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SFA Part XII — Market Conduct

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| Document Type | MAS Act | | Status | current | | Last Updated | 2026-05-02 | | Source | https://sso.agc.gov.sg/Act/SFA2001 |

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Overview

Part XII of the Securities and Futures Act 2001 (SFA) contains Singapore's core market misconduct provisions. These provisions are designed to maintain fair, orderly, and transparent capital markets by prohibiting insider trading, market manipulation, false trading, and other forms of market abuse.

Part XII establishes both criminal offences and a civil penalty regime, allowing MAS to pursue enforcement through criminal prosecution (via the Public Prosecutor) or civil penalty proceedings before the courts.

Note: While historically referred to as "Part V" in some commentary, the market conduct provisions are located in Part XII (Sections 197–232) of the current SFA as revised.

Division 1 — False Trading and Market Rigging

Section 197 — False Trading and Market Rigging Transactions

Prohibition: No person shall create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any capital markets products on an organised market, or a false or misleading appearance with respect to the market for, or the price of, any capital markets products.

Prohibited conduct includes:

  1. Wash trading — Entering into transactions that involve no change of beneficial ownership (buying and selling the same securities through different accounts controlled by the same person).

  2. Matched orders — Entering orders to buy or sell securities with the knowledge that a substantially similar order has been or will be entered by the same person or an associate, at substantially the same time, price, and quantity.

  3. Painting the tape — Entering into a series of transactions to give the appearance of active trading volume in a security, with no genuine change of ownership or economic interest.

  4. Marking the close — Executing trades near the close of trading to affect the closing price of a security, particularly to influence derivative settlement prices or portfolio valuations.

  5. Cornering or squeezing — Acquiring a dominant position in a capital markets product with the purpose of manipulating the price.

Elements of the offence: - The person must have done something (act or omission) - That creates, or is intended or likely to create, a false or misleading appearance - Of active trading or of the market/price of capital markets products - On an organised market (i.e., an exchange or recognised market operator)

Section 198 — Securities Market Manipulation

Prohibition: No person shall effect, take part in, be concerned in, or carry out (directly or indirectly) two or more transactions in capital markets products, being transactions that have or are likely to have the effect of:

  1. Raising the price of those capital markets products
  2. Lowering the price of those capital markets products
  3. Maintaining the price of those capital markets products
  4. Stabilising the price of those capital markets products

where those transactions were entered into for the purpose of inducing other persons to subscribe for, purchase, or sell those capital markets products.

Key distinction from Section 197: Section 198 targets price manipulation through actual transactions (not merely creating false appearances), where the purpose is to induce others to trade.

Section 199 — False or Misleading Statements

Prohibition: No person shall make a statement, or disseminate information, that is false or misleading in a material particular and is likely to:

  1. Induce other persons to subscribe for, purchase, or sell capital markets products; or
  2. Have the effect of raising, lowering, maintaining, or stabilising the market price of capital markets products

if the person: - Does not care whether the statement or information is true or false; or - Knows or ought reasonably to have known that the statement or information is false or misleading in a material particular.

Scope: This provision covers a broad range of communications, including: - Research reports and analyst recommendations - Company announcements and press releases - Social media posts and online forum discussions - Tips and rumours deliberately circulated - False order book information

Section 200 — Fraudulently Inducing Trading

Prohibition: No person shall, by making or publishing any statement, promise, or forecast that the person knows to be misleading, false, or deceptive:

  1. Induce or attempt to induce another person to deal in capital markets products; or
  2. With the intention of creating or maintaining a market price that is artificial

Elements: - The person must have made or published a statement, promise, or forecast - The person must have known it to be misleading, false, or deceptive - The purpose must have been to induce trading or create artificial prices

Section 201 — Employment of Manipulative and Deceptive Devices

Prohibition: No person shall, in connection with the subscription, purchase, or sale of any capital markets products:

  1. Employ any device, scheme, or artifice to defraud
  2. 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
  3. Make any untrue statement of a material fact, or omit to state a material fact necessary to make statements made not misleading

This is a broad "catch-all" anti-fraud provision modelled on US SEC Rule 10b-5.

Division 2 — Insider Trading

Section 218 — Insider Trading — Connected Person

Prohibition: A person who is connected to a corporation must not (whether as principal or agent):

  1. Subscribe for, purchase, or sell, or enter into an agreement to subscribe for, purchase, or sell, any securities of the corporation; or
  2. Procure another person to do any of the above

if the person possesses information that is not generally available and which, if it were generally available, a reasonable person would expect to have a material effect on the price or value of those securities.

Connected persons include: - Officers (directors, secretaries, executives) of the corporation - Substantial shareholders (holding 5% or more of voting shares) - Persons occupying a position that may reasonably be expected to give them access to inside information (e.g., auditors, lawyers, bankers advising on a transaction) - Persons who obtained inside information from a connected person (tippees)

Section 219 — Insider Trading — Other Persons

Prohibition: Any person (whether or not connected to the corporation) who possesses information that:

  1. Is not generally available; and
  2. If it were generally available, a reasonable person would expect it to have a material effect on the price or value of securities

must not trade in those securities or procure another person to do so.

Key elements:

"Information that is not generally available": - Information is generally available if it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of that kind. - Information is also generally available if it consists of readily observable matter or deductions, conclusions, or inferences made from generally available information. - A reasonable period must have elapsed since the information was made generally available for the market to absorb it.

"Material effect on price or value": - A reasonable person would expect the information to have a material effect on the price or value of the securities if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of those securities.

Section 220 — Defence: Knowledge of Inside Information

It is a defence to prove that: - The person did not know, and ought not reasonably to have known, that the information was not generally available - The person entered into the transaction for reasons unrelated to the inside information (e.g., a pre-existing obligation)

Section 221 — Defence: Chinese Walls

It is a defence for a corporation to prove that: - The individual making the decision to trade did not possess the inside information - Effective Chinese wall arrangements were in place to prevent the flow of inside information to the decision-maker - The information was not communicated to the decision-maker

Tipping (Section 218(3)–(5))

A connected person who possesses inside information must not communicate the information to another person if the connected person knows, or ought reasonably to know, that the other person would or would be likely to:

  1. Subscribe for, purchase, or sell securities of the corporation; or
  2. Procure a third person to do so

This provision targets the deliberate or reckless communication of inside information ("tipping") regardless of whether the tipper personally trades.

Division 3 — Civil Penalty Regime

Section 232 — Civil Penalty for Market Misconduct

MAS may, with the consent of the Public Prosecutor, bring an action in court for a civil penalty against any person who has contravened any of the market conduct provisions in Part XII.

Civil penalty amounts: - For individuals: up to S$2,000,000 or 3 times the amount of profit gained or loss avoided (whichever is greater) - For corporations: up to S$4,000,000 or 3 times the amount of profit gained or loss avoided (whichever is greater)

Standard of proof: Civil standard (balance of probabilities), which is lower than the criminal standard (beyond reasonable doubt).

Advantages of civil penalty route: - Lower standard of proof - Faster proceedings compared to criminal prosecution - MAS can pursue cases where criminal prosecution may be difficult - Can result in prohibition orders in addition to financial penalties

Relationship Between Criminal and Civil Proceedings

  • MAS and the Public Prosecutor will determine whether to pursue criminal prosecution or civil penalty action.
  • Both cannot be pursued simultaneously for the same conduct.
  • An acquittal in criminal proceedings does not prevent civil penalty proceedings (as the standard of proof differs).
  • A conviction in criminal proceedings may be used as evidence in civil penalty proceedings.

Division 4 — Defences and Exceptions

Stabilisation (Section 203A)

Price stabilisation activities conducted in accordance with prescribed conditions are exempt from the market manipulation provisions. Stabilisation is permitted in connection with the distribution of newly issued securities, subject to: - The stabilisation being conducted by or on behalf of the issuer or lead manager - Compliance with SGX Listing Rules on stabilisation - Disclosure of stabilisation activities in the offer document - Time limits on stabilisation period (typically 30 calendar days after the close of the offering)

Market-Making

Legitimate market-making activities are not considered market manipulation, provided the market maker: - Has been approved by the relevant exchange - Acts in accordance with market-making obligations - Does not engage in manipulative conduct outside of its market-making function

Buy-Backs

Share buy-back programmes conducted in accordance with the Companies Act and SGX Listing Rules are generally exempt from the market manipulation provisions.

Practical Implications for Financial Institutions

Compliance Framework Requirements

Financial institutions must establish robust frameworks to:

  1. Prevent insider trading:
  2. Maintain restricted lists and watch lists
  3. Implement Chinese wall procedures between departments
  4. Monitor personal trading by employees
  5. Establish pre-clearance procedures for employee trades

  6. Conduct regular training on insider trading obligations

  7. Detect market manipulation:

  8. Implement surveillance systems for unusual trading patterns
  9. Monitor order-to-trade ratios
  10. Review large or unusual orders before execution

  11. Report suspicious transactions to MAS (STR obligations under CDSA)

  12. Control information flow:

  13. Classify information by sensitivity level
  14. Restrict access to material non-public information (MNPI)
  15. Monitor communications (email, chat, phone) for potential information leaks
  16. Maintain records of persons with access to MNPI (insider lists)

Reporting Obligations

Financial institutions must report suspicious transactions to MAS under: - Section 201B of the SFA (suspicious transaction reporting) - The Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA) for suspicious transactions relating to proceeds of crime

Training Requirements

All representatives and relevant staff must receive training on: - Recognition of insider trading and market manipulation - Obligations under Part XII of the SFA - Internal policies and procedures for preventing market abuse - Reporting channels for suspicious activities - Consequences of non-compliance (criminal and civil penalties)

Cross-References

  • Part XIII — Penalties and enforcement provisions
  • SF(LCB)R — Business conduct requirements for CMS licence holders
  • MAS Practice Note — Guidance on enforcement approach for market misconduct
  • SGX Listing Rules — Listed company disclosure obligations, continuous disclosure
  • Singapore Code on Take-overs and Mergers — Restrictions on trading during take-over periods
  • Companies Act — Share buy-back provisions, director duties

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