THE local corporate watchdog is showing its teeth. The Accounting and Corporate Regulatory Authority (Acra) is starting to investigate possible breaches of regulations at Singapore Post's board, the postal and e-commerce group revealed in a bourse filing on Thursday morning.
Acra on Wednesday "required" SingPost to furnish it the joint special audit report on SingPost's corporate governance dated May 3 "as it (Acra) is commencing investigations into possible breaches of the Companies Act as highlighted in the report", SingPost said in its one-liner statement before the market opened.
The announcement sent SingPost shares tumbling in the session. The stock fell as much as 3.5 per cent to a two-and-a-half month low of S$1.525 before recovering slightly to end the day S$0.025 lower at S$1.55 on 11 million shares traded.
The corporate regulator's move comes shortly after SingPost's joint special auditors, Drew & Napier and PricewaterhouseCoopers, said in a summary of their report that former SingPost lead independent director Keith Tay was "arguably in breach of section 156(1) of the Companies Act" for not declaring his interest in the 2013 acquisition of Famous Holdings "as soon as practicable".
The auditors had also found that Mr Tay had breached some fiduciary duties relating to the Famous Holdings deal and SingPost's acquisition of Famous Pacific Shipping (NZ) in 2015. Breaches of fiduciary duties come under the Companies Act, which is under Acra's purview.
SingPost has released only a summary of the report to the public, though it sent the full special audit findings to the Singapore Exchange.
When asked to confirm Acra's launch of a probe and how quickly it aimed to complete it, an Acra spokesman said in an emailed statement: "ACRA is unable to provide further comments as investigations are on-going."
Singapore Exchange head of listing compliance June Sim said over email that the exchange was still reviewing the special audit findings to determine the appropriate course of action, adding: "SGX will refer potential breaches of regulations to the relevant authorities and has referred this matter to ACRA ... Any regulatory action to be taken against the relevant persons will have to be proportionate to the listing rule breach." She reiterated that SGX has told SingPost to get independent confirmation on its implementations of the special auditors' recommendations.
It is unclear whether or how much Acra's investigation will focus on Mr Tay, the man at the centre of the recently concluded corporate governance probe at SingPost which revealed disclosure lapses and weak board controls.
Mr Tay's lawyer Thio Shen Yi, a Senior Counsel and joint managing director of TSMP Law Corp, told The Business Times on Thursday: "One expects the relevant authorities to do their jobs so we consider the request from ACRA for the full report to be relatively routine. We have not been contacted by any of the regulators. Keith is more than prepared to tell his side of the story and to address the issues arising from the report at the appropriate juncture if necessary."
SingPost spokesman Peter Heng said in an email on Thursday that the group has "provided the full report to ACRA for their investigation". He also said the group did not know of any SingPost directors, former or current, who have been asked to assist Acra in the investigation, adding: "We will cooperate with any regulator."
Observers noted that Acra's move to investigate was swift given the amount of detail to comb through in the 47-page summary report, adding that they hoped there would be appropriate enforcement or safeguards to prevent future governance lapses.
"I am pleased that ACRA is following up quickly with further investigations. Timely and effective enforcement is critical to a robust regulatory framework and improving corporate governance standards," said SingPost shareholder and corporate governance specialist Mak Yuen Teen. He added: "In this case, the special auditors' report is a report on the action of the board and certain directors. It is not a case where the board has commissioned a report to investigate management ... If regulators have access to the full report to consider possible action, shouldn't shareholders have access to the full report for the same reason? Why should the board whose actions are in question be allowed to decide not to release the full report without justification?"
Corporate lawyer Robson Lee of Gibson Dunn said: "I believe ACRA needed time to study the rather voluminous summary report that was earlier published to assess if a full investigation is required. That ACRA has now asked for the complete special audit report suggests that the information revealed in the summary report warrants a full investigation by the Authority on the highlighted transactions involving SingPost and/or the conduct of the relevant person(s) who had been involved in the transactions."
Mr Lee said the market "should be informed as soon as possible whether any regulatory enforcement action would be taken against any errant director or management executive for any breach of the law", adding that market participants would ideally also like to know "if the outcome of the investigation reveals only lapses of corporate governance best practices that did not contravene the law, what remedial actions and safeguards has the Authority (Acra) procured the board of SingPost to put in place to prevent a future recurrence of such lapses and misdemeanors".
"This will bring closure to an unfortunate episode of an established institution that has served Singapore very well for many decades."
SingPost commissioned the corporate governance probe last December after admitting it had made an "oversight" in a 2014 deal disclosure. It had wrongly said no directors had an interest in its acquisition of freight forwarder FS Mackenzie - when Mr Tay in fact held 34.5 per cent of Stirling Coleman, which advised FS Mackenzie's seller.