For corporate executives and traders in Singapore, acting on a tip can quickly cross the line from smart business to a serious crime, carrying up to seven years in prison.
You do not even need to trade yourself to be liable; simply encouraging another person to buy shares can trigger prosecution under the Securities and Futures Act (SFA). With the Monetary Authority of Singapore (MAS) aggressively enforcing extra-territorial reach, assuming you are safe because you traded overseas or through a friend is a dangerous misconception.
To safeguard your reputation and career, you must understand these 19 key facts about the law and your potential defences.
1. What Is Insider Trading?
Insider trading in Singapore involves buying or selling securities while in possession of confidential, price-sensitive information that is not generally available to the public. Under the Securities and Futures Act (SFA), liability is based on the possession of this information, regardless of whether the person is a company insider or an unrelated third party.
In Singapore, insider trading is illegal under the Securities and Futures Act (SFA) 2001. The law applies to both individuals and companies engaging in unlawful trading practices using undisclosed information.
Types Of Insider Trading
- Illegal Insider Trading – Buying or selling securities using confidential, price-sensitive information.
- Legal Insider Trading – When company insiders, such as directors or senior executives, trade shares but disclose their transactions publicly to regulatory authorities.
Understanding the distinction between these two is important, as not all insider trading is unlawful.
2. Is Insider Trading Illegal In Singapore?
Insider trading is strictly prohibited in Singapore as it gives certain individuals an unfair advantage over others in the market. The use of undisclosed, price-sensitive information to trade securities undermines investor confidence and disrupts fair market operations.
Under the SFA, Section 218 prohibits corporate insiders, such as directors and key shareholders, from trading based on non-public, material information.
Similarly, Section 219 extends this prohibition to individuals who are not directly connected to a corporation but have obtained confidential information and used it for trading.
Why Is Insider Trading Prohibited?
- Unfair Advantage: Those with access to confidential corporate information can profit while the general public remains unaware of critical developments.
- Market Manipulation: It interferes with the natural price discovery process, leading to distorted stock prices.
- Erosion of Investor Confidence – Retail and institutional investors may be discouraged from participating in a financial system that appears biased or unfair.
Legal Framework Governing Insider Trading
Singapore has a strict regulatory framework to combat insider trading, primarily enforced by:
- Monetary Authority of Singapore (MAS) – Oversees financial market regulations and ensures compliance with trading laws.
- Commercial Affairs Department (CAD) – Investigates financial crimes, including insider trading, in coordination with MAS.
The Securities and Futures Act (SFA) provides a clear definition of insider trading, sets legal boundaries, and prescribes penalties for offenders.
These regulations help maintain market transparency and fairness, ensuring that all investors operate on equal footing.
3. Penalties For Insider Trading In Singapore
Engaging in insider trading carries serious legal consequences under Singapore’s SFA. Individuals and corporations involved in such activities face both criminal and civil penalties, as outlined in Sections 218, 219, and 221 of the SFA.
Criminal Penalties
Under Section 221(1), individuals convicted of insider trading may face a fine of up to S$250,000 and/or imprisonment of up to 7 years.
Civil Penalties
Under Section 232, MAS is empowered to pursue civil penalty actions against individuals or entities involved in insider trading. The court may impose a civil penalty of three times the amount of profit gained or loss avoided as a result of the contravention.
If no profit was gained or loss avoided, the penalty ranges between $50,000 and $2 million.
Legal Framework Under The Securities And Futures Act (SFA)
Singapore’s laws on insider trading are outlined under Sections 218 and 219 of the SFA, addressing both individuals with direct access to confidential corporate information and those who receive such information indirectly.
Section 218 – Insider Trading by Connected Persons
For a breach of Section 218(1) to be established, the following elements must be satisfied:
- The individual is a “connected person” in relation to a corporation, such as an officer, a substantial shareholder, or an individual in a position granting access to confidential corporate information.
- The person possesses material information about the corporation that is not publicly available.
- A reasonable person would expect that, if the information were public, it would significantly impact the price or value of the company’s securities.
- The connected person knows or ought reasonably to know that the information is confidential and would affect market value if disclosed.
Those in professional or business relationships with a company, such as senior employees, auditors, or legal advisors, may also be classified as connected persons if they have access to sensitive financial or strategic information.
Section 219 – Insider Trading by Non-Connected Persons
Section 219(1) applies to individuals who are not directly connected to a corporation but have received non-public, material information and engaged in trading activities. For a breach to be established:
- The person is not a connected individual within the corporation but has obtained confidential information.
- The information is not generally available to the public.
- A reasonable person would recognise that the disclosure of such information would impact the price or value of securities, derivatives, or collective investment schemes (CIS) units.
- The individual knows or ought reasonably to know that the information is confidential and would affect the market if made public.
Section 219(3) – Unlawful Communication of Insider Information
Beyond trading on inside information, Section 219(3) makes it an offence to pass on confidential details to another person if the insider knows or ought reasonably to know that the recipient may:
- Trade securities, derivatives, or CIS units based on the information.
- Encourage or direct another individual to buy or sell affected securities.
If the recipient of such information subsequently engages in illegal trading under Section 291(3)(a) or (b), they too may be liable for an offence under Singapore law.
4. Examples Of Insider Trading
Several real-world cases in Singapore illustrate the various forms this illegal activity can take and the legal consequences that follow.
1) Employee Trading On Private Information
In 2023, Ms. Wang, an employee of Broadway Industrial Group Limited (BIGL), engaged in insider trading by purchasing shares based on non-public information about the company’s impending sale of its businesses.
She acquired a total of 2.33 million shares for herself and her family members before the public announcement. Following the disclosure, she sold the shares, realising a profit of $188,895. Ms. Wang was subsequently sentenced to four months’ imprisonment for her actions.
2) A Tip-Off To Friends Or Family
In 2019, Shae Toh Hock, a Senior Vice President at a Nippon Paint Holdings subsidiary, disclosed confidential information about a proposed acquisition to his sister and brother-in-law.
Acting on this tip, they purchased shares and profited S$75,000. All three were convicted of insider trading and fined between S$100,000 and S$150,000 each.
3) Professionals Misusing Privileged Information
Between 2007 and 2014, Mr Leong Chee Wai, Mr E Seck Peng Simon, and Mr Toh Chew Leong orchestrated a front-running scheme, marking Singapore’s first prosecution of such an offence as insider trading.
Mr Leong and Mr E, traders at a multinational fund management firm, colluded with Mr Toh, a remisier, to exploit confidential, market-sensitive information. Over seven years, they amassed personal profits totalling S$8.07 million.
The trio received prison sentences ranging from 20 to 36 months and were ordered to forfeit significant sums to the state.
5. How To Avoid Insider Trading Risks
To mitigate the risks associated with insider trading, adherence to the SFA and the guidelines set forth by MAS is imperative. Below are actionable steps for both company insiders and investors, along with pertinent legal references:
For Company Insiders:
- Safeguard Confidential Information: Refrain from disclosing non-public, material information to external parties. Unauthorised dissemination may contravene Section 218 of the SFA, which addresses insider trading by connected persons.
- Observe Designated Trading Periods: Engage in the trading of company securities only during periods authorised by your organisation. Trading while in possession of undisclosed, price-sensitive information is prohibited under the SFA.
- Comply with Internal Policies: Adhere to your company’s internal compliance protocols regarding securities transactions to ensure alignment with legal standards.
For Investors and Traders:
- Exercise Due Diligence: Avoid acting on tips or information that is not publicly available. Trading based on such information may violate Section 219 of the SFA, which pertains to insider trading by individuals not connected to the corporation.
- Monitor Unusual Market Activity: Be cautious of abrupt or unexplained changes in stock prices or volumes, as these may indicate potential insider trading activities.
- Report Suspected Misconduct: If you suspect insider trading, report it to the MAS or the relevant authorities. Whistleblowers may receive legal protection under certain circumstances.
By diligently following these guidelines and familiarising yourself with the provisions of the SFA, both companies and individuals can contribute to a transparent and equitable financial market in Singapore.
Alternatively, seeking legal advice from a lawyer with expertise in securities law can provide clarity on compliance requirements and help mitigate risks associated with insider trading.
Whistleblower Protection
In Singapore, while there is no overarching legislation dedicated to whistleblower protection, certain statutes offer safeguards for individuals reporting specific offences.
For instance, the Prevention of Corruption Act includes provisions to protect the identity of informants involved in corruption cases.
Similarly, the Misuse of Drugs Act and the Betting Act contain clauses that prevent the disclosure of an informer’s identity during legal proceedings. These protections aim to encourage individuals to report wrongdoing without fear of retaliation.
6. Singapore’s Laws Have Extra-Territorial Reach
Many executives and traders mistakenly believe that if they execute a trade from an overseas brokerage account or while physically outside Singapore, they are beyond the reach of the Monetary Authority of Singapore (MAS). This is a dangerous misconception.
Section 339 of the Securities and Futures Act (SFA) extends the long arm of Singapore law beyond its borders. It provides that even if an act is committed wholly outside Singapore, the offender can still be prosecuted if that act has a “substantial and reasonably foreseeable effect” in Singapore.
This provision, often referred to as the “effects doctrine,” prevents market misconduct from being offshored.
What does this mean for you?
- Trading from Overseas: If you are in London or Hong Kong and trade shares of a company listed on the Singapore Exchange (SGX) using inside information, you can be liable under Section 339. The “effect” on the Singapore market is considered substantial because it undermines market integrity here.
- Dual-Listed Companies: If you trade shares of a dual-listed company on a foreign exchange, and that trading impacts the price of the shares in Singapore, you may fall within this jurisdiction.
- Foreign Intermediaries: Using a foreign broker to execute the trade does not shield you. If the trade ultimately affects a product regulated in Singapore, the MAS has the jurisdiction to investigate and prosecute.
This extra-territorial reach ensures that Singapore’s financial markets remain protected, regardless of where the keystroke to “buy” or “sell” originated.
7. Civil Settlements May Require an “Admission of Liability”
For many accused individuals, avoiding a criminal conviction is the primary goal. A criminal conviction carries the stigma of a criminal record and the risk of imprisonment. The Civil Penalty Regime offers an alternative route, where the MAS can impose a fine of up to three times the profit gained or loss avoided, without a criminal sentence.
However, there is a critical strategic nuance that is often overlooked: the Admission of Contravention.
Under Section 232 of the SFA, the MAS has the power to enter into a civil penalty settlement agreement “with or without admission of liability”. While the law permits a settlement without admission, in practice, the MAS frequently requires the accused to admit to the contravention as a condition of settlement.
Why this matters for your reputation:
- Public Record: An admission of liability is not a private agreement. It is typically published in an MAS press release, detailing the individual’s name, the specific provisions of the SFA contravened, and the penalty paid.
- Civil Liability Exposure: While you avoid jail, a formal admission can be used by third parties (such as investors who lost money) to launch independent civil suits against you for compensation. This is sometimes called a “piggyback action.”
- Professional Consequences: For directors and finance professionals, a public admission of market misconduct can result in disqualification from serving as directors or managing companies for a specified period.
Therefore, negotiating a civil settlement is not just about the dollar amount. It requires a lawyer to carefully manage the terms of any admission to mitigate long-term reputational and professional damage.
8. You Can Be Liable Even If You Never Bought a Single Share (The “Procuring” Offence)
Many individuals under investigation believe they are safe because they did not personally execute a trade. They often assume that if they simply told a friend or spouse to buy, but didn’t touch their own trading account, they have not committed insider trading. This is false.
Under Section 218(2) and Section 219(2) of the Securities and Futures Act (SFA), it is an offence to “procure” another person to trade while you are in possession of inside information.
What does “Procuring” mean? You do not need to reveal the confidential information to be guilty. If you simply instruct, encourage, or advise someone else to buy or sell shares, even if you keep the specific reasons to yourself, you are liable for procuring.
9. The Law Presumes You Knew (Reversed Burden of Proof)
In most criminal cases, the prosecution bears the entire burden of proving every element of the offence “beyond a reasonable doubt.” However, for corporate insiders, the Securities and Futures Act (SFA) tilts the playing field against you.
Section 218(4) of the SFA creates a “rebuttable presumption” against connected persons (such as directors, secretaries, and executive officers).
If the prosecution can prove that you are a “connected person” and that you possessed the information, the Court will legally presume that:
- You knew the information was confidential (not generally available); AND
- You knew it would have a material effect on the share price.
This effectively reverses the burden of proof regarding your mental state (mens rea). Instead of the prosecutor having to prove you knew it was inside info, YOU must prove to the Court that you didn’t know.
This makes it significantly harder for directors and executives to defend themselves compared to an outsider (tippee), who does not face this automatic legal presumption. Your defence strategy must be far more robust, often requiring concrete evidence (emails, meeting minutes) to rebut this presumption.
Conclusion On Things You Need To Know About Insider Trading
Insider trading is a serious offence in Singapore, carrying severe legal and financial repercussions for individuals and corporations alike. The strict regulations under the Securities and Futures Act ensure that financial markets operate fairly, preventing any undue advantage for those with access to confidential information.
However, navigating insider trading laws can be complex, and any misstep may lead to significant consequences. Whether you are facing allegations, seeking legal advice on compliance, or need guidance on corporate trading policies, having the right legal support is crucial.
At Tembusu Law, our experienced financial and corporate lawyers are well-versed in Singapore’s insider trading regulations. We are committed to providing strategic legal guidance to safeguard your interests, whether you are an individual investor, a corporate executive, or a business entity.
Contact us today for a consultation and ensure you stay on the right side of the law while making informed financial decisions.
Frequently Asked Questions About Things You Need To Know About Insider Trading
Is Insider Trading Illegal If I Didn’t Make A Profit?
Yes. The offence is committed when you trade while in possession of inside information or communicate it to others. Making a profit or avoiding a loss is not required to incur liability, though it may affect the severity of the penalty.
Is Buying Shares Before Public Announcements Always Illegal?
Not necessarily. Buying shares before a public announcement is only illegal if the decision is based on confidential, material information not available to the general market. If the information is publicly accessible, the trade would not be considered insider trading.
Should Employees Disclose Their Trades To Their Employer?
Many companies have internal policies requiring employees, especially those with access to sensitive financial data, to disclose their trades. This is to prevent conflicts of interest and potential breaches of insider trading laws. Failing to comply with corporate disclosure requirements could lead to disciplinary action or regulatory scrutiny.
Are Family Members Liable For Insider Trading If They Receive A Tip?
Yes, family members who receive non-public, price-sensitive information and trade on it can be liable under Section 219 of the SFA. The law applies even if the tip was shared casually without explicit instructions to trade. Those who knowingly benefit from such information may face the same penalties as the individual who disclosed it.
Is It Insider Trading If Someone Trades Based On A Rumour?
If the rumour is based on public speculation or industry chatter, trading on it is not considered insider trading. However, if the rumour originates from a source with direct access to confidential corporate information, such as an executive or auditor, trading on it could breach Sections 218 and 219 of the SFA. Determining the source and credibility of the information is crucial.
How Can Individuals Defend Themselves Against Insider Trading Allegations?
Defending against insider trading allegations requires demonstrating that the trade was based on publicly available information or made without knowledge of insider details. Legal representation is crucial, as authorities will examine communication records, financial transactions, and market activity. Seeking advice from a qualified financial or corporate lawyer is the best course of action in such cases.
If you require legal guidance regarding insider trading compliance or allegations, contact Tembusu Law today for a consultation.
