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BURSA MALAYSIA REPRIMANDS, FINES AND SUSPENDS TAN YEE CHEE FOR ENGAGING IN FALSE TRADING ACTIVITIES
Bursa Malaysia Securities Berhad (Bursa Securities) has publicly reprimanded, imposed a fine of RM30,000 and suspended Tan Yee Chee (TAN) for six months as a Registered Person, including from trading on or through the stock market of Bursa Malaysia as a Dealer’s Representative (DR), for engaging in false trading activities involving the securities of Engtex Group Berhad (ENGTEX) in his two clients’ accounts. TAN is also required to undergo training on the conduct or professionalism of DRs and market offences.
TAN, who was at the material time of the breach a Commissioned DR of HwangDBS Investment Bank Berhad at its Taman Tun Dr. Ismail branch office, contravened and/or triggered the provisions of Rules 401.1(3), 404.3(1) and 1302.1(1)(a) & (g) of the Rules of Bursa Securities.
Bursa Securities places a strong emphasis on the need to maintain a fair and orderly market. Bursa Securities will not tolerate any acts or practices which could lead to false trading or manipulative activities. Registered Persons or DRs are reminded to act with integrity in maintaining market confidence and upholding the interest of the investing public and the market. Bursa Securities will not hesitate to take appropriate actions against anyone who engages in such misconduct, including suspension or striking off a Registered Person from the Register and imposing fine, commensurate with the severity of the breach.
BACKGROUND
The finding of the breach and the imposition of the sanctions on TAN were made pursuant to Rule 1301.2 of the Rules of Bursa Securities upon completion of due process and after taking into consideration all facts and circumstances, including the impact of the trades undertaken, the conduct of TAN and the following:-
- Over a period of several trading days, TAN had undertaken dealing activities in such a manner which resulted in the buy orders entered for the share buyback account of ENGTEX (ENGTEX SBB account) being matched against the sell orders of another client (Selling Client). These dealing activities resulted in over 90% of the shares bought by ENGTEX SBB account being matched to the Selling Client’s account.
- TAN had undertaken his dealing activities for these 2 clients in the following manner:-
- entered sell orders for the Selling Client followed by the buy orders for ENGTEX SBB account at the same price or half a sen higher than the sell order price in order to take up the sell orders; or
- entered buy orders for ENGTEX SBB account followed by the sell orders for the selling client at the same price as the buy order price or half a sen lower, and most of these opposing buy/sell orders were entered within close proximity of time resulting in the matching of these orders with each other.
- The characteristics in which TAN undertook his dealing activities for the aforesaid 2 clients including the manner and proximity of the dealings/trades, the fact that ENGTEX only engaged in purchases of the shares pursuant to its share buyback exercise when the Selling Client disposed of his shares and evidence of connection/relationship between the Selling Client and the person authorised to operate or give instruction for ENGTEX SBB account indicated that the trades were pre-arranged and/or executed in such a manner so that they would be matched against each other.
Hence, TAN had: - facilitated the matched trades undertaken on-market between ENGTEX SBB account and the Selling Client’s account; and/or
- circumvented the prohibition against undertaking married deals for share buyback which was aimed at ensuring that listed companies buy back their own shares at a fair price as determined by market forces.
- As an experienced DR, TAN knew or ought to have known that the orders entered by him for both sides of the order book at the same price or half a sen higher or lower (most of which were entered in close proximity of time to each other) could potentially be matched against each other, especially since the stock was illiquid of which TAN was aware of.
- The matched trades for orders between the 2 clients which represented significant market volume for ENGTEX shares during the period had impacted the volume traded for ENGTEX and gave rise to false/misleading appearance with respect to the active trading and/or market for the securities of ENGTEX.
- TAN’s trading activities did not reflect the fair and orderly dealing activities which are expected of a responsible Registered Person undertaking dealing activities and showed that TAN had failed to observe professional standards of integrity and fair dealing at all times.
- As a DR, TAN must, amongst others:
- observe professional standards of integrity and fair dealing including exercising due care and diligence in the execution and monitoring of trades;
- carry out his duties efficiently and in a manner which contributes to the maintenance of a fair and orderly market; and
- avoid/refrain from engaging or becoming a party to, or getting involved in any acts/practices which might lead to a false/misleading appearance with respect to the securities.
Arising from such matched trades undertaken on-market between ENGTEX SBB account and the Selling Client’s account, there was price distortion for the securities concerned as these pre-arranged matched trades were not executed due to price discovery arising from natural market forces.
ADDENDUM
Rules 401.1(3), 404.3(1) and 1302.1(1)(a) & (g) of the Rules of Bursa Securities (the Rules) state, amongst others, that:-
- DRs shall avoid any act or practice which might lead to a false or misleading appearance of active trading in any securities on the stock market of the Exchange or a false or misleading appearance with respect to the market for, or the price of, any such securities or directly or indirectly be tantamount to stock market manipulations.
- DRs shall at all times observe professional standards of integrity and fair dealing, act honestly and in the best interest of their clients and conduct their business in a manner which contributes to the maintenance of a fair and orderly market.
- Any Participant who, in any circumstances, directly or indirectly commits a breach of or violates any of the Rules or fails to perform his duties efficiently, honestly or fairly shall be liable and be dealt with in accordance with the provisions of the Rules relating to the same.