SGX Proposed Changes in Listing Rules

Date: May 11, 2007

SIAS has been against the back dating of options to coincide with low stock prices. Under the stock option scheme which must be approved by shareholders, the exercise price for options is based on the average of closing prices for the last few days. It is certainly not correct to back date options to achieve a lower exercise price than what it would be otherwise and this kind of manipulation is tantamount to cheating.

SIAS first brought up this issue over four years ago in a press release dated 24 Jan 2003 after investors brought to our attention likely instances of companies back dating stock options. We called on companies to promptly disclose option grants which would have eliminated the practice of back dating.

In another press release dated 13 June 2006, SIAS called for a requirement for companies granting stock options to disclose the size of grant and its exercise price to the public within 2 business days of the grant. We are therefore pleased that the authorities have heeded our call for more transparency required in this area.

For the latest proposed rule on disclosure of stock option grants, we would advocate that companies be required to make the disclosure immediately after the offer of options rather than after the grant of options. This is because there is a considerable period, say one month, for the acceptance of an offer which allows considerable leeway for back dating if disclosure is required only after the options are granted. In any case the offer of option is almost invariably accepted by the offeree.

SIAS will continue to monitor corporate practices of listed companies and will highlight to the investors and the authorities on areas of concern.

David Gerald
For Management Committee, SIAS