ON Jan 17 (yesterday), High Court judge Datuk Ahmad Fairuz heard oral arguments from the counsels of Serba Dinamik Holdings Bhd and from Bursa Malaysia Securities Bhd.  

Serba Dinamik’s counsel Mak Lin Kum argued that the Main Market Listing Requirements (MMLR) applies to both the regulator and the listed issuer. Henceforth, Bursa Securities cannot 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.  

Datuk Loh Siew Cheang who is Bursa Securities’ counsel appears to suggest that the market regulator 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 two directives issued by Bursa that were challenged by Serba. The first was a directive on June 28, 2021 for Serba Dinamik to appoint Ernst & Young Consulting Sdn Bhd (E&Y Consulting) under MMLR 2.24 when Bursa Securities failed to state what listing requirement was breached by the global integrated oil & gas (O&G) service provider.  

That failure to specify the breach remains until today and the implication is that if there was no breach, the directive to appoint E&Y Consulting and its subsequent appointment is without power. By extension, any work done by them was improper. 

The other directive challenged was issued by Bursa Securities on Oct 22, 2021 whereby the market regulator had imposed a requirement to announce the Factual Findings Update in accordance with MMLR 9.03 and 9.35A failing which Serba Dinamik’s securities will be suspended from trading. 

Definition of “auditor”

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

On the directive concerning E&Y Consulting’s appointment – besides the lack of any opinion from Bursa Securities as to what listing requirement was breached by Serba Dinamik – the company’s argument was that it was E&Y Consulting who claimed that they were qualified to be appointed under MMLR 2.24 as suggested by the content of their letter of engagement.  

MMLR 2.24 uses the word “auditor”. Counsel Loh 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 Securities 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 Section 9 of the Capital Markets and Services Act 2007.  

Further, the AOB is a body that was specifically set up to deal with the Securities Commission Act 1993, hence there should be some seriousness as to what is meant by “auditor” in the MMLR.  

It is understood that it was in Serba Dinamik’s written submissions that in a textbook written by Loh, he specifically insisted that the “auditor” referred to in MMLR 2.24 must be registered or recognised by the AOB. 

Serba’s indefinite suspension

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

The terms of engagement was that among others, E&Y Consulting had stated that their report was not to be relied upon, was subject to further corroborate interviews, disclaimed any correctness, had not given consent for publication and was for internal use by Serba Dinamik’s independent directors only.  

This directly implies that Bursa Securities knew all along that E&Y Consulting never intended for the Factual Findings Update to be the subject matter of an announcement.  

Counsel Loh had argued that if the announcement of the Factual Findings Update breached the Letter of Engagement, that was a separate problem that Serba Dinamik had to deal with with E&Y Consulting and that did not concern Bursa Securities.  

In this regard, counsel Mak submitted that Bursa Securities had acted in a manner that contradicts the MMLR and also their own regulatory procedures.  

The Gan Boon Aun case was cited as a proposition that it is the normal procedure for Bursa Securities to issue a show cause and refer alleged breaches of the MMLR to its listing committee who comprised independent individuals who are not Bursa Securities’ employees.  

What Bursa Securities has done now is to enforce an indefinite suspension without reference to the listing committee. Its own website does state that the enforcement of the listing requirements is done by the listing committee.  

The overall tone of counsel 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, he submitted that Bursa Securities had taken out proceedings to compel Serba Dinamik to announce the Factual Findings Update because the suspension imposed by the market regulator was damaging on investors.  

Loh also submitted that the announcement of the Factual Findings Update must be in accordance with exactly how Bursa Securities tells Serba Dinamik to announce it – without caveats or qualifications.  

He also submitted that Bursa Securities would like to remove the suspension after Serba Dinamik has announced the Factual Findings Update.  

To this, counsel Mak replied saying that if Serba Dinamik were forced to announce the Factual Findings Update, then the company would make it clear that it is a work product of E&Y Consulting and it is E&Y Consulting who must answer any questions arising there from. Serba Dinamik cannot be answering on E&Y Consulting’s behalf. 

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

Serba Dinamik’s stance was that if E&Y Consulting takes responsibility for the statements in the Factual Findings Update, that would make it clear who made the Factual Findings Update. – Jan 18, 2022 

Serba Dinamik is an international energy services group providing engineering solutions to the O&G and power generation industries with operational facilities in Malaysia, Indonesia, UAE, Bahrain and the UK.

https://focusmalaysia.my/court-chronicle-has-bursa-committed-a-mis-step-by-suspending-serbas-trading/