Tan Chong Koay and Pheim Asset Management Sdn, ordered to pay S$250,000 ($207,000) each in Singapore’s first civil lawsuit for market manipulation, failed in their bid to overturn the ruling.
The Monetary Authority of Singapore, which sued Tan and his asset manager Pheim, said the fund manager intended to create a “false and misleading appearance” in the city’s stock market by buying shares of United Envirotech Ltd. (UENV) in the last three trading days of 2004.
The “pattern of trading was not consistent with either the actions of an investor who genuinely believed that UET shares were undervalued or those of a ‘contrarian’ investor,” a panel of three judges including Chief Justice Chan Sek Keong wrote in a 45-page ruling today. Reducing the penalties “would set back MAS’s efforts and objective to promote Singapore as a well- regulated and trusted fund management hub.”
Singapore’s central bank, which has tightened the rules for financial misconduct after the global credit crisis in 2008, has said it won’t tolerate “window dressing” and allow fund managers to think they can get away lightly.
Pheim bought almost 90 percent of the traded shares of United Envirotech from Dec. 29 to Dec. 31, 2004, according to the ruling. The shares climbed 17 percent over the three trading days, triggering bonuses of about S$50,000 and boosting the net value of Pheim’s accounts, allowing them to beat their benchmarks.
Pheim started selling the shares in March 2005 and completely sold them by 2007, according to the ruling.
The Pheim Group, including its Singapore operations, manages about $1.8 billion.
Pheim and Tan, named one of five successful Singapore-based boutique fund managers by the Government of Singapore Investment Corp. in 2002, had denied the stock-rigging claims and said they wouldn’t have risked their livelihood and business. They had a “genuine commercial intent to buy the shares,” Vinodh Coomaraswamy, their lawyer had argued.
The authority was represented by Cavinder Bull.
The case is Tan Chong Koay v. Monetary Authority of Singapore, CA186/2010 in the Singapore Court of Appeal.
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