The Singapore Stock Exchange (SGX) has reported nine cases of alleged insider trading and market manipulation in the first three months of this year, SGX revealed on Friday (April 22), after news broke that the central bank and white-collar crime police are investigating several brokerages and their trading representatives for potential breaches of the securities law.

DBS Vickers, Maybank Kim Eng, OCBC Securities and Phillip Securities were raided by the Monetary Authority of Singapore (MAS) and Commercial Affairs Department (CAD) earlier this week, The Business Times reported on Friday. Some remisiers were taken away for questioning, along with certain items, the report said.

Several sources told TODAY that a remisier at DBS Vickers was taken away for questioning on Wednesday morning, and released later that day. Reports also said that the authorities also took the mobile phone and laptop of a remisier at OCBC Securities.

A remisier is a self-employed person working in a brokerage. Unlike a stockbroker or dealer, a remisier is not on a brokerage’s payroll, their income is based on commission from their trades. For a fee, a remisier can utilitise the brokerage’s facilities including office space and administrative services.

In response to queries from TODAY, a DBS Vickers spokesperson said: “Based on facts currently available to us, we believe that DBS Vickers is not under investigation.”

Spokespeople for Maybank Kim Eng, OCBC and Phillip Securities declined to comment. When contacted, Mr Jimmy Ho Kwok Hoong, president of The Society of Remisiers (Singapore), said: “Such investigations are a good move before situations go out of control and morph into a crisis.”

The MAS confirmed on Friday that together with the CAD, it is investigating possible contraventions of the Securities and Futures Act and the authorities have obtained documents and items from several broking firms and trading representatives. The MAS declined to provide further details, citing the ongoing investigations.

The Act relates to the regulation of activities and institutions in the securities, futures and derivatives industry, and of clearing facilities.

Separately, the SGX said it had referred three cases of insider trading and six cases of market manipulation to the MAS between January and March. SGX regularly refers case investigations to the MAS, it said, adding that it had referred 11 cases of insider trading and 13 cases of market manipulation to the MAS for the whole of last year. The central bank declined, however, to say if the raids were triggered by SGX’s referrals. “As a matter of policy, MAS does not comment on its supervisory dealings with specific financial institutions,” it said.

Market players TODAY spoke to said insider trading and market manipulation could involve several artificially-created demand and supply scenarios. A “pump and dump” scam, for instance, is a situation where an investor or a group of investors holding a stock artificially inflates the price by releasing positive news that are false or misleading. This boosts demand and the share price for the stock, but when the masterminds sell the shares and make a profit, the price often plummets, leaving other investors stuck with a stock that they bought in at a much higher price.

This scheme, market observers said, is usually targeted at small cap and penny stocks. In 2013, Blumont Group, LionGold and Asiasons Capital surged more than 800 per cent over several months before crashing by more than 90 per cent in an unexplained freefall.

Investigations are still ongoing but the authorities have tightened trading rules in the aftermath of the penny stock crash episode which created immense market volatility, wiping out billions in market value. 

The reverse of a pump and dump scam is a “short and distort” scheme, where investors use a smear campaign to drive down the stock price and make a profit. On the raids earlier this week, a broker requesting anonymity told TODAY: “There is nothing obvious in the market that can be linked to this investigation ... But if four houses are raided at one go, this points to some sort of syndicate. When the market is vibrant, it is not that obvious. But the market has been quite quiet, and they probably did not cover their tracks very well.”

Source:
courtesy of TODAY

by Rumi Hardasmalani & Alison Jenner

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