SINGAPORE: After getting inside information from the chief financial officer of Broadway Industrial Group (BIGL) that two of its businesses would be sold, a woman bought shares for herself and her family ahead of the sale.
As a result, she sold the shares for a profit of about S$77,900 for herself and another S$111,000 for her father, brother and sister-in-law.
Hui Choy Leng, 51, was sentenced to four months’ jail on Friday (Apr 14) for two counts of insider trading under the Securities and Futures Act. Another five charges were taken into consideration.
Hui, also known as Chris, was a friend of the then-chief financial officer of BIGL, 59-year-old Tan Chee Keong. Tan earned between S$200,000 and S$300,000 annually in his role.
BIGL, which manufactures precision-machined components, was listed on the mainboard of the Singapore Exchange Securities Trading Limited (SGX).
THE INTENDED SALE
In 2016, BIGL was intending to sell its foam plastic solutions and flow control device businesses for S$150 million.
On Apr 1, 2016, BIGL’s general counsel told all BIGL employees that the proposed sale was a price-sensitive transaction and asked all staff to refrain from trading BIGL shares.
Tan attended meetings about the sale and knew that BIGL would use the cash received from the sale to repay its debts and pay dividends to shareholders.
He also knew that the move would be perceived as good news by the market and have a positive impact on BIGL’s share price.
Around March 2016, Tan met two of his friends, including Hui. He told them he had plans to revive BIGL assets by restructuring and repacking BIGL’s business, including selling unwanted assets such as its foam plastic business.
He subsequently gave more information and updates to his two friends, who knew this was inside information. They also knew that the sale would have a positive impact on the share price of BIGL.
At his end, Tan knew that a large cash injection into BIGL would have a material and positive impact on BIGL’s share price, and that Hui would likely trade in BIGL shares after receiving the inside information.
Between Jul 11, 2016 and Aug 22, 2016, Hui bought about 2.4 million BIGL shares on six occasions.
SHE BUYS SHARES FOR FAMILY AND HERSELF
She bought 1.1 million shares for her father, 930,000 for herself and 300,000 for her brother and sister-in-law.
She sold all the shares between Sep 23, 2016, and Mar 15, 2017. As a result, she made a total profit of S$188,895, of which S$77,906 was for her own shares.
The Monetary Authority of Singapore (MAS) received information from SGX in December 2016 about suspected insider trading before the announcement BIGL made on the sale of its businesses on Aug 22, 2016.
Hui has since paid S$77,906 to the Account-General’s Department and agreed that the sum would be forfeited to the state.
Deputy Public Prosecutor Eric Hu asked for four months and two weeks’ jail for Hui.
He said insider trading is a very serious offence that affects the integrity of the securities market and is akin to fraud.
Insider trading amounts to cheating the other person in the transaction and is an abuse of corporate confidentiality, he said.
Hui had committed the offences to make a wrongful profit for herself and her family members, and did so on six occasions.
He said the defence argued that Hui was not out to make a killing, but “the fact is, she did”.
“Today she has only disgorged her own profits, whereas her family members have not disgorged any profits,” said Mr Hu.
Disgorgement refers to the act of giving up illegal profits or benefits by legal compulsion.
Hui’s lawyer, Mr Joseph Chai, said his client was remorseful and contrite and has “suffered immensely” in the five years since the offence.
He said Hui did not immediately sell the shares after the announcement was made, and did not make a killing.
He said Hui has always been a law-abiding citizen and that going to jail would keep her away from her daughter, who requires her constantly.
Hui was allowed to begin her jail term on May 2.
Tan received three months and two weeks’ jail in June for his involvement.