SINGAPORE Trends and Developments Contributed by: Sreenivasan Narayanan SC, Jason Lim and Palaniappan Sundararaj, Sreenivasan Chambers LLC
Sreenivasan Chambers LLC 96 Robinson Road #15-02 SIF Building Singapore 068899
Tel: +65 6031 1577 Email: kylegabriel@sreenivasanchambers.com Web: www.sreenivasanchambers.com
Two topics stand out – market-related offences under the Securities and Futures Act 2001 (SFA), and asset seizure cases (often linked to money-laundering). In this section we will be looking at a number of cases, some of which have been highly publicised in Singa - pore. We hope to offer practical guidance to those looking to work and/or do business in Singapore. Market-Related Offences The SFA is the cornerstone of Singapore’s securities regulation framework. It regulates listed companies, their directors and market participants to rigorous statutory obligations in matters of market conduct, disclosure and corporate governance. Heightened enforcement activity has brought these obligations into sharp focus in recent years. We will focus on two categories of offences prosecut - ed under the SFA – non-disclosure of material infor - mation under Section 203, and market manipulation under Section 197. Non-disclosure offences (Section 203 of the SFA) The collapse of Hyflux Ltd – once a flagship water treatment company with a market capitalisation peak - ing at approximately SGD3 billion – exposed systemic failures in corporate disclosure. Criminal proceedings were brought against not just executive directors but also independent non-executive directors for non-dis - closure of material information under Section 203 of the SFA. This case, which affected some 36,000 retail investors, serves as a reminder to skilled professionals taking up board and management appointments in Singapore of the serious consequences that flow from inattention resulting in disclosure failures.
Key observations include the following. • Section 203 of the SFA, read with SGX Listing Rules 703 (1)(b), imposes a continuous disclosure obligation on listed entities. • An offence arises where a responsible person intentionally, recklessly or negligently fails to dis - close material information that would be necessary to avoid the establishment of a false market in the entity’s securities. • The test of materiality requires a determination of whether the information is “likely to materially affect the price or value” of the securities in ques - tion. There are a few categories of information which would clearly constitute material information – events of default, loss of key franchises or signifi - cant litigation. Save for these clear-cut categories, the inquiry as to whether a piece of information (eg, the progress or failure of M&A negotiations or the devaluation of particular assets) is material is often a judgment call. Critically, materiality is a business judgement, and not a purely legal test. • Judgement calls made as to the materiality of infor - mation are open to scrutiny subsequently, often with the benefit of hindsight, although liability is a matter to be determined on the state of knowledge at the time of the offence. Notable cases include the following. • The Hyflux case involved a company with a mar - ket capitalisation that peaked at approximately SGD3 billion and affected 36,000 retail investors and bond holders. Rajsekar Kuppuswami Mitta, a former Independent Director of Hyflux who served on the board for over eight years, was convicted
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