UOB Kay Hian’s ban from IPO, RTO sponsor activities significant but unsurprising: market watchers 

UOB Kay Hian’s ( UOBKH ) ban from new issue and sponsor activities is a significant one, but comes as no surprise to market watchers polled by The Business Times.

Singapore Exchange Regulation (SGX RegCo) said on Tuesday (Dec 27) after market close that it was barring UOBKH from undertaking new mandates to act as an issue manager or full sponsor for initial public offering (IPO) and reverse takeover (RTO) submissions on the local bourse. This came after the Monetary Authority of Singapore (MAS) on Aug 31 fined UOBKH S$375,000 for business conduct compliance failures. UOBKH had failed to adhere to the Securities and Futures (Licensing and Conduct of Business) Regulations, as well as to anti-money laundering and countering the financing of terrorism requirements.

Robson Lee, a senior corporate lawyer, said he expected some form of operational consequence for UOBKH, following MAS’ earlier announcement. He noted that the fine UOBKH paid was a “small amount” and that it was likely left to SGX RegCo to administer the downstream consequences of UOBKH’s lapse. But the lack of a time limit on the ban was “rather unusual” and likely reflective of the gravity of the lapse, Lee said. “This is probably an unprecedented case of a very established institution having an unlimited ban,” he said.

However, Lee added, this does not mean that UOBKH cannot return to business.

Indeed, David Gerald, chief executive of the Securities Investors Association (Singapore) or Sias, noted that the ban can be lifted if UOBKH reviews internal controls and meets requirements. “The ball is in UOBKH’s court to put their house in order,” said Gerald, who is also founder and president of Sias.

He viewed the move as a necessary action to ensure market players meet minimum standards and maintain the quality of due diligence processes. “Maintaining high standards of conduct in the industry is important to safeguard the interest of investors,” he added.

Chew Sutat, pro-tem chairman of SGListCos, called the move an “unprecedented significant step”, adding that companies and investors should be encouraged by enforcement action if and when required. Chew said: “It will, however, be good to have more active participants to support the capital makers, with competition and choice, including UOBKH when they have addressed this present matter.”

According to Bloomberg data of IPO activity over the last five years, UOBKH had been involved in some number of deals, but with a small market share by value.

The company, which is publicly traded and counts UOB as a major shareholder, was a financial adviser in at least 17 deals over the period, with a market share of 0.9 per cent. Shares of UOBKH ended Wednesday unchanged.

Brokerage Lim & Tan Securities, in a client note on Dec 28, said the prohibition “will impact sentiments” but would have “minimal” impact on sales and profitability. It also noted that the stock’s valuations are not demanding, as it trades at 11 times trailing earnings and 71 per cent of its book value. The stock also has a dividend yield of 6.3 per cent.