The Lift Conversation: Sri Tanjung Plantations

The information. The CFO's remark is specific, price-sensitive and not generally available: a RM420 million sale of 4,000 hectares, signing next Tuesday. That is inside information. Farid is connected both through his employment at a licensed firm and through his source.

Three separate issues.

1. Communicating inside information. Telling his brother-in-law, who then traded, is communication of information likely to induce a trade. Section 188 of the CMSA 2007 prohibits communicating inside information and procuring or causing another person to trade. The brother-in-law's trade is caught, and 'I did not know he would buy' is not a defence to the communication.
2. Trading on his own account. The RM60,000 purchase at 9:45am on Monday, after hearing the remark and before the note, is strongly suggestive. Trading records and CDS statements must be secured immediately.
3. The client call and the research note. Telling the fund manager 'something big is coming' is another communication. Publishing a Buy note that raises the target price and cites 'improving asset monetisation' while omitting the sale is at best a misleading research note and at worst a device to move the price while clients are positioned. That moves the analysis from insider trading into market misconduct and exposes the firm itself.

No defence. 'It was a public lift' misses the test - the question is whether the information was generally available, not where it was heard. 'I did not trade' ignores that communicating and procuring are separate offences.

Preventive controls. A personal account dealing policy with pre-clearance and minimum holding periods; a watch list and restricted list triggered by any contact with a listed issuer; a Chinese wall between research and advisory; annual attestations; training that covers lift talk, social media and family accounts; a gifts and entertainment log; and a rule that analysts cannot discuss unpublished research with clients.

Now.

1. Suspend Farid and restrict access to systems and records, and preserve the trading records, emails, chat messages and the research file.
2. Escalate to the board and take legal advice on self-reporting to the SC and responding to Bursa's query. Cooperation is mitigating; managing the outcome around a client relationship is not.
3. Issue a litigation hold covering the analyst, the fund manager client and the research department.
4. Review the fund manager client's trades after the call. If the client traded, the firm has a confidentiality and market-conduct problem of its own.
5. Correct or withdraw the research note and stop further distribution.
6. Trace whether other clients or staff traded in the stock in the window, and whether the restricted list process failed.

Firm liability. A firm is not automatically liable for an employee's rogue conduct, but it is exposed where controls were absent or ignored. The absence of a restricted-list trigger after an issuer contact is exactly the gap a regulator will examine.

Farid. Section 188 CMSA 2007 carries criminal and civil exposure: on conviction, imprisonment and a fine, and separately civil penalties and disgorgement. The civil standard is the balance of probabilities, which is why civil actions are often pursued even where a criminal case is difficult. His CMSRL fit-and-proper status is at risk regardless of the criminal outcome, and the firm should consider restitution and a claim against him. He has also breached the firm's personal-dealing and confidentiality policies, which is a disciplinary matter in its own right.

Brother-in-law and his wife. The trade through the wife's CDS account is caught - the account holder's identity is not a shield. Disgorgement of the profit and a civil penalty are realistic outcomes. 'My brother-in-law gave me a tip' is not a defence.

Fund manager client. If the client traded after the call, the client faces exposure and the firm faces a conflict-of-interest and confidentiality problem that must be disclosed and managed.

Firm. Supervisory and control failures, reputational damage, possible licence conditions and a probable investigation into the research note. The best mitigation is prompt self-report, full cooperation, remediation of controls and remediation of any client harm. The worst is to investigate quietly and hope Bursa's query goes away - that converts a misconduct problem into an integrity problem.