Public Prosecutor v Tan Seo Whatt Albert and another appeal

• Jurisdiction: Singapore
• Judge: Hoo Sheau Peng J
• Judgment Date: 28 June 2019
• Neutral Citation: [2019] SGHC 156
• Court: High Court (Singapore)
• Hearing Date: 11 January 2019,01 April 2019,22 March 2019
• Docket Number: Magistrate’s Appeal Nos 9242 of 2018/01 and 9242 of 2018/02
• Plaintiff Counsel: Nicholas Khoo and Suhas Malhotra (Attorney-General's Chambers)
• Defendant Counsel: Foo Cheow Ming (Foo Cheow Ming Chambers)
• Subject Matter: Criminal Law,Statutory Offences,Securities and Futures Act,Offering securities without a prospectus,Criminal Procedure and Sentencing,Sentencing
• Published date: 11 July 2019

Hoo Sheau Peng J: Introduction

These are cross-appeals against the sentence imposed on Tan Seo Whatt Albert (“the Accused”), a manager of Gold Insignia LLP (“Gold Insignia”), after he pleaded guilty to 20 charges of consenting to Gold Insignia offering securities to various investors without the offers being made in or accompanied by a prospectus or profile statement. These are offences under s 331(3A) read with s 240(1) of the Securities and Futures Act (Cap 289, 2006 Rev Ed) (the “SFA”), and punishable under s 240(7) of the SFA. The Accused was sentenced to a total fine of $600,000. He has paid the fines imposed.

Arising from the scheme by Gold Insignia, four offenders, including the Accused, have been prosecuted for offences under these provisions. According to the Prosecution, this is the first time these provisions have been invoked before the court. As a guide for sentencing in future cases, the Prosecution proposed certain factors to be considered in sentencing. The Prosecution argued that the custodial threshold had been crossed, and that a global imprisonment term of 12 to 16 weeks would be appropriate. Defence Counsel argued to the contrary, and contended that the fines imposed were manifestly excessive.

Having regard to the parties’ written and oral submissions, this is my decision.

Facts

The facts are as stated in the Statement of Facts (the “SOF”), admitted to by the Accused and reproduced in entirety at [6] of the District Judge’s grounds of decision in Public Prosecutor v Tan Seo Whatt Albert [2018] SGDC 247 (the “GD”). I summarise them here.

Offences of offering securities without prospectus committed by Gold Insignia

Gold Insignia was a limited liability partnership which offered debentures, being a form of securities, without a prospectus to the investing public. The debentures were structured as “memberships”. In the course of its business, there were three versions of the memberships, with the following key terms: On purchase of a membership, an investor received a physical gold bar, worth about 70% of the membership fees. The gold bar remained the property of Gold Insignia, but the investor was to hold it on trust for Gold Insignia as collateral to secure his paid-up membership fees and the fixed pay-outs from Gold Insignia. The investor was to be given fixed pay-outs. The pay-out was fixed at 4.5% per quarter (18% per annum) under the first two versions of the membership, and 6% on a bi-annual basis (12% per annum) for the third version of the membership. Each investor could terminate his membership by giving one month’s notice after a fixed non-terminable period. Upon termination, each investor was to return the gold bar to Gold Insignia, and the investor was entitled to a full refund of the original membership fee, or the prevailing market value of the membership, whichever was higher. If investors received a call-back notice from Gold Insignia, investors had two options – return the gold collateral to Gold Insignia and receive the prevailing market value of his membership, or sell the gold collateral to a third party.

In other words, of the funds obtained from the investors, around 70% of the funds were held by the investors in the form of gold bar collaterals. As for the remaining 30% of the funds, around $200,000 was invested by Gold Insignia’s management committee, with the returns from the investments belonging to the partners of Gold Insignia. All the other monies were held by third party discretionary fund managers and brokerage firms for investment, without any input from Gold Insignia. The returns from these investments covered part of the operational costs of Gold Insignia, including the fixed pay-outs to the investors.

There were about 135 independent sales consultants who marketed and sold Gold Insignia’s memberships. These sales consultants were paid a commission for every month a client, to whom they sold a membership, stayed in the programme. The commission was 1.3% of the price of the membership per client per month.

Between June 2010 and November 2011, Gold Insignia sold a total of 853 memberships to 547 investors. The memberships were sold for prices between $5,000 to $1,000,000. During this period, $29,970,000 was raised by Gold Insignia from the sales of the memberships.

Each time Gold Insignia offered its membership to an investor without an accompanying prospectus or profile statement that complied with the requirements prescribed under s 240(4A) and s 243 of the SFA, it contravened s 240(1) SFA, punishable under s 240(7) of the SFA.

The role of the Accused

The business concept of Gold Insignia was conceived of by the Accused. Although he was not registered as a partner of Gold Insignia, he was the senior-most member of the management team of Gold Insignia, and had the final say in its management. In 2010, the Accused was a consultant and advisor to Gold Insignia, and was responsible for advising Gold Insignia on investing the moneys raised from the sales of the memberships. From February 2011 onwards, the Accused was the acting CEO of Gold Insignia. He was also the head of Gold Insignia’s in-house trading team, after it was set up in January 2011. He was paid a monthly salary of $20,000 from October 2010 to August 2011, and a “Partial Consultant fees” of a total of $211,000 in 2011.

The Accused was also experienced in the financial industry, and was the sole proprietor of an entity known as Private Capital Fund Management (“PCFM”) which was in the business of fund management. PCFM was an exempt fund manager lodged with the Monetary Authority of Singapore (“MAS”) from 2005, and was permitted to conduct fund management for up to 30 sophisticated investors.

The roles of the other accused persons

Along with the Accused, three other persons were involved in the management of Gold Insignia, being Jacinta Ong Pei Yuen (“Jacinta”), Yeo Qianhui Serene (“Serene”) and Wu Shiqiang, alias Ray (“Ray”). They were also charged for their roles in Gold Insignia’s scheme.

Jacinta was one of two registered partners of Gold Insignia from 23 June 2010. After the Accused, Jacinta was the next-most senior figure in the Gold Insignia management team. Jacinta was deregistered as a partner sometime in July 2011 (backdated to January 2011). However, Jacinta remained on the management team of Gold Insignia, and was involved in its decision-making.

Serene was the second registered partner of Gold Insignia. In actual fact, she was a salaried employee, earning about $3,000 per month. She took instructions from the Accused, and was assigned administrative and operational tasks.

Ray joined Gold Insignia sometime in end-2010. He was the business marketing manager of Gold Insignia. From July 2011, Ray was also added to the management team of Gold Insignia. He was paid a salary of about $3,000 per month.

The proceeded charges

The charges against the Accused related to the offences committed by Gold Insignia with the consent of the Accused, as a manager of Gold Insignia at the material time. They involved a total of 12 investors and $585,000 invested, as follows:

No.	DAC No.	Date	Investor	Amount invested
1	901081-2017	15/02/2011	Khoo Lee Yak	$50,000
2	901156-2017	7/10/2010	Ng Wai Guek	$20,000
3	901157-2017	28/03/2011	$20,000
4	901158-2017	30/12/2010	Chan Noi Eng	$100,000
5	901159-2017	13/04/2011	$100,000
6	901160-2017	15/07/2011	Lim Cheng Hon Yvette	$50,000
7	901161-2017	30/03/2011	Aw Choi Yin	$20,000
8	901162-2017	30/03/2011	Tan Lee See	$10,000
9	901163-2017	30/05/2011	$10,000
10	901164-2017	16/09/2010	Leck Yam Keng	$20,000
11	901167-2017	26/04/2011	Lee Bee Geok	$20,000
12	901168-2017	21/04/2011	Heng Sai Boh	$20,000
13	901169-2017	29/07/2011	$20,000
14	901170-2017	25/02/2011	Vasuhi D/O Ramasamypillai	$20,000
15	901171-2017	31/05/2011	$50,000
16	901172-2017	20/09/2010	Cher Jia Sheng	$5,000
17	901173-2017	30/10/2010	$10,000
18	901174-2017	23/02/2011	$10,000
19	901175-2017	20/09/2010	Lau Chiew Nah	$20,000
20	901176-2017	12/05/2011	$10,000

Charges taken into consideration

In addition to the 20 proceeded charges, there were 49 similar charges taken into consideration. These 49 charges involved offering Gold Insignia memberships to 25 different investors, but the sums involved are not stated in the charges or the SOF.

Additional facts raised in mitigation

For completeness, there were several facts which were raised in the Accused’s mitigation plea as follows: Gold Insignia had made verbal enquiries with several authorities, namely the MAS, International Enterprise Singapore, the Accounting and Corporate Regulatory Authority and the Singapore Police Force about the running of Gold Insignia’s business.¹ Exhibits of follow-up emails of these enquiries showed that the authorities gave confirmations to the effect that limited liability partnerships could run membership programmes.² The Gold Insignia membership application form had included the applicable terms and conditions. One example is cl 7.1 which states that “members are subjected to a potential financial loss risk of 50% to 65% should Gold Insignia be unable to fulfil [its] obligations”.³ The Accused allegedly took steps to “mitigate the effects of” his offence, by sending out advisory letters to Gold Insignia members to keep them informed,⁴ appealing to the Commercial Affairs Department to use confiscated funds to refund the membership fee to new members who had their gold bars seized,⁵ and scheduling a “redemption exercise” for some...