MAS Takes Civil Penalty Enforcement Action

Singapore, 21 October 2004...The Monetary Authority of Singapore (MAS) has taken civil penalty enforcement action against three employees of the Government of Singapore Investment Corporation Pte Ltd (GIC) for breaches of the insider trading provisions under Section 219 of the Securities and Futures Act (SFA). MAS was alerted to the matter by the Financial Services Agency of Japan (FSA) and the Securities and Exchange Surveillance Commission of Japan. MAS decided to undertake civil penalty investigations in accordance with its standard operating procedures. 

2   The insider trading breaches involved shares of Sumitomo Mitsui Financial Group Inc. (SMFG) that are listed on the Tokyo Stock Exchange, the Osaka Stock Exchange and the Nagoya Stock Exchange. The SFA covers securities traded outside Singapore in relation to a relevant act in Singapore.

3   MAS civil investigations found that on 13 February 2003, the three GIC employees used non-public material price sensitive information concerning a proposed offering of convertible preferred shares by SMFG. As the price of SMFG shares fell after the announcement of the proposed offering, the sales of SMFG shares resulted in gains (through losses avoided) of about S$710,000. These gains were not retained by the GIC employees concerned.

4   The three employees of GIC, Mr Lim Kee Chong, Mr Teng Cheong Thye, and Mr Choo Yong Cheen have admitted to civil penalty liability and will pay civil penalties to MAS as provided by law, without court action. Mr Lim will pay a civil penalty of S$400,000 in respect of breaches of Sections 219(2)(a), 219(2)(b) and 219(3) of the SFA. Mr Teng will pay a civil penalty of S$240,000 in respect of a breach of Section 219(2)(b) of the SFA and Mr Choo will pay a civil penalty of S$75,000 in respect of a breach of Section 219(2)(a) of the SFA.

5   Mr Shane Tregillis, Assistant Managing Director (Market Conduct), MAS, said, "Insider trading and other market misconduct undermines the confidence of investors in the integrity of our capital markets. MAS will take firm enforcement action against any person in this jurisdiction who engages in market misconduct under the SFA.  The ability to bring action against market misconduct under the new civil penalty regime provides an additional enforcement tool. The substantial financial penalties to be paid by the individuals send a clear message to the market that market misconduct will not be tolerated." 

6   Mr Tregillis noted that the present case highlights the importance of international regulatory cooperation and the strength of the cooperative relationship between MAS and the FSA. He said, "By taking enforcement action in response to information provided by the FSA about trading in their markets, MAS also clearly demonstrates its strong commitment to international regulatory cooperation to ensure market integrity in cross border transactions."

7   As part of the Japan-Singapore Economic Agreement for a New Age Partnership (JSEPA), MAS and FSA have arrangements for mutual cooperation and information sharing for the effective enforcement of the securities law of Singapore and Japan.

8   Throughout the investigations, GIC and the three employees concerned cooperated fully with MAS. The cooperation of the three employees has been taken into account in the civil penalty quantum.

9   MAS' investigations did not find any breach of the SFA by GIC.  However GIC has volunteered to give a sum of about S$710,000 (representing the gains resulting from the breaches of the three employees) over to MAS. MAS will use this to fund additional consumer financial education programmes.

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Notes to Editor:

A   The civil penalty regime

(i)  A civil penalty action is a court action that MAS may, with the consent of the Public Prosecutor, bring against a person for market misconduct breaches under the Securities and Futures Act (SFA), Part XII (of which insider trading is one) to seek an order from the Court requiring that person to pay a civil penalty to MAS. A civil penalty action is not a criminal action and does not attract criminal sanctions. The civil penalty regime, designed to complement criminal sanctions and provide a nuanced approach to combat market misconduct, became operational at the beginning of 2004.

(ii)  Under Section 232 of the SFA, the Court may, if satisfied that a person has contravened a provision in the SFA, Part XII, make an order against that person for the payment of a civil penalty of a sum not exceeding three times the amount of the profit gained or loss avoided by that person, subject to a minimum of $50,000, where the contravention has resulted in the person gaining a profit or avoiding a loss. Where the contravention did not result in the person gaining a profit or avoiding a loss, the Court may make an order against that person for the payment of a civil penalty of a sum not less than $50,000 and not more than $2 million.  MAS may enter into agreements with any person for that person to pay, with or without admission of liability, a civil penalty within the limits referred to in Section 232 for a contravention of any provision of the SFA, Part XII.

(iii)  Unless arrived at by agreement, civil penalties in civil penalty actions brought by MAS are ordered by the Court. In determining the quantum of civil penalties to seek in such actions, MAS takes into consideration all facts and circumstances relating to the contravention and the contravening person.

(iv)  MAS takes into consideration the degree of seriousness of the misconduct, the extent of impact of the misconduct on the market, the need for effective action and other relevant characteristics of the case when deciding to undertake civil penalty enforcement action.

B   Insider Trading under section 219 of the SFA

(i)  Section 219(2)(a) of the SFA prohibits a person who is in possession of material price sensitive information concerning any securities, which he knows is not generally available and material price sensitive, from subscribing for, purchasing, selling, or entering into an agreement to subscribe for, purchase or sell those securities.

(ii)  Section 219(2)(b) of the SFA prohibits a person who is in possession of material price sensitive information concerning any securities, which he knows is not generally available and material price sensitive, from procuring another person subscribe for, purchase, sell, or enter into an agreement to subscribe for, purchase or sell those securities.

(iii)  Section 219(3) of the SFA prohibits a person who is in possession of material price sensitive information concerning any securities, which he knows is not generally available and material price sensitive, from communicating the information to another person if he knows or ought to reasonably know that the other person would or would likely to

• Subscribe for, purchase, sell, or enter into an agreement to subscribe, purchase or sell those securities; or
• Procure a third person to subscribe for, purchase, sell, or enter into an agreement to subscribe for, purchase or sell those securities.

(iv)  Section 213 (a) of the SFA provides that SFA, Part XII, Division 3 on insider trading applies to acts occurring in Singapore in relation to securities listed for quotation or quoted on a securities market in Singapore or elsewhere.