Bursa Malaysia Securities Bhd has publicly reprimanded and fined a commissioned dealer’s representative (CDR) of Kenanga Investment Bank Bhd RM100,000 for false trading and market manipulation in the trading of Axis Incorporated Bhd shares.
In a statement yesterday, Bursa Securities said it ordered that Lee Beng Huat be struck off the register, if he was still a registered person of the exchange.
The exchange said Lee had carried out false trading and market manipulation involving about 41 million Axis shares, out of the market turnover of 104 million Axis shares, for 87 trading days in 2006 and 2007.
It said during that period, Lee had dealt in Axis shares mainly through the accounts of 10 clients.
“He had entered buy and sell orders which were manipulative in nature and which had led to false or misleading appearance of active trading in, or market for, Axis shares and tantamount to stock market manipulations,” Bursa Securities said, adding that Lee had breached trading rules.
It said the dealing in Axis shares by Lee via the 10 accounts, which were the top buyers and sellers during the period, had several characteristics:
1. Entry of orders which were several bids lower than the last done price with no real intention to have the buy orders matched.
2. Lee also engaged in order splitting, entering a series of buy orders in succession through any one of the 10 accounts with the same price. These buy orders gave rise to and created an impression of continuous demand for Axis shares which led to false or misleading appearance of active demand/market for Axis shares.
3. The buy and sell orders executed in the 10 accounts:
• had cross-trades which were matched among each other for about 12 million units of Axis shares involving Lee as their common CDR;
• resulted in the buy and sell transactions of Axis shares in the 10 accounts without any change to the beneficial ownership of Axis shares (NCBO trades) and during the relevant period, there were 65 NCBO trades involving 385,800 units of Axis shares;
• were frequently matched with the corresponding orders keyed in by another CDR from another broker which indicated that there were some form of pre-arrangements for these trades to be matched;
• resulted in trades which were rolled over periodically with the same or almost the same block of Axis shares which gave rise to the manipulative trading activities; and
• had trades which were subsequently amended to other clients’ accounts resulting in a change of the original party to the contract which is not permitted.
Bursa Securities said Lee, by engaging in the manipulations, managed to sell about 72% of the sell orders (40.98 million out of 56.67 million units of sell orders entered for the 10 accounts) and bought about 55% of the buy orders (41.6 million out of 76.14 million units of the 10 accounts’ buy orders).
It said the higher volume and percentage of the buy orders, which were subsequently cancelled and/or lapsed due to the orders being lower than the last done price resulting in lower percentage of buy orders matched, gave an impression of and created an inflated demand for Axis shares.
This, it said, led to a misleading appearance of an active market for Axis shares.
Bursa Securities said Lee had failed to take heed of the concerns raised by the exchange on his irregular trading activities in Axis shares in the 10 accounts but had continued to trade in the irregular and manipulative manner.
This article appeared in The Edge Financial Daily, July 9, 2010.
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