July 31, 2013
Securities and Exchange Surveillance Commission
Recommendation for Administrative Monetary Penalty Payment Order for Market Manipulation of the Shares of RISE Inc.
1. Contents of the Recommendation
Pursuant to Article 20(1) of the Act for Establishment of the Financial Services Agency (the “FSA”), on July 31, 2013, the Securities and Exchange Surveillance Commission made a recommendation that the Prime Minister and the Commissioner of the FSA shall issue an administrative monetary penalty payment order for market manipulation of the shares of RISE. This recommendation is based on the findings of the investigation of market manipulation, whereby the following violations of laws and ordinances were identified.
2. Summary of the Findings regarding Violations of the Laws and Ordinances
Juggernaut Capital Management Pte. Ltd. (“Juggernaut”) is a limited private company incorporated under the Companies Act of the Republic of Singapore. Juggernaut was empowered to make investment management decision on the assets of a hedge fund, which was incorporated as a limited company under the laws of the Cayman Islands (the “Feeder Fund”), with holding all of the voting rights attaching to the shares of the Feeder Fund, based on the discretionary investment management agreement by and among the Feeder Fund and the trustee of the other hedge fund, which was incorporated as a trust under the laws of the Cayman Islands (the “Master Fund”).
Juggernaut, by its representative and others, in relation to its business, in shares of RISE, in order to raise the share price, from around 8:33 on March 21, 2012 to around 15:08 on April 25, 2012, for 26 business days, with the purpose of inducing orders from other market participants for shares of RISE, under the names of the Master Fund, among other things, raised the market price of the share by placing massive purchase orders at prices equal to or below the best bid and by placing orders by a minimum order unit at a price higher than the current market price, and placed massive market-on-close orders at the closing sessions to participate in creating the closing prices, and, thus, in total, on the account of the Feeder Fund, it purchased 13,492,000 shares and sold 10,188,400 shares while they placed purchase orders of 246,134,300 shares in RISE. This constituted a series of purchase and sales orders that would mislead other persons into believing that sales and purchase of RISE shares were thriving and would cause fluctuations in prices of RISE shares.
This act by Juggernaut was recognized as “a series of Sales and Purchase of Securities, etc.” and “Entrustment, etc.” conducted “in violation of Article 159(2)(i)” as stipulated under Article 174-2(1) of the Financial Instruments and Exchange Act.
3. Calculation of the Amount of the Administrative Monetary Penalty
Pursuant to the Financial Instruments and Exchange Act, the amount of the administrative monetary penalty applicable to the above violation is 431,180,000 yen.
Details of the calculation are presented in the Attachment.
4. Others
We acknowledge the assistance of the Monetary Authority of Singapore in this matter.
Attachment
- Method of Calculation of the Amount of the Administrative Monetary Penalty
1.Pursuant to Article 174-2(1) of the Financial Instruments and Exchange Act, the amount of the administrative monetary penalty shall be computed as the sum of (1) and (2) below:
(1)Amount pertaining to a Matching Volume of Sales and Purchase (Note 1): (Value pertaining to sales, etc. of securities) – (Value pertaining to purchase, etc. of securities)
and,
(2)Where the number of securities purchased, etc. pertaining to acts of violation exceeds the number of securities sold, etc. pertaining to acts of violation:
(Highest price of the securities on each day of a one-month period following the termination of acts of violation × Excess transaction volume) – (Value pertaining to purchase, etc. of securities with respect to the excess transaction volume)
Note 1: Matching Volume of Sales and Purchase: The smaller of the number of securities sold, etc. and number of securities purchased, etc. pertaining to acts of violation.
2. In the present case, the amount of the administrative monetary penalty is 431,180,000 yen, which is computed pursuant to Article 176(2) of the Financial Instruments and Exchange Act by rounding down the fraction less than ten thousand yen from 431,183,900 yen as the sum of (1) and (2) below:
(1) The amount pertaining to a Matching Volume of Sales and Purchase
The Matching Volume of Sales and Purchase pertaining to the act of violation is 10,188,400 shares, because
(i)the number of securities sold, etc. pertaining to the act of violation is 10,188,400 shares, and
(ii)the number of securities purchased, etc. is 20,344,500 shares, which is a total of 13,492,000 shares (actual number of securities purchased, etc.) and 6,852,500 shares (Pursuant to Article 174-2(8) of the Financial Instruments and Exchange Act and Article 33-13(i) of the Order for Enforcement of the Financial Instruments and Exchange Act, the number of the securities, etc. held at the inception of the act of violation deemed to have been purchased, etc. at the price prevailing at the inception of the act of violation (31 yen)).
The amount pertaining to the Matching Volume of Sales and Purchase is:
486,076,500 yen (value pertaining to sales, etc. of securities)(Note 2)
– 333,431,700 yen (value pertaining to purchase, etc. of securities)(Notes 3 and 4)
=152,644,800 yen.
Note 2: Value pertaining to sales, etc. of securities is a total of the following:
[33yen × 375,000shares + 34yen × 54,000shares + 35yen × 280,000shares + 36yen × 100,000shares + 38yen × 470,000shares + 39yen × 1,495,000shares + 40yen × 557,000shares + 41yen × 625,000shares + 43yen × 150,000shares + 45yen × 355,000shares + 46yen × 250,000shares + 47yen × 782,700shares + 48yen × 521,400shares + 49yen × 613,400shares + 50yen × 1,024,400shares + 51yen × 143,100shares + 52yen × 50,000shares + 54yen × 159,400shares + 55yen × 235,600shares + 56yen × 85,000shares + 57yen × 210,000shares + 58yen × 119,000shares + 59yen × 51,000shares + 62yen × 170,000shares + 63yen × 175,500shares + 64yen × 404,500shares + 65yen × 140,000shares + 70yen × 10,000shares + 71yen × 107,200shares + 72yen × 390,200shares + 73yen × 5,000shares + 74yen × 80,000shares]
Note 3: Value pertaining to purchase, etc. of securities is a total of the following:
[31yen × 6,852,500shares + 32yen × 250,000shares + 33yen × 100shares + 34yen × 160,300shares + 35yen × 1,188,700shares + 36yen × 42,500shares + 37yen × 672,700shares + 38yen × 528,300shares + 39yen × 281,100shares + 40yen × 212,200shares]
Note 4: In the calculation of the value pertaining to purchase, etc., pursuant to Article 33-14(5) of the Order for Enforcement of the Financial Instruments and Exchange Act, the purchase relating to the violating act shall be serially allocated on a first-ordered, first-allocated basis up to the quantity equal to the Matching Volume of Sales and Purchase.
In this case, the allocation shall start from the securities, etc. held at the inception of the act of violation which deemed to have been purchased, etc. on its own account at the price prevailing at the inception of the act of violation (31 yen) pursuant to Article 174-2(8) of the Financial Instruments and Exchange Act and Article 33-13(i) of the Order for Enforcement of the Financial Instruments and Exchange Act.
(2) As indicated in (1) above, the number of securities purchased, etc., pertaining to the act of violation exceeds the number of securities sold, etc. pertaining to the act of violation. Therefore, the amount shall be:
With respect to the excess transaction volume (20,344,500 shares – 10,188,400 shares),
782,019,700 yen (77 yen × 10,156,100 shares) (The amount shall be calculated by multiplying the excess transaction volume by the highest price, among the Highest Prices on each day of a one-month period following the termination of the act of violation (77 yen).)
– 503,480,600 yen (value pertaining to purchase, etc. of securities)(Note 5)
= 278,539,100 yen.
Note 5: Value pertaining to purchase, etc. of securities is a total of the following:
[39yen × 694,000shares + 40yen × 941,600shares + 41yen × 608,500shares + 42yen × 331,900shares + 43yen × 618,400shares + 44yen × 8,700shares + 45yen × 57,300shares + 46yen × 202,500shares + 47yen × 881,600shares + 48yen × 793,600shares + 49yen × 51,200shares + 50yen × 1,081,000shares + 51yen × 1,295,200shares + 52yen × 1,400shares + 53yen × 300shares + 54yen × 75,300shares + 55yen × 93,000shares + 56yen × 109,900shares + 57yen × 38,900shares + 58yen × 83,600shares + 59yen × 200shares + 60yen × 125,600shares + 61yen × 504,000shares + 62yen × 713,600shares + 63yen × 480,200shares + 64yen × 226,100shares + 65yen × 117,700shares + 66yen × 4,100shares + 67yen × 4,000shares + 69yen × 200shares + 70yen × 800shares + 71yen × 1,100shares + 72yen × 7,700shares + 73yen × 2,100shares + 74yen × 300shares + 75yen × 500shares]
