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Fund Manager Appeals Singapore’s First Civil Stock-Rigging Case

Fund Manager Appeals Singapore Civil Stock-Rigging Case
Chief Executive Officer Tan Chong Koay, seen here in a 2006 file photo, and Pheim bought almost 90 percent of the traded shares of United Envirotech Ltd. from Dec. 29 to Dec. 31, 2004. Photographer: Munshi Ahmed/Bloomberg

Dec. 23 (Bloomberg) -- Pheim Asset Management Sdn. and its Chief Executive Officer Tan Chong Koay, appealed a Singapore High Court ruling that they’d manipulated the shares of a listed company in the country’s first civil stock-rigging lawsuit.

“If left to stand, the decision would either serve to curtail genuine market activity by the timorous or to set a penal trap for the unwary,” they said in their appeal filed Dec. 21 at the Singapore High Court.

Tan and Pheim bought almost 90 percent of the traded shares of United Envirotech Ltd. from Dec. 29 to Dec. 31, 2004. The shares rose 17 percent over the three trading days and helped raise the net asset value of the fund management firm’s accounts, triggering bonuses of S$50,790 ($38,866) and a management fee of S$115. Justice Lai Siu Chiu said the gain sought by Pheim and Tan wasn’t monetary, in ruling they manipulated the stock.

Tan and his Malaysian fund management company were fined S$250,000 each. The Monetary Authority of Singapore sought a fine of S$1 million for each.

Pheim “is a value investor,” the company and Tan said in their appeal. “Pheim is also a contrarian investor -- buying when others are selling and selling when others are buying.”

The Monetary Authority has no evidence to prove Pheim and Tan had any other intention but to buy undervalued shares, they said in the 212 pages of court documents filed to back the appeal.

“There was in fact no other intention,” they said.

‘Good Investment’

Pheim expected shares of companies in the water treatment sector to rise since 2001, according to the filing. United Envirotech shares were overlooked and deemed to be a good investment, Pheim said in its appeal.

Singapore, which expanded its fund management industry to a record S$1.2 trillion at the end of 2009, has vowed to clamp down on market abuse. The central bank, which won the city’s first civil lawsuits for stock rigging and insider trading this year tightened the rules for financial institutions in reporting employee misconduct.

“Such offenses undermine the effectiveness and efficiency of the securities market and are often insidious and difficult to detect,” Lai said.

Tan, who founded Pheim Group, was in 2002 named one of five successful Singapore-based boutique fund managers by the Government of Singapore Investment Corp..

Tan has offices in Singapore and Malaysia. He had said, jokingly, in August 2006 that Pheim, which manages about $1 billion, was a made-up word which means Please Help Everyone Invest Money.

Tan and Pheim “would not have risked their livelihood and business by seeking to manipulate” the stock knowing that any unusual trading activities would be tracked by the financial regulator, according to their appeal.

The case is Pheim Asset Management Sdn Bhd. v Monetary Authority of Singapore, CA186/2010 in the Singapore High Court.

-- Editors: Joe Schneider, Douglas Wong

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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