The reason why I reported late is because of the cumbersome system of reporting to the Bursa Malaysia. To fill up Form 29A & B requires details such as the number of shares and the date I bought or sold. Moreover, the buying or selling price frequently changes. To report the price I have to work out the average price I traded in the whole day.
To complicate the whole issue, I have margin accounts with TA Securities, Maybank, Kenanga, CIMB, RHB, HLIB, Alliance and Affin. My total margin loan is about Rm 150 million, my average daily trading exceeds Rm one million and the number of shares I buy and sell every day is quite many.
As I have so many trading accounts and I am 83 years old, I do not key in my orders to buy or sell myself. I simply give instructions to my remisiers to buy or sell and at a certain price. I have to watch to see the number of buyers and sellers so that I can change my previous instruction in order to succeed in my buying or selling. For example, if I see there are a lot of buyers willing to take the sellers, I will offer a higher price if I want to buy or sell. If there are less buyers, I will have to reduce my price offer to buy or sell.
A few times I made the mistake of instructing one remisier to sell in the morning the same share that I instructed another remisier to buy in the afternoon. In fact, the authorities had reprimanded my remisers who were involved in these transactions that may seem to mislead investors. Those were honest mistakes.
As a result of the above difficulties, I waited until I have sold enough to own less than 5% of the total issued shares of the company. I just have to fill up one form to state that I have ceased to be a substantial shareholder without the requirement of stating the dates and the prices I sold.
I have some sympathy regarding dealing with a cumbersome system.
But rules are rules, and they are there for a clear reason.
I assume that there were two easy ways out for Mr. Koon:
- The easiest way to deal with the situation is to make sure that one never breaches the 5% rule, so no announcements have to be made
- If however one wants to breach the 5% rule, and the process is too cumbersome to do oneself, then one should hire a good secretary for that job
The Star reported: "Koon not the only one", and gives several other examples of breaches of the reporting rule.
I always had the same impression, that enforcement was really lax on this rule, for instance here, here and here. If it is so easy to find examples, there must be many, many more examples, especially with shareholders often registering shares under someone else's name.
Some more observations from The Star's article (emphasis mine):
Areca Capital fund manager and CEO Danny Wong notes that timely disclosure is very important to ensure fairness and transparency across the market.
“It improves market efficiency for timely decisions and an inefficient market will discourage investors as it will only benefit insiders,” he says.
Wong also suggests that there should be a more robust system for disclosure here.
“It should be automated.”
Another observer who is well-versed with the local capital market concurs.
“In order to protect minority shareholders, substantial shareholders who are often the controlling shareholders should make the disclosure within 24 hours as opposed to the current seven market days so at least the minorities are aware that they (the substantial shareholders) have sold in the case of a disposal,” he says.
He points out that after seven days, a stock may have already lost a lot of value without the minorities being aware of what had actually happened.
In neighbouring Singapore for instance, the disclosure period requirement is much shorter, that is within two business days.
Fortress Capital Asset Management CEO Thomas Yong shares the same view as the rest.
“Trade actions of company insiders or even substantial shareholders are generally considered as material price sensitive information and as such require timely disclosures in the interests of protecting other minority shareholders and smaller-scale investors.”
It is about time that things change in Malaysia, both the cumbersome reporting and the lax enforcement. Both jobs are begging to be automated, something that should be pretty straight forward.
It would also require that the ultimate beneficial shareholders are revealed in a proper way, something that was also long overdue.