Bursa Malaysia Securities Berhad (Bursa Securities) has publicly reprimanded, imposed a fine of RM10,000 and suspended Raja Mohamad Adnan Bin Raja Osman (Mohamad Adnan) for three 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 Hibiscus Petroleum Berhad (HIBISCUS) in two of his clients’ accounts. Mohamad Adnan is also required to undergo training on the conduct or professionalism of DRs and market offences.
Mohamad Adnan, who was at the material time of the breach a Commissioned DR of Kenanga Investment Bank Berhad at its Principal Office, contravened and/or triggered the provisions of Rules 401.1(3), 404.3(1)(a) & (c) 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 and 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. Appropriate actions will be taken against anyone who engages in such misconducts, including suspending or striking off a Registered Person from the Register or imposing a fine that commensurate with the severity of the breach.
BACKGROUND
The finding of the breach and the imposition of the sanctions on Mohamad Adnan 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 transactions undertaken, the conduct of Mohamad Adnan and the following:-
- Mohamad Adnan had executed orders in two clients’ accounts for HIBISCUS shares which resulted in trades that did not involve any change in the beneficial ownership (NCBO Trades) and also matched trades between these two clients who were related to each other (On-Market Matched Trades akin to NCBO Trades).
- The trades were executed in the following manner:-
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- NCBO Trades:
Mohamad Adnan had entered buy or sell orders of large quantities followed by the opposing orders for the other side of the order book for the same clients’ accounts at the same price and quantity resulting in the matching of these buy and sell orders against each other.
- On-Market Matched Trades akin to NCBO Trades:
Mohamad Adnan had also entered several large buy orders in one client’s account and sell orders in another client’s account, which were entered at the same price resulting in large quantities of the opposing sell and buy orders being matched against each other.
- NCBO Trades:
- By entering orders at one side of the order book followed by the opposing orders, both for large quantities and at the same price, Mohamad Adnan knew or ought to have known that these orders entered for his clients’ accounts could potentially be matched against each other at the opposite side of the order book. As such, he ought to have monitored the orders and the trades executed to ensure that there were no NCBO Trades or On-Market Matched Trades akin to NCBO Trades being executed. Such execution of opposing sell and buy orders in the same clients’ accounts or the accounts of the related person could give rise to false or misleading appearance with respect to the active trading in the securities concerned, market for and/or the price of such securities and is a violation of the Rules.
In this regard, as his two clients were related and the instructions to trade were submitted to him by one client for/on behalf of the two accounts, Mohamad Adnan ought to have been more diligent in executing and/or monitoring the orders entered to ensure that one client’s buy orders would not be matched with the other client’s sell orders.
- Mohamad Adnan’s trading activities did not reflect the fair and orderly dealing activities which are expected of a responsible Registered Person undertaking dealing activities as the NCBO Trades and On-Market Matched Trades akin to NCBO Trades might give rise to false or misleading appearance with respect to the active trading in the securities concerned, market for and/or the price of such securities and is a violation of the Rules.
- As a DR, Mohamad Adnan must, amongst others:
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- 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 or refrain from engaging or becoming a party to, or getting involved in any acts or practices which might lead to a false/misleading appearance with respect to the securities.
ADDENDUM
Rules 401.1(3), 404.3(1)(a) & (c) 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 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.