15 March 2017
KUALA LUMPUR – The Federal Court today upheld the validity of section 122(1) of the Securities Industry Act 1983 (SIA).
Justice Tan Sri Jeffrey Tan Kok Wha, in delivering the apex court’s landmark decision, held that the provision did not violate the Federal Constitution.
The ruling has wide ranging ramifications as there are 32 other provisions in other Acts that are akin to the said provision.
Section 122(1) of the SIA deems a company director, chief executive officer, officer or representative of the company, to have committed an offence of the company, unless he can prove the lack of consent or connivance on his part and the exercise of diligence to prevent the commission of the offence.
Gan Boon Aun, the former Chief Executive Officer of Transmile Group Bhd (Transmile), was charged by Securities Commission Malaysia in 2007 for abetting Transmile in making a statement that was misleading in a material particular relating to Transmile revenue in the company’s Quarterly Report on Unaudited Consolidated Results for the Financial Year ended 31 December 2006 which was likely to induce the purchase of Transmile’s shares by other persons.
Gan was also charged in the alternative with having furnished a misleading statement to Bursa Malaysia Securities Bhd in the same financial statement.
Gan was called to enter his defence on the alternative charge after the close of the prosecution case.
In June 2011, Gan made an application to the High Court to refer a constitutional question on the validity of section 122(1) of the SIA arguing that the provision was inconsistent with Article 5(1) of the Federal Constitution.
In 2016, the High Court referred the constitutional questions to the Federal Court for determination.
Today the Federal Court held the provision to be valid and ordered the matter to be remitted to the Sessions Court for continuation of the trial.