3 traders jailed after making more than S$8 million from insider trading

3 traders jailed after making more than S$8 million from insider trading

gavel crime
File photo of a gavel. (Photo: Jeremy Long)

SINGAPORE: Three men were jailed on Wednesday (Jul 10) after making more than S$8 million from insider trading over seven years, the Monetary Authority of Singapore (MAS) said in a media release.

Leong Chee Wai, E Seck Peng Simon and Toh Chew Leong carried out a front-running arrangement over a period of seven years, the court was told. 

This is the first case in Singapore of front-running prosecuted as an insider trading offence, which carries a more severe penalty.

According to the Corporate Finance Institute, front running is the illegal practice of purchasing a security based on advance non-public information regarding an expected large transaction that will affect the price of the share. 

Leong and Toh, who worked at an investment firm, shared confidential information about impending trades ordered by their clients with E, a remisier, and all three profited from the trades made.

Leong was charged with 115 counts of insider trading. He was convicted on 37 charges, and the rest were taken into consideration when he was sentenced to three years' imprisonment.

E was charged with 107 counts of insider trading, of which he was convicted on 35 counts, with the rest taken into consideration for sentencing. He was sentenced to two-and-a-half years' imprisonment.

Toh faced 111 charges of insider trading. He was convicted on 37 charges, with the rest taken into consideration for sentencing. He was sentenced to one year and eight months' imprisonment. 

THE INSIDER TRADING AGREEMENT

The three men were representatives of Capital Market Services Licence holders when they committed the offences. 

E was a remisier with UOB Kay Hian from February 2002 to Oct 1, 2014. His university schoolmate, Leong, was a senior equity dealer with First State Investments Singapore (FSIS) from Dec 28, 2002 to May 16, 2014. 

Toh was also a senior equity dealer with FSIS, from Jul 2004 to May 16, 2014. 

FSIS is an international financial investment firm which provides fund management and investment services for its clients. Its trades are significant in terms of their potential effect on the market, as they generally involve large quantities of shares.

FSIS’ international dealing desk operates through a trading system where fund managers would place orders, which would then flow through a series of modules, including checks by the compliance team, before the orders are sent to the dealing desks for execution, the court was told.

In March 2007, E and Leong agreed to profit from the confidential information that Leong received in relation to intended orders by FSIS. 

Leong would provide information to E about the intended orders and E would use his personal trading account to place orders in the same counters, usually ahead of FSIS’ orders. This was known as front-running.

"E would subsequently unwind his position in the opposite direction of FSIS as FSIS trades were being executed. The profits generated would be split between them equally," the statement of facts said.

Toh subsequently joined Leong and E in the front-running arrangement from August 2008. The profits generated from the insider trading were then split equally among the three of them.

As FSIS dealers, Leong and Toh would instruct E on the whether to buy or sell a counter when they were tasked to execute trading orders placed by FSIS’ portfolio managers.

E would then conduct the trades using his personal trading account, and inform Leong and Toh once the trades had been executed.

In order not to arouse suspicion, the trio intentionally avoided front running a larger volume of orders than what FSIS intended to trade, in order to avoid a large market impact.

"The information, taken with the fact that FSIS’s orders were usually substantial, would have a material effect on the price of the shares of the above counters. Leong and Toh knew that the above information was not generally available and that the said information would have a material effect on the price of the shares of the counters," Deputy Pubilc Prosecutor Hon Yi said in the statement of facts.

"Leong and Toh were not authorised to communicate the information about FSIS’ orders to E, or (to) any person outside FSIS."

"MOTIVATED BY GREED": PROSECUTION

The court heard that Toh and E had also used the information from FSIS' intended orders to trade in contract for differences (CFDs) on the counters that FSIS was intending to trade in. They were carried out in their own trading accounts. 

In total, Leong made more than S$2.68 million in profit, of which he will forfeit S$310,000. Toh made more than S$2.63 million and the court ordered S$1.35 million to be forfeited.

E also made profits of more than S$2.74 million, of which S$770,000 will be forfeited.

"This is a case where three market traders, motivated by greed, systematically and persistently over the course of seven years, grossly abused the inside information which two of them had by virtue of their appointment with FSIS to generate a staggering amount of profit," said Mr Hon.

FORFEITURE AND PROHIBITION ORDERS

MAS has since served notices of intention to impose Prohibition Orders (POs) on the three individuals from performing regulated activities under the Securities and Futures Act (SFA).

It is seeking to ban Leong and E for 15 years each, and Toh for 13 years. The lengths of the POs take into account the duration of misconduct, as well as the amount of illicit profits made and surrendered.

“The three individuals had colluded to misuse confidential information for personal gain, thereby undermining market integrity," said Ms Loo Siew Yee, Assistant Managing Director (Policy, Payments & Financial Crime) at MAS.

"MAS will pursue insider trading charges against individuals involved in front running in appropriate cases and ensure that those guilty of such misconduct are kept out of the industry as warranted.”

Source: CNA/ic(mi/hm)

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