The SC streamlined several enforcement initiatives in 2022, to enhance the effectiveness, efficiency and swiftness of its enforcement actions which involved focusing on breaches of securities law concerning securities fraud, unlicensed activities, and disclosure breaches, as part of the SC’s enforcement priorities.
A range of regulatory tools were used including the use of non-formal enforcement tools to address the parties in breach such as the issuance of six Notices of Cease and Desist to immediately halt persons who were found to be providing investment advice to investors without licence.
Collaboration with Other Law Enforcement Agencies and Cross Border Authorities
Highlights in Enforcement Cases by the SC
On 14 July 2022, the Sessions Court convicted Amirruddin Nin on all three charges for failing to comply with Orders issued by an SC Investigating Officer in 2017 and 2018 under the Anti-Money Laundering, Anti- Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA). He was sentenced to a fine of RM100,000 and one day imprisonment for each of the three charges, to be served concurrently. Further, he was ordered to pay a daily fine of RM2,000, resulting in a total fine of RM1,958,000, for his continuous failure to comply with the orders to appear for examination issued by the SC for a span of 979 days.
Read more on Amirruddin’s conviction under the AMLATFPUAA.
On 17 August 2022, the Federal Court dismissed the application for leave to appeal by audit firm Afrizan Tarmili Khairul Azhar (AFTAAS) and its partners against the Court of Appeal’s decision in 2021 which was in favour of the SC. This relates to an application for judicial review to challenge the enforcement actions by the AOB against them. In 2019, the AOB had taken enforcement action against AFTAAS for non-compliance of auditing standards by barring the firm and its partners from accepting clients and auditing accepting as clients and auditing PIE or schedule funds for a period of 12 months and fined AFTAAS and its partners.
The High Court set aside the AOB’s decision in 2020 and the AOB’s appeal to the Court of Appeal in 2021 was successful where the High Court’s decision was set aside. AFTAAS and its partners sought for leave to appeal to the Federal Court. With the disposal of the case by the Federal Court, the AOB’s enforcement decision would take effect from 17 August 2022.
Read more on the Federal Court’s dismissal of the AFTAAS appeal.
Read more on the Court of Appeal’s decision in 2021.
On 14 November 2022, the Sessions Court convicted Uzir Abd Samad (Uzir), on all three offences relating to unlicensed fund management activities and wrongfully holding himself out as a licensed person under sections 58(1) and 362(3) of the CMSA. He was sentenced to a one-year imprisonment for each of the three charges and the court further ordered that the imprisonment terms be served concurrently. Uzir had pleaded guilty mid-way during the prosecution’s case after a plea-bargaining process under section 172C of the Criminal Procedure Code.
Read more on media release ‘Former Company Director Jailed for Unlicensed Fund Management Activities’.
On 12 December 2022, the Sessions Court convicted two former officers of Jalatama Management Sdn Bhd (Jalatama) on two charges respectively relating to carrying out a business of dealing in derivatives without a licence under section 58(1) of the CMSA read together with section 367(1) of the same Act. Su Eng Kooi (Su) and Yap Choong Seong (Yap) were convicted by the court after a full trial and sentenced to one-year imprisonment and a fine of RM1 million (in default one-year imprisonment) for each of the two charges respectively. The court ordered that the imprisonment terms be served concurrently.
Read more on media release ‘Former Company Officers Jailed, Fined RM2 Million Each for Unlicensed Derivatives Dealing’.
Mitigating Systemic Risks And Promoting Financial Stability
Enhanced Risk Governance Framework
In 2021, the SC-wide risk governance framework was enhanced as part of an overall initiative to have an effective integrated and predictive risk surveillance to maintain regulatory agility.
The structured risk governance framework integrated the wider spectrum of risks such as technology, cyber and conduct risk at the SC’s Systemic Risk Oversight Committee (SROC) and Accounting, Market and Corporate Surveillance Committee (ACMS).
Intensified surveillance
The SC continued to intensify its surveillance of systemic risk to maintain market resilience and stability. Regular SROC engagements were held to deliberate concerns emanating from various segments across the capital market. Domestic equity and bond market, foreign fund flows and trade participation continued to be monitored closely for potential stress points.
In addition, measures and economic stimulus packages introduced by the government to weather the impact of COVID-19, market trading conduct and the financial position of listed companies were among the focus areas for discussion.
Thematic assessments
The SC also conducted thematic assessments covering investors’ fund flows, the position of firms, and policy decisions to ascertain the possible impact on the capital market. In 2021, the SC reviewed and enhanced its crisis indicators on potential emerging risks in the
capital market.
The enhanced crisis indicators provided a reference point for escalation to SROC when the identified indicators and triggers materialised and ensured prompt response to manage and prevent any issues of concern that might lead to a systemic crisis.
Joint regulatory discussions
In 2021, the SC conducted frequent joint regulatory discussions with other authorities such as Bank Negara Malaysia (BNM) and Labuan Financial Services Authority (Labuan FSA) to identify systemic risk concern areas within the financial and capital markets in Malaysia.
Monitoring of various components of the capital market
The SC continued its efforts to undertake a methodological and integrated approach to ensure any potential systemic risk was being monitored, mitigated, or managed. Figure 1 highlights the findings from the following risk assessments on the various components of the capital market.
