SC: Errant directors, CEOs who breach the law risk disqualification, removal

“The Securities Commission (SC) will not hesitate to use its powers to take action against and penalise actual and prospective abuses of power by directors and chief executive officers (CEOs),” said SC Chairman Datuk Ali Abdul Kadir.

“Directors and CEOs as elected company stewards must carry out their duties professionally and with integrity. Investor protection is of paramount importance, and the SC will not tolerate any transgressions by errant directors and CEOs that compromise this,” he added.

Datuk Ali further warned, “In reviewing and approving submissions and corporate financial statements, the SC will certainly take into account wrongdoings in matters such as criminal breach of trust and fraudulent tax evasion.”

The SC’s powers to disqualify and remove directors and CEOs from office under the Securities Commission Act 1993 (SCA) and the Securities Industry Act 1983 (SIA) have been broadened significantly with amendments to the Acts which came into effect in January this year.

Under section 100 of the SIA, the SC can take pre-emptive action, even before a crime is committed, against any director who is found likely to contravene any securities laws. The SC can also apply to Court to remove and bar that director from office, or from becoming a director of any other public or public listed company.

In addition, the SC may also apply to Court under section 99C(3) of the SIA to remove a CEO or director from office where that person has been convicted of an offence under any securities laws, or where the SC has taken civil proceedings or actions against that person for any breaches of securities laws, or for non-compliance with exchange rules. Under this provision, the SC may apply to Court for the director or CEO’s removal from office for any period such as the Court deems fit.

“In this instance, the provision is not limited to directors but also extends to CEOs, and it allows the SC to remove them under broad circumstances as necessary,” said Datuk Ali.

The SC also has the power under section 158 of the SCA to take administrative action, which includes a penalty of up to RM1 million and public reprimands, against persons failing to comply with conditions and guidelines relating to fund raising. The SC may also issue public statements declaring that the continual retention of a director found in breach would be prejudicial to public interest.

Disqualification of company directors is also provided for under section 130 of the Companies Act 1965, for those convicted of offences involving fraud or dishonesty, for a maximum period of five years.

Datuk Ali also added that the SC would continue to work closely with other authorities in maintaining corporate accountability, integrity and transparency in the market. He said, “Where we find evidence of transgressions of laws, whether securities related or otherwise, such as criminal breach of trust, tax evasion, fraudulent financial transactions, money laundering and illegal transfer pricing mechanisms, we will continue to work with our fellow regulators to ensure that national public interest is not compromised.”

5 February 2004