Beneficial owner of CDS account who allows another person to effect dealings in securities using the CDS account violates the law ― Hafiz Hassan

JANUARY 7 ― Section 29A of the Security Industry (Central Depositories) Act 1991 (SICDA) states as follows:

All dealings in respect of deposited securities shall only be effected by the beneficial owners of such deposited securities or an authorised nominee, as the case may be.

The general penalty is provided under section 51 which states as follows:

A person who contravenes or fails to comply with any of the provisions of this Act or of any regulations made thereunder shall be guilty of an offence under this Act and, where no penalty is expressly provided, shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding five years or to both.

In simple words, the offence under section 29A is indictable, that is, a charge may be preferred against the offender.

This is illustrated in a 2018 case before the Sessions Court at Kuala Lumpur where the offender/accused was charged for an offence under section 29A read together with section 51 of SICDA (Case No 62SC-9–03 of 2018). The charge reads as follows:

That you, between 14 October 2011 and 20 October 2011 at Bursa Malaysia Securities Berhad (Company No 635998-W), Exchange Square, Bukit Kewangan, 50200 Kuala Lumpur in the Federal Territory of Kuala Lumpur, as the beneficial owner of Central Depository System [CDS] account bearing number xxx-xxx-xxxxxxxxx (‘the said account’) maintained at [an investment bank] had allowed one [XYZ] to effect the acquisition of 1,000,000 units of [a limited company] (Company No xxxxxx] shares in the said account, and thereby committed an offence under section 29A of the Securities Industry (Central Depositories) Act 1991 (Act 453), and punishable under section 51 of the same Act.

As the charge above shows, the accused was alleged to have allowed another person [XYZ], who is the accused’s wife, to effect dealings in securities using the accused’s CDS account in violation of section 29A of SICDA.

On the same day the accused was charged, charges were also filed against two other persons, one of whom was the accused’s wife. She was preferred with four charges under s 188(2)(a) of the Capital Markets and Services Act 2007 (CMSA), and registered as Case No 62SC-(6&7)-03 of 2018.

As the charge above shows, the accused was alleged to have allowed another person [XYZ], who is the accused’s wife, to effect dealings in securities using the accused’s CDS account in violation of section 29A of SICDA. — Reuters pic

The four charges relate to her purchases of different lots of the company’s shares on four different dates during a seven-day period in April 2011, totaling one million shares in aggregate.

The prosecution against the accused was led by the Deputy Public Prosecutor, Securities Commission (SC). It went up for revision before High Court Judge Mohd Nazlan and reported as [2020] 9 MLJ 246.

The point is this: the SC has preferred charges for alleged offences under section 29A of SICDA.