Investor Protection Paramount – Singapore High Court affirms broad scope of Securities Fraud under the Securities and Futures Act 2001 (“SFA”)

Investor Protection Paramount – Singapore High Court affirms broad scope of Securities Fraud under the Securities and Futures Act 2001 (“SFA”)

In Sun Weiyeh v Public Prosecutor [2025] SGHC 216 (“Sun”), the Singapore High Court set out for the first time its authoritative interpretation of “fraud”, for the purpose of securities fraud offences under s 201(b) of the SFA. 

In terms of the mens rea of the offence, the High Court held that “fraud” does not require a specific intention to deceive, manipulate or defraud. It clarified that the touchstone of fraud is dishonesty, and an offence under s 201(b) would be made out upon proof that the offender acted with an objectively dishonest state. 

The High Court found that the offence under s 201(b) encompassed situations in which an accused person abused their position to enrich themselves at the expense of their principals. 

In this regard, it would be dishonest for a person (A), who is placed in a position where he is expected not to act against the financial interests of another person (B), to do an act intentionally with the knowledge that his act would be detrimental to the financial interests of B. This is even more so if B's financial loss results in financial gain to A.

Background facts in Sun

In Sun, the Appellant was a portfolio manager of several funds managed by the now-defunct One Asia Investment Partners. He had sold over the counter bonds from one fund that he managed (the “Selling Fund”) at undervalued prices to another fund in which he held a majority stake of 94.1%, despite knowing of higher bids for the bonds from third parties. The Appellant deliberately chose to sell the bonds to himself because he “liked” these bonds and because he was aware of their high potential value. 

By doing so, the Appellant caused losses of US$324,500 to investors of the Selling Fund. On the other hand, the Appellant realised a handsome profit of US$1.16 million when he eventually sold the bonds in the market. 

At first instance, he was convicted on two charges under s 201(b) of the SFA for engaging in acts that were “likely to operate as a fraud” upon the investors of the Selling Fund, and sentenced to six months’ imprisonment.

The High Court dismissed the appeal and clarified the meaning of “fraud” under s 201(b) SFA

On appeal, the Appellant contended that the DJ erred in law, and argued that “fraud” under s 201(b) of the SFA required proof of deception, done with an intent to obtain an advantage for himself or herself, or to impose a disadvantage on someone else by such means of deception. The Appellant argued that his position was aligned to the definition of the word “fraudulently” in s 25 of the Penal Code 1871, which specifies an intent to deceive another person.

The High Court disagreed, and held that the definition of "fraudulently" in the Penal Code could not apply to "fraud" in s 201(b) of the SFA. In the context of s 201(b) SFA, the High Court recognised that the legislative intention was the need to ensure that investors would be adequately protected from fraud. Fraud could take many forms and Parliament had intended s 201(b) SFA to be broad in scope. 

Hence, while the High Court did not set out a precise definition of fraud, it clarified that the scope of “fraud” was not confined exclusively to cases also involving deception. 

Where a person is placed in a position where he is expected to safeguard, or not act against, the financial interests of another person, the abuse of such a position which results in detriment to the financial interests of the other person would fall within the types of acts envisaged in s 201(b) of the SFA. 

There is no requirement that the offender must have a specific intent to deceive, manipulate or defraud for an offence under s 201(b) of the SFA to be made out. The touchstone of fraud is dishonesty, and an offence would be made out upon proof that the offender acted with an objectively dishonest state of mind.

Practical implications 

Professionals in the financial sector, such as fund managers and advisors, must always uphold their duty to act honestly and in the best interests of investors. Following the conviction in Sun, the Monetary Authority of Singapore (“MAS”) reiterated that directors and portfolio managers of fund management companies owe a fundamental duty to act in investors’ interests at all times. MAS has also made clear that it will take to task persons who abuse their position in the financial sector for personal gain, to the detriment of investors. 

From a regulatory standpoint, the case also signals that severe penalties are likely to be imposed to deter similar misconduct.

It is therefore advisable for financial institutions and professionals to reassess their internal governance controls, strengthen conflict of interest protocols, and enhance transaction oversight to prevent any abuse of position. 

Further, this case underscores the crucial role of whistleblowers in uncovering complex financial misconduct, and the value of proactive internal reporting frameworks to identify and address issues before they escalate into enforcement action. The offences in question, involving abuse of position and conflicts of interest, were inherently difficult to detect. The High Court notably observed that the misconduct would not have come to light but for a whistleblower’s letter to the MAS. 

Fostering a culture that encourages responsible reporting and maintaining robust, accessible whistleblowing channels are essential to strengthening organisational integrity and accountability.