announcement by China Holdings Acquisition Corp. There is ground for MAS to suspect that the takeover news has been leaked out before it was announced. The directors have indicated that it is premature to assume that the takeover plan will be scrapped due to the infringement of section 203. The last SGX listed company to be convicted of infringing section 203 was more than 2 years ago in April 2006. The contravention by Trek, was in relation to the company's failure to promptly announce an earnings projection, in breach of its disclosure obligations under the SGX-ST listing rules.
On 19 January 2006, Trek disclosed in an interview with Reuters that it expected sales and earnings to grow by 20% to 25% over the next three to five years. As the information was material and had not been publicly disseminated before the interview, SGX-ST listing rules required that it be promptly announced to the market via SGXNET. Trek failed to do this. The company only made the announcement after being alerted by SGX-ST on the morning of 20 January 2006. By this time, there had been sharp increases in the price and trading volume of its shares. On 14 February 2006, SGX-ST publicly reprimanded Trek for breach of its disclosure obligations under the listing rules.
Trek has admitted to contravening section 203(2) of the SFA by negligently failing to notify SGX-ST of the earnings projection. The company has paid a civil penalty of S$75,000 to MAS without court action.
In the event that BW is guilty of not safe-guarding the price sensitive info, I believe the punishment will be at most a hefty fine.
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3 comments:
Let's face it, news leak are bound to happen, even in america. I have seen shares of companies rising without any news beforehand, a few months later,they come up with a takeover announcement. Even in this bear market, some shares did not drop due to news leak of takeover/delisting arrangments. If SGX has to penalise every company for news leak, we ought to see more culprits. Let's accept that there is an informational asymmetry in the market, we just need to look for a margin of safety and not worry about whether we are privvy to insider news.
Very true. Agree totally. Such news leak are also pervasive in some countries around the region. And the stock exchanges do not do anything about it. The authorities can try hard to level the playing field. But in reality, the field is never flat. Section 203 is a good and necessary rule to have. The main problem lies in reinforcing it. This is why i believe that at most, Bright world will get a hefty fine. End of story.
this coutner price had been spiked up and donw by a few trades lately, for no apparent reasons. It is quite a surprise no querry from exchange so far... but let ponder why all these little, unsustainable volume up to ...at this time of mkt..... There is ONLY one word crosses my mind....Beware !!!
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