MAS Takes Civil Penalty Action and Issues Prohibition Order against Tan Hua Ann for False Trading
Singapore, 19 March 2015... The Monetary Authority of Singapore (MAS) has taken civil penalty action against Mr Tan Hua Ann for false trading under Section 197(1)(b) of the Securities and Futures Act (SFA).
2 On 20 October 2011, Mr Tan, then a remisier with UOB Kay Hian Private Limited, entered a false sell order to create a false appearance in the indicative opening price for an Exchange-Traded Fund, Lyxor UCITS ETF MSCI AC Asia Ex Japan (LA10) during the pre-open phase before the start of the Singapore Exchange’s trading day. He made personal gains of S$62,723 from the false trading.
3 Mr Tan had cooperated fully with MAS during the investigation. He admitted to contravening section 197(1)(b) of the SFA through his action. He has paid MAS a civil penalty of S$157,000, without court action. MAS has also issued a prohibition order to Mr Tan under section 101A of the SFA, prohibiting him from (i) conducting business in any regulated activity under the SFA or acting as a representative in respect of any regulated activity under the SFA; and (ii) taking part in the management of any holder of a capital market services licence or any person exempt from holding a capital market services licence under section 99(1) of the SFA in Singapore, for a period of two years.
4 Mr Lee Boon Ngiap, Assistant Managing Director (Capital Markets), MAS, said: “The pre-open phase was introduced to facilitate orderly price discovery before the market opening. Mr Tan, an experienced remisier who understood the pre-open phase, had sought to create a false impression in the indicative price of an ETF during the pre-open phase for personal gain. MAS will take firm action against any form of false trading or manipulation as such actions affect investors’ confidence in the market. When a licensed person knowingly commits such misconduct, MAS will not hesitate to prohibit such person from carrying out regulated activities for an appropriate period to deter such conduct and protect the investing public.”
5 This matter was referred to MAS by Singapore Exchange Securities Trading Limited.
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 Part XII of the SFA,
(a) of a sum not exceeding three times the amount of the profit gained or loss avoided by that person, subject to a minimum of either $100,000 (if the person is a corporation) or $50,000 (if the person is not a corporation); or
(b) (where the contravention has not resulted in the person gaining a profit or avoiding a loss) $2 million, subject to a minimum of $50,000.
(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) Section 197(1)(b) of the SFA (before 18 March 2013)
Under section 197(1)(b) of the SFA, a person must not create or do anything that is intended or likely to create a false or misleading appearance with respect to the market for, or the price of, securities.
(C) The pre-open phase and indicative opening price
The pre-open and matching phases are designed to facilitate orderly price discovery during market opening. The use of the matching algorithm (details below) helps to smoothen price movements during opening by allowing all orders to be matched at a single price.
The pre-open phase is a 30-minute-long period that occurs before the start of the trading day. During this phase which starts at 08:30:00, orders are collated, but not matched. It is only at the end of this phase that all orders that can be matched are executed at a single price known as the Equilibrium Price which then forms the opening price of the security for the day. The Equilibrium Price is determined during the non-cancel phase which commences randomly within a one-minute window between 8:58:00 and 8:59:00.
At any time before the non-cancel phase, a theoretical Equilibrium Price known as the indicative opening or equilibrium price is displayed and made available to the public. The indicative opening price is dynamic and is calculated based on an algorithm, and may change depending on how the demand or supply (and their respective order prices) of a security changes.