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The Federal Court yesterday affirmed the Court of Appeal’s decision dated 5 September 2022 which had dismissed Dato’ Sreesanthan Eliathamby’s appeal on insider trading of Worldwide Holdings Berhad (Worldwide) shares and awarded costs of RM100,000 to the SC.
In its decision, the apex court comprising of Chief Judge of Malaya, Dato’ Sri Hasnah Binti Dato' Mohammed Hashim and Federal Court Judges, Datuk Abdul Karim bin Abdul Jalil and Datuk Vazeer Alam bin Mydin Meera unanimously affirmed the decisions of the Court of Appeal and the High Court.
In summary, the Federal Court held that:
- Section 89E (1) of the Securities Industry Act 1983 (now Section 188(1) of the Capital Markets and Services Act 2007) is not a strict liability provision and instead contains the mental element of knows or ought reasonably to know that the information is not generally available.
- In determining the materiality of the information in the possession of the insider, the Court is not confined to the facts and circumstances at the time of the acquisition, but may also take into consideration facts and circumstances after the time of the impugned acquisition.
- The power of the Attorney General to institute proceedings for an offence under Article 145(3) of the Federal Constitution, does not extend to civil actions brought by the SC under section 90A(5) of the SIA for insider trading.
In 2016, the SC had filed a civil action against Dato’ Sreesanthan for his acquisition of 600,000 Worldwide shares between 7 June and 11 July 2006.
His acquisition took place while in possession of material non-public information relating to the proposed privatisation of Worldwide by Perbadanan Kemajuan Negeri Selangor.
At the material time, Dato’ Sreesanthan was a senior partner in a law firm where he was engaged by CIMB Investment Bank to act as its legal adviser for the said corporate exercise.
Following a full trial, the High Court allowed the SC’s claim and Dato’ Sreesanthan was ordered to pay the SC a sum of RM1,989,402.00 being an amount equal to three times the profits gained as a result of the insider trading and civil penalty of RM1,000,000.
Additionally, Dato’ Sreesanthan was barred from being a director of any public listed company for a period of ten years starting 18 November 2020. The decision by the High Court was affirmed unanimously by the Court of Appeal.
Following yesterday’s decision, the Federal Court ordered Dato’ Sreesanthan to pay costs amounting to RM100,000.00 to the SC. The SC had previously been awarded costs amounting to RM150,000.00 at the High Court and Court of Appeal. In total, Dato’ Sreesanthan was ordered to pay the SC a sum of RM3,239,402.00.
The SC views insider trading as a serious breach that undermines the integrity of the capital market and erodes investor confidence.
This landmark judgment by the apex court sends a strong and clear message to the public that such contraventions will not be tolerated by the courts.
The continuous enforcement by the SC demonstrates its commitment to address misconduct and abuses affecting the integrity of the capital markets.
