Civil Penalty Enforcement Action for Insider Trading
Singapore, 28 April 2011 … The Monetary Authority of Singapore (MAS) has taken civil penalty enforcement action against Mr Song Qing for contravening the insider trading provision under Section 218(2)(a) of the Securities and Futures Act (SFA).
2 Bright World Precision Machinery Ltd (Bright World), a company listed on the Singapore Exchange Securities Trading Ltd (SGX-ST), announced on 21 July 2008 that China Holdings Acquisition Corp (China Holdings) intended to make a voluntary conditional cash offer for all the issued ordinary shares of Bright World, at the price of $0.70 or $0.75 per share. After the announcement, Bright World’s share price closed at $0.665, an 80% increase over the preceding trading day’s closing price of $0.37.
3 Messrs Shook Lin & Bok LLP was the legal adviser to Bright World’s majority shareholder for China Holdings’ voluntary conditional cash offer for Bright World shares. On 26 June 2008 and 8 July 2008, Mr Song, an employee with Messrs Shook Lin & Bok LLP, purchased a total of 40,000 Bright World shares when he was in possession of non-public price sensitive information concerning China Holdings’ voluntary conditional offer. Mr Song had obtained the information while reviewing the translation of draft legal documents regarding China Holdings’ voluntary conditional offer. As a result of his Bright World share purchases, Mr Song made a profit of about $1,000.
4 Mr Song has admitted to contravening Section 218(2)(a) of the SFA and has paid a civil penalty of $50,000 to MAS without court action. Mr Song has cooperated fully with MAS in the course of the investigations.
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.
(B) Insider Trading under section 218(2)(a) of the SFA
Section 218(2)(a) of the SFA prohibits a person who is in possession of material price sensitive information concerning a corporation (to which he is connected), which he knows is material price sensitive and not generally available, from subscribing for, purchasing, selling, or entering into an agreement to subscribe for, purchase or sell those securities of that corporation.
(C) Connected Person
Section 218(5) of the SFA provides that a person is connected to a corporation if, amongst others, he occupies a position that may reasonably be expected to give him access to information of a kind to which Section 218 applies by virtue of any professional or business relationship existing between himself (or his employer or a corporation of which he is an officer) and that corporation or a related corporation.