Public Prosecutor v Lim Kheng Guan
| Jurisdiction | Singapore |
| Judge | Wong Keen Onn |
| Judgment Date | 07 September 2004 |
| Neutral Citation | [2004] SGDC 212 |
| Court | District Court (Singapore) |
| Published date | 28 February 2005 |
| Year | 2004 |
| Plaintiff Counsel | Hamidul Haq (Deputy Public Prosecutor) |
| Defendant Counsel | DC Edmond Pereira (Edmond Pereira and Partners) |
| Citation | [2004] SGDC 212 |
7 September 2004
District Judge Wong Keen Onn
The Charges
1 The accused is one Lim Keng Guan, male, 33 years old. He was convicted upon his plea of guilt, of fourteen (14) charges, namely two (2) charges of directly engaging in practice when operated as a fraud in purchase and sale of securities under Section 102(b) of the Securities Industry Act (“SIA”), one (1) charge for failing to comply with condition (3) of the Dealer’s Representative License under Section 33(3) SIA, one (1) charge of forgery under s 465 of the Penal Code, two (2) charges of fraudulent of using forged documents as genuine under Section 471 of the Penal Code and eight (8) charges criminal breach of trust as an agent under Section 409 of the Penal Code. The remaining seventy charges were taken into consideration for the purpose of sentencing. These charges relate to 25 similar counts under Section 409 of the Penal Code, 16 counts under Section 102(b) SIA, 3 counts under Section 33(3) SIA, 13 counts of forgery under Section 465 of the Penal Code and 13 counts of using forged documents as genuine under Section 471 of the Penal Code.
Facts
Background and Margin Trading Accounts
2 The accused Lim Kheng Guan, was at the material time, a remisier with OCBC Securities Pte Ltd (“OSPL”). He was a remisier with OSPL since 19 June 1997 till 15 August 2002, whereupon his services was terminated. The gravamen of the charges of unauthorised trading against the accused related to the accounts of six main victims, Teo Ting Seng (“Teo”), Tan Puan Kim (“Tan”, who is the wife of Teo), Ang Kim Chuan (“Ang”), Foo Kock Kuan (“Foo”), Chan Hian Cher (“Chan”) and Ng Loo Yek (“Ng”). Teo and these five (5) persons were either related to each other or were business acquaintances. Before the 6 victims became acquainted with the accused, they were trading shares through other securities firms. As a result of introductions, each of them opened Cash Trading Accounts (“Cash Account”) with OSPL through the accused. All of them then appointed the accused as their remisier and started to used the accounts to trade with the accused.
3 In December 1999, OSPL introduced Margin Trading Accounts (“Margin Account). The Margin Account gives account holders up to 14 days to settle any payment of securities purchased. However, a Margin Account holder is required to pledge his or her fully paid-up shares with OSPL as collateral security for all share transactions undertaken in the Margin Account before any trading is allowed. Share trading undertaken in the Margin Account can only be effected up to OSPL attributed value (i.e. 70% of purchase price) of the collateral security pledged to OSPL in the Margin Account. If the price of the share falls to a certain level, then the client is required to top up in cash or additional shares to be pledged. A failure to top up monies or additional shares will result in OSPL automatically selling off their shares (force sell).
4 On 15 March 2000, Singapore Exchange Ltd (“SGX”) came out a ruling that payment for shares purchased must be settled after 3 market days of trading (T + 3). Before the T+3 ruling came into effect, the accused suggested to the 6 victims to open Margin Account with OSPL so that they could still enjoy 14 days settlement period. All the 6 victims subsequently opened a Margin Account each through the accused. They each transferred fully paid shares from their CDP to their Margin Account as collateral security.
Accused’s Modus Operandi
5 Investigation revealed that soon after the six victims opened accounts with OSPL and appointed the accused as their remisier, their relationship with the accused grew close. Their trades were heavy and accused earned good commission from their trades. The accused would visit them often and provide personalised service. Before long, the accused took advantage of his relationships with his victim and began to use their trading accounts to trade without their knowledge and authorisation. Most of the trades were contra trades. Many a time, when the shares purchased in one account had reached settlement deadline, but the accused still wants to hold on to the shares, he would arrange to sell of the shares from the said account and use another client’s account to buy in the same shares with the intention to sell them later when the price is right. Because of his constant use of the victims’ Margin accounts to trade, many a time margin calls were made in these accounts. To top up the margin, the accused would submit a Request For Transfer of Securities (CDP 4.1) with forged signatures of the account holder to transfer securities from their Central Depository Pte Ltd (CDP) account to their Margin Account.
6 The accused also had a personal trading account no. 64820 with OSPL. He had also asked his wife to open a Cash Account no. 102016 and a Margin Account no. 136920 with which he also used to conduct his own trades. Because of his heavy trading and usage of several accounts to conduct his trades, he would use gains or proceeds from one account to cover the loss or purchases in another account. On many occasions, when the victims gave him cheques to settle payments of their purchases or losses, he would misappropriate them by using the cheques to settle payment in other accounts which he had used. He would use the sale proceeds from another account or another person’s cheque to cover up. As he was the remisier of all these accounts, he was able to see which accounts had low margins and only use those, which had enough margins.
7 Apart from the six mentioned victims, the accused also used other clients’ accounts to conduct trading without their knowledge and authorisation. A few of them were approached by the accused and they agreed to allow the accused to use their accounts to trade. Most of the victims trusted the accused and did not check the statements which OSPL sent to them. On a number of occasions the victims received contract notes and noticed that they did not do the trades stated in the contract notes. When they questioned the accused, the accused would either tell them that he had made a mistake by keying other person’s trade in their account or that OSPL had made the mistake. He would then assure them that he would settle the matter.
8 Initially, the accused was able to cover up his scam. Eventually, the market went against him and he had to sell off shares kept in the victims’ margin accounts. Many times when victims instructed him to purchase shares, he would sell them off without the knowledge of the victims. He would use victims’ cheques meant for the payment of the share purchase to settle other accounts which he had used. He thought he would buy the shares back for the victim later but due to the weak market, he was unable to do so. As he did not want the victims to see the actual status in their trading accounts, he changed their mailing addresses without their authorisation by submitting forged applications for change of mailing address so that the victims would not receive the statements and contract notes.
9 The offences came to light after these victims subsequently discovered discrepancies in their contract notes and trading statements. Teo lodged a police report on 19 June 2002 against the accused at the Commercial Affairs Department (“CAD”).
Facts Relating To DAC 15293/2004 (2nd Charge, s. 102(b) SIA)
10 For the 2nd charge DAC 15293/2004, between 6 March 2000 and 5 February 2002, the accused used Tan Kim Puan’s trading account (cash account No 115303) to conduct purchases and sales of securities in 1392 trades without the knowledge and authorisation from Tan. The accused had thus engaged in a practice which operated as a fraud upon OSPL when he represented to OSPL that the transactions were for and on behalf of Tan Puan Kim when they were in fact for his own interest. These transactions resulted in a total loss of $470.011.08 (including $283,294.58 brokerage and clearing fees) in the said trading account,
Facts Relating To DAC 15295/2004 (4th Charge, s. 102(b) SIA)
11 In respect of the fourth charge DAC 15292/2004, the accused had, between 23 March 2001 and 31 May 2002, used Ang Kim Chuan’s trading account No 115302 to conduct purchases and sales of securities, in 170 trades without the knowledge and authorisation from Ang. The accused had engaged in a practice which operated as a fraud upon OSPL when he represented to OSPL that the transactions were for and on behalf of Ang Kim Chuan when they were in fact for his own interest. These transactions made a gain of $123,797.80 in the said trading.
12 The total number of unauthorised trades for the two proceeded charges was 1562 whilst the corresponding number for the similar charges taken into consideration was 1491, giving a total figure of 3053 unauthorised trades carried out by the Accused between 6 March 2000 to 31 May 2002. It was not in dispute that the total losses in the two proceeded charges were S$ 354,213.28 while that in relation to 11 victims for all the charges under Section 102(b) SIA (including the charges taken into consideration) amounted to a staggering sum of $3,705 808.24. As at 30 June 2002, the amount outstanding was $444, 181,84 and two years later on 17 June 2004, the outstanding sum that was not received was $372,093.30.
Facts Relating To DAC 15311/2004 (20th Charge, s.33(3) SIA)
13 In respect of the twentieth (20th) charge, the accused asked Yeo, sometime in November 2000, if he could use Yeo’s trading account No 007801 to trade for himself (accused). Yeo agreed after the accused assured Yeo that he would settle any losses that should incur from the arrangement. Between 22 November 2000 and 20 July 2001, the accused, being a dealer’s representative licensed by MAS and as OSPL’s remisier, used Yeo’s trading account to conduct twenty-five trades in shares for himself. By doing so, the accused had thus failed to comply with Condition (3) of his Dealer’s Representative Licence No. DR...
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