The Securities Commission (SC) has recommended to the Attorney General’s Chambers to file an appeal against the 6 December 2006 High Court decision, which allowed the appeal by Yap Kim Seng, the former managing director of Pasaraya Hiong Kong Sdn Bhd (PHK).
The Sessions Court had imposed a sentence of two years imprisonment on Yap Kim Seng on 16 January 2006, after he pleaded guilty to a charge of submitting false information to the SC in connection with the corporate restructuring exercise of Ocean Capital Berhad. The High Court in allowing the appeal substituted this custodial sentence with a RM500,000 fine.
Yap Kim Seng was charged, together with Yap Kim Fatt, the executive director of PHK, on 25 April 2005 with submitting false information on the revenue of PHK for the year ended 31 March 2003. This information was submitted in connection with Ocean Capital Berhad’s proposed corporate restructuring exercise which included the proposed acquisition of PHK. The charge against Yap Kim Fatt was withdrawn upon the guilty plea by Yap Kim Seng.
Yap Kim Seng had admitted that, PHK’s Financial Statements for the year ended 31 March 2003 contained fictitious sales totaling RM7,786,665, which had the effect of increasing PHK’s profit before tax to RM13,073,565.
Had the fictitious transactions not been captured in the accounting records of PHK, it would have recorded a profit before tax of RM5,286,900. This would have resulted in PHK reporting an after tax profit of well below the minimum RM8,000,000 required for a listing on the Main Board of the then Kuala Lumpur Stock Exchange.
The SC said that it will continue to seek custodial sentences for breaches of securities laws in cases that undermine public and investor confidence in the integrity of the Malaysian capital market.
Related to this, the SC had on 30 August 2006 publicly reprimanded Deloitte KassimChan (Deloitte) and Hwang-DBS Securities Berhad (Hwang-DBS), the reporting accountant and principal adviser, respectively, for the corporate restructuring exercise of Ocean Capital Berhad. Deloitte was also imposed with a 6-months sanction of non-acceptance of all types of submissions under section 32 of the Securities Commission Act 1993 where Deloitte acts as the reporting accountant.