Prioritising Swift and Effective Outcomes in Enforcement

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

As capital markets and investment schemes become more inter-linked and complex, the SC continued to work in strategic collaboration with other authorities within and outside Malaysia to protect investors. Domestically, the SC continued to work with agencies such as BNM, Royal Malaysia Police (PDRM) and Malaysian Anti-Corruption Commission. Internationally, the SC leverages the IOSCO’s Multilateral Memorandum of Understanding to seek as well as assist other member jurisdictions for investigative assistance, as part of its enforcement strategy.
  • Supervisory co-operation MMOU at global regulators meeting

    The SC signed the IOSCO Asia Pacific Regional Committee’s (APRC) Multilateral Memorandum Of Understanding For Supervisory Co-operation (Supervisory MMOU) at the IOSCO Annual Meeting 2022 in Morocco on 17 October 2022. Given the increasing cross-border activities in capital markets within the region, this supervisory MMOU establishes for the first time, a formal framework for regional supervisory co-operation among capital market regulators.

    With the signing of this Supervisory MMOU, the SC now has a co-operative arrangement on supervisory matters with its regional regulatory counterparts including in Australia, Hong Kong, Japan, Singapore and Thailand.
  • Enhancing regulatory collaboration – MOU with Labuan FSA

    The SC entered into a MOU with the Labuan FSA on 23 May 2022 to enhance regulatory, enforcement and supervisory co-operation and collaboration. This MOU builds upon and further strengthens the Memorandum of Co-operation and Mutual Assistance signed between the two agencies in 2004.

    The MOU, which covers the development and regulation of capital market activities in Malaysia, reflects both the regulators’ commitment to ensure Malaysia’s capital markets remain relevant and achieve the intended outcomes as this will enable the SC and Labuan FSA to:

    1. further strengthen collaboration in areas of mutual interest, including monitoring of risks and promoting stability of the capital market; and
    2. enhance provision of technical assistance, capacity building and exchange of information between the two regulators which will, among others, better enable the regulators to assess risks to the stability of the capital market to ensure the integrity of the onshore market or Labuan International Business and Financial Centre.

Highlights in Enforcement Cases by the SC

  • Deceiving investors with non-existent securities

    On 16 and 24 June 2022, Chua Yi Fuan (Charles Chua), was charged with a total of 17 counts of securities fraud under section 179(c) of the Capital Markets and Services Act 2007 (CMSA) for deceiving 14 investors into believing that they were investing in purported investment schemes involving subscription of non-existent securities which caused 14 investors to suffer losses amounting to RM1,738,292. Following joint efforts between the SC, PDRM and Interpol, Charles Chua was arrested and deported from Cambodia.

    Read more on SC’s action against Charles Chua for deceiving investors: 
  • Deceiving investors with non-existent futures investment scheme

    On 14 February 2022, Mohd Azhidi Laili (Azhidi) was charged with nine counts under section 206(b) of the CMSA for deceiving nine investors of RM1,450,000 for investing in a non-existent FCPO investment scheme. Azhidi was also charged for holding himself out as a representative of AmFutures Sdn Bhd without the requisite Capital Markets Services Representative’s Licence (CMSRL) issued by the SC at the material time. Additionally, Azhidi was further charged for non-compliance of a notice in connection with an investigation issued by an Investigating Officer of the SC.

    Read more on the SC’s action against Azhidi for defrauding investors:
  • Furnishing false and misleading information to Bursa Malaysia

    On 13 April 2022, the SC imposed the maximum compound on Serba Dinamik Holdings Bhd, its Chief Executive Officer (CEO) and Group Managing Director Dato’ Dr. Ir. Ts. Mohd Abdul Karim Abdullah, Executive Director Datuk Syed Nazim Syed Faisal, Group Chief Financial Officer Azhan Azmi and Vice President of Accounts and Finance Muhammad Hafiz Othman (Hafiz) for a sum of RM3 million each for submission of false financial statement in relation to the revenue figure of RM6.01 billion contained in Serba Dinamik’s Quarterly Report on Consolidated Results for the Quarter and Year ended 31 December 2020.

    Hafiz was also issued with the maximum compound of RM1 million for falsifying the accounting records of the company’s subsidiary Serba Dinamik Sdn Bhd.
  • Insider trading cases

    On 5 September 2022, the Court of Appeal dismissed Dato’ Sreesanthan Eliathamby’s appeal against the High Court decision. The High Court’s decision after a full trial in 2020 included a declaration that he had engaged in insider trading in respect of Worldwide Holdings Bhd shares, a payment of the sum of RM1,989,402 which is equivalent to three times the profit made, civil penalty of RM1 million and an order that he be barred from being a director of any PLC for a period of 10 years.

    Read more on the Court of Appeal’s dismissal of Dato Sreesanthan’s insider trading appeal.

    On 7 April 2022, the SC successfully proved its case in the civil suit against Dato’ Raymond Yap Wee Hin, a former Deputy Chairman of Patimas Computers Bhd, for the insider trading. The High Court ordered him to pay a sum of RM3.28 million being an amount equal to three times the losses avoided by him as a result of the insider trading, to pay the SC a civil penalty of RM1 million and barred him from being a director of any PLC for a period of five years.

    Read more on SC’s suit against Dato’ Raymond Yap for insider trading.

    07 April 2022 On 16 November 2022, the SC won its civil suit against Dato’ Ng Back Heang, a former executive director of Patimas Computers Bhd, for insider trading. The High Court ordered him to pay the SC a sum of RM1.24 million which is three times the losses he avoided as a result of the insider trading, pay a civil penalty of RM700,000 to the SC and barred him from being appointed as a director of a PLC for five years.

    Read more on SC’s suit against Dato’ Ng for insider trading. 
  • Causing wrongful loss to a PLC

    On 7 September 2022, the Federal Court dismissed Datin Chan Chui Mei’s leave to appeal against the Court of Appeal’s decision which affirmed the High Court’s decision in 2019 that she had breached securities laws namely causing wrongful loss to Stone Master Corporation Bhd.

    Read more on the Federal Court’s dismissal of Stone Master’s leave application to appeal.

    On 29 November 2022, the SC filed a civil suit against five individuals, Tey Por Yee, Lim Chye Guan, See Poh Yee, Francis Tan Hock Leong and Faizatul Ikmi binti Abdul Razak for scheme to defraud and/or causing wrongful losses totalling RM120.6 million to four PLCs, namely, Nexgram Holdings Bhd, R&A Telecommunication Group Bhd, Asdion Bhd and Ire-Tex Corporation Bhd.

    The SC alleged that Tey, Lim, See and Tan, in their capacities as directors and officers of the four PLCs, siphoned out the proceeds of the companies’ fundraising exercises, while Faizatul Ikmi abetted or furthered the siphoning.

    Read more on SC’s suit against the five individuals for causing wrongful loss.

  • Non-compliance with anti-money laundering orders

    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.

  • Furnishing misleading information to Bursa Malaysia
    On 25 January 2022, the High Court allowed the SC’s appeal and increased the jail sentence of former Transmile CEO and Executive Director Gan Boon Aun from one day to 24 months. He was convicted by the Sessions Court in 2020 for furnishing a misleading financial statement to Bursa Malaysia and sentenced to a fine of RM2.5 million (in default, 18 months’ imprisonment) and one day imprisonment.

    Read more on the High Court’s decision in increasing Gan Boon Aun’s jail term to two years.
  • Non-compliance with auditing standards

    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. 

  • Unlicensed fund management activities

    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’.

  • Unlicensed derivatives dealing

    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’.

  • Money laundering involving unlicensed investment advice

    On 10 November 2022, Mohamad Afiq Md Isa, and his wife, Natasha Mohamed Taufek, were charged with money laundering offences involving more than RM1.2 million which were committed between May 2020 and October 2021.

    Mohamad Afiq was charged at the Kuala Lumpur Sessions Court with eight counts under section 4(1)(b) of the AMLATFPUAA for receiving and transferring proceeds from unlawful activity, namely unlicensed investment advice which was done through a business and a company he owns. Natasha was charged with one count of receiving proceeds of the unlicensed investment advice activity.

    Read more on media release ‘SC Charges Four Individuals with Money Laundering of Over RM7.2 Million’.

    On 11 November 2022, Tan Soon Hin, and his wife, Teh An See, were charged with a total of 10 counts of money laundering involving more than RM6 million between January 2020 and November 2021.

    Tan was charged at the Kuala Lumpur Sessions Court with eight counts under section 4(1)(a) of the of AMLATFPUAA for engaging in transactions involving proceeds of unlawful activity, namely unlicensed investment advice. Teh, who is the sole owner and shareholder of the business and company used to carry out the unlicensed investment advice, was charged for receiving the proceeds and faced five charges under section 4(1)(b) of the same Act.

    Read more on media release ‘SC Charges Four Individuals with Money Laundering of Over RM7.2 Million’.

  • KL Sessions Court’s jurisdiction to try cases in any part of peninsular Malaysia

    On 20 July 2022, the Court of Appeal in a landmark ruling allowed the SC’s appeal and decided that the Sessions Court in Kuala Lumpur can try civil and criminal cases from any part of peninsular Malaysia. The judgment came following the High Court’s earlier decision in quashing the conviction of Abul Hasan Mohamed Rashid (Abul), who had been found guilty by the Sessions Court upon full trial for an offence of criminal breach of trust involving RM26 million funds belonging to Multi-code Electronics Industries (M) Bhd. The conviction was quashed following the High Court’s decision in allowing a preliminary objection raised by Abul pertaining to the Kuala Lumpur Sessions Court’s territorial jurisdiction to try the case. The Court of Appeal set aside the decision of the High Court and further remitted the case to the High Court for merits of the case to be heard before another High Court judge.

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.

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