Public Prosecutor v Chen Yue

• Jurisdiction: Singapore
• Judge: Wong Choon Ning
• Judgment Date: 27 November 2015
• Neutral Citation: [2015] SGDC 333
• Court: District Court (Singapore)
• Docket Number: DAC No 926469 of 2014
• Published date: 12 December 2015
• Year: 2015
• Hearing Date: 28 September 2015,09 September 2015
• Plaintiff Counsel: DPPs Mr Leong Weng Tat and Mr Nicholas Khoo
• Defendant Counsel: Mr Wendell Wong Hin Pkin and Mr Benedict Teo Chun-Wei (Drew & Napier LLC)
• Citation: [2015] SGDC 333

District Judge Wong Choon Ning:

The accused pleaded guilty to a charge for directly, in connection with the trading of futures contracts, engaging in acts which operated as a deception upon a futures broker, which was an offence under Section 210(b), and punishable under Section 212(1), of the Securities and Futures Act (Cap 289, Rev Ed 2006). The accused’s acts of deception had resulted in a loss of US$7,285,910 (or approximately S$9,067,315) to the said futures broker.

After hearing the prosecution’s address on sentence and the learned counsel’s mitigation plea, and in consideration of the facts and circumstances of the case, I sentenced the accused to 36 months’ imprisonment. The sentence was further backdated to take effect from the accused’s date of remand, namely, 22 Jul 2015.

The defence is dissatisfied with the order of sentence and now appeals against it. The accused is currently serving sentence.

FACTS OF THE CASE

The Statement of Facts (PS 1), to which the accused admitted without qualification, revealed that, the accused, aged 32 years, was employed as a broker by a futures broker known as UOB Bullion and Futures Limited (hereinafter referred to as “UOBBF”). As a broker, the accused’s role was to execute trades upon receiving orders from customers or upon instructions from UOBBF. The accused was not permitted to execute trades without such instructions.

When a broker received an order from a customer, he was required to raise an order ticket. The trades must first be booked into UOBBF’s brokerage account, before being transferred to the customer’s account, based on the order tickets submitted by the broker. The broker had to write down, on the order ticket, the customer’s account number, the customer’s instructions and the filled order quantity. Once the order had been filled, the broker was to submit the order tickets. The dealing support team would then update the customer’s account and, if an account was over-traded, an alert would be raised to the risk management team.

Account H808 was in the name of one Shen Di. The account had a trading limit of 20 crude oil futures contracts. Either Shen Di or her husband would give instructions for the trades conducted using this account.

Investigations revealed that, sometime in 2011, the accused had made a mistake in an order entry which resulted in a loss of about US$100,000. The accused then booked this loss into account H808 even though it had nothing to do with this account. In the interim, the accused would conduct unauthorised trades using account H808 to try to recoup the loss of about US$100,000.

Between 9.09 pm on 3 May 2012 and 1.36 am on 4 May 2012,¹ without authorisation from Shen Di, UOBBF or any other person, the accused, in UOBBF’s office, bought 4,987 lots, and sold 10 lots, of NYMEX Light Sweet Crude Oil CLM2 futures contracts, through the Chicago Mercantile Exchange, with delivery in Jun 2012. Each lot represented 1,000 barrels of oil. The notional value of all these unauthorised trades amounted to US$512.3 million. The accused was unable to continue trading beyond the said 4,997 lots because UOBBF’s brokerage account had a trading limit of 5,000 lots for crude oil futures.

The accused had deliberately held on to the order tickets for the said unauthorised trades and failed to pass them to the dealing support team, as he knew that, if he were to pass them to the dealing support term, it would trigger an alert to the risk management team. As a result, despite the fact that the accused’s unauthorised trades far exceeded the trading limit of the customer’s account, no alert was raised.

On 4 May 2012, at about 4 am, the accused informed UOBBF that he had allowed account H808 to purchase CLM2 contracts beyond its trading limits, and he lied that the trades had been made on the instructions given by Shen Di’s husband for and on behalf of Shen Di. UOBBF immediately took steps to close the positions, and the close-out was completed on the same day. Later in the day, at about 8.45 pm, the accused continued to insist that the trades had been authorised by the customer during his interviews with officers from UOBBF and UOB. It was only the next morning on 5 May 2012 that the accused finally admitted to UOBBF that the trades had in fact been unauthorised.

ANTECEDENTS

The accused was a first offender.

PROSECUTION’S ADDRESS ON SENTENCE

The prosecution noted that there were no reported decisions on unauthorised trading in futures under Section 210(b) of the Securities and Futures Act. There were, however, sentencing precedents for unauthorised trading in securities under Section 201(b) of the same Act. It was the prosecution’s submission that guidance might be gleaned from these precedent cases given that the two provisions provide for the same punishment and they also read almost in pari materia save for the fact that one provision governs “futures” and the other provision governs “securities”.²

In Ng Geok Eng v Public Prosecutor [2007] 1 SLR(R) 913, Tay Yong Kwang J held that, for unauthorised share trading offences under Section 201, which was carried out without the consent of the account holder, the need for general deterrence would warrant the imposition of a custodial sentence. General deterrence would feature strongly as a sentencing principle for offences which threaten to undermine or impair financial systems as the “public interest vested in a secure and reliable financial system that facilitates convenient commercial transactions is extraordinary, especially in light of Singapore’s reputation as an internationally respected financial, commercial and investment hub” (see Public Prosecutor v Law Aik Meng [2007] 2 SLR(R) 814 at para 24). Where there has been unauthorised trading without the consent of the account holder, imprisonment is even more strongly warranted, as there would clearly be a greater detriment caused to the innocent investor. Where an investor’s trading account has been used without his consent by middle-men in the financial industry, such as the broker or remisier, public confidence in the securities market (or, in our case, the futures market) would be severely undermined. As noted in Public Prosecutor v Loo Kiah Heng [2010] SGDC 434 at para 51 :-

“…. Investment funds involve persons or institutions placing their assets in the hands of a few to manage those funds. Such funds and their constituent parts are often complex and few understand how they are actually run. Lax oversight of such management can lead not only to the widespread misuse of the monies in such funds, but also to fund managers/asset managers attempting various methods of dealing with the funds to push the boundaries of acceptable conduct in the hope that if they are caught, leniency will be shown to them. It must be impressed upon persons placed in positions of trust in investment houses and the like that they cannot misuse the assets placed in their care and expect to get away lightly ….”

These statements in Ng Geok Eng v Public Prosecutor and Public Prosecutor v Loo Kiah Heng were subsequently endorsed by a three-Judge coram of the High Court in Public Prosecutor v Ng Sae Kiat [2015] SGHC 191.

The prosecution further referred to several factors, which have been held by the High Court to be relevant for consideration in sentencing for unauthorised trading offences in Public Prosecutor v Ng Sae Kiat and Teo Kian Leong v Public Prosecutor [2001] SGHC 364 (which was a case concerned with the offence of unauthorised share trading under Section 102(b) of the Securities Industry Act (Cap 289, Rev Ed 1985)).³ One relevant factor was the loss suffered by the victim. The prosecution pointed out that, in the present case, the accused’s actions had resulted in a total loss of US$7,285,910. Based on the prevailing exchange rate at the time of the commission of the offence, this would be equivalent to about S$9,067,315. The notional trade of the trades, which was US$512.3 million or S$637.6 million, further reflected the risk to which the accused, by his unauthorised trading, had exposed UOBBF as well as the innocent investor. Had the market declined further than it did on 3 and 4 May 2012, the loss generated could have far exceeded US$7,285,910.⁴ The prosecution submitted that, given the staggering amount of loss occasioned by the accused’s actions, which dwarfed the amounts in all the available sentencing precedents save for the collapse of Barings Bank involving Mr Nick Leeson, the sentence to be meted out must sufficiently reflect the gravity and seriousness of the accused’s offence.

Secondly, it was submitted that the accused’s actions were highly premeditated and carefully planned over a period of time. Back in 2001, the accused had booked a loss of about US$100,000 into Shen Di’s account before he subsequently used the account to conduct unauthorised trades to try to recoup the loss.⁵ Thirdly, the prosecution pointed to the sophistication of the fraud. There were measures within UOBBF to prevent unauthorised trades. By virtue of his position as a broker of UOBBF, the accused was aware of such risk control measures. As a result, he deliberately withheld the submission of the order tickets in order to contravene these safety measures which the bank had put in place.⁶

Fourthly, the accused had executed 270 transactions⁷ by continuously trading in the course of one night using Shen Di’s account. This was not a one-off offence committed on the spur of the moment.⁸ The prosecution further submitted that, given that the accused had ceased his unauthorised trading only after buying 4,987 lots, had there not been a trading limit of 5,000 lots for crude oil futures for UOBBF’s brokerage account, he would have in all likelihood continued with his unauthorised trading, thereby causing greater losses or subjecting UOBBF and/or the customer to greater risks.⁹

Fifthly, the accused had defrauded an...