SGX: Firms in material talks should monitor share trading activity

Singapore

WHILE a company is involved in confidential and material discussions, it must track the trading of its stock, said Tan Boon Gin, chief regulatory officer of the Singapore Exchange (SGX).

And if the SGX is investigating suspected insider trading, it will likely refrain from communication, especially when material information has already been disclosed, he added.

He made these points on Friday in a "Regulator's Column" on SGX's website, a page which aims to provide guidance and increase awareness of potential regulatory concerns.

He was raising the issue amid market talk on the subject.

A commentary in The Business Times on Thursday had mentioned market observers being concerned about how commodity trader Olam International's share price had spiked right before it was disclosed that Japanese trading giant Mitsubishi Corp would buy a 20 per cent stake in it. The commentary noted that in February and March in 2014, the same happened before the announcement of a takeover by Temasek Holdings.

Another recent instance of unusual activity about which SGX issued a caution was the trading in fuel oil trader CEFC International's shares.

SGX's Mr Tan said companies involved in material discussions are obliged to monitor their share trading activity.

While listing rules allow some latitude in the timing of announcements with material information, companies should maintain the strictest confidentiality, he said.

"During this period, the onus is on the company to keep a close watch on the trading activity of its shares and be prepared to make an immediate announcement if necessary, rather than wait to be queried by SGX," he said. Should the company not be ready to make the disclosure, it should release a holding statement to explain its position, Mr Tan said. The company can also suspend trading to allow for more time for matters to be concluded, he added.

If a company's share trading is unusual and no disclosure is forthcoming, SGX will find it necessary to query it, he said.

SGX will also take action if unusual share trading is indicative of market misconduct, for example, insider trading. The action includes obtaining from the company the name list of parties privy to the material announcement, analysing trades, obtaining information from brokers and referring cases to the Monetary Authority of Singapore, he said.

The information that SGX will disclose is guided by considerations of whether investors will benefit from knowing about a possible false market, or if investigations are at risk, Mr Tan said.

He concluded: "In cases where the material information has already been disclosed to the market, silence may yield a better overall outcome."