Court upholds conviction of insider trader Dato Sreesanthan

The recent decision by the Federal Court to uphold the conviction of Dato’ Sreesanthan Eliathamby for insider trading of Worldwide Holdings Berhad (Worldwide) shares reaffirms the ruling of the Court of Appeal from September 5, 2022. The court also ordered Dato’ Sreesanthan to pay costs amounting to RM100,000 to the Securities Commission (SC).

One of the key findings of the Federal Court emphasized that according to the Capital Markets and Services Act 2007, the accused must have knowledge of the information not being publicly available. This clarification points out that liability in insider trading cases is not strictly based on information’s public availability.

Determining the information’s materiality in insider trading involves assessing the facts and circumstances surrounding the acquisition and subsequent events that transpire. This detailed examination is essential in establishing the gravity of the insider trading offense.

The specific mention of Article 145(3) of the Federal Constitution underscores that the Attorney General’s authority to initiate proceedings does not extend to civil actions conducted by the SC under section 90A(5) of the SIA for insider trading cases. Consequently, the Securities Commission is not obliged to seek the Attorney General’s consent for civil actions related to insider trading charges.

In the case against Dato’ Sreesanthan initiated by the SC in 2016, he was alleged to have acquired 600,000 Worldwide shares between June 7 and July 11, 2006, while possessing material non-public information about the proposed privatization of Worldwide by Perbadanan Kemajuan Negeri Selangor. At the time, Dato’ Sreesanthan held a senior partner position at a law firm advising CIMB Investment Bank on the corporate exercise.

Following a comprehensive trial, the High Court ruled in favor of the SC, compelling Dato’ Sreesanthan to settle a sum of RM1,989,402.00 (three times the gains from insider trading) and an additional civil penalty of RM1,000,000. He was further disqualified from serving as a director of any public listed company over a ten-year period starting from November 18, 2020. The Court of Appeal unanimously upheld this ruling.

The Federal Court’s recent ruling adds an additional RM100,000.00 to the total amount that Dato’ Sreesanthan must pay, bringing the overall sum to RM3,239,402.00.

In conclusion, the court’s decision to uphold the conviction of Dato’ Sreesanthan for insider trading of Worldwide shares reinforces the legal standards and consequences of engaging in prohibited financial activities like insider trading. Such cases serve as reminders of the repercussions individuals face for violating securities laws and regulations, emphasizing the importance of ethical conduct in financial transactions.