Monetary Authority of Singapore v Tan Chong Koay: Market Rigging & False Trading in UET Shares

The Monetary Authority of Singapore (MAS) sued Tan Chong Koay and Pheim Asset Management Sdn Bhd in the High Court of Singapore, alleging a breach of Section 197(1)(b) of the Securities and Futures Act for creating a false or misleading appearance with respect to the price of United EnviroTech (UET) shares between 29 and 31 December 2004. The court, presided over by Justice Lai Siu Chiu, found that Dr. Tan had given instructions to purchase UET shares with the primary purpose of window dressing, thereby intending to manipulate the market price. The court ruled in favor of MAS, imposing a civil penalty of $250,000 each on Pheim Malaysia and Dr. Tan.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Plaintiff

1.3 Case Type

Regulatory

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

MAS sues Tan Chong Koay and Pheim Asset Management for market rigging of United EnviroTech shares, alleging false trading to inflate prices. Judgment for MAS.

1.7 Decision Date

16 September 2010

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Monetary Authority of Singapore	Plaintiff	Government Agency	Judgment for Plaintiff	Won	Cavinder Bull of Drew & Napier LLC Gerui Lim of Drew & Napier LLC Yarni Loi of Drew & Napier LLC Wong Liang Wei of Drew & Napier LLC
Tan Chong Koay	Defendant	Individual	Civil Penalty Imposed	Lost	Michael Hwang of Chambers of Michael Hwang Fong Lee Cheng of Chambers of Michael Hwang
Pheim Asset Management Sdn Bhd	Defendant	Corporation	Civil Penalty Imposed	Lost	Foo Maw Shen of Rodyk & Davidson LLP Melvin See of Rodyk & Davidson LLP Mar Seow Hwei of Rodyk & Davidson LLP

3. Judges

Judge Name	Title	Delivered Judgment
Lai Siu Chiu	Judge	Yes

4. Counsels

Counsel Name	Organization
Cavinder Bull	Drew & Napier LLC
Gerui Lim	Drew & Napier LLC
Yarni Loi	Drew & Napier LLC
Wong Liang Wei	Drew & Napier LLC
Michael Hwang	Chambers of Michael Hwang
Fong Lee Cheng	Chambers of Michael Hwang
Foo Maw Shen	Rodyk & Davidson LLP
Melvin See	Rodyk & Davidson LLP
Mar Seow Hwei	Rodyk & Davidson LLP

4. Facts

Dr. Tan, a fund manager, directed Pheim Malaysia to purchase UET shares between 29 and 31 December 2004.
The purchases occurred near the end of the trading day and year, increasing UET's share price by 17%.
UET was an illiquid counter, making it easier to manipulate the share price.
The Pheim Group's funds recorded a $1,086,989 increase in their NAVs due to the rise in UET’s share price.
Three accounts managed by Pheim Singapore would not have outperformed their benchmark returns for 2004 but for the rise in UET’s share price.
Pheim Malaysia had opportunities to purchase UET shares at lower prices before and after the material time but did not do so.
Tang had to use the force-key function as the trade was at more than six bids above the last traded price.

5. Formal Citations

Monetary Authority of Singapore v Tan Chong Koay and another, Suit No 658 of 2008, [2010] SGHC 277

6. Timeline

Date	Event
2004-03-01	UET announced its intention to conduct an initial public offering of its shares on the SGX
2004-04-22	UET commenced trading on the SGX
2004-10-28	UET announced it had secured a long-term Transfer, Operate and Transfer contract to treat wastewater in China
2004-11-02	UET clarified that the TOT contract would be able to generate a steady stream of income for a period of 30 years
2004-11-12	UET announced that it had recorded a 125% increase in net profit for the third quarter of financial year 2004, as compared to the same period for financial year 2003
2004-12-15	Pheim Malaysia’s Investment Committee met and decided to increase its exposure to UET shares for Accounts 89, 90 and 91
2004-12-21	UET announced that its subsidiary had secured a S$4m contract with Tianjin TEDA Water Technology Co Ltd
2004-12-28	Pheim Malaysia sold S$815,000 worth of shares in Azeus Systems Holdings Ltd from Accounts 89, 90 and 91
2004-12-29	Pheim Malaysia purchased UET shares
2004-12-30	Pheim Malaysia purchased UET shares
2004-12-31	Pheim Malaysia purchased UET shares
2005-01-19	Pheim Malaysia purchased 205,000 UET shares at a weighted price of $0.416 for Account F5
2005-03-18	Pheim Malaysia sold 87,000 UET shares from Account 91 at a weighted price of $0.379 per share
2005-10-01	Pheim Malaysia sold UET shares
2006-02-01	Pheim Malaysia sold UET shares
2006-03-28	Dr Tan was interviewed by the MAS about the UET trades conducted at the material time
2006-04-01	The SCM asked Pheim Malaysia to provide a report on the UET trades that took place at the material time
2006-04-19	Pheim Malaysia provided a report to SCM on the UET trades that took place at the material time
2006-06-06	Some of Pheim Malaysia’s staff was also interviewed by the SCM
2006-06-07	Some of Pheim Malaysia’s staff was also interviewed by the SCM
2006-06-08	Some of Pheim Malaysia’s staff was also interviewed by the SCM
2010-09-17	Judgment issued

7. Legal Issues

Market Rigging
- Outcome: The court found that the defendants engaged in market rigging by creating a false or misleading appearance with respect to the price of UET shares.
- Category: Substantive
- Sub-Issues:
  - False Trading
  - Creating a False or Misleading Appearance of Active Trading
  - Window Dressing
Breach of Securities and Futures Act
- Outcome: The court found the defendants liable for infringing s 232(3) read with s 197(1)(b), of the Securities and Futures Act (Cap 289, 2006 Rev Ed).
- Category: Substantive

8. Remedies Sought

Civil Penalty

9. Cause of Actions

Violation of Section 197(1)(b) of the Securities and Futures Act

10. Practice Areas

Regulatory Enforcement
Securities Litigation

11. Industries

Finance
Investment Management

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
North v Marra Developments Ltd	High Court of Australia	Yes	(1981) 148 CLR 42	Australia	Cited to establish the principle that the object of securities legislation is to protect the market against artificial manipulation and ensure genuine supply and demand.
Fame Decorators Agencies Pty Ltd v Jeffries Industries Ltd	Unspecified	Yes	(1998) 28 ACSR 58	Australia	Cited to support the principle that conduct calculated to effect sales at the lowest obtainable price, timed to deflect the possibility of purchasers bidding up the price, had both the purpose and effect of creating an artificial market and price.
Braysich v R	Unspecified	Yes	(2009) 74 ACSR 387	Australia	Cited to clarify that the defense against market manipulation requires proving that the purpose of the act did not include creating a false or misleading appearance of active trading.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Securities and Futures Act (Cap 289, 2006 Rev Ed)	Singapore
Securities and Futures Act	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Market Rigging
False Trading
Window Dressing
Securities and Futures Act
UET Shares
Careful discretion orders
Portfolio Performance
Illiquid Counter
Benchmark Returns
Net Asset Value

15.2 Keywords

Market Manipulation
Securities Fraud
Financial Regulation
Singapore High Court
Civil Penalty
False Trading
Market Rigging

17. Areas of Law

Area Name	Relevance Score
Securities Fraud	90
Market Manipulation	85
Window Dressing	80
Portfolio Pumping	75
Financial Services Law	70
Banking and Finance	60
Corporate Law	50

16. Subjects

Securities Regulation
Market Conduct
Financial Markets