KUALA LUMPUR (Sept 29): The High Court on Tuesday dismissed a judicial review by ACE Holdings Bhd against the Securities Commission (SC) decision in imposing a RM400,000 fine and reprimand against the company by way of administrative action.
Judge Norliza Othman dismissed ACE Holdings judicial review as the court disagreed with ACE Holdings counsel’s argument that the SC had acted ultra vires in invoking its administrative powers under Section 354(1)(a) of the Capital Market and Services Act in respect of an alleged breach of the Securities Commission Malaysia Act 1993 (SCMA).
Norliza said the court found that a plain reading of Section 354(1)(a) of the CMSA was clear and that the SC acted within its powers of the CMSA as it excludes “Part V and Division 2 of Part VI of the CMSA”, which governed market misconduct, prohibited conduct, and the regulatory framework for take-overs, mergers, and compulsory acquisitions.
The judge said it does not exclude “any securities laws” as defined in Section 2 of the SCMA.
Section 354(1)(a) of the CMSA gives the SC the power to take administrative action against any person or entity which contravenes provisions of the Act (excluding certain criminal matters).
The court, Norliza added, also found a requisition notice of ACE Holding’s wholly owned subsidiary, ACE Credit (M) Sdn Bhd, nominating two individuals as directors of Apex Equity Holdings Bhd.
The notice, she added, shows that ACE Holdings and the two individuals had a prior relationship, interaction and connection prior to the annual general meeting.
The High Court found that the SC had correctly exercised its powers in the imposition of the sanctions for the breach committed by ACE Holdings under section 152(2)(a) of the SCMA read together with section 354(1)(a) of the CMSA for making false and/or misleading statement to the SC.
Subsequently, the court ordered ACE Holdings to pay RM10,000 costs to SC.
ACE Holdings was represented by Muhammad Farhan Shafee of Messrs Shafee & Co, while counsel Lee Shih from Messrs Lim Chee Wee Partnership, along with Charles Chong and Sarah Chin appeared for the SC.
Lee, when contacted by The Edge, confirmed the outcome. The proceedings were initially supposed to be held online but changed to a physical court decision at the last minute.
Judicial review and leave secured in 2023
The company filed the judicial review three years ago to challenge the SC's decision.
On July 18, 2023, then High Court judge Datuk Ahmad Kamal Md Shahid (now Court of Appeal judge) had granted leave to ACE Holdings to commence judicial review against the SC's decision.
In judicial review applications against government authorities, leave (permission) had to be gained before the merits of the challenge were heard. This is to make sure that the challenge is not frivolous, vexatious and an abuse of the court process.
The main grounds cited by ACE Holdings for the judicial review is that the SC's decision to impose the penalties against the company by way of Section 354(4) of the Capital Markets and Services Act 2007 (CMSA) read with Section 152(2)(a) of the Securities Commission Act 1993 is ultra vires (outside the boundaries of law).
According to the SC’s website, the regulator had reprimanded ACE Group over its investment scheme in December 2018.
It said ACE Holdings had breached the CMSA for the issuance of private placement information memoranda dated Sept 8, 2015, and Jan 5, 2018, which contained “false or misleading information”.
This “false or misleading information” related to the issued and paid-up capital of ACE Credit, the targeted amount of funds to be raised, utilisation of the proceeds and ACE Holdings’ past record of funds raised, the SC added.
The commission also claimed that during its investigations on ACE Holdings, the SC had disclosed inconsistent particulars of the administrative charge against ACE Holdings leading to a breach of natural justice when deciding to impose the penalties of RM400,000 and the said reprimand.
This application for judicial review is part of a larger dispute between Ace Holdings and the SC in relation to Ace Holdings’ prior acquisition of shares in Apex Equity, which owns Apex Securities Bhd. The shares in Apex Equity have since been disposed of by ACE Holdings.
In a filing on Dec 1, 2022, Apex Equity said the SC is seeking a court declaration that its subsidiary Apex Securities has contravened securities laws, and that ACE Holdings, which is part of the ACE Group, has been knowingly involved in the contravention.
The SC claimed that Apex Securities contravened the securities laws "as ACE has become a controller of Apex Securities, when ACE is not a fit and proper person" to do so.