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2024 MarsdenLR 2537
HIGH COURT MALAYA KUALA LUMPUR
SURUHANJAYA SEKURITI MALAYSIA – Appellant
Versus
LIM KOK BOON & ANOR – Respondent
[Civil Suit No: WA-22NCC-389-09-2017]
Insider trading occurs when an insider communicates non-public information to another party who then trades on that information, violating provisions of the Capital Markets and Services Act.
Headnote:(A) Capital Markets and Services Act 2007 – Sections 188(2)(a) and 188(3)(a) – Insider trading – Plaintiff claimed defendants liable for insider trading, alleging 1st defendant provided inside information to 2nd defendant, who purchased shares based on that information – Court found defendants contravened CMSA provisions – Defendants' relationship and communications indicated insider trading – Civil penalties imposed: RM1,000,000 on 1st defendant and RM500,000 on 2nd defendant. (Paras 184-188)
Facts of the case: Plaintiff alleged insider trading by defendants regarding shares of GW Plastics Holdings Berhad, claiming 1st defendant communicated inside information to 2nd defendant prior to share transactions.
Findings of Court: Court found sufficient circumstantial evidence of insider trading, establishing defendants' possession of inside information and their contraventions of CMSA.
Issues: Whether defendants communicated inside information and whether 2nd defendant acted on that information in purchasing shares.
Ratio Decidendi: Court ruled that the close relationship and communications between defendants, along with the timing of share purchases, indicated insider trading, fulfilling the elements required under CMSA.
Result: Plaintiff's claim allowed; civil penalties imposed on both defendants.
JUDGMENT
A. Introduction
[1] The plaintiff instituted this civil action, seeking to make the defendants liable for insider trading under the Capital Markets and Services Act 2007 ("CMSA"). The plaintiff claimed the 1st defendant provided inside information to the 2nd defendant, and the 2nd defendant purchased shares that relate to the inside information.
[2] I found the defendants had contravened the relevant provisions under the CMSA. Thus, I allowed the plaintiff's claim. The reasons for my decision are set out below.
B. Background Facts
[3] The shares in issue are of a company known as GW Plastics Holdings Berhad ("GWP"). The principal activity of GWP at the material time was investment holding, while its subsidiaries Great Wall Plastic Industries Berhad ("GWPI") and GW Packaging Sdn Bhd ("GW Packaging") manufactured and marketed plastic film packaging products.
[4] GWP had entered into a share sale agreement ("SSA") on 3 October 2012 with Scientex Packaging Film Sdn Bhd ("Scientex Packaging"). Pursuant to the SSA, GWP disposed of its 100% equity interest in GWPI and GW Packaging to Scientex Packaging for a total cash consideration of RM283,200,000.00 ("Disposal"). This is essentially a disposal of the entire business and undertaking of GWP to Scientex Packaging.
[5] The cash proceeds arising from the Disposal were to be distributed to all shareholders of GWP ("Distribution"). In effect, GWP will no longer have any business or operations.
[6] On 28 September 2012, prior to the execution of the SSA, GWP made the following announcements:
a. that trading in GWP shares had been suspended with effect from 4:43pm on 28 September 2012, pending a material announcement; and
b. that Bursa Malaysia had approved GWP's request to suspend trading of its shares until 5:00pm on 3 October 2012.
[7] On 3 October 2012, an announcement was made to Bursa Malaysia that GWP had entered into the SSA ("Announcement").
[8] The person primarily involved in negotiations on the Disposal and the Distribution was the 1st defendant, who was the Chief Executive Officer and substantial shareholder of GWP at the material time.
[9] He and the 2nd defendant knew each other. The exact nature of their relationship will be discussed further.
[10] The plaintiff claimed that the information related to the Disposal and the Distribution ("Inside Information") was only made generally available on 3 October 2012, when the Announcement was made.
[11] It is the plaintiff's case that the 1st defendant had provided the Inside Information to the 2nd defendant, and the 2nd defendant had thereafter acquired 350,000 GWP shares on 25 and 27 September 2012 ("September 2012 Transactions").
[12] Thus, the plaintiff claimed the 1st defendant breached s 188(3)(a) of the CMSA, in communicating the Inside Information to the 2nd defendant, while the 2nd defendant breached s 188(2)(a) in carrying out the September 2012 Transactions.
[13] The defendants denied any communication between them on the Inside Information. They claimed their relationship was purely professional, thus eliminating the possibility of communication on the Inside Information. They also raised the following individual defences:
a. The 1st defendant claimed it had always been his practice not to disclose market sensitive and/or inside information to third parties or the 2nd defendant. He further alleged that the plaintiff had failed to investigate leaks of the Inside Information. He also claimed that this action is an abuse of process.
b. The 2nd defendant contended that the September 2012 Transactions were based entirely on her continued interest to invest in GWP shares, because of the high returns she received since she first purchased GWP shares in October 2010. She claimed that in carrying out the September 2012 Transactions, she relied on analyst reports and reports on GWP from newspapers and postings on the Bursa Malaysia website.
C. The Law On Insider Trading
[14] Prohibitions against insider trading are set
