Civil Penalty Enforcement Action for False Trading

Singapore, 11 January 2007...The Monetary Authority of Singapore (MAS) has taken civil penalty enforcement action against Mr Tan Pomas Candranegara for contravening the provisions on false trading under Section 197(1)(a) of the Securities and Futures Act (SFA).

2   Between 13 January and 3 February 2004, Mr Tan conducted a total of 30 wash sales in the shares of Eagle Brand Holdings Ltd (Eagle). A wash sale is a transaction in securities that does not involve a change in the beneficial  ownership of those securities ^[1]. The daily volume of Mr Tan's wash sales was between 1.5 and 4.8 million shares. This accounted for 36% to 50% of the market volume for Eagle shares on each of the affected days.

3   Mr Tan has admitted to civil penalty liability for contravening section 197(1)(a) of the SFA and will pay a civil penalty of S$50,000 without court action.

4   Mr Shane Tregillis, Deputy Managing Director (Market Conduct), MAS, said, "Wash sales convey the false impression that there is interest to trade in a security. This may mislead other market participants. MAS will not hesitate to take enforcement action against persons who engage in activities that undermine the integrity of our capital markets."

5   This matter was referred to MAS by SGX-ST. Civil penalty investigations were carried out by MAS in accordance with standard operating procedures.

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Notes to Editor:

(A)    The civil penalty regime

(i) 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, MAS may enter into agreements with any person for that person to pay, with or without admission of liability, a civil penalty for a contravention of any provision of the SFA, Part XII, 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.

(iii) 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 deterrence and other relevant characteristics of the case when deciding to undertake civil penalty enforcement action.

(B)  False trading under Section 197(1)(a) of the SFA

Under Section 197(1)(a) of the SFA, a person must not create or do anything that is intended or likely to create a false or misleading appearance of active trading in any securities on a securities market.

¹ A wash sale occurs when a person is both the buyer and the seller in a securities transaction.