Letter – Standing Order 18(1) to move an adjournment of the House on a matter of urgent, definite public importance

17th July 1993

Tan Sri Yang di Pertua,
Dewan Rakyat,
Kuala Lumpur.

YB Tan Sri,

Standing Order 18(1) to move an adjournment of the House on a matter of urgent, definite public importance

This is to give notice under Standing Order 18(2} that I wish to move the following motion to seek leave of the House to adjourn the House on a matter of urgent, definite public importance, namely, the Union Paper Holdings Sdn.Bhd. shares scandal:

“That this House gives leave to the Ketua Pembangkang, YB Lim Kit. Siang under S.O. 18 to adjourn the House on a matter of urgent, definite public importance, namely, the Union Paper Holdings Sdn.Bhd. shares scandal, as this is an urgent, definite public importance for the following reasons:

Firstly, public confidence in the Kuala Lumpur stock exchange as an orderly, fair and transparent marketplace has been gravely shaken with the Union Paper Holdings Sdn.Bhd. scandal, where a joss paper, toilet paper and wrapping paper processing outfit skyrocketted from a low of RM1.73 early this year to RM23 on June 14, and then crashed down to RM4.72 on 25th June 1993;

Secondly, the wild gyrations in the share prices of Union Paper Holdings Bhd. in three weeks until its suspension by the Kuala Lumpur Stock Exchange has reinforced national and international image that the KLSE is just a casino where well-connected predators are seen as being able to fleece ordinary investors with impunity;

Thirdly, the handling of the Union Paper Holdings Sdn. Bhd. scandal by the Kuala Lumpur Stock Exchange is a scandal by itself, for the following reasons:
(I) It is the small boys rather than the big boys who are burnt most badly in the UPHB shares scandal;

(ii) In failing to curb manipulation and excessive speculation on UPHS in the ten days from 4th June to 14th June 1993 by declaring it ‘designated securities’ which would have protected the small investors and the small boys;

(iii) In arbitrarily declaring that UPHB had been ‘cornered1 and suspending trading in the share, and instituting a buying-in at RM15.20, the chief beneficiaries are the ‘short-sellers’ who were left off cheaply while the small investors were made to bear the brunt, of the losses;

(iv)The buying-in of 3.315 million Union Paper shares at. RM15.20 per share on 9th July 1993 was conducted in so unfair a fashion that there were cries of malpractices as large numbers of investors, remisiers and stockbrokers were unable to sell their shares to the buying-in market, plunging public confidence and credibility of KLSE to another low;

(v) the astonishing and self-contradictory two-hour press conference by the KLSE Executive Chairman, Nik Mohamad Din Nik Yusuff last Tuesday
(a)in refusing to acknowledge that massive illegal short-selling had been the cause of the Union Paper shares scandal, claiming that the KLSE had to institute a buying-in of the3.315 million Union Paper shares because there were “12 defaulting sellers” – strenously denying that they were “short-sellers” which also made a complete mockery of the Securities Industry Act 1983 which made’short-selling1 illegal and an offence punishable -with RMS, 000 fine or two years jailor both;

(b)becoming an apologist, for the “12 shortists” by making the preposterous statement:”Are you going to say that if the client doe not deliver to the stock broking house because he is away, that he short sold, when later” he was found to have the shares?” two weeks after the suspension of Union Paper;
(c) the KLSE Chairman’s credibility sunk to an all-time low while on the one hand stoutly denying that there was any evidence of short-selling, he inadvertently admitted the prevalence of short-selling when asked whether the KLSE had contacted the 12 ‘defaulting sellers’, he said: “You see, this is an offence under the Securities Industry Act, so we have submitted whatever we have to the relevant authorities”.

(d)From the KLSE Chairman’s press conference statement, he was clearly more concerned about protecting the 12 “defaulting sellers”, even claiming that “none of the names (of the12) are familiar to us yet.” than to protect, the small investors or the integrity of the KLSE.

Fourthly, the Union Paper shares scandal demonstrates that the regulators, namely the KLSE, the Securities Commission, the Registrar of Companies and the Finance Ministry have failed to develop the KLSE into a strong and healthy stock market to raise funds in the process of capital formation, for economic growth and development, operating in an orderly, fair and transparent manner;

Fifthly, public confidence in the KLSE both and internationally can only be restored if the actions are taken:

(i) short-sellers linked to Union Paper are brought to justice, regardless of their political connections, as short-selling is illegal;

(ii) the names of the 12 ‘defaulting sellers’ must be made public: as they caused the suspension of Union Paper which precipitated a collapse of the stock market, causing untold losses and hardships to the small investors; and

(iii)the establishment of a Royal Commission of Inquiry to inquire into all the causes of the Union Paper shares scandal, the inadequacies of the Securities Industry Act as well as the regulators of the securities industry.”

Lim Kit Siang