Danaharta appointment of Special Administrators over six stockbroking companies

Kuala Lumpur, 12 February 1999

The Securities Commission (SC) views the move by Pengurusan Danaharta Nasional Berhad (Danaharta) to appoint Special Administrators over Alor Setar Securities Sdn Bhd, Halim Securities Sdn Bhd, Labuan Securities Sdn Bhd, MBf Northern Securities Sdn Bhd, Taiping Securities Sdn Bhd and WK Securities Sdn Bhd as a significant step in efforts to restructure and regularise the financial positions of troubled brokers. The appointments are in keeping with the scheme announced by the SC on 3 November 1998 which is aimed at providing an industry-wide solution to the problems of troubled stockbroking companies.

The purpose of the broker scheme, as announced on 3 November 1998, is to provide for an effective and timely resolution of the problems of troubled brokers by ensuring recapitalisation and regularisation of their financial positions. The scheme is also designed to ensure an overall strengthening and consolidation of the industry.

The appointments have been made by Danaharta under its statutory powers following on from the first stage of the broker scheme in which it had acquired the non-performing loans of stockbroking companies from banks. These appointments have been made in consultation with the SC, which is committed to seeing a satisfactory resolution of the problems facing these brokers.

In addition to assuming control and management of the assets and affairs of the brokers, the Special Administrators will prepare workout proposals that focus on maximising the value of each company. These proposals are expected to be submitted to the SC for approval within the next three months. As such, the Special Administrators will facilitate an expedient resolution of the positions of these brokers, which the companies have been unable to achieve independently.

As the licensing authority for stockbroking companies pursuant to the Securities Industry Act 1983, the SC will closely review the workout proposals to ensure that the objectives of the scheme are met, allowing trading restrictions to be lifted as soon as possible.

The appointment of the Special Administrators will have no impact on the trading operations of the brokers, which will continue as usual in accordance with any trading restrictions imposed previously. The Special Administrators, assisted by representatives from the Kuala Lumpur Stock Exchange (KLSE), will be on hand to address any queries which may arise.

The SC and the KLSE will take appropriate action to ensure that investor protection concerns are addressed and systemic stability is not compromised.

The SC notes that Special Administrators have already been appointed to Capitalcorp Securities Sdn Bhd on 4 January 1999 and are currently in the process of preparing a workout proposal for the company.

The special task force headed by the SC and including representatives from KLSE and Danaharta will continue to review the implementation of the broker scheme.

SECURITIES COMMISSION MALAYSIA

Issued on behalf of the Securities Commission. For assistance please contact the Corporate Affairs Department at tel no. 03-6548164 (Karen De Cruz) / 03-2507527 (Ida Mariana Azmi) or fax no.: 03-6515078.