The Securities Commission has to be transparent in its investigation


THE Securities Commission (SC) has, in a statement, said it would be in touch with a senior civil servant following an affirmation by him, publicly, that he had authorised his sibling to purchase quoted shares in companies listed on Bursa Malaysia using his central depository system (CDS) account, shares he claimed were later transferred to his sibling.

Matters that falls under the conduct of SC include the following:

i) Misconduct of corporates, individuals and markets that are licensed, registered or authorised by the SC

ii) Unlicensed 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 wide, including any person who comes into possession of material non-public information relating to securities.

As far as the law is concerned, so long as a person is in possession of “information” and that person knows that the said information is not generally available – which, upon becoming generally available, would have a material effect on the price or the value of securities – that person becomes an insider, regardless of whether he or she is a director or officer of the company.

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

In the SC’s Guidelines on Market Conduct and Business Practices for Stockbroking companies and Licensed Representatives, updated in November 2014, 11 core principles were issued.

One of which is conflict of interests, where it states that a licensed person must manage conflict of interests fairly, both between itself and its customers, and between a customer and another customer.

Stockbroking companies and their representatives must also comply with undertaking and perform customer due diligence.

If the purchase of the shares had undertaken after January 31, 2017, where section 56(1) of the act provides that the company may issue a notice in writing to any member of the company to provide confirmation whether the member holds any voting shares as beneficial owner or as trustee, then they are required to disclose the identity and particulars of the beneficiary.

The Companies Commission of Malaysia thus would have to conduct an investigation to determine whether such disclosures were made.

Nevertheless, over the years, the SC has initiated civil and enforcement action against the following individuals for insider trading, where all the perpetrators were alleged to have allowed another person who is not the beneficial owner of their CDS account.

In actions taken against Wong Shin Yih and Teh Bee Lee individually on May 13, 2020, the SC charged that both had breached section 354(1)(a) of the Capital Markets and Services Act 2007 read together with section 29A of the Securities Industry (Central Depositories) Act 1991, by allowing another person who is not the beneficial owner of their CDS accounts to dispose shares through their accounts.

In 2018, Lim K.C., the CEO and director of Melewar Industry Group Berhad, and a director of M3nergy at the, faced 11 charges under section 188(2)(a) of the Capital Markets and Services Act 2007 for acquiring M3nergy Berhad (M3nergy) shares through trading accounts belonging to Tay H.C., who is Lim’s brother-in-law, and another individual.

Tay also faced nine charges of abetting Lim in the commission of the offences under section 370(c) read together with section 188(2)(a) of the same act.

On July 26, 2017, the SC filed a civil suit against Yeow Kheng Chew, Paulene Chee and Tan Yee Chee where the SC sought a declaration that Yeow had contravened S188 (2)(a) of the Capital Markets and Services Act 2007 when he 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 charged for contravening the same act for acquiring the shares, while Tan had contravened the act in respect of the acquisition of 1.159 million Kencana shares on July 8, 2011, through Chee’s trading account.

Again in 2018, Daniel Yong was charged 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 20, 2011, through his account, an offence under section 29A of the Securities Industry (Central Depositories) Act 1991.

Ng was also charged with four counts of insider trading.

Azuzay Zamani, who holds an account at OSK Investment Bank Berhad, was charged under section 29A of the Securities Industry (Central Depositories) Act 1991 for allowing Mohd Nor Abdul Wahid to acquire 500,000 units of Three-A Resources Berhad shares on October 5, 2009.

Nor was charged under section 188(2)(a) of the Capital Markets and Services Act (CMSA) 2007.

In all the above cases, the alleged perpetrator and the party who allows their CDS accounts to be used were charged by Securities Commission. No one was spared.

Now, not only the public is watching the outcome of its investigation. The alleged perpetrators and the third parties that were alleged to have conspired with them are also watching this development closely.

Would this lead to a slew of applications for judicial reviews following the results of the investigation by SC? – January 7, 2022.

* FLK reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.


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Comments


  • Frankly I DON'T trust any of these people, whether at the MACC or the Securities Commission. They are all birds of a feather. Parliament should investigate him.

    Posted 2 years ago by Simple Sulaiman · Reply