Lew Chee Fai Kevin v Monetary Authority of Singapore

JurisdictionSingapore
Judgment Date10 February 2012
Date10 February 2012
Docket NumberCivil Appeal No 123 of 2010
CourtCourt of Appeal (Singapore)
Lew Chee Fai Kevin
Plaintiff
and
Monetary Authority of Singapore
Defendant

[2012] SGCA 12

Chan Sek Keong CJ

,

Andrew Phang Boon Leong JA

and

V K Rajah JA

Civil Appeal No 123 of 2010

Court of Appeal

Financial and Securities Markets—Insider trading—Definition of common investor (‘Common Investor’)—Whether Common Investor would possess general professional knowledge of daily retailer or expert investor—Whether Common Investor would assess investments on quarterly or more long term basis—Sections 215 and 216 Securities and Futures Act (Cap 289, 2006 Rev Ed)

Financial and Securities Markets—Insider trading—Definition of information—Information alleged to be unreliable—Whether information included knowledge of uncertain, speculative or unreliable nature—Sections 214 and 218 Securities and Futures Act (Cap 289, 2006 Rev Ed)

Financial and Securities Markets—Insider trading—Generally available information—Whether Common Investor could deduce, conclude or infer from generally available information same quality or character as alleged inside information—Sections 215 (c) and 218 Securities and Futures Act (Cap 289, 2006 Rev Ed)

Financial and Securities Markets—Insider trading—Materiality of information—Whether information would be likely to influence Common Investor's decision to buy or sell shares—Whether court should consider actual effect of share price in market when information was made generally available—Sections 216 and 218 Securities and Futures Act (Cap 289, 2006 Rev Ed)

The appellant was found liable for insider trading under s 218 of the Securities and Futures Act (Cap 289, 2006 Rev Ed) (‘the SFA’) and was penalised with a civil penalty under s 232 (2) of the SFA. At the material time, the appellant was the Group General Manager of WBL Corporation Private Limited's (‘WBL’) Enterprise Risk Management group. He sold 90,000 of his shares in WBL on 4 July 2007 when he was allegedly in possession of non-public price-sensitive information about WBL which he had acquired at an internal executive meeting held on 2 July 2007 (‘the 2 July 2007 GMC Meeting’).

WBL was the company whose shares were the subject of alleged insider trading. It was a public company listed on the Singapore Exchange Ltd (‘SGX’). The substance of the alleged inside information concerned the financial performance of WBL's three subsidiaries under the Technology Manufacturing Division: Multi-Fineline Electronix Inc (‘M-Flex’), MFS Technology Ltd (‘MFS’) and Wearnes Precision (Thailand) Limited (‘WPT’).

The trial judge found that the information Lew possessed consisted of the following pieces of information: (a) WBL had forecasted a loss of either $2.3 m (excluding M-Flex's and MFS's forecasted performance) or $0.4 m (including M-Flex's and MFS's forecasted performance) in 3Q FY07 (‘the Loss Forecast’), (b)it was very likely for WBL to take a significant impairment charge on WPT in 3Q FY07 (‘the Significant Impairment Prospect’) and (c)as a result of (a) and (b) above, it was very likely that WBL would incur a significant overall loss for 3Q FY07 (‘the Significant Overall Loss Forecast’) (collectively, ‘the Information’). The trial judge found that the Information was not generally available as defined in s 215 of the SFA, and that, if the Information were generally available, a reasonable person would expect it to have a material effect on the price of value of WBL securities. The trial judge further found that Lew knew or ought reasonably to have known that the Information was not generally available and that, if it were generally available, it might have a material effect on the price or value of WBL securities. The trial judge therefore found that all elements of s 218 (1) of the SFA were made out, and that the appellant was thus liable for insider trading. She ordered him to pay a civil penalty of $67,500. The appellant appealed.

The appellant disputed the significance and reliability of the information he had received at the 2 July 2007 GMC Meeting. The appellant argued that the information he received was ‘generally available’ under s 215 of the SFA and not material under s 216 of the SFA. He also argued that he did not know or reasonably ought to know that the information was not generally available and that if the information were generally available, it might have a material effect on the price or value of WBL's shares. Thus, the appellant argued that he was not liable for insider trading under s 218 of the SFA.

Held, dismissing the appeal:

(1) Section 214 of the SFA did not define ‘information’ exhaustively but adopted an inclusive definition that included a wide range of information. Information did not have to be factual knowledge of a concrete kind and might include rumours circulating in the market. The issue of reliability was not relevant to the very broad and general question as to what constituted ‘information’ in the first place as the issue of reliability related to the quite separate question as to the nature and quality of that ‘information’. Information might well include knowledge of an uncertain, predictive or speculative nature. Therefore, while the appellant disputed the certainty and reliability of the Information he acquired from the 2 July 2007 GMC Meeting, this did not prevent that information from being information which he possessed within the meaning of s 218 of the SFA (‘Issue 1’): at [29] to [31].

(2) The appellant did not dispute that he knew WBL made the Loss Forecast at the 2 July 2007 GMC Meeting. The objective evidence also clearly demonstrated a strong likelihood of a full impairment charge on WPT being taken in 3Q FY07 and that the impairment would be a substantial one. Thus, based on the Loss Forecast and the Significant Impairment Prospect, Lew knew as at the 2 July 2007 GMC Meeting that it was very likely that WBL would incur a significant overall loss in 3Q FY07. Put simply, the Loss Forecast and the Significant Impairment Prospect were not only significant pieces of information in themselves, but also had to be viewed holistically, particularly in the context of the issues in this appeal and Issue 1 in particular: at [33], [41] and [46].

(3) The inquiry into the nature of the Information (which was crucial to the resolution of Issue 2 (whether the information was generally available) and Issue 3 (whether the information would have a material effect on the price or value of the shares if the information were generally available) would be clearer if the Information had been more specifically particularised by the trial judge. A distinction should be made between what the appellant knew about WBL's state of affairs with full certainty and what the appellant knew about WBL's state of affairs with a high degree of probability. The importance of particularising the information was especially critical for Issue 2 when it was disputed whether the information could be deduced from information that was generally available: at [47] to [49].

(4) The central figure for both ss 215 and 216 of the SFA was the common investor (‘Common Investor’). Under s 215 (c), it was the Common Investor who had to make the deductions, conclusions or inferences from the generally available information in ss 215 (a) and 215 (b) of the SFA to determine what information already exists in the market. While s 215 (b) involved a more specific type of Common Investor than s 216, both sections, at a general level, required the Common Investor in both s 215 (b) and s 216 to possess the same basic level of professional knowledge as the ‘reasonable investor’ defined in Public Prosecutor v Chua Seng Huat [1999] 3 MLJ 305: at [80] to [82].

(5) Whether or not the Information in question was generally available was to be assessed at the time of the alleged insider trading transaction. The Information was not generally available under the respective limbs of s 215 of the SFA, especially under s 215 (c) of the SFA. The information on WBL that was generally available at the time of the appellant's alleged insider trading transaction was too weak for the Common Investor to draw the deductions, conclusions and inferences that would enable him or her to arrive at the same content as that contained in the Information possessed by the appellant: at [83] and [85].

(6) Even if the Common Investor could have arrived at the same conclusions as those contained in the Information, the deductions, inferences and conclusions from the generally available information on WBL would not satisfy the legal test embodied in s 215 (c). Information would only qualify as ‘generally available’ under s 215 (c) if the Common Investor could make deductions, conclusions or inferences from information which were of the ‘same character’ or ‘quality’ as the information the insider possessed. In this case, the Information the appellant possessed was not of ‘same character’ or ‘quality’ as the generally available information on WBL which the Common Investor relied upon to make his or her deductions, inferences and conclusions: at [87] and [91].

(7) The materiality of the Information was to be assessed with reference to the date of the alleged insider trading transaction, ie, 4 July 2007: at [94].

(8) Information was material if there was a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. The test of materiality under s 216 of the SFA did not require proof of a substantial likelihood that disclosure of the omitted fact would have caused the reasonable investor to actually change his vote. Put another way, there had to be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available: at [95].

(9) Based on the plain language of s 216 of the SFA, there was no need for an actual impact on a company's share price in order to establish the...

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4 cases
  • Madhavan Peter v PP
    • Singapore
    • High Court (Singapore)
    • 27 July 2012
    ...of the Securities and Futures Act (Cap 289, 2006 Rev Ed) by the Court of Appeal in Lew Chee Fai Kevin v Monetary Authority of Singapore[2012] 2 SLR 913. The ruling on the applicability of the TSC test to s 216 merited reconsideration when a case involving this section came before the Court ......
  • Public Prosecutor v Soh Guan Cheow Anthony
    • Singapore
    • District Court (Singapore)
    • 14 August 2015
    ...law on insider trading had been comprehensively set out by the Court of Appeal in Lew Chee Fai Kevin v Monetary Authority of Singapore [2012] 2 SLR 913 (“Kevin Lew”) wherein it was held, inter alia, that: the word “information” in Section 214 of the SFA should be interpreted more widely tha......
  • WBL Corporation Ltd v Lew Chee Fai Kevin
    • Singapore
    • Court of Appeal (Singapore)
    • 10 February 2012
    ...against the Judge's decision in Suit 71 and which the Court of Appeal dismissed in Lew Chee Fai Kevin v Monetary Authority of Singapore[2012] 2 SLR 913. Held, dismissing the appeal: (1) There was no dispute that WBL was under a contractual obligation to issue the shares to Lew pursuant to h......
  • Madhavan Peter v Public Prosecutor and other appeals
    • Singapore
    • High Court (Singapore)
    • 27 July 2012
    ...purposes of determining the materiality of the information. The Court of Appeal in Lew Chee Fai Kevin v Monetary Authority of Singapore [2012] 2 SLR 913 (“Kevin Lew”) took a similar view towards market impact evidence in the context of insider trading. The expert witness in Kevin Lew had te......
1 books & journal articles
  • MONEY LAUNDERING OFFENCES UNDER THE
    • Singapore
    • Singapore Academy of Law Journal No. 2017, December 2017
    • 1 December 2017
    ...See Monetary Authority of Singapore v Lew Chee Fai Kevin[2010] 4 SLR 209 (HC) and Lew Chee Fai Kevin v Monetary Authority of Singapore[2012] 2 SLR 913 (CA) (appeal dismissed). 22 The High Court and Court of Appeal were apparently able, on the facts of the case, to make this determination wi......

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