The Malaysian Bar refers to the recent news reports concerning Serba Dinamik Holdings Bhd (“Serba Dinamik”). It was reported that in December 2021, four Serba Dinamik officers were charged in court for submitting a false statement to Bursa Malaysia, which is an offence under section 369(a)(B) of the Capital Markets and Services Act 2007 (“CMSA”).1 Under section 369(a)(B) of CMSA, if convicted, a person faces an imprisonment term not exceeding 10 years and shall also be liable to a fine not exceeding RM3 million. The imprisonment term demonstrates the severity of such a charge.
However, in April 2022, the Securities Commission Malaysia (“SC”) with the written consent of the Public Prosecutor, and pursuant to its powers under Section 373(1) of CMSA, compounded Serba Dinamik and its accused officers for a sum of RM3 million each. The Vice President of Accounts & Finance, Muhammad Hafiz Othman, was also compounded an additional RM1 million for falsifying the accounting records of Serba Dinamik’s subsidiary.2 This follows the decision of the Public Prosecutor to accept the representation made to the Attorney-General’s Chambers (“AGC”) by Serba Dinamik and the individuals involved.3 There were no reports whether the SC was informed about the representation letter.
Under section 375 of CMSA, the SC can only institute prosecution proceedings with the written consent of the AGC. Similarly, under section 373(1) of CMSA, the SC requires the written consent of the AGC to issue a compound.
The Malaysian Bar is mindful of the immense authority wielded by the Attorney General. Such powers are granted under Article 145(3) of the Federal Constitution, which provides the Attorney General with the discretion to institute any proceedings for an offence. It is our view that such power must be exercised in a way that would promote and strengthen the rule of law. With due respect, the AGC should refrain from making a decision that overrides the recommendations made by the regulator — in this case, the SC — as this could potentially erode the function as well as the public perception vested in the regulator.
One of the core objectives of securities regulations is to foster a fair market system, thereby instilling confidence in investors and shielding the market from systemic risks. To achieve this, regulators who are exercising their statutory duties must be given the liberty to enforce law and regulations against wrongdoers. The manner in which this matter has been handled and resolved undermines the capital market regulators’ commendable efforts to uphold the integrity of the market. Such leniency is likely to create a negative perception of selective enforcement by the authorities and that the decision of the regulators can be overruled. It is our view that the considered opinions of the market regulators — in this case, the SC and Bursa Malaysia — should be preserved and executed accordingly.
The Malaysian Bar is also concerned with the lack of transparency in this matter, given the wider impact that the Serba Dinamik compound has on the integrity of the capital market’s governance and regulatory framework. At the time of writing this press release, the AGC has yet to provide any statement for its decision not to prosecute Serba Dinamik and the accused officers. As this is a case of public interest, there is a need for the AGC to provide details of how the decisions in such cases are reached.
The Malaysian Bar therefore implores the AGC to make a full and frank disclosure on the reason, if any, for the issuance of compounds to Serba Dinamik and the accused individuals, instead of proceeding with prosecution. The AGC should engage in a purposeful consultation process with the regulators to ensure the proper penalties are enforced. The old adage rings true now more than ever — “Justice must not only be done, but must be seen to be done.”
Mohamad Ezri Abdul Wahab
6 May 2022
1 “SC Charges Serba Dinamik, Its Director and Officers for False Information in Its Financial Statement”, Media Release, Securities Commission Malaysia, 28 December 2021.
2 “SC compounds Serba Dinamik, top execs RM3 mil each for submitting false revenue that KPMG flagged”, The Edge Markets, 13 April 2022.
3 “SC Imposes Maximum Compound against Serba Dinamik, CEO, Director, and Officers for Submitting False Financial Statement to Bursa Malaysia”, Media Release, Securities Commission Malaysia, 13 April 2022.