Jurisdiction - Singapore
Reports and Analysis
Singapore – Maiden Decision on Insider Trading.

21 February, 2012

Kevin Lew Chee Fai v Monetary Authority of Singapore [2012] SGCA 12
This was the first civil insider trading case litigated in the Singapore Courts under the relevant provisions of the Securities and Futures Act (“SFA”) enacted in 2001. The matter proceeded all the way to the Court of Appeal which gave a detailed exposition of what constitutes insider trading under the laws of Singapore.
Under section 218(1) of the SFA, a person is guilty of insider trading if:
(a) he is a “person who is connected to a ncorporation”;
(b) he possesses “information concerning that corporation”;
(c) that information is not “generally available”;
(d) a reasonable person would, if that information were generally available, expect it to have a “material effect on the price or value of securities of that corporation”;
(e) the connected person knows or ought reasonably to know that the information is not generally available; and 
(f) the connected person knows or ought reasonably to know that if the information were generally available, it might have a material effect on the price or value of those
securities of that corporation.
Cavinder Bull SC, Yarni Loi and Gerui Lim acted successfully for the Monetary Authority of Singapore.
The appellant, Kevin Lew Chee Fai (“Lew”) was a high-ranking executive of WBL Corporate Private Limited (“WBL”), a publicly listed company. He was the Group General Manager of WBL’s Enterprise Risk Management group. On 4 July 2007, Lew sold 90,000 of his shares in WBL (“WBL Shares”) after attending an internal executive meeting held on 2 July 2007 (“Executive Meeting”). At the meeting, Lew was apprised of non-public, price-sensitive information about WBL. From his sale of the WBL Shares, Lew raised S$448,200.
In 2009, the Monetary Authority of Singapore (“MAS”) brought an action against Lew, alleging that Lew’s sale of the WBL Shares had constituted insider trading, an act prohibited under the SFA.
At the end of the trial, the High Court found in favour of the MAS and ordered Lew to pay a civil penalty of $67,500.
Dissatisfied with the High Court’s decision, Lew appealed to the Court of Appeal.
The Court of Appeal upheld the decision of the High Court and dismissed 
Lew’s appeal. Lew possessed information as defined in the SFA
The Court of Appeal held that at the time when Lew sold the WBL Shares, he had the following information in his possession, owing to his attendance at the Executive Meeting:
(a) WBL’s senior management had forecasted a loss (“Loss Forecast”) for that quarter,
(b) the Loss Forecast was based on actual results from previous months, 
(c) WBL’s senior management had discussed the possibility of taking an impairment charge on one of WBL’s subsidiaries, Wearnes Precision (Thailand) Limited (“WPT”),
(d) WBL’s senior management had estimated the quantum of the impairment charge on WPT,
(e) the impairment charge on WPT was very likely to occur and be of significant consequence, and
(f) WBL would incur significant overall loss for that quarter.
Lew argued that the information he possessed was too uncertain and preliminary to have been reasonably relied on. However, the Court of Appeal found that even if the Information was uncertain and preliminary as alleged, the definition of “information” under the SFA was broad enough to encompass information of that nature.
Under the SFA, “information” includes “matters of supposition and other matters that are insufficiently definite to warrant being made known to the public”. The Court of Appeal held that this definition was broad enough to potentially include rumours in the market. Therefore, even if Lew was correct and the information he possessed was
uncertain and unreliable, this did not preclude the information from falling within the definition of “information” within the meaning of the SFA.
Lew possessed information that was not “generally available”
Lew also argued that the information he had acquired at the Executive Meeting was “generally available”. He argued that based on the information generally available in the market at the material time, the common investor would have been able to make inferences and come to the same conclusions and deductions as the information he had acquired at the Executive Meeting.
The Court of Appeal disagreed with Lew. It held that the financial results of WBL and its subsidiaries (which reflected decreasing profits) as well as cautiously-worded forward-looking statements released to the public by WBL, would not have led the common investor to deduce that WBL would suffer a loss in that quarter or that WBL would take an impairment charge on WPT which would have a significant impact on WBL’s bottom-line. Further, no profit warning had been nissued by WBL at the material time.
Lew would have expected such information to have a material effect on the price or value of the WBL Shares Lew if made public
The Court of Appeal agreed with the High Court’s approach in adopting the US Supreme Court’s test for materiality in TSC Industries, Inc, et al, Petitioners v Northway, Inc (1976) 426 US 438. The Court of Appeal held that in order to satisfy the test, there must be a “substantial likelihood” that the information will influence the common investor. On the facts, the Court of Appeal held that there was a substantial likelihood that the disclosure of the Loss Forecast would have been viewed by the common investor as having significantly changed the “total mix” of information made available. There was no necessity to prove that the common investor would actually change his position. Rather, the Court of Appeal was concerned whether the information would be of actual significance in the common investor’s deliberations.
Agreeing with the approach adopted in United States of America v Paul A Bilzerian 926 F 2d 1285 (1991), the Court of Appeal added that how the market actually reacted when the information became generally available was a relevant factor in determining materiality but was not in itself conclusive.
Lew ought to have known that the information he possessed was not generally available
Lew admitted under cross-examination that the information he acquired at the Executive Meeting was not generally available. Further, the information Lew acquired was of a better quality than what was available in the market. The Loss Forecast he had was based on actual recent results and the market was unaware at the material time that the impairment charge was pending. Under the SFA, once such information is proved not to be generally available, it is presumed that the insider trader knew the information might have a material effect on the price and value of the company’s shares. 
In the premises, the Court of Appeal upheld the High Court’s decision and found that Lew had contravened section 218 of the SFA. The Court of Appeal added that the elements of insider trading as set out in this case, applied to both civil and criminal charges of insider trading. 
The landmark decision of the Court of Appeal merits close reading. It sets out a comprehensive, careful and well-written exposition of insider trading laws in Singapore.
In particular, senior executives occupying positions of influence, who are commonly in possession of insider information, should take note. Singapore Courts will not tolerate insider trading which threatens the integrity of Singapore’s capital markets and undermines investor confidence.
For further information, please contact:
Yarni Loi, Partner, Drew & Napier
Gerui Lim, Drew & Napier


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