What SC says

It was an opportune moment to speak with the chief regulator of the capital market last Thursday. It was close to the ending of the SC-Bursa Malaysia Corporate Governance Week 2010 and it was at a time when a flurry of high-profile governance issues seem to have hit our capital market. If that wasn’t enough, the SC had been in the news for the manner it has questioned journalists as witnesses in its probe of Kenmark Industrial Co (M) Bhd.

Below are excerpts of the interview with SC chairman Tan Sri Zarinah Anwar by StarBizWeek’s P Gunasegaram, Risen Jayaseelan and Tee Lin Say:

Tan Sri Zarinah Anwar ... ‘Close and effective cooperation among the key regulators are important elements in promoting the integrity of the capital market

The lack of custodial sentences

SBW: How would you describe the level of cooperation between the key regulators, namely Bursa Malaysia, the Companies Commission of Malaysia and the SC, especially in bringing to book those who do wrong in the capital market? Shouldn’t all the regulators work together in cases like Kenmark, where the entire capital market’s credibility is at stake?

Zarinah: Close and effective cooperation among the key regulators are important elements in promoting the integrity of the capital market. In this regard, the SC has always enjoyed close cooperation with the other regulators and authorities, and this extends beyond Bursa Malaysia and the Companies Commission of Malaysia, and includes Bank Negara and the police. We continue to work closely with key regulators especially in areas of mutual concern and supervision, and our efforts have always been coordinated.

Despite attempts by the SC to seek custodial sentences for perpetrators in the capital market, this has not happened for one reason or another. Why do you think this is so and what needs to happen in order to change this?

Our record shows we have a good conviction rate, whether after a full trial or through a plea of guilt. We have 87% success rate overall out of a total of 85 concluded cases. This shows that our investigations have been thorough. Once conviction is secured, sentencing is the purview of the courts. Our role is to put up a robust submission seeking a sentence which is commensurate with the offence committed, taking into account the impact on the market and the longer-term effects on investor confidence and the broader economy. In some cases, where sentences imposed are inadequate, we have filed appeals to the higher court. Presently, there are 13 appeals against sentences and nine against acquittal.

We have charged a total of 119 individuals since 2000. Cases against 85 individuals have been concluded, while 32 are still ongoing. Out of the 85, we have secured convictions against 74 individuals. Out of the 74, eleven have received custodial sentences.

In all these 13 appeals to the higher courts for a heavier sentence, am I right to say that there has been no custodial sentences, and it has been just fines?

In some cases of securities breaches, we feel that the nature of the offence, given its serious impact on the market and on Malaysia’s attractiveness as an investor destination, warrants custodial sentences. So where we feel the sentencing is inadequate, we make recommendations to the AG’s Chambers to file an appeal.

There is insufficient Penal Code prosecutions on directors. CBT for example. This is beyond the SC?

Yes, this is beyond the SC. In the course of our collaborative work with the police and other regulators, if we find there is an offence under the Penal Code, we will hand the case over to the police to investigate. Similarly if we find an offence under the Companies Act, then we will hand it over to the Companies Commission for them to investigate.

On Kenmark, Ishak and the questioning of journalists

SBW: In light of Kenmark’s case, investors have become even more spooked about China IPOs in our market. How do you plan to address this, considering that the SC’s plan is to attract foreign companies to list here?

Zarinah: We have implemented a robust framework for initial public offerings (IPOs) to ensure that investors are appropriately protected and we treat all IPOs, whether of local or foreign companies, in the same manner. Investment risk exists in all markets, whether developed or emerging. Moreover, both Bursa and the SC continue to monitor the compliance of post-listing obligations by listed companies. We continuously work towards strengthening our investor protection framework taking into account the profile of the market.

Earlier you mentioned about 19 people, including four reporters, being questioned in the investigation of Kenmark. There have been complaints in the manner the reporters were interviewed especially in the case of The Star. Even the lawyer has now been given notice to appear for questioning. What are your comments?

We all have to work in cooperation with each other. The SC has its statutory duty to protect investors and to make sure that the market operates in a fair, orderly and transparent manner. Otherwise, there will be no investor confidence. Here we are talking about corporate governance and enforcement, about the need to investigate wrongdoing and bring the culprits forward. How do we do that effectively if we do not have witnesses to come forward and help us prove the case against the offenders? Witnesses can come from anywhere, and we call witnesses whom we feel can help us, provide information about the case. And when these witnesses come, they are subjected to the same process of question and answer. In the course of statement taking, there are certain rules and guidelines that have to be observed.

Have you managed to speak to the directors, and Datuk Ishak?

I cannot talk about individual investigations. At the moment, we are actively investigating this case.



- by thestar.com.my