Bursa Malaysia Reprimands, Fines And Orders To Strike Off/Suspend Two Dealers’ Representatives For Manipulative Dealing Activities

Bursa Malaysia Securities Berhad (Bursa Securities) has publicly reprimanded, fined and ordered to strike off a Dealer’s Representative (DR) and imposed suspension on another DR for engaging in manipulative dealing activities in the securities of Progressive Impact Corporation Bhd (PICORP). In addition, the DR facing suspension is required to undergo training on the conduct or professionalism of DRs and market offences (Mandatory Training).

Huda and Hani, who were at the material time of the breach, Commissioned DRs of RHB Investment Bank Berhad at its Principal Office, contravened and/or triggered 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. Bursa Securities will not hesitate to take appropriate actions against anyone who engages in such misconduct, including imposing suspension/striking off a Registered Person from the Register and/or imposing a substantial fine, commensurate with the severity of the breach.

BACKGROUND

The findings of the breaches and the imposition of the sanctions on these two DRs 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:

1. Huda and Hani had engaged in manipulative trading activities over a period of several months (Relevant Period) in 17 clients’ accounts. The majority of these clients were related to Huda and Hani. All trades in these clients’ accounts were controlled and dictated by Huda as they had given her the authority and discretion to trade in their accounts. Hani assisted Huda in the execution of trades in these clients’ accounts upon instructions received from Huda.
   
   
2. During the Relevant Period, both Huda and Hani had actively engaged in activities of:
   1. entering buy and sell orders in the 17 clients’ accounts giving rise to these clients being both the buyers and sellers in numerous transactions for PICORP shares resulting in their opposing buy and sell orders matched against each other (Cross Trading/Cross Trades); and
      
      
   2. rolling over the trades in the 17 clients’ accounts which were carried out rotationally and almost on daily basis (Churning/Rollover Activities).
      
      
3. The characteristics of the entry of the buy and sell orders undertaken including the close proximity of time of these orders indicated a deliberate attempt to match the trades of these clients against each other and for the trades to be rolled-over on/prior to due date of settlement (Settlement Date) for the purchases so that the clients avoided paying for the purchases in their accounts on the Settlement Date and thus, avoided force selling and margin calls.
   
   
4. The Cross Trades and Rollover Activities undertaken in the clients’ accounts had artificially inflated the volume traded for PICORP shares and created a false or misleading appearance of active trading in and/or market for PICORP shares during the Relevant Period.
   
   
5. The trading activities of Huda and Hani do not reflect the fair and orderly dealing activities which are expected of a responsible Registered Person undertaking dealing activities as the Cross Trades and Churning/Rollover Activities had given rise to false/misleading appearance of active trading in/market for/price of PICORP shares. 
   
   
6. In imposing the sanctions on Huda and Hani, the severity of breach committed by each of them was assessed taking into account the differing roles played by them (i.e. primary and secondary roles of Huda and Hani respectively) in the manipulative trading activities. 
   
   
7. Notwithstanding Hani merely assisted Huda who had control and dictated the manipulative trading activities in her clients’ accounts, Hani was expected to exercise reasonable due care and diligence in assisting Huda in undertaking dealing activities in PICORP shares and should undertake proper assessment of the instructions to ensure compliance of the relevant rules. 
   
   
8. As DRs, Huda and Hani must, amongst others:
   1. observe professional standards of integrity and fair dealing including exercising due care and diligence in the execution of trades; 
      
      
   2. carry out their duties efficiently and in a manner which contributes to the maintenance of a fair and orderly market; and
      
      
   3. 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;
• every DR employed or engaged by the Participating Organisation 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; and
• any Participant who, in any circumstances, directly or indirectly commits a breach of or violates any of the Rules or fails to perform his/her duties efficiently, honestly or fairly shall be liable and be dealt with in accordance with the provisions of the Rules relating to the same.