Wednesday, 27 July 2011


  • Immediately abolish all “Independent” Reports, they are useless and are even hurting the rights if the Minority Investors.
  • All the votes that EPF/PNB are making should be made public, I think everybody is entitled to that, since they are managing public's money.
  • If major shareholders abstain (like in RPT's), EPF/PNB will “voluntarily” also abstain from voting, letting the small shareholders (who put their money where their mouth is) and the private fund managers (who want to optimize long term performance) decide if the proposed deal should go through or not. I think this rule will hugely increase the chance of success for Minority Investors, and will thus be very beneficial for the investing ecosystem. Majority Investors will now have to convince the small investors and the fund managers, so they better come with a decent deal. This rule prevents the possibility that EPF/PNB would vote a certain way, while under pressure.
  • All voting on important resolutions like RPT’s should be made public.
  • Do away with DCF (Discounted Cash Flow) valuations, the minority shareholders never receive the details so they cannot check the validity of the calculations.
  • Bursa Malaysia (BM) will pro-actively check if certain shareholders are linked to the Majority Investor and bar them from voting. In reality, I doubt if this will work well, but at least an attempt should be made.
  • There have only been three really good events in the last 15 years regarding CG in the Malaysian share market: quarterly reporting, the Bursa Malaysia announcements website and The Edge Malaysia. Some quarters want to abolish quarterly reporting. It would be extremely detrimental to give in to these parties, Minority Investors desperately need all the information they can lay their hand on, having had the short end of the stick for so long. Many frauds would have been earlier detected if the SC paid as much attention to the quarterly reports as certain bloggers did, “Where is Ze Moola” is the best of these and was proven right many times. His most famous prediction was the events surrounding Megan Media, a company clouded in controversy: a suspicious RPT, insider selling, suspicious quarterly accounts, fraud detected, much too light sentences for the directors. One blogger can unearth many suspicious cases while the SC with is hundreds of full-time employees, its fancy office building, expensive computer systems and most importantly its special investigative powers can’t? The SC should be ashamed of its performance.
  • A small, special, fast moving, high-powered commission should be formed, completely independent from any other institute. The members will be highly motivated professionals (accountants, lawyers, financial analysts), not to be recruited from employees of SC or BM. This commission will receive all complaints send to SC/BM, they can chose which ones to follow up. Their recommendations to take action will have to be implemented by SC/BM. The advantage is that they will also look into complaints about SC/BM, and being independent they actually can take action. They are also able to spot the usual stonewalling and delaying tactics of complaints from Minority Investors by SC/BM and immediately take action.
  • Minority Investors should receive more time to investigate important issues like RPT’s or GO’s with delisting threat. They will also be able to complain directly to the special commission about possible Minority Investor abuse.
  • The rules regarding GO’s with delist threat and RPT’s have always been very clear, especially Minority Investors should not be disadvantaged, SC/BM should (when in doubt) always give preference to the Minority Investors, not to the Majority Investor as they have done so far. Majority Investors can perfectly take care of themselves, SC/BM don’t have to worry about them, as they have always don’t in the past. The top management of SC and BM should make it very clear to all their employees that in the cases of GO’s and RPT’s Minority Investors have clearly the benefit of the doubt, not Majority Investors.
  • MSWG started disappointedly, it had initially something good going with the new CEO but the momentum has been mostly lost. I think it has to be re-organized, their ties with EPF/PNB will have to be cut (EPF/PNB are part of the problem, not the solution). They can try to follow the example of other, successful watchdog groups (for instance SIAS from Singapore or VEB from The Netherlands) and be much more pro-active and independent. They can also learn from individuals like David Webb from Hong Kong, a highly regarded, extremely sharp fighter for Minority Investors rights who has yet to be proven wrong. To protect MSWG they should have immunity from prosecution (they have been sued before). They can organize joint cases when Minority Investors have been abused and drum up support. They should start to build up a large community of retail investors by hugely increasing its membership. Lots of information from MSWG should be available for free, instead of the current high prices.
  • Make all AGM’s and EGM’s open for all journalists, including from the alternative news providers like MalaysiaKini. In some countries this is normal, journalists can simply report about sharp issues brought forward by Minority Investors but can’t ask questions themselves, unless allowed by the board to do so.
  • SC/BM will make checklists of information that is absolutely necessary in circulars, like timely audited accounts, purpose of investments, sales pipeline, forecasts, DCF projections including the basic data they are based on, etc. Valuations and assumptions will be checked on reasonableness, with special attention to the usual accounting tricks that are used in these occasions (“hard” cash against “soft” values, GAAP, comparable way is misused, etc). SC/BM should very much shape up in this field, until now it has been so disappointing. If necessary, they should get input from outside their organizations and ask the help of credible, independent advisors.
  • SC/BM will have to hugely improve their relationship with Minority Investors, no more stonewalling when Minority Investors come with genuine issues. I have never heard of any retail investor with a positive story about their contacts with either SC or BM, it is really about time that action is taken if the authorities are serious about wooing back the retail investors. According to the website of SC, they will follow-up every quarter on complaints. I haven’t seen a single proof of that actually being done. I think the idea of regular updates is good (also by BM) and should be followed. In principle (except very exceptional cases which should be communicated clearly to the complainant) all complaints should be handled well within one year. The current practice of complaints dragging on for years is simply unacceptable. If Minority Investors come with genuine complaints and offer to come to the SC to offer more information, they should be heard, SC should be interested in this extra information that could be worthwhile. It is about time that finally Minority Investors are taken seriously by SC and BM and are treated with respect.

No comments:

Post a Comment