Singapore: New Insider Trading Legislation

Publication Date01 Apr 2000
AuthorRavi Chandran
SubjectAccounting & finance
Journal of Financial Crime Vol. 8 No. 2 International
Singapore: New Insider Trading Legislation
Ravi Chandran
Journal of Financial Crime
Henry Stewart Publications
ISSN 0969-6458
Hitherto, perhaps the most striking gap in Singa-
pore's insider trading legislation has been the lack of
effective civil remedies for insider trading. This and
several other issues have been addressed in the
recent Securities Industry (Amendment) Bill 1999,
which came into effect in February 2000.
Under the old s. 105 of the Securities Industry Act,
it was possible for an investor who suffered a loss to
bring a civil action. However, there were severe
limitations to this right. First, before a civil action
could be brought, it was necessary for the insider
to be convicted. Conviction was in the hands of
the prosecution and thus beyond the control of
the investor. Further, it was provided that no
action could be commenced after the expiration
of two years after the date of completion of the
transaction in which the loss occurred. Thus if
there was a delay in the prosecution and it stretched
on beyond two years, a civil action could not be
commenced. Again the investor had no control
over such matters. Thirdly, a civil action was lim-
ited to a person who had entered into a transaction
for the sale or purchase of securities with the insider
or with a person acting on his
In an open
market transaction that takes place through the
stock exchange, since one would usually not
know whom the transaction is with, this require-
ment made it very difficult for a civil action to
be brought. In fact, since the legislation was first
introduced in Singapore in 1973, there has not
been a single case in which a civil action was com-
menced. Thus s. 105 remained largely a dead letter.
Under the recent amendments two new sets of civil
actions have been introduced. It is also specifically
provided that the burden of proof for these civil
actions is on the balance of probabilities.1 In addition
these civil actions now have to be commenced within
six years of the date of the transaction,2 instead of two
as was the case previously.
Civil penalty
The first action is an order for a civil penalty. The
new s. 104A provides that the regulatory authority
in Singapore, namely the Monetary Authority of
Singapore, can bring an action seeking an order for
a civil penalty for an insider trading contravention.
The penalty would be:
a sum not exceeding three times the amount of
the profit that the person gained or the amount
of the loss that he or she avoided as a result of
the contravention or
an amount equal to S$50,000 if the person was
not a body corporate, or S$100,000 if the
person was a body corporate,
whichever was greater.3
These penalties relate to situations where the
insider had personally made a gain for himself or
avoided a loss.4 In situations where he merely pro-
cures someone else to trade or passes on the infor-
mation to someone else,5 the penalty ranges from
S$50,000 to S$250,000.6 The penalty is essentially
a fine, as was stated during the parliamentary
debates, but by making it a civil action and only
requiring the case to be proved on a balance of
probabilities, it is likely that many more actions
can now be brought. Further, the heavy penalties
are likely to act as an effective deterrent. However,
it provides that an action for an order of civil pen-
alty cannot be commenced if the person has been
convicted or acquitted in criminal proceedings
relating to the contravention. The reason for this
appears to be that since the civil penalty is in
effect a fine, there should not be a duality of
action and the insider should not be exposed to
two sets of proceedings which are essentially penal
in nature for the same contravention.
Claim for compensation
The other action is an order for compensation.
The new s. 104C provides that whether or not
there is a conviction or an imposition of a civil
penalty, the person who has acted in contraven-
tion of s. 103, which relates to insider trading,
Page 178

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