Bursa Malaysia Reprimands CLSA Securities Trader
BURSA MALAYSIA SECURITIES REPRIMANDS AND IMPOSES TRAINING REQUIREMENT ON MOHAMED KAMAL BIN MOHD RIDZAM DEVA FROM CLSA SECURITIES MALAYSIA SDN BHD FOR VIOLATION OF RULES
1. Bursa Malaysia Securities Berhad (Bursa Securities) publicly reprimands Mohamed Kamal Bin Mohd Ridzam Deva (Mohd Kamal) and orders him to undergo training programme relating to professional conduct of duties of Dealer’s Representatives. Mohd Kamal, a Salaried Dealer’s Representative (SDR) with CLSA Securities Malaysia Sdn Bhd (CLSA), violated Rules of Bursa Securities (Rules) which led to the sharp increase of the closing price for the shares of Kuala Lumpur Kepong Bhd (KLK) on 5 October 2009.
2. Mohd Kamal, at the material time of the breach, violated Rules 1302.1(1)(g) and 404.3(1)(b) & (c) of the Rules of Bursa Securities (the breach).
Rules 1302.1(1)(g) and 404.3(1)(b) & (c) of the Rules of Bursa Securities (“the Rules”) state, amongst others, that Dealer’s Representatives (DRs) shall :-
* perform their duties efficiently, honestly and fairly; and
* act honestly and in the best interest of their clients; and conduct their business in a manner which contributes to the maintenance of a fair and orderly market.
3. In relation to Mohd Kamal’s dealing in securities for an institutional client of CLSA for KLK shares on 5 October 2009, he failed to carry out his duties efficiently and acted in a manner which did not contribute to the maintenance of a fair and orderly market as he had:
1. entered a buy order which is a Market Order for 150,000 units of KLK shares (Buy Market Order) during the Pre-Closing phase [which is an order accumulation period from 4.45 p.m. to 4.50 p.m. when orders can be entered, modified and deleted but no matching – please refer to the Addendum for the details of the trading phases]; and
2. failed to closely monitor the Buy Market Order during the Pre-Closing phase from the time he entered the Buy Market Order to the time when the Buy Market Order was matched,
resulting in the closing price for KLK shares to be recorded at RM17.00, a RM3.30 increase or an almost 25% upwards movement from RM13.70, which was the last traded price prior to the Pre-Closing phase. This had caused the FBMKLCI to increase by 5.84 points from 1210.61 to 1216.45.
4. As Mohd Kamal’s buy order of 150,000 units of KLK shares was a Market Order which could be matched at any price within the 30% upper/lower limit price, Mohd Kamal should have closely monitored his Buy Market Order during the Pre-Closing phase so as to ensure that the Buy Market Order would not be matched at a price which could:-
1. give rise to a substantial price movement as against the last traded price done before the Pre-Closing phase; and
2. result in the movement to the FBMKLCI as KLK shares is a component stock for FBMKLCI that made up of about 2% of the index weightage.
As a SDR, Mohd Kamal was aware of the possibility of his Buy Market Order being matched at RM17.80 (as this was the highest potential match price displayed) from the time he entered the Buy Market Order until the end of the Pre-Closing phase. This is particularly so as he would/should have noticed that the total sell quantity on board throughout the Pre-Closing phase was insufficient to meet his Buy Market Order.
The insufficient quantity of sell order to be matched against the Market Order had caused an imbalance for the buy side of the Market Order and this should have alerted Mohd Kamal to be cautious and exercise due care and diligence in his execution of order and monitoring of the unmatched order during the Pre-Closing phase. Mohd Kamal’s Buy Market Order was maintained in the order book without any change, even up to the time when the orders could still be withdrawn resulting in his Buy Market Order being matched at RM17.00.
5. As a SDR, it is Mohd Kamal’s duty to use his best endeavour to obtain the best executable price for the client and to carry out the business of dealing in securities in a manner which contributes to the maintenance of a fair and orderly market. This requires him to take reasonable steps to ensure that the buy order of the client entered by him during the Pre-Closing phase would not have ended up in the execution at a price which was far apart from the last done price prior to the Pre-Closing phase as it would result in the client having to incur high cost for the buy order given for execution and causes significant impact to the price and FBMKLCI.
6. A more severe penalty including imposition of fine and suspension/striking off from the Register would have been imposed on Mohd Kamal had he been found to have entered the Buy Market Order with the intention to create a false or misleading appearance with respect to the market for, or the price of, KLK shares or manipulate the market.
7. Bursa Securities emphasizes and reminds all licensed persons including DRs that they must act responsibly as they have obligations under the Rules to conduct their business not only in the best interest of their clients but also in the best interest and for the integrity of the market. The DRs must:-
* exercise proper skill, care and diligence to ensure that they do not enter orders that could lead to artificial increase/fluctuation in trading volume and the shares price;
* diligently monitor the orders entered to ensure that the orders entered and matched do not lead to artificial increase/fluctuation in the shares price;
* carry out their duties as a Registered Person efficiently and in a manner which contributes to the maintenance of a fair and orderly market and to ensure a fair dealing in the observance of the professional standard of integrity; and
* equip themselves with in-depth knowledge and technical skills relating to the trading phases and mechanisms of the Bursa Trade Securities (BTS).
9. The need to maintain a fair and orderly market is imperative and Bursa Securities will not tolerate any acts or omissions which might threaten/affect the integrity of the market that Bursa Securities operates. Bursa Securities will not hesitate to take the appropriate action including imposing a fine and/or suspension / strike off a person from the Register and bar the person from trading on or through the stock market of the Exchange for any violation of rules which hampers the maintenance of a fair and orderly market.