The securities commission must be transparent in its investigation

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The Securities Commission (SC) said in a statement it would be in contact with a senior official following a claim by him, publicly, that he had authorized his brother to buy listed shares in listed companies. on Bursa Malaysia using his central depository system (CDS) account, the shares, he said, were then transferred to his brother.

Matters that fall within the scope of HC’s conduct include the following:

i) Misconduct by companies, individuals and markets approved, registered or authorized by the SC

ii) Unauthorized capital market activities, including illegal schemes or scams

iii) Market misconduct, including market manipulation and insider trading.

The definition of an insider under the Capital Markets and Services Act 2007 (CMSA) is broad, including anyone who comes into possession of material non-public information relating to securities.

Under the law, as long as a person is in possession of “information” and knows that this information is not generally available – which, once generalized, would have a significant effect on the price or the value of the securities – this person becomes an insider, whether a director or an officer of the company.

Even though the SC plays an important role in regulating the market to prevent manipulation and misconduct, the vagueness of the definition of market manipulation constantly poses a challenge to any coercive action.

In the SC Guidelines on Market Conduct and Business Practices for Brokerages and Authorized Representatives, updated in November 2014, 11 core principles were published.

One of them is conflict of interest, where it states that an authorized person must manage conflicts of interest fairly, both between themselves and their clients, and between a client and another client. .

Brokerage firms and their representatives must also comply with the undertaking and perform client due diligence.

If the purchase of the shares had been undertaken after January 31, 2017, when section 56 (1) of the law provides that the company can issue a written notice to any member of the company to confirm whether the member holds shares with right to vote as beneficial owner or as trustee, they are then required to disclose the identity and contact details of the beneficiary.

The Malaysian Companies Commission should therefore investigate whether any such disclosures have been made.

Nonetheless, over the years, the SC has taken civil and repressive lawsuits against the following people for insider trading, where all of the perpetrators have allegedly authorized another person who is not the beneficial owner of their CDS account.

In the actions brought against Wong Shin Yih and Teh Bee Lee individually on May 13, 2020, the SC accused both of violating section 354 (1) (a) of the 2007 Capital Markets Act and services, read in conjunction with section 29A of the securities industry. (Central Depositories) Act 1991, allowing another person who is not the beneficial owner of their CDS accounts to dispose of shares through their accounts.

In 2018, Lim KC, CEO and Director of Melewar Industry Group Berhad, and Director of M3nergy within the, faced 11 charges under section 188 (2) (a) of the 2007 Law on capital markets and services for the acquisition of M3nergy Berhad (M3nergy) shares through trading accounts owned by Tay HC, who is Lim’s brother-in-law, and another person.

Tay also faced nine counts of Lim’s complicity in the commission of the offenses under section 370 (c) read in conjunction with section 188 (2) (a) of the same statute.

On July 26, 2017, the SC brought a civil action against Yeow Kheng Chew, Paulene Chee and Tan Yee Chee where the SC sought a declaration that Yeow had violated S188 (2) (a) of the Markets Act 2007 capital and services when it acquired 5.159 million Kencana Petroleum Berhad (Kencana) shares between June 2 and July 8, 2011, through Chee’s trading accounts: Asia Premium Corp and Angnew Resources Limited.

Chee was also accused of breaking the same law for acquiring the shares, while Tan was breaking the law regarding the acquisition of 1.159 million Kencana shares on July 8, 2011, through the trading account. by Chee.

Again in 2018, Daniel Yong was indicted for allowing his wife and head of equity derivatives at AmInvest, Ng Ee Fang, to acquire 1 million units of Hirotako shares between October 14 and October 20, 2011, via his account, an offense under section 29A of the Securities Sector Act 1991 (Central Depositories).

Ng was also charged with four counts of insider trading.

Azuzay Zamani, who has an account with OSK Investment Bank Berhad, was indicted under section 29A of the 1991 Central Depositories Act for authorizing Mohd Nor Abdul Wahid to acquire 500,000 Three-A Resources Berhad share units on October 5, 2009.

He has also not been charged under section 188 (2) (a) of the 2007 Capital Markets and Services Act (CMSA).

In all of the above cases, the alleged perpetrator and the party authorizing the use of their CDS accounts have been indicted by the Securities Commission. No one was spared.

Now, not only are the public watching the results of their investigation. The alleged perpetrators and third parties who allegedly conspired with them are also watching this development closely.

Would this lead to a multitude of judicial review applications following the results of the HC investigation? – January 7, 2022.

* FLK reads The Malaysian Insight.

* This is the opinion of the author or post and does not necessarily represent the views of The Malaysian Insight.


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