Former Macquarie Bank trader Oswyn de Silva has been sentenced to 2 1/2 years’ jail time for insider trading by “front running” his orders on the Singapore Stock Exchange in 2006 and 2007. He has now been sentenced to serve a minimum of 18 months imprisonment on a charge of insider trading brought by the Australian Securities and Investments Commission. Oswyn Indra de Silva, a resident of Malaysia had been on remand at Sydney’s Silverwater jail since March 16, after judge Terry Buddin revoked his bail since it was certain that he would get a jail sentence.
The 37-year-old de Silva admitted his guilt in November 2010 to a charge involving 12 separate sets of transactions which happened while he was employed by Macquarie Bank as a fund manager. In particular, he was involved in real estate-related stocks in the Asia region for Macquarie, and was single-handedly responsible for determining the volume and pricing of trades to meet the funds’ investments with its model. De Silva admitted to buying CFDs in stocks that he was about to buy as part of his job – a practice that is known as front running – whereby a perpetrator with insider information personally buys shares before buying shares for his representing business. In this case the fund manager made use of his personal brokerage account at Singapore broker Phillip Securities, from a computer at a cafe in the Macquarie Bank Sydney headquarters prior to Macquarie trading in the same stocks on the SGX. De Silva was then able to dispose of his securities and exit his CFD trades and gain from the effect of Macquarie’s trading in the underlying shares.
He executed the trades between December 2006 and April 2007 for a total gross profit of about $1.41 million, which materialised between December 2006 and April 2007, although it was only in mid-2008 that the Monetary Authority of Singapore alerted Australian authorities to the suspected insider trades. De Silva’s offences happened soon after he learned that he was HIV positive and he claims to have later deliberately mis-invested the money because he felt guilty about his illicit deeds. However, NSW Supreme Court judge Justice Terence Buddin said this could not be used an excuse. ‘The fact remains that the offender sought to act as he did in order to enrich himself.’ His illicit gains were spent on a Porsche, an apartment in Malaysia, cocaine and cannabis.
De Silva narrated how he was ‘head-hunted’ to work for Macquarie Bank after migrating to Australia in 2004, and he described his role as ‘very stressful, involving long hours and constant international travel’. The work environment was nothing less than ‘toxic’, he commented. De Silva disclosed to a psychologist he also had a very poor work relationship with his superior, and that he felt discriminated against because of his homosexuality. He started working in the bank in 2005 on a salary of $175,000, which had gone up to $220,000 in 2007, while also having received $680,000 in bonus and profit share. A psychiatrist’s report compiled about the offender noted that De Silva had narcissistic and obsessional personality traits and showed panic symptom.
He was employed at Macquarie variously in Sydney and London but left the company in 2008 because of ill health. Sentencing de Silva in the NSW Supreme Court yesterday, Justice Buddin noted that the maximum penalty for insider trading was recently lifted from 5 to 10 years and that higher penalties could be expected in future. De Silva’s crimes predated the change and he also earned a 25% sentence reduction by pleading guilty. In sentencing, the judge also took in consideration De Silva’s HIV status and the adverse publicity he had received. De Silva has not repaid any of his illegally gained funds and will be deported back to Malaysia at the expiry of his term.
Regulator ASIC, which investigated the case with the Commonwealth Director of Public Prosecutions, noted last night that de Silva was the second person in three months to go to jail in Australia for front running.