It does not pay to manipulate the stock market

24 September 2018 | Applicable law: Singapore

Manipulating the stock market can be done in a variety of manners, and the law has sought to identify and curb stock market manipulation by prohibiting certain actions.

Sections 196 to 201 of the Securities and Futures Act (Cap. 289) (SFA) target persons who manipulate the stock market by methods such as false trading, market rigging, market manipulation, making false or misleading statements or fraudulently inducing people to deal in securities. These methods can all be classified as Stock Market Manipulation.

Types of stock market manipulation

False Trading and Market Rigging (Section 197 SFA)

False trading and market rigging are acts where a person creates a false impression to the volume of trades done on the securities exchange. This can be done by placing matching orders of buys and sells, where the ultimate owner of the securities remains the same. For example, a person can sell a certain number of shares, and appoint his company or employees to buy back those shares. Another method could be where two or more parties place matching buy and sell orders.

Market manipulation (Section 198 SFA)

Market manipulation is when a person carries out transactions in the securities of a corporation which have the effect of raising, decreasing or maintaining the price of securities, with the intention to induce other persons to subscribe, purchase or sell those securities.

Dissemination of misleading information (Section 199 SFA)

These are acts where the prices of shares are affected by the dissemination of favourable or unfavourable information likely to induce the subscription, sale or purchase of shares by other people, or raise, lower or maintain the market price of shares.

Fraudulently inducing persons to deal in securities (Section 200 SFA)

These are acts where a person publishes any statement, promise or forecast that he knows or reasonably ought to know to be misleading, false or deceptive. They can be by:

  • Any dishonest concealment of material facts;
  • Recklessly making or publishing of any statement, promise or forecast that is misleading, false or deceptive; or
  • Recording or storing in, or by means of, any mechanical, electronic or other device information that he knows to be false or misleading in a material particular, and as a result, induces or attempts to induce, another to deal in the shares.

Employment of manipulative and deceptive device (Section 201 SFA)

This section has been designed as a catch-all section to prohibit any form of stock market manipulation that has not been dealt with in above-mentioned sections. The prohibited actions include:

  • Employing any device, scheme or artifice to defraud;
  • Engaging in any act, practice or course of business which operates as a fraud or deception, or
  • Acts likely to operate as a fraud or deception, upon any person;
  • Making any statement the person knows to be false in a material particular; or
  • 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.

Penalties for manipulating the stock market

There are both civil and criminal penalties for manipulating the stock market. Civil penalties include:

a) A fine not exceeding S$250,000 or to imprisonment for a term not exceeding seven years or to both; or

b) Payment of a civil penalty under section 232 by a court order; or

c) An agreement with the Monetary Authority of Singapore (MAS) to pay, with or without admission of liability, a civil penalty under section 232(5).

Singapore cases on stock market manipulation

In the case of Public Prosecutor v Ng Sae Kiat and Ors [2015] SGHC 191, the four defendants faced multiple charges under Section 201(b) of the SFA. The defendants were employed by Philip Securities Pte Ltd as Contract for Differences Hedgers and dealt in Contract for Differences (CFDs), which are over-the-counter trading instruments that allow an investor to make profits on price movements of securities listed on selected stock exchanges without having to own them. The respondents were given discretionary powers and could act on behalf of Philip Securities in accepting or rejecting CFD trades. The fraudulent transactions involved buying overpriced CFDs and/or selling discounted CFDs. These trades were transacted with nominee accounts under the names of their friends and relatives. The defendants pleaded guilty to the charges and all four received total fines ranging between S$60,000 and S$140,000 depending on factors such as the number of charges involved, the number of transactions, and the amount of losses caused.

The Prosecution appealed to the High Court, arguing for custodial sentences to be imposed. The High Court however upheld the fines imposed by the District Court. While the High Court stated that it was neither possible nor desirable to lay down a bright line rule as to when the custodial threshold would be crossed in respect of a Section 201(b) offence, they also commented that the following non-exhaustive list of factors would be useful in ascertaining whether the custodial threshold was crossed.

a) The extent of the loss/damage caused to victim(s);

b) Sophistication of the fraud;

c) The frequency and duration of the offender's unauthorised use of the relevant account;

d) Extent of distortion, if any, to the operation of the financial market;

e) The identity of the defrauded party (ie, whether the defrauded party is a public investor or a securities firm);

f) Relationship between the offender and the defrauded party; and

g) The offender's breach of any duty of fidelity that may be owed to the defrauded party.

Apart from criminal proceedings, the Singapore authorities have also taken out civil penalty actions against individuals. Under Section 232 of the SFA, MAS may enter into agreements with any person for that person to pay, with or without admissions of liability, a civil penalty which may be up to three times the amount of profit gained or loss avoided by that person as a result of the contravention.

In 2015, MAS took out a civil penalty action against Tan Hua Ann. Tan, then a remisier with UOB Kay Hian Private Limited, had entered a false sell order during the pre-open phase before the beginning of the trading day. He made personal gains of S$62,723 from the false trading. He was ordered to pay MAS S$157,000, without court action, and was also slapped with a prohibition order under Section 101A(2)(a) of the SFA, prohibiting him from conducting business in any regulated activity under the SFA or acting as a representative in respect of any regulated activity under the SFA; and from taking part in the management of any holder of a capital market services licence or any person exempt from holding a capital market services licence under section 99(1) of the SFA in Singapore, for a period of two years.


Recent cases show that the authorities will not hesitate to take criminal or civil action against anyone who manipulates the market, even if they attempt to argue that they are under instructions to do so or did not profit personally. Individuals should be placed under notice not to pursue such actions under any circumstances.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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