Ex-company director pleads guilty to market rigging; bought and propped up shares to protect his reputation
SINGAPORE: After the price of shares he had recommended to investors began falling, a company director began buying them under another person's account to manipulate the market over a year, in order to protect his reputation.
Wong Leon Keat, 45, pleaded guilty on Thursday (Feb 11) to seven counts of market manipulation and one count of using another person's securities account for his own trades. Another 11 charges will be considered in sentencing.
The court heard that Wong was a director of corporate advisory firm WLA Regnum from 2007 to 2017. His firm provided advice on corporate entities' optimal structures, for the purpose of listing company shares in an initial public offering (IPO) on the Mainboard of Catalist Board of the Singapore Exchange Securities Trading Limited (SGX).
Wong was also co-director of Rhodus Capital Limited, which was an investment holding company to jointly hold shares of private companies he invested in.
Around 2012, Wong's advisory firm was engaged by oil and gas contractor Gaylin Holdings to advise on the latter's intended IPO listing on SGX.
Wong had known Gaylin's founder and former CEO as well as his three sons since his childhood, and knew the company's senior management members well.
Wong advised Gaylin on the structure of the intended IPO and SGX's listing criteria, assembling the IPI working team by roping in professionals and introducing investors to Gaylin.
Gaylin was listed on the Mainboard of SGX on Oct 25, 2012. However, its shares began on a persistent downward trend, causing Wong to be concerned.
AFRAID OF MARRING HIS REPUTATION
He had recommended the shares to several investors and was afraid that the poor performance of the shares would cause investors to lose trust and confidence in him, said the prosecutors. He later admitted to being worried that his reputation would be marred by the falling price of the Gaylin shares he had recommended.
Between November 2015 and October 2016, Wong bought Gaylin shares in small quantities using the trading account of a former client, without the latter's knowledge.
He did so on 17 occasions to create a misleading appearance with regard to Gaylin shares, instructing his trading representative to carry it out. The small trades caused the share prices to close at 6.5 per cent to 38.6 per cent higher than what they would have been.
Wong used three methods to prop up the closing price of the shares: Buying them at the best ask price ten minutes before closing routine commenced; placing buy orders to raise the closing price during the closing routine; and buying the shares at the best ask price during the trading day.
The prices of Gaylin shares had been on a general decline, from about 60 cents per share in 2014 to about 15 cents in 2016, and Wong's actions propped up their closing prices.
"The accused’s trades on the 17 occasions also had the effect of incurring disproportionate and uneconomical brokerage fees which ranged from 27.15 per cent to 70.53 per cent of the value of the trades," said Deputy Public Prosecutors Nicholas Khoo, Gerald Tan and Michelle Tay.
"All 17 small trades incurred the minimum brokerage fee of S$40, which applied to trade values of S$8,000 or less."
Court documents did not specify how the crimes came to light in the first place - but representatives from the Monetary Authority of Singapore interviewed Wong between August 2017 and June 2018.
UNCOOPERATIVE IN INVESTIGATIONS
He was uncooperative and denied manipulating the price of Gaylin shares, claiming that he was helping his friends manage their investments and accumulate the shares through their trading accounts.
Because of his uncooperative behaviour, extensive investigations had to be conducted to establish the scope of his market manipulation. Investigators interviewed multiple witnesses and retrieved trading records from SGX spanning three years of trading activity, on top of bank statements, trading statements and telephone records.
The prosecution called for 16 to 20 weeks' jail for Wong and a S$40,000 fine, saying that market rigging offences cause investors to question the fairness and honesty of Singapore's financial markets.
Investigations into his offences consumed about 538 man hours, with Wong's lack of cooperation compounding the difficulty of completing the prosecution, said the prosecutors.
He had engaged in "a sustained and repeated course of offending in a desperate attempt to prop up the price of Gaylin shares", they added.
Defence lawyer Lee Teck Leng said a high fine would be enough as a deterrent, adding that when investors look at shares, they do not just look at the price but at the volume.
Both sides will return for sentencing in March.
For market manipulation under the Securities and Futures Act, Wong could be jailed for up to seven years, fined up to S$250,000, or both.