About Gatekeepers And Authorities

Posted on Corporate Governance in Malaysia ( have you bookmark this brand new exciting blog? ) : Step up, gatekeepers and authorities

• I have myself contacted the Bursa Malaysia (BM) & Securities Commission (SC) several times, and each time was stonewalled. It took literally three years (!) for complaints to get settled, nobody can convince me that that is an efficient way of dealing with these matter. There was no communication at all from the side of the authorities, although the SC promises to give an update every 3 months, they simply don't do that. And lastly, the SC & BM are "hiding" behind the confidentiality rule, a rule that in itself is good, but can not be used as an excuse in each instance not to give out any information. When I submitted a detailed report of many pages with appendices to the SC I received a letter back with one line stating that no rule had been broken, no explanation whatsoever.

That's absolutely disappointing to read to say the least.

I, for one, asks Where's The Enforcement Dude?

Sigh.

Take the latest trading debacle where DRB Went Into A Meltdown During Trading At Close.. Guess Who Came For Dinner. That mighty strange close caused the call warrant, DRBHicom-CE, issued by OSK to go from 'in-the-money' into 'junk'. Of course OSK tried to explain that it has nothing to do with the fat fingers that caused the trading error which crushed the call warrant to bits.

So what's going to be done?

And what about the future? Abolish all these call warrants which does nothing but help seduce the investing public to gamble and not invest in the market? Well if the Gatekeepers and Authorities are not going to do anything about it, how about preventing bankers from issuing call warrants whose settlement price is based on CLOSING DAY prices?

Think about it!

Isn't it insanely ludicrous that a settlement price of a call warrant could be severely impacted by ONE trading error?

And when such a trading error occurs, who does it benefit?

And if the call warrant has such a MASSIVE loophole in it, where does this leads us? More fat fingers trading errors?

Or how about the recent issue on Ranhill, where Ranhill's director bought shares of the company a week BEFORE Ranhill announced that there is a takeover bid of the company???

Is this allowed?

If I complain to the Gatekeepers, would I get the no rule is broken reply?

And what about company doing share buybacks the same period the company major shareholder is selling?

Won't it make a mockery to the stock exchange if such an incident did happen?

Well... sadly... it did happen.

16 Oct 2008: Changes in Director's Interest (S135) - Lee Swee Eng. Two transactions mentioned in that announcement.

• Acquired 23/10/2008 11,376,000
  Disposed 16/10/2008 72,271,600

Now look at this: Notice of Shares Buy Back by a Company pursuant to Form 28A

Date of buy back from : 16/10/2008

Date of buy back to : 22/10/2008
Total number of shares purchased (units) : 22,190,200
Minimum price paid for each share purchased (RM) : 0.415
Maximum price paid for each share purchased (RM) : 0.690
Total amount paid for shares purchased (RM) : 13,544,216.1

How?

Share buyback took place on the very same day, the boss sold some 72,271,600 shares.

What's your conclusion?

Is this allowed?

Think about it.

......

Anyway, M.A. Wind continues on his blog:

• I found a huge amount of scepticism with ordinary Malaysians (although they did offer to help me, an offer I happily accepted) when I told them about my plans to file detailed complaints to the authorities. At the end they were right of course it only gave me a huge headache.
  
  The SC & BM have a large job on their hands, convincing current and would-be influencers (and I am sure there are many out there) to start taking them serious, and therefor to start lodging complaints about important issues.
  
  The problem is, the SC & BM do indeed need them very much, there are a thousand listed companies out there, and it is sheer impossible to monitor them. What better than to ask the people who put their money where their mouth is, the well informed investors, or the people who follow the news for instance in Blogs to help them with that task, and report any issue that came up?
  
  My recommendations:
  
  * SC & BM should be honest, openly admitting that mistakes have been made in these processes dealing with complaints, and promise better times ahead
  * SC & BM should hugely step up their efforts in the handling of complaints
  * Complainants should at least every 3 months be updated on the progress of their complaints
  * 95% of the complaints should be handled easily withing one year, preferable in much less
  * Complaints that are not handled within one year should follow some "heavy" procedure, like getting formal approval from the Chairman of the SC and complainants should be informed
  * No abuse anymore of the confidentiality rule: public information, rules and regulations, accounting standards etc can be used to inform complainants about the decision taken.

I have one other recommendation.

• SC & BM should publish out all complaints on their websites.

Yes, let the whole investing public know what complaint have been lodged, why and against which company. Let's be extremely transparent with all these complaints.

What say you?