SERBA Dinamik Holdings Bhd has probably created history in corporate Malaysia vis-à-vis its filing of a legal action against Bursa Malaysia Securities Bhd in the Kuala Lumpur High Court in response to actions taken by the latter against the company.
Filed on Nov 3, the Originating Summons ensued from the market regulator’s intervention in Serba Dinamik’s auditing concerns that arose in late May 2021.
The application for interim injunctive relief is fixed for hearing on Nov 11 with the case management for the Originating Summons scheduled for Nov 17.
Recall that Bursa Malaysia had issued directives to Serba Dinamik on June 28 and July 2 respectively to appoint Ernst & Young Consulting Sdn Bhd (EY) as a special auditor to conduct a Special Independent Review (SIR) and a subsequent instruction dated Oct 22 for the company to announce a “Factual Findings Update” of the progress update made by EY.
“Both instructions were allegedly made on the pretext that the Main Market Listing Requirements (MMLR) had given Bursa such powers,” the global integrated oil & gas service provider pointed out.
“In addition, Bursa had on Oct 22 suspended the trading of Serba Dinamik’s securities pending the company’s announcement (of its SIR findings) in accordance with Bursa’s latest instructions.”
In its legal suit, Serba Dinamik is challenging Bursa Malaysia’s authority on the current matter by contending that the latter is acting in excess of its power.
“Bursa has no power to direct or instruct Serba Dinamik and furthermore to suspend continuously the trading of Serba Dinamik’s securities,” contended Serba Dinamik’s chairman Datuk Mohamed Ilyas. “The suspension lacked procedural fairness and violated the rules of natural justice.”
In its claim, Serba Dinamik seeks, among others, for declaration that the directives given by Bursa Malaysia as well as the suspension of its stock trading is null and void and of no effect.
Above all else, Serba Dinamik is also hoping for an order to restrain Bursa Malaysia from taking any action against the company to announce the whole or any part of the “Factual Findings Update” and/or from issuing any instruction to Serba Dinamik to appoint any person to act as a special auditor to review/investigate its affairs as well as to remove the suspension of Serba Dinamik’s stock trading.
The legal suit further questions Bursa Malaysia’s authority to instruct and direct the company to take any steps, action or engage in any conduct which may contravene or otherwise may not comply with several provisions of Bursa Malaysia’s own MMLR namely Paragraph 9.03 and Paragraph 9.35A.
“There was no opinion by Bursa as to breach(es) of any provision of the MMLR by Serba Dinamik,” Ilyas pointed out.
“We were not notified of any breach and Bursa did not notify us the reason a special independent review was necessary in any event. Therefore, the actions taken against Serba Dinamik were grossly in excess of authority.”
Protecting shareholders’ interest
Moreover, Serba Dinamik also seeks to contest Bursa Malaysia’s power – purportedly pursuant to MMLR – in directing Serba Dinamik to appoint EY as a special auditor to conduct a SIR on top of challenging EY’s status as an auditor under the MMLR and the Companies Act 2016.
Together with the claim for damages, Serba Dinamik is also seeking for interim injunctive relief pending the full and final disposal of the Originating Summons.
The interim injunctive seeks to restrain Bursa Malaysia from publishing the “Factual Findings Update” prepared by EY and exercising any power to instruct Serba Dinamik to provide show cause for any purported breach of the MMLR pending the full and final disposal of the Originating Summon.
“This is to protect our shareholders’ interest as most of them are losing money and margin call,” added one Serba Dinamik independent non-executive directors (INEDs) who spoke on condition of anonymity.
The action by Serba Dinamik raises a very interesting perspective with regard to the reach/limit of the powers of regulatory authorities.
This is given the situation facing Serba Dinamik is especially interesting when considering how a listed issuer is allegedly being directed to make announcements of “findings” ahead of its already anticipated audited financial statements which is due to be announced latest by Nov 30.
“What is being played out is an interesting development which concerns all listed issuers. The crux of what Serba Dinamik is saying is why should a regulator require any listed issuer to announce piecemeal findings ahead of audited financial statements that are due to be issued,” noted the Serba Dinamik INED.
“There is merit in Serba Dinamik’s contention because the market will be asked to evaluate a piecemeal finding and it will also eventually receive the ‘news’ of the audited financial statements. The question, therefore, is, why should a regulator push for such competing information to be announced in the first place.” – Nov 8, 2021
