Senior V-P’s tip-off helps sister, brother-in-law net $75k on stocks; all fined for insider trading
During a family gathering at a restaurant in Resorts World Sentosa, Shae Toh Hock told his sister and her husband about an impending takeover of an Australian paint company by Nippon Paint Holdings.
Shae, a senior vice-president at one of Nippon’s subsidiaries, knew that Nippon would likely acquire DuluxGroup and that it would likely make an offer with a premium of around 30 per cent over Dulux’s existing share price.
Following the conversation, Shae’s sister and her husband bought Dulux shares before the acquisition and subsequently made a profit of $75,000.
The trio pleaded guilty on Friday to an insider trading charge each and Shae, 62, was fined $100,000, while his sister Shae Hung Yee, 59, and her husband Siew Boon Liong, 63, were each fined $150,000.
Deputy Public Prosecutor Edwin Soh said Shae Toh Hock was the senior vice-president of corporate plans and development at Nipsea Management Company, and his role included overseeing merger and acquisition matters for Nippon.
Having been tasked with conducting due diligence on Dulux before the acquisition, Shae Toh Hock’s team shared a report with Nipsea’s chief executive on March 20, 2019, which assessed Dulux’s business positively.
Despite having signed a letter of confidentiality barring him from disclosing the existence of the acquisition to any third party, Shea told his sister and brother-in-law about Nippon’s interest in acquiring Dulux during a gathering on April 7, 2019.
He added that his due diligence team was impressed with Dulux’s business and the chances of the acquisition were very high.
Days later, on April 11, Shae Hung Yee called her brother, who said that the price of Dulux shares would probably rise around 30 per cent after the acquisition.
After a discussion, Shae Hung Yee and her husband decided to purchase Dulux shares based on the information provided by Shae Toh Hock.
The next day, Siew placed a buy order for 40,000 shares in Dulux costing $295,730.70, of which his wife funded $100,000.
Dulux announced Nippon’s acquisition on April 17, 2019. That day, a total of 15.7 million Dulux shares were traded – an 865 per cent increase from the average daily traded volume in the month preceding the announcement. Dulux’s share price rose 27.1 per cent from its previous day’s close.
Between April 19 and May 9 that year, Siew sold all the shares and the couple netted a profit of $75,224.36.
The court was told that Shae Toh Hock did not personally trade or profit from the inside information.
On Friday, Senior District Judge Bala Reddy said the fines imposed take into account the abuse of position by Shae Toh Hock and the greed-driven conspiracy and premeditation exhibited by Shae Hung Yee and Siew.
While taking into account the trio’s early plea of guilt, the judge said it was important to deter insider trading offences.
He added: “In a world driven by trust and transparency, the spectre of insider trading casts a dark shadow over the very foundations of our financial ecosystem, undermining a level playing field for all investors. It is a crime that strikes at the heart of fairness, eroding the faith of investors and undermining the integrity of markets.
“It is imperative that the courts, regulators and lawmakers recognise the immense harm inflicted by such illicit activities and impose deterrent sentences that send an unambiguous message: exploiting privileged information for personal gain attracts deterrent punishment.”
For insider trading, the trio could each have been jailed for up to seven years, fined up to $250,000, or both.
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