MAS Civil Penalty Enforcement Action For False Trading
The Monetary Authority of Singapore (MAS) has taken civil penalty enforcement action against Mr Tan Wee Kiat Melvin for contravening the false trading provisions under section 197(1)(b) of the Securities and Futures Act (SFA). Mr Tan is a trading representative of CIMB-GK Securities Pte Ltd.
On 11 August 2009, Mr Tan placed four sell orders for a total of 275,000 Singapore Petroleum Company Ltd shares in the last five minutes prior to the close of the trading session, with no intention to fulfill the orders. Instead, Mr Tan’s intention was to create the appearance of a large supply of shares on sale in the market and thereby discourage potential sellers from placing further sell orders. Seconds before the close of the trading session, Mr Tan deleted three of the sell orders. By discouraging potential sellers from entering further sell orders, Mr Tan sought to achieve a higher selling price for his remaining sell order than what he may otherwise have been able to achieve. The profit earned from the trades was approximately $3,800.
Mr Tan has fully cooperated with MAS in the course of the investigation and has admitted to civil penalty liability for contravening section 197(1)(b) of the SFA. He has paid a civil penalty of $50,000 to MAS without court action. MAS has also suspended the Capital Markets Services representative licence held by Mr Tan for three months.
Mr Leo Mun Wai, Assistant Managing Director (Capital Markets), MAS, said, “The entry and deletion of orders with intent to artificially raise or depress the closing price of securities distorts the market and undermines its efficiency because the closing price would not reflect the forces of genuine supply and demand. This is prohibited under our securities law. MAS will not hesitate to take action against anyone who engages in such conduct.”
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.
(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) False trading under 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 or the price of securities.