Serba Dinamik sued Bursa Malaysia: What transpired in the High Court

On 17 January 2022, Judge Dato’ Ahmad Fairuz heard oral arguments from Serba Dinamik and from Bursa’s counsel. Mak argued that the Main Market Listing Requirements (MMLR) applies to both the regulator and the listed issuer.

It does not mean Bursa can issue directives that ignore the clear words of the MMLR. He also said that the main provisions under consideration were 2.24, 9.03 and 9.35A of the MMLR.

Dato’ Loh, counsel for Bursa, appears to suggest that Bursa may issue any directive and once issued, must be complied with. It does not matter if the directives were issued in a manner that did not comply with the requirements of the MMLR.

There were 2 directives issued by Bursa that were challenged by Serba. The first was a directive on 28.6.2021 to Serba to appoint EYC under MMLR 2.24 when Bursa failed to state what listing requirement was breached by Serba. That failure to specify breach remains until today and the implication is that, if there was no breach, the directive to appoint EYC, and EYC’s appointment, is without power. By extension, any work done by them was improper.

The other directive challenged was issued by Bursa on 22.10.2021 where Bursa had imposed a requirement to announce the Factual Findings Update in accordance with MMLR 9.03 and 9.35A failing which Serba’s securities will be suspended from trading.

Factually, it was submitted that the directive for announcement of the Factual Findings Update was issued by Bursa even before Serba was given a copy of the Factual Findings Update. It was already a forgone conclusion that Bursa required the announcement whether or not EYC allowed it.

On the directive concerning appointment of EYC, besides the lack of any opinion from Bursa as to what listing requirement was breached by Serba, Serba’s argument was that it was EYC who represented that they were qualified to be appointed under MMLR 2.24 as suggested by the contents of their letter of engagement. MMLR 2.24 uses the word “auditor”.

Loh, counsel for Bursa, argued that the word “auditor” in the MMLR is not intended to mean in an orthodox sense, a qualified auditor. This suggestion by Loh trivialises the fact that Bursa had taken the trouble to define “auditor” as meaning an auditor registered or recognised by the Audit Oversight Board (AOB).

That definition would have been approved by the Securities Commission (SC) under s. 9 of the CMSA. Further, the AOB is a body that is specifically set up and dealt with in the Securities Commission Act 1993 and hence, there should be some seriousness as to what is meant by “auditor” in the MMLR. It is understood that it was in Serba’s written submissions that in a textbook written by Loh, Loh specifically insisted that the “auditor” referred to in MMLR 2.24 must be registered or recognised by the AOB.

On the challenge to the announcement of the Factual Findings Update, Mak’s argument was that Bursa knew that EYC did not give any consent to announce the Factual Findings Update and Bursa was fully aware of the terms of EYC’s engagement.

The terms of engagement was that amongst others, EYC had stated that their report was not to be relied upon, was subject to further corroborative interviews, disclaimed any correctness, had not given consent for publication and was for internal use by the Independent Directors of Serba only.

This directly means that Bursa knew all along that EYC never intended for the Factual Findings Update to be the subject matter of an announcement. Loh had argued that if the announcement of the Factual Findings Update breached the Letter of Engagement, that was a separate problem that Serba had to deal with with EYC and did not concern Bursa.

Further, Mak had submitted that Bursa had acted in a manner that contradicts the MMLR and also their own regulatory procedures. The Gan Boon Aun case was cited as proposition that it is the normal procedure for Bursa to issue a show cause and refer alleged breaches of the MMLR to its listing committee, who comprised independent individuals who are not Bursa employees.

What Bursa had done now is to enforce an indefinite suspension without reference to the listing committee. Bursa’s own website does state that the enforcement of the listing requirements is done by the listing committee. The overall  tone of Loh’s submissions was that the listing committee need not be resorted to and that management could do as they like.

In a surprising revelation, Loh submitted that Bursa had taken out proceedings to compel Serba to announce the Factual Findings Update because the suspension imposed by Bursa was damaging on investors. Loh also submitted that the announcement of the Factual Findings Update must be in accordance with exactly how Bursa tells Serba to announce it, without caveats or qualifications.

Loh submitted that Bursa would like to remove the suspension after Serba has announced the Factual Findings Update. Mak replied saying that if Serba were forced to announce the Factual Findings Update, then Serba will make it clear that it is a work product of EYC and it is EYC who must answer any questions arising therefrom. Serba cannot be answering for EYC.

It does appear that Bursa had committed a mis-step by suspending the trading of the securities of Serba without thinking through the fact that EYC did not actually give consent to announce and that EYC was not willing to verify anything about the Factual Findings Update.

Serba’s attitude was that if EYC takes responsibility for the statements in the Factual Findings Update, that would make it clear who made the Factual Findings Update. - DagangNews.com