Prohibited Market Conduct
All customers need to be aware that certain market conduct are prohibited under the Securities and Futures Acts (“SFA”). Relevant prohibited market conduct are set out below:
False trading and market rigging transactions
197.—(1) No person shall do any thing, cause any thing to be done or engage in any course of conduct, if his purpose, or any of his purposes, for doing that thing, causing that thing to be done or engaging in that course of conduct, as the case may be, is to create a false or misleading appearance —
(a) of active trading in any capital markets products on an organised market; or
(b) with respect to the market for, or the price of, any capital markets products traded on an organised market.
(1A) No person shall do any thing, cause any thing to be done or engage in any course of conduct that creates, or is likely to create, a false or misleading appearance of active trading in any capital markets products on an organised market, or with respect to the market for, or the price of, any capital markets products traded on an organised market, if —
(a) he knows that doing that thing, causing that thing to be done or engaging in that course of conduct, as the case may be, will create, or will be likely to create, that false or misleading appearance; or
(b) he is reckless as to whether doing that thing, causing that thing to be done or engaging in that course of conduct, as the case may be, will create, or will be likely to create, that false or misleading appearance.
(2) A person must not maintain, inflate, depress, or cause fluctuations in, the market price of any capital markets products —
(a) by means of any purchase or sale of any capital markets products that does not involve a change in the beneficial ownership of the capital markets products; or
(b) by any fictitious transaction or device.
(3) Without prejudice to the generality of subsection (1), it is presumed that a person’s purpose, or one of a person’s purposes, is to create a false or misleading appearance of active trading in capital markets products on an organised market if the person —
(a) effects, takes part in, is concerned in or carries out, directly or indirectly, any transaction of purchase or sale of the capital markets products, being a transaction that does not involve any change in the beneficial ownership of the capital markets products;
(b) makes or causes to be made an offer to sell the capital markets products at a specified price, where the person has made or caused to be made or proposes to make or to cause to be made, or knows that a person associated with the person has made or caused to be made or proposes to make or to cause to be made, an offer to purchase the same number, or substantially the same number, of the capital markets products at a price that is substantially the same as the firstmentioned price; or
(c) makes or causes to be made an offer to purchase the capital markets products at a specified price, where the person has made or caused to be made or proposes to make or to cause to be made, or knows that a person associated with the person has made or caused to be made or proposes to make or to cause to be made, an offer to sell the same number, or substantially the same number, of the capital markets products at a price that is substantially the same as the firstmentioned price.
(4) The presumption under subsection (3) may be rebutted if the defendant establishes that the purpose or purposes for which he did the act was not, or did not include, the purpose of creating a false or misleading appearance of active trading in the capital markets products on the organised market.
(5) For the purposes of this section, a purchase or sale of capital markets products does not involve a change in the beneficial ownership if any of the following persons has an interest in the capital markets products after the purchase or sale:
(a) a person who had an interest in the capital markets products before the purchase or sale;
(b) a person associated with the person mentioned in paragraph (a).
(6) In any proceedings against a person for a contravention of subsection (2) in relation to a purchase or sale of capital markets products that did not involve a change in the beneficial ownership of the capital markets products, it is a defence if the defendant establishes that the purpose or purposes for which the defendant purchased or sold the capital markets products was not, or did not include, the purpose of creating a false or misleading appearance with respect to the market for, or the price of, the capital markets products.
(7) The reference in subsection (3)(a) to a transaction of purchase or sale of the capital markets products includes —
(a) a reference to the making of an offer to purchase or sell the capital markets products; and
(b) a reference to the making of an invitation, however expressed, that expressly or impliedly invites a person to offer to purchase or sell the capital markets products.
Market manipulation in relation to securities and securities-based derivatives contracts
198.—(1) A person must not effect, take part in, be concerned in or carry out, directly or indirectly, 2 or more transactions in securities, or securities-based derivatives contracts, of a corporation, being transactions that have, or are likely to have, the effect of raising, lowering, maintaining or stabilising the price of securities, or securities-based derivatives contracts, as the case may be, of the corporation on an organised market, with the intent to induce other persons to subscribe for, purchase or sell securities, or securities-based derivatives contracts, as the case may be, of the corporation or of a related corporation.
(2) A person must not effect, take part in, be concerned in or carry out, directly or indirectly, 2 or more transactions in securities, or securities-based derivatives contracts, of a business trust, being transactions that have, or are likely to have, the effect of raising, lowering, maintaining or stabilising the price of securities, or securities-based derivatives contracts, as the case may be, of the business trust on an organised market, with the intent to induce other persons to subscribe for, purchase or sell securities, or securities-based derivatives contracts, as the case may be, of the business trust.
(3) In this section —
(a) a reference to transactions in securities or securities-based derivatives contracts of a corporation includes —
(i) a reference to the making of an offer to purchase or sell such securities or securities-based derivatives contracts, as the case may be; and
(ii) a reference to the making of an invitation, however expressed, that directly or indirectly invites a person to offer to purchase or sell such securities or securities-based derivatives contracts, as the case may be; and
(b) a reference to transactions in securities or securities-based derivatives contracts of a business trust includes —
(i) a reference to the making of an offer to purchase or sell such securities or securities-based derivatives contracts, as the case may be; and
(ii) a reference to the making of an invitation, however expressed, that directly or indirectly invites a person to offer to purchase or sell such securities or securities-based derivatives contracts, as the case may be.
False or misleading statements, etc.
199. No person shall make a statement, or disseminate information, that is false or misleading in a material particular and is likely —
(a) to induce other persons to subscribe for securities, securities-based derivatives contracts or units in a collective investment scheme
(b) to induce the sale or purchase of securities, securities-based derivatives contracts or units in a collective investment scheme, by other persons; or
(c) to have the effect (whether significant or otherwise) of raising, lowering, maintaining or stabilising the market price of securities, securities-based derivatives contracts or units in a collective investment scheme,
if, when he makes the statement or disseminates the information —
(i) he does not care whether the statement or information is true or false; or
(ii) he knows or ought reasonably to have known that the statement or information is false or misleading in a material particular.
Fraudulently inducing persons to deal in capital markets products
200.—(1) No person shall —
(a) by making or publishing any statement, promise or forecast that he knows or ought reasonably to have known to be misleading, false or deceptive;
(b) by any dishonest concealment of material facts;
(c) by the reckless making or publishing of any statement, promise or forecast that is misleading, false or deceptive; or
(d) by recording or storing in, or by means of, any mechanical, electronic or other device information that he knows to be false or misleading in a material particular,
induce or attempt to induce another person to deal in capital markets products.
(2) In any proceedings against a person for a contravention of subsection (1) constituted by recording or storing information as mentioned in subsection (1)(d), it is a defence if it is established that, at the time when the defendant so recorded or stored the information, he had no reasonable grounds for expecting that the information would be available to any other person.
(3) In any proceedings against a person for a contravention of subsection (1) in relation to the dealing in capital markets products that are securities, securities-based derivatives contracts or units in a collective investment scheme, the opinion of any registered or public accountant as to the financial position of any company at any time or during any period in respect of which he has made an audit or examination of the affairs of the company according to recognised audit practice shall be admissible, for any party to the proceedings, as evidence of the financial position of the company at that time or during that period, notwithstanding that the opinion is based in whole or in part on book-entries, documents or vouchers or on written or verbal statements by other persons.
Employment of manipulative and deceptive devices
201. No person shall, directly or indirectly, in connection with the subscription, purchase or sale of any capital markets products —
(a) employ any device, scheme or artifice to defraud;
(b) engage in any act, practice or course of business which operates as a fraud or deception, or is likely to operate as a fraud or deception, upon any person;
(c) make any statement he knows to be false in a material particular; or
(d) omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.
For the SFA proper, please refer to Securities and Futures Act
In addition to SFA, please see the following for the rules regarding prohibited market practices of the following exchanges. Please visit the relevant exchanges for more details, or follow the links below:-
SGX-ST (SGX Rulebooks - Chapter 3 Conduct of Members, Approved Traders and Representatives)
Rule 5.12.2 False Trading and Market Rigging
SGX-ST's determination of whether a course of conduct is likely to create a false or misleading appearance will be made on an objective basis. The factors that SGX-ST will take into account when making that determination include but are not limited to the following:
(a) whether the execution of the transaction is inconsistent with the recent trading activity in the security or futures contract, taking into account prevailing market conditions;
(b) whether the execution of the transaction is likely to cause or contribute to a material change in the price of, or the market for, the security or futures contract, and whether the person involved or another person with whom the first person is collaborating may directly or indirectly benefit from alterations in the market or price;
(c) whether the execution of the transaction involves the placing of multiple buy and sell orders at various prices higher or lower than the market price, or the placing of buy and sell orders that give the appearance of increased volume;
(d) whether the execution of transaction is likely to coincide with or influence the calculation of reference prices, settlement prices and valuations;
(e) whether parties involved in the transaction are connected or associated with each other;
(f) whether the order or orders for the purchase (or sale) of a security or futures contract is or are entered with the knowledge that an order or orders of substantially the same size, at substantially the same time and at substantially the same price, for the sale (or purchase) of the security or futures contract has been or will be entered by or for the same or different parties (excluding Direct Business);
(g) whether the execution of the transaction is likely to cause the price of the security or futures contract to increase or decrease, but following which the price is likely to immediately return to about its previous level;
(h) whether the bid (or offer) is higher (or lower) than the previous bid (or offer) but is withdrawn or amended to avoid execution;
(i) whether the volume or size of the order or transaction is excessive relative to reasonable expectations of the depth and liquidity of the market at the time;
(j) whether the buy (or sell) order is likely to trade with the entire best offer (or bid) volume and part of the offer (or bid) at the next price level;
(k) whether the buy (or sell) order forms part of a series of orders that successively and consistently increase (or decrease) the price of the security or futures contract; and
(l) whether there appears to be a legitimate commercial reason for the transaction.
Rule 5.12.3 Transaction with no change in beneficial ownership
A Trading Member or a Trading Representative must not effect, take part in, be concerned in, or carry out, directly or indirectly, any transaction to purchase or sell a security or futures contract, being a transaction that does not involve any change in the beneficial ownership of the security or futures contract as defined in Section 197(5) of the Securities and Futures Act. It is a defence if the Trading Member or Trading Representative can show that the purpose or purposes for which it or he purchased or sold the security or futures contract was not, or did not include, the purposes of creating a false or misleading appearance with respect to the market for, or the price of, the security or futures contract.
Rule 5.12.5 Market manipulation
A Trading Member or a Trading Representative must not deal in a security or futures contract in a manner that will or may have the effect of raising, lowering, maintaining or stabilising the price of the security or futures contract or its underlying (where applicable), with intent to induce other persons to subscribe for, purchase or sell the security or futures contract. This Rule 5.12.5 does not apply to stabilising action carried out in accordance with Regulations 3A or 3B of the Securities and Futures (Market Conduct) (Exemptions) Regulations 2006.