Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded, imposed a fine of RM200,000 and ordered to strike off Koh Pee Beng (KOH) if he was still a Registered Person of Bursa Malaysia Securities, for engaging in manipulative dealing activities in the securities of Magna Prima Berhad (MAGNA) and D.B.E. Gurney Resources Bhd (DBE).
KOH, who was at the material time of the breach a Commissioned Dealer’s Representative (CDR) of AmInvestment Bank Berhad at its Principal Office, had contravened and/or triggered the provisions of Rules 401.1(3), 404.3(1)(a)&(c) and 1302.1(1)(a)&(g) of the Pre-Revamped Rules of Bursa Malaysia Securities.
Bursa Malaysia 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, manipulative activities and/or compromise the integrity of the market. Bursa Malaysia Securities will not hesitate to take appropriate actions against anyone who engages in such misconduct which commensurate with the severity of the breach, including striking off a Registered Person from the Register and imposition of fines.
BACKGROUND
The finding of the breach and the imposition of the sanctions on KOH were made pursuant to Rule 15.02 of the Rules of Bursa Malaysia Securities after according due process to KOH and taking into consideration all facts and circumstances, including that:-
(1) KOH had carried out dealing activities in MAGNA shares over a period of time in the accounts of his three clients, two of whom were related to him (i.e. his brother and his niece) (KOH’s clients) involving churning and rollover activities which had created a false or misleading appearance of active trading in, the market for and/or the price of the securities (False/Misleading Appearance) of MAGNA. The characteristics and impact of KOH’s dealing activities were as follows:-
(a) the active buying and selling in MAGNA shares at/about the same price in his three clients’ accounts through numerous series of buy and sell orders rolled-over and churned (Rollover and Churning activities);
(b) the Rollover and Churning activities were carried out on daily/almost daily basis over a period of several months which involved the sales undertaken to close off purchases in these clients’ accounts on/prior to the due dates for settlement and on the same day, fresh purchases were made in another client’s account;
(c) these Rollover and Churning activities had enabled the purchase positions of KOH’s clients to be rolled over to the next trading cycle(s) whilst having MAGNA shares retained within this group of KOH’s clients’ accounts to prolong their holding period;
(d) the repeated active buying and selling activities/Churning activities were also noted to have been frequently matched to opposing orders from certain brokers that had supported each other’s opposing orders/trades, indicating cross/pre-arranged trades that were not subject to natural market forces of supply and demand;
(e) the Churning and Rollover activities had created false/misleading appearance of increased activity and demand of MAGNA shares in the market with its price being traded/maintained/dictated at certain levels; and
(f) the execution of increasing bid buy orders (driving up the price activities) of MAGNA shares in KOH’s clients’ accounts which were carried out whenever MAGNA share price retreated to lower level or traded at a bid lower. Such driving up the price activities had the effect of causing/influencing the share price of MAGNA to increase/maintain at certain price levels.
(2) In respect of the securities of DBE, KOH had engaged in false trading activities on two trading days through the creation of order entries/order stacking and the subsequent withdrawal of these orders in a client’s account which avoided priority queue and/or facilitated the selling activities.
(3) As a Registered Person acting in the capacity as a Dealer’s Representative (DR), KOH was obligated to carry out his duties including ensuring maintenance of a fair and orderly market and fair dealing. As such, it is not acceptable for KOH to act as a mere order-taker/to give trade instructions to his assistants towards executing clients’ orders without making proper assessment of the orders received/executed. In undertaking dealing activities for his clients, KOH ought to have exercised reasonable due care and diligence so as to avoid/prevent/refrain from any manipulative/false dealing activities.
(4) The imposition of the sanctions including the striking off on KOH had taken into account:-
(a) the extent and impact of the manipulative trading activities in KOH’s clients’ accounts as well as the ill-gotten gains of significant commission earned from such activities; and
(b) the repeated breaches of the rules by KOH including the manipulative trading activities of another counter (of which he had been subjected to enforcement action) had brought into question whether he was a fit and proper person to be a Registered Person.
(5) As a DR, KOH must at all times:
(a) observe professional standards of integrity and fair dealing including exercise due care and diligence in the execution of trades;
(b) carry out his duties efficiently and in a manner which contributes to the maintenance of a fair and orderly market; and
(c) 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 of active trading in, the market for or price of the securities.
