Securities Commission Malaysia (SC) recently filed a suit against Datin Chan Chui Mei, Deputy Managing Director, Stone Master Corporation Bhd (Stone Master) for allegedly causing wrongful loss to the listed corporation.
In the claim, the SC alleged that Stone Master had entered into several agency agreements with 23 foreign companies for the exclusive rights to market and promote, in Malaysia and Singapore, products belonging to the foreign companies. In consideration of the exclusive rights granted to it, Stone Master paid several local representatives of the 23 foreign companies a sum amounting to RM11.59 million in the form of a non-refundable deposit. The SC alleged that of the RM11.59 million, a sum of RM11.54 million was subsequently paid by the local representatives to Datin Chan’s personal account, in breach of sections 179 and 317A(1) of the Capital Markets and Services Act 2007 (CMSA).
Section 179 of the CMSA prohibits a person from using any manipulative device for the subscription, purchase or sale of any securities. Under section 317A, a director or an officer of a listed corporation shall not do anything with the intention of causing wrongful loss to the listed corporation.
In order to prevent dissipation of the RM11.54 million paid into Datin Chan’s banks accounts, the SC had, on 28 September 2016, obtained an injunction from the Kuala Lumpur High Court to restrain Datin Chan from dealing with the monies in her bank accounts up to the amount of RM11.54 million. In granting the injunction, the High Court also ordered her to provide a detailed account of the RM11.54 million which she had received.
In the suit, the SC is seeking various orders, including an order that Datin Chan:
|a.||contravened sections 179 and 317A of the CMSA;|
|b.||makes restitution to persons aggrieved by the contravention;|
|c.||pays the SC the said sum of RM11.54million, to be held in trust for Stone Master;|
|d.||be barred from being a director of a public-listed company for a period of five years.|
SC is also seeking a civil penalty for the sum of RM1 million against Chan.
The High Court has fixed 14 October 2016 for her to respond to the injunction application.
Well, that is quite heavy stuff and rather specific in amounts and payments made (except for the exact time line).
Not surprisingly, the share dropped like a stone (pun intended) after the news.
Bursa queried the company on the above, and the company replied in a rather disappointing way, without giving much specifics.
It also appears that Datin Chan stays on as an executive director, no announcement of her resignation has been made.
Would it not be much better if she steps down for the time being given the seriousness of the allegations, as long as the air is not cleared?