It can now prosecute those who intentionally cause ‘wrongful loss’
Source: Star Biz
KUALA LUMPUR: The Securities Commission (SC) is investigating cases involving breaches of fiduciary duties of directors under new powers given to the regulator under Section 317A of the Capital Markets and Services Act (CMSA).
Section 317A, which came into force only on April 1, 2010, states that the SC can prosecute a director or an officer of a listed company that has done something with the intention of causing wrongful loss to his company.
SC chairman Tan Sri Zarinah Anwar told StarBiz that while no charge had been made yet under this new section, investigations were ongoing and it would “depend very much on the outcome of the investigations.”
“We have to get all the facts of the case before we take appropriate action.
“In the past, we only had power to deal with offences that were related to securities, now we can deal with offences related to dishonest conduct of directors,” Zarinah said.
She added that as an example, cases involving questionable related-party transactions where assets were injected into the company at inflated prices or sold to directors at depressed prices, would fall under Section 317A.
The section carries a punishment of a fine of up to RM10mil and imprisonment of up to 10 years.
According to a corporate lawyer, Section 317A covers instances, which are similar to directors’ fiduciary duties that come under Section 132 of the Companies Act.
The enforcement of the Companies Act, however, comes under the powers of the Companies Commission of Malaysia (SSM).
However there have not been any prosecutions of directors by the SSM under this section. And no director has been sentenced to imprisonment under the Companies Act.
“The new amendment to the CMSA gives the SC new teeth,” said the corporate lawyer, who pointed out that sentencing was ultimately in the hands of the courts.
The new section 317A of the Capital Markets and Services Act reads as follows:
Prohibited conduct of director or officer of a listed corporation
317A. (1) A director or an officer of a listed corporation or any of its related corporations shall not do or cause anyone to do anything with the intention of causing wrongful loss to the listed corporation or any of its related corporations irrespective of whether the conduct causes actual wrongful loss.
(2) This section is in addition to and not in derogation of any law relating to the duties or liabilities of directors or officers of a listed corporation.
(3) A person who contravenes subsection (1) commits an offence and shall, on conviction, be punished with imprisonment for a term not exceeding ten years and be liable to a fine not exceeding ten million ringgit.
(4) For the purpose of this section—
―"director" includes a person who is a director, chief executive officer, chief operating officer, chief financial controller or any other person primarily responsible for the operations or financial management of a company, by whatever name called;
―"property" has the same meaning as in section 138;
―"wrongful loss" means loss of property by unlawful means to which the person losing is legally entitled.
Amended by Act