The Present Regime of Securities Regulation

And a Glimpse at Future Legislative Innovations

This article aims to provide a general overview of the existing securities law as set out in the Securities Industry Act (Cap 289) ('SIA') but does not attempt to delve into a comprehensive analysis of the relevant statutory provisions. Nevertheless, it is hoped that the nuggets of information presented in this article will whet the appetite of readers to begin their own study of this commercially relevant area of law. The writer is deeply grateful for the insightful annotations by Walter Woon of the Securities Industry Act (Cap 289) in Butterworths' Annotated Statutes of Singapore, vol 1, that have been a valuable foundation for this journey through the SIA.

Illegitimate Conduct under s 97(1), SIA

• To create;
• to cause to be created; or
• to do anything that is calculated to create

1. a false or misleading appearance of active trading in any securities on a securities exchange in Singapore; or
2. a false or misleading appearance with respect to the market for, or the price of, any such securities.

Prohibited Activities under s 97, SIA

Churning: s 97(1), SIA

• 'Churning' involves creating a false or misleading appearance of active trading in any securities on a securities exchange of Singapore. Essentially, it involves creating a false impression of activity in a counter and once enough buying pressure has been generated to push the price up, the manipulator will sell and take his profit.
• Matched orders are specifically prohibited by s 97(3)(b) and 97(3)(c), SIA. In the US Case of Wright v SEC 112 F 2d 89 (California (2nd Cir), 1940), it was held that there was no contravention of broadly similar US provisions unless the orders were for substantially the same amounts of securities. As such, where an order to sell 10,000 shares was followed by an order to buy 2,500 shares, it was held that the relevant statutory provisions had not been infringed. Quaere whether a person, who instructs a broker to buy or sell 'at market' can be said to have offered to deal in the securities 'at a specified price'? Clearly, however, the concurrent placing of buy and sell orders 'at market' for the same securities would be proscribed.
• There is a statutory defence in s 97(4), SIA, of proving that transactions are not for the purpose of creating a false or misleading appearance of active trading.

Creating an illusory market/market price

The statutory prohibition has the object of ensuring that the market reflects the forces of genuine supply and demand: North v Marra Developments Ltd (1981) 148 CLR 42, per Mason J. To quote from the relevant passages of this illuminating judgment:

In terms the statutory prohibition is directed against activity which is designed to give the market for securities or the price of securities a false or misleading appearance. In this setting, 'calculated' means 'designed' or 'intended' rather than 'adapted' or 'suited'. It is not altogether easy to translate the generality of this language into a specific prohibition against injurious activity, whilst at the same time leaving people free to engage in legitimate commercial activity which will have an effect on the market and on the price of securities. Purchases or sales are often made for indirect or collateral motives, in circumstances where the transactions will, to the knowledge of the participants, have an effect on the market for, or the price of, shares. Plainly enough it is not the object of the section to outlaw all such transactions.
...
It seems to me that the object of the section is to protect the market for securities against activities which will result in artificial or managed manipulation. The section seeks to ensure that the market reflects the forces of genuine supply and demand. By 'genuine supply and demand' I exclude buyers and sellers whose transactions are undertaken for the sole or primary purpose of setting or maintaining the market price. It is in the interests of the community that the market for securities should be real and genuine, free from manipulation. The section is a legislative measure designed to ensure such a market and it should be interpreted accordingly.
...
Transactions which are real and genuine but only in the sense that they are intended to operate according to their terms, like fictitious or colourable transactions, are capable of creating quite a false or misleading impression as to the market or the price. This is because they would not have been entered into but for the object on the part of the buyer or of the seller of setting and maintaining the price, yet in the absence of revelation of their true character they are seen as transactions reflecting genuine supply and demand and having as such an impact on the market.
...
When purchases have been made of shares in a company at or about a particular level for the purpose of setting and maintaining a market price for those shares there is a breach of the statutory prohibition. At the very least purchases have then been made which are calculated to create 'a false or misleading appearance with respect to the market for, or the price of' the shares. In reality the purchases are calculated to create a false market or false price. The false or misleading appearance is that the market, in the absence of any disclosure that a market support operation is on foot, appears to be real or genuine, there being no overt sign of market support or manipulation. [emphasis added]

Wash sales: s 97(2), SIA

• 'Wash sales' are activities affecting the price of securities by way of sale or purchase transactions in which no change in the beneficial ownership of those securities occurs. An illustration is where there is a series of transactions at the end of which the beneficial ownership of securities does not change.
• In an illustrative case, Endresz v Whitehouse (1997) 24 ACSR 208, a director, A, of CTC Nominees Pty Ltd ('CTC') instructed B, a broker to sell 4m shares in Emu Hill Gold Mines NL ('Emu'). On the same day, A instructed another broker, C, to purchase 4m shares in Emu at 14c per share. B and C agreed that CTC would not have to pay for the shares acquired by C for three months. As such, effectively, CTC received a free loan until the proposed date of the deferred settlement. Ormiston JA (at 226) held that 'There was a totally artificial transaction involving four million shares and it resulted in no change in the ownership of the shares, just an apparent surge in activity to the extent of four million shares on the day …' .
• For the purposes of s 97, there is no change in the beneficial ownership of securities if the person who was buying or selling the securities or a person associated with him has no interest in those securities after the completion of the transaction: s 97(5), SIA.
• Another clear-cut example of wash sales is buying and selling the same block of shares through nominees: R v Lampard [1968] 2 OR 470.

Sham transactions

• Activities affecting the price of securities by means of fictitious transactions or devices would be sham transactions.
• A judicial definition of sham transactions is found in Snook v London and West Riding Investments Ltd [1967] 1 All ER 518, ie acts done which are 'intended to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create.'
• An example of a sham transaction is where a company transfers securities to brokers who then re-sell to a subsidiary of the original seller: see eg R v M & Ors (1979) 4 ACLR 610.

Does s 97, SIA, Extend to Unquoted Securities?

In the Malaysian case of Pertubuhan Keselamatan Sosial v Chin Chee Kuang & Ors 11 Mallal's Digest (4th Ed, 1996 Reissue) para 782, the Malaysian High Court expressed the view that it was arguable that the Malaysian equivalent of this section might apply to unquoted securities. The issue has yet to be judicially settled in Singapore.

Application of s 97(1), SIA, to Pre-Trading Period?

• The wording of s 97(1), SIA, states 'false or misleading appearance with respect to the market for, or the price of, any such securities' which would suggest that the securities referred to are 'securities on a securities exchange in Singapore'.
• In the writer's view, there is a vital distinction between 'create, or cause to be created' and the alternative actus reus of doing anything that is 'calculated to create'. Whereas the 'creating' or '[causing] to be created' pre-supposes that the securities are already on a securities exchange, the latter wording of 'calculated to create' could well apply to the pre-listing period as the words conceivably extend to a future listing after an initial public offering that is afoot.

Section 98, SIA

• This is closely related to s 97, SIA, but may catch 'pool operations' where s 97, SIA, would not. It could also extend to some types of short selling.
• Each of the three separate offences created by s 98 only applies to a person who engages in two or more transactions in the relevant securities. This requirement seems to be intended to protect innocent one-off transactions: see Meyer, 'Fraud and Manipulation in Securities Markets: A Critical Analysis of Sections 123 to 127 of the Securities Industry Codes' (1986) 4 C & S LJ 92 at 95.
• The impugned transactions must be in listed securities although it would appear that they need not occur on a stock market. This is clear from s 98(4)(b), which states that the reference to 'transaction' includes a reference to 'the making of an invitation, however expressed, that expressly or impliedly invites a person to offer to sell or purchase such securities of the body corporate'.

Elements of s 99, SIA

• A person
• shall not make a statement or disseminate information
• that is false or misleading
• in a material particular
• and is likely to induce the sale or purchase of securities by other persons or is likely to have the effect of raising, lowering, maintaining or stabilising the market price of securities
• if, when he makes the statement or disseminates the information
• he does not care whether the statement or information is true or false; or he knows or ought reasonably to have known that the statement or information is false or misleading in a material particular.

Section 99, SIA

False or misleading statement

• The scope of s 99 is very wide as it extends to 'any statement'. Its ambit extends to:

1. false rumours by people who try to 'talk up' or 'talk down' the market; and
2. public announcements by lead managers of IPOs.

• Non-disclosures could amount to misleading statements in certain circumstances: see eg R v M & Ors (1979) 4 ACLR 610. A mere non-disclosure, without more, is not an offence; the non-disclosure must have the effect of amounting to deception: Commonwealth Homes and Investment Co Ltd v Smith (1937) 39 CLR 443.

Section 100, SIA

Unlike s 99, SIA, it does not appear to be confined to securities traded on a stock exchange.

What constitutes 'misleading, false or deceptive' statements within the meaning of s 100(1)(a), SIA?

• outright lies,
• statements literally true yet misleading,
• half-truths, and
• partial disclosure/silence where a comment is reasonably expected.

Deception commonly feeds on error and confusion: Shoshana Pty Ltd v 10th Cantanae Pty Ltd (1987) 79 ALR 279, per Burchett J (dicta). However, statements/conduct that may merely confuse a person are not necessarily misleading or deceptive: McDonald's System of Australia Pty Ltd v McWilliam's Wines Pty Ltd (1979) 28 ALR 236. However, if the statements are intended to confuse, they may be misleading or deceptive: NSW Dairy Corp v Murray-Goulburn Co-op Co Ltd (1989) ATPR (Digest) 46-049 at 53,171, per Gummow J (dicta).

What constitutes the 'reckless' making/publishing of statements for the purposes of s 100(1)(c), SIA? The term 'reckless' has been judicially interpreted in PP v Measor (reproduced in Pillai, Sourcebook of Singapore and Malaysian Company Law (2nd Ed, 1986), unreported) to mean 'gross carelessness'. The court must be satisfied that it was a rash statement to make in the sense that there was no real factual basis on which the statement could be supported.

However, if the person making the statement bases it on facts which he/she has reason to believe are true, that statement is not reckless even though it is made carelessly: R v Grunwald [1960] 3 All ER 380 at 384.

Section 102, SIA: Employment of Manipulative and Deceptive Devices

Illegal conduct includes:

• employing any device, scheme or artifice to defraud;
• engaging in any act, practice or course of business which operates/would operate as a fraud or deceit upon any person; or
• making any untrue statement of a material fact/omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.

This statutory provision is based on US Rule 10b-5 made under the Securities Exchange Act 1934. It is intended to be a catch-all section designed to prohibit any other form of securities fraud not specifically dealt with in any other section.

It should be noted that unlike ss 97 to 99, SIA, s 102 is not by its terms confined only to securities traded on the stock exchange; unquoted securities would also come within its purview.

Section 103, SIA: Insider Trading

Insider trading is a process whereby a person who is connected with a corporation uses information not generally available to the public when dealing in the shares of that corporation. The insider is in a position to make huge gains by selling or buying securities before information that might affect the price of the corporation's securities ('price-sensitive information') is made public. Statutory safeguards are vitally important as insider trading is the most widely known form of market abuse today.

The rationale for the obligation imposed on insiders has been stated as follows:

Analytically, the obligation rests on two principal elements: first, the existence of a relationship giving access, directly or indirectly, to information intended to be available only for a corporate purpose and not for the personal benefit of anyone; and second, the inherent unfairness involved where a party takes advantage of such information knowing it is unavailable to those with whom he is dealing ... . Intimacy demands restraint lest the uninformed be exploited.

See Re Cady, Roberts & Co 40 SEC 907 (Securities Exchange Commission disciplinary proceeding, United States (1961)).

An Australian court has also suggested that 'the theory behind insider trading is breach of fiduciary duty' (Exicom Pty Ltd v Futuris Corp Ltd (1995) 18 ACSR 404 at 408-409, per Young J). In this regard, s 157(2) of the Companies Act (Cap 50) should be noted as it complements the insider trading laws by its clear prohibition against officers/agents of a company making improper use of any information acquired by virtue of their position as officers/agents to gain a direct/indirect personal advantage.

Types of Insider Trading

The Australian Stock Exchange in their Circular to Member Organisations, 21 June 1990, has helpfully identified the following principal types of insider trading:

• Classic Insider Trading: when a director or associate of a company buys or sells shares before the release of a price-sensitive announcement.
• Front Running: when a broker, knowing that a client has a large or market-sensitive order, puts through a transaction on the broker's or another client's behalf, thus benefitting from the pre-warning.
• Scalping: trading prior to the release of a research report.
• Piggybacking: when a broker, after observing a series of transactions of a client who has a high degree of success, repeats their investments for the broker or clients. This practice is similar to front running but occurs after the transaction of the client has been completed.
• Inside Market Information: when a broker disseminates information that certain trading activity is occurring or about to occur which will cause a price change.

Prohibitions in s 103, SIA

• Direct Insider Trading
  Prohibition against corporate insiders trading in the securities of their own corporation.
• Indirect Insider Trading
  Prohibition against persons with access to price-sensitive information regarding dealings between his corporation and another corporation from dealing with the securities of the other corporation.
• Tippees
  Prohibition against dealings in securities by persons receiving price-sensitive information from insiders.

Direct Insider Trading

There are five elements to the offence:

• the person in question was an insider at the material time;
• he was in possession of price-sensitive information;
• he obtained the information by reason of his position as an insider;
• the information was not generally available; and
• he dealt in the securities of the corporation.

Who is an Insider?

By virtue of s 103(1) and (2), SIA, an insider is a person who is/has been in the preceding six months connected with a corporation. Section 103(9), read together with s 103(12), provides that the following individuals may be potential corporate insiders:

• a director of the corporation or of a related corporation;
• a secretary of the corporation or of a related corporation;
• an executive officer of the corporation or of a related corporation;
• an employee of the corporation or of a related corporation;
• a receiver or receiver and manager of the property of the corporation or of a related corporation;
• a judicial manager of the corporation or of a related corporation;
• the liquidator of the corporation or of a related corporation;
• a trustee or any person administering a compromise or arrangement made by the corporation or its related corporations;
• a substantial shareholder of the corporation or of a related corporation;
• an officer of a substantial shareholder of the corporation or of a related corporation, if he occupies a position that may reasonably be expected to give him access to price-sensitive information; and
• any person who occupies a position that may reasonably be expected to give him access to price-sensitive information by reason of any professional or business relationship between himself (or his employer or a body corporate of which he is an officer) and the corporation or a related corporation.

Direct Insider Trading: Some Observations

• A company cannot be an insider of itself as 'the whole genesis of this aspect of the law from the law of fiduciary obligation shows that one does not owe a fiduciary obligation to oneself': Exicom Pty Ltd v Futuris Corp Ltd (1995) 18 ACSR 404 at 409, per Young J.
• The term 'person' is defined in the Interpretation Act (Cap 1, 1985 Ed), s 2(1), as including both natural and artificial persons. In PP v Allan Ng Poh Meng (1989) CSLR XIII 1327 (District Court, Singapore), the learned District Judge accepted this broader definition of 'person' in s 103, SIA.
• A person is guilty of an offence only if the information was acquired by the accused by virtue of his position as an insider. This can be proved by circumstantial evidence, for instance, the fact that a director was present at a board meeting at which a certain matter was discussed: Waldron v Green (1977) 3 ACLR 289. In that case, the Supreme Court of Victoria also pertinently observed that 'Whether or not, [the director] gained additional information from outside sources as, for instance, by the reports of marketeers and people studying movement of shares is not to the point. What the section is concerned with is the question of whether an officer of a corporation has acquired information by virtue of his position. If he does, it is nothing to the point that that information is supplemented by information acquired as a matter of common knowledge or by reference to outside sources.'

Price-Sensitive Information

The following have been held to amount to price-sensitive information:

• knowledge of an impending takeover bid;
• knowledge of an offer for the purchase of shares at a higher price;
• knowledge that a cash call is contemplated;
• knowledge of a proposed reduction in the corporation's dividend;
• knowledge of sharp fluctuations in the company's earnings;
• knowledge that the company is facing a financial crisis;
• knowledge of the date on which suspension of the company will be lifted;
• knowledge of the year-end results of a company; and
• knowledge of the impending resignation of a director.

Matters requiring disclosure under the SES Listing Manual will probably be construed by the courts as being price sensitive.

When does Price-Sensitive Information Become Generally Available?

• Formal announcements.
• Press reports.
• Documents filed in court or with the Registry of Companies and Businesses.
• Disclosure through mechanism of stock exchange.

Section 103(2), SIA: Indirect Insider Trading

Six elements of the offence:

• the person in question was an insider at the material time;
• he was in possession of price-sensitive information;
• he obtained the information by virtue of his position as an insider;
• the information related to transactions (actual or proposed) between his corporation and another corporation, or to dealings by his corporation in another corporation's securities;
• the information was not generally available; and
• he dealt in the securities of the other corporation.

Section 103(3), SIA: Tippees

In order for a tippee to be guilty of an offence, four things must be proven:

• he obtained price-sensitive information directly or indirectly from another person;
• he was aware, or ought reasonably to have been aware, of facts or circumstances by virtue of which that other person was precluded from dealing in the securities in question;
• he was 'associated' with that person at the time or had an arrangement with him for the communication of price sensitive information with a view to dealing in securities by himself or that other person or either of them; and
• he dealt in the securities of the corporation to which the information related.

Insider Trading by Corporations

In Hooker Investments Pty Ltd v Baring Bros Halkerston & Partners Securities Ltd (1986) 10 ACLR 524, it was held that the only way a body corporate could be guilty of an offence under s 103 was if it fell within s 103(6).

Section 103(7), SIA, provides a defence where a 'Chinese wall' has been set up between the officers who are in possession of price-sensitive information and those who take the decision to deal in securities. The onus of proof of the existence of a Chinese wall lies on the accused company.

Section 103, SIA: (Additional Observations)

• A director who uses insider information for his own benefit breaches his fiduciary duty to the company, in contravention of s 157 of the Companies Act (Cap 50, 1994 Ed) and is liable to account for the proceeds: Keygrowth Ltd v Mitchell (1990) 3 ACSR 476.
• A transaction entered into by an insider (or his associates) in breach of s 103, SIA, would be illegal and a court will not enforce such a transaction: Chase Manhattan Equities Ltd v Goodman [1991] BCLC 897. Such contracts may be avoided at the instance of the purchaser: per the majority in Singh v Crofter (1992) 10 ACLC 1365 at 1368.
• Further, by virtue of s 114(1), SIA, the court has discretionary powers to grant injunctive relief to restrain any transaction which would contravene s 103, SIA.

Civil Penalties for Insider Dealing

• With effect from 3 March 2000, the insider trading laws have been buttressed through the introduction of civil penalties for insider trading. The Monetary Authority of Singapore ('MAS') may, with the consent of the Attorney General, bring an action in court against the wrongdoer to seek an order for a civil penalty in respect of the contravention: s 104A(1), SIA.
• The burden of proving the contravention is on a balance of probabilities (ie the civil standard of proof). If so satisfied, the court is empowered by virtue of s 104A(3), SIA, to order payment of a civil penalty of a sum:

1. not exceeding three times the amount of profit gained by the wrongdoer/loss avoided by the wrongdoer; or
2. $50,000 for an individual or $100,000 for a corporation,

whichever is the greater.

• A civil penalty imposed under s 104A, SIA, is payable to MAS and may be sued on and recovered as a judgment debt: s 104A(4) and (5), SIA.
• The civil penalty action created by s 104A, SIA, will be time-barred six years from the date of contravention of s 103, SIA: s 104B(1), SIA. Such an action will also be automatically stayed if criminal proceedings have been taken against the insider and thereafter, may only be continued if there is a discharge not amounting to an acquittal or there is a withdrawal of the charge in respect of that contravention: s 104B(3), SIA.

Civil Liability for Insider Dealing

• An insider who has not been convicted/penalised does not thereby escape civil liabilities to persons who have suffered loss by reason of contemporaneous dealing in the securities subject to the contravention. Such persons who suffer loss by either buying/selling the securities from the insider dealing in securities subject to the contravention have locus standi to recover for such losses by virtue of s 104C(1), SIA. Section 104C(1)(b), SIA, paves the way for such claimants to recover losses computed as the difference between the price at which the securities were dealt with in the contemporaneous dealing and the notional price at which the securities would have been dealt in but for the contravention.
• The insider is liable for the full extent of such loss suffered by the claimant up to the 'maximum recoverable amount' (s 104C(2), SIA), ie the amount of profit gained by the insider/amount of loss avoided as a result of the contravention, after deducting all previous amounts of court-ordered compensation to other claimants under
  s 104C, SIA, arising out of the same contravention.
• Like the provisions on the civil penalty, the limitation period is six years from the date of completion of the contemporaneous dealing in which the loss occurred:
  s 104C(3), SIA. Leave of court is required to bring such a civil claim where either criminal proceedings under s 104, SIA, or a civil penalty claim under s 104A has been brought against the insider: s 104D(1), SIA. Pending civil actions will be stayed upon the institution of such criminal/penalty proceedings: s 104D(2), SIA. The reason for this is that a statutory recourse is available to the court ordering the conviction/penalty to fix a date for claimants to file and prove their claims for compensation in respect of that contravention and make consequential orders of payment to such claimants by the insider: s 104E, SIA.
• The District Court has been conferred with jurisdiction to hear and determine a civil penalty action or a civil claim for insider dealing even if the amounts exceed S$250,000: see s 104F, SIA.

General Penalties

• Individuals contravening securities regulations in Part IX of the SIA are liable on conviction to a fine not exceeding $250,000 or to imprisonment for a term not exceeding seven years or to both. Companies face a fine not exceeding $500,000: s 104(1), SIA.
• Interestingly, Australia has accepted that a heavy fine is not always appropriate in the case of a corporation, as the burden of loss would fall not on the guilty officers but on the innocent shareholders of the corporation: see R v Wattle Gully Gold Mines NL (1980) 4 ACLR 959. It is uncertain whether the Singapore courts will adopt this reasoning.
• It is also significant to note that by virtue of s 111, SIA, 'where a body corporate is guilty of an offence under [the SIA], any director, executive officer, secretary, or employee of the body corporate who was, in any way, by act or omission, directly or indirectly, knowingly concerned in, or a party to, the commission of the offence shall also be guilty of that offence'.

Remedies

Presently, quite apart from civil redress for insider dealing, the courts are also empowered to order convicted persons to pay compensation to a victim of the offence. Section 105(1), SIA, allows

any person who, is convicted of an offence under s 104 for a contravention of any provision of [Part IX] other than s 103 [to] be liable to pay compensation to any person who, in a transaction for the purchase or sale of securities entered into with [the convicted person] or with a person acting for or on his behalf, suffers loss by reason of the difference between the price at which the securities were dealt in in that transaction and the price at which they would have been likely to have been dealt in in such a transaction at the time when the first-mentioned transaction took place if the contravention had not occurred.

Three observations may be made about this remedy:

• The amount of compensation recoverable is 'the amount of the loss sustained by the person claiming the compensation': s 105(2), SIA.
• An action for recovery of a loss cannot be started after the expiry of two years from the date of completion of the transaction in which the loss occurred: s 105(3), SIA.
• The statutory remedy is without prejudice to any other liability that a convicted person may incur: s 105(4), SIA.

A Glimpse at Future Legislative Innovations

A draft Securities and Futures Act 2001 ('SFA') (subject to changes and review by the Attorney General's Chambers before being presented to Parliament) has been issued by MAS on 21 March 2001. The introduction to the Consultation Document states that 'The impetus for the [SFA] is the introduction of structural policy reforms in the supervision of Singapore's capital markets which would require a substantial rewriting of our existing laws.' The intended omnibus legislation promises to reform the regulation of Singapore's capital markets and seeks to consolidate and rationalise the provisions in the SIA and the Futures Trading Act.

Among others, the SFA aims to 'extend the civil fine/civil remedy regime which is presently available only for insider trading to other forms of market misconduct - market rigging, market manipulation, the publishing of false or misleading information and the employment of fraud and deceit in dealing. This will complement the present framework of criminal offences for such misconduct.' The Business Times, 11 November 2000, reported on this objective of the SFA as follows: 'Through US-style class action suits, aggrieved investors could then sue for compensation by riding on the coat-tails of a criminal conviction or a successful civil penalty action by the MAS.'

Information-Connected Approach in Insider Trading

The SFA will also redefine our present law on insider trading. According to Part 10, para 1 of the Consultation Document on The Securities and Futures Act 2001 ('the Document'), 'The present provisions are based on the defendant's connection with the company. Further, the present provisions make only the insider and the tippee (a person acting in concert with the insider) liable for insider trading. There is difficulty in extending liability to others who are further down the information chain, but who knowingly possess inside information and trade on it.'

Further, 'The new insider trading provisions in the draft SFA will no longer depend on the proof of a person's connection with the company. The test instead will shift to the core essence of the offence, ie trading while in possession of undisclosed market-sensitive information by the defendant, irrespective of his connection with the company. The scope of insider trading would therefore not just be restricted to the insider and the tippee, but to all persons who knowingly possess inside information, and who trade on it.' (Part 10, para 2 of the Document.)

Mental Intent Test

According to the Document, the new provisions will also tighten the mens rea (mental intent) test for directors and connected persons. 'Once it has been proven that they have actual or constructive knowledge of the fact of the inside information, they would be deemed to know that the information in their possession is undisclosed and is price sensitive, but this would be a rebuttable presumption.' (Part 10, para 3 of the Document.)

Conclusion

The future for securities is in the Securities and Futures Act. The reforms heralded by the draft Securities and Futures Act 2001 issued on 21 March 2001 can only inspire greater confidence among investors in Singapore's capital markets. Legal practitioners too eagerly await the restructuring of the existing securities law and its satellite provisions, which undoubtedly deserves a detailed treatment in its own right at a future stage.

Gregory Vijayendran
Wong Partnership