Published April 16, 2009

MAS takes insider trading case to court

But ex-employee of WBL denies any wrongdoing

By LYNETTE KHOO

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(SINGAPORE) In the first civil suit it has ever filed, the Monetary Authority of Singapore (MAS) is suing a former employee of WBL Corporation for alleged insider trading.

Affidavits have been exchanged and filed in court and hearings are expected next month.

This is the first time MAS is acting as the plaintiff in a lawsuit. Previous cases have seen fines imposed without court action after the individuals admitted to the civil penalty liability for contravening the Securities Futures Act (SFA).

Kevin Lew Chee Fai, former general manager of enterprise risk management at WBL, has denied any breach. According to court documents, Mr Lew sold a total of 90,000 WBL shares at $4.98 per share on July 4, 2007.

But he was said to be informed about the internal forecasts of WBL's financial results for the third quarter of its fiscal 2007 results ended June 30, 2007 at a group management council meeting two days before on July 2, 2007. The group was projecting a quarterly net loss and impairment costs on its Thai subsidiary Wearnes Precision Thailand Ltd (WPT).

Lawyers for MAS allege that Mr Lew was advised by the company secretary/head of legal and compliance of WBL after the meeting that the information was price sensitive and he should not trade in WBL shares.

One month later on Aug 14, WBL announced a third-quarter net loss of $27.3 million, adversely affected by impairment of $26.6 million on assets relating to its precision manufacturing business in Thailand.

'The defendant's contravention of section 218(2a) of the SFA resulted in his avoiding a loss of approximately $27,000,' MAS lawyers say in the statement of claim.

Section 218(2a) of the SFA prohibits a person who is in possession of confidential price-sensitive information concerning a corporation (to which he is connected) from trading securities of that corporation.

But the defendant's lawyers assert that the defendant has 'genuinely, reasonably and honestly believed that the information would not have a material effect on the price or value of WBL shares'.

They say in the statement of defence that the financial forecast was 'extremely preliminary and could not be reasonably relied on as all the subsidiaries of WBL were still preparing their accounts for the month of June 2007'.

Also, the impairment of $26.6 million was not expected or foreseeable by the defendant as problems of WPT were not discussed at length at earlier meetings and the defendant was not part of the team that knew all the relevant and material facts about WPT, they add.

Mr Lew's lawyers claim that the defendant sold his shares to raise funds to exercise his WBL share options.

Drew & Napier is acting for MAS while Mr Lew is represented by TSMP Law Corporation.

Since the civil penalty regime was introduced into the SFA in 2004 to complement criminal sanctions and provide a nuanced approach to market misconduct, MAS has enforced civil penalty liabilities for 16 times without court action.

The last enforcement action was taken against Chu Chwee Tiak for insider trading of shares in See Hup Seng Ltd (SHS). He was fined $50,000 for profiting from buying SHS shares a few days before SHS announced that it was buying a company from CT Holdings Pte Ltd, where he was director and shareholder.