by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lint Kit Siang, in Petalinq Jaya on Friday, 16th July 1993:
DAP calls on Finance Minister, Anwar- Ibrahim to introduce amendments to the Securities Industry Act in the forthcoming Parliamentary meeting to prevent a recurrence of the Union Paper scandal and ensure an orderly, fair and transparent KLSE instead of operating like a casino
The Union Paper Holdings Bhd. (UPHB) shares scandal would not have occurred if the Kuala Lumpur Stock Exchange (KLSE) and the Securities Commission had been effective in ensuring an orderly, fair and transparent KLSE instead of allowing the KLSE to operate like a casino.
The KLSE enjoyed the biggest bull run in its history until last, month, and is already the largest stock market in Asean with a market capitalisation in excess of RM 300 billion.
It had overtaken the New York Stock Exchange and the Tokyo Stock Exchange, the two largest bourses in the world, in terms of daily turnover, with a record 1.04 billion shares traded on a single day on April 15 this year.
The question is whether this is the performance of a strong and healthy stock market to raise funds in the process of capital formation, for economic growth and development, or that of a casino where corporate fraud and market abuses reigned supreme?
Union Paper, a joss paper, toilet paper- and wrapping paper processing outfit, sky-rocketted in the KLSE from a low of RM1.73 early this year to RM23.00 on June 14, and crashing down to RM4.72 on 25th June. Is this the characteristic of a strong and healthy stock market or of a casino?
The Government must” take a serious view of the Union Paper shares scandal, for it highlights not only the failure of the Kuala Lumpur Stock Exchange and the Securities Commission, but the Securities Industry Act as well.
For this reason, DAP calls on the Finance Minister, Datuk Seri Anwar Ibrahim to introduce amendments to the Securities Industry Act in the forthcoming Parliamentary meeting to prevent a recurrence of the Union Paper shares scandal in the country, ensure that the KLSE does not become the biggest casino in Asean and establish an orderly, fair and transparent marketplace in the Malaysian stock exchange.
Nik Din has compromised and undermined his position as KLSE Chairman to regulate the stock exchange when he became an apologist, for the 12 ‘short-sellers’ who caused the KLSE to institute buying-in of 3.315 million Union Paper shares by saying they are mere ‘-defaulting sellers”
The attempt by the .KLSE executive chairman, Datuk Nik Mo-named Din Nik Yusuff at his two-hour press conference on Tuesday to deny that the Union Paper shares scandal was caused by massive short-selling, is the height of irresponsibility – not only because the Union Paper shares scandal had brought, about the collapse of the stock market, but also because it had destroyed the hard-earned savings of small investors in the country.
By his stance, Nik Din has made a total mockery of the Securities Industries Act which made short-selling illegal and an offence punishable with a RM5,000 fine or to a two years’ jail or both.
Section 41 of the Securities Industry Act 1983 on ‘short-selling’ states that
“a person shall not sell securities to a purchaser unless, at the time when he sells them –
(a) he has or, where he is selling as agent, his principal has; or
(b) he believes on reasonable grounds that he has, or where he is selling as agent,, his principal has, a presently exercisable and unconditional right to vest the securities in the purchaser.”
At the press conference, Nik Din gave the astonishing explanation that the KLSE had to institute a buying-in of 3.315 million Union Paper shares at RM15.20 per share because there were 12 “defaulting sellers” – strenouslv denying that they were “short-sellers”.
Nik Din even explained that the 3.315 million Union Paper shares could have defaulted because “the clients are away arid the scrip could not be delivered on that day”.
By coming to the defence and becoming an apologist, of the 12 “short, sellers”, Nik Din has completely compromised and undermined his position as a regulator of the stock exchange, as such defences should have come from the lawyers of these 12 “shortists” rather than from the executive chairman of the KLSE.
In fact, Nik Din seems to be; more concerned about protecting these 12 “defaulting sellers” than the investing public and the integrity of the KLSE.
Nik Din’s statement is the best proof that something is very wrong with the Securities Industries Act, where the KLSE Chairman is openly looking for loopholes for the ‘short-sellers’ who caused the Union Paper shares scandal and the collapse of the stock market, when he should be bringing the whole wrath and weight of the law against them.
Has Anwar Ibrahim softened his stand against, corporate frauds arid stock market abuses
The Finance Minister, Datuk Seri Anwar Ibrahim has taken a very low-profile in the Union Paper shares scandal although he is the Minister who is responsible to Parliament for the KLSE and the Securities Commission.
Anwar’s low-keyed position is that the Finance Ministry would not intervene in the Union Paper shares scandal and would leave its investigations to the ‘regulators’ for alleged shares manipulation.
This is a far cry from Anwar Ibrahim’s strong and crusading stand when he first became Finance Minister in 1991 declaring that, the Government would take firm action against all forms of commercial fraud and stock market abuses, like insider trading.
Anwar should explain whether he has softened his stand against corporate frauds and stock market, abuses.