5 Things You Need to Know about Insider Trading

Last updated on December 20, 2018

Intrigued about insider trading through watching American movies like “Wolf of Wall Street”, “Wall Street” and “Boiler Room”? Here are 5 things you need to know about insider trading in Singapore.

1. What is Insider Trading?

Insider trading is the process of intentionally trading upon proprietary, non-public information concerning a firm’s future by a corporate official or another party in possession of the non-public information.

In “traditional” insider trading cases, it involves a company officer like the director, the chief financial officer (CFO) or the company secretary misappropriating non-public information to trade on the company’s shares for their own benefit or to avoid some detriment.

In non-traditional cases, it involves a secondary party to the non-public information. Persons like a spouse of the key company officer, a stockbroker who accidentally received non-public information or a waiter who overheard discussion on the company’s non-public information might be found liable for breaching insider trading laws if they acted upon the non-public information.

2. There is Divided Opinion on Criminalising Insider Trading

Some have argued against criminalising insider trading on the basis that there are no victims to insider trading and that the market is not harmed.

Supporters of insider trading regulations argue that it goes against market fairness because it privileges some investors in the company over others who do not possess such exclusive information on the company in question.

The contrasting views towards insider trading was highlighted by the Court of Appeal in Lew Chee Fai Kevin v Monetary Authority of Singapore [2012] SGCA 12 where the Court recognised that there are two contrasting theories on insider trading:

  1. An equal access theory that adopts a strict approach towards insider trading; and
  2. A “market efficiency” theory that adopts a more benevolent approach towards insider trading.

3. Singapore Adopts an “Information-Connected” Approach to Combat Insider Trading

Singapore adopts an “information-connected” approach towards combating insider trading.

Under the “information-connected” approach, liability is found through identifying what constitutes as insider information. This is in contrast to the previous “person-connected” approach that focused on establishing the link between the information and the insider.

The “information-connected” approach adopted by Singapore makes it easier for enforcement because the authorities need not establish the links between the insider (non-public) information and the person who possess it.

This is especially important for prosecuting “outsiders” of the company who gained access to such inside information.

4. The Offence of Insider Trading is punishable under the Securities and Futures Act (SFA)

The offence of insider trading is set out under section 218 of the Securities and Futures Act (SFA). For a breach of section 218 of the SFA to be made out, it needs to be established that the person:

  1. Is a “person who is connected to a corporation”;
  2. Possesses “information concerning that corporation”;
  3. The information is not “generally available”;
  4. A reasonable person would, if that information were generally available, expect it to have a “material effect on the price or value of securities of that corporation”;
  5. The connected person knows or ought reasonably to know that the information is not generally available; and
  6. The connected person knows or ought reasonably to know that if the information were generally available, it might have a material effect on the price or value of those securities of that corporation.

Once all these limbs are satisfied, a person would be found liable for breaching section 218 of the SFA.

5. There is a Civil and a Criminal Regime for Punishing Insider Trading

Not all perpetrators of insider trading will be imprisoned. The SFA provides for civil and criminal penalties to punish insider trading.

Under section 232(1) of the SFA, the Monetary Authority of Singapore (MAS) can take up a civil penalty action against the wrongdoer with the concurrence of the Public Prosecutor. The court may order the payment of a sum three times of the amount of profit gained or loss avoided as a result of the wrongdoer’s act.

If the wrongdoer did not make any profit or suffered any loss as a result of his act, then the court may order the wrongdoer to pay a penalty sum between S$50,000 to S$2 million.

Criminal penalties in respect of a breach of section 218 of the SFA is provided for under section 221 of the SFA. A natural person may be fined up to S$250,000 or sentenced to imprisonment for up to 7 years or to both.

Section 333 of the SFA provides for a corporation to be fined up to twice the maximum amount prescribed for the relevant offence. When the company is found liable for offences under the SFA, the director, executive officer, secretary or similar officer of the company who knew of the transaction or is a party to the transaction shall also be guilty of the offence.

It is also important to note that once a wrongdoer has been penalised under the civil regime, he is not to be punished again under the criminal regime.

The standard of proof is also different between the civil and criminal regime in that the Prosecution is required to prove on a balance of probabilities in a civil action in contrast to a prove beyond reasonable doubt for a criminal prosecution.

If you are concerned that you might be in breach of insider trading laws, you can consult a criminal lawyer to seek advice on how you can comply with the law.

Arrest and Investigation
  1. Police Investigation Process in Singapore
  2. Arrest Warrant Issued Against You in Singapore: What to Do
  3. Police Arrest Procedure in Singapore
  4. Arrestable and Non-Arrestable Offences in Singapore
  5. What Should You Do If You Witness a Crime in Singapore?
  6. Can the Public Make a Citizen's Arrest in Singapore?
  7. What to Do If You’re Being Investigated for a Criminal Offence in Singapore
  8. "Right to Remain Silent" to Singapore Police: Does It Exist?
  9. Police Custody in Singapore: What You Should Know
  10. Search Warrant: The Issuance and Execution of It in Singapore
  11. Is Lying to the Police or Authorities an Offence in Singapore?
  12. Can You Say No to a Lie Detector Test in Singapore? And Other FAQs
  13. Surrender of Passport to the Police and How to Get It Back
  14. Extradition: What If I Flee After Committing Crime in Singapore
Bail
  1. The Essential Guide to Bail and Personal Bonds in Singapore
Prosecution
  1. What is Private Prosecution?
  2. Magistrate’s Complaints, Private Summons and Private Prosecutions in Singapore
  3. Prosecutorial Discretion in Singapore
  4. Compounding or Composition of Offences in Singapore
  5. Plea Bargaining in Singapore: All You Need to Know
During Criminal Proceedings
  1. Can I Represent Myself in a Criminal Court Case in Singapore and How?
  2. Claiming Trial as an Accused
  3. Pleading Guilty in Singapore: Consequences & Withdrawal of Plea
  4. The Defence of Unsound Mind in Singapore: What is It?
  5. Gag Orders in Singapore: Whose Identity Can be Protected?
  6. Mitigation Plea: How to Plead for Leniency in Court in Singapore
After Criminal Proceedings
  1. Guide to Filing a Criminal Appeal in Singapore
  2. Criminal Motion: What is It and How to File One in Singapore
  3. Guide to Filing a Criminal Revision in Singapore
  4. Presidential Clemency in Singapore
  5. Repatriation or Deportation from Singapore: How Does It Work?
  6. Criminal Records in Singapore
  7. Visiting a Loved One in Prison or On Death Row in Singapore
  8. Getting Parole (Early Prison Release) in Singapore
Types of Orders After Committing an Offence
  1. Consequences of Receiving a Stern Warning in Singapore
  2. Probation: Eligibility and Whether It Leaves a Criminal Record
  3. How Can Adult Offenders Get Probation in Singapore?
  4. Reformative Training in Singapore: When Will It be Ordered?
  5. Are You Eligible for a Mandatory Treatment Order (MTO)?
  6. Caning in Singapore: Judicial, School & Parental Corporal Punishment
  7. 7 Detention Orders in Singapore: When Will They be Ordered?
  8. Day Reporting Order: Eligibility and Offender's Obligations
Being a Victim
  1. Using Your Right to Self-Defence When Attacked in Singapore
  2. Compensation for Crime Victims in Singapore: How to Obtain
Offences Against the Human Body
  1. Voluntarily Causing Hurt Penalties in Singapore (Non-Arrestable)
  2. Murder vs Culpable Homicide in Singapore (and Penalties)
  3. Is Suicide Illegal in Singapore? Will I Be Punished for Trying?
  4. Kidnapping Scam: Penalties & Responding to a ‘Kidnap Call/Text'
Sexual Offences
  1. Legal Age for Sex in Singapore and Common Sexual Offences
  2. Consent in Sexual Offences in Singapore and What Victims Can Do
  3. Accused of Molest: Outrage of Modesty in Singapore
  4. What Can Victims of Sexual Harassment in Singapore Do?
  5. What is the Law on Sexting in Singapore?
  6. Revenge Porn: What If Your Nudes are Leaked in Singapore?
  7. Crime of Voyeurism in Singapore (Penalties and Defences)
  8. Date Rape: What to Do If Your Drink Has Been Unlawfully Spiked?
  9. STDs: Can I Go to the Police If a Partner Infected Me in Singapore?
Vice-Related Offences
  1. Singapore's Legal Smoking Age & Common Smoking Offences
  2. Is Vaping Illegal in Singapore?
  3. Legal Drinking Age and Drinking-Related Laws in Singapore
  4. Is Watching, Downloading or Filming Porn Illegal in Singapore?
  5. Child Pornography in Singapore: Offences and Penalties
  6. Is it illegal to visit prostitutes in Singapore?
  7. Singapore's Drug Laws: Possession, Consumption and Trafficking
  8. Gambling Legally (In Public or Online) in Singapore
  9. The Offence of Human Trafficking in Singapore and Its Penalties
Cybercrime
  1. Penalties for Cheating/Scamming and What Victims Can Do
  2. Penalties for Impersonating Someone and Victim Redress
  3. Singapore Fake News Laws: Guide to POFMA (Protection from Online Falsehoods and Manipulation Act)
  4. Laws and Penalties for Doxxing in Singapore (With Examples)
White-Collar Crimes
  1. Criminal Breach of Trust (CBT) in Singapore: What is It?
  2. All You Need to Know About Corruption in Singapore
  3. Anti-Money Laundering Laws and You
  4. 5 Things You Need to Know about Insider Trading
  5. Dishonest assistance and knowing receipt - The case of David Rasif
Road Offences
  1. Charged with a Traffic Offence in Singapore: What to Do
  2. DUI: Here are the Penalties for Drink-Driving in Singapore
  3. What Happens If You’re Caught Speeding in Singapore?
  4. Road Rage: What is It and How are Offenders Sentenced in Singapore
  5. Penalties for Dangerous Driving for Singapore Drivers
  6. Fatal Traffic Accidents: Are Drivers Always Punished?
  7. Guide to E-Scooter and PMD Laws for Singapore Riders
  8. Is it Legal for Drivers to Carpool in Singapore?
Animal-Related Offences
  1. Is it illegal to feed stray animals in Singapore?
  2. Singapore Animal Abuse Offences, Penalties & How to Report
Offences Relating to Public Peace and Good Order
  1. Public Assemblies and Processions in Singapore: Police Permits and the Public Order Act
  2. Misbehaving in Public: 5 Things You Need to Know
  3. Racial Enmity: Sections 298 and 298A Penal Code Explained
  4. Religious Cults in Singapore: Are they Illegal? Penalties & More
  5. Penalties for Financing Terrorist Operations in Singapore
Certificate of Clearance
  1. How Do You Apply for a Certificate of Clearance in Singapore?
Other Criminal Offences
  1. Here are the Penalties for Committing Forgery in Singapore
  2. Penalties for Illegal Immigration and Overstaying in Singapore
  3. Criminal Intimidation: Penalties for Making Threats in Singapore