Friday, 16 January 2009
MAS Begins Civil Proceedings in Two Cases of Securities Violations
The Monetary Authority of Singapore (MAS) has begun civil penalty proceedings in two separate cases in the High Court. Today understands this is the first time the financial regulator is using the courts to impose civil penalties under the Securities and Futures Act (SFA).
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MAS Begins Civil Proceedings in Two Cases of Securities Violations
Leong Wee Keat
16 January 2009
The Monetary Authority of Singapore (MAS) has begun civil penalty proceedings in two separate cases in the High Court. Today understands this is the first time the financial regulator is using the courts to impose civil penalties under the Securities and Futures Act (SFA).
In previous cases, individuals or companies found to have contravened the SFA by manipulating the market or trading shares based on non-public information, have agreed to settle their cases and pay a fine without going to court. While criminal charges can be brought against people who commit insider trading offences, the civil penalty regime requires a less onerous burden of proof.
Still, under the civil penalty regime that started in 2004, the MAS can take court action against suspected offenders, as it has done with these two cases.
The first case involves Pheim Asset Management chief executive Tan Chong Koay who is accused of creating a false and misleading appearance in the share price of United Envirotech. He had allegedly traded in the shares in the last few minutes over a few trading days towards the end of 2004 with intent to manipulate the price of the shares in the environmental engineering company. A pre-trial conference will be held today.
The second case involves former WBL Corporation employee Kelvin Lew Chee Fai, who is accused of insider trading. On July 2, 2007 during a management meeting, Mr. Lew was said to have come into possession of information relating to an updated internal forecast of WBL’s financial results for the third and fourth quarters of the company’s 2007 financial year.
Mr. Lew, who was then the company’s group general manager for enterprise risk management, allegedly possessed slides prepared by the Finance Department and heard the discussions during the meeting.
According to the writ of summons filed by MAS, Mr. Lew was advised by the company secretary after the meeting on July 2 that the information was “price sensitive” and he should not trade in the company’s shares. On July 4, Mr. Lew sold 90,000 WBL shares at $4.98 per share.
After the market closed on Aug 14, WBL announced a pre-tax loss of $33.9 million and a net loss attributable to shareholders of $27.3 million. Shares fell from $4.78 on Aug 14 to close at$4.68 on Aug 16.
Under the SFA, a person cannot buy, subscribe to, or sell shares, if he has price-sensitive information that he knows is not generally available. The MAS charged that Mr. Lew’s alleged contravention of the SFA had resulted in the defendant avoiding a loss of around $27,000.
In his defence, Mr. Lew denied that the slides prepared by WBL were distributed to the attendees of the July 2 meeting. He claimed that the financial forecasts for the third quarter were “extremely preliminary and could not be reasonably relied on” as all the company’s subsidiaries were still preparing their accounts for June 2007.
Mr. Lew also claimed that WBL’s poor results were information guided by the company — in previous quarterly earnings announcements — and were generally available and/or expected by the public.
The case will be mentioned in a pre-trial conference on Monday. Mr. Lew is represented by Senior Counsel Thio Shen Yi and Ms Leow Yuan An from TSMP Law Corporation, while MAS is represented by Drew & Napier’s Mr. Tan Hee Joek and Ms Lim Gerui.
Civil penalties decided by the courts can amount to three times any profit earned or loss avoided, subject to a minimum of $50,000 for individuals and $100,000 for companies.
If there is no profit or loss avoidance, the courts can order a civil penalty of at least $50,000 but not more than$2 million.
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