Taking Stock of Bursa Malaysia’s Enforcement Powers

Ruth Garnet Maran discusses key legal issues pertaining to enforcement proceedings by Bursa Malaysia




The Court of Appeal's decision of Bursa Malaysia Securities Berhad v Gan Boon Aun [2009] 6 MLJ 695 ("Gan Boon Aun Case") and the High Court's decision of Tengku Dato' Kamal ibni Sultan Sir Abu Bakar & Ors v Bursa Malaysia Securities Berhad (unreported)1 ("Tengku Dato' Kamal Case") have important implications on companies listed on Bursa Malaysia Securities Berhad ("Bursa") in relation to circumstances in which the Court will review the enforcement proceedings of Bursa; and whether or not such enforcement proceedings can proceed concurrently or otherwise where there is an action pending disposal in Court based on the same, or substantially the same, facts.






A person who is adversely affected by a decision of a public authority may challenge the administrative act or omission by applying to the High Court for a judicial review of the act or omission in question.


An application for judicial review is made under Order 53 of the Rules of the High Court 1980 (“RHC”). The applicant may seek a prerogative order including, amongst others, a mandamus (order requiring a decision maker to perform a public duty imposed on him), certiorari (order quashing a decision made by an administrative tribunal or other public authority in excess of its jurisdiction) or in appropriate circumstances, a declaration, an injunction or damages.


An application for judicial review must be preceded by a Court order under Order 53 Rule 3 granting leave to apply for judicial review. The application for leave must be made within 40 days from the date the decision was communicated to the aggrieved person.


It is important to note that the remedy of judicial review is not concerned with reviewing the merits of the decision in respect of which the application for judicial review is made. It is concerned with the decision making process itself and is intended to ensure that the individual is given fair treatment by the authority to which he has been subjected2.


The general principle of an application for judicial review is that the Court will not interfere in the exercise of any power or discretion which has been conferred on that body unless it has been exercised in a way which is not within that body’s jurisdiction or that decision is manifestly absurd or unreasonable.




Bursa, as a stock exchange, has a statutory duty under Section 11 of Capital Markets and Services Act 2007 (“CMSA”) to ensure an orderly and fair market in the securities that are traded through its facilities. It also has a duty to take appropriate action under its rules to monitor or secure compliance with such rules, as stipulated in Section 11(4) of the CMSA.



The Listing Requirements: The legal basis for Bursa’s enforcement decisions


In order for Bursa to discharge its statutory duty, various rules and requirements are issued, thereafter monitored and enforced by Bursa. The Listing Requirements ("LR") sets out the minimum standards of conduct which any company that is admitted to the Official List of Bursa must comply with. The LR forms the legal basis upon which Bursa has the right to exercise its discretion after according due process to companies listed on the Official List.


Prior to the Gan Boon Aun Case and the Tengku Dato' Kamal Case, the Federal Court had held in O.S.K & Partners Sdn v Tengku Noone Aziz & Anor [1983] 1 MLJ 179 that the Kuala Lumpur Stock Exchange (the predecessor to Bursa) was amenable to judicial review but did not elaborate on the circumstances in which the Court would intervene in enforcement actions by a stock exchange.3 It was also unclear whether a stock exchange is precluded from taking enforcement action against listed companies and their directors where there are ongoing proceedings in Court.


These are important questions to be determined as Bursa delivers enforcement decisions on a regular basis against recalcitrant listed companies and their directors for various breaches of its rules and regulations in the discharge of its statutory duty to ensure a fair and orderly market for securities that are traded on Bursa. If the Courts readily issue orders under Order 53 of the RHC to restrain the enforcement decisions of Bursa or to compel it to uplift imposition of penalties without carefully considering the merits of the application, the floodgates could be opened for companies and directors facing prosecution for criminal offences or breach of securities laws to attempt to restrain Bursa from enforcing its rules and imposing penalties in relation to breaches of the LR. This would ultimately erode investors’ confidence in the ability of the stock exchange to regulate the capital market.




The Respondent, Gan Boon Aun (“GBA”) who was a director of Transmile Group Berhad  (“Transmile”) (a listed company), sought judicial review of Bursa’s decision to proceed with enforcement proceedings against him for breaches of the LR for failing, as a director of Transmile, to ensure Transmile’s compliance with the provisions of the LR that required Transmile to submit its annual audited accounts and annual report for its financial year ended 31 December 2006 and its quarterly report for the period ended 31 March 2007 within the stipulated timeframes (“Enforcement Proceedings”).


At or around the same time, the Securities Commission (“SC”) preferred criminal charges against GBA at the Kuala Lumpur Sessions Court for making a misleading statement in a material respect in Transmile's quarterly report for the financial period ended 31 December 2006 ("Criminal Proceedings") pursuant to the Securities Industry Act 1983 (which has since been repealed and replaced by the CMSA).


GBA contended that the Enforcement Proceedings were sub judice4 the on-going Criminal Proceedings and sought an order directing Bursa to adjourn the pending Enforcement Proceedings sine die pending disposal of the Criminal Proceedings and/or an order restraining the implementation of any decision reached by Bursa.


GBA was granted leave for judicial review and a stay of the Enforcement Proceedings pending disposal of judicial review by the High Court. Bursa appealed against this decision on the grounds that it should be at liberty to proceed with the Enforcement Proceedings as it is in discharge of Bursa’s prescribed statutory duties to maintain market integrity. Bursa contended that in law, it can proceed with and decide on the breaches of its rules and requirements independent of and/or concurrent with proceedings in Court on breaches by the same individual of any other written law and that in the circumstances no issue of sub judice arose.


The Court of Appeal (“CA”) comprising Zaleha Zahari, Datuk Heliliah Bt Mohd Yusof and Sulong Matjeraie JJCA, in deciding whether leave for judicial review under Order 53 of the RHC should have been granted by the High Court, considered, amongst others the following issues:


(1) Whether the Enforcement Proceedings were sub judice the Criminal Proceedings;

(2) The circumstances in which the Court will review enforcement actions by Bursa; and

(3) Whether the Enforcement Proceedings ought to be stayed pending the determination of the judicial review application.



Whether the Enforcement Proceedings were sub judice the Criminal Proceedings

As GBA’s application for leave was primarily grounded on the alleged applicability of the sub judice rule, the CA addressed its mind to whether or not there was in law sub judice before deciding whether the learned High Court judge erred in law in granting leave for judicial review.


The CA found that the true nature of the sub judice doctrine requires that there has to be established an actus reus (action) and mens rea (intention) to cause certain publications which would have a prejudicial effect on a pending criminal proceeding. In this case, the CA found that it could not even be gleaned whether the situation could lead to civil contempt. The CA held that GBA had not shown that there was a situation where a court and Bursa’s Listing Committee ("LC") would contemporaneously be considering the same or identical issues in a manner that one would affect the evaluation of the other.


The CA held that it was also not shown that ultimately the decision in the LC would lead to a predetermination of the matters pending in the Criminal Proceedings. The issues in the Enforcement Proceedings concerned delay whereas the Criminal Proceedings turned on what constitutes 'making misleading statements'. The CA acknowledged that although at the crux of the matter there may be some overlap of facts, in effect this should not blur the different functions and the different objectives of the Court and Bursa’s disciplinary proceedings.




What are the circumstances in which the Court will intervene in enforcement actions by Bursa?

The CA considered authorities from three different jurisdictions, namely Australia5, the United Kingdom6 and New Zealand which have considered legal challenges to decisions of a stock exchange wherein it was held that the courts ought to be reluctant to interfere in the decisions of any capital market regulator where it acts in good faith.


The CA recognised Bursa as “a body vested with statutory powers” and agreed that “there are peremptory requirements that the Bursa itself has to observe and implement to sustain the required orderly and fair market in respect of securities or future contracts. Uppermost it has to act in public interest singularly for the protection of investors in the financial sectors ... In effect there is a homogenised issue of public duty and private law matters.” The CA referred to the English case of R v Securities and Futures Authority ex p Panton (unreported; 20 June 1994) wherein Sir Thomas Bingham said:


“It seems to be quite plain that they are bodies over whom the court can, in appropriate circumstances, and will exercise a supervisory jurisdiction, but recognition of that jurisdiction must in my judgment be combined with a recognition that the clear intention of the Act is that the bodies established under that Act should be regulatory bodies and that it is not the function of the court in anything other than a clear case to second guess their decisions or, as it were to look over their shoulder”.


The CA was of the view that apart from submissions premised on the sub judice rule, GBA had not been able to persuade the Court that the Enforcement Proceedings were in excess of statutory authority or were so erroneous in law such that it rendered Bursa susceptible to judicial review.



Whether the Enforcement Proceedings ought to be stayed pending the determination of the judicial review application

The CA considered whether the word “proceedings” in the phrase ‘stay of the proceedings’ in Order 53 Rule 3(5) of the RHC includes Bursa’s processes and whether the phrase ‘any proceeding whatsoever of a civil nature’ found in Section 3 of the Courts of Judicature Act 1964 is wide enough to envisage putting a stop to the further conduct of the deliberations of the LC.


The CA took the view that it would be an excess of power if the expression ‘stay of proceedings’ was extended to the internal deliberations of Bursa being a commercial entity vested with regulatory measures in the capital market. Accordingly the CA held that there had been a serious and clear misdirection in the exercise of discretion by the High Court in granting a stay of the Enforcement Proceedings which warranted intervention by the CA.



Decision of the CA

For the reasons discussed above, the CA allowed Bursa’s appeal and set aside the order of the High Court granting leave to apply for judicial review and the order for a stay of Bursa’s deliberations.




The CA's decision in the Gan Boon Aun Case was referred to and applied in the Tengku Dato’ Kamal Case. In this case, the Applicants were former directors of Cepatwawasan Group Berhad (“Cepatwawasan”), a company listed on the Main Board of Bursa.


The Applicants had caused Cepatwawasan’s wholly-owned subsidiary, Prolific Yield Sdn Bhd (“Prolific Yield”), to make payments totalling RM16 million to a company called Opti Temasek Sdn Bhd and an individual, Sheikh Abdul Rahim. As such payments were in breach of the financial assistance provisions in the LR, Bursa issued a show cause notice to the Applicants and fixed a hearing before the LC. The Applicants failed to attend this hearing and the LC found that the Applicants had breached the LR and imposed various penalties on the Applicants.


The Applicants appealed to the Appeals Committee (“AC”) of Bursa and having heard the Applicants’ Counsel, the AC dismissed the Applicants' appeal (“AC’s Decision”).


The Applicants filed an application for judicial review of the AC’s Decision and raised two grounds of challenge: (i) that the decision was sub judice due to pending civil suit proceedings against the Applicants; and (ii) that there had been a breach of natural justice.


The High Court found that there was no sub judice as the issues determined in Bursa’s enforcement action were different from that in the civil suit proceedings. Further, there was no real risk that the AC’s decision would prejudice the civil suit trial.


The High Court also found that there was no breach of natural justice as the Applicants had received notice of the initial hearing before the LC but they did not attend.


Hadhariah Bt Syed Ismail J in her written grounds of judgment was of the view that the stock exchange, having been vested with the power to ensure its rules and regulations are complied with by its members, had an unfettered discretion in the exercise of its powers. However, the learned Judge pointed out that where there appears to be an exercise of discretion lacking in good faith, interference by the court is warranted.


The learned Judge dismissed the application for a judicial review on the ground that there was no sub judice and held that “the court should be slow to interfere with the decisions of Bursa who had been vested with the power to decide freely, fearlessly and without the prospect of the correctness of its decision being investigated in protecting the public interest”.




The decisions of the courts in the Gan Boon Aun Case and the Tengku Dato' Kamal Case appear to have clarified the circumstances in which the courts may exercise their powers under Order 53 of the RHC to review enforcement decisions of Bursa.


The Gan Boon Aun Case has recognised the need for Bursa’s enforcement proceedings to proceed unhindered in line with the principles of timeliness and accuracy which are apt in matters of financial control in a highly fluid financial market. It has also made it clear that Bursa can proceed with and decide on the breaches of its rules and requirements independent of, or concurrent with, proceedings in Court on breaches by the same individual of any other written law.


The Gan Boon Aun Case suggests that the court should intervene only where the enforcement actions are in excess of statutory authority or are so erroneous as to warrant judicial intervention while the Tengku Dato' Kamal Case suggests that intervention is warranted only where there is a lack of good faith on the part of the stock exchange in the exercise of its’ discretion. As the Tengku Dato’ Kamal Case is presently pending appeal to the CA, it will be interesting to see whether the appellate court will take the same view and uphold the HC’s decision.



RUTH GARNET MARAN ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )





1 Kuala Lumpur High Court Appellate and Special Powers Division, Judicial Review Application No. R1-25-260-2006, Grounds of Judgment delivered on 18 January 2010


2 Per Lord Hailsham LC in Chief Constable of North Wales Police v Evans [1982] 3 All ER 141 at 143


3 It should be noted that the Supreme Court in Ganda Oil Industries Sdn Bhd & Ors v Kuala Lumpur Commodity Exchange & Anor [1988] 1 MLJ 174 held that the Commodity Exchange is not amenable to judicial review as the relationship between the members of the exchange is contractual and the exercise of the power of the exchange is an exercise of a power derived under a contract


4 The sub judice rule prohibits publications concerning ongoing legal proceedings that are intended to impede or prejudice the administration of justice. A publication that is sub judice is punishable as a contempt of court


5 Kwikasair Industries Ltd v Sydney Stock Exchange Ltd [1968] ASLC 30701


6 R v International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd, Ex parte Else Ltd & Anor [1993] QB 534



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