Unusual trading: Who keeps tab?

If a firm sees signs of unusual trading activity, it should consider issuing an immediate full announcement, a holding statement or a trading halt, says SGX.
If a firm sees signs of unusual trading activity, it should consider issuing an immediate full announcement, a holding statement or a trading halt, says SGX.PHOTO: AGENCE FRANCE-PRESSE

Onus is on firms involved in confidential discussions to monitor their shares, says SGX

The Singapore Exchange (SGX) has reminded companies here that while they are involved in confidential and material discussions, they must closely monitor their shares for signs of unusual trading activity.

Any such sign should be regarded as "a serious matter", and the company should consider issuing an immediate full announcement, a holding statement or a trading halt.

This reminder came in the SGX's latest regulator's column.

The timely disclosure of material information is fundamental to maintaining a fair, orderly and transparent market, chief regulatory officer Tan Boon Gin wrote.

But deciding on the timing for an announcement can be challenging, especially if companies are in the midst of negotiations or if matters are in a state of flux, he noted.

The timely disclosure of material information is fundamental to maintaining a fair, orderly and transparent market, chief regulatory officer Tan Boon Gin wrote.

However, the listing rules do allow companies some latitude when it comes to the timing of announcements, he said. In exceptional cases, the company can even withhold the announcement until later, though it is obliged to maintain the strictest confidentiality in the meantime.

During this period, the onus is also 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 the SGX, Mr Tan said.

"This is particularly crucial when the matter is close to being concluded. For example, if trading activities of its shares suggest there could be a potential leak of the matter under negotiations or discussions, the company must call a trading halt and make the announcement."

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 may then request a suspension of trading if it is unable to release the information by the end of the trading halt.

The SGX will issue a query to a company only if its share trading is unusual and it has not issued any statements that could explain the activity. After all, unusual share trading ahead of announcements may be indicative of market misconduct, Mr Tan explained.

"Should SGX suspect insider trading, we will take action including 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."

From time to time, Mr Tan added, the SGX has been asked to confirm whether certain situations were indicative of insider trading and whether investigations were ongoing.

Among factors the SGX considers when deciding whether to share information, two key questions it weighs are: Would the information benefit investors in their decisions? And would the revelation jeopardise investigations?

When the SGX shares information, the SGX would have deemed that the need for investors to be informed of a possible false market far outweighs the interest of keeping possible investigations confidential, Mr Tan said.

A version of this article appeared in the print edition of The Straits Times on September 05, 2015, with the headline 'Unusual trading: Who keeps tab?'. Print Edition | Subscribe