JANUARY 14 ― Malaysia was the only severely affected country which did not adopt an International Monetary Fund (IMF) programme during the Asian financial crisis that began with the economic meltdown in Thailand in July 1997.

The Philippines too did not accept an IMF programme to respond to the crisis, but the country was not severely affected by the crisis.

Much has been written on the Malaysian responses. While these might have been motivated less by principle and more by political expedience and egocentricity of then prime minister Dr Mahathir Mohamad (Ross P Buckley and Sarala M Fitzgerald, “An Assessment of Malaysia’s Response to the IMF During the Asian Economic Crisis”, 2004), the country’s policy response to the crisis has been described as ‘the best story in the region’. (Prema-Chandra Athukorala, Crisis and Recovery in Malaysia: The Role of Capital Controls, 2001)

Little, however, has been written on Malaysia’s legislative measures in response to the crisis, except perhaps the Danaharta Act 1998. The Act established Pengurusan Danaharta Nasional Berhad (Danaharta), the national asset management company (AMC), in addition to a debt restructuring body and a recapitalisation vehicle, in response to the growing nonperforming loan (NPL) problem in 1998.

The Act was the legal authority through which the government gave the AMC the mandate to remove NPLs from the financial system and achieve maximum recovery value. (Mallory Dreyer, “Malaysia: Pengurusan Danaharta Nasional Berhad”, Journal of Financial Crises, 2021).

The Act was passed by the Dewan Rakyat in July 1998, a year after the crisis began.

The Dewan Rakyat having been adjourned sine die on August 4, 1998, Dr Mahathir then called for a 2-day special sitting of the House (September 29 and 30, 1998) during which a slew of legislative bills was introduced.

One of the Bills was the Securities Industry (Central Depositories) Bill 1998. The bill proposed a raft of amendments to the principal Act, that is, the Securities Industry (Central Depositories) Act 1991 (SICDA). At the second reading of the bill, Dr Mahathir said, among others:

“Saya mohon memperkenalkan pindaan-pindaan dalam Akta Perindustrian Sekuriti (Depositori Pusat) 1991 ini. Krisis ekonomi yang melanda negara telah menunjukkan pelbagai kelemahan dan kekurangan dalam industri sekuriti yang memerlukan langkah-langkah untuk mengatasinya bagi memulihkan kembali keyakinan terhadap pasaran modal di Malaysia.

Antara kelemahan-kelemahan yang telah dikenal pasti adalah seperti berikut:

(i) dagangan saham dijalankan dengan begitu mudah tanpa dizahirkan identiti pemunya benefisial (beneficial owner). Pada masa yang sama ini menyebabkan naik turun harga saham tanpa sebab dan kegiatan memanipulasi harga-harga saham secara artificial. Oleh sebab identiti pembeli dan penjual disembunyikan oleh nominee, maka perniagaan saham menjadi kabur dan tidak telus. Pemilik saham yang lain, bahkan syarikat berkenaan mengalami tekanan dan kerugian yang ketara. Pasaran yang tidak diiktiraf dapat ditubuhkan di luar negara yang meraih keuntungan besar daripada manipulasi harga saham.”

Dr Mahathir then went on to explain in details the proposed amendments:

“Pindaan-pindaan penting yang diperkenalkan dalam Rang Undang-Undang Perindustrian Sekuriti (Depositori Pusat) (Pindaan) 1998 mengandungi 28 fasal dan meliputi perkara-perkara berikut:

(i) Takrif-takrif baru - takrif-takrif baru “nominee” diberi kuasa (authorised nominee) dan pemunya benefisial (beneficial owner) diperkenalkan melalui fasal 2 bagi memberi kesan ke atas kehendak undang-undang bahawa semua pegangan saham dan peniagaan sekuriti mestilah dibuat atas nama pemunya benefisial ataupun nominee diberi kuasa.

Nominee diberi kuasa ditakrifkan sebagai orang yang diberi kuasa untuk bertindak sebagai nominee seperti yang dinyatakan dalam kaedah-kaedah depositori pusat. Ini termasuklah entiti yang menjalankan aktiviti sah yang menyumbang kepada perniagaan broker saham dan bank-bank yang mengambil saham sebagai kolateral bagi kredit atau pembiayaan margin (margin financing) yang diperuntukkan oleh mereka dan syarikat-syarikat nominee ataupun syarikat-syarikat amanah yang digunakan bagi saham amanah yang diluluskan, skim pelaburan kolektif (collective investment scheme) dan dana yang diluluskan (approved fund).

(ii) …

(iii) …

(iv) Larangan bagi nominee memegang dan berniaga sekuriti - Fasal 13 bertujuan meminda seksyen 25 bagi memasukkan subseksyen baru (4), (5) dan (6). Pada dasamya semua akaun sekuriti yang dibuka dengan depositori pusat mestilah atas nama pemunya benefisial atau nominee diberi kuasa (authorised nominee). Apabila akaun sekuriti tersebut dibuka sesuatu diklarasi perlu dibuat oleh orang yang membuka akaun itu kepada depositori pusat. Deklarasi palsu adalah satu kesalahan.

Fasal 14 memasukkan seksyen baru 25A yang memperuntukkan bahawa apabila nomini diberi kuasa (authorised nominee) membuka akaun sekuriti mereka adalah dikehendaki memegang sekuriti-sekuriti telah dideposit bagi satu pemunya benefisial berkenaan dengan setiap akaun sekuriti yang dibuka. Fasal 17 bertujuan memasukkan seksyen baru 29A yang memperuntukkan bahawa semua dagangan berkenaan dengan sekuriti telah deposit hanya boleh dijalankan oleh pemunya benefisial sekuriti-sekuriti telah deposit (deposited securities) atau nominee diberi kuasa.

Dr Mahathir concluded his speech as follow:

“Cadangan pindaan kepada Akta berkenaan adalah perlu bagi menyokong tindakan-tindakan secara pentadbiran yang telah diambil oleh BSKL, SCANS dan MCD. Langkah tidak mengizinkan kegiatan nominee adalah bertujuan untuk memastikan ketelusan dalam urusniaga sekuriti di pasaran saham negara dan membanteras urusniaga saham-saham Malaysia di Bursa Saham yang tidak diiktiraf.

Matlamat akhir pada pindaan tersebut adalah untuk mengembalikan semula keyakinan pelabur-pelabur terhadap pasaran saham negara.”

Again here, as I have done before, I share the legislative history of section 25 and 29A SICDA for good reasons.

Legislative history has a role in interpreting and understanding the context of a legal provision. It forms the backdrop and the foundation of the understanding of the legislation or provision. As such, it is always useful to narrate the legislative history and genesis of a legal provision.

The above helps to explain why the Securities Commission of Malaysia (SC) on January 6 issued a statement that it would be speaking to MACC chief Tan Sri Azam Baki after he admitted that his brother had used his name to purchase shares.

“The SC will be in touch with the parties involved, including Tan Sri Azam Baki, for an explanation and to verify statements made, as well as gather any relevant evidence,” it said.

Securities Commission of Malaysia (SC) on January 6 issued a statement that it would be speaking to MACC chief Tan Sri Azam Baki after he admitted that his brother had used his name to purchase shares. — Picture by Shafwan Zaidon
Securities Commission of Malaysia (SC) on January 6 issued a statement that it would be speaking to MACC chief Tan Sri Azam Baki after he admitted that his brother had used his name to purchase shares. — Picture by Shafwan Zaidon

The SC pointed out that under Section 25 SICDA, every security account opened with a central depository must be in the name of the beneficial owner of the deposited securities or in the name of an authorised nominee.

“In addition, section 29A of SICDA stipulates that all dealings in securities shall be effected only by the beneficial owner of the securities or an authorised nominee,” the SC added.

In a latest statement, the SC would also be calling up the brother of Azam. According to a Malay Mail report, Nasir Baki was set to give his statement to the regulatory body soon as to why and whether he chose to use his brother’s share trading account to buy shares in 2015, since it was understood that he has his own trading account.

As rightly reported by Malay Mail, under section 25 SICDA, every securities account opened with a central depository must be in the name of the beneficial owner of the deposited securities or in the name of an authorised nominee.

Section 29A SICDA also stipulates that all dealings in securities shall be effected only by the beneficial owner of the securities or an authorised nominee.

The law aims to prevent market manipulation and insider trading since a person with inside information could open multiple accounts and trade and share profits with account holders.

Malay Mail is also spot on in reporting that Azam’s admission of allowing Nasir to use his share trading account to buy millions of shares in two public-listed companies in 2015 could on the face of it constitute offences under sections 25 (as against Nasir) and 29A (as against Azam).

In legal parlance, there are reasonable suspicions to commence investigations for offences under the said sections.

So, let the SC complete its investigations.

* This is the personal opinion of the writer or organisation and does not necessarily represent the views of Malay Mail.