SINGAPORE (Oct 15): Representatives from CGS-CIMB Securities and DBS Vickers Securities in court on Tuesday denied knowledge of unauthorised third-party instructions in the trading of stocks related to the 2013 penny stock crash.

Taking the stand at the trial of John Soh Chee Wen and Quah Su-Ling, the alleged masterminds behind the market manipulation scandal, the representatives in their respective conditioned statements had also said they would have rejected Soh as an authorised third-party.

Voo Wai Lum, the regional head of compliance at CGS-CIMB, noted adverse media reports on Soh, while DBS Vickers’ Sim Han Kiang said Soh would not have been approved as an authorised operator based on the broking house’s screenings.

Instructions from John Soh

However, Voo revealed that one of CGS-CIMB’s trading representatives, Yu May San, had received trading instructions from Soh.

The revelation came after the Monetary Authority of Singapore in January 2018 requested for information concerning the accounts of Edwin Sugiarto, Adeline Cheng Jo-Ee, Quah Su-Ling, James Hong Gee Ho, and Friendship Bridge Holding.

During an interview when CGS-CIMB conducted its investigation in February 2018, Yu had revealed that she had received instructions from Soh.

According to Voo, Yu claimed that she had “erroneously believed” that her clients Quah and Sugiarto had completed and returned the third-party authorisation forms. This was to authorise Soh to give trading instructions on their behalf.

Yu was subsequently disciplined by CGS-CIMB. She was given a letter of warning and a month’s suspension, and was also placed under close supervision for a year after her suspension.

CGS-CIMB’s other trading representatives did not receive any disciplinary action.

One of these trading representatives, Jenny Lim Mui Yin, who was Hong’s broker, claimed that the trading orders came directly from Hong.

Meanwhile, the trading representative for the Friendship Bridge account had left by the time CGS-CIMB started its investigation.

Under cross-examination by Soh’s lawyer, senior counsel N. Sreenivasan of K&L Gates Straits Law, Voo admitted that CGS-CIMB had carried out investigations on these accounts due to the MAS query.

He added that some of these accounts were reviewed as part of the broking house’s compliance practices. However, no disciplinary action was taken until the query.

Voo also revealed that, beyond her own signed statement to CGS-CIMB, there was no proof of Yu taking instructions from Soh.

Third-party authorisation

Sreenivasan also asked Voo whether account holders would assume that a third-party authorisation form is not needed unless the trading representatives “make noise”.

Later, Quah’s counsel, Philip Fong, managing partner at Eversheds Harry Elias, also pressed him on the same issue.

However, Voo adamantly stuck to his guns, and repeated that account holders cannot assume so because the clause is present in the terms and conditions when opening an account.

Questioned further by Sreenivasan, Voo also revealed that CGS-CIMB would accept third-party cheques to settle trading losses if the third party is deemed appropriate to make the payment.

Later, DBS Vickers’ Sim also repeated that the broking house does not allow unauthorised third-party instructions.

Sim also revealed that DBS Vickers had suspended Sugiarto’s account after adverse news broke about him. However, no disciplinary action was taken against Sugiarto’s trading representative, Fred Yong.

When grilled by Sreenivasan, Sim admitted that DBS Vickers would not have known if Soh or Quah gave such instructions to Yong.

When asked about the third-party authorisation form, Sim – in a departure from the usual reply from financial institutions – said that it was the client’s responsibility to provide the paperwork

Sim also agreed that it is the trading representative’s responsibility to ensure they take instructions only from the account holder or authorised third parties.

The trial resumes on Oct 21.

What the 2013 Penny Stock Crash trial is about

John Soh Chee Wen is the alleged mastermind behind the penny stock crash of 2013, which prosecutors have called “the most audacious, extensive and injurious market manipulation scheme ever in Singapore”.

Together with his alleged co-conspirator and girlfriend Quah Su-Ling, Soh and his associates are alleged to have been behind the massive rise and sudden collapse of shares in Blumont Group, LionGold Corp and Asiasons Capital (now Attilan Group), which wiped out some $8 billion in market value.

Subscribers can click here to read our 8-page special pullout on the penny stock crash trial.

Don’t miss out on these highlights in the penny stock saga so far:

Second tranche of witnesses (starting Oct 1, 2019)

First tranche of witnesses (March 11, 2019 to May 24, 2019)