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Grounds publishedDecided 10 Feb 2012
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Court of Appeal

Lew Chee Fai Kevin v Monetary Authority of Singapore

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[2012] SGCA 12Case no. Civil Appeal No 123 of 2010

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  1. Andrew Phang Boon Leong JA (delivering the grounds of decision of the court):

  2. Introduction

  3. [1] This is an appeal against the judgment of the trial judge (“the Judge”) for Suit No 71 of 2009 in Monetary Authority of Singapore v Lew Chee Fai Kevin [2010] 4 SLR 209 (“the Judgment”). The appellant, Kevin Lew Chee Fai (“Lew”), was found liable for insider trading under s 218 of the Securities and Futures Act (Cap 289, 2006 Rev Ed) (“the SFA”) and was penalised with a civil penalty under s 232(2) of the SFA. The gist of the case against Lew was that he sold 90,000 of his shares in WBL Corporate Private Limited (“WBL”) on 4 July 2007 (“the material time”), when he was in possession of non-public price-sensitive information about WBL which he had acquired at an internal executive meeting held on 2 July 2007. We dismissed the appeal and now give the detailed grounds for our decision.

  4. [2] By way of general background, the SFA imposes both civil and criminal penalties for the offence of insider trading as defined in s 218 (which applies to “connected persons” as defined in s 218(5)) and s 219 (which applies to all other persons) of the SFA, respectively. Section 218 is the relevant section in this appeal. Under s 221 of the SFA, a defendant may be criminally prosecuted for contravening s 218 (which we will refer to hereafter as “criminal insider trading”). Alternatively, the Monetary Authority of Singapore (“MAS”), the respondent in this appeal, may bring a civil action against the defendant for the same (which we will refer to hereafter as “civil insider trading”). This was the first civil insider trading case to be litigated under the SFA since it was passed in 2001 and the first to be appealed to the Court of Appeal. In previous cases of civil insider trading, MAS had availed itself of its power under s 232(5) of the SFA to enter into agreements with the alleged insider traders to pay civil penalties, thereby dispensing with the need for litigation. In fact, since Parliament eschewed the “person-connected approach” (see [50] below for elaboration) under the now-repealed Securities Industries Act (Cap 289) in favour of the “information-connected approach” (see [51] below for elaboration) under the SFA, this was the first opportunity for this court to holistically examine the elements that constitute inside information (which elements would, of course, apply equally to criminal insider trading).

  5. [3] This appeal was heard together with Civil Appeals Nos 149 and 150 of 2010, which were, respectively, an appeal and a cross-appeal from a separate but related suit, Suit No 129 of 2008. Suit No 129 of 2008 was also jointly heard with Suit No 71 of 2009 before the Judge. In Suit No 129 of 2008, Lew sought specific performance of WBL’s obligation to issue him shares under its Executive Share Option Scheme. It was undisputed that the funds Lew had used to exercise his share options under WBL’s Executive Share Option Scheme had come from his sale of 90,000 of his shares in WBL (see [1] above), which was the transaction alleged to constitute insider trading in the context of the present appeal. The substantive merits of Civil Appeals Nos 149 and 150 of 2010 will be dealt with in a separate judgment (see WBL Corporation Ltd v Lew Chee Fai Kevin [2012] SGCA 13).

  6. The parties involved

  7. Lew

  8. [4] Lew was a senior employee at WBL. He was a trained accountant and had joined WBL as its Group Financial Controller in 1998. At the material time, he was the Group General Manager of WBL’s Enterprise Risk Management group, which was in charge of developing and implementing an enterprise-wide risk management strategy for WBL. Lew resigned from WBL on 19 July 2007.

  9. MAS

  10. [5] MAS is the respondent in the appeal and the plaintiff in Suit 71 of 2009 below. Under s 232 of the SFA, MAS may, with the consent of the Public Prosecutor, seek a civil penalty against a person whom it believes has contravened any provision in Pt XII of the SFA (ie, the “Market Conduct” provisions). This was in fact MAS’s approach in the present case.

  11. WBL and its senior personnel

  12. [6] WBL is the company whose shares (referred to hereafter as “WBL shares”) were the subject of the alleged insider trading. It is a public company listed on the Singapore Exchange Ltd (“SGX”). At the material time, it had about 90 active subsidiaries. Its principal business is in Technology Manufacturing, Automotive Distribution, Technology Solutions and Investments. Its Technology Manufacturing Division was the main contributor to WBL’s turnover, contributing more than 50% in 2006 and 2007. The substance of the alleged inside information concerned the financial performance of three subsidiaries under the Technology Manufacturing Division: Multi-Fineline Electronix Inc (“M-Flex”), MFS Technology Ltd (“MFS”) and Wearnes Precision (Thailand) Limited (“WPT”), respectively.

  13. [7] At the material time, in addition to Lew, who (as just mentioned) was WBL’s Group General Manager for Enterprise Risk Management, WBL’s senior management consisted of the following persons: (a) Mr Tan Choon Seng (“C S Tan”) as its Chief Executive Officer (“CEO”); (b) Mr Wong Hein Jee (“Wong”) as its Chief Financial Officer; and (c) Mr Tan Swee Hong (“Swee Hong”) as its Company Secretary and Group General Manager for Legal and Compliance.

  14. [8] C S Tan, Wong and Swee Hong were MAS’s witnesses at the trial. Mr Soh Yew Hock (“Soh”), a non-independent and executive director of WBL, testified for Lew. Soh retired on 16 July 2007 and was no longer with WBL at the time of the trial. He was not present at the internal executive meeting at which the inside information was allegedly acquired by Lew (see [12]–[14] below).

  15. The expert witnesses

  16. [9] Lew’s expert witness was Mr Timothy James Reid, a partner at Ferrier Hogdson, a firm that specialises in corporate turnover and restructuring. MAS’s expert witness was Mr Christopher Chong Meng Tak (“Chong”). Chong is a financial and corporate consultant based in Singapore and is currently a director of ACH Investments Pte Ltd, a specialist corporate advisory firm with operations in Australia, China, India, Singapore and the US.

  17. The chronology of events

  18. [10] An insider trading transaction generally comprises three important events:

  19. (a) the acquisition of inside information by the alleged insider/defendant;

  20. (b) the acting on the inside information by the alleged insider/defendant (eg, by buying or selling the shares of the company concerned); and

  21. (c) the subsequent release of the inside information into the public domain.

  22. [11] In the present case, the factual background was not disputed by the parties. What was disputed was the significance and reliability of the information which Lew received and the interpretation of the market behaviour of WBL’s share price after that information was released to the public.

  23. Event No 1 – The 2 July 2007 General Management Council meeting

  24. [12] General Management Council (“GMC”) meetings were instituted in WBL in 2004 to support the Board of Directors in strategic, operational and financial matters. The weekly GMC meetings were chaired by C S Tan and attended by members of WBL’s senior management. The agenda for the meetings depended on whether the meetings were operational or financial meetings. At financial meetings, it was common for financial forecasts to be presented by WBL’s finance department. The presentation materials were not distributed because of their confidential nature. It was at such a GMC meeting, held on 2 July 2007 (“the 2 July 2007 GMC Meeting”), that Lew acquired the alleged inside information.

  25. Information (A): WBL’s forecast loss for the third quarter of the financial year for 2007

  26. [13] The 2 July 2007 GMC Meeting was a financial meeting. It was held two days after 30 June 2007, the date on which the third quarter of the financial year for 2007 (“3Q FY07”) ended. At the meeting, there was a presentation of WBL’s financial forecasts for 3Q FY07 and the fourth quarter of the financial year for 2007. The presentation forecasted that WBL would make a loss of either $2.3m (excluding M-Flex’s and MFS’s forecasted performance) or $0.4m (including M-Flex’s and MFS’s forecasted performance). The forecast was based on the actual results for April and May 2007 as well as the estimated results for June 2007. The forecast did not take into account the possible impairment charge on WPT that is referred to in [14] below.

  27. Information (B): The impairment charge over WPT

  28. [14] WBL’s subsidiary, WPT, had been making significant losses for some time. During previous GMC meetings, the possibility of WBL taking an impairment charge over WPT had already been discussed. An impairment charge is a one-time write-off against a company’s assets. The effect of the impairment charge would be to adjust the book value of the company’s assets downwards to reflect their fair value, and this is reflected as a loss on the company’s profit and loss statement. In the present case, the parties did not dispute that the need for WBL to take an impairment charge over WPT was discussed at the 2 July 2007 GMC Meeting. Rather, they disputed the degree of likelihood, as evinced during the discussion at the 2 July 2007 GMC Meeting, of such an impairment charge being taken. MAS argued that it was very likely that an impairment charge would be taken over WPT, whereas Lew argued that no actual decision was made at the 2 July 2007 GMC Meeting on whether or not such an impairment charge would be taken and that, even if a decision had been made, the quantum of the impairment charge had not yet been decided.

  29. Lew’s conversation with Swee Hong after the 2 July 2007 GMC Meeting

  30. [15] After the 2 July 2007 GMC Meeting, Lew had a conversation with Swee Hong. The exact nature of the conversation was disputed. MAS contended that Lew sought Swee Hong’s advice, in her capacity as WBL’s Group General Manager for Legal and Compliance, as to whether he could sell his WBL shares in the light of what had been revealed at the 2 July 2007 GMC Meeting. Lew denied that he had sought Swee Hong’s advice and contended that the conversation “did not amount to advice” from Swee Hong that he should not sell his WBL shares because the information disclosed at the meeting was price-sensitive. In our view, this dispute of fact is immaterial. Regardless of whether Lew had actually sought Swee Hong’s advice, it was undisputed that Swee Hong had told Lew that it would not be prudent for him to sell his WBL shares because the information at the 2 July 2007 GMC Meeting was price-sensitive.

  31. Event No 2 – Lew’s sale of 90,000 of his WBL shares on 4 July 2007

  32. [16] Two days after the 2 July 2007 GMC Meeting, ie, on 4 July 2007, Lew sold 90,000 of his WBL shares in three tranches of 30,000 shares each at $4.98 per share (collectively, “the Transaction”).

  33. [17] On 5 July 2007, Lew e-mailed Swee Hong to inform her about the Transaction. This was in accordance with WBL’s internal procedures for the sale and purchase of WBL shares by WBL’s senior management. On 9 July 2007, Swee Hong replied stating that, in her view, the Transaction might be construed as insider trading because Lew possessed price-sensitive information from the 2 July 2007 GMC Meeting. On the same day (9 July 2007), Lew replied stating that he had sold his shares to raise cash to exercise his share options under WBL’s Executive Share Option Scheme. He also stated that he did not think the matters discussed at the 2 July 2007 GMC Meeting were price-sensitive, but that if Swee Hong considered his explanation insufficient, he would promptly buy back the same number of WBL shares at no less than the price at which he had sold his WBL shares. On the same day, Lew also submitted the requisite notices under the WBL’s Executive Share Option Scheme as were necessary to exercise his share options.

  34. [18] Swee Hong replied on 10 July 2007 pointing out that Lew had sought her advice on 2 July 2007, and that she had advised then that it would not be prudent for him to deal in WBL shares in the light of the 2 July 2007 GMC Meeting. She then advised that it would nevertheless be improper for him to repurchase the same number of WBL shares from the market.

  35. Event No 3 – Release of the alleged inside information by WBL after the 2 July 2007 GMC Meeting

  36. [19] The following table reflects the information released by WBL after the 2 July 2007 GMC Meeting:

  37. [20] The market evidence regarding how the stock market reacted to the release of the information tabulated above will be examined below (see [122]–[136]). We note that the nature of the information released by WBL as tabulated above was similar but not completely identical to the inside information Lew was alleged to possess (explained further at [109] below).

  38. Subsequent developments for Lew

  39. [21] On 12 July 2007, C S Tan asked Lew to give a statement to the law firm, Allen and Gledhill LLP (“A&G”), in respect of the Transaction. After A&G took a statement from Lew, he was summarily suspended from duty with immediate effect. On 17 July 2007, WBL lodged a Suspicious Transaction Report with the Commercial Affairs Department in respect of the Transaction. On 11 September 2007, MAS examined Lew pursuant to s 154 of the SFA and took a statement from him.

  40. [22] It should be noted that Lew did not sell all his WBL shares and still possessed 227,771 of such shares at the time of these proceedings.

  41. The issues arising in this appeal

  42. [23] MAS’s claim against Lew was based on s 218 of the SFA (“s 218”), which sets out what is “prohibited conduct by [a] connected person in possession of inside information”. Section 218 reads as follows:

  43. Hence, under s 218(1) of the SFA, a person is liable for insider trading if:

  44. (a) he is a “person who is connected to a corporation”;

  45. (b) he possesses “information concerning that corporation”;

  46. (c) that information is not “generally available”;

  47. (d) a reasonable person would, if that information were generally available, expect it to have a “material effect on the price or value of securities of that corporation”;

  48. (e) the connected person knows or ought reasonably to know that the information is not generally available; and

  49. (f) the connected person knows or ought reasonably to know that if the information were generally available, it might have a material effect on the price or value of those securities of that corporation.

  50. [24] It was undisputed that limbs (a) and (b) had been satisfied in the context of the present appeal. Lew, as a senior employee of WBL, was “connected” to WBL within the meaning of s 218(5) of the SFA, and the information he allegedly possessed at the material time “concern[ed]” WBL. The issues arising in this appeal were therefore as follows:

  51. (a) What information concerning WBL did Lew possess at the material time (“Issue 1”)?

  52. (b) Was the information concerning WBL which Lew possessed at the material time (referred to hereafter as “the Information”) generally available (“Issue 2”)?

  53. (c) If the Information was not generally available, would a reasonable person expect it to have a material effect on the price or value of WBL shares if the Information were generally available (“Issue 3”)?

  54. (d) Did Lew know or ought he reasonably to have known that:

  55. (i) the Information was not generally available (“Issue 4(a)”); and

  56. (ii) if the Information were generally available, it might have a material effect on the price or value of WBL shares (“Issue 4(b)”)?

  57. [25] Under s 218(4) of the SFA, if MAS proves that Lew possessed information concerning a company to which he was connected (ie, WBL) and, that such information (ie, the Information, in the context of the present appeal) was not generally available, the presumption arises that Lew knew that:

  58. (a) the Information was not generally available; and

  59. (b) if the Information were generally available, it might have a material effect on the price or value of WBL shares.

  60. The burden of proof would then be shifted to Lew to rebut this presumption (“the presumption of knowledge under s 218(4)”).

  61. Issue 1: What did the Information consist of?

  62. [26] The Judge found (at [53] of the Judgment) that the Information consisted of the following pieces of information:

  63. (a) WBL had forecasted a loss of either $2.3m (excluding M-Flex’s and MFS’s forecasted performance) or $0.4m (including M-Flex’s and MFS’s forecasted performance) in 3Q FY07 (“the Loss Forecast”);

  64. (b) it was very likely for WBL to take a significant impairment charge on WPT in 3Q FY07 (“the Significant Impairment Prospect”); and

  65. (c) as a result of (a) and (b) above, it was very likely that WBL would incur a significant overall loss for 3Q FY07 (“the Significant Overall Loss Forecast”).

  66. [27] Lew argued that the Judge was wrong to make the above findings because she failed to fully consider the surrounding facts which affected the reliability or certainty of the results presented. In particular, Lew submitted that the Judge was wrong to find that WBL had made a reliable forecast of loss. As we point out below, however (at [31]), although the argument with regard to reliability is an important one, it was not appropriate to raise it at this threshold stage of ascertaining what the Information consisted of.

  67. [28] Lew argued that what was discussed at the 2 July 2007 GMC Meeting was too uncertain and preliminary to be reasonably relied on. Implicit in Lew’s argument at this stage of the inquiry was the proposition that information of an uncertain or unreliable nature could not be treated as part of the Information. To resolve this issue, we need to examine what constitutes “information” under the SFA.

  68. [29] Under s 132A(1) of the Companies Act (Cap 185, 1970 Rev Ed) , “information” was interpreted more specifically as “knowledge of a particular event or situation such as advice, communication, intelligence, news, notification and the like” (see the Singapore Court of Criminal Appeal decision of Public Prosecutor v Choudhury [1979–1980] SLR(R) 766 at [19]). However, it is quite clear from the present s 214 of the SFA that “information” is meant to be interpreted more widely. Section 214 of the SFA does not define “information” exhaustively but adopts an inclusive definition that includes a wide range of information as follows:

  69. [30] Our current provisions on insider trading are based on Australian legislation and Australian courts have taken a wide approach in interpreting the term “information”. The New South Wales decision of R v Rivkin [2004] NSWCCA 7 at [126] (reported in part in (2004) 59 NSWLR 284, but not with regard to the points that are germane to the present appeal) concerns a case of insider trading pursuant to the Australian Corporations Act 2001 (the Australian legislation on insider trading). The New South Wales Court of Criminal Appeal agreed with McInerney J’s decision in the Supreme Court of Victoria case of Commissioner for Corporate Affairs v Green [1978] VR 505 at 511 (“Green”), that information did not have to be “factual knowledge of a concrete kind”. McInerney J also held in Green (at 511) that:

  70. It is also significant to note that the leading local author in this field observes that “[t]he reference to ‘matters of supposition’ in [limb (a) of the definition of “information” in s 214 of the SFA] in effect means that information may include rumours circulating in the market” (see Hans Tjio, Principles and Practice of Securities Regulation in Singapore (2nd Ed, LexisNexis, 2011) (“Tjio”) at para 8.12); in this regard, the learned author has also referred to the following (italicised) observations by Young J in the Supreme Court of New South Wales decision of Hooker Investments Pty Ltd v Baring Bros Halkerston & Partners Securities Ltd & Ors (1986) 10 ACLR 462 (at 468) as having been reflected in the phrase “matters of supposition” in limb (a) of the definition of “information” in s 214 of the SFA (see Tjio at para 8.12, note 54):

  71. [31] Indeed, as alluded to above (at [27]), the issue of reliability is not relevant at this particular juncture, although it is certainly significant with regard to Issue 2 (ie, whether the Information was “generally available”) and Issue 3 (ie, if the Information had been generally available, whether a reasonable person would expect it to have had a “material effect” on the price or value of WBL shares). Put simply, Issue 1 relates to the very broad and general question as to what constitutes “information” in the first place, whereas the issue of reliability (and, we might add, certainty) relates to the quite separate question as to the nature and quality of that “information”. Indeed, in so far as Issue 1 is concerned, “information” might well include knowledge of an uncertain, predictive or speculative nature. Therefore, while Lew disputes the certainty and reliability of the information which he acquired from the 2 July 2007 GMC Meeting, this did not prevent that information from being information which he possessed within the meaning of s 218. It bears repeating that s 218 has various cumulative stages of inquiry (as seen above at [23]) and, therefore, parties should be careful that their respective arguments do not conflate the different stages of inquiry. Whilst the definition of “information” under s 214 of the SFA might appear wide, as the leading local author in this area of the law perceptively observes (referring to the relationship, which we have just noted, between Issue 1 on the one hand and Issue 2 and Issue 3 on the other; see Tjio at para 8.12):

  72. However, as the parties have joined issue on the questions of certainty and (especially) reliability at this threshold stage, we will proceed to consider the Judge’s findings – bearing in mind the fact that the arguments in relation to reliability are more relevant and appropriate when we consider Issue 2 and Issue 3 later on in these grounds of decision.

  73. The Judge’s findings on Lew’s knowledge

  74. [32] It is well-established that an appellate court should defer to the trial judge’s finding of fact unless it is established that the finding of fact is plainly wrong or unjustified on the totality of the evidence before the trial judge (see, for example, the decision of this court in TV Media Pte Ltd v De Cruz Andrea Heidi and another appeal [2004] 3 SLR(R) 543), particularly where the veracity and credibility of witnesses are concerned (see, for example, the decision of this court in Tan Chin Seng v Raffles Town Club Pte Ltd [2003] 3 SLR(R) 307). In this vein, we noted that the Judge’s findings were largely based on: (a) the finding that Lew was an unreliable witness; and (b) a preference for the testimonies of C S Tan, Wong and Swee Hong over that of Lew.

  75. (A) Finding relating to the Loss Forecast

  76. [33] Lew does not dispute that he knew WBL made the Loss Forecast at the 2 July 2007 GMC Meeting. As noted above, Lew’s case against the reliability of the Loss Forecast was a red herring at this stage.

  77. (B) Finding relating to the Significant Impairment Prospect

  78. [34] Although the Judge did not cite Lew’s admissions against himself in the Judgment, Lew made important admissions in his affidavit of evidence-in-chief (“AEIC”) and during cross-examination with regard to the need for WBL to take a significant impairment charge on WPT. In his AEIC, Lew admitted that “WPT’s problems and need for assets impairment were discussed since the last quarter of 2006 and throughout 2007 during GMC meetings and other ‘offline’ meetings”.

  79. [35] In his cross-examination, Lew made the following admissions:

  80. Lew clearly admitted that he knew that C S Tan, the CEO of WBL, had made it very clear at the 2 July 2007 GMC Meeting that there was a need for WBL to take a full impairment charge on WPT for 3Q FY07. Lew also admitted that he knew that a full impairment charge on WPT would involve a substantial sum of about $22m to $30.5m.

  81. [36] The Judge accepted, at [46] of the Judgment, the testimony of C S Tan, Wong and Swee Hong that “any attendee of the 2 July 2007 GMC Meeting would know that the decision to impair was almost a certainty”. Lew admitted that no one else at the meeting could corroborate his evidence that he did not know an impairment charge on WPT was very likely to materialise. Furthermore, Lew’s argument that it was not likely for him to know that an impairment charge would be taken on WPT in 3Q FY07 was in direct contradiction to the objective evidence on record, ie, the minutes of the Audit Committee meetings (“ACM”) and GMC meetings from February 2007 to 2 July 2007, which showed the growing inevitability and increasing likelihood of an impairment charge being taken on WPT. Lew was present at all those meetings.

  82. [37] To elaborate, in the 9 February 2007 ACM minutes, it was stated that:

  83. Hence, at the time of the 9 February 2007 ACM, WPT had already recorded, for the first quarter of the financial year for 2007 (“1Q FY07”), losses that were greater than the projected losses, and there were already discussions on the necessity of taking an impairment charge on WPT. WBL’s management deferred the decision because of the possibility of WPT securing contracts from new customers and undertaking cost reduction initiatives to reduce its losses.

  84. [38] In the 9 April 2007 GMC meeting minutes, C S Tan was quoted as saying:

  85. [39] For the 8 May 2007 ACM, Microsoft Powerpoint presentation slides were prepared and the slides presented three options to deal with the continuing losses suffered by WPT, as follows:

  86. [40] More importantly, in the minutes of the 8 May 2007 ACM, which was chaired by Dr Cham Tao Soon, it was recorded that:

  87. Based on the 8 May 2007 ACM Powerpoint slides and minutes, it was clear that WBL’s senior management recognised that taking an impairment charge on WPT was the “most predictable outcome” and that the only thing holding back the taking of an impairment charge was the prospect of WPT obtaining a new key customer. WBL’s senior management also recognised that the final decision as to whether or not to take an impairment charge over WPT could not be deferred indeterminately as WPT struggled to get a new customer, and agreed that WPT’s progress would be determinatively evaluated in 3Q FY07.

  88. [41] In the 2 July 2007 GMC Meeting minutes, in reference to WPT’s continued losses being more than the forecast losses, it was stated as follows:

  89. The objective evidence clearly demonstrated a strong likelihood of a full impairment charge on WPT being taken in 3Q FY07. C S Tan testified that it was clear that an impairment charge had to be recognised since WPT had failed to get the new key customer discussed during the 8 May 2007 AMC (see above at [40]).

  90. [42] Lew attempted to discount the effect of the GMC minutes set out above by arguing that GMC meetings were not taken seriously by WBL’s senior management. To this end, he labelled GMC meetings as being a “grand master’s circus” and argued that no substantive decisions were taken at such meetings and that decisions made were not implemented. However, we agreed with the Judge that the evidence did not support Lew’s case: even Lew’s own witness, Soh, admitted that GMC meetings were important to WBL’s business. Lew later admitted that confidential information such as financial data was in fact discussed at GMC meetings. Indeed, it seems incredulous, in our view, that the senior management of WBL would have carried out weekly GMC meetings since 2004, only to make no substantive decisions at such meetings or to fail to implement decisions made at such meetings.

  91. [43] Lew also argued that no actual decision to take an impairment charge on WPT for 3Q FY07 was made at the 2 July 2007 GMC Meeting. He argued this on the basis that: (a) previous meetings were inconclusive as to whether an impairment charge on WPT would be taken; (b) there was no quorum at the 2 July 2007 GMC Meeting to make a decision on whether or not such an impairment charge should be taken; and (c) there was no discussion at the 2 July 2007 GMC Meeting of a profit warning, which would have to be issued in the event of WBL taking an impairment charge on WPT. The Judge did not find that an actual decision to take an impairment charge on WPT for 3Q FY07 was made at the 2 July 2007 GMC Meeting – instead, her finding was that it was very likely that a significant impairment charge on WPT would be taken for 3Q FY07. Lew’s arguments were, in contrast, pegged at the higher threshold of an actual decision on the taking of an impairment charge being made at the 2 July 2007 GMC Meeting. This is not surprising, not least because it would have been disingenuous, in the light of the evidence on record, for Lew to have argued that it was not very likely for an impairment charge to be taken over WPT.

  92. [44] We also agreed with the Judge’s rejection of Lew’s argument that the management of WBL had extended the deadline for taking the impairment charge on WPT to 31 July 2007 (see [48] of the Judgment). The extension of the deadline to 31 July 2007 was in reference to possible plans to divest the plants of WPT, which would affect only the quantum of the impairment charge taken on WPT but not the decision to take an impairment charge itself.

  93. [45] However, Lew argued that he could not have known the quantum of the impairment charge on WPT or that it was very likely the impairment charge would be significant. We found this difficult to believe in the light of his admission that he knew the value-at-risk on WPT’s assets was a ballpark figure ranging from $22m to $30.5m (see above at [35]). Lew’s argument was based on the following statement in the minutes of the 2 July 2007 GMC Meeting, as follows: “[in] the past 2 weeks, there were visits related to a big buyer looking into WPT. This week the buyers are going to make a decision and that it may be necessary to get a new valuer as the old valuation was unrealistically high”. However, we rejected this argument; in particular, we agreed with the Judge that “[e]ven taking into account any possibility of a sale of WPT (at a distressed price or any other valuation), the evidence strongly suggested that the impairment would still be a substantial one, even if it may not be at $30 million)” (see [52] of the Judgment).

  94. (C) Finding relating to the Significant Overall Loss Forecast

  95. [46] We also agreed with the Judge’s finding that, based on the Loss Forecast and the Significant Impairment Prospect, it was very likely that WBL would incur a significant overall loss in 3Q FY07. We acknowledged that the Loss Forecast was small in itself, being only $0.4m in the best-case scenario (ie, with M-Flex’s and MFS’s forecasted performance included). However, the combination of the Loss Forecast (which projected a loss of either $0.4m or $2.3m) and the Significant Impairment Prospect (which projected a write-off of between $22m to $30.5m) led to the inference that it was very likely WBL would incur a significant overall loss in 3Q FY07 because WBL would not be able to offset the substantial losses arising from a significant impairment charge being taken on WPT with profits from WBL’s other subsidiaries. Put simply, the Loss Forecast and the Significant Impairment Prospect were not only significant pieces of information in themselves, but also had to be viewed holistically, particularly in the context of the issues in this appeal in general and this issue (Issue 1) in particular.

  96. Conclusion for Issue 1: Particularising the Information

  97. [47] Having regard to the above analysis, we upheld the Judge’s findings with regard to the specific pieces of information comprised in the Information. However, the inquiry into the nature of the Information (which is crucial to the resolution of Issue 2 and Issue 3 to be considered below) would have been clearer if Lew’s knowledge had been specifically particularised. With respect, the Judge should have distinguished between what Lew knew about WBL’s state of affairs with full certainty (see (a), (b), (c) and (d) below) and what Lew knew about WBL’s state of affairs with a high degree of probability (deduced, in the main, from what he knew about WBL’s state of affairs with full certainty) (see (e), (f) and (g) below). Specifically, the Information should be particularised as follows:

  98. (a) Lew knew WBL’s senior management had forecasted a loss for 3Q FY07;

  99. (b) he knew the Loss Forecast was based on actual results in April and May 2007 but estimated results for June 2007;

  100. (c) he knew WBL’s senior management had discussed the possibility of taking an impairment charge on WPT and had been discussing this possibility since the last quarter of 2006 (“4Q FY06”);

  101. (d) he knew that WBL’s senior management had estimated an impairment charge on WPT to be in the range of $22m to $30.5m;

  102. (e) he knew that it was very likely an impairment charge on WPT would be taken in 3Q FY07;

  103. (f) he knew that it was very likely the impairment charge on WPT would be significant; and

  104. (g) he knew that it was very likely WBL would incur significant overall loss for 3Q FY07.

  105. [48] The importance of particularising the Information became especially apparent in relation to the inquiry with regard to Issue 2, which involved determining if the Information was “generally available”. In Hannes v Director of Public Prosecutions (Cth) (No 2) (2006) 60 ACSR 1 (“Hannes v DPP”), another case under the Australian insider trading legislation (see [30] above) in pari materia with ours, the Supreme Court of New South Wales Court of Criminal Appeal likewise stressed the importance of particularising the information known by the alleged insider trader in determining if the inside information was “generally available”. In particular, the court stated (at [382]) that:

  106. [49] The importance of particularising the Information is especially critical when it is disputed whether the Information can be deduced from information that was generally available. In the present case, even if the public could reach the same conclusions as those contained in the Information (eg, even if the public could deduce that WBL would incur a significant overall loss for 3Q FY07), the grounds on which the public made such deductions could be completely different. If the Information is not sufficiently particularised so as to state clearly the bases of Lew’s knowledge, it would be difficult to compare the qualitative differences in the Information with the deductions made by the public. We therefore bore this in mind with regard to the next issue, ie, whether the Information was “generally available” within the meaning of s 218 of the SFA; and it is to this issue (ie, Issue 2) that our attention must now turn.

  107. Issue 2: Was the Information “generally available”?

  108. Legislative history of the insider trading regime under the SFA

  109. [50] Before considering the statutory definition of “generally available” under the SFA, it is important to consider the legislative history of the insider trading regime under the SFA. The previous legislative framework for insider trading under s 103 of the Securities Industry Act (Cap 289, 1985 Rev Ed) followed almost exactly s 128 of the Australian Securities Industry Act 1980 (Act 66 of 1980), which was repealed in Australia sometime towards the end of the 1980s. The previous scheme emphasised a person’s connection with the company (the “person-connected approach”). In particular, there were, historically, five elements for the offence of insider trading under s 103(1) of the Securities Industry Act, as follows:

  110. (a) the person in question was an insider at the material time;

  111. (b) he was in possession of price-sensitive information;

  112. (c) he obtained the information by virtue of his position as an insider;

  113. (d) the information was not generally available; and

  114. (e) he dealt in the securities of the corporation.

  115. Thus, the previous framework made it very difficult to catch “tippees”, viz, persons who acquired price-sensitive information from an insider. Section 103(3) of the Securities Industry Act required the “tipee” to be aware that the person who tipped him was an insider. Under this framework, there was no statutory definition of “generally available” information.

  116. [51] The Securities and Futures Bill (Bill 33 of 2001) (“the Bill”) “redefine[d] the laws on insider trading” (per BG Lee Hsien Loong (“BG Lee”), Deputy Prime Minister, during the second reading of the Bill (see Singapore Parliamentary Debates, Official Report (5 October 2001) vol 73 (“Singapore Parliamentary Debates (5 October 2001)”) at col 2137)). The Bill transformed our legislative framework on insider trading from a person-connected approach to an “information-connected” approach (id at col 2159). This was a clear move away from the position in the US, where the theory of insider trading is based on fiduciary duties. Under the new information-connected approach, there is no longer a need to trace the information back to its original source, which was needed under the person-connected approach. The examination focuses, instead, on the nature of the information and whether it: (a) was generally available; and (b) would have a material effect on the price or value of the shares in question – which is the present legal position under s 218.

  117. [52] Our shift to an information-connected regime was inspired by Australia’s own shift from a person-connected approach to an information-connected approach. Our insider trading provisions in Pt XII, Div 3 of the SFA were based wholly on the insider trading provisions in the Australian Corporations Act 2001. Hence, the judicial and academic interpretations in Australia are of particular importance in interpreting the provisions of the SFA. While the specific Australian provisions on which the SFA was based have since been repealed, those provisions were reproduced as different sections in the same act, ie, the Australian Corporations Act 2001 (see [54] below); the law of insider trading in Australia has therefore not changed in substance. The only significant amendment to the law of insider trading in Australia was the Financial Services Reform Act 2002, which added the option of a civil penalty for insider trading.

  118. [53] The main policy reason for the transformation of our insider trading regime to a focus on the nature of the information was as follows (per BG Lee, Deputy Prime Minister, in Singapore Parliamentary Debates (5 October 2001) at col 2136):

  119. Hence, under an information-connected approach, the identification of what constitutes inside information is central to the enforcement of the regime. The significance of the Australian Corporations Act 2001, which (as noted above) we followed in the SFA, was the insertion of a statutory definition for “generally available” information.

  120. Statutory definition of “generally available” information

  121. [54] The statutory definition of “generally available” information is to be found in s 215 of the SFA (“s 215”), which reads as follows:

  122. Section 215 was based on the (then) s 1002B of the Australian Corporations Act 2001, which is now s 1042C of the Australian Corporations Act 2001.

  123. [55] Hence, while the genesis of the Australian provisions recognised the need to define what was inside information so that the insider trading regime would be easier to enforce (see generally Alan Griffiths, Fair Shares for All, Insider Trading in Australia (Australian Government Publishing Service, 1989) (“the Griffiths Report”)), the statutory definition in the SFA and in Australia is, in fact, a negative formulation of what is inside information, ie, information that is not generally available. The problem with a negative formulation of inside information is that if the definition of “generally available” is not interpreted properly, it may lead to over-regulation, ie, the capturing as insider trading transactions of those transactions that do not actually involve the kind of “undisclosed market sensitive information” (see Singapore Parliamentary Debates (5 October 2001) at col 2137) that Parliament originally aimed to regulate.

  124. [56] The Judge referred to the test in s 215(a) as the “readily observable test”, the test in s 215(b) as the “publishable information test” and the test in s 215(c) as the “market analysis test” (see the Judgment at [55]). This is the same terminology referred to in the Australian academic material. Whilst these terms are helpful, they should nevertheless not replace the language of the statute itself. While the Judge recognised (at [55] of the Judgment) that “these definitions [were] not without difficulty” and made observations on the s 215(a) “readily observable test” and the s 215(b) “publishable information test”, she decided (at [63] of the Judgment) not to lay down a definitive view as to what legal interpretation should be adopted for s 215(a) and s 215(b). The Judge held (at [63] of the Judgment) that it was “not strictly necessary” to decide which interpretation should be adopted in the Singapore context since “MAS, in its submissions, did not dispute that the information which Lew sought to rely on (viz, the press releases and announcements of companies listed in Singapore or the US) satisfies the readily observable test or publishable information test”. The Judge thus only decided on the legal interpretation of the s 215(c) “market analysis test” – more specifically, she considered whether the Information could consist of “deductions, inferences and conclusions” drawn from the information referred to in s 215(a) and s 215(b) and, on that basis, be regarded as “generally available” information within the meaning of s 215(c).

  125. [57] With respect, we beg to differ from the Judge’s approach of interpreting s 215(c) without considering the legal interpretations of s 215(a) and s 215(b), since (as we have just noted) the scope of the information which falls within s 215(c) is clearly and necessarily dependent upon what information is generally available under s 215(a) and s 215(b). The Judge compared the deductions which could be made from information indisputably available in the public domain with the Information (as determined in Issue 1), held that the deductions were not of the “same character” or “quality” as the Information, and thus held that the Information was not “generally available” under s 215. However, the Judge failed, with respect, to state exactly who made the deductions, inferences and conclusions from the generally available information for the purposes of s 215(c). The Judge mentioned “the market”, “a person”, “an investor”, “a reasonable investor”, “the public” and the “investing public” at different points of her analysis as the perspective from which the deductions, inferences and conclusions were made (see [74]–[81] of the Judgment). We are of the view, however, that a consistent point of reference must be identified, because different people with different viewpoints and skills would necessarily make different deductions, inferences and conclusions.

  126. [58] Without interpreting s 215(a) and s 215(b) in conjunction with s 215(c), the Judge had in fact interpreted s 215(c) in a vacuum. Considering the fundamental importance of the statutory definition of “generally available” information in establishing the offence of insider trading under the SFA, all three limbs of s 215 ought to be interpreted clearly and rationally in relation to each another. Indeed, the Judge recognised that there was a tension between the policy of efficiency embodied in s 215(a) and s 215(c) and the policy of fairness in s 215(b) (see the Judgment at [58]). Furthermore, while s 215(a) and s 215(c) do not identify to which parties the information must be readily observable (for s 215(a)) and which are the parties who make the deductions, conclusions and inferences (for s 215(c)), s 215(b) in fact identifies the parties that the information must be made known to: the information must be brought to “the attention of persons who commonly invest in securities of a kind whose price or value might be affected by the information” [emphasis added]. For ease of reference, we will refer, collectively, to “persons who commonly invest in securities” as “Common Investors”. The significance of the Common Investor will be emphasised again when we consider Issue 3, as the Common Investor is also reflected in s 216 of the SFA in determining if a reasonable person would expect the Information, if it were generally available, to have a material effect on the price or value of the WBL shares. The only difference between the Common Investor in s 216 and in s 215(b) of the SFA is that the Common Investor in s 215(b) (“the s 215(b) Specific Common Investor”) is one who commonly invests in securities of a kind whose price or value might be affected by the information in question, and this group of s 215(b) Specific Common Investors will vary depending on the nature of the information. In contrast, the Common Investor in s 216 is the Common Investor of securities generally. As already mentioned, we will return to this point later when we consider Issue 3. In conclusion, the differences in, and the relationship between, the three limbs of s 215 must be reconciled satisfactorily within the entire statutory framework of s 215. However, before attempting to reconcile the three limbs of s 215, we ought to discuss the correct approach to be adopted in interpreting this section.

  127. Approach to s 215 – unique aspects of Singapore’s insider trading regime

  128. [59] It has been observed that Australia’s insider trading legislation contains one of the broadest prohibitions against insider trading in the world (see Keith Kendall, “Information that is ‘generally available’ under the insider trading provisions in Australia” (2006) 21 (1) Journal of International Business Law 29). It is interesting to note that our legislation is even stricter than Australia’s legislation inasmuch as Singapore is the only jurisdiction to have legislatively removed (via s 220 of the SFA) the requirement of “prov[ing] intention to use” the inside information. Our Parliament has made it clear that s 220 was enacted to legislatively overrule the decision in PP v Ng Chee Keong [1999] 2 SLR(R) 1176, which required proof of an “intent to use” the inside information for insider trading (see Singapore Parliamentary Debates (5 October 2001) at cols 2137 and 2138). There is therefore no longer any requirement of proving the mens rea to use inside information in order to prove a contravention of either s 218 or s 219 of the SFA.

  129. [60] Instead, we have the presumption of knowledge under s 218(4) that applies where “connected persons” (as defined in s 218(5)) are involved. This presumption is also unique to Singapore. The Griffiths Report in the Australian context did consider if the evidential burden of proving lack of mens rea should be placed on the insider trader, but this was not accepted in the final legislation enacted in Australia. Singapore’s framework for insider trading is therefore very strict where connected persons are concerned: once a connected person is proved to be in possession of information concerning the company to which he is connected and once such information is proved to be not “generally available”, the connected person is presumed to know that: (a) the information was not generally available; and (b) if the information were generally available, it might be material to the price or value of the company’s securities. As was stated in the parliamentary debates on the Bill, the intention of the presumption of knowledge under s 218(4) was to impose “greater discipline on those in fiduciary positions” (per BG Lee in Singapore Parliamentary Debates (5 October 2001) at col 2149). However, it was also recognised that “without the need to prove any intent, a balance ha[d] to be struck so that it would not be too onerous for operators, especially non-executive directors” [emphasis added] (ibid at col 2149).

  130. [61] Although there is much truth in the Judge’s view (at [63] of the Judgment) that “the efficacy of the insider trading regime would be best maintained by imposing a narrow view of what is ‘generally available information’” [emphasis added], it must nevertheless be borne in mind that a balance needs to be struck, lest the SFA result in regulating the use of information in an over-expansive fashion contrary to Parliament’s intent – a point which is illustrated by the preceding paragraph.

  131. [62] Adopting too narrow an interpretation of what is “generally available” information may capture information that is fortuitously (yet legitimately (within the confines of the legislation)) gained. For example, the Supreme Court of New South Wales Court of Criminal Appeal held in R v Firns (2001) 51 NSWLR 548 (“Firns”), that information could be gained simply by the defendant being fortuitously present in court during the release of a judgment (in that case, a judgment of the Supreme Court of Papua New Guinea). Alternatively, information can also be gained from inferences and deductions gained through extra diligence or exceptional analytical skills by a sophisticated investor. Fortuitously gained information and information gained through diligence or analytical prowess were not, in our view, part of the mischief Parliament intended to address when it stated that the core evil of insider trading was in “tilting the playing field unfairly against other market participants” (see Singapore Parliamentary Debates (5 October 2001) at col 2137). The insider trading regime is not intended to have a chilling effect on the trading of securities. The approach to s 215 should therefore be neither narrow nor broad, but commonsensical. Once the interpretation of each limb of s 215 is rationalised with its underlying policy consideration, what constitutes “generally available” information will be neither under- nor over-inclusive. With these considerations in mind, let us turn to a consideration of the various limbs of s 215.

  132. The relationship between s 215(a) and s 215(b)

  133. Introduction

  134. [63] The information Lew relied on as being “generally available” under either s 215(a) or s 215(b) (“the Generally Available Information on WBL”) was as follows:

  135. (a) various press releases from WBL;

  136. (b) announcements regarding WBL posted on SGX’s or WBL’s websites; and

  137. (c) public announcements by WBL’s subsidiaries such as WPT and M-Flex.

  138. The Judge held that there was “no real dispute that such information satisfie[d] the readily observable test [under s 215(a)] or publishable information test [under s 215(b)]” [emphasis added] (see the Judgment at [72]). Implicit in the Judge’s statement is that s 215(a) and s 215(b) have separate spheres of application.

  139. [64] We agree with the Judge that s 215(a) and s 215(b) have separate spheres of application. In particular, s 215(b) is far more specific than s 215(a) and contains clearer and more stringent requirements. Put simply, under s 215(b), the information has to be “made known in a manner that would, or would be likely to, bring it to the attention” [emphasis added] of specific parties (namely, the s 215(b) Specific Common Investors), and has a time requirement of a “reasonable period for [the information] to be disseminated among [the s 215(b) Specific Common Investors]” (see also Firns). Under a literal interpretation of s 215, s 215(a) should not be constrained by s 215(b) since s 215(b) is stated to be “without limiting the generality of paragraph (a)”. Hence, Parliament clearly intended that information that falls within the scope of s 215(b) should be subject to more stringent requirements in order to be considered “generally available” information, compared to information that falls within the scope of s 215(a). Such a construction is supported by not only the literal language of s 215(a), but also the relevant legislative history of s 215(a) and s 215(b) – a point to which our attention now briefly turns.

  140. The legislative history of s 215(a) and s 215(b)

  141. [65] The Griffiths Report only proposed the “publishable information” test (as reflected in the Australian version of s 215(b)) for “generally available” information. The Explanatory Memorandum to the Corporations Legislation Amendment Bill 1991 at para 327 highlighted that the “readily observable” test (as reflected in s 215(a)) was added because of concerns that:

  142. The relevant legislative history of the Australian equivalent of s 215(a) and s 215(b) has in fact been thoroughly and perceptively explored by Mason P in Firns, whose analysis we gratefully adopt.

  143. [66] Put simply, there are at least two contrasting theories of insider trading. The first is the “market fairness” or “equal access” theory (which mandates a strict approach towards insider trading), whereas the second, viz, the “market efficiency” theory, mandates a far more benevolent approach towards insider trading (see generally Firns at [40]–[52]). The Griffiths Report endorsed the former theory, which is reflected in the “publishable information” test under the Australian equivalent of s 215(b) (see Firns at [55]). Indeed, had the relevant recommendation in the Griffiths Report been adopted (see Firns at [55]), “s 1002B(2) [the Australian equivalent of s 215] would have contained s 1002B(2)(b) [the Australian equivalent of s 215(b)] (or something similar), but not s 1002B(2)(a) [the Australian equivalent of s 215(a)] and perhaps not s 1002B(3) [the Australian equivalent of s 215(c)]” [emphasis added] (see Firns at [56]). However, when the Australian equivalent of s 215 was enacted, the Australian equivalent of s 215(a), which endorsed the latter theory (viz, the “market efficiency” theory), was also promulgated. Mason P perceptively observed that the Australian Parliament had wanted to avoid “[penalising] individual initiative and diligence” and to endorse (as well as encourage) “cleverness, swiftness and efficiency”, at least with respect to “some types of information” (see Firns at [57]). Therefore, the “market efficiency” theory was also embraced by inserting “the opaque words ‘readily observable matter’” (ibid) in the Australian equivalent of s 215(a).

  144. [67] The result, as stated in Mason P’s perceptive analysis in Firns, was that “the Griffiths Committee’s clear vision of an underlying policy of promoting fairness in the market through equal access to information became badly blurred in the legislative process” [emphasis added] (see Firns at [53]). What further resulted was, in the learned judge’s view, “a form of legislated astigmatism because the attempt to converge essentially incompatible policy goals … produced a patchy blurring of the image” [emphasis added] (ibid).

  145. [68] As Mason P correctly observed, “[t]hese policy and drafting decisions left the courts with a difficult interpretative task” [emphasis added] (see Firns at [58]); the learned judge proceeded to observe thus (ibid):

  146. [69] He also astutely pointed out, as follows (see Firns at [61]–[62]):

  147. [70] In the circumstances, Mason P’s following conclusion as to what is “readily observable matter” (here, in the context of the Australian equivalent of s 215(a)) is not at all surprising (see Firns at [68]):

  148. [71] The learned judge also observed that “[s]ometimes information [would] consist of matter that [was] directly visible, yet … not … [‘]observable[’], at least not [‘]readily[’] so”, with “[e]xamples [being] a message which is widely published yet encrypted or a gold nugget lying in a remote corner of a desert” (see Firns at [73]). Mason P was also of the view that interpreting “readily observable matter” as “facts directly observable in the public arena”, whilst “helpful in some contexts”, nevertheless “[could not] be taken too far” (citing the example, just noted, of the published encrypted message (ibid)). Indeed, the learned judge pertinently pointed out that “[a]t other times”, such an approach would be “too narrow”, citing the facts of Firns itself as an example (at [74]). In his view, “[s]ome information has the capacity to generate its own dissemination” inasmuch as “[i]ts initial disclosure may be limited, yet the type of information involved and the initial group of persons to whom it is disclosed may ensure that it gets abroad” (ibid). In this regard, “[f]or the purposes of s 1002B(2)(a) [the Australian equivalent of s 215(a)] it does not matter how many people actually observe the relevant information”, and neither is this particular provision “concerned with the time that is likely to elapse between the information becoming [‘]readily observable[’] and when it was in fact observed” as “[i]nformation may be readily observable even if no one observed it” (see Firns at [77]). This is, of course, entirely consistent with the broad ambit of the provision, as noted below (at [78]).

  149. [72] Mason P also emphasised the important impact that modern technology has on the interpretation of what is “readily observable matter”; in the learned judge’s words (see Firns at [78], which was cited by Gzell J in the Supreme Court of New South Wales decision of Australian Securities and Investments Commission v MacDonald and others (No 11) (2009) 71 ASCR 368 at [1130]):

  150. [73] At this juncture, we pause to observe that although there was a dissenting judgment by Carruthers A-J in Firns, the difference between the majority (Mason P, with whom Hidden J agreed) and the minority (Carruthers A-J) turned, in the final analysis, on their respective views as to what constituted the “public” domain. The majority held, consistently with the principles set out above by Mason P, that ready observability ought not to be tested by reference to a hypothetical person “within Australia”. Elaborating on his views above, Mason P opined thus (see Firns at [81]–[82]):

  151. [74] On the other hand, Carruthers A-J was of the view, in agreement with counsel for the respondent, “that the matter must be readily observable by the public at large as it is that group of persons who are capable of trading on the share market in Australia, or in shares of corporations which are formed or carry on business in Australia” [emphasis in original] (id at [113]). The learned judge proceeded to observe as follows (ibid):

  152. [75] Significantly, however, the issue of who should properly constitute the “public”, which was the crux of the disagreement between the majority and the minority in Firns, does not arise in the context of the present appeal. More importantly, the perceptive analysis by Mason P of the Australian equivalent of s 215(a) and s 215(b) is not affected by this disagreement. Indeed, there may, in our (provisional) view, be no real need for a definitive definition as such of the “public”, with everything depending, in the final analysis, on the precise facts and circumstances of each case, bearing in mind the observation in Firns that information may be “readily observable” notwithstanding the fact that nobody has observed it (see above at [71]). Furthermore, any interpretation of “public” must be careful to allow the market efficiency policy, as exemplified by s 215(a), to be facilitated lest over-regulation of information leads to a situation where the standards and quality of information drops to the “lowest common denominator” for the market. Indeed, investors would be deterred from taking the initiative to find out information of a higher quality from public resources if they are going to be penalised for their diligence on the basis that the information acquired is not readily observable in “public”.

  153. Conclusion

  154. [76] Although there is some potential inconsistency between s 215(a) and s 215(b) when viewed against the backdrop of their Australian origins (and as set out clearly by Mason P in Firns above), the SFA itself does in fact embody both the “market fairness” or “equal access” theory as well as the “market efficiency” theory. Although the main policy aim of the insider trading provisions in the SFA is to prevent insiders from taking advantage of their position to use information unfairly (see [53] above), this does not detract from the legislation itself recognising that insider trading legislation should not impede economically efficient exchange of information. The Judge also recognised (see [62] of the Judgment) that the SFA provisions on insider trading were part of MAS’s “continuing efforts to ensure that our markets operate fairly and efficiently” [emphasis added] (see MAS’s Insider Trading Consultation Document (27 January 2001) at para 21). The defences and exceptions to insider trading found in ss 222 to 231 of the SFA also reflect the recognition of economic efficiency as an equally vital policy consideration in Singapore’s insider trading legislation (see Alexander Loke, “From the Fiduciary Theory to Information Abuse: The Changing Fabric of Insider Trading Law in the U.K., Australia and Singapore” (2006) American Journal of Comparative Law 123 at p 166).

  155. [77] Given the fact that the SFA attempts to accommodate both the seemingly disparate theories of insider trading as noted briefly in the preceding paragraph, the following question remains: can s 215(a) and s 215(b) nevertheless be reconciled (a point which was not considered in Firns itself)? In fact, when we examine how the parity of information defences in s 231 of the SFA work with s 215, we can identify some reconciliation of these seemingly disparate policies. While s 215(b) embodies the policy of market fairness, s 231(1)(a) of the SFA read with s 215(b) also allows the policy of market efficiency to operate. Section 231(1)(a) of the SFA makes it clear that s 215(b) is largely intended to control “insiders” who have “made known” the information. Under s 231(1)(a), it is a defence in any proceedings for a contravention of s 218(2) or s 219(2) if the court is satisfied that “the information came into the … person’s possession solely as a result of the information having been made known as referred to in section 215(b)(i)” [emphasis added]. Therefore, s 215(b) does not penalise the efficient and speedy Common Investor who acted on the information in question immediately after it was made known as long as he did not, as an insider, know of the information before it was released. How s 215(a) and s 215(b) can be completely reconciled is indeed an interesting issue. However, as the parties did not address us on it, we will not venture to say anything more in the context of the present appeal.

  156. [78] Nevertheless, what is clear – and this is of the first importance from a practical perspective – is that s 215(a) is clearly broader in scope than s 215(b). As recognised above at [64], s 215(a) and s 215(b) have separate spheres of application. Hence, there must be fact situations that fall within the ambit of s 215(b) but not within s 215(a). However, while we need not, for the purposes of the present case, define the precise contours of s 215(b), we note that there must be certain types of information that Parliament intended to subject to the more stringent requirements of s 215(b) and, for those types of information, s 215(a) cannot be used as a backdoor to avoid the more stringent requirements of s 215(b). It is, nevertheless, likely that, with the broad purview of s 215(a), the sphere of application of s 215(b) will be narrow.

  157. [79] However, as already noted above (at [63]), the Generally Available Information on WBL relied upon by Lew would clearly fall within both s 215(a) and s 215(b). The issue that next arises, therefore, is whether or not s 215(c) is satisfied on the facts of the present appeal.

  158. Section 215(c)

  159. Introduction

  160. [80] It is clear that the central figure with regard to both s 215 and s 216 of the SFA is the Common Investor. As we noted above (at [58]), unlike s 216 (which relates to “persons who commonly invest in securities” generally), s 215(b) focuses on the narrower category of Common Investors of securities “of a kind whose price or value would be affected by the information” [emphasis added]. Section 215(b) requires a more specific focus on a particular group of Common Investors in order to ensure effective and fair disclosure of a specific type of inside information as defined by that provision itself. Section 216, on the other hand, relates to the issue of materiality pursuant to Issue 3 in the present appeal and, in that regard, the materiality of the inside information has to be determined from the perspective of the Common Investor of securities generally. However, despite this difference which may lead to different specific characteristics depending on the nature of information in each case, at a general level, the s 216 Common Investor and s 215(b) Specific Common Investor should both possess the same basic level of professional knowledge as elaborated below in [82].

  161. [81] Under s 215(c), it is the Common Investor who has to make the deductions, conclusions or inferences mentioned. Hence, it is from the Common Investor’s perspective from which it is deduced, concluded or inferred from the generally available information in s 215(a) and s 215(b) what information exists in the market itself. This perspective requires that an objective standard be applied to such deductions, conclusions and inferences, which must also be reasonable.

  162. [82] Both parties in the appeal agreed that the Common Investor possesses general professional knowledge and adopted the definition of the “reasonable investor” as set out in the Sarawak High Court decision of Public Prosecutor v Chua Seng Huat [1999] 3 MLJ 305 at 329–330 (“Chua Seng Huat”). In Chua Seng Huat (at 328), the reasonable investor was described as “an investor who possesses general professional knowledge as opposed to the said daily retailer or a person who has made specific researches”. Therefore while the s 215(b) Specific Common Investor and s 216 Common Investor may have different specific characteristics depending on the specific nature of information in each case, at a general level, both the s 216 Common Investor and s 215(b) Specific Common Investor should possess the same basic level of professional knowledge. In this regard, we adopt the definition of the “reasonable investor” as set out in Chua Seng Huat which refers to an investor with “general professional knowledge” with an additional dimension added to the Common Investor in [112] for the inquiry under Issue 3. This particular definition strikes a balance between daily retailers out to make a quick buck without the general knowledge of the considerations that would inform an investor as to whether or not to buy or sell securities on the one hand, and expert investors who specialise in the research of investing in securities on the other. The court in Chua Seng Huat (at 328) elaborated that “general professional knowledge” included:

  163. (a) the ability to analyse and determine the quality and the prospect of shares, which goes towards deciding when to buy;

  164. (b) the ability to do technical and fundamental analysis on information that is freely available;

  165. (c) the knowledge that fundamental analysis is the intrinsic valuation of a stock, which involves studying financial stock ratio, operating ratio and profitability ratio, and which also involves the use of variation measures like price earning ratio, dividend yield and price-to-book ratio;

  166. (d) the knowledge that technical analysis is concerned with examining the price and the volume behaviour of a share; and

  167. (e) the knowledge of how to read and analyse financial accounts and statements.

  168. We now proceed to analyse the Generally Available Information on WBL from the perspective of a Common Investor in accordance with the criteria set out above.

  169. The Judge’s findings with regard to the Generally Available Information on WBL

  170. [83] Whether or not the information in question was generally available is to be assessed at the time of the alleged insider trading transaction (see the Supreme Court of Victoria decision of R v Evans & Doyle [1999] VSC 488), in the present case, as at 4 July 2007. Although the Judge did not clarify precisely from whose perspective the deductions, conclusions and inferences from the Generally Available Information on WBL were made, we agree that the Generally Available Information on WBL that Lew relied on was too weak for the Common Investor to draw the deductions, conclusions and inferences that would enable him or her to arrive at the same content as that contained in the Information. We will not set out the Generally Available Information on WBL in detail again (which includes the financial results and announcements made by WBL regarding its results and its subsidiaries) as the Judge has already succinctly set it out in the Judgment at [9]–[14]. It would suffice for us to hold that the financial results of WBL and its subsidiaries, which showed decreasing profits, as well as the cautiously-worded forward-looking statements by WBL could not have led the Common Investor to deduce that: (a) WBL would suffer a loss in 3Q FY07; (b) WBL would take an impairment charge on WPT in 3Q FY07, (c) the quantum of the impairment charge would be significant; and (d) because of the significant impairment charge, WBL would suffer significant losses in 3Q FY07. The logic behind Lew’s proposal of a “regression analysis” based on the fact that the profits of WBL had been consistently declining was not credible: in particular, a regression analysis based on six points (which represent the available financial results for 2006 and the first two quarters of 2007, see [118] below) of declining profits was a very weak basis from which to lead the Common Investor to infer that WBL would suffer a loss in the next quarter. Indeed, Lew himself admitted the weakness of this logic:

  171. [84] The Judge was also correct to find it “significant that no profit warning was issued” (see Judgment at [78]). There was no basis in the Generally Available Information on WBL for the Common Investor to deduce that WBL was going to take an impairment charge on WPT in 3Q FY07 and that even if such an impairment could be deducible, the Common Investor could not from the Generally Available Information deduce the quantum of the impairment charge. Lew himself admitted this during cross-examination:

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