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High Court Dismisses China Sky Director’s Bid to Quash SGX Reprimand

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by Ernie B. Calucag

The Singapore High Court has dismissed the application of Yeap Wai Kong, a former director of China Sky Chemical Fibre Co Limited, to quash the Singapore Exchange’s (SGX) public reprimand of him on December 16 last year.

In a statement, SGX said that the High Court found that the exchange has fully and substantively accorded Yeap a fair hearing by giving him notice of its intention to reprimand, particulars of the case against him and full opportunities to be heard.

“The High Court further held that an orderly transparent securities market is contingent on the timely and accurate disclosure of material corporate information, and that the failure on the part of China Sky to make disclosure as requested by SGX, despite the full knowledge and approval of all the directors, is troubling,” it added.

The SGX reiterated that timely and accurate disclosure is necessary for investors to trade with confidence.

“Listed companies and their directors have the responsibility to see to it that there is proper disclosure and adherence to listing rules, failing which the SGX will act in the best interests of investors and marketplace,” it said.

China Sky and its directors have clashed with Singapore regulators following their refusal to heed a directive by the exchange in November last year to appoint a special auditor.

Yeap, who was appointed to China Sky’s board in May last year, quit in January this year. 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.

The Commercial Affairs Department is also probing the Chinese nylon-fibre maker for possible breaches of securities laws after a “number of irregularities” were discovered by the SGX.

The white-collar crime agency, which began the probe on February 16 this year, is examining possible offenses that include false and misleading statements as well as failure to disclose material information.

Such offenses may be punishable with a criminal fine of as much as S$250,000 and a jail term of as long as seven years or a fine of as much as S$2.0 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 January 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 January 16, without a reason provided.

The Monetary Authority of Singapore, meanwhile, on March 28 sought a court order to freeze the assets of former China Sky Chief Executive Officer Huang Zhong Xuan.

Trading in China Sky shares has been suspended since November 17 last year, a day after the exchange first ordered the company to appoint the special auditor.

The shares closed trading on November 16 at S$0.102, tumbling 96 per cent from their peak of S$2.74 in October 2007.