KUALA LUMPUR: Serba Dinamik Holdings Bhd has filed a legal action against Bursa Malaysia in response to actions taken by the latter.
Serba Dinamik said its originating summons, filed on November 3 at the High Court here, ensued from Bursa's intervention in its auditing concerns that arose in late May this year.
Following that, Bursa had issued directives to Serba Dinamik on June 28 and July 2 respectively to appoint Ernst & Young Consulting Sdn Bhd as a special auditor to conduct a special independent review" and a subsequent instruction dated Oct 22 for the company to announce a "Factual Findings Update" of the progress made by EY.
Both instructions were allegedly made on the pretext that the Main Market Listing Requirements (MMLR) had given Bursa such powers.
In addition, on Oct 22 the market regulator had suspended trading of Serba Dinamik securities on the Main Market pending the company's announcement in accordance with Bursa's latest instructions.
Serba Dinamik, in its legal suit, is challenging Bursa'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 continuously suspend the trading of Serba Dinamik securities. The suspension lacked procedural fairness and violated the rules of natural justice," said chairman Datuk Mohamed Ilyas in a statement to the New Straits Times.
In its filing to the stock exchange today, Serba Dinamik said it is seeking, among others, for declaration that the directives given by Bursa as well as the suspension of trading are null and void and of no effect.
Serba Dinamik also seeks for an order that Bursa be restrained from taking any action and all actions to announce the whole or any part of the "Factual Findings Update" and from issuing any instructions to Serba Dinamik to appoint any person to act as its special auditor to review or investigate its affairs together with an order for the removal of the trading suspension.
The legal suit questions Bursa'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's own MMLR namely para 9.03 and para 9.35A.
"There was no opinion by Bursa as to breach(es) of any provision of the MMLR by Serba Dinamik. 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," Ilyas said.
Serba Dinamik contests Bursa's power, purportedly pursuant to MMLR, in directing it to appoint EY as a special auditor, on top of challenging EY's status as an auditor under the MMLR and Companies Act 2016.
Serba Dinamik contended that Bursa cannot exercise a purported power to direct it to appoint a person who is not an auditor and to announce any material prepared by a person who is not an auditor which is not obliged to follow any auditing standards or other engagement standards issued by the accounting and audit profession.
It is also alleged, in its claim, that Bursa had acted in contravention of Section 11(3)(a) of the Capital Markets and Services Act 2007 (CMSA) which stated that Bursa shall act in the public interest having particular regard to the need for the protection of investors.
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 from publishing the "Factual Findings Update" prepared by EY and exercising any power to do anything or to instruct any directive or issuing any notice against Serba Dinamik.
This includes to show cause for any purported breach of the MMLR pending the full and final disposal of the originating summon.
Serba Dinamik's action raises interesting questions in regards to the reach of and limit of the powers of regulatory authorities.
This is especially interesting when it is considered that 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 by November 30 2021.
A market observer said 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.
The observer felt that 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.