Woman jailed for causing investors to lose some S$700,000 from unauthorised scheme

SINGAPORE — A director of two companies was jailed 12 weeks on Thursday (May 30), after she admitted to causing 29 investors to lose more than S$700,000 from a collective investment scheme that involved properties in the United States.

This was the first case here of someone prosecuted for offering units in an unauthorised collective investment scheme, and offering units in such a scheme without a prospectus.

Doris Tan Stephenson, a Singaporean, came up with the scheme in 2013. Formerly known as Clara Tan Lisin, the 43-year-old helmed real estate investment firms CTL Group and CTL Global Holdings between March 2011 and December 2015.

Money from the investors were pooled together for CTL Global to buy a group of properties in the US. Investors were promised returns from the profits generated by CTL Global Holdings, which rehabilitated, sold, or leased the properties to tenants in the US.

However, when the investors failed to receive their promised returns, they filed a total of 10 police reports against CTL Group.

The companies collected S$1,055,000 in total from 29 investors for the scheme in July 2013.

For their returns, they received only S$342,340, leading to a loss of S$712,660.

On Thursday, Tan pleaded guilty to 19 charges under the Securities and Futures Act. Another 40 similar charges were taken into consideration for sentencing.

WHAT TAN DID

The court heard that the scheme was called the Capital Multiplying System, or CapMS. Investors agree to put money in it for either one year or three years.

In 2013, CTL Group marketed the scheme in Singapore on behalf of CTL Global Holdings, which was incorporated in the US.

Together with her sales employees, Tan personally conducted seminars at CTL Group’s former office on Pemimpin Drive near Bishan. They also distributed marketing materials to interested parties.

For the one-year investment, investors were promised returns ranging from 8.5 per cent to 22 per cent. If they chose to invest for three years, they were promised similar returns, including 8.5 per cent to 20 per cent of the invested capital at the 12th-month mark.

CTL Group and CTL Global Holdings also profited, after they paid the investors their returns.

Each investor held onto a unit, which amounted to “securities” under the Securities and Futures Act, in the collective investment scheme.

However, CTL Group did not hold a capital markets services licence from the Monetary Authority of Singapore (MAS) at the time, which would allow it to deal in securities.

It did not have an established track record in dealing with securities either, as it was incorporated in Singapore only in March 2011.

Despite marketing a scheme involving more than a million dollars, Tan did not seek legal advice on the need for CTL Group to apply and get such a licence.

She also failed to seek legal advice on the need for the scheme to be authorised or recognised by the MAS, as well as for it to be made in or accompanied by a prospectus.

Investigations revealed that Tan had significant control over CTL Group’s operations.

She directed and managed its sales team, personally went through the deals with some of the investors, and signed off on all the CapMS agreements.

Having set a minimum investment amount of S$10,000 for potential investors, she knew how much they stood to lose should the scheme fail.

She was also the authorised signatory of the OCBC bank accounts held by CTL Group, into which the investors were required to make their payments.

‘FLY-BY-NIGHT OPERATION’

Deputy Public Prosecutors Nicholas Khoo and Magdalene Huang sought at least 12 weeks’ imprisonment for Tan, saying it would send a message to other like-minded offenders.

They noted that “only where there is confidence in the financial system would companies and individuals transact in the financial markets to invest and to raise capital”.

They argued that Tan ran a “fly-by-night operation”, and earned about S$5,000 a month from running the business from 2012 to early 2015.

Tan’s lawyer, Mr Jonathan Cho, asked for a lighter sentence of not more than six weeks’ jail. He argued that his client’s offences were “really crimes of omission rather than defrauding behaviour”.

He told the court that Tan herself has lost about S$3 million from her personal savings, and “is struggling to rebuild her life now”.

“All things considered, my client is not really the kind of common criminal… she omitted having to do what needed to be done. She wants to move on and take responsibility for her actions,” he added.

District Judge Ng Peng Hong said that a custodial sentence was warranted, considering the amount of money and number of investors involved.

For running the scheme without a capital markets services licence, Tan could have been jailed up to three years and fined up to S$150,000.

For offering units in an unauthorised collective investment scheme, and for offering units in such a scheme without a prospectus, she could have been jailed up to two years and fined up to S$150,000.