Wednesday, April 07, 2010

SC to probe EPF insider trading allegations

The Securities Commission (SC) said today that it is following up on claims that the Employees Provident Fund (EPF) was potentially involved in insider trading of Malaysian Resources Corporation Bhd (MRCB) shares.

DAP National Publicity Secretary Tony Pua had yesterday urged the SC to investigate EPF based on suspicion of illegal insider trading and market manipulation following the recent announcement of a major property development project in Sungai Buloh to be led by EPF.

“The Securities Commission Malaysia is looking into the claims made by YB Tony Pua to the press on 6 April 2010 in relation to the Employees Provident Fund and Malaysian Resources Corporation Bhd,” said the SC in a written response to The Malaysian Insider’s request for comment.

Pua had yesterday alleged that EPF and MRCB had engineered a rights issue exercise by the latter on Dec 4 last year to enable EPF to acquire substantial additional stakes in MRCB prior to the announcement of the massive 3,000 acre Sg Buloh project by the prime minister on March 30.

The market had been speculating that MRCB would be appointed the joint venture partner for development of the valuable land, located within the Klang Valley, and the share price of MRCB almost immediately rose following the prime minister’s announcement.

Among the factors which bolstered market speculation that MRCB would be appointed is the fact that the former group managing director of MRCB, Shahril Ridza Ridzuan, joined EPF as its new chief investment officer late last year.

MRCB CEO Mohamed Razeek Hussain also said in a media statement on April 2 that MRCB had the right resources to help EPF develop the land. No formal announcement has been made however.

Pua contended that it was “completely ridiculous” for EPF to deny prior knowledge of the project and that discussions on the joint venture must have been concluded well before the March 30 announcement and said that rumours of the project being awarded to EPF and MRCB had been circulating in financial circles since the end of 2009.

He also claimed that EPF was allocated a disproportionately higher percentage of rights issued or 37.7 per cent of the rights issued despite the rights issue being oversubscribed 1.74 times.

As a result, its shareholding in MRCB rose to 33.78 per cent from 30.6 per cent it held prior to the rights issue, triggering a mandatory general offer (GO) as it breached the 33 per cent shareholding mark.

He noted that EPF was forced in its GO to offer to purchase all shares of MRCB at the price of RM1.50 per share on March 4 and it continued to actively purchase shares from the open market and had since increased its stake in MRCB to approximately 41.5 per cent as of 29 March 2010.

The DAP MP added that EPF and MRCB should be investigated under the Capital Market and Services Act (CMSA) 2007. Those found guilty of an offence under the law can be punished by imprisonment not exceeding 10 years or a fine of not less than RM1 million.

courtesy of Malaysian Insider

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