Yeap Wai Kong, one of China Sky Chemical Fibre Co.’s former independent directors, is challenging the Singapore Exchange in court, arguing the bourse was wrong in publicly reprimanding him in December.
The exchange had been “tyrannous in the use of its strength,” Yeap’s lawyer Tan Cheng Han told Singapore’s High Court today at the start of a three-day hearing.
China Sky and its directors have clashed with Singapore regulators following their refusal to heed a Nov. 16 directive by the exchange to appoint a special auditor. The Commercial Affairs Department is also probing the Chinese nylon-fiber maker for possible breaches of securities laws after a “number of irregularities” were discovered by the Singapore Exchange Ltd., also known as SGX.
“Stand-offs like the one in China Sky would only spook investors,” said Eugene Tan, a law professor at the Singapore Management University. “Enforcement is the flavor of the day and there may well be a perception that Singapore is upping the ante here.”
China Sky had intended to comply with the exchange’s directive, contrary to the bourse’s impression, and had sought to understand the basis for appointing the auditor, Yeap, said in a Feb. 26 e-mailed statement.
“My point was SGX could not simply base on its ‘impression’ to issue reprimands,” Yeap, 42, said at the time.
Yeap, who was appointed to China Sky’s board in May 2011, quit in January and declined to comment today. China Sky’s two other independent directors Er Kwong Wah and Lai Seng Kwoon quit on the same day as Yeap, citing non-compliance with the bourse’s order.
Yeap was “part of a collective and determined effort on the part of the directors of the company to stymie the exchange’s repeated efforts to get to the bottom of issues,” Singapore Exchange’s lawyer Davinder Singh said in his opening statement today. He “now complains of unfairness.”
Singapore Exchange said Feb. 22 it’s prepared to review the reprimand of Yeap, which is separate from the probe by the white-collar crime agency.
“SGX has clearly breached the rules of natural justice” by not informing him of the rebuke ahead of time and giving him an opportunity to respond, Yeap said in his February statement. “If not dealt with, the public reprimand would constitute a permanent blemish on my record,” he said.
The white-collar crime agency, which began the probe on Feb. 16, is examining possible offenses that include false and misleading statements as well as failure to disclose material information, according to the filing.
Such offenses may be punishable with a criminal fine of as much as S$250,000 ($200,000) and a jail term of as long as seven years or a fine of as much as S$2 million as a civil penalty.
China Sky, based in Quanzhou City, Fujian, China, has disputed that it breached any listing rules or securities laws.
The Singapore Exchange sued China Sky in a separate lawsuit on Jan. 6 to compel it to appoint a special auditor to look into deals between the firm and its Audit Committee Chairman Lai as well as an aborted land acquisition in China. The exchange had questioned the independence of Lai whose accounting firm provided services to China Sky. The case was dropped on Jan. 16, without a reason provided.
The Monetary Authority of Singapore, which oversees the bourse, on March 28 sought a court order to freeze the assets of former China Sky Chief Executive Officer Huang Zhong Xuan.
“We should not look at all the actions and think that the regulators are somehow getting together to punish the company and its directors because the company challenged SGX,” said Mak Yuen Teen, a finance professor at the National University of Singapore.
The case is Yeap Wai Kong v Singapore Exchange Securities Trading Ltd. OS72/2012 in the Singapore High Court.