Trio jailed for illegal share trading scheme

They reaped $8m using 'front-running', buying or selling based on advance information on pending share orders

Three men who ran an illegal share trading scheme that netted them $8.07 million have been jailed for terms ranging from 20 months to three years.

The men - Leong Chee Wai, Toh Chew Leong and Simon E Seck Peng - pleaded guilty yesterday to more than 100 charges involving a process called "front-running".

This occurs when a broker uses advance information of pending share orders to then place buy or sell trades through his personal account with the aim of benefiting once the stock price moves.

Another 220 or so charges were taken into consideration for sentencing.

This is the first front-running case prosecuted as an insider trading offence, which attracts a heavier punishment in part due to involvement of price-sensitive information.

The case centred on offences committed from 2007 to 2014 involving trades in 100 counters listed on the Singapore Exchange and markets such as Hong Kong and Australia.

The Singapore-listed counters included Ascendas Real Estate Investment Trust, CapitaMalls Asia and Global Logistic Properties.

Leong, 50, was a senior equity dealer in First State Investments Singapore (FSIS) in March 2007 when he entered into an agreement with E, 50, to profit from confidential information he had about orders that FSIS intended to make.

E would use his personal trading account with UOB Kay Hian to place orders, usually ahead of the FSIS trades being lodged.

Once the share price started to rise in the wake of the usually sizeable FSIS trades, E would offload his stock to reap a profit. The money was split between the pair.

Toh, 43, also an FSIS senior equity dealer at the time, joined the pair in their scheme in August 2008 and received an equal cut of the profits.

Deputy Public Prosecutor Hon Yi told the court yesterday that the activities went on undetected for seven years, and the case involves the integrity of the economic infrastructure.

Leong and Toh had information on FSIS orders that was not generally available, like their size and price range.

"That the information... was valuable cannot be disputed - the accused persons had made significant money by carrying out their own trades based on this information," he said in submissions to the court. He added that the information, taken with the fact that FSIS' orders were usually substantial, would have a "material effect on the price of the shares".

All three were found guilty of offences under the Securities and Futures Act.

Leong was sentenced to three years' jail, E for 30 months and Toh for 20 months. Their terms took into account the amounts of wrongful gains they have returned and the length of time they participated in the scheme.

Defence lawyer Thong Chee Kun of Rajah & Tann said information involved in front-running often does not affect the inherent value of an equity, unlike in insider trading, suggesting it is less reprehensible.

He added that there was no guarantee of profit, or evidence of adverse market distortion at the expense of other investors.

Principal District Judge Ong Hian Sun said in sentencing that he agreed with the prosecution on the general deterrence needed to maintain the integrity of the trading system.

He also considered the huge profits made.

FSIS said in a statement that it suspended Leong and Toh when the Monetary Authority of Singapore alerted it to the case. They left the firm after an internal probe.

Corporate lawyer Robson Lee of Gibson Dunn & Crutcher called the judgment "significant", saying it sends a clear signal this is not just unethical, but also illegal.