Insider trading, why the differences in punishment? (2)

I received the trading data of APLI during the time the insider trading.

Three snippets from the article on the SC website:

• Thai was convicted for communicating non-public information between 26 October 2007 and 29 October 2007 to Tiong
• APLI made announcements to Bursa Malaysia Securities Bhd about the audit adjustments and its classification as a PN 17 company on 31 October 2007
• Tiong was convicted for two counts of disposing a total of 6,208,500 APLI shares while in possession of the same non-public information

If the announcement was made on October 31 2007, then the share price would have been impacted on the following trading date, November 1, 2007.

The relevant closing prices of APLI on those days are:

• October 26, 2007: RM 0.39
• October 29, 2007: RM 0.40
• November 1, 2007: RM 0.31

So if Tiong sold 6,208,500 on October 26 and/or October 29 instead of November 1 (when the news was available to all parties), then the price difference is in the order of 6,208,500 times about RM 0.09, or about RM 560,000.

Compared to the sentences (5 years jail and RM 5 Million fine for Thai) that looks like a surprisingly small amount.

Just to put it in perspective, I suspected insider trading in Proton shares (see link) and wrote:

EPF sold about 15 million shares of Proton, for a price clearly below the MGO price. If the buyers of these shares were trading with insider information, then EPF was disadvantaged for an amount of roughly RM 20-30 million on those trades.

And that was just one party (EPF) possibly (hugely) disadvantaged in just one suspected insider trading case in Malaysia. I am pretty sure I can come up with dozens of similar suspicious insider trading cases, if not more.

According to this article in The Edge, Thai's lawyers "have advised that there are sufficient grounds to appeal on the conviction. As to the sentence, his lawyers have also filed an appeal on the grounds that it is manifestly excessive."

Insider trading, why the differences in punishment?

From the SC website:

Ex-CEO of APL Industries Bhd and Ex-Remisier Fined and Jailed Five Years for Insider Trading


The Kuala Lumpur Sessions Court today convicted former CEO of APL Industries Bhd (APLI), Stanley Thai Kim Sim, and former remisier Tiong Kiong Choon for insider trading offences. Thai was sentenced to a five-year jail term and a RM5 million fine, while Tiong was sentenced to five years jail and a RM10 million fine.

Insider trading offences, under section 188 of the Capital Markets and Services Act 2007 (CMSA), carry a mandatory punishment of imprisonment not exceeding 10 years and a fine of not less than RM1 million.

Thai was convicted for communicating non-public information between 26 October 2007 and 29 October 2007 to Tiong. Tiong was convicted for two counts of disposing a total of 6,208,500 APLI shares while in possession of the same non-public information via accounts belonging to his mother-in-law and his mother. At the time of the commission of the offence, Tiong was also a licensed intra-day trader with a stock broking company.

The non-public information communicated from Thai to Tiong related to the audit adjustments proposed by APLI’s auditors which resulted in APLI reporting a higher loss for the financial year ended 30 June 2007, as compared to the previously reported unaudited Q4 results for the same financial year, and that APLI would be classified as a PN 17 company. APLI made announcements to Bursa Malaysia Securities Bhd about the audit adjustments and its classification as a PN 17 company on 31 October 2007.

In passing the sentence, Sessions Court judge Tuan Zulqarnain Hassan ruled that a deterrent sentence was warranted as insider trading offences were deemed more serious than conventional crimes, given far reaching effects on investors’ confidence and the public as a whole. “Insider trading is a modern white-collar economic crime. It is serious and is in a category or class of its own,” said the learned judge.

The conviction came after a full trial where 14 witnesses testified for the Prosecution while four witnesses testified for the defence.


This blog has always been in favour of enforcement, which has been so much lacking in Malaysia, especially in white-collar crime. However, punishment has to be consistent.

Many cases of insider trading have been settled for three times the profit without admitting guilt.

This bags the question: which factors played a role in the above case compared to other cases that explain the huge difference in punishment?

On another matter, the events happened ten years ago, can the legal process please be done faster?

Insider trading is a serious crime with real victims, the investors who were not privy to the inside information. Those victims should be able to come forward and claim what is due to them. But who can remember what happened such a long time ago? Most people will have discarded their trading statements after some years.

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.

Maxbiz CEO: “RM 50 million is nothing to shout about” (2)

I wrote before about this subject. Two of the many red flags I mentioned:


[2] Maxbiz and five directors received public reprimands and fines:

• MAXBIZ had breached paragraph 9.16(1)(a) of the LR for failing to ensure that the 4th quarterly report for the financial year ended 31 December 2008 ("4th QR 2008") which was announced on 2 March 2009 took into account the adjustments as stated in the Company’s announcement dated 4 May 2009.
• MAXBIZ had reported an unaudited loss after taxation and minority interest of RM6.227 million for the financial year ended 31 December 2008. However, the Company had on 30 April 2009 reported an audited loss after taxation and minority interest of RM76.926 million.
• Bursa Securities also found that the directors of MAXBIZ to be in breach of paragraph 16.11(b) of the LR for permitting knowingly or where they had reasonable means of obtaining such knowledge the Company to commit the above breach.

[4] Directors own not even a single share:

The Securities Commission has now charged one of the above directors, this time for (allegedly) insider trading.


Securities Commission Malaysia (SC) today charged Dato’ Vincent Leong Jee Wai (Dato’ Vincent Leong) for insider trading of shares of Maxbiz Corporation Berhad (Maxbiz).

Dato’ Vincent Leong, 58, was charged at the Kuala Lumpur Sessions Court this morning with two counts of communicating material non-public information between November 2010 and January 2011 to one Leong Wye Keong when he should have known that Leong Wye Keong would tend to dispose shares of Maxbiz Corporation Berhad (Maxbiz). Dato’ Vincent Leong was at the material time the Managing Director of Maxbiz.

The material non-public information for the first charge relates to the decrease in Maxbiz’s shareholders’ equity which was close to Maxbiz being classified as financially distressed. The second charge concerns the classification of Maxbiz as a Practice Note 17 (PN17) company.

Dato’ Vincent Leong claimed trial to both charges. Kuala Lumpur Sessions Court Judge, Puan Azian binti Othman fixed bail at RM250,000 with one surety.  Dato’ Vincent Leong was also ordered to surrender his passport to the court.

Insider trading is punishable under section 188(4) of the CMSA, with an imprisonment term not exceeding 10 years and a fine of not less than RM1 million.


A certain "Leong Wye Keong" is mentioned in this court case (most likely as an aggrieved investor in a fund managed by SJ Asset Management). I am not sure if it is the same person, but it could very well be so, the name is not very common. The court case is against SJ Asset Management (and other parties).

I wrote before:


A strange coincedence is the fact that SJ Asset Management was the 2nd largest shareholder of Maxbiz, an asset management company being examined closely by the Securities Commission (SC) due to irregularities in its accounts.


It is a small world, isn't it?

The Securities Commission is quite active in enforcement regarding insider trading these days. Unfortunately, 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?

Insider trading effectively legalized in US?

Yves Smith wrote "Bill Black: Second Circuit Decision Effectively Legalizes Insider Trading", a very worrisome article. Some snippets:


A U.S. appeals court dealt federal prosecutors a blow in their crackdown on insider trading on Wall Street on Wednesday, overturning the convictions of two former hedge fund managers charged with making illegal trades in technology stocks.

The 2nd U.S. Circuit Court of Appeals in New York said prosecutors presented insufficient evidence to convict Todd Newman, a former portfolio manager at Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors.

The court held that defendants can only be convicted of insider trading if the person trading on confidential information knew the original tipper disclosed it in exchange for a personal benefit.

What does this mean in practical terms? The court has just provided a very-easy-to-satisfy roadmap for engaging in insider trading legally. Don’t give the person who gave you the choice tidbit any explicit payoff. You can give him all sorts of buttering up before hand (fancy meals, hot women, illicit substances, box seats, whatever you think will induce cooperation and show your seriousness and ability to pay) and just engage in vague winks and nods. As long as you don’t pay the tipster for the trade in any crass or traceable way (and no communications that point to an explicit payoff), you are good to go. Compensation down the road, in hard dollar or soft forms is perfectly kosher.

Needless to say, the implications are terrible. Thanks to high frequency trading, way too cozy a relationship between the Fed and its preferred banks, and years of suspicious trading patterns (markets too consistently not breaching technically significant price levels, with the trading looking decidedly not organic) has sapped the faith of retail and even smaller institutional investors in the integrity of markets. The Second Circuit has just announced open season on pervasive misuse of inside information.

Wall Street’s court of appeals (the Second Circuit) has just issued an opinion not simply overturning guilty verdicts but making it impossible to retry the elite Wall Street defendants that grew wealthy through trading on insider information. Indeed, the opinion reads like a roadmap (or a script) that every corrupt Wall Street elite can follow to create a cynical system of cutouts (ala SAC) that will allow the most senior elites to profit by trading on insider information as a matter of routine with total impunity. The Second Circuit decision makes any moderately sophisticated insider trading scheme that uses cutouts to protect the elite traders a perfect crime. It is a perfect crime because (1) it is guaranteed to make the elite traders who trades on the basis of what he knows is secret, insider information wealthy absent successful prosecutions and (2) using the Second Circuit’s decision as a fraud roadmap, an elite trader can arrange the scheme with total impunity from the criminal laws. The Second Circuit ruling appears to make the financial version of “don’t ask; don’t tell” a complete defense to insider trading prosecutions. The Second Circuit does not simply make it harder to prosecute – they make it impossible to prosecute sophisticated insider fraud schemes in which the elites use junior cutouts to create (totally implausible) deniability.


In Malaysia, recently regulatory activities regarding insider trading has increased. However, progress is very slow, a recent announcement by the SC involved an alleged insider trading case which happened more than 7 years ago.

And the exchanges responded ....

In reference to the last two postings, it is good to notice that both exchanges (Bursa and SGX) have responded in a timely fashion.

SGX is rectifying its web-page issues

MAS takes a serious view of market misconduct


"Since 2008, criminal prosecutions have successfully led to convictions in 33 market misconduct cases. In the same period, MAS [Monetary Authority Singapore] has successfully obtained civil penalty judgments in 4 cases before the Singapore Courts, as well as entered into 14 civil penalty settlements. Importantly, all these settlement agreements include an admission of liability by the offender."


That sounds indeed not bad, and I like especially the last part, on Bursa too many parties are allowed to "escape" without admission of liability in cases of possible insider trading.

However, "since 2008" is quite a long time, six plus years, how many cases were investigated in total, and in how many cases complaints were filed of possible misconduct? That would give an indication of the success rate of the enforcement.

Also, how many cases ended in a jail sentence (the only punishment that really counts, in my humble opinion)?


Bursa to go on public engagement sessions

"Bursa Malaysia Bhd plans to embark on a series of public engagement sessions with retail investors to further address certain issues that were raised at its AGM."

That sounds good and proactive.

I still can remember years ago that I complained to Bursa about the RM 40 minimum brokerage fee. Quite a few counters that I was interested in had rather low trading volumes, and a large spread between the highest buyer and lowest seller price. I usually put in a buy order of a decent size at the middle between those two prices, but sometimes was rudely surprised finding out that only 100 shares were bought (once at a price around RM 0.50), and that the brokerage in percentage of the order was much too high for comfort.

I also gave two pretty simple solutions:

• either raise the minimum board lot size for shares trading at lower prices (in Hong Kong for instance penny stocks go in lots of 10,000 shares)
• or lower the minimum brokerage for these small orders.

Bursa answered that I should just buy at the sellers price and sell at the buyers price, if I had a problem with the brokerage fee.

Needless to say, this advice equates to a one way ticket to the poor house and I was pretty disappointed about the answer, also about the tone of it.

I also approached MSWG who came with a better solution: if say half an hour before the closing a small amount of a trade is done, then one could try to buy at a somewhat higher price, since the brokerage will count for both orders.

In itself good advice, but not always practical, for instance, I don't always have time to monitor my trades.

The situation is the more surprising, since low (or no) volume is a real problem on Bursa, even today, despite the fact that the market has had a very nice run-up since 2009 and many people must have made money, at least on paper.

On a day like today, 146 out of 992 main board counters (15%!) are not traded at all (and many other counters only for small amounts). The percentage of untraded counters for the ACE market is higher, at 20%, and for structured warrants it is a whopping 76%.

Hopefully Bursa Malaysia will look seriously into this problem of the high minimum brokerage, and come with a proper solution.

Heated questioning at Bursa's AGM

Article on The Edge website:

Bursa AGM: Shareholders question Bursa’s efficiency at long heated meeting

Some snippets:

Bursa Malaysia Bhd’s annual general meeting (AGM) today was longer than expected, with shareholders incessantly raising questions on the operational efficiency of the stock exchange and voicing dissatisfaction on various issues. The meeting, punctuated by some heated questionings, began at 10 am and ended at 1.20 pm today. During the three-hour long AGM, Bursa Chairman and Non-Executive Director Tun Mohamed Dzaiddin bin Haji Abdullah was said to have cut short some issues raised by shareholders, which prompted some infuriated shareholders to storm out. “How can the chairman deny us the opportunity to raise important issues?” a shareholder complained, while talking to theedgemalaysia.com.


The Board of Directors has to answer questions of the shareholders during an AGM, the only time they can ask questions.

From the above it looks like the journalist of The Edge Malaysia was not allowed in the AGM, why not? I think it should be a completely common practice to allow journalists in, a healthy dose of transparency should do no harm, I would think.

One way to solve this problem is that an organisation like MSWG buys small amounts of shares in all listed companies under several different subsidiaries, and let some journalists (beside their own representative(s) of course) be a proxy for those subsidiaries.


The management of the stock exchange – including CEO Datuk Tajuddin Atan – declined to talk to reporters after the annual general meeting (AGM). But a shareholder told theedgemalaysia.com that many shareholders had raised pointed questions and made sharp comments at the AGM. One was that ‘Bursa is not quick enough in response to unusual market activity (UMA)’. “For instance, we see some shares surging all of a sudden without any apparent reason. Is there insider trading involved?” the shareholder said. “We also want to know what Bursa will do and how to curb such activity,” the shareholder added, noting Bursa’s response was that it would investigate any ‘unhealthy activity’. Another shareholder piped in: “The trading practices are not fair to investors. We want it to be simpler and fairer for all investors.” Shareholders were also unhappy over ‘high brokerage fee’ to buy, sell and transfer shares. The minimum brokerage fee to buy or sell shares is RM40, while to transfer shares it cost RM10. “It is painful for retail investors like us when we trade in small volume,” a shareholder said.


I agree that RM 40 minimum brokerage fee is very high when the amount of shares traded is small. The minimum brokerage should be much lower, otherwise the whole idea behind having trading lots of only 100 shares does not make sense.

The above questions do again put the spotlight on Bursa being a monopoly, an exchange, a regulator and a listed company. Too many hats, if one would ask me.

SGX: twice "attacked" in the press

Today the SGX was twice "attacked" in the Business Times (Singapore):

SGX site is now counter-intuitive

Some snippets:

... The most baffling, unannounced change concerns real estate investment trusts (Reits) and business trusts. Previously, someone who wanted to search for the announcements made by, say, Cache Logistics Trust, could go directly to the "company disclosure" section and search immediately for the name of the company. Now, one can only access the information after identifying and searching for the name of the company managing the Reit or trust, which can sometimes be very different.

...... Moreover, the new layout is a design disaster.

The main focus of the page no longer seems to be on the company announcements themselves, but on two large columns devoted to company names and security names. The titles of the actual announcements themselves - which can be significant corporate events like contract wins, debt listings, mergers and acquisitions and financial results - are squished into one tiny column on the right.

..... Mr Webb, by the way, has a great webpage with a formidable database on directors and companies, which he built through the years with just one other person. SGX, with all its resources, can do better here.


In my opinion, Bursa Malaysia has an excellent website regarding the company announcements and thus appears to be doing much better than the SGX. A few things could be improved though:

• When a company changes its name (which does quite often happen), one can only find the old information under the new name. For instance, information regarding "Woo Hing Brothers" is to be found under "Kamdar Group", the 12th page and further.
• Enforcement actions are stored (or rather, hidden) under "Media". There should be an easier way to find all enforcement related news sorted by date or company, combined with those of the Securities Commission.
• I love long term charts, it would be good if Bursa can give the price charts over more than 5 years.
• A database of companies and directors, similar as done by David Webb.

But other than this, an excellent announcements website, that can compete with the best.


The second article regarding SGX is from Mak Yuen Teen:

SGX should be more proactive against potential insider trading

Last week was not a good week for the regulatory side of SGX. On the one hand, it was criticised for not querying Olam, while on the other, it was told that it was too easy on the trigger for "Trade with Caution" (TWC) alerts.

There is a role for TWC alerts, particularly for issuers which have unusual trading activities and which cannot explain them when queried by SGX. From our research, about three-quarters of responses to price queries say that they could not explain the price run-up or decline. SGX should focus on these companies when issuing TWC alerts, rather than companies which have attempted to explain the unusual trading activities. This is not to say that SGX should never issue TWC alerts in other cases but it should be more circumspect in doing so. Otherwise, over time, such alerts may cease to serve any useful purpose and we may then see a new alert in the form of Trade with Extreme Caution to differentiate it from Trade with Caution.

I appreciate that SGX is enhancing its regulatory role and the increase in its surveillance activities should be applauded. However, SGX and other regulators should recognise that surveillance is only part of the system of monitoring and enforcement.

In the case of the 75 per cent of issuers which say that they have no explanation for unusual trading activities, do the regulators track whether these issuers announce significant corporate developments soon after they issue their "no explanation" responses? Do they investigate whether the prior unusual trading activities were the result of leakage of information about these developments?

Olam, which was not queried, is far from being the only stock that has experienced significant price movements before a major corporate announcement. The issue should not primarily be about whether an issuer is queried, but whether there are unusual price or volume movements before major corporate announcements which may indicate possible insider trading. Some markets, such as the US, focus on investigations and enforcement rather than queries and public disclosure around these queries.

SGX and other regulators should examine the balance between surveillance and enforcement and ensure that sufficient resources are put into investigations and enforcement. This may require the government to review the resources allocated to agencies and units which are responsible for investigating and prosecuting capital market-related offences. Surveillance and enforcement need to go hand in hand and it is well accepted that the key to a robust capital market is effective enforcement. If enforcement is improved, we may also see a decline in the need to issue queries and TWC alerts over time as unusual trading activities may become less common.


This article is unfortunately very relevant for Bursa Malaysia, both regarding possible insider trading (which I think is a real problem in the Malaysian market), and regarding the last paragraph (resources allocated to enforcement).

Masterskill: who is Gary How?

Masterskill made an announcement on March 20, 2014:


MEGB wishes to announce that the Company had in the evening of 19 March 2014 received a notification from its substantial shareholder Mr. Siva Kumar A/L M Jeyapalan (“Mr. Siva Kumar”), who is also an Executive Director of the Company that he has entered into a Call and Put Option Agreement (“the Agreement”) on 19 March 2014 with Mr. Gary How Soong Khong (“Mr. Gary How”) (NRIC No. 690511-10-6087) of RM1705, 17/F, Hip Kwan Comm Bldg, 38 Pitt Street, Yaumatei, Hong Kong.


This came one day after its share had a decent run up from RM 0.32 to 0.38 (+19%) in much higher volume. Did some people know about this announcement beforehand and act upon it?

The Star writes:

Very little is known about How, a Malaysian who is based in Hong Kong, and why he is offering to buy the shares at a steep premium to the market price.


That seems to be true, searches by Google or LinkedIn don't seem to shed any more light on this person. Rather remarkably, since he might have to come up with RM 132 million, quite a nice and tidy amount.

So who is this Gary How, and how credible is this announcement?

Also, if he does exercise his call option, does he have to make a general offer for the remaining shares? The amount of shares is just below 30%, so I would guess that it is not needed.

I have written many times about Masterskill, a company that has performed horribly since being listed:

Year   Revenue   PAT
2008    203M     72M
2009    273M     97M
2010    316M    102M  <=== IPO
2011    250M     38M
2012    149M    -28M
2013     59M   -167M 

Its revenue is down by more than 80%, it booked horrible losses in 2013 (partly one-off losses that are hardly explained), and this all despite raising money during the IPO.

Olam: possible insider trading?

I have written before about Singapore listed Olam, especially about the attacks from Muddy Waters.

Things took an interesting turn when Temasek launched an offer for all of the shares of Olam, at a price of $2.23 per share, as reported by TodayOnline:


The Republic’s state investor Temasek Holdings has offered to buy all shares in Olam owned by minority shareholders in a cash deal that values the commodity trading firm at US$4.3 billion (S$5.45 billion).

The deal will be done through a Temasek unit, Breedens Investments. Breedens, along with Olam’s family share holders, members of its executive committee, and Arandda Investments, another Temasek unit, already hold around 52.5 per cent of Olam shares.
 
“Breedens wishes to increase its shareholding to support Olam’s strategy and growth plans for the long term,” it said in a statement.

The offer price of S$2.23 per share represents an 11.8 per cent premium over Olam’s last traded price.

Breedens is not planning at this point to take the company private, intending to Olam remain listed in Singapore unless it becomes in breach of the exchange’s requirement that at least 10 per cent of shares be freely floated.

Breedens is also offering to buy Olam’s outstanding convertible bonds and warrants.


However, one day later TodayOnline reported the following:


Temasek Holdings’ buyout offer yesterday came after Olam’s share price had accelerated dramatically in recent weeks against the backdrop of a flat market, leading some investors to cry foul and call on regulators to investigate possible insider trading in violation of securities laws.

Shareholder activist Mano Sabnani said in his Facebook posting: “What is upsetting is that there seems to have been a big leak of information on this takeover bid.

“The stock has been steadily rising on increasing trading volume in the past three to four weeks.”
Over the last four weeks, Olam shares have risen 41.1 per cent, compared with the 1.1 per cent gain in the benchmark Straits Times Index during the same period.

“In such a takeover, there will be many people involved in planning it and the chances of a leak are great. An early suspension in trading of the stock would have helped to achieve a level playing field,” said Mr Sabnani.

The six month graph of Olam's share price:

From BusinessInsider comes: "One Of Carson Block’s Big Shorts Is Up Big Today":


It looks like short-seller Carson Block’s just got burned on his short on Singaporean agricultural commodities trading firm Olam International.

Bloomberg News reports that Singapore’s state-owned Temasek Holdings Pte’s unit has offered to buy Olam International Ltd. for $4.2 billion. Temasek was already the largest shareholder.

The stock is on a tear. It was up more than 11.7% following the news.

Block, who runs Muddy Waters Research, revealed that he was shorting Olam back in November 2012. At the Ira Sohn Conference in London, Block questioned the Olam’s accounting practices. He believes the trading firm is booking profits from transactions before the deals are done. He also said he thinks the company will fail.

Shares of stock have climbed more than 14% since then.

Block declined to comment on Olam, Bloomberg reports.

Andrew Barber, chief strategist at Asymmetric Risk Advisors, has been following Olam for a while. Barber, who does not have a position in the stock, explained that these things can happen.

“One of the big problems with shorting a stock is that it can turn into an arm wrestling match with large holders. If they have more capital than you they can rip your face off even if you are correct in your investment thesis.”

Block is well-known for targeting Chinese companies he believes are frauds. He’s best known for his Sino-Forest takedown. Block’s Muddy Waters issued a report that claiming the company overstated its timberland holdings. This caused hedge fund billionaire John Paulson  to lose millions and eventually sell out of the stock. The company ultimately ended up filing for bankruptcy.

To comment on this, I am not sure if Block currently still is short Olam's stock, he might have bought back the shorted shares in the past.

SC Charges Former CEO of Malaysia Pacific Corp for Insider Trading

Announcement by the Securities Commission:

"The Securities Commission Malaysia (SC) today charged Dato’ Ch’ng Chong Poh, the former Chief Executive Officer (CEO) of Malaysia Pacific Corporation Berhad (MPAC) with 58 counts of insider trading of MPAC shares between 14 May 2008 and 20 August 2008.

All 58 charges preferred against Dato’ Ch’ng were for offences under Section 188(2) of the Capital Markets and Services Act 2007. Dato’ Ch’ng had allegedly acquired the MPAC shares ahead of the entering into of a multi-million ringgit joint venture project between Oriental Pearl City Properties Sdn Bhd, a wholly owned subsidiary of MPAC and Amanahraya Development Sdn Bhd (ADSB), a wholly owned subsidiary of Amanah Raya Berhad, to undertake and manage several projects in the Iskandar Development Region in Johor.

The offences carry a punishment of mandatory imprisonment not exceeding 10 years and a fine of not less than RM1 million.

Dato’ Ch’ng claimed trial to the charges preferred.  Sessions Court judge, Tuan Mat Ghani bin Abdullah who set bail at RM300,000 with one(1) surety also required Dato’ Ch’ng to surrender his international passport to the court.

The SC views insider trading seriously and will continue to actively enforce such breaches to maintain investor confidence in the capital market."

As far as I can remember, this is only the third time ever that someone is charged for insider trading. I am all in favour of more enforcement regarding possible insider trading, just pity that it took six years to file the charges.

The announcement for the project with ADSB can be found here. The project had indeed a decent potential, that is if all would go according to plan. The reader should however be reminded that during the summer of 2008 the global recession started to take shape, culminating in the fall of Lehman Brothers (September 2008).

The share price of MPAC during that period:

Notable is the sudden rise in price and volume starting end of July 2008, about one month before the official announcement of the project.

There are a few interesting issues regarding to this case. First of all, this is a screenshot of the announcements of Bursa Malaysia of MPAC:

In other words, no change in shareholding has officially been reported to Bursa between May and August 2008.

Another issue is that the official announcement of the project was made on August 20th 2008, but that The Edge Malaysia published some details of the deal already in their issue dated August 18th 2008, according to this announcement, which is a reply on a query by Bursa.

Ch’ng Chong Poh has by the way recently resigned as CEO of MPAC on December 19, 2013 according to this announcement.

MPAC is involved in several material litigation cases, for instance here and here, but also in one involving the above joint venture agreement with ADSB.

The last annual shareholders meeting seems to have been a rather heated affair, the company had to issue twice clarifications to Bursa, here and here.

Insider trading: regulatory settlements

The Securities Commission published on its website some regulatory settlements.

About the first issue (The Malaysian Insider issuing an apology) we wrote already before.

The second and third issue deal with insider trading in shares of Worldwide and Orisoft Technology.

I have three comments about the settlements:

[1] Again the enforcement reflects a settlement "without admission or denial of liability". I find that very weak, why do the authorities (SC and BM) almost always settle alleged insider trading cases with a settlement? It leaves an unsatisfactory taste. I wrote before about this same issue.

[2] Another issue is regarding this statement: "In accordance with the provisions of section 90A(7)) of the SIA, the amount recovered from Lew @ Leow Muy Lai will be used first to reimburse the SC for all costs of investigations and proceedings. Any remaining amount, if available, will be used to compensate the sellers who sold their Worldwide shares before the information became generally available."

Interestingly, in Hong Kong there is a settlement for insider trading, the amount involved is HKD 23.9 million, the verdict can be found here. David Webb comments on the settlement:


"This is the first restoration order for insider dealing. We question the fairness of the allocation though. 297 sellers whose orders just happened to be matched with his, during an 11-week period in which he bought 26.7m shares, will get about $0.90 per share - even though some of them may have been net buyers during the period. The whole market was unaware of the good news, and anyone who sold shares during that period, when volume was 1844m shares, but not to Mr Du, gets nothing. That turns the payout into a lottery with about a 1 in 69 chance of success."


As usual I have to agree with David Webb. One essential element of trading is that you don't know with whom you are trading. Therefore it is rather strange to treat some people who sold shares differently from other people who sold shares of the same company on the same day, both groups of people not knowing what was going on.

[3] The trading on Bursa happened in 2006, 2007 and 2008, in other words between five and seven years ago. Why do these cases take so long time, especially when they only lead to "without admission or denial of liability"? I really think enforcement should be much faster, "justice delayed is justice denied".

I have to admit, the Hong Kong case also happened in 2007, six years ago. But there court cases (both civil and criminal) were conducted, those take a lot of time and effort. In addition to that, I like to draw the readers attention not only to the high fine in Hong Kong, but also to the fact that a jail sentence of seven years was meted out, something that has never happened in Malaysia in cases of insider trading. According to the article mentioned here, not a single person so far has been successfully convicted of insider trading in Malaysia:


"Sreesanthan is only the second person to be charged with insider trading by the Securities Commission. In 1996, the commission had pressed criminal charges against Kim Hin Industry managing director Chua Seng Huat for allegedly using confidential information to sell company shares and gain profits for its holding company. But the Kuching Sessions Court later acquitted him in the grounds that the prosecution had failed to prove beyond reasonable doubt that he had the relevant information at the time."


And that is a bad statistic of which Malaysia should not be proud at all.

The Malaysian Insider retracts untrue report on Securities Commission

Article on The Malaysian Insider:

"The Malaysian Insider retracts a report on the SC over the Sime-E&O case

With regards to The Malaysian Insider's report on August 10, 2012 headlined "SC to order Sime general offer for E&O, say sources", The Malaysian Insider would like to retract the said report on the Securities Commission (SC) as it is untrue.

The statement in the said article that was attributed to the SC was untrue and was published without verification with the SC. The report has now been withdrawn as it is untrue and false.

We apologise to the Securities Commission for the said untrue report. - October 24, 2013."


I wrote about this article:

• SC to order Sime general offer for E&O? 
• The E&O price surge – and collapse.

"the share price of E&O is up RM 0.42 in very heavy volume, the warrant is up a whopping 3,199%, also in very heavy volume.

Looks like the authorities have another possible case of insider trading to deal with since there has been no official announcement."


Some persons must have made a lot of money trading E&O on that fateful day, August 10, 2012, while other must have lost their shirt. I hope the authorities are looking into that.

I like to re-iterate the words of P. Gunasegaram:


Nothing less than the integrity of our markets is at stake here. For too long, market manipulation and insider trading have been excused on the grounds that it makes the market, that it provides excitement and that it provides opportunities to make money for both traders and brokers.

But really, that's not the purpose of the market. The purpose is to provide a place where investors and others can seek a fair value for the assets they buy and sell through a fair, transparent and straightforward process that provides equal information and opportunity to all.

The economic aim for all that is to provide investors with a place to raise capital efficiently so that business can flourish.

It is lamentable that this basic aim of capital markets seems to be lost and it has become a place for wheelers, dealers and plain crooks to make money in less than honourable, and even illegal, ways.

What a shame! And will it ever change?

Sersol: projections are no projections, dilution is very real

There is a lot of speculation going on in several Malaysian and Singaporean counters lately, and even in the Singaporean counters often there is a Malaysian link.

One company in Malaysia that has been in the limelight is Sersol Bhd.

The graph of the share price and the much increased volume in the last few months:

On September 25, 2013 the company announced that Mohd Nazifuddin Bin Mohd Najib (the son of the Prime Minister of Malaysia) had bought more than 40 Million shares.

As regular readers of this blog probably know, I am not exactly a fan of mixing politics with business.

Next to that, the share price of Sersol went up a lot in relatively high volume before the above announcement was published, which looks puzzling.

Anil Netto wrote a good article about this matter.

The Malaysian Reserve published the next day information based on an interview:

If companies make projections, then all shareholders should be informed about that, so Sersol announced the following (possibly after being probed by Bursa Malaysia):


"The Board of Directors wishes to inform Bursa Securities that the reported statement above does not in any way represent a projection, estimate or forecast of the Company’s performance for the financial year ending 31 December 2014.

It is merely an expression of the Major Shareholder’s target and aspiration."


In other words, "a projected revenue" does not represent a projection in any way.

I am sorry to say, but I don't understand that, a projection is a projection, or not?


There is also another issue that I would like to point out, the company proposed (combined with a rights issue and warrant issue) a SIS (Share Issue Scheme) to its directors and employees, and the numbers are staggering:

The number of current shares is 96 Million, the maximum number of shares from the SIS Options is an unbelievable high 87 Million.

I agree, the shareholders can subscribe to rights issue and can exercise their warrants, but both do cost serious money.

The above proposal was approved on February 25, 2013, and the company did not spend one word too much on it:


"The Board of Directors of SerSol Technologies Berhad ("SerSol") wishes to announce that all the ordinary and special resolutions (as set out in the notice of Extraordinary General Meeting (“EGM”) of the Company dated 21 January 2013) have been approved by the shareholders of SerSol as tabled at the EGM held on 23 February 2013."


In my opinion, such an important matter should be done by poll voting, and the results should be announced in detail (number of shares plus percentage, in favour and against).

A dilution of 30% of the shares for directors and employees, and that after minority shareholders have pumped in additional money in the form of a rights issue and exercising warrants) is really way too high, I think the maximum should be probably 10% (even that is pretty generous).

In the current situation directors can apparently propose large numbers of shares for these schemes, and since minority shareholders have hardly any chance to win in a vote, they will get hugely diluted.

The odds are already stacked against minority shareholders, they have hardly any say (in practice), they have a quite substantial information disadvantage. If a company is successful and shareholders then get hugely diluted, I think that is not fair at all.

I think therefore that the rules should be changed, there really should be a limit on what the Board of Directors can propose in the form of a ESOS or SIS scheme.

Hedge funds going nowhere

A picture paints a thousand words:

Up to the crisis of 2008/9 the story was that hedge funds were trailing but they would do better when markets turn south, their bets were "hedged".

That story turned out to be simply not true.

From The Economist:

The S&P 500 has now outperformed its hedge-fund rival for ten straight years, with the exception of 2008 when both fell sharply. A simple-minded investment portfolio—60% of it in shares and the rest in sovereign bonds—has delivered returns of more than 90% over the past decade, compared with a meagre 17% after fees for hedge funds (see chart). As a group, the supposed sorcerers of the financial world have returned less than inflation. Gallingly, the profits passed on to their investors are almost certainly lower than the fees creamed off by the managers themselves.

And then: "Justifications for poor performance are as diverse as hedge funds themselves."

But numbers don't lie, performance has been too bad and we don't really need to know the justifications. There can only be one explanation, the 2/20 commission simply doesn't work, it is much too much in favour of the managers, to the detriment of the investors.

[2/20 refers to 2% yearly management fees and 20% of the outperformance]

Interestingly, I know some hedge fund managers who have outperformed their niche markets (for instance Asian small and mediumsize cap stocks) by a wide margin, and I don't think that was luck at all. I am pretty convinced they will continue to do so.

But the bad news is that the returns for the other managers will then even be lower.

Also, there has been a lot of news lately about insider trading cases in the US by hedge fund managers. Apparently, the pressure to perform (justifying the 2/20 commissions) might have been too high for some and they resorted to illegal means.

For those seeking exposure to international stocks and bonds, ETF's might be a good alternative.

SC to order Sime general offer for E&O?

Interesting article on the Malaysian Insider website suggesting that Sime Darby has to make a general offer for E&O shares after all.

The crux of the matter: "A general offer can also be triggered if a new party buys less than 33 per cent but secures management control of the target company".

However, according to an article on the website of The Star

Sime Darby Bhd does not have to make a general offer for the remaining shares in Eastern and Oriental Holdings (E&O) after it acquired a 30% stake, according to the Securities Commission.

The SC said in a statement on Friday that its position on the GO requirement in the Sime Darby-E&O acquisition remained unchanged as per the statement issued on Oct 11, last year.

"The decision is now subject to judicial review which is pending in court," the SC said.

Securities of E&O surged in active trade late Friday on a news portal report that the SC would now order Sime Darby to make a GO for the remaining E&O shares.

Above is today's chart, the share price of E&O is up RM 0.42 in very heavy volume, the warrant is up a whopping 3,199%, also in very heavy volume.

Looks like the authorities have another possible case of insider trading to deal with since there has been no official announcement.


Article from Malaysian Insider:

In a volte face (Wiki: a total change of position, as in policy or opinion; an about-face), the Securities Commission (SC) will now order Sime Darby Bhd to make a general offer for Eastern & Oriental Bhd (E&O) shares after buying a 30-per cent stake last year, say government sources.

The Malaysian Insider understands the decision was made after a review by the leadership under new SC chairman Datuk Ranjit Ajit Singh.

“The SC has reviewed the matter and decided to overturn the earlier decision made when Tan Sri Zarinah Anwar was the chairman,” a government source told The Malaysian Insider.

Ranjit, who was the SC managing director, took over as chairman after Zarinah ended her term last March 31.

Another source confirmed the review and said the decision will be made public soon.
Sime Darby purchased its controlling 30 per cent interest in the property developer from three major shareholders — managing director Datuk Terry Tham, Singapore’s GK Goh Holdings and a group of investors led by businessman Tan Sri Wan Azmi Wan Hamzah — at the end of August last year in a deal that valued E&O shares at RM2.30 a piece.

The purchase price represented a 60 per cent premium over the value of the shares in the company on the open market when the deal was announced.

The RM776 million deal triggered unease over the widely-perceived coddling by the agency of large state-controlled companies at the expense of minority shareholders when exercising its authority on corporate takeovers.

The SC ruled six weeks after Sime Darby’s purchase of the three blocks that the plantation-based conglomerate need not make a general offer, prompting E&O minority shareholder Michael Chow to sue the SC for failing to compel Sime Darby to make a general offer for the rest of the shares.

The legal suit has renewed debate over the SC’s handling of alleged irregular trading activities and had put pressure on Zarinah, whose husband — the E&O chairman — had raised his personal stock holdings in the company just weeks before Sime Darby announced the acquisition.

The SC has also filed an application to recuse the judge hearing the suit as he used to be with the regulator. But the judge dismissed the application, only for the SC to file an appeal with the Court of Appeal, which heard the case yesterday.

Singapore’s Straits Times reported last January that a SC task force found that Sime Darby was obliged to make a general offer for E&O shares after acquiring a 30 per but was superseded by the regulator’s top ruling authority.

The daily reported that the task force was of the view that a general offer obligation had been triggered as a new “concert party” was created between Sime Darby and Tham, who jointly controlled more than 33 per cent in the property concern after the deal.

Malaysia’s takeover rules stipulate that any party that acquires more than a 33 per cent interest in a publicly-listed entity must carry out a general offer for the remaining shares.

A general offer can also be triggered if a new party buys less than 33 per cent but secures management control of the target company.

But the SC’s final ruling three-member committee adjudged “in a majority decision” that there was no general offer obligation as Sime Darby and Tham were not acting in concert, according to an affidavit by the agency’s second-most senior commissioner Datuk Francis Tan, which was sighted by the Singapore daily.

The committee also accepted the task force’s recommendation that the three groups that sold the blocks of E&O shares to Sime Darby did not collectively control the company and that the disposal did not trigger a general offer.

Jail for UK insider trading

Great job by the UK watchdog, the Financial Services Authority (FSA), jail sentences (up to three and a half year) and fines for 6 people after a very extensive investigation:

• The four-and-a-half-month trial cost the UK’s Financial Services Authority (FSA) £5 million — the longest and most complex prosecution to date in its “credible deterrence” drive against market abuses
• The case marked a strategic push into so-called digital forensics, whereby experts use the latest technology to sift through emails, telephone records and computers
• The judge praised the watchdog’s meticulous and exhaustive investigation
• It culminated in raids and arrests in July 2008, when a search of Paresh Shah’s home uncovered a wealth of evidence
• The day-traders used information from the “drop box” to place spreadbets on 500 different stocks.
• The ring used 130 trading accounts, usually in third-party names, making it hard initially to identify the culprits
• The FSA sifted through 250,000 emails and 375,000 lines of telephone data, and checked 15,000 news stories to show that the traders could not have obtained the information from the press

Will Malaysia's investigation into the KL Heavyweight insider trading case be on par?

Interesting comment: "Last month the FSA said that a fifth of company announcements in Britain were still preceded by unexplained share price movement, indicating possible insider trading."

How would this compare to Malaysia? I hope Bursa Malaysia would come with similar statistics, but I am afraid that the percentage of possible insider trading will be much higher, possibly more than fifty percent.

KL 'heavyweight' charged with insider trading (2)

Article in The Sunday Times (Singapore) "KL charges top lawyer with insider trading".

"Sreesanthan is only the second person to be charged with insider trading by the Securities Commission.

In 1996, the commission had pressed criminal charges against Kim Hin Industry managing director Chua Seng Huat for allegedly using confidential information to sell company shares and gain profits for its holding company.

But the Kuching Sessions Court later acquitted him in the grounds that the prosecution had failed to prove beyond reasonable doubt that he had the relevant information at the time."

I find this rather shocking news, even in the one year existence of this blog I wrote about several cases of possible insider trading. Many more can be found in other blogs like Where Is Ze Moola. The number of cases where a juicy announcement is preceded by a significant rise in both price and volume is huge.

And before this recent case the SC only charged one person so far, 16 years ago, and even in that case the person was acquitted.

More information in this article in The Star.

“The investigation has taken some time and expenses,” said Rosmawar (SC prosecutor DPP), adding it was a serious offence.

"Some time", that sounds like a huge understatement, the first alleged offence happened six years ago!

Some more specifics:

"Under the first three charges, Sreesanthan is alleged to have acquired 75,000 units of Sime Darby Berhad shares while in possession of insider information on the proposed acquisition of several real estate and plantation companies by Synergy Drive Sdn Bhd between Oct 9 and Nov 12, 2006.

For the next two charges, he is accused of insider information involving 250,000 units of Maxis Communication Bhd shares on the proposed conditional take-over by Binariang GSM Sdn Bhd to acquire all the voting shares in Maxis and Maxis' proposed privatisation between April 25 and 27, 2007.

Under the sixth and seventh charges, he is accused of buying 200,000 units of UEM World Berhad and 100,000 units of VADS Berhad shares while in possession of insider information on Feb 13 and Sept 18, 2008, respectively."

Another article in The Star.

KL 'heavyweight' charged with insider trading

Article from the Singapore Business Times:

"One of Kuala Lumpur's most prominent corporate lawyers, Sreesanthan Eliathamby, was charged yesterday on seven counts of insider trading, according to a report in the online version of The Star newspaper.

The news sent ripples through Kuala Lumpur's legal fraternity as Sreesanthan, 51, is not only a highly respected merger and acquisition (M&As) specialist but a major corporate figure.

The lawyer, a senior partner of Kadir, Andri, Aidham & Partners, sits on the boards of several listed firms, including Maybank, Sime Darby, Guinness-Anchor and Scomi Group. He was also the legal adviser in several of billionaire T Ananda Krishnan's most visible deals, including the RM40 billion (S$16 billion at current rate) privatisation of telco Maxis in 2007".

The official announcement from the Securities Commission (SC) can be found here.

Everybody is innocent until proven guilty. But the fact that the SC goes after a heavyweight must be applauded. And especially insider trading is perceived to be rampant in Malaysia, so it is quite timely that action has been taken in that area.

The details of the charges are quite specific:

"The charges involved three counts of insider trading in the shares of Sime Darby Berhad in 2006, ahead of the acquisition by Synergy Drive of companies within the Sime Darby, Guthrie and Golden Hope groups. The two counts of insider trading in the shares of Maxis Communications Bhd, which were preferred under the Securities Industry Act 1983, were alleged to have taken place during the privatisation of Maxis in 2007.

Two other charges were preferred for insider trading under section 188(2) of the Capital Markets and Services Act 2007 involving the shares of UEM World Bhd and VADS Bhd in 2008. Dato' Sreesanthan's trades in UEM World were said to have been made with his knowledge of the corporate restructuring of the UEM group, while his trades in VADS allegedly involved his knowledge relating to VADS's proposed privatisation."

The last sentence of the press release is a bit puzzling though: "The SC has been proactively pursuing market misconduct cases ....".

To go after cases that happened six years ago is not really proactive, according to my dictionary.

Proactive: "Acting in advance to deal with an expected difficulty; anticipatory".

Although insider trading is often not easy to prove, six years is a really long time, these cases should be wrapped up more quickly in my opinion: "follow the moneytrail!"

Jail for insider trading

Enforcement news from Hong Kong:

"Jail sentence and fine against insider dealer restored after final appeal".

Interesting is the last paragraph:

"The Hon Mr Justice Ribeiro of the CFA agreed with the Court of First Instance that, save for exceptional circumstances, the appropriate sentence for insider dealing should be immediate imprisonment coupled with a fine which, at the very least, removes a defendant’s unjust profits".

I haven't noticed a single jail sentence in Malaysia, while insider trading appears to happen frequently. A few fines without admission of guilt is all that the enforcement has to show for.

Bursa Malaysia should hugely step up its efforts on insider trading, without fear or favour, to restore confidence with retail investors, and aim for jail sentences as serious deterrent.