Recent Development on Misleading Disclosure and Non-Disclosure to the Securities Market (and Their Relationships with Insider Trading) in Singapore Madhavan Peter v. PP and Other Appeals

Abstract

In Madhavan Peter v PP and other appeals, the Singapore court had to consider the scope of the offence of misleading disclosure to the securities market allegedly committed by three directors of Airocean, a company listed on Singapore Exchange (SGX), and the scope of the offence of non-disclosure of material information to the securities market allegedly committed by two of the three directors. The case is controversial and significant for a number of reasons. First, the district judge at first instance convicted the three directors for consenting to the listed company’s misleading disclosure to the securities market, and sentenced one of them (an independent director and who is also a lawyer by profession) to four months’ imprisonment in relation to that charge. (The other two directors received fines.) Independent directors of SGX-listed companies are rarely prosecuted for disclosure failures of their listed companies and this was the first time that an independent director was given a custodial sentence on the company’s disclosure failure, though eventually his conviction was overturned on appeal. Second, the case provides an important clarification on the thresholds of materiality for the offences of non-disclosure of material information, and making materially misleading statements, to the securities market, as well as the offence of trading while in possession of material price-sensitive information. Third, the case considers the scope and applicability of the defence of reliance of independent counsel, which was raised by the two directors in respect of the non-disclosure charge.