Are SC/BM not involved in 1MDB probe? (2)

I wrote before:


“There are three agencies involved, comprising the police which deal with cheating, criminal breach of trust and so on; the MACC (Malaysian Anti-Corruption Commission) which deals with corruption; and the central bank, BNM, that deals with aspects relating to our financial system and what contravention there has been of our rules [and] regulations, and our laws."

I definitely hope that the Securities Commission and/or Bursa Malaysia are included in the probe as well. Although 1MDB is not a listed company, the following companies are or were listed on Bursa:

• Utama Banking Group Bhd
• Cahaya Mata Sarawak Bhd
• Putrajaya Perdana Bhd
• Loh & Loh Corp Bhd
• RHB Cap Bhd

I definitely should add AmBank to that list. This bank paid a penalty of RM 53.7 Million to Bank Negara, although the exact reason for it ("non-compliance with certain regulations") is very vague (here and here).

With the shareholders of AmBank being hit by the penalty, are they not allowed to know the exact facts regarding the non-compliance? Later this year, at the AGM, they have to vote about the Board of Directors, should they not know who was responsible for this issue?

More news regarding the UBG deal has been revealed by The Australian: "Email trail links banks to Malaysian scandal", some snippets:

Together with other information compiled by police in neighbouring Singapore, they also raise concerns that the UBG takeover may have ultimately benefited 1MDB adviser and UBG director Jho Low, who is close to the family of Malaysian Prime Minister Najib Razak, at the expense of ordinary Malaysians.

......

While AmBank told the world, through the Malaysian stock exchange, that PSI belonged to Obaid, internal bank emails obtained by The Weekend Australian show it was told the secrecy was necessary because Saudi royals were behind the company.

“PSI, a privately held company of the Royal Family of the Kingdom Saudi Arabia, is governed by the strictest confidentiality,” Ambank officer Daniel Lee was told in a March 18, 2010 email.

“As such, it is with regret that we are not able to provide you with access to PSI’s financials.”

Adding to the secrecy shrouding the deal, the email to Lee came from an anonymous Gmail ­account “project.unicorn1@ gmail.com”, operated by a person or persons calling themself “Team Project Unicorn”.

Even now, five years after PSI took control of UBG and delisted it from the Malaysian exchange, the identities of the person or people operating the email account remain unknown.

Saudi Arabian documents obtained by The Weekend Australian show that when PetroSaudi was set up in 2007 it was half-owned by Obaid and half by Saudi royal Prince Turki bin Abdullah. However, there is no indication Prince Turki was ever involved in PSI.

The Weekend Australian was also unable to verify the existence and status of PSI. It’s not listed on the Seychelles publicly available company register, and yesterday the country’s Financial Services Authority had yet to respond to a request for a more detailed search.

It is sometimes hard to tell who was on whose side during Project Unicorn.

In UBG’s corner, Low sat on the board as a representative of the Abu Dhabi-Kuwait-Malaysia Investment Corporation or ADKMIC, which owned a little over half of UBG — a stake it had bought from the Taib family.

Even though ADKMIC carries a name that makes it seem a fund from the oil-rich Middle East, police in Singapore have told Malaysian authorities that Low actually sits behind the British Virgin Islands company.

However, in UBG’s 2009 annual report, Low declared he owned no shares in UBG, either directly or indirectly.

......

Later in the year when PSI was mopping up minority shareholders, this would be directly contradicted in a statement to Malaysia’s stock exchange, Bursa Malaysia, describing Obaid as “the sole shareholder and director or PSI Seychelles”.

......

On January 12, 2011, almost a year after Team Project Unicorn set out the outlines of the deal, the UBG takeover was complete. With all shareholders paid out and the company now solely owned by PSI’s Malaysian subsidiary, Javace, UBG was delisted from Bursa Malaysia and dissolved.

At 2.50 ringgit a share, ADKMIC was entitled to 658m ringgit, or about $US195m.

But who got that money? When the UBG takeover was announced at the beginning of 2010, Malaysian state-owned newsagency Bernama reported ADKMIC shareholders included “prominent Middle-Eastern investors”. But police in neighbouring Singapore tell a different story. In March last year, Singapore Police’s Commercial Affairs Department told Malaysia’s central bank that an account held in ADKMIC’s name at the Singapore branch of Swiss bank BSI was “beneficially owned by Jho Low”.

Singapore Police allege that between June 2011 and September 2013 almost $529m flowed into the ADKMIC account from an account at RBS Coutts’ Zurich branch held by another company allegedly associated with Low and embroiled in the 1MDB scandal, Good Star.

The SC should have investigated these claims by now, the above might implicate serious breaches of the listing rules.

AmBank was of course also involved with the (in)famous "donation" of RM 2.6 Billion in the accounts of the PM.

But there might be more. According to blogger "jebatmustdie", there are issues with a RM 5 Billion bond from 1MDB (the article can be found here, readers in Malaysia might need a VPN to access it):

The terms and conditions of this RM5 billion bond had been clearly spelled out and that it could only be used according to Shariah principles.

Is sending money to Good Star Ltd in compliance to Shariah principles? What does Good Star do?

Securities Commission is the controller of bond issuance process. It also ensures compliance to documents when the bond was offered as well as the continuous monitoring that the terms and conditions are always being complied with.

In it's 2015 annual report, there is no mentioning at all of 1MDB, the elephant in the room

AMMB: How To Make RM 5.7 million By Doing Almost Nothing

http://www.securitiesarbitrations.com/Securities-Arbitration-Blog/Article/11/2011/174/How-To-Make-$1-8-million-By-Doing-Almost-Nothing

In a curious case of absent oversight, Morgan Stanley Investment Management has been fined $1.5 million by the Securities and Exchange Commission (SEC) for improperly charging a fund it manages for investment advisory services that were never performed.

Morgan Stanley Investment Management is a wholly owned subsidiary of Morgan Stanley. From 1996 to 2007, it charged The Malaysia Fund Inc. about $1.845 million pursuant to a research and advisory agreement with AMMB Consultant Sendirian Berhad. Under the agreement, AMMB was supposed to provide advice, research, and assistance to Morgan Stanley for the benefit of the fund, according to a Nov. 16 cease and desist order from the SEC that serves to settle the charges.

All AMMB did was send Morgan Stanley two reports per year on the state of the Malaysian market comprising information that could have been gathered by anyone with an Internet connection. Nonetheless, for more than 10 years, Morgan Stanley kept passing the AMMB charges onto the fund, despite having agreed to monitor AMMB’s performance, the SEC order said

As a condition of the settlement, Morgan Stanley was censured and will reimburse the fund the $1.845 million it shelled out for AMMB, less a credit of $543,000 that has already been paid back.

Morgan Stanley also agreed to cease and desist from committing or causing any violations and any future violations of Sections 15(c) and 34(b) of the Investment Company Act, and Sections 206(2) and 206(4) of the Advisers Act and various rules thereunder, the order said.

The cease and desist order also directs Morgan Stanley to implement and policies and procedures within 45 days to improve its Section 15(c) processes and its oversight of advisers and sub-advisers, principal underwriters, administrators, and transfer agents. Section 15(c) concerns the renewal of services contracts and the gathering of information to ensure accurate evaluations of such contracts.

The policies and procedures include requiring Morgan Stanley personnel with direct knowledge of a service agreement to review and verify the services performed, obtain an annual certification from the service provider that the services were performed, and provide accurate descriptions of the service providers and their services to its clients, the order said.

This latter measure includes ensuring that personnel with knowledge of a given agreement and the services it covers will review descriptions of the services providers contained in a registration statement, application, report, account, record, or other document filed or transmitted pursuant to the Investment Company Act, as well as any financial statements and marketing materials.

Morgan Stanley was also directed to certify to the SEC that it has implemented these policies and procedures within 60 days of their completion.

The Malaysia Fund Inc. is a closed-end investment company launched and managed by Morgan Stanley in 1987 to invest in the equity securities of Malaysian companies. As of June 30, 2011, the fund reported net assets of $93.8 million. Morgan Stanley is the fund’s the primary investment adviser.

The two signed a written advisory agreement in 1987 for investment management services, including investment trading and maintenance of the books and records. The fund pays Morgan Stanley an annual fee of 0.90 percent of the fund’s first $50 million of average weekly net assets, with the percentage decreasing incrementally to 0.50 percent of the fund’s average weekly net assets in excess of $100 million. Morgan Stanley is also the fund’s administrator, for which it receives additional fees.

AMMB, of Kuala Lumpur, Malaysia, is a wholly owned subsidiary of AM Bank Group, one of the largest banking groups in Malaysia. It was an investment adviser registered with the SEC from 1987 until February 2008, when it withdrew its registration.

As part of the agreement between the fund, Morgan Stanley and AMMB, Morgan Stanley was supposed to assist AMMB in making the relationship as productive as possible. It was also supposed to give guidance to AMMB on working procedures -- and most to the point -- monitor AMMB’s performance of services, the order said.

The funds board of directors approved AMMB’s fees each year based on Morgan Stanley’s representations, the SEC order said. As a result, it paid $1.845 million to the sub-adviser between 1996 and the end of 2007 for advisory services it did not receive. In early 2008, after the SEC began to look into the fund’s relationship with AMMB, its services were terminated.

Per the service agreement that the fund paid out on for so long, AMMB collected fees at an annual rate of 0.25 percent for the first $50 million of average weekly net assets, 0.15 percent for the next $50 million and 0.10 percent of assets in excess of $100 million.

Every year the contract lasted, AMMB sent a report to Morgan Stanley that falsely claimed it was providing specific research, intelligence, and advice to Morgan Stanley. The purpose of the report, according to the SEC order, was to provide the fund’s board of directors with the information it needed to evaluate the terms of the sub-adviser agreement.

In each of these reports, AMMB said that it provided the following services to Morgan Stanley on behalf of the fund: research on Malaysian companies to identify and recommend stocks for investment; statistical reports to help with investment decisions; market intelligence on local corporate developments; and advice on changes in economic and political conditions in Malaysia. The report also listed personnel and included AMMB’s unaudited financial statements, the order said.

Despite the fact that very little of the information listed above was ever imparted to Morgan Stanley, the investment management company submitted these reports to the fund’s board as it considered renewal of the AMMB advisory agreement.

Morgan Stanley also submitted two compliance reports to the fund and its shareholders that indicated AMMB was providing the advisory services, when actually these services were limited to two minor monthly reports, which Morgan Stanley’s portfolio management team did not even use.

Section 15(c) of the Investment Company Act requires an investment adviser to furnish such information as may reasonably be necessary for its client to evaluate the terms of any contract whereby any person or entity agrees to act as investment adviser.

The SEC’s order stated that Morgan Stanley did not provide The Malaysia Fund’s board with information reasonably necessary for the board to evaluate the nature, quality, and cost of AMMB’s services. Morgan Stanley represented to the board and the funds investors that AMMB was providing advisory services for the benefit of the fund when it was doing no such thing.

Full text: http://www.sec.gov/litigation/admin/2011/ia-3315.pdf