Press Conference Statement (2) by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Penang on Wednesday, 25th April 1990 at 11 a.m.
Call for an independent inquiry as to whether KLSE Committee Members had abused their position and office in withholding the new Bank Negara directive limiting margin for three weeks before informing all stockbroking companies
The Malaysian stock market is going through the doldrums. One reason is the lack of confidence in the Kuala Lumpur Stock Exchange, not only with regard to the unresolved missing scrips problem, but in the leadership of the KLSE.
In this connection, I call for an independent inquiry as to whether the KLSE Committee Members had abused their positions and office in withholding for three weeks from stockbroking companies the new Bank Negara directive limiting margin trading.
Bank Negara sent an official directive to the KLSE on 16th March 1990, laying down new conditions restricting margin trading for stockbroking companies, such as
(i) the type of collaterals which may be placed by clients to secure their margin financing facilities;
(ii) a ban or margin financing facilities for trading on foreign stock exchange;
(iii) limit on the amount of margin financing;
(iv) maximum tenure of three months for margin financing facility;
(v) parties and persons who are probhibited from obtaining margin trading;
(vi) prohibition on under-capitalised stockbroking firms from granting margin financing facilities. Only those stockbroking companies which have $5 million sharehloders’ funds could grant margin financing facilities to their clients.
(vii) internal guidelines and procedures by stockbroking companies in processing applications for margin financing, such as credit rating, documentation and monitoring of clients;
(viii) surprise check jointly by KLSE and Bank Negara on stockbroking companies to ensure compliance with these new conditions on margin trading;
(ix) Complusory regular report by stockbroking companies to Bank Negara on the margin financing facilities provided by them.
(x) Date the new conditions on margin trading is to come into effect.
In this letter of March 16, bank Negara asked the KLSE Executive Chairman, Nik Mohamed Din Nik Yusoff, to inform all the stockbroking companies “as soon as possible” of the new conditions on margin trading, which were to take effect in a month’s time from April 15, 1990.
This was not done. I have received complaints that the KLSE did not inform the stockbroking companies under KLSE of the new Bank Negara conditions on margin trading until three weeks after receipt of the Bank Negara directive, i.e. around 8th or 9th or April.
I have also received complaints that handful of stockbroking companies which were privy to the Bank Negara directive of March 16were able to take unfair advantage of this information to clear their margin tradings well before the directive was made known to all other members of the KLSE.
There should be a full and independent inquiry as to whether KLSE committee members had abused their position and office by withholding for three weeks the new bank Negara directive limiting margin trading before informing all stickbroking companies.
A responsible KLSE Executive Chairman would have circulated the new directive from bank Negara laying down new conditions on margin trading on the very same day of receipt of the letter of Bank Negara on March 16.