The Monetary Authority of Singapore (MAS) welcomes the Singapore High Court's judgment today which found that Kevin Lew Chee Fai contravened the insider trading provisions under the Securities and Futures Act (SFA). The High Court has asked to further hear parties on the issue of the civil penalty payable by Mr Lew and legal costs.
2. The High Court ruled that Mr Lew, formerly the chief financial officer and later the chief risk officer of WBL Corporation Limited (WBL), had during his employment at the company from 1998 to 2007, contravened Section 218(2)(a) of the SFA by selling 90,000 shares on 4 July 2007 after attending a senior management meeting on 2 July 2007. At this meeting, he had learnt that for the third quarter of its financial year 2007 WBL had forecasted incurring a loss and would very likely recognise a significant impairment in respect of a loss-making subsidiary. As a result of this, Mr Lew knew that it was very likely that WBL would incur a significant overall loss for that quarter.
3. The High Court noted that Mr Lew had then proceeded to sell his shares despite being advised by WBL's in-house counsel that the information shared at the management meeting on 2 July 2007 was price-sensitive.
4. Leo Mun Wai, Assistant Managing Director (Capital Markets Group), MAS said, "When senior executives are exposed to company information that is confidential and price-sensitive they are expected to use this information responsibly and not seek to profit by trading on such information. Insider trading unfairly tilts the playing field against other market participants and undermines investor confidence in the integrity of our capital markets. As this case demonstrates, MAS will use every effort and resource to enforce our insider trading laws".
Notes to Editor:
A) The civil penalty regime
(i) This is the first time that MAS has commenced civil penalty proceedings in court since the civil penalty regime under the SFA became operational in 2004.
(ii) A civil penalty action is a court action that MAS may, with the consent of the Public Prosecutor, bring against a person for market misconduct contraventions under the SFA, Part XII (of which insider trading is one such contravention) to seek an order from the Court requiring that person to pay a civil penalty to MAS. A civil penalty action is not a criminal action and does not attract criminal sanctions. The civil penalty regime is designed to complement criminal sanctions and provide a nuanced approach to combat market misconduct. It became operational in 2004.
(iii) Under Section 232 of the SFA, the Court may, if satisfied that a person has contravened a provision in SFA, Part XII, make an order against that person for the payment of a civil penalty 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 if the person is not a corporation or $100,000 if the person is a corporation, where the contravention has resulted in the person gaining a profit or avoiding a loss. Where the contravention did not result in the person gaining a profit or avoiding a loss, the Court may make an order against that person for the payment of a civil penalty of a sum not less than $50,000 and not more than $2 million. MAS may enter into agreements with any person for that person to pay, with or without admission of liability, a civil penalty within the limits referred to in Section 232 for a contravention of any provision of the SFA, Part XII.
B) Insider Trading under Section 218 of the SFA
(i) Section 218(2)(a) of the SFA prohibits a person who is in possession of materially price-sensitive information concerning a corporation (to which he is connected), which he knows is not generally available and materially price-sensitive, from subscribing for, purchasing, selling, or entering into an agreement to subscribe for, purchase or sell those securities of that corporation.
(ii) Section 218(5)(b) of the SFA provides that a person is connected to a corporation if he is an officer of that corporation or of a related corporation. Section 218(6)(a) provides that an "officer", in relation to a corporation, includes a director, secretary or employee of the corporation.
(iii) Section 218(4) of the SFA provides that where it is proved that a connected person possessed at the material time information concerning the corporation to which he was connected and that the information was not generally available; it would be presumed until the contrary is proved, that the connected person knew at the material time that the information was not generally available and if the information were generally available, it might be materially price-sensitive.
