Bursa Malaysia Securities Berhad (Bursa Securities) has publicly reprimanded, imposed a fine of RM100,000 and suspended Chong Lee Fatt (Chong) for 12 months as a Registered Person, including from trading on or through the stock market of Bursa Malaysia as a Dealer’s Representative (DR), for breaching rules related to the opening of a client’s account and for unauthorised and false trading activities in the shares of:-
- YGL Convergence Bhd (YGL); and
- HDISPLAY (MSC) Bhd (HDISPLAY).
Chong, who was at the material time of the breach, a Commissioned DR of MIMB Investment Bank Berhad (MIMB),triggered and breached the provisions of Rules 1302.1(1)(a)&(g), 1302.1(1)(i)(i)(aa)&(iii), 404.3(1), 404.4(6)(a), 404.3(6)(b), 404.4(9)(b) and 401.1(2)&(3) of the Rules of Bursa Securities.
Bursa Securities views misconducts that compromise the protection of clients’ interests seriously. In addition, the need to maintain a fair and orderly market is imperative and Bursa Securities will not tolerate any acts/practices which could lead to false trading or manipulative activities.
Bursa Securities strongly emphasises that all Registered Persons/DRs must observe professional standards of integrity and fair dealing when carrying out/discharging their functions and responsibilities under the rules so as to maintain market confidence. They must also uphold the interest of their clients, the investing public and the market. Bursa Securities will not hesitate to take appropriate actions, including imposing long periods of suspension, striking off from the Register or imposing a substantial fine, commensurate with the severity of the breach.
BACKGROUND
The finding of the breach and the imposition of the above sanctions on Chong 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 that:-
- Chong had failed to authenticate the application to open an account for a client (the said client) in the manner as required under the rules and falsely declared authentication of the account opening forms. In this regard, the account opening forms were not executed by the said client in person before him but instead, the forms were submitted by a third party.
- Chong had allowed the said client’s account to be operated by a third party who had unlawfully undertaken numerous trades in the account. These unauthorised trades gave rise to losses in the account which was disputed by the said client. In this regard, the losses suffered were subsequently set off against Chong’s commission and security deposit lodged with the Participating Organisation (PO).
In undertaking these unauthorised dealing activities, Chong was noted to have acted upon the instruction given by the third party who was not a person allowed and authorised, in writing, to trade on behalf of the said client. - Chong’s dealing in the securities of YGL and HDISPLAY in the said client’s account constituted false trading activities/unethical trading as there were rollover activities in the said client’s account. This gave rise to a false or misleading appearance of active trading or the market for the securities concerned.
- As a DR, Chong was not a mere order taker as he was required to carry out a proper and reasonable assessment of clients’ orders to ensure their instructions were executed in accordance with the rules requirements.
- As a DR, Chong must, amongst others:
- observe professional standards of integrity and fair dealing;
- act honestly and in the best interest of his clients;
- not use his clients’ accounts to trade for a third party or unlawfully transact in clients’ accounts;
- not accept or act on any instruction received from any other persons purporting to act on behalf of his clients prior to obtaining written authorisation from his clients; and
- conduct his business in a manner which contributes to the maintenance of a fair and orderly market.
ADDENDUM
Rules 1302.1(1)(a)&(g), 1302.1(1)(i)(i)(aa)&(iii), 404.3(1), 404.4(6)(a), 404.3(6)(b), 404.4(9)(b) and 401.1(2)&(3) of the Rules of Bursa Securities state, amongst others, that:-
- any Participant who, in any circumstances, directly or indirectly, being a DR:
- commits a breach of or violates any of the Rules and fails to perform his/her duties efficiently, honestly and fairly,
- unlawfully transacts on another person’s account; and
- without prejudice to the generality of the foregoing falsely declares authentication of an account opening application,
shall be liable and be dealt with in accordance with the provisions of the Rules relating to the same;
- commits a breach of or violates any of the Rules and fails to perform his/her duties efficiently, honestly and fairly,
- every DR employed or engaged by the PO 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;
- where a client submits an application to open an account with the PO through a DR, the DR shall authenticate his client’s application for account opening by ensuring that the application form(s) for account opening is(are):–
- duly completed and all particulars and information of the client in the application form(s) are verified against relevant supporting documents in accordance with the requirements stipulated by the Exchange, the Depository and the written procedures established by the PO; and
- duly executed by his client in person before the DR;
- duly completed and all particulars and information of the client in the application form(s) are verified against relevant supporting documents in accordance with the requirements stipulated by the Exchange, the Depository and the written procedures established by the PO; and
- no PO, Head of Dealing and DR shall, prior to obtaining written authorisation from a client, accept or act on any instruction received from any other person purporting to act on behalf of that client;
- no PO, Head of Dealing and DR shall use a client’s account to trade for a third party;
- POs, Heads of Dealing and DRs shall:
- in their conduct of their business for the sale, disposal, purchase, acquisition or exchange of securities, refrain themselves from engaging in, or be a party to, any unethical practices that may damage the confidence of investors and hamper the sound development of the stock market;
- 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,
and shall not participate in any operation by others which might have the same result.
- in their conduct of their business for the sale, disposal, purchase, acquisition or exchange of securities, refrain themselves from engaging in, or be a party to, any unethical practices that may damage the confidence of investors and hamper the sound development of the stock market;