Securities Offenses: Capital Market Services Act 2007

• Chapter 8 discusses Securities Offenses including offenses dealing in securities under the Capital Market Services Act 2007.
• The chapter also examines designated securities, corners, penalties for contravention, other offenses, and compensation fund.
• The learning outcomes are to explain the offences dealings in securities and describe penalties for contravention.

Irregular Market Action

• Bursa Malaysia (BM) suspends counters if a share's market price appreciates by more than 30% from the previous trading session's closing price.
• BM also suspends counters if the share price drops by more than 30% from the closing price of the previous trading session.

Offences Dealing in Securities Under Capital Market Services Act 2007

• Issuing a statement containing false or misleading information that affects the price of securities in the stock market or induces the sale or purchase of securities is prohibited under Section 86 of the Securities Industry Act (SIA).
• It is prohibited to publish misleading, false, or deceptive statements or forecasts, or to conceal material facts dishonestly with fraudulent intent to induce others to deal in securities.
• An officer, agent, or employee of a corporation or stock exchange should not misuse specific confidential information acquired through their position to gain an advantage in securities dealings.
• Short selling is selling a security that the seller does not own at the time of the transaction; sellers engage in a sell transaction anticipating a price fall, intending to buy the securities at a lower price and profit from the difference.
• Stock market manipulation involves effecting transactions to raise, lower, or maintain securities prices to induce others to buy or sell, violating Section 85 of the SIA.
• False trading and market rigging involves activities intended to create a false appearance of active trading or the market for securities, violating Section 84 of the SIA.

Designated Securities

• A listed counter is declared as designated security if there is manipulation or excessive speculation.
• Actions usually involved in a designated Securitiy are imposing a margin of cover on all dealings.
• Restrictions of dealings in the counter to immediate or prompt bargains usually occurs.
• A stockbroking firm's trade is restricted in the counter such that outstanding contracts do not exceed 5% of the paid-up capital, or other percentage prescribed by Bursa Malaysia.
• Sales are prohibited unless the seller delivers the share script together with the duly executed transfer form at the time of entering into the sale contract.

Corners

• Corners occur when an individual or group buys large amounts of stock to control and manipulate the share price.
• Market manipulators lend share scripts to short sellers, then withdraw them to force the short sellers to buy at dictated prices due to an inability to obtain the scripts from the market.
• Corners are created when a single interest group acquires control of the affected securities, with such operations mostly being possible on the shares of companies with relatively small paid-up capital.
• Actions usually taken include to postpone the date of delivery of share scripts.
• Further postponement of the date of delivery of the share scripts usually occurs.
• A declaration is ordered if the share scripts are still undelivered on a given date, such contract shall be settled not by delivery but by payment of the difference between the buying or selling price for the contract and the fair settlement price fixed by the Bursa Malaysia.

Penalties for Contravention

• Under the Securities Industry Act, individuals committing offences involving improper dealings in securities may face a maximum fine of RM1 million, or ten years' imprisonment, or both upon conviction.