PROHIBITED CONDUCT (regulated by Securities Commission)

1. Main types of prohibited conduct (according to CMSA 2007)

1.1. False trading (S175 (1))

1.2. Market rigging transactions (S175 (2))

1.3. Stock market manipulation (S176)

1.4. False or misleading statements (S177)

1.5. Fraudulently inducing persons to deal in securities (S178)

1.6. Use of manipulative and deceptive devices (S179)

1.7. Dissemination of information about illegal transactions (S181)

1.8. Insider trading (S188)

1.9. Short selling (S98)

2. False trading & market rigging

2.1. False trading and market rigging are acts in which a person creates a false impression of the volume of securities exchange trading done

2.2. This can be done through placing matching buy and sell orders, where the securities' ultimate owner remains the same.

2.3. SECTION :

2.3.1. SECTION 175. (1) & SECTION 202 OF CMSA 2007 explained about false trading in securities and derivatives

2.3.2. SECTION 204 OF CMSA 2007explained about dissemination of information about false trading

2.3.3. SECTION175. (2) OF CMSA 2007 explain about market rigging

2.3.4. SECTION 175. (3)(a)(b) and (c) OF CMSA 2007 explain about a provision that provides, in simple terms, how a person is deemed to be involved in false trading.

2.3.4.1. SECTION 146 OF LABUAN FINANCIAL SERVICES AND SECURITIES ACT 2010 explain about creation of false or misleading market.

2.4. Punishment

2.4.1. imprisonment for a term not exceeding ten years

2.4.2. fine of not less than one million ringgit

3. EXAMPLE CASES LISTED IN THE SLIDE

3.1. Malaysia

3.1.1. Securities Commission Malaysia vs 7 defendants (Kenneth Vun @ Vun Yun Liun, Teng Choo Teik, Simon Ling Siang Hock, Lye Pei Ling, Chuah Hock Soon, Choong Lay Ti, Gui Boon Huat)

3.1.2. Huatah Sdn Bhd v Yap Chee Kian and Ors (KLHC OS No. WA-24-NCC-453-10/2017)

3.1.3. Securities Commission Malaysia vs 7 defendants (Ng Wai Hong (Hwang-DBS Securities Berhad), Lo Ga Lung, Toh Pik Chai, Ling Pik Ngieh, Ng Soo Tian, Chan Kok and Chai Shou We)

3.2. Hong Kong

3.2.1. Securities and Future Commission vs Ms Samantha Keung Wai Fun, Ms Wu Hsiu Jung and Mr Chen Kuo Chen

4. Short Selling

4.1. A sale of securities where the seller does not have presently exercisable and unconditional right to vest the securities in a purchaser at the time of the sale.

4.2. not exceed 12 months from the trade date.

4.3. Types of Short Selling

4.3.1. Tradisional/ Covered Short Selling

4.3.1.1. with borrowed securities

4.3.2. Naked Short Selling-

4.3.2.1. without borrowed securities

4.3.3. Permitted Short Selling Transaction

4.3.4. Regulated Short Selling (RSS)

4.3.5. Intraday Short Selling (IDSS)

4.4. Regulation (Section)

4.4.1. SECTION 98(1)(a)(b) OF CMSA 2007 explained the prohibition on selling securities that are not owned.

4.4.2. SECTION 2 OF CMSA 2007, an individual who contravenes subsection (1) is guilty of an offense and is liable on indictment for a penalty not exceeding five million ringgit or incarceration for a period not exceeding ten years or both.

4.5. Criminal Prosecution

4.5.1. Securities Commission vs Ahmad Shkri

5. Process of Short Selling

5.1. 1. Borrow stock from broker

5.2. 2. Sells that stock at market price.

5.3. 3. Buy back that stock at a lower price.

6. PRO and CONS of short selling

6.1. PRO

6.1.1. Making a trade profitable if the price of stock go down.

6.1.2. Reduce volatility and increase liquidity in the market

6.2. CONS

6.2.1. Unlimited potential risk.

6.2.1.1. Investor and portfolio manager may use it as hedge against the downside risk of a long position in the same security or a related one.

6.2.2. The opportunity cost of the capital tied up due to margin requirements