Lay Hong directors reprimanded, fined for inaccurate replies to Bursa's UMA query

PETALING JAYA: Bursa Malaysia yesterday asserted its tough stance on ensuring the integrity of the market, with what may be its first punitive action with regard to unusual market activity (UMA) queries, by publicly reprimanding and fining the board of Lay Hong Bhd for inaccurate responses.

The exchange operator and regulator imposed fines totalling RM750,000 on eight directors of Lay Hong for failing to disclose corporate developments in response to UMA queries on two separate occasions.The censure is for actions that were taken over 1½ years ago.

Bursa Malaysia found that the company’s board did not disclose, and in fact denied that there were, corporate developments that could have led to the surge in its share price in its responses to UMA queries through two filings, dated Nov 3, 2015 and Jan 19, 2016 respectively.

This was despite an impending corporate exercise involving a proposed bonus issue, share split and issuance of free warrants, among others, which was subsequently announced by Lay Hong about two weeks after claiming to be unaware of the reason for the UMA in its announcement on Jan 19, 2016.

“Based on the facts and circumstances, particularly where Lay Hong and its board had in fact agreed and confirmed to undertake or proceed with the proposals prior to the UMA queries on Nov 2, 2015 and Jan 19, 2016; and the specific wordings of the UMA queries requiring the company’s confirmation which covered any corporate development including ‘those in the stage of negotiation or discussion’ that may account for the trading activity; Lay Hong must make factual disclosure of the proposals in responding to the UMA queries,” Bursa Malaysia said in a statement.

Apart from that, the board failed to make an immediate announcement upon approval of the proposals, which was given on Tuesday, Jan 26, 2016. An announcement was only made on Feb 2, 2016. Lay Hong claimed “non-finalisation” of the proposals/announcement after the board’s approval in defence of its delay, which Bursa Securities found to be unacceptable.

Executive chairman Yap Hoong Chai and three executive directors Yap Chor How, Ng Kim Tian and Yeap Weng Hong, were fined RM150,000 each. The penalty consists of RM100,000 for inaccurate responses to UMA queries and RM50,000 for failing to announce the proposals immediately.

Non-executive directors Yeap Fock Hoong, Cheng Chin Hong, Gan Lian Peng and Tan Ooi Jin were fined RM50,000 each. Bursa Malaysia said executive directors saw higher levies as they were the directors responsible for and/or involved in the proposals and primarily responsible for the approval and issuance of announcements to the stock exchange.

It noted that the “directors were or should be aware that the proposals were clearly material information and hence, might have reasonably contributed to/accounted for the increase in Lay Hong’s share price and volume traded .”

Bursa Malaysia said listed companies must ensure that undisclosed material developments be announced to the market. including those in negotiation and discussion stage, in the event of an UMA, which signifies leak of information that could have accounted for the changes in trading.

The poultry firm’s share price saw a continued increase of 20.2% between Jan 18, 2016 and Feb 3, 2016. It also saw a 17.8% increase in its share price between Jan 26, 2016 and Feb 3, 2016, which happened to be the time frame between the board’s approval of the proposals and the announcement.