Court convicts three individuals for insider trading

The individuals carried out a front-running arrangement over a seven-year period, resulting in profits of $8.07m.

The State Court has convicted three individuals, Leong Chee Wai, E Seck Peng Simon and Toh Chew Leong, who were charged with a total of 333 counts of insider trading offences, an announcement by the Monetary Authority of Singapore (MAS) revealed.

The individuals, who were sentenced to 36 months, 30 months and 20 months, respectively, had carried out a front-running arrangement over a period of seven years, resulting in profits of $8.07m. This is said to be the first case of front-running prosecuted as an insider trading offence in Singapore, which carries a more severe penalty.

The State Court also ordered that the sums of approximately $310,000, $770,000 and $1,350,000 be forfeited to the State from Leong, E and Toh, respectively. These monies, suspected to be criminal proceeds, were seized from the individuals in the course of investigations conducted by MAS.

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Leong, E and Toh, were representatives of Capital Market Services Licence holders when they committed the offences. Leong and Toh were senior equity dealers with First State Investments (Singapore) (FSIS) , where they were tasked to execute trading orders placed by FSIS’ portfolio managers. E was a remisier with UOB Kay Hian (UOBKH).

Starting from March 2007, Leong and E reportedly colluded to profit from the price sensitive confidential information that Leong received on intended orders by FSIS.

“Under this arrangement, Leong informed E about FSIS’ intended orders and Mr E used his personal trading account to place orders in the same counters, ahead of FSIS’ orders, thus front-running FSIS’ orders. As FSIS’ orders typically involved large quantities of shares, the orders had significant price impact on the market,” MAS explained. When FSIS’ orders generated favourable price movements, E unwound his position by trading in the opposite direction of FSIS’ orders. This led to insider trading profits which were split equally between the two.

Toh joined FSIS’ dealing desk in July 2004, and 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.

In light of the convictions, MAS served notices of its intention to impose prohibition orders (POs) on the three individuals from performing regulated activities under the SFA. MAS seeks to ban Leong and E for a period of 15 years, and Toh for a period of 13 years.

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Under the front-running arrangement, Leong and E made profits of about $2.69m each, whilst Toh made a profit of about $2.37 from the trades in 100 counters listed on the Singapore Exchange Securities Trading (SGX-ST) and in overseas countries including Hong Kong and Australia.

“In addition, Toh and E separately used the information on FSIS’ intended orders to trade in contract for differences (CFDs) on the counters that FSIS was intending to trade in. The CFDs trades were carried out in their own trading accounts and the profits from these trades were not shared with others. Toh made insider trading profits of about $273,398 and E, $59,492,” MAS said.

The investigations conducted by MAS arose from a referral by the SGX-ST. In the course of MAS’ investigations, the agency also obtained the assistance of the Australian Securities and Investments Commission.

“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,” Loo Siew Yee, MAS’ assistant managing director for policy, payments & financial crime, said.