High Court Makes Civil Penalty Order Against Fund Manager and its Chief Executive Officer for Market Rigging
Singapore, 17 September 2010... The Singapore High Court today found that a Malaysian fund manager, Pheim Asset Management Sdn Bhd (“Pheim Malaysia”), and its founder and CEO, Dr Tan Chong Koay had contravened the market rigging provisions under section 197(1)(b) of the Securities and Futures Act (SFA) by trading with the intention of creating a false or misleading appearance in the price of United Envirotech Ltd (“UET”) shares. The High Court ordered Pheim Malaysia and Dr Tan to each pay a civil penalty of $250,000 and legal costs to the Monetary Authority of Singapore.
2 The High Court found that Dr Tan had placed large orders to purchase UET shares, through Pheim Malaysia, over the last three trading days of 2004 and within the last half an hour of trading on each day. These trades accounted for 88% of all trades carried out over those three days for UET shares and caused the price of UET shares to rise by 17%. The High Court found that Dr Tan had purchased UET shares in this manner with the intention of creating a false or misleading appearance in the price of UET shares. In particular, the sole and primary purpose of the trades was to raise and set a higher market price for UET shares. This “window dressing” then enabled certain funds managed by the Pheim Group to outperform their respective benchmarks.
3 Leo Mun Wai, Assistant Managing Director (Capital Markets Group), MAS said, "Fund managers should not engage in window dressing practices that would mislead investors as to the performance of securities and the funds under their management. As this case illustrates, MAS will not hesitate to pursue and take stern action against anyone who attempts to rig our capital markets, regardless of whether the perpetrator is in Singapore or overseas.”
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 contraventions under the SFA, Part XII (of which insider trading is one such contravention) 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 is designed to complement criminal sanctions and provide a nuanced approach to combat market misconduct. It became operational in 2004.
(ii) Under Section 232 of the SFA, the Court may, if satisfied that a person has contravened a provision in 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 if the person is not a corporation or $100,000 if the person is a corporation, 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.
(B) False trading and market rigging 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.