Thursday June 28, 2012
Securities Commission wins another battle against market manipulators
By EUGENE MAHALINGAM
PETALING JAYA: The Securities Commission (SC) has won another battle against market manipulators after the Court of Appeal decided in the regulator's favour to increase the punishment meted on former Fountain View Development Bhd director Datuk Chin Chan Leong.
“In a landmark decision, the Court of Appeal imposed a jail term of 12 months, and a fine of RM1.3mil on Datuk Chin Chan Leong for market manipulation involving Fountain View shares,” the SC said in a statement yesterday.
Chin, who pleaded guilty to shares manipulation two years ago, was initially given a one-day jail sentence and RM1.3mil fine for the offence.
The offence took place over a two-month period from November 2003 to January 2004 during which the price of Fountain View shares increased from RM1.99 to RM6.05, raising its market capitalisation from RM885mil to RM2.73bil.
Fountain View was listed on the Main Board of the stock exchange. The company was delisted on Sept 22, 2010 for failing to submit a regularisation plan to the SC or Bursa Malaysia within the prescribed timeframe.
Chin was charged in 2005 but had only pleaded guilty on Feb 5, 2010 to the offence of creating a misleading appearance of active trading in Fountain View shares by indirectly being concerned in transactions for the sale and purchase of those shares, which did not involve any change in beneficial ownership.
Chin was found to be trading with 20 central depository system accounts which he beneficially owned through the companies that he controlled.
The one-day jail sentence was affirmed by the High Court in September 2010 which led to an appeal by the Public Prosecutor .
The Court of Appeal held that the offence under section 84(1) of the Securities Industry Act 1983 was serious with adverse consequences on the stock market and the economy and that the earlier sentence did not reflect the gravity of the offence.
“In deciding to impose a 12-month jail term, the Court of Appeal took into account the fact that the offence committed was pre-planned and well thought out.
“The SC has been proactively pursuing this and other market misconduct cases (such as manipulation, market rigging and insider trading) because such activities severely undermine investor confidence and tarnishes the reputation of the Malaysian capital market,” the SC said, adding that it would continue to be vigilant and take whatever action necessary to protect investors and to maintain a fair and orderly capital market.
Over the years, there had been a number of account mismanagement and share manipulation court cases. Among them were Kenmark Industrial Co (M) Bhd, Granasia Corp Bhd, Kiara Emas Asia Industries Bhd, Idris Hydraulic (M) Bhd, Aokam Perdana Bhd and Ekran Bhd.
In the case of troubled furniture company Kenmark, its Taiwanese managing directors and key management personnel went missing in May 2010. In June 2010, one Datuk Ishak Ismail emerged as a 32% shareholder, but sold all his shares two weeks later. The SC alleged that he had committed insider trading.
In the case of Granasia Corp Bhd, in March 2010, the Kuala Lumpur Sessions Court convicted Chan Kok Suan, the former managing director of Granasia for submitting false statements to the SC, namely the revenue and profit after tax of the company for the year ended Dec 31, 2002.
The information was submitted in connection with Granasia's proposal to list on the main board of the stock exchange.
Chan was convicted under section 32B(4) of the Securities Commission Act and imposed a fine of RM500,000 in default, 10 months imprisonment, according to the SC. He was charged on Feb 9, 2006 and pleaded guilty on March 1, 2010.
According to reports, the prosecution had filed an appeal against the sentence to the High Court.