Three traders with the Government of Singapore Investment Corp were found to have used non-public price-sensitive information in selling shares in Sumitomo Mitsui Financial Group in February 2003 to avoid a loss of S$710,000 (US$424,570), the Monetary Authority of Singapore (MAS) said.

The sale was in response to a planned convertible preferred share offering by SMFG, Japan’s second largest banking group, before it was publicly disclosed.

The traders had anticipated that the SMFG share offer would cause a subsequent fall in the bank’s share price.

The disclosure of the insider trading deal came after a recent report by Standard Poor’s, the international ratings agency, suggested that GIC, which manages more than US$100bn in Singapore’s reserves, had suffered poor investment returns in the last five years.

The three traders were fined S$715,000, but were not dismissed from their jobs.

“GIC has taken into account that the substantial financial penalties will be borne personally by them and that they had not personally benefited from the transaction,” GIC said.

In 1997, a senior GIC manager was convicted of accepting bribes for buying shares in a listed company, but his conviction was later overturned on appeal.

MAS, the city-state’s financial supervisor, said it had been alerted to the insider trading by Japan’s Financial Services Agency and Securities and Exchange Surveillance Commission. It did not say when it had learned of the case and why it took 18 months to be made public.

GIC is barred by law from investing in Singapore and its holdings consist of overseas equities, bonds and property.

The performance of the secretive investment group is overseen by Lee Kuan Yew, modern Singapore’s founding father, and his son Lee Hsien Loong, the prime minister, who serve as GIC chairman and deputy chairman, respectively.

The government has never disclosed the exact amount of the government reserves that GIC manages or its return on investments since the fund was established in 1981.

Raymond Lim, the acting second finance minister, told parliament this week that it was not in Singapore’s national interest to disclose such financial data since the information could be used by speculators to attack the Singapore dollar.

MAS said it brought the action against GIC under a new civil penalty regime that came into force this year.

In addition to the fines levied against the three traders, GIC has agreed to pay S$710,000 to MAS to support a financial consumer education programme.

“MAS investigations did not find any breach of the SFA (Securities and Futures Act) by GIC,” the authority said.

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