1. Breach of listing requirements regarding financial assistance by directors of a listed company — application by stock exchange to enforce penalties under Section 360, CMSA 2007. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 )
Back
Next 
2012 MarsdenLR 1838
COURT OF APPEAL (PUTRAJAYA)
RAMLY ALI, J, ZAHARAH IBRAHIM, J, AZIAH ALI, JJCA
Tengku Dato' Kamal Ibni Sultan Sir Abu Bakar & Ors – Plaintiff
Versus
Bursa (M) Securities Bhd and another – Defendant
CIVIL APPEAL NOS W-02(IM)(NCC)-89 OF 2011 AND W-02–485 OF 2010
Advocates:
Muhammad Shafee Abdullah (Nurul Atiqah Zaini with him) (Shafee & Co) for the appellants.
Lim Chee Wee (Skrine) for the respondent.
Muhammad Shafee Abdullah (Nurul Atiqah Zaini with him) (Shafee & Co) for the appellants.
Lim Chee Wee (Skrine) for the respondent.
The phrase "appears to the court" in s 360(1)(c) of the CMSA 2007 establishes a lower standard of proof than "proved," requiring a reasonable well-founded belief. Regulatory enforcement of listing requirements is a distinct statutory duty to protect public interest, independent of civil recovery actions.
Headnote:(A) Capital Markets and Services Act 2007 - Sections 360(1)(c), 360(j), 360(k), 354, 390(1), and 381(3) - Listing Requirements - Paragraphs 8.23(1), 16.10, 16.11, 16.16, and 16.17 - Enforcement of penalties by a stock exchange - Interpretation of the phrase "appears to the court" - The use of the word "appears" instead of "proved" indicates a lower standard of proof, allowing for a reasonable margin of probabilities and a well-founded belief based on circumstances rather than strict proof (Paras 44, 47, 50).
(B) Capital Markets and Services Act 2007 - Section 390(1) and 381(3) - Transitional provisions - Rights to take action for breaches committed under repealed legislation are preserved, and decisions made under repealed laws are deemed to have been made under corresponding provisions of the current Act (Para 56).
(C) Regulatory Enforcement vs. Civil Recovery - Action taken by a stock exchange to enforce listing requirements is a statutory duty to protect the public interest and ensure market fairness - Such proceedings are distinct from civil suits for recovery of monies and do not constitute duplicity of proceedings or double recovery, provided the court ensures no double damages are awarded (Paras 60-66).
Facts of the case:
Directors of a listed company caused a wholly-owned subsidiary to provide unauthorized financial assistance to another company and an individual, breaching listing requirements. The stock exchange's listing committee imposed fines and ordered the restoration of funds. The stock exchange subsequently applied to the court to enforce these sanctions. The directors challenged the application on grounds of standing, the applicability of the current legislation to past breaches, and the existence of a prior civil settlement for a portion of the funds.
Findings of Court:
The court found that the stock exchange is explicitly empowered to apply for enforcement orders. The standard of proof required for the court to be satisfied that a contravention "appears" to have occurred is lower than the standard of "proof." The current Act applies to the breaches via transitional provisions. The regulatory action is a fresh proceeding aimed at public interest and is separate from the civil recovery action.
Issues: Whether the stock exchange has the standing to enforce penalties under the Act; whether the phrase "appears to the court" requires strict proof; whether the current Act applies to breaches committed under repealed legislation; and whether a civil settlement precludes regulatory enforcement.
Ratio Decidendi: The phrase "appears to the court" denotes a lower standard of proof than "proved," requiring only a reasonable well-founded belief based on evidence and circumstances. Regulatory enforcement of listing requirements is a statutory duty to protect investors and the public interest, which remains independent of private civil settlements between the company and its directors.
Result: Appeal dismissed with costs of RM20,000.
Legal Category Hierarchy
- securities law
- practice and procedure
Table of Contents
2. Whether a stock exchange can enforce penalties under Section 360, CMSA 2007 — interpretation of "appears to the court" — effect of private settlements on regulatory sanctions. (Para 8 , 9 , 40 , 41 , 51 , 55 , 58 , 59 )
3. The phrase "appears to the court" implies a lower standard of proof than "proved" — regulatory enforcement is distinct from civil recovery — public interest overrides private settlements. (Para 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 52 , 53 , 54 , 56 , 57 , 60 , 61 , 62 , 63 , 64 , 66 )
4. Section 360(1)(c) CMSA 2007 allows stock exchanges to enforce penalties based on a lower standard of proof than strict proof, independent of civil settlements. (Para 44 , 50 , 62 , 66 )
6. What is the standard of proof required when a court determines if a person has contravened a relevant requirement under Section 360(1)(c) of the CMSA 2007?
The phrase "appears to the court" denotes a lower standard of proof than "proved." It does not require strict proof or certainty beyond doubt, but rather a reasonable margin of probabilities or a well-founded belief based on evidence and circumstances. (Para 44 , 47 , 48 , 50 )
7. Can a stock exchange independently apply for court orders to enforce its penalties under the CMSA 2007, or must such action be brought by the Securities Commission?
A stock exchange is explicitly entitled under Section 360(1)(c) of the CMSA 2007 to apply for court orders to enforce penalties for the contravention of relevant requirements, independent of the Securities Commission. (Para 23 , 53 , 54 )
8. Does a consent judgment in a civil suit to recover funds extinguish a regulatory body's power to order the restoration of those funds to a company?
No. Regulatory enforcement of listing requirements is a separate proceeding from civil recovery. In the public interest and to protect investor confidence, the court may still order the restoration of funds despite a private settlement. (Para 60 , 62 , 64 , 66 )
9. How does the CMSA 2007 apply to enforcement actions for breaches committed under repealed legislation like the Securities Industries Act 1983?
Under Section 390 of the CMSA 2007, liability for breaches committed under repealed legislation is preserved, and decisions or directions made under repealed laws are deemed to have been made under corresponding provisions of the CMSA 2007. (Para 56 , 57 )
Ramly Ali JCA (delivering judgment of the court)
[1]The appellants, at the material time, were directors of Cepatwawasan Group Bhd, ('Cepatwawasan') a company listed on the main board of the Malaysian stock exchange, Bursa (M). The respondent is Bursa (M) Securities Bhd which has a statutory duty pursuant to s 11
[2]Shortly prior to their removal as directors of the company (Cepatwawasan) the appellants had caused the company's wholly owned subsidiary, Prolific Yield Sdn Bhd to make payments totaling RM16m to a company called Opti Temasek Sdn Bhd and an individual Sheikh Abdul Rahim (who, at the material time, was the driver of the first appellant, Tengku Dato Kamal Ibni Sultan Sir Abu Bakar).
[3]Such payments were in breach of the financial assistance provisions in the respondent's Listing Requirements ('LR'). The respondent had on 12 July 2005 issued a notice to show cause against the appellants and fixed a date for hearing before the respondent's listing committee.
[4]The appellants failed to attend the initial hearing before the Listing Committee on 13 October 2005. The Listing Committee proceeded with the hearing and made a finding that the appellants had breached section 16.11(a) of the Listing Requirements for causing Cepatwawasan to breach section 8.23(1) of the LR. At the material time, the first and second appellants were the only directors of Prolific Yield.
[5]Consequently, the Listing Committee imposed the following penalties, namely:
(a)the first and second appellants were fined RM1m each;
(b)the third and fourth appellants were fined RM500,000 each; and
(c)the first and second appellants were also directed to restore to Cepatwawasan the RM13m paid to Opti Temasek and the RM3m paid to Sheikh Abdul Rahim.
[6]The appellants appealed to the Appeal Committee against the said order of the Listing Committee. However on 12 June 2006, the appeal was dismissed. Consequently the penalties and directions of the listing committee stand. The appellants' application for judicial review was dismissed by the High Court on 18 January 2010.
[7]On 26 May 2010, the respondent filed the originating summons to seek the court's orders to enforce its sanctions or penalties against the appellants pursuant to ss 360(1)(c)(i), 360(J) and 360(K) of the CMSA 2007
(a)that within 14 days of the date of this order, the first defendant (first appellant) pay the sum of RM1,000,000 to the plaintiff (respondent);
(b)that within 14 days of the date of this order, the second defendant (second appellant) pay the sum of RM1,000,000 to the plaintiff (respondent);
(c)that within 14 days of the date of this order, the third defendant (third appellant) pay the sum of RM500,000 to the plaintiff (respondent);
(d)that within 14 days of the date of this order, the fourth defendant (fourth appellant) pay the sum of RM500,000 to the plaintiff (respondent);
(e)that within 30 days of the date of this order, the first and second defendants (first and second appellants), jointly and severally, restore to Cepatwawasan Group Bhd the RM13,000,000 paid to Opti Temasek Sdn Bhd;
(f)that within 30 days of the date this order the defendants (the appellants), jointly and severally, restore to Cepatwawasan Group Bhd the RM3,000,000 paid to Sheikh Abdul Rahim bin Sheikh Hassan;
(g)that the plaintiff (the respondent) be at liberty to apply for the necessary directions for service of the order on the defendants (the appellants) and any extension of time for such service;
(h)that the plaintiff (the respondent) be awarded the costs of this application; and
(i)such further and/or other order as the court deems fit.
THE APPELLANTS' OPPOSITION TO THE ORIGINATING SUMMONS AT THE HIGH COURT
[8]The appellants (as the defendants at the court below) opposed the originating summons on three main grounds, namely:
(a)under s 360(1)(c) of the CMSA 2007
(b)only the Securities Commission (SC) can bring the present action, as s354s 354(8) of the CMSA 2007, the appellants contended that if the SC gives directions, t
