Civil Penalty Enforcement Action for False Trading

Singapore, 6 February 2007...The Monetary Authority of Singapore (MAS) has taken civil penalty enforcement action against Mr Pai Keng Pheng for contravening the provisions on false trading under Section 197(1)(b) of the Securities and Futures Act (SFA).

2   On 15 trading days between 23 November 2004 and 3 February 2005, Mr Pai purchased shares of China Merchants Holdings (Pacific) Limited (CMH) just before the close of trading. MAS' investigations found that Mr Pai had intended to boost the closing price of CMH shares in order to maintain or increase the value of the CMH shares in his margin account to avoid margin calls.  His purchases caused the price of CMH shares to close at between three and 15 bids, or between 3% and 12%, above prevailing market prices. On five days, Mr Pai's trades accounted for more than 50% of the market traded volume in CMH shares.

3   Mr Pai has admitted to civil penalty liability for contravening section 197(1)(b) of the SFA and has paid a civil penalty of S$80,000 without court action.

4   This matter was referred to MAS by SGX-ST. Civil penalty investigations were carried out by MAS into the matter 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)(b) of the SFA

Under Section 197(1)(b) of the SFA, a person must not create or doing anything that is intended or likely to create a false or misleading appearance with respect to the market or the price of securities.