New Spore: GIC employs officers convicted of insider trading

GIC employs officers convicted of insider trading

February 23rd, 2014 |  Author: Editorial

A reader has written in to let TRE know of a case where GIC officers caught for insider trading were allowed to continue to work in GIC.

GIC is among the world’s largest fund management companies. It was established in 1981 to manage Singapore’s foreign reserves.

The insider trading case involved 3 GIC staff in 2003: Lim Kee Chong, Teng Cheong Thye and Choo Yong Cheen. The case surfaced in 2004 and was reported by international media when the Financial Services Agency (FSA) and the Securities and Exchange Surveillance Commission (SESC) of Japan reported the matter to the central bank of Japan.

The Associated Press reported the incident on 21 October 2004 [Link]:

Singapore’s central bank said Thursday it has fined three employees of the government’s secretive investment fund for insider trading involving shares of a Japanese financial company.

Lim Kee Chong, Teng Cheong Thye and Choo Yong Cheen were fined a total of 710,000 Singapore dollars (US$422,700; euro 346,000) for the offense, the Monetary Authority of Singapore said in a statement.

The employees of the Government of Singapore Investment Corp., or GIC, sold the shares of Sumitomo Mitsui Financial Group Inc. last year after obtaining confidential information that the company planned to issue new shares, the statement said.

When news of the issue was made public, investors sold the stock due to fears that the additional supply would reduce the value of Sumitomo Mitsui’s existing shares. By selling the shares before the announcement, the employees avoided a loss of S$710,000 for the GIC – the same amount they were fined.

Singapore’s Securities and Futures Act imposes fines of up to three times the profit – or loss avoided – from insider trading. The GIC wasn’t penalized and the employees will not face criminal charges, the statement said.

TRE was not able to find the said statement on the Monetary Authority of Singapore’s (MAS) website anymore. However, we were able to find an old statement on FSA’s website.

FSA is a Japanese government organisation responsible for overseeing banking, securities and exchange, and insurance in order to ensure the stability of the financial system of Japan. The agency operates with a commissioner and reports to the Minister of Finance. It also oversees the Securities and Exchange Surveillance Commission (SESC) and, the Certified Public Accountants and Auditing Oversight Board.

According to the 2004 statement on FSA’s website [Link], the 3 GIC staff were guilty of “insider trading involving Japanese securities market”. The kind of insider trading committed is “cross border transaction” which is a transaction in the Japanese securities market by a foreign resident.

FSA further said, “The enforcement action by MAS has come as a result of our request of investigation into and providing information of a suspicious case of insider trading, which was detected by the Securities and Exchange Surveillance Commission of Japan (SESC), based on the bilateral Memorandum of Understanding (MOU) with MAS on the sharing of information on securities matters.”

TRE has screen-captured an excerpt of the statement (below):

The TRE reader said:

The leader, Mr Lim Kee Chong, settled the civil suit against him. Two others, Teng Cheong Thye and Choo Yong Cheen, were also found guilty in the civil suit then. They accepted the civil suit and were fined various amounts and were also suspended from work.

They remained in GIC. Teng left GIC in late 2012. Both Lim and Choo are Managing Directors of GIC now. In fact, Lim is the Group Deputy Chief Investment Officer.

A check of GIC’s website [Link] by TRE confirmed this. Indeed, Lim Kee Chong is now GIC’s Deputy Group Chief Investment Officer:

Choo Yong Cheen is part of GIC Investment Groups (Special Investments). He is currently in charge of direct investments in Asia as well as funds and co-investments in Asia and the emerging markets:

The TRE reader added:

Based on MAS’s Guidelines on Fit and Proper Criteria (revised on 7 August 2012), one of the factors that is relevant to the assessment of the honesty, integrity and reputation of a relevant person is found in clause 13(i) of the Guidelines: whether any civil penalty enforcement action has been taken against it or him by MAS or any other regulatory authority under any law in any jurisdiction.

He then asked the following questions:

Have Lim and the other two been subjected to the same standards of test that I am told every financial industry practitioner is put through?

If not, why?

If so, does it mean they were wrongly punished by the 2003 civil penalty?

In fact, further checks by TRE reveal that Deputy Group Chief Investment Officer Lim Kee Chong’s name is in the industry-related sanction list of the US-based CFA Institute.

CFA Institute [Link] is a prestigious, non-profit, association of investment professionals from over 100 countries worldwide. The organization offers the Chartered Financial Analyst (CFA) designation, the Certificate in Investment Performance Measurement (CIPM) designation, as well as the Claritas Investment Certificate.

On its website, CFA Institute has a section which lists individuals who, since 1 January 2000, are currently serving public disciplinary sanctions for violations of the CFA Institute Code of Ethics and Standards of Professional Conduct or who have resigned their memberships while under investigation for industry-related misconduct.

Public sanctions for industry-related conduct include the following [Link]:

Censure

Suspension from the CFA Program

Suspension of membership

Suspension of the right to use the CFA designation

Permanent prohibition/suspension from the CFA Program

Revocation of membership

Revocation of the right to use the CFA designation

Summary suspension

In the case of Lim Kee Chong, CFA Institute conducted its own hearing in 2010 and found Lim to have violated the CFA Institute Code of Ethics and Standards of Professional Conduct with regard to the 2003 insider trading incident. This was later affirmed by another review panel in 2011. This is what CFA Institute said of Lim:

It is not known if Lim voluntarily disclosed his past insider trading case to CFA Institute in 2010 or the CFA Institute found out about it 7 years later.

It is also not known if the MAS knows that CFA Institute heard Lim Kee Chong’s case in 2010 and blacklisted him subsequently, 7 years after the insider trading incident.