What Is Insider Trading in Singapore?
Insider trading happens when someone uses confidential, non-public information about a company to buy or sell stocks for their own benefit. This usually involves someone within the company—like a director, CFO, or company secretary—who takes advantage of privileged knowledge.
But it’s not just company insiders who can be held accountable. Even those outside the firm, like a family member, friend, or even a bystander who overhears sensitive information, can be guilty if they act on that knowledge.
Is Insider Trading a Crime? Views Are Split
Not everyone agrees that insider trading should be criminalized. Some argue it doesn’t actually harm anyone or the market, so it shouldn’t be treated as a crime.
Others believe it undermines the fairness of financial markets by giving certain individuals an unfair edge. The Singapore Court of Appeal highlighted this debate in Lew Chee Fai Kevin v MAS (2012), pointing to two competing schools of thought:
- The equal access theory, which supports strict regulation to ensure fairness.
- The market efficiency theory, which takes a more lenient view, suggesting insider trades could reflect more accurate market pricing.
Singapore’s Unique Approach
Singapore follows an “information-connected” approach to regulate insider trading. This method focuses on the nature of the information rather than the person’s role or connection to the company.
This shift makes enforcement more straightforward, especially in cases where outsiders come into possession of insider information and act on it. It removes the need to prove a formal link between the individual and the company.
Legal Rules under the Securities and Futures Act (SFA)
Insider trading laws in Singapore are laid out in Sections 218 and 219 of the SFA.
- Section 218 targets company insiders—like executives or major shareholders—who trade based on confidential, price-sensitive information.
- Section 219 covers outsiders who come across such information and use it improperly.
Section 219(3) also prohibits passing on insider information if it could lead someone else to trade on it.
Real-World Example: In May 2023, Shae Toh Hock was fined $100,000 for sharing insider info about a potential acquisition with his sister. She and her husband used the tip to buy shares before the news went public and were fined $150,000 each.
Two Paths for Punishment: Civil and Criminal
Singapore’s law allows for both civil and criminal penalties when insider trading occurs.
- Civil actions (under Section 232) let the Monetary Authority of Singapore (MAS) seek financial penalties up to three times the gains or losses avoided—or a fixed fine ranging from S$50,000 to S$2 million.
- Criminal charges (under Section 221) can lead to fines up to S$250,000, jail time of up to 7 years, or both. Companies found guilty may face double the fine, and responsible officers can also be prosecuted.
Importantly, a person can’t be punished under both regimes for the same act. And the standard of proof differs: civil cases require a balance of probabilities, while criminal cases require proof beyond a reasonable doubt.