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SGX reviewing SPH Media circulation information; investor watchdog urges 'no let up' if market deliberately misled

SINGAPORE — The regulator and operator of Singapore's stock market, the Singapore Exchange (SGX) Group, is reviewing SPH Media’s circulation information, following news that the organisation inflated the circulation numbers of its publications by 10 to 12 per cent.

SGX reviewing SPH Media circulation information; investor watchdog urges 'no let up' if market deliberately misled
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  • Singapore Exchange (SGX) Group said it is reviewing SPH Media’s circulation information, following the news that the media company inflated its circulation numbers
  • An investor watchdog said there should be no let up by the authorities if the stock market was misled as a result of the inflated circulation figures
  • TODAY spoke to some experts including Professor Mak Yuen Teen, who said that this was a serious matter and could imply wrongdoing
  • While some senior lawyers said that this would unlikely imply a criminal breach of trust, inflating circulation numbers could have other legal ramifications such as alleged misrepresentation or alleged cheating

SINGAPORE — The regulator and operator of Singapore's stock market, the Singapore Exchange (SGX) Group, is reviewing SPH Media’s circulation information, following news that the organisation inflated the circulation numbers of its publications by 10 to 12 per cent.

Separately, an investor watchdog here said that if there has been any deliberate act to mislead the market, there would be no let up and appropriate action should be taken by the authorities.
 
Circulation numbers are important as they set a benchmark for the price publications can look to charge advertisers. In general, the greater the circulation, the higher the cost of advertising.

In response to TODAY's query, an SGX spokesperson said on Tuesday (Jan 10): “We are reviewing the circulation information including its materiality and time of occurrence.”

In the context of the stock market and laws relating the governance of listed companies, "material" information refers to information that is likely to affect a company's share price.

Strict rules relate to the timely release of material information so that investors can make informed decisions about buying shares. The deliberate release of inaccurate information that has a material impact on a company's share price is also covered by such laws.

Until December 2021, the titles published by SPH Media, such as The Straits Times and The Business Times, were part of Singapore Press Holdings (SPH), which was listed on the SGX, and therefore subject to such rules.

After that, SPH Media split from SPH and became a company limited by guarantee, and no longer listed on the SGX. SPH itself has since been renamed Cuscaden Peak Investments with a focus on property-related investments.

The timing of the inflated circulation information is not clear, including whether it may have occurred during the period the publications were part of SGX-listed SPH.

Experts that spoke to TODAY said that the revelations by SPH Media imply some degree of wrongdoing, and if so, this could lead to serious repercussions for SPH.

While SPH Media did not state the period of time in which the circulation numbers were inflated, The Straits Times reported that an internal review was initiated in March last year.

The period of review covered the period from September 2020 to March 2022. SPH Media was still part of the listed company SPH for the portion of the review period from September 2020 to November 2021.

SPH Media had said on Monday that daily circulation numbers of its titles have been found to be inflated by between 85,000 and 95,000, including instances where copies were printed, counted for circulation and then destroyed.

There was also "double-counting" of subscriptions across multiple instances, and a project account was "injected with additional funding over a period of time to purchase fictitious circulation".

In addition, lapsed contracts continued to be counted into circulation data.

On this point, Mr David Gerald, founder, president and chief executive officer of the Securities Investors Association (Singapore), which acts on behalf of smaller investors, said that "obviously, there has been a breakdown in the internal process, during the term of the last management of the listed company".

He noted that the authorities are looking into this incident.

“I'm confident that the current management will improve its internal controls and do everything it can to avoid a similar incident," he said.

"If there has been any deliberate act to mislead the market, there will not be a let up and appropriate action should be taken.” 

If there has been any deliberate act to mislead the market, there will not be a let up and appropriate action should be taken.
Mr David Gerald, head of the Securities Investors Association (Singapore)

EXPERTS SUGGEST CONDUCT MAY HAVE SERIOUS CONSEQUENCES

The whole matter of inflating circulation numbers is very serious, said Professor Mak Yuen Teen, professor (practice) of accounting at NUS Business School, who specialises in corporate governance.

He questioned if the use of funds to buy fictitious copies was tantamount to some form of fraud.  

"It’s not just a matter of mistakes being made,” he said.

Prof Mak added that this raises questions as to what extent SPH Media management and board have put in proper controls in the company, and whether deeper investigation should be done by regulatory authorities.

While he does not expect private action by shareholders due to the costliness of lawsuits, he said it is possible that certain advertisers may sue the media company.

“Certain major advertisers may sue if they have significant contracts with SPH if the circulation numbers may have been a basis in signing certain contracts for advertising," he said.

"For instance, the contracts specifically mentioned the circulation numbers, or set advertising prices specifically because of the circulation numbers,” said Prof Mak.

This also raises questions around internal and external auditing, Prof Mak added, such as whether revenue tallied with number of circulation, and whether auditing of these numbers were properly done.

"And if the fake circulation did not flow into revenues, then one needs to ask why no one picked up the discrepancy,” said Prof Mak.

TODAY also spoke to three senior lawyers on other possible legal ramifications.

According to lawyer Chooi Jing Yen, a partner at Thuraisingam LLP, this was not considered a criminal breach of trust, which usually requires a person to “take something of value”, such as property or money.

“People think they pay you money for a certain purpose, but actually you had no intention of using the money for that purpose,” said Mr Chooi.

However, lawyer Mark Teng, executive director of That.Legal LLP, said that SPH Media could be taken to court by advertisers for either alleged misrepresentation or cheating. 

Mr Teng said a misrepresentation in contract law is a statement of fact that is not true, and that persuades someone to enter a contract. 

“So if SPH’s customers had relied on the circulation numbers to decide to enter in a contract for advertising, then these affected customers could claim damages from SPH, or in a more serious case, a revision of the contract,” said Mr Teng.

Another senior lawyer, Mr Sunil Sudheesan, director of Quahe Woo & Palmer LLC, said that SPH shareholders could also potentially file a police report against the company because they had bought stock based on what they knew about circulation.

While SPH Media is not publicly-listed, Mr Sudheesan said that the period of time when the false declarations took place would matter, such as whether it was a one-off incident or it took place before the company was delisted.

TODAY has reached out to 10 major advertisers with SPH Media, but they did not reply or declined to comment.

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