The Monetary Authority of Singapore (MAS) has taken civil penalty enforcement action against Mr Lee Wee Soon for contravening sections 197(1)(b) and 198(1) of the Securities and Futures Act (SFA), which prohibit false trading and market manipulation, respectively.
2 On 25 March 2008, Mr Lee, a remisier with UOB Kay Hian Pte Ltd, entered five buy orders through his personal account for shares in Cosco Corporation (S) Ltd (Cosco), during the Singapore Exchange Securities Trading Limited's Pre-Open Phase. The buy orders were priced between $3.38 and $3.48, totaling 1.1 million shares, and represented 62.7% of all buy order quantities queuing at the 20 best bid prices of Cosco shares at the material time.
Concurrently, Mr Lee also placed a sell order for 100,000 Cosco shares at $3.35. Mr Lee deleted the buy orders just before the opening price for Cosco shares was determined at 8:59 a.m.
3 Mr Lee has admitted to contravening sections 197(1)(b) and 198(1) of the SFA by placing buy orders to raise the indicative opening price of Cosco shares during the Pre-Open Phase and thus induce other persons to purchase Cosco shares when the market opened at 9 a.m. Mr Lee had no intention of fulfilling the buy orders but had entered them to create a favourable environment to fulfill his sell order at $3.35. His actions resulted in a profit of $3,645.
4 Mr Lee has paid a civil penalty of $50,000 to MAS without court action. MAS has also issued an order against Mr Lee prohibiting him, for a period of 1 year, from (i) conducting business in any regulated activity or acting as a representative in respect of any regulated activity; and (ii) taking part in the management of any holder of a capital market services licence or any person exempt under section 99(1) of the SFA in Singapore.
5 Mr Lee Chuan Teck, Assistant Managing Director of the Capital Markets Group, MAS, said: "The Pre-Open and Pre-Close Phases were introduced to increase efficiency, market integrity and transparency. It is important that the orders are genuine. Actions that create a false or misleading appearance as to the market, or are taken to manipulate the opening and closing prices, are offences under the SFA."
(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
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) Section 198(1) of the SFA
Under section 198(1) of the SFA, a person must not effect, take part in, be concerned in or carry out, directly or indirectly, 2 or more transactions in securities of a corporation, being transactions that have, or are likely to have, the effect of raising, lowering, maintaining or stabilising the price of securities of the corporation on a securities market, with intent to induce other persons to subscribe for, purchase or sell securities of the corporation or of a related corporation.