Employees alleged to have misled investors, failed to disclose important company information

The General Division of Singapore's High Court recently dealt with allegations about employees misleading investors and failing to disclose important company information.

The investors sued them for not communicating internal organizational changes, not being transparent with their roles, and had expectations about the information they were going to disclose.

The case raised questions about employment responsibilities and transparency obligations, particularly when workers hold multiple roles in an organisation.

An investor started legal action against three workers, arguing they failed to disclose important information and made misleading statements during business dealings. The investor said he would not have made the investment if he had known certain facts about management changes and regulatory investigations.

The case explored what information employees must share when dealing with stakeholders, and how employment transitions should be handled.

Dispute with management over investments

The dispute involved a fund management company registered with the Monetary Authority of Singapore.

The company employed a sales director who promoted private equity investments, particularly in healthcare and education sectors in the United Arab Emirates. Although he held the title of sales director, he was not a board director.

The organisational structure included another key figure who served as both chief executive officer and board director until October 2016.

This executive later moved to a different role within the broader corporate group, managing educational investments.

The sales director's employment focused on introducing investment opportunities to clients. As the court noted:

"[The sales director's] role in [the company] was sales-focused, ie, to introduce clients to opportunities to invest in private equity. Specifically, he promoted the purchase of shares in the PE companies."

During October 2016, the sales director met with potential investors and shared information about investment opportunities. The meetings led to discussions about expected returns and company management.

Management changes and communication

The case examined how the company handled leadership transitions. The chief executive officer stepped down from his position and moved to a different role within the corporate group.

The court considered whether employees had obligations to actively communicate such changes.

When looking at email communications, the court observed:

"[The executive] cannot control people putting [him] onto [the carbon copy] of emails. What [he] can control would be [him] replying to the emails that matter to [him]."

Employment duties regarding information disclosure

The court addressed arguments about the scope of employment duties regarding information disclosure. It stated:

"A free-standing duty to disclose every conceivable facet of possibly negatively-perceived news to potential investors would be an unrealistic and impossible standard."

The judgement emphasised practical considerations about workplace communication and professional duties. The court found no evidence that employees acted inappropriately within their roles.

In reaching its conclusion, the court stated: "Whatever the merits of the initial investment in the company, and whatever the factors that motivated [the investment]... it was plainly not the result of the misrepresentations made by [the employees] or any conspiracy between them."

This decision provided guidance about reasonable expectations for information sharing and professional conduct in similar employment situations.