Enforcement - Regulatory Performance and Outcomes | Securities Commission Malaysia

Enforcement

The SC deploys a broad range of enforcement tools to address identified breaches of securities law, foster good
conduct and lawful behaviour among capital market participants as well as ensure credible deterrence.

TABLE 21

Key enforcement outcomes

Key outcomes	2023	2022
Preliminary investigation
No. of cases reviewed for enforcement action	43	35
No. of offences reviewed	76	53
Investigation
No. of investigations commenced	19	13
No. of active investigations	55	49
No. of raids conducted	10 locations	2 locations
Criminal actions
New criminal actions commenced	2 persons (involving 12 charges)	6 persons (involving 47 charges)
No. of criminal actions completed with no pending appeal	7 (involving 14 persons)	3 (involving 5 persons)
No. of ongoing criminal cases	21 (involving 32 persons)	21 (involving 33 persons)
No. of persons convicted/conviction affirmed	5	10
Custodial sentences imposed	One day to three years	One day to two years
Total value of fines imposed by the Court	RM8.675 million	RM12.958 million
Compounds
No. of compounds issued	2 (Involving 2 persons)	6 (involving 5 persons)
Total compounds imposed	RM269,900	RM16 million
Civil actions
No. of civil actions commenced including issuance of Letter of Demands	15	8
No. of civil actions completed	3 (involving 15 defendants)	3 (involving 3 defendants)
No. of ongoing civil cases	11 (involving 21 defendants)	15 (involving 23 defendants)
No. of civil actions completed successfully	3 (involving 15 defendants)	3 (involving 3 defendants)
Total value of civil penalties imposed by the Court	RM4,813,123	RM33,741,544
Regulatory settlements
No. of regulatory settlements (before the commencement of any court action)	6 (Involving 6 persons)	6 (involving 6 persons)
Total disgorgement	RM13.83 million	RM4.58 million
Restitution
No. of investors restituted	119	284
Amount restituted	RM301,208	RM1,532,294.70
Administrative actions
No. of sanctions imposed: Penalties Reprimands Directives	140 (44) (80) (16)	118 (39) (72) (4)
Total value of penalties imposed	RM19.530 million	RM11.999 million
Infringement Notices
No. of Infringement Notices issued	124	76

Arising from the SC’s active surveillance, supervision, and complaints received, various breaches of securities law were reviewed in 2023. 41% of these offences relate to the SC’s enforcement priorities namely disclosure breaches, securities fraud and unlicensed activities (Table 22).

Accordingly, the SC’s investigation efforts remain focused on cases related to offences involving unlicensed activities, securities fraud and disclosure breaches, which constitutes more than 50% of the investigation commenced in 2023.

TABLE 22

Breaches of securities law reviewed

Nature of offence	No. of breaches reviewed
Breaches related to disclosure	14
Breach of the SC’s LOLA Guidelines	14
Securities fraud	12
Corporate misconduct*	8
Breach of Bursa Rules, Directive or Listing Requirements	5
Unlicensed activities	5
Breach of SICDA	4
Breach of the SC’s other Guidelines#	4
Breach of the SC’s Licensing Handbook/Condition	3
Market manipulation	2
Abetment	2
Non-compliance of Investigating Officer’s Notice	2
Insider trading	1
TOTAL	76

* Breach of s.317A CMSA only.

# Guidelines on the Registration of Venture Capital and Private Equity Corporations and Management Corporations, Guidelines on Advertising for Capital Market Products and Related Services, Guidelines on Conduct for Capital Market Intermediaries and Guidelines on Sales Practices of Unlisted Capital Market Products.

Details of the SC’s Active Investigation Cases
The SC continues to unwaveringly pursue its investigation efforts. Apart from the raids conducted at 10 locations in 2023, the SC deploys various methods and tools in its evidence gathering to establish the securities law breaches being investigated. Generally the SC receives good co-operation from persons involved in its investigation.

As of 31 December 2023, the breakdown of the 55 active investigations cases by the nature of offence are reflected in Chart 1.
The SC’s investigation process ensures that investigation activities are conducted thoroughly, objectively, and effectively following the due process. In 2023, more than 1,600 notices were issued to compel individuals and entities to either appear before an SC’s Investigating Officer for examination or to produce specific documents and information to an SC’s Investigating Officer, for the purpose of fact finding and evidence gathering. A series of raids have also been carried out at various locations in Malaysia to facilitate the ongoing investigations of several cases. Details of which are provided in Figure 2.
Mitigating Risk of Money Laundering
In 2023, the SC took steps under the AMLATFPUAA, to freeze and seize cash and shares amounting to approximately RM100 million, which are suspected to be proceeds of unlawful activities. This action is part of an ongoing money laundering investigation, and the freezing and seizing of the said funds aim to prevent the dissipation of funds, while the investigation is still ongoing.
Leveraging the SC’s Digital Forensic Unit
The increased utilisation of digital communication and digital devices has undeniably heightened the complexity of the SC’s investigation of securities offences. Following the establishment of the SC’s in-house Digital Forensics (DF) unit in 2020, there has been significant improvement of timely extraction and preservation of digital evidence.

With the proliferation of mobile technology, the SC has since continuously invested in mobile forensic tools that facilitates efficient extraction as well as e-Discovery tools to perform in-depth analysis of large volumes of data extracted from digital evidence, to expedite the process of identification and evidence gathering.

In 2023, the DF unit had preserved evidence from 351 digital sources including from physical sources (computers, mobile phones and tablets) as well as online sources (email accounts and cloud storage). A quarter of the digital evidence were extracted and preserved on-site upon identification. The preservation of digital evidence such as emails and text messages is crucial for establishing the modus operandi of criminal activities involving securities fraud, corporate misconduct and disclosure breaches. The integration of digital forensic capabilities enhances investigative efficiency by facilitating the analysis of preserved digital evidence in criminal cases.

Effective Collaboration with Other Law Enforcement Agencies and Foreign Supervisory Authorities

Collaboration with other law enforcement agencies is paramount for the SC to carry out its regulatory functions. The SC continuously works closely with other enforcement agencies and regulatory authorities within Malaysia, in its efforts to collaborate and gather evidence for purpose of establishing breaches investigated under securities law. These include among others, the Royal Malaysia Police, BNM and the Malaysian Anti-Corruption Commission (MACC).

TABLE 23

Requests for investigative assistance to IOSCO members

Jurisdictions	No. of requests
Hong Kong	9
Singapore	6
Australia	3
United Kingdom	3
British Virgin Island	2
United States	2
Canada	1
Denmark	1
Ireland	1
Japan	1
Pakistan	1
TOTAL	30

For cases that involve cross-border investigation, the SC mainly leverages the IOSCO Multilateral Memorandum of Understanding (IOSCO MMOU) for purpose of gathering information and/or evidence in the respective jurisdictions. In 2023, the SC made 30 requests for investigative assistance to 11 foreign supervisory authorities (Table 23). Most of these requests were made to seek assistance in procuring documentary evidence such as banking documents and documents related to securities transactions, as well as to record statements from witnesses located abroad. Such documents and statements are pivotal to the SC’s investigation to help identify the beneficial owners and controllers of the banking and securities transactions. This is particularly important in cases involving insider trading and market manipulation offences.

Conversely, the SC also renders investigative assistance to IOSCO members. In 2023, the SC assisted three foreign supervisory authorities, in gathering necessary information and/or documents for purpose of their ongoing investigation.

Ongoing Criminal and Civil Cases at Various Courts

In addition to the SC’s ongoing criminal enforcement efforts which are undertaken with the Public Prosecutor’s consent, the SC initiated 15 civil actions (including the issuance of letters of demand) for the year 2023. Additionally, the total disgorgement and civil penalties obtained by the SC in 2023 amount to RM18.6 million, and will be utilised in accordance to law which includes to compensate aggrieved investors. The amount disgorged by the SC in 2023 via its civil enforcement actions represent an increase of three times more than year 2022 at RM13.38 million (Table 21).

For year 2023, there were 32 ongoing cases in court at first instance or appeal stages, involving 53 individuals as listed in Table 24.

The nature of these cases includes corporate misconduct, insider trading, securities fraud, market manipulation, unlicensed activities as well as money laundering offences.

table 24

Ongoing criminal and civil cases

Types of actions	Court	No. of cases	No. of individuals
Criminal Action	Sessions Court	8	13
	High Court	7	10
	Court of Appeal	6	9
Civil Action	High Court	9	19
	Court of Appeal	1	1
	Federal Court	1	1

Efforts to Restitute Investors
The SC remains committed in protecting investors. Following the outcome of the SC’s successful civil suits and regulatory settlements entered, the SC has restituted 119 investors in 2023 in the amount of RM301,208. Additionally, a further RM4,586,915.35 has been earmarked for restitution involving 658 investors.
Highlights of the SC’s Successful Enforcement Cases
Former investment banker deceives 10 investors with non-existent securities
On 29 March 2023, the Sessions Court convicted Chua Yi Fuan (Charles) for one charge of securities fraud while taking into consideration another 16 charges for securities fraud, which were all offences under section 179(b) of the CMSA.

Charles pleaded guilty and was sentenced to a three year imprisonment term and was fined RM1 million where his failure to pay the fine will result in 12 months’ imprisonment.

The 17 charges of securities fraud that Charles faced were for deceiving 10 investors into believing that they were investing in purported investment schemes involving subscription of non-existent securities which caused 10 investors to suffer losses amounting to RM1,738,292.

Read more on media release ‘Former Investment Banker Jailed Three Years For Deceiving Investors’.
RM2.36 million disgorgement for insider trading
On 13 April 2023, the SC successfully proved its case in the civil suit against Toh Kai Fatt (Toh) for committing insider trading. The High Court ordered Toh to pay a sum of RM2.36 million being an amount equal to three times the profit made by him as a result of the insider trading, to pay the SC a civil penalty of RM250,000 and barred him from being a director of any PLC for a period of five years. Toh was also restrained from trading in any securities for a period of five years.

Read more on media release ‘SC Wins Insider Trading Civil Suit’.
Conviction and sentence for failure to appear before the SC’s Investigating Officer affirmed by the High Court and Court of Appeal
Amirruddin Nin
On 28 June 2023, the High Court affirmed the conviction and sentence of Amirruddin Nin (Amirruddin) on one charge under section 32(8)(a) of the AMLATFPUAA for failing to comply with written order to appear before an Investigating Officer of the SC in 2017. The High Court also affirmed the sentence of one day imprisonment and a fine of RM100,000 for the said charge. However, the High Court set aside the conviction and sentence for the second and third charges together with the daily fine of RM2,000 which was imposed by the Sessions Court.

The SC initially charged Amirruddin with three charges on 19 February 2020 at the Kuala Lumpur Sessions Court. After a full trial, the Sessions Court convicted Amirruddin on all three charges and sentenced him to one day imprisonment, RM100,000 fine for each of the three charges and also imposed a daily fine of RM2,000 for 979 days for the continuing offence.

Read more on the SC’s updates on criminal prosecution in 2023.
Ong Kar Kian
On 11 September 2023, the Court of Appeal affirmed the conviction of Ong Kar Kian on three charges under section 32(8)(a) of the AMLATFPUAA for failing to comply with written orders to appear before an Investigating Officer of the SC in 2018. The Court of Appeal also affirmed the sentence of one day imprisonment and a fine of RM25,000 for each charges. However, the Court of Appeal affirmed the High Court’s decision to set aside the daily fine of RM1,500 which was imposed by the Sessions Court.

The SC had initially charged Ong Kar Kian with the three charges on 10 December 2020 at the Kuala Lumpur Sessions Court. At the end of the defense case the Sessions Court judge convicted Ong Kar Kian and imposed a one day imprisonment, RM25,000 fine for each charge and also imposed a daily fine of RM1,500 for 673 days for continuing offence. The total amount of fine imposed was RM1,084,500.

Read more on media release ‘Court of Appeal Upholds Conviction and Jail Term of Asia Media Group’s Former Accountant’.
Carrying on fund management activities without licence
Muhamad Fadzli Jamaludin
On 9 November 2023, Muhamad Fadzli Jamaludin (Fadzli) was charged with a total of three counts under section 58(1) of the CMSA by holding himself out as carrying on a business in the regulated activity of fund management without holding a CMSL. The alleged offences took place between November 2018 and April 2020 in Kuala Lumpur and Melaka.

Read more on media release ‘SC Charges Former Company Director for Unlicensed Capital Market Activities’

Subsequently on 29 November 2023, Fadzli was charged with a total of nine counts of money laundering under section 4(1)(b) of the AMLATFPUAA for receiving proceeds of unlawful activity involving over RM1.23 million between August 2018 and April 2020. The unlawful activity was in relation to unlicensed fund management activities by Fadzli.

Read more on media release ‘SC Charges Former Company Director for Money Laundering Offences Involving Over RM1.23 million’
Removal of ACE Holdings Bhd as a Controller of Apex Securities Bhd
On 23 November 2023, the SC concluded its civil action against Apex Securities Bhd (Apex Securities) and Apex Equity Holdings Bhd (Apex Equity) at the High Court of Malaya at Kuala Lumpur through a consent judgment entered between the parties. A salient term of the consent judgment is that no person who has any prior relationship, interaction and/or connection with ACE Holdings Bhd (ACE) or any related companies with ACE may be appointed to the Board of Directors of Apex Equity.

The SC had initiated the civil action to remove ACE as a controller (within the meaning of Section 60(7)(b) and/ or (c) of the CMSA) of Apex Securities, a CMSL holder. Apex Equity is the parent company of Apex Securities. The SC was of the view that ACE is not a fit and proper person to be a controller of Apex Securities as ACE was subjected to administrative sanctions by the SC on 11 December 2018, for issuing Information Memorandums that contained false or misleading information. In the course of the civil action, ACE had divested its entire shareholdings in Apex Equity and key individuals who the SC contended were nominees linked to ACE, had ceased to remain as Apex Equity’s Board of Directors. The SC’s enforcement actions demonstrate the SC’s commitment to ensure strict compliance of the fit and properness of a controller of a CMSL holder.

Leveraging the SC’s Administrative Actions

Apart from initiating criminal or civil actions, the SC also leverages its statutory powers for administrative actions, which provides a full spectrum of sanctions and remedies against the persons in breach (Table 25).

In 2023, a total penalty of RM19.53 million has been imposed against 40 persons for their misconduct and breaches under the securities laws and guidelines issued by the SC as follows:

Nine licensed intermediaries for delay in submitting the annual report and/or investment returns for the relevant wholesale funds;
Eight individuals who had breached provisions under Securities Industry (Central Depositories) Act 1991 (SICDA), including causing and/or permitting his/her shares to be deposited and/or maintained in a third-party’s trading account and who had effected trades in his/her shares in a third-party’s trading account;
Four individuals who carried on a business in a regulated activity of providing investment advice without licence;
Three individuals who engaged in transactions which involved proceeds of unlawful activities;
One entity and its director who failed to seek recognition by the SC in relation to making available, offer for subscription or purchase, or issue an invitation to subscribe for or purchase of foreign securities and failure to register a disclosure document and prospectus;
One entity and four of its directors who submitted false information pertaining to the validity of its Qualified Persons’ status to the SC (via Annual Declaration) and Bursa Malaysia (via Listing Application);
One entity who failed to submit true, complete and accurate information to the SC and who failed to promptly report potential breaches of securities laws to the SC;
One group of persons acting in concert for failing to undertake a mandatory offer; and
Two entities, comprising a Private Equity Management Corporation and its Private Equity Fund, together with their respective directors, failed to register a prospectus with the SC for making available, offer for subscription or purchase, or issue an invitation to subscribe or purchase the Private Equity Fund’s Cumulative Redeemable Preference Shares to nonsophisticated investors alongside with other breaches of securities laws.

TABLE 25

Administrative sanctions imposed

Type of persons	Sanctions imposed
Type of persons	Reprimand	Penalty	Restitution	Directive	Revocation of licence	Suspension of licence
Persons acting in concert	11	1	1	-	1	-
Registered persons	18	2	-	2	-	-
Directors of registered persons	6	2	-	-	-	-
Licensed persons	10	16	-	1	-	-
Other entities/ individuals	35	23	-	12	-	-
TOTAL	80	44	-	16	-	-

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Redress via Infringement Notices

In carrying out the SC’s surveillance, gatekeeping and supervisory functions, the SC also utilises its nonstatutory enforcement tools, to address breaches of securities laws or guidelines that do not warrant the initiation of any formal enforcement actions. In such instance, the SC may issue the following Infringement Notices to the relevant parties concerned:

Supervisory letters with infringement – issued pursuant to the exercise of the SC’s supervisory function or the conduct of an examination under section 126 of the Securities Commission Malaysia Act 1993 (SCMA).
Warning letters – issued pursuant to the discharge of the SC’s gatekeeping function such as the issuance of licences, approval of corporate proposals and review of prospectuses. Warning letters may be issued to licensed, registered persons or other professionals or experts.
Non-compliance letters – issued pursuant to the discharge of the SC’s gatekeeping function for minor breaches.
Notice of Cease and Desist – issued to immediately halt and prevent further violation of any obligations under the securities laws. Failure to comply with the Notice of Cease and Desist may attract formal enforcement action by the SC.

In 2023, 124 Infringement Notices have been issued by the SC, with the breakdown as in the Table 26. There has been an increase in the overall issuance of Infringement Notices by the SC from 2022 to 2023. This increase was partly attributable from various noncompliances detected by the SC against Shariah advisers under the SC’s Guidelines on Islamic Capital Market Products and Services. In addition, the SC also detected non-compliances by licensees under the requirements of the securities laws and the SC guidelines, particularly the Licensing Handbook.

TABLE 26

Type of Infringement Notices

Type of Infringement Notices	No. issued
Type of Infringement Notices	2023	2022
Supervisory letters with infringement	40	33
Warning letters	59	13
Non-compliance letters	20	24
Notice of Cease and Desist	5	6
TOTAL	124	76

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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.