Dennis Tey Thean Yang, a Malaysian national, was sentenced to 16 weeks imprisonment by a Singapore judge after he pleaded guilty to charges that he engaged in spoofing-type conduct involving the trading of contracts for differences and their underlying securities between October 2012 and January 8, 2013. (CFDs involving securities typically are contracts between an investment bank and an investor where the parties exchange the difference in the price of a specific quantity of a security between the beginning and end of the term of the contract.) According to the Monetary Authority of Singapore, during the relevant time, Mr. Tey placed “false orders” in the underlying securities listed on the Singapore Exchange in order to influence the prices in the corresponding CFDs offered by IG Asia Pte Ltd and CMC Markets Singapore Pte. After executing the CFDs, Mr. Tey cancelled his orders in the underlying securities. He realized profits of Sing $30,239 (US $22,000) through his activities, said MAS. Mr. Tey was charged with his alleged offenses following an investigation by MAS and the Commercial Affairs Department of the Singapore Police Force. This action marked the first criminal enforcement effort by the Singapore authorities. Separately, the China Securities Regulatory Commission sanctioned Hanbo Tang RMB 251 million (US $36.4 million) including disgorgement of RMB 42 million (US $2.1 million), for engaging in cross-border market manipulation in China using the stock connect arrangement between the Hong Kong Exchange and the Shanghai Stock Exchange. According to CSRC, Mr. Tang accomplished his objectives with the assistance of his trader, Tao Wang (who also was fined RMB 600,000 (US $87,000)) by using three accounts in HK and one in China to engage in various manipulative practices, including spoofing and wash trading of a stock listed on the Shanghai Exchange. (Click here for background on the Shanghai and Shenzen Stock Connect – a means to access China stock markets through accounts in HK.) Both Mr. Tang and Mr. Wang are citizens of China. This case was the first enforcement action by CSRC related to cross-border market manipulation.

My View: Last year, Michael Coscia, the first individual prosecuted and convicted under the provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act that expressly prohibits spoofing, was sentenced to three years in prison. This was after Mr. Coscia settled civil actions related to the same conduct with the Commodity Futures Trading Commission, the Financial Conduct Authority and the CME Group by payments of aggregate fines of approximately US $3.1 million; disgorgement of profits; and a one-year trading suspension. Subsequent to his sentencing, Mr. Coscia appealed his conviction to a Federal Court of Appeals where oral arguments were held on November 10, 2016. (Click here for background on Mr. Coscia’s alleged offenses, conviction, sentencing, and appeal in the article “Federal District Court Approves Flash Crash Spoofer’s US $38 Million Settlement; Federal Appeals Court Appears Sympathetic to Michael Coscia’s Claim That Spoofing Prohibition Is Too Vague” in the November 20, 2016 edition of Bridging the Week.) As I have written many times, although Mr. Coscia’s conduct may have been problematic, he was convicted under a provision of law that prohibits “spoofing” but defines it as “bidding or offering with the intent to cancel the bid or offer before execution.” However, many legitimate orders, including stop loss orders, are placed with the goal or hope not to have the order executed, as that would mean the value of a position is declining. The Federal District Court judge overseeing Mr. Coscia’s trial did not have a problem with the clarity of the relevant statute and, in any case, believed that Mr. Coscia should have known his specific trading was prohibited. Soon we should know what the Court of Appeals thinks.