Supermax’s Stanley Thai first to get jail sentence for insider trading, files appeal

This article first appeared in The Edge Malaysia Weekly, on November 27, 2017 - December 03, 2017.
-A +A

SUPERMAX Corp Bhd group managing director Datuk Seri Stanley Thai Kim Sim was sentenced last Friday by the Kuala Lumpur Sessions Court to a five-year jail term and RM5 million fine for insider trading offences committed when he was CEO of APL Industries Bhd (APLI), a company that was delisted from Bursa Malaysia in 2009.

This is the first time that a jail term has been imposed on a person for insider trading. It is also the harshest sentence passed down thus far by the court for the offence.

The Securities Commission Malaysia (SC) said Sessions Court judge Zulqarnain Hassan, in passing the sentence, had ruled that a deterrent sentence was warranted as insider trading offences were deemed more serious than conventional crimes, given the far-reaching effects on investor confidence and the public as a whole.

“Insider trading is a modern, white-collar economic crime. It is serious and is in a category or class of its own,” Zulqarnain said.

The conviction came after a full trial where 14 witnesses testified for the prosecution while four witnesses testified for the defence.

It is worth noting that the former executive chairman of Repco Holdings Bhd, Low Thiam Hock — or better known as Repco Low — was also sentenced to a five-year jail term and fine of RM5 million. His conviction was for share price manipulation.

Prior to that, in 2001, there was a case involving Kim Hin Industry Bhd managing director Chua Seng Huat, who pleaded guilty and was convicted of the offence of making improper use of information in dealing with Kim Hin’s securities trading.

Chua was fined RM1.2 million, in default of 12 months’ imprisonment.

More recently, on Sept 29 this year, the SC won an insider trading case against Lim Chiew, a former independent director of Magnum Corp Bhd.

The SC claimed that Lim had breached Section 89E (2) of the Securities Industry Act 1983 when he acquired 590,000 shares in Bolton Bhd on July 12, 1999, while in possession of material non-public information.

Lim was ordered to pay a sum of RM1.24 million, amounting to three times the profit he earned as a result of the insider trading.

In a statement last Friday, the SC said the Kuala Lumpur Sessions Court convicted Thai, and he was sentenced to a five-year jail term and a RM5 million fine, while former remisier Tiong Kiong Choon was sentenced to five years in jail and a RM10 million fine.

Insider trading offences, under Section 188 of the Capital Markets and Services Act 2007 (CMSA), carry a mandatory punishment of imprisonment not exceeding 10 years and a fine of not less than RM1 million.

“Thai was convicted for communicating non-public information between Oct 26, 2007 and Oct 29, 2007 to Tiong. Tiong was convicted on two counts of disposing [of] a total of 6.21 million APLI shares while in possession of the same non-public information via accounts belonging to his mother-in-law and his mother. At the time of the commission of the offence, Tiong was also a licensed intraday trader with a stockbroking company,” the SC’s statement read.

“The non-public information communicated from Thai to Tiong related to the audit adjustments proposed by APLI’s auditors, which resulted in APLI reporting a higher loss for the financial year ended June 30, 2007 (FY2007), as compared to the previously reported unaudited fourth-quarter results for the same financial year, and that APLI would be classified as a PN17 company.

“APLI made announcements to Bursa Malaysia about the audit adjustments and its classification as a PN17 company on Oct 31, 2007,” the SC explained.

At the time, APLI’s auditor had proposed to report higher losses amounting to RM21.1 million for FY2007, from the unaudited loss of RM4.5 million.

The prosecution by the SC can be traced back to December 2014, when the local capital market regulator, apart from charging Thai, also charged his wife Datin Seri Tan Bee Geok for communicating non-public information as APLI’s group executive director to her sister, Tan Bee Hong, between Oct 23 and Oct 31, 2007.

The SC said Bee Hong disposed of 350,000 APLI shares held in her account while in possession of the said non-public information on Oct 31, 2007.

There are no updates on the charges against Bee Hong and Bee Geok so far.

Supermax issued a statement late Friday, assuring that it is business as usual for the company after Thai’s conviction.

The group said a stay of execution for Thai’s punishment was granted by the court, and an appeal has been filed against the conviction and the sentencing.