EPISODE 28: Corporate raiding par excellence (part 1)

ARCHIVES 2012

By MT Webmaster On Apr 25, 2012

What I do want to talk about is regarding two people in the Bursa — Wong Kay Yong, the Head of Corporate Surveillance & Governance, and Ho Kwok Piow, the Head of Corporate Surveillance Department Regulation — and how they are ripping off the public. Wong and Ho could best be described as corporate blackmailers and hijackers. What they do is to look for companies in distress and hold them to ransom. The owners of these companies are then squeezed and forced to sell off their interests at fire-sale prices.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

HK regulator looking at criminal liability for IPO sponsors

(Free Malaysia Today/Reuters) – The head of Hong Kong’s market watchdog said today that it is considering making investment bankers face the prospect of jail if they are found to have been negligent in their listing work. Securities and Futures Commission chief executive Ashley Alder told Reuters that a forthcoming consultation paper on initial public offering sponsors would look at making them hold criminal and civil liability for the contents of listing prospectuses. “We are looking at both,” Alder told Reuters on the sidelines of the APREA Property Leaders Forum in Hong Kong.

Reuters reported last week that the SFC would consider making sponsors liable for the contents of listing prospectuses, but it was not known whether this would include making them criminally culpable for rule breaches. IPO sponsors, typically banks or corporate finance houses, prepare a company’s listing documents and perform due diligence to ensure they comply with Hong Kong’s listing rules. The SFC wants them to face tougher rules after a number of mainland Chinese companies that listed in Hong Kong ran into trouble shortly after going public.

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Securities and Futures Commission

The Securities and Futures Commission (SFC) of Hong Kong is the independent statutory body charged with regulating the securities and futures markets in Hong Kong. The SFC is responsible for fostering an orderly securities and futures market, to protect investors and to help promote Hong Kong as an international financial centre and a key financial market in China. Even though it is consider as a branch of the government, it is run independently under the authorisation of the laws relating to Securities and Futures.

SFC: History

The SFC was created in 1989 in response to the stock market crash of October 1987. In 1997, following the Asian financial crisis, the regulatory framework was further improved. A comprehensive Securities and Futures Ordinance (SFO) was implemented in 2003, which expanded the SFC’s regulatory functions and powers.

The SFC is one of four regulatory organisations that make up financial regulators in Hong Kong, one of the major financial centres in the world. The others are the Hong Kong Monetary Authority, Office of the Commissioner of Insurance and the Mandatory Provident Fund Schemes Authority. The SFC is responsible for securities and futures markets including the Hong Kong Stock Exchange, the seventh largest Stock Exchange in the world.

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Bursa Malaysia: History

Bursa Malaysia, previously known as Kuala Lumpur Stock Exchange (KLSE, Bursa Saham Kuala Lumpur in Malay) dates back to 1930 when the Singapore Stockbrokers’ Association was set up as a formal organisation dealing in securities in Malaya. The first formal securities business organisation in Malaysia was the Singapore Stockbrokers’ Association, established in 1930. It was re-registered as the Malayan Stockbrokers’ Association in 1937. The Malayan Stock Exchange was established in 1960 and the public trading of shares commenced. The board system had trading rooms in Singapore and Kuala Lumpur, linked by direct telephone lines.

In 1964, the Stock Exchange of Malaysia was established. With the secession of Singapore from Malaysia in 1965, the Stock Exchange of Malaysia became known as the Stock Exchange of Malaysia and Singapore. In 1973, currency inter-changeability between Malaysia and Singapore ceased, and the Stock Exchange of Malaysia and Singapore was divided into the Kuala Lumpur Stock Exchange Berhad and the Stock Exchange of Singapore. The Kuala Lumpur Stock Exchange, which was incorporated on 14 December 1976 as a company limited by guarantee, took over the operations of the Kuala Lumpur Stock Exchange Berhad in the same year.

On 14 April 2004, following the demutualisation exercise, the Kuala Lumpur Stock Exchange was renamed Bursa Malaysia Berhad, the purpose of which was to enhance competitive position and to respond to global trends in the exchange sector by making themselves more customer-driven and market-oriented. It consisted of a Main Board, a Second Board and MESDAQ with total market capitalisation of MYR700 billion (US$189 billion).

Bursa Malaysia has since then focused on various initiatives aimed at improving its product and service offerings, increasing the liquidity and velocity of its markets, improving the efficiency of its businesses and achieving economies of scale in its operations. On 18 March 2005, Bursa Malaysia was listed on the Main Board of Bursa Malaysia Securities Berhad with a 17% or RM0.50 premium over its retail price of RM3.00.

Source: Bursa Malaysia’s History Page – Data updated as at 9 March 2010

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Bursa Malaysia: Structure

The wholly owned subsidiaries of Bursa Malaysia own and operate the various businesses, as set out below:

1. Bursa Malaysia Securities Bhd – Provide, operate and maintain securities exchange.

2. Bursa Malaysia Derivatives Bhd – Provide, operate and maintain a futures and options exchange.

3. Labuan International Financial Exchange Inc. – Provide, operate and maintain offshore financial exchange.

4. Bursa Malaysia Bonds Sdn Bhd – Provide, operate and maintain registered electronic facility for secondary bond market.

5. Bursa Malaysia Securities Clearing Sdn Bhd – Provide, operate and maintain a clearing house for the securities exchange.

6. Bursa Malaysia Derivatives Clearing Bhd – Provide, operate and maintain a clearing house for the futures and options exchange.

7. Bursa Malaysia Depository Sdn Bhd – Provide, operate and maintain a central depository.

8. Bursa Malaysia Depository Nominees Sdn Bhd – Act as a nominee for the central depository and receive securities on deposit for safe-custody or management.

9. Bursa Malaysia Information Sdn Bhd – Provide and disseminate prices and other information relating to securities quoted on exchanges within the group.

10. Bursa Malaysia Islamic Services Sdn Bhd – Operate all Islamic Markets businesses and activities initiated under Bursa Malaysia.

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I thought I would start part 1 of this expose by giving you a bit of background and history regarding Bursa Malaysia and Hong Kong’s Securities and Futures Commission so that you can see the difference between the two. As you may have noticed, the Bursa started as a stockbrokers’ association in 1930 and eventually transformed into a stock exchange in 1960 and, today, it is a profit-motivated listed company.

In Singapore, the Monetary Authority of Singapore (MAS) supervises the securities industry. The day-to-day supervision of the market is left to the Singapore Exchange (SGX) though. In Hong Kong, the Securities and Futures Commission (SFC) plays this role. The question is: is Malaysia’s Bursa the same as the SFC in Hong Kong and the MAS-SGX in Singapore, that plays a regulatory role and keeps the ‘market players’ in line, or is the Bursa about making money and is itself a market player?

But that is not really what I want to talk about. What I do want to talk about is regarding two people in the Bursa — Wong Kay Yong, the Head of Corporate Surveillance & Governance, and Ho Kwok Piow, the Head of Corporate Surveillance Department Regulation — and how they are ripping off the public.

Wong and Ho could best be described as corporate blackmailers and hijackers. What they do is to look for companies in distress and hold them to ransom. The owners of these companies are then squeezed and forced to sell off their interests at fire-sale prices.

A ‘white knight’ then waltzes in and picks up these shares at below market value. Of course, in the same process, they would make tons of money, with a huge kickback to Wong and Ho.

Many have become victims to these ‘corporate raiders’ and in part 2 we will go into the details — so stayed tuned.