Article from The Star, December 28, 2011 by Fintan Ng.
Remisiers feel that rigid enforcements may not be good for the market
PETALING JAYA: Market participants, including remisiers, are concerned that Bursa Securities' strict interpretation of the stock exchange rules and regulations may be a deterrent to trading and negatively impact the industry.
They voiced their concerns after Bursa Securities, the regulatory arm of the local bourse, issued seven public reprimands to dealers' representatives and other market participants since July from the six issued in the last two years.
Remisiers Association of Malaysia president Sam Ng Soon Lee told StarBiz that while the number of dealers' representatives that were punished or struck off the register was small, the stricter measures might not bode well for the industry or the market.
His fear stems from the stricter procedures in the provision of liquidity in the equities market. “We're semi-liquidity providers but many are put-off by the tightened measures over volume activity (which may breach stock exchange rules) and this will impact trading volume,” Ng said.
He observed that market regulators must also consider the consequences of interpreting the rules more strictly as this could impact genuine participants whose business would be affected.
Bursa Securities took over the policing of market offences from the Securities Commission in late 2008. In recent months, among the most common offences cited by the regulator were “engaging in irregular/manipulative dealing activities” and others of a trading nature.
According to Bursa Malaysia's website, actions taken against market participants including dealers' representatives between 2009 and 2010, were focused on market breaches such as price manipulation, short selling/intra-day short selling and trades with no change of beneficial ownership.
Persons familiar with the enforcement procedures said the reason why there were more such public reprimands was because this reflected the completion of investigations and the establishment of guilt.
“It takes a year or so for due diligence to be completed,” a person familiar with the procedures said, adding that this included an assessment and investigations in order to establish that offences had been committed.
She said the parties under investigation would be given time to respond before a public reprimand was issued.
However, she said this did not mean that there was a rising trend in punitive actions as remisiers feared.
“I believe Bursa Securities will take action when there are offences committed, these are all under Bursa's business rules so the regulator would mete out whatever punishments it deems appropriate,” she added.
Enforcement actions by Bursa Malaysia can be found here:
Below are the details of the misconduct, as described on Bursa's website. I find the details very specific and worrisome. I find the punishments definitely not too high.
All participants and representatives received  a public reprimand,  a fine (in the range of RM 10K to 150K) and  either were suspended for 18 months or were ordered to strike from the Register as a Dealer Representative (DR).
If I were a remisier I would be very happy that decisive action was taken and that the integrity of their profession was upheld. Surely we don't want a few rotten apples to spoil the whole barrel?
Between August 2010 and December 2011 there are only seven cases reported by Bursa, that does not sound like a lot to me.
Wahid had made a false declaration that monies which were deposited by another client into the trust account of the Participating Organisation (PO) belonged to his client, causing the PO to pay the said monies to his client who was not entitled to the monies.
Wahid admitted that he had acted on the instructions of a third party when he declared that the monies deposited into the PO’s trust account belonged to his client. This subsequently caused the PO’s other client to incur losses.
Wahid’s conduct by falsely declaring the monies which did not belong to his client based on representation by a third party, without proper due diligence, showed failure on his part to carry out his duties efficiently and fairly as a Registered Person.
In respect of Chee’s dealing activities in COCOLND shares on a particular day, Chee had entered false buy orders during the pre-opening phase which were subsequently withdrawn before the market opened for trading and these buy orders had influenced the Theoretical Opening Price (TOP) of COCOLND shares on the day concerned.
Chee’s dealing activities in JETSON-WA and KBUNAI shares over a few trading days involved spurts of false buy or sell orders created by Chee which were subsequently withdrawn. During these spurts of trading activities, Chee had also engaged in the “layering of orders” where she placed orders or a series of buy/sell orders at various price levels which were withdrawn when her sell/buy orders were matched. Chee’s dealing activities in JETSON-WA and KBUNAI shares led to a false impression of heightened interest in the trading of the stocks concerned during the relevant periods.
Zainol had carried out several sale and purchase transactions in the securities of SURIA and PILECON-WA using a client’s account. The client has denied knowledge of or authorising these transactions. The unauthorised transactions resulted in losses which were disputed by the client.
Zainol had failed to act in the best interest of his client by executing personal trades using his client’s account for his own benefit as admitted by him in a declaration made to the client. It was noted that despite making the said declaration, he had failed to settle the outstanding amount in his client’s account.
Mohd Zahir had carried out numerous unauthorised sale and purchase transactions in the securities of HDISPLAYS and CARLAW over a period of time via two of his clients’ accounts. The unauthorised transactions carried out by him had resulted in substantial contra losses which were disputed by the clients when they were subsequently informed of the losses.
In undertaking these unauthorised dealing activities, Mohd Zahir had colluded with a third party (the identified third party) who was not a person allowed and authorised, in writing, to trade on behalf of these clients. In this regard, instructions to trade via the two clients’ accounts were received from the identified third party and were carried out by Mohd Zahir. The commission generated from these trades was shared between Mohd Zahir and the identified third party.
Mohd Zahir had also colluded with the identified third party to manipulate these two securities by maintaining their prices at certain levels. The manipulative trading activities had impacted the price of these securities during the relevant period.
Mohd Zahir’s misconduct in carrying out these unauthorised trades and participating in unlawful activities, including price manipulation of these securities over a period of time, demonstrated his blatant disregard of his obligations as a responsible DR.
Ruzelman had undertaken dealing activities in the shares of Tracoma involving the execution of orders through the accounts of four clients, which he matched against one another (Cross Trading/Cross Trades). Ruzelman executed numerous trades through these accounts which did not result in any change in the beneficial ownership (NCBO Trades). He had also entered orders at or near the close of the market at prices higher than the prevailing market price which had an impact on the closing price of the shares on several trading days (Marking the Close).
These improper trading activities by Ruzelman, which were irregular/manipulative, spanned over a period of about 5 months (the Relevant Period). His actions resulted in the share price of Tracoma being maintained at a certain range and at unusually high trading volumes. This led to the false/misleading appearance of active trading in the market for the shares of Tracoma (False Trading).
Ruzelman dominated the trading activities of Tracoma shares during the Relevant Period with more than 70% of the trades involving Cross Trades between his clients’ accounts. On certain dates, Ruzelman’s dealing activities in the said securities accounted for over 90% of the total trades done for the day.
There were 31 trading days out of 95 trading days during which Ruzelman had deliberately entered buy orders in his clients’ accounts at a price higher than the previously traded price, resulting in Tracoma shares closing higher than the last done price. The increase in the closing price ranged from 0.91% to 56%.
Yap had carried out amendments to numerous purchase and sale contracts in his clients’ accounts (“1st named clients”) which had day trade gains so that these gains were thereafter transferred to his wife’s account. Through the process of abusing the contract amendment facility in the trading system, Yap had unlawfully transferred/amended profitable trades in the 1st named clients’ accounts to his wife’s account resulting in illegal/unlawful gains in his wife’s account to the disadvantage of the 1st named clients.
Yap had carried out frequent and numerous contract amendments which resulted in a change of the original party to the contract, most of which involved the same clients/common clients thus indicating that the contract amendments carried out were not due to execution error.
The only case against both a company and persons:
Bursa Malaysia Securities Berhad (Bursa Securities) has publicly reprimanded and imposed fines of RM50,000, RM25,000 and RM10,000, respectively, on Macquarie Capital Securities (Malaysia) Sdn Bhd (Macquarie); Thomas Chin Yun Phin (Chin); and Hilton Lee (Lee) for inflating trades in several securities over a period of eight months. Chin and Lee were Macquarie's former Heads of Dealing.
Bursa Securities has ordered to strike off Chin from the Register, if he was still a Registered Person of Bursa Securities. The Exchange has also ordered restrictions on Lee from carrying out activities as a Registered Person, including trading on or through the stock market of Bursa Malaysia, for a period of 18 months from 23 November 2010.
It was found that there was a lack/lapses of supervision in the dealing activities of Macquarie following a series of incidences of Inflated Trades which took place for at least eight months prior to the discovery of the same by Macquarie. In addition, Macquarie failed to ensure the accuracy of information provided to Bursa Securities by not undertaking an independent verification of the details provided to Bursa Securities and had merely relied on representations made by its Heads of Dealing who were the very persons involved in the concerned trades. Arising from these, Macquarie had triggered the provision of Rule 1302.1(1)(a) and breached Rules 404.1(1), 404.1(7)(b)&(c) and 1205.1(4) of the Rules of Bursa Securities (refer to Addendum for the details of the affected Rules).