Financial Crime World

High Court Orders Lim Kok Boon and Cheah Mean Har to Pay RM2.165 Million for Insider Trading Scandal in Malaysia

The following article is written in markdown format for easy reading and organization.

Background

On April 22, 2023, in a landmark ruling, the High Court found former GW Plastics Holdings Bhd CEO, Lim Kok Boon, 66, and his friend, Cheah Mean Har, 47, liable for their involvement in an insider trading breach and ordered them to pay a total of RM2.165 million to the Securities Commission Malaysia (SC).

Penalties for Lim Kok Boon and Cheah Mean Har

  • Disgorgement of profits: Lim and Cheah were each ordered to pay disgorgement of RM142,500 to the Securities Commission Malaysia, representing three times the profits earned by Cheah as a result of the illicit acts.
  • Civil penalties: They were also required to pay a civil penalty of RM1 million and RM500,000, respectively.
  • Costs: Lim and Cheah were ordered to pay costs of RM200,000 and RM30,000, respectively.

Violations Committed

  • Lim breached Section 188(3)(a) of the Capital Markets and Services Act 2007 by sharing non-public information with Cheah.
  • Cheah was found liable for a breach under section 188(2)(a) of the CMSA, having acquired GW Plastics shares on September 25 and September 27, 2012, and using non-public insider information to gain an unfair advantage in trading.

Insider Information and the Share Sale Agreement

The insider information pertained to a proposed share sale agreement between GW Plastics and Scientex Packaging Film Sdn Bhd, as well as the subsequent distribution of the share sale proceeds to GW Plastics’ shareholders. This information was made public on October 3, 2012, but Cheah had used non-public information to gain an unfair advantage in trading.

Market Integrity and the Importance of this Decision

This decision serves as a significant warning to those considering engaging in insider trading activities, emphasizing the Securities Commission Malaysia’s dedication to upholding market integrity and addressing market misconduct and abuses that can negatively impact the capital market.

Appeal Against the Judgment

Both Lim and Cheah have filed an appeal against the High Court judgment.