Untitled DocumentIn March 1999 the executive chairman of Goldtron, Ong Soon Kiat, was charged with eight counts of false trading under Section 97(1)(1) of the Securities Industries Act. This was the third such case concerning false trading following enactment of the Securities Industries Act in 1986. It is useful to see what the Singapore courts have accepted as 'false trading' for the purpose of Section 97(1).

The Goldtron Case

The facts
Goldtron's shares are listed on the secondary board of the Stock Exchange of Singapore - known as SESDAQ (which is similar to the United States' NASDAQ).

In July 1995 Ong had invited a certain Indonesian party to form a strategic alliance with Goldtron in Indonesia. Ong offered the Indonesian party a substantial stake in Goldtron and offered to procure 35 million Goldtron shares at S$1.10 per share. Ong informed the Indonesian party that the 35 million shares would have to be purchased in tranches and from the market itself.

Between July and October 1995, the Indonesian party was notified on four occasions to purchase tranches of Goldtron shares through his stockbrokers. However, the shares were to be purchased at inflated prices of S$1.23 to S$1.65 per share. Ong persuaded the Indonesian party to buy at these inflated prices as Ong undertook to reimburse the Indonesian party the difference in the purchase price, the commission and brokerage charges.

In total, the Indonesian party, and subsequently his company, purchased 24.5 million Goldtron shares from the market. These purchases had the effect of boosting Goldtron's share prices and trading volume during the period July to October 1995 as well as improving Ong's own 30.4% interest at that time.

The prosecution's case
It was part of the prosecution's case that the four transactions caused investors to have a favourable disposition to Goldtron's shares and to believe that there was a greater demand for these shares than there actually was. The investors were also misled that the trading prices in the market reflected the demand for these shares as they were not aware of the private deal of only S$1.10 per share.

The sentence
Ong pleaded guilty to five counts of false trading and agreed to the remaining three counts being taken into consideration for the purpose of sentencing. Citing the need to protect the investors, the court imposed the maximum fine of S$50,000 per charge as a deterrent sentence. Ong escaped a custodial sentence that could have been imposed - a maximum prison term of seven years.


As Ong quickly pleaded guilty to the charges, the prosecution did not set out the reasons why Ong embarked on the scheme to artificially inflate the price of Goldtron's shares.

The court did not have the opportunity to define 'false trading'. However, it appears that the court may accept as 'false trading' any scheme in which the times and prices at which a player (including an innocent player) enters the market have been pre-determined if the rest of the market is misled by such player's trades.


(1)Section 97(1) states: "A person shall not create or cause to be created, or do anything that is calculated to create, a false or misleading appearance of active trading in any securities on a securities exchange in Singapore or a false or misleading appearance with respect to the market for, or the price of, any such securities."

For more information on this topic contact Rosalind Lazar at Drew & Napier by telephone (+65 531 2412) or by fax (+65 532 7149) or by email ([email protected]). The Drew & Napier web site can be accessed at www.drewnapier.com .

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