Court Orders Civil Penalties for False Trading and Unauthorised Trading
Singapore, 16 February 2017… The Monetary Authority of Singapore (MAS) has successfully obtained civil penalties of $100,000 each against Chionh Teow Hie John (Chionh) and Kiew Yoon Seng (Kiew) for contraventions under the Securities and Futures Act (SFA).
2 Between June 2008 and November 2009, Chionh and Kiew engaged in false trading in the shares of Keda Communications Limited (Keda) by crossing 52 trades with each other using trading accounts held with Phillip Securities Pte Ltd (PSPL). The cross trades1 did not represent genuine market demand for and the supply of Keda shares; instead the trades were the direct result of the collaboration and coordination between Chionh and Kiew, thereby leading to false or misleading appearances with respect to the price of and market for Keda shares. Chionh and Kiew’s misconduct in relation to the cross trades contravened section 197(1) of the SFA.
3 In addition to the 52 cross trades, Chionh also conducted 6 wash trades2 in Keda shares that did not involve a change in beneficial ownership. He conducted these wash trades through two of his trading accounts, one of which was held with PSPL while the other was held with Lim & Tan Securities Pte Ltd. Chionh was essentially trading with himself and the wash trades had also led to false or misleading appearances with respect to the price of and market for Keda shares, thereby contravening sections 197(1) and section 197(2) of the SFA.
4 The 58 cross trades and wash trades collectively accounted for 34% of the total traded volume of Keda shares between June 2008 and November 2009. Many of these cross trades and wash trades also artificially raised the price of Keda shares, with increases ranging from 11% to 146% from the previous traded price.
5 Kiew had carried out the cross trades with Chionh through a trading account belonging to Lee Hon Sun (Lee) held with PSPL. Neither Kiew nor Lee informed or sought authorisation from PSPL on the use of Lee’s account by Kiew. As such, both of them had intentionally deceived PSPL of the true beneficial owner of the account so that Kiew could enjoy a lower rate of brokerage fee which he would otherwise not have been entitled to. Kiew and Lee’s deceptive conduct thereby contravened section 201(b) of the SFA.
6 Lee admitted to contravening section 201(b) of the SFA and paid MAS a civil penalty of $50,000 in a separate out-of-court settlement in January 2013. Further information on Lee’s settlement can be found at the link .
Civil Penalty Orders
7 MAS commenced civil penalty actions in the State Courts of Singapore against Chionh for contravening sections 197(1) and 197(2) of the SFA, and against Kiew for contravening sections 197(1) and 201(b) of the SFA. For the contraventions, the Court ordered civil penalties against the defendants as follows:
(a) Against Chionh - $100,000 (comprising $50,000 for the section 197(1) SFA contravention and another $50,000 for the section 197(2) SFA contravention), plus costs and disbursements; and
(b) Against Kiew - $100,000 (comprising $50,000 for the section 197(1) SFA contravention and another $50,000 for the section 201(b) SFA contravention), plus costs and disbursements.
8 Mr Lee Boon Ngiap, Assistant Managing Director (Capital Markets), MAS, said: “The price of securities was manipulated in this case by way of coordinated cross trading between two individuals, and by one of the individual’s wash trades. The civil penalty actions against these individuals reflect MAS’ firm resolve to stamp out such misconduct from our markets.”
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(1) of the SFA, whenever it appears that any person has contravened any provision in Part XII of the SFA, MAS may, with the consent of the Public Prosecutor, bring an action in a court against him to seek an order for a civil penalty in respect of that contravention. If the court is satisfied on a balance of probabilities that the person has contravened a provision in Part XII of the SFA which resulted in his gaining a profit or avoiding a loss, the court may make an order against him for the payment of a civil penalty of a sum not exceeding:
(a) 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) $2 million (where the contravention has not resulted in the person gaining a profit or avoiding a loss), subject to a minimum of $50,000.
(iii) 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 actions.
(iv) When determining the quantum of civil penalties to be ordered, the Court will take into consideration all facts and circumstances relating to the contravention and the contravening person.
(B) False Trading under section 197 of the SFA
Section 197(1) of the SFA prohibits the creating or doing of anything that is intended or likely to create a false or misleading appearance of active trading or with respect to the market for, or the price of, securities.
Section 197(2) prohibits the manipulation of the market price of securities by way of transactions that do not involve a change in the beneficial ownership of those securities.
(C) Section 201(b) of the SFA
Under section 201(b) of the SFA, no person shall, directly or indirectly, in connection with the subscription, purchase or sale of any securities engage in any act, practice or course of business which operates as a fraud or deception, or is likely to operate as a fraud or deception, upon any person.
***1 Cross Trades: These are trades whereby two persons pre-arrange to trade with each other as counterparties and there is a change in the beneficial ownership of the traded securities.
2 Wash Trades: These are trades that do not involve a change in the beneficial ownership of the traded securities.