Late "strong pick-up" by Bursa

Article from The Star, one snippet (emphasis mine):


Bursa Malaysia staged a late strong pick-up before closing, led by gains in selected blue chips such as CIMB Group Bhd, Axiata Group Bhd and MISC Bhd.

The benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) closed 12 points higher to 1,773.16 yesterday, after a slow start to the week.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said foreign investors were net sellers yesterday despite the strong pick-up in the FBM KLCI.

“It was a last-minute push before the long holiday, and it was quite unusual considering the results season is still ongoing,” he told StarBiz.


It was definitely unusual, let's zoom in on a few counters.

On 16:50:01 it was CIMB's turn, a sudden 32 cent jump in price:

Two seconds later UMW's turn, a 45 cent jump:

And one second later at 16:50:04 Timecom's turn, a 53 cent jump in price:

As a consequence, a sudden spike in the KLCI:

Who was (were) the buyer(s), may be a fund that needed to show good results at the last trading day of August?

It looks all very artificial, is this actually allowed, will SC take action?

XingQuan: boardroom getting rather empty

Two more independent directors of XingQuan resigned, "Due to time commitment issue" and somewhat more specific:


As he will not be able to discharge and perform the duties and responsibilities of an independent director due to the expiry of the employment contract of the CFO in early May 2017, the resignation of Audit Committee Chairman in end of May 2017, the recent resignation of the other independent director, and the inability of the Company to secure suitable candidates to fill the aforesaid vacancies since May 2017, he therefore tender resignation as an independent director.


That means that the audit committee is now vacant, as is the department of independent directors. Any takers? If not, who will defend the rights of the minority investors?

I have warned several times about XingQuan, the first time (XingQuan: does the company believe its own cash?) almost exactly two years ago.

So far no visible action has been taken by the authorities. Did it really have to come this far? Fast, adequate action might for instance have prevented the rights issue, pouring more good money after bad. Or may be some of the assets could have been saved and liquidated, to the advantage of the minority investors.

In a unrelated case, the Securities Commission has taken action against a father and son for submitting false or misleading information. But the punishment is a mere reprimand and permanent moratorium regarding listings in Malaysia. I guess the perpetrators will simply shrug their shoulders and move on, the world outside Malaysia is pretty large after all.

The real test will be if the Malaysian authorities will be able to fine foreigners or impose a jail sentence. So far no action of that kind has ever been taken against any of the listed Chinese companies in Malaysia. Time will tell if it ever will happen.

If it turns out to be near impossible to impose these penalties, then Bursa should never have allowed foreign companies to list in Malaysia, because of the absence of any significant deterrent.

SC sues 7 for insider trading

From the website of the Securities Commission:


Securities Commission Malaysia (SC) has filed a civil suit at the Kuala Lumpur High Court against seven individuals for insider trading involving the shares of Worldwide Holdings Bhd (Worldwide), a company previously listed on Bursa Malaysia.

Datin Paduka Low Siew Moi, Tan Cheng Teik, Liaw Huat Hin, Hoi Main Seng, Chua Keng Hong, Datuk Ter Leong Yap, and Ter Leong Hing were alleged to have been involved in the insider trading of Worldwide shares between 2006 and 2007.

In the suit filed on 18 May 2017, SC claimed that Low had communicated material non-public information, namely the proposed privatisation of Worldwide, which was undertaken by Perbadanan Kemajuan Negeri Selangor (PKNS), to Tan, Liaw, Hoi, Chua, and Ter Leong Yap, in breach of section 89E(3)(a) of the Securities Industry Act 1983. Low was the deputy general manager in PKNS and a director of Worldwide at the material time.

SC also alleged that Ter Leong Yap and Tan had further communicated the said information to Ter Leong Hing, and also Hoi and Liaw respectively. SC claimed that Tan, Chua, Hoi, Liaw and Ter Leong Hing breached section 89E(2)(a) of the SIA when they purchased Worldwide shares while in possession of the material non-public information.

SC is seeking a disgorgement of three times the profits earned by the defendants as a result of the insider trading and a civil penalty of RM1 million from each of the defendants.


Good that the SC chases insider trading activities, which have been rampant in Malaysia. Many significant corporate announcements have been preceded by a surge in volume and price, indicating that some participants were (most likely) privy to confidential information.

In a previous posting on this subject I wrote:

" .... the cases seem all rather old, the alleged events often took place 6-8 years ago. Does it really need to take such a long time before somebody can be charged?"

May be I was too mild, because the above case was 10-11 years old.

There is another interesting issue though, according to an article of The Malay Mail:


The Malaysian Anti-Corruption Commission (MACC) announced today it was cooperating with the National Chamber of Commerce and Industry of Malaysia (NCCIM) to fight graft, the same day the Securities Commission (SC) named NCCIM’s president as one of seven it was suing for insider trading.

The MACC said it has established a “network of cooperation” with NCCIM to fight corruption and also abuse of power, following a meeting between top officials from both the agency and the chambers.

“Businessmen play an important role in spurring our economic growth. The cooperation can help increase business activities and strengthen economic stability,” MACC said in a statement.

The chambers’ representatives were led by its president, Datuk Ter Leong Yap, who is also founder and executive chairman of Sunsuria Berhad, a property developer that is reportedly planning to launch projects with a total gross development value of RM1.55 billion this year.

However, SC announced today that it has filed a civil suit at the Kuala Lumpur High Court on May 18 against Ter and six others for insider trading involving the shares of Worldwide Holdings Bhd ― a company engaged in property environmental services, investment holding and medical device manufacturing businesses ― between 2006 and 2007.

Are there really no concealed placements to nominees of major shareholders in Malaysia?

From Hong Kong:

SFC seeks court orders against former chairman of Kong Sun Holdings Limited and China Sandi Holdings Limited


The Securities and Futures Commission (SFC) has commenced legal proceedings in the Court of First Instance to seek disqualification and compensation orders against Mr Tse On Kin, former chairman and executive director of Kong Sun Holdings Limited (Kong Sun) and China Sandi Holdings Limited (China Sandi), for devising a scheme to conceal his interests in the companies’ share placements in 2009 (Notes 1 & 2).

The SFC alleges that Tse, who was the chairman of the two companies at the material time, used a nominee company to subscribe for their placement shares, which were intended only for independent placees.

Tse also allegedly concealed his interests in the placement shares from the companies’ boards and shareholders in order to obtain them at discounts for which he should not have been eligible.

As part of the proceedings, the SFC is seeking orders to compel Tse to account for the profit he made from the sale of the placement shares in Kong Sun and to pay compensation to Kong Sun for the secret profit he made (Note 3).


In Malaysia both shares being held by nominees and the issue of private placements are a rather common practice (in the very large majority of private placements we will never know the names of the persons or companies that will receive the placement shares).

I am therefore almost sure that the above scheme to conceal interests must have happened at Bursa listed companies, probably frequently.

But why has there been hardly any enforcement at all in this area? Are the enforcement agencies not pro-active enough, doing some investigations, looking for clues, connecting the dots, following the money trail?

I don't suggest enforcement of this is easy, but a few successfully prosecuted cases would at least give some confidence that action is being taken and that perpetrators are at a risk.

SC sues Stone Master executive (2)

Some updates in this case.

From The Edge: Stone Master deputy MD fails to strike out Securities Commission's civil suit

A few snippets:


Stone Master Corp Bhd deputy managing director Datin Chan Chui Mei failed in her application to strike out the Securities Commission's (SC) claims against her for allegedly causing wrongful loss to the company.

Following the decision by High Court Judge Datuk Has Zainah Mehat, the hearing of SC’s application for an injunction restraining her from dealing with monies in her bank account up to the amount of RM11.54 million, pending the disposal of the trial, is set for decision or clarification on March 20.  

In September 2016, SC obtained an ex-parte injunction against Chan.

Chan was charged under sections 179 and 317A (1) of the Capital Markets and Services Act 2007 (CMSA). She received RM11.54 million out of RM11.59 million meant to be paid by Stone Master to local representatives of 23 foreign companies, relating to the exclusive rights to market and promote their products in Malaysia and Singapore.

Section 179 of the CMSA prohibits a person from using any manipulative device for subscription, purchase or sale of any securities.

Under section 317A, a director or an officer of a listed corporation is prohibited from doing anything with the intention of causing wrongful loss to the listed corporation.

The SC wants Chan to pay the regulator the sum of RM11.54 million, which is to be held in trust for Stone Master, and for Chan to be barred from being a director of a public-listed company for a period of five years.

In addition, the SC is also seeking a civil penalty of RM1 million against Chan.

Despite facing the charges, Chan remains as Stone Master's deputy managing director.


That last sentence sounds very strange, of course the deputy MD should have been suspended immediately, at least temporarily. It seems to me that the other Directors of the company also have a responsibility in this matter.

Also, it seems surprising (given the seriousness of the allegations of the SC) that things have not yet moved to the criminal court, apart from the civil penalty sought by the SC.

Stone Master issued its Annual Report 2016.

If one would read the Chairman's statement, one would not get a very accurate picture of what is really going on with the company. For that one would have to dive into the notes that accompany the accounts.

Note 26 (page 107 contains numerous Related Party Transactions. For instance Starfield Capital, a company related to the deputy MD, made a loan to the company of RM 18 Million.

Note 32 (page 117) details significant events during and after the financial year, a whopping 27 pages packed with information, some of it simply astonishing. Amounts in the Billions of RM are mentioned, and this for a company with a current market cap of only RM 9 Million (and consistently losing money).

If anybody would like to jump into the action, based on those Billions mentioned, one should first read the following paragraph (the current share price of Stone Master is RM 0.10):

My question: was the original business model based on the Exclusive Agencies and mentioning those Billions of RM really ever viable?

Also the action by the Securities Commission and the current PN17 status are mentioned in the annual report. And on page 146 one can find the disclaimer of opinion by the auditor, another clear red flag.

It's a small world

Two interesting articles:

Penny stock crash: John Soh accused of witness tampering

7 executives of Platinum Partners charged with US$1 bil fraud

In it the companies in the "Penny Stock Saga" (Blumont, Asiasons and LionGold) are linked to ISR and John Soh and to US-based hedge fund Platinum Partners.

It is indeed a small world in the world of finance.

Good to see that at least some enforcement is being delivered in Singapore and the US.

Remains the question: John Soh seems to be (allegedly) the mastermind in this all, what would have happened if the Malaysian authorities would have punished him more appropriately for his alleged role in the downfall of several Malaysian listed companies?

The fine of RM 6 Million seems to be woefully inadequate, at least to me.

MyEG shares jump after juicy government contract (3)

I wrote before about this issue, here and here.

Bursa announced the following enforcement:


Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded My E.G. Services Berhad (“MYEG” or “the Company”) and its Managing Director, Wong Thean Soon for breaching the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Main LR).  In addition, the Managing Director has been fined RM50,000.

MYEG is publicly reprimanded for breaching paragraph 9.08(2) of the Main LR which prescribes that a listed issuer must ensure that no disclosure of material information is made on an individual or selective basis to analysts, shareholders, journalists or other persons unless such information has previously been fully disclosed and disseminated to the public (i.e. to Bursa Malaysia Securities pursuant to paragraph 9.08(5) of the Main LR).  In the event that material information is inadvertently disclosed on the occasion of any meeting with analysts, shareholders, journalists or others, it must be publicly disseminated as promptly as possible.

MYEG had at the CIMB Conference on 6 January 2015 disclosed the government’s decision for MYEG to implement the fully online renewal of foreign workers’ permit from 2015 onwards (“the New Renewal of Foreign Workers Permit Arrangement”) as well as impact of the same to the Company (e.g. market share and market potential).

However, the announcement on the New Renewal of Foreign Worker Permit Arrangement was made to Bursa Malaysia Securities only on 9 & 12 January 2015 and even so, without any disclosure of details of its impact / implication on MYEG’s financials which was disclosed in MYEG’s presentation to the fund managers at the CIMB Conference.

The New Renewal of Foreign Workers Permit Arrangement was material / significant to the Company’s business and prospects as well as financials to MYEG particularly as the arrangement would increase the Company’s market share on renewal of foreign work permits from 8% (based on MYEG’s representation at the CIMB Conference) to 100%.

There was a significant increase of up to 26% in the Company’s share price from 6 January 2015 to 9 January 2015 with high volume traded following MYEG’s presentation at the CIMB Conference on 6 January 2015, the CIMB Equities research report issued on 7 January 2015 which had, amongst others, stated that the target price for MYEG was to be RM7.80 (from RM5.28) and The Star article on 9 January 2015 which had reported on the New Renewal of Foreign Workers Permit Arrangement. 

Wong Thean Soon, the Managing Director of MYEG is publicly reprimanded and fined RM50,000 for breaching paragraph 16.13(b) of the Main LR where he had permitted the Company’s breach of paragraph 9.08(2) of the Main LR.  He had selectively disclosed information on the New Renewal of Foreign Workers Arrangement in making the presentation for MYEG at the CIMB Conference on 6 January 2016.

In addition to the public reprimand, MYEG is required to undertake or arrange for the necessary training programme(s) in relation to compliance with the disclosure obligation under the Main LR and ensure its directors and relevant personnel of the Company attend the same.
Bursa Malaysia Securities views the contravention seriously as the disclosure obligations are fundamental obligations of listed companies to preserve and sustain market integrity and investor confidence.

Bursa Malaysia Securities has reminded MYEG and its Board of Directors on their responsibility to maintain the appropriate standards of corporate responsibility and accountability to its shareholders and the investing public.


The above enforcement was expected, it is reasonably fast and gives the right amount of detail in the above press release, both regarding the impact of the contract on the business of MyEG and on the share price.

However, the size of the fine (only RM 50K) looks very low, is this really an adequate deterrent? Especially since Wong Thean Soon settled only a few months before the highest regulatory amount in the history of the SC:


"On 26 September 2014, Wong Thean Soon (“TS Wong”), entered into a settlement with the Securities Commission Malaysia (“SC”) in the sum of RM7,000,000 when he agreed without admission or denial of liability, to settle a claim that the SC was proposing to institute against him and 13 others for the manipulation of MyEG Services Berhad shares between 16 January 2007 and 24 April 2007, contrary to section 84(1) of the Securities Industry Act 1983."

SC sues Stone Master executive

The Securities Commission announced:


Securities Commission Malaysia (SC) recently filed a suit against Datin Chan Chui Mei, Deputy Managing Director, Stone Master Corporation Bhd (Stone Master) for allegedly causing wrongful loss to the listed corporation.

In the claim, the SC alleged that Stone Master had entered into several agency agreements with 23 foreign companies for the exclusive rights to market and promote, in Malaysia and Singapore, products belonging to the foreign companies. In consideration of the exclusive rights granted to it, Stone Master paid several local representatives of the 23 foreign companies a sum amounting to RM11.59 million in the form of a non-refundable deposit. The SC alleged that of the RM11.59 million, a sum of RM11.54 million was subsequently paid by the local representatives to Datin Chan’s personal account, in breach of sections 179 and 317A(1) of the Capital Markets and Services Act 2007 (CMSA).

Section 179 of the CMSA prohibits a person from using any manipulative device for the subscription, purchase or sale of any securities. Under section 317A, a director or an officer of a listed corporation shall not do anything with the intention of causing wrongful loss to the listed corporation.

In order to prevent dissipation of the RM11.54 million paid into Datin Chan’s banks accounts, the SC had, on 28 September 2016, obtained an injunction from the Kuala Lumpur High Court to restrain Datin Chan from dealing with the monies in her bank accounts up to the amount of RM11.54 million. In granting the injunction, the High Court also ordered her to provide a detailed account of the RM11.54 million which she had received.

In the suit, the SC is seeking various orders, including an order that Datin Chan:

a.	contravened sections 179 and 317A of the CMSA;
b.	makes restitution to persons aggrieved by the contravention;
c.	pays the SC the said sum of RM11.54million, to be held in trust for Stone Master;
d.	be barred from being a director of a public-listed company for a period of five years.

SC is also seeking a civil penalty for the sum of RM1 million against Chan.

The High Court has fixed 14 October 2016 for her to respond to the injunction application.


Well, that is quite heavy stuff and rather specific in amounts and payments made (except for the exact time line).

Not surprisingly, the share dropped like a stone (pun intended) after the news.

Bursa queried the company on the above, and the company replied in a rather disappointing way, without giving much specifics.

It also appears that Datin Chan stays on as an executive director, no announcement of her resignation has been made.

Would it not be much better if she steps down for the time being given the seriousness of the allegations, as long as the air is not cleared?

Patimas: will there be justice? (3)

I wrote first about Patimas, after giving a long list of alleged irregularities and red flags:

"Will the authorities take appropriate action within a reasonable timeframe? Time will tell."


In the next posting in which Bursa handed down fines of RM 2 Million in total to four executive directors I wrote:

"Is the punishment enough, will it act as a deterrent? I don't think so, I think only a jail sentence will suffice."


Now the Securities Commission revealed that it "charged a former Managing Director and three former executive directors of Patimas Computers Berhad (Patimas) with ten charges of causing wrongful loss to the company."

"Law Siew Ngoh, 55, a former Managing Director, Yap Wee Hin, 58, a former Deputy Executive Chairman, Robert Daniel Tan Kim Leng, 59, and Ng Back Heang, 62, both former executive directors of Patimas are said to have made payments totalling RM5.1 million between July to December 2010, for the purported development of various software for Patimas when in fact they were not used for such purpose."

"This is the first time the SC is taking a criminal action for an offence under section 317A(1) of the Capital Markets and Services Act 2007. Under this section, an officer of a listed corporation or any of its related corporation, commits an offence if he does anything or cause anyone to do anything with the intention of causing wrongful loss to the listed corporation or its related corporation. At the material time, the offence was punishable with an imprisonment term not exceeding ten years and a fine not exceeding RM10 million."

1MDB accounts "are audited by an international firm" (3)

From my previous posting on this matter:


The Board would like to stress that 1MDB accounts are audited by an international audit firm, Deloitte, " it said in a statement issued in capital Kuala Lumpur tonight.
It said that Deloitte signed off 1MDB’s 2013 and 2014 accounts without qualification and similarly KPMG signed off the 2010, 2011 and 2012 accounts with no qualification.


This subject has suddenly become more interesting, since the news has been published that Deloitte has resigned as an auditor.

1MDB did not give any reason why it held back the news of Deloitte's resignation, which was known for five months, and which seems to be material information.

But then again, transparency was never 1MDB's strongest point.

On top of that:

".... in a separate statement referred to the civil forfeiture complaint filed by the United States Department of Justice (DoJ) on July 20. It said the complaint contains information, which, if known at the time of the 2013 and 2014 audits of 1MDB, would have impacted the financial statements and affected the audit reports."


Despite this "small setback", 1MDB declared:


".... the Board remains confident that no wrongdoing has been committed by 1MDB and that the past audited financial statements continue to show a true and fair view of the company’s affairs at the relevant points in time ......"


That confidence seems highly misplaced given the overwhelming information available pointing to the opposite.

Hopefully one day the Board (and all other parties associated with 1MDB) will be held responsible for its deeds.

The Securities Commission has formed the AOB (Audit Oversight Board), its mission statement:

Fostering high quality independent auditing to promote confidence in the quality and reliability of audited financial statements of public-interest entities and schedule funds in Malaysia.

Over the years many critical articles have been published and dozens of red flags have been spotted regarding 1MDB. How is it possible that three of the highest regarded accounting firms in Malaysia have failed to spot the many relevant issues and have approved the accounts without even a single qualification? These same companies have also audited numerous companies listed on Bursa.

AOB should investigate all that went wrong, the reasons behind it and take appropriate measures.

Koon Yew Yin's late disclosures (2)

Koon Yew Yin has replied regarding his late reporting, some snippets:


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.

To Cliq or not to Cliq? (8)

A new development in this case, according to this announcement:


..... Best Oracle has filed a Judicial Review Application to the High Court of Malaya (“the High Court”) (“the JR Application”) in respect of the request/decision by the Securities Commission (“SC”) via a letter from Maybank Investment Bank Berhad (“Maybank IB”) on 7 January 2016 to CLIQ Energy Berhad (“CLIQ/the Company”) (“the Said Letter”).


In the JR Application, the SC was named as the first respondent and CLIQ was named as the second respondent. Best Oracle is a 20% shareholder of the Company and the shareholders of Best Oracle are the 5 members of the Management Team of CLIQ.


Best Oracle has the most to lose when the company will be liquidated, they put in the initial money. It will be interesting to follow the above JR Application, with CLIQ being the first SPAC being liquidated, we are in unchartered waters.

I have written a lot about SPACs in the past, here is a 2013 article from Investor Central about the IPO of CLIQ.

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

To Cliq or not to Cliq? (5)

I have been rather sceptical about Cliq's qualifying proposal.

The company announced on Bursa the following (some snippets, emphasis mine):


.... the SC had vide its letter dated 29 January 2016 addressed to Maybank IB, returned the Application as the SC is unable to proceed with its review due to required information and documents that have yet to be submitted to the SC relating to several fundamental matters in relation to the Application that have yet to be addressed, in particular:

(i)         Supporting data used in the assessment of the volume of oil reserves by the independent technical expert that has yet to be provided to the SC. Without this, the SC is unable to determine if disclosures to shareholders of CLIQ are appropriate;

(ii)         An independent expert was appointed to provide a fairness opinion as required under item 4, Part F of Appendix 10B of the Main Market Listing Requirements issued by Bursa Securities (“Fairness Opinion”). However, the independent expert has relied on the asset valuation report prepared by the asset valuation expert, despite not taking a view on the reasonableness of the report and its contents, in arriving at its fairness opinion. This qualification has been specifically stated in its Fairness Opinion. As a result, shareholders of CLIQ would not have the benefit of a fairness opinion that encompasses all aspects that they need to consider to make an informed decision; and

(iii)        The technical reports prepared by the independent technical expert and the Fairness Opinion have not been updated to reflect the current oil prices trends. This is not in compliance with paragraph 3.34 of the SC’s Guidelines on Due Diligence Conduct for Corporate Proposals.

The Company has taken all reasonable efforts to address the above required information and documents in relation to the Application. However, the Company had also encountered certain unanticipated external factors beyond its control namely:

(i)         substantial drop in oil price since the signing of the SPA on 24 March 2015; and

(ii)         substantial depreciation of RM against USD which resulted in the shortfall of cash available to satisfy the purchase consideration for the Proposed Acquisition.

In addition, the Company was unable to obtain certain information from third parties to support the assessment of the volume of oil reserves and consequently, the relevant updated reports which were all required for the Application.

The Board will deliberate on the next course of action to be taken and an announcement will be made by the Company in due course.


I would like to add that the economy of Kazakhstan and its currency also have been hit severely by the sharp decline of commodities. I am pretty sure that therefore the sellers would like the deal to continue (all foreign money is probably welcome at the moment).

But is this deal at the agreed price, given the current situation in the oil and gas industry, in the best interest of the shareholders of Cliq? Time will tell.

SC punishes audit company

Announcement by the Malaysian Securities Commission:

Audit Oversight Board Revokes Registration of Auditor for the First Time

The Audit Oversight Board (AOB) has revoked the registration of an audit firm Wong Weng Foo & Co along with the Managing Partner, Wong Weng Foo and its Partner, Abdul Halim Husin effective from 2 December 2015.

The revocation is under section 31Q(1)(a)(B) of the Securities Commission Malaysia Act 1993 (SCMA) for failure to remain fit and proper to audit public interest entities.

The SCMA gives AOB the power to revoke the registration of an auditor if the auditor contravenes condition of registrations imposed by the AOB under section 31O(3) of the SCMA.

Wong Weng Foo & Co, Wong Weng Foo and Abdul Halim Husin were found to have failed to comply with auditing standards in the engagement performance of two public listed entities. In addition, Wong Weng Foo & Co failed to carry out the practice honestly, competently and with due care when it failed to implement the remedial action as reported to AOB in respect of past inspection findings.

Wong Weng Foo & Co also failed to ensure that the person who audits the financial statement of a public listed entity on behalf of the audit firm is appropriately qualified, sufficiently trained and competent.

Announcement by the US Securities and Exchange Commission:

Grant Thornton Ignored Red Flags in Audits

The Securities and Exchange Commission today announced that national audit firm Grant Thornton LLP and two of its partners agreed to settle charges that they ignored red flags and fraud risks while conducting deficient audits of two publicly traded companies that wound up facing SEC enforcement actions for improper accounting and other violations.

Grant Thornton admitted wrongdoing and agreed to forfeit approximately $1.5 million in audit fees and interest plus pay a $3 million penalty.

Melissa Koeppel was an engagement partner on the deficient audits of both companies, and Jeffrey Robinson was an engagement partner on one of the deficient audits, which spanned from 2009 to 2011 and involved senior housing provider Assisted Living Concepts (ALC) and alternative energy company Broadwind Energy.  An SEC investigation found that Grant Thornton and the engagement partners repeatedly violated professional standards, and their inaction allowed the companies to make numerous false and misleading public filings.


Pretty similar announcements, one could say, but there are some crucial differences.

The US announcement does name the listed companies, the Malaysian (unfortunately) not. In the latter case the shareholders of the companies involved do not know what happened to the audits, if the management was involved, if any action has to be taken.

Also, there is a very detailed description given in the US case (please visit this website for more information including some links), but not in the Malaysian case.

It is good that some enforcement has been meted out by the Securities Commission, but more information what exactly happened would be helpful.

Are SC/BM not involved in 1MDB probe?

Article in The Edge: "Zeti: Public deserves answers to 1MDB"

One snippet:


“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

According to this article from The Malaysian Insider, all these companies were very much linked to 1MDB and the actors involved in the drama.

BM and/or SC have been as quiet as a mouse over the whole affair, but they should revisit all deals regarding these four companies, if the information provided to the public has been correct at all times.

Loopholes plugged by SC

Article in The Star, some snippets:


An amendment to a securities law is to plug a loophole in the law that allowed parties to exclude liability for the veracity of statements made in marketing material related to corporate bonds.

The Capital Markets and Services (Amendment) Act 2015 (CMSA 2015) now makes it clear that any “document, agreement or contract” that seeks to exclude the liability of the issuer of that document from the accuracy and reliability of information in that document will be deemed as void.

In other words, this means that parties preparing information memoranda (info memo), that typically accompany the issuance of private debt securities such as corporate bonds, can no longer seek to exclude their liability.

The amendment effectively addresses the issues that arose following the 2014 decision of the Federal Court in the Pesaka Astana bond case.


I wrote several times about the Pesaka Astana issue (here, here and here).

More from the article from The Star:


The amendments to the CMSA also enhanced minority shareholder protection in the event of corporate takeovers and mergers. The amendment allows the SC to appoint an independent adviser for an offeree if the latter fails to appoint one.

Another good change.

I noted before regarding KPMG's independent advice on Maybulk's RPT:

I think that is highly debatable, I think there is a very good case to be made that KPMG is liable. Anyhow, I strongly recommend the authorities to come down hard on independent advisers who issue these kinds of statements:

If advisers don’t want to take any responsibility while at the same time they make very clear judgment calls which have consequences for the voting behavior of shareholders then they should simply not be allowed to be independent adviser.


I hope with the above changes that this issue is also settled.

Patimas: will there be justice? (2)

I wrote before about Patimas. I ended the posting with the following:

"Will the authorities take appropriate action within a reasonable timeframe? Time will tell."

That question has been answered by Bursa, some snippets:


Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded Patimas Computers Berhad (PATIMAS) and its 4 executive directors at the material time for breaching the Bursa Malaysia Securities Main Market Listing Requirements (Main LR).  In addition, the 4 executive directors of PATIMAS were fined a total of RM1,986,200.

All the 4 executive directors had or should have knowledge of the financial affairs of PATIMAS including these transactions and were in a position or had the reasonable means to detect, ascertain, address and/or resolve the veracity of the transactions and the audit issues arising from the same.  This was particularly in light of the nature, irregularities and magnitude / materiality of the transactions and their position, roles and responsibilities in the Company (including as directors in the subsidiaries involved in these transactions) as well as their knowledge of and/or involvement in the transactions.


Is the punishment enough, will it act as a deterrent? I don't think so, I think only a jail sentence will suffice.

Jail sentences are rarely given in offences regarding listed companies in Malaysia, but we just saw one example where the Securities Commission indeed managed to get the former Managing Director of Pancaran Ikrab Berhad (PIB) jailed for six years, and fined RM1 million.

AirAsia X lodges complaint with SC

According to this article in The Star, AirAsia X has lodged a complaint against GMT Research with the Securities Commission.

First of all, I have to admit that I haven't read the original article by GMT Research (I have read though the freely available articles).

Secondly, filing a complaint with the SC is not akin to suing a company, everybody can file a complaint with either SC or BM.

The article is not very specific about the reasons behind the complaint, only one item is mentioned:


“GMT has accused AAX, among others, of practising or allowing profit shifting between AirAsia Bhd (AAB) and AAX by way of transfer pricing of the service fees and costs charged by AAB,” it said.


A reference is made to article 177 of the CMSA:

In other words, even if what GMT wrote was not correct (I am not sure about that, no concrete example with supporting evidence is given), then still it must be proven that either GMT didn't care that the information was wrong, or that they knew that the information was wrong. Looks to me rather difficult to prove.

For two more links from GMT Research about AirAsia: here and here.

AirAsia and AirAsia X are probably the most hyped companies listed on Bursa, the public is bombarded by PR campaigns on a weekly (sometimes daily) basis. Many times "rumours" are picked up by the media, which are then denied a few days later. Twice (free) PR, all very much in the Richard Branson style.

Both AirAsia and AirAsia X have however hugely disappointed in the last few years, despite using very aggressive accounting techniques.

Naturally, that combination will attract critical comments, may be not so much in Malaysia, where the mainstream media seems rather cosy with AirAsia (AirAsia is of course a large advertiser) but more so outside.

It is (at least for me) disappointing when one of the most hyped companies, having one of the worst post IPO performances, can't stand some critical comments.

Especially given the recent events in Malaysia, where "shooting the messenger" is (as always) very widespread.

BNM: Capital Asia Group (M) "unlicensed activities"

I wrote before about the Proven Oil Asia scheme, most notable here.

In an interview with Kinibiz, Jonathan Quek, one of the investment scheme’s promoters in Malaysia, it was mentioned:


Amid the criticism, however, Quek revealed that the investment scheme’s promoters are engaging the authorities in order to bring the scheme under regulation. “We are doing our best to have our lawyers to work with SSM and SC to see how we can regulate this product,” said Quek, though declining to comment further on what progress had been made in this regard. “The last thing I want is for us to be raided by SC and Bank Negara, so we are taking a very active approach to contact all these regulators.”


Things might not have gone exactly "according to plan" with the regulators.

First of all the Securities Commission put Proven Oil Asia on it's list of unauthorised websites (I blogged about it here).

And secondly Bank Negara Malaysia has put Capital Asia Group (M) Sdn Bhd (partner of Quek's Wealth Insider Group" and involved with Proven Oil Asia) on it's alert list due to "unlicensed activities":

"Bank Negara Malaysia (BNM) would like to alert the members of the public a list of companies and websites which are neither authorised nor approved under the relevant laws and regulations administered by BNM.

This list has been compiled based on information, complaints and queries received by BNM regarding the activities of the persons and entities concerned. This list is not exhaustive and the Bank will update the list periodically from time to time. The list is intended to serve as a guide to the public.


The public is advised not to make any deposit or investment with individuals and entities that are not regulated under the relevant laws and should conduct the necessary checks with the relevant authorities if there are doubts regarding any schemes offered."