Brokers reminded not to key in personal trades

BROKERS at brokerage houses have been reminded not to key in personal trades but channel them through house brokers. This reminder, already part of Bursa Malaysia's rulings to prevent insider trading and front running, came in the wake of massive trading losses at Golden Jomalina Food Industries Bhd, a subsidiary of Golden Hope Plantations Bhd.

Traders and industry players said they would not be surprised if the relevant brokerages, through which the trades were executed, were already conducting in-house investigations.

In fact, the Securities Commission and Bursa would have the credit trail of all trades done and could easily find out if anyone has “benefited'' from this fiasco and in what manner. In fact, industry players say the authorities can unveil all “submarine'' trades.

In response to a query from StarBiz, the SC said: “We review all cases on a regular basis.''

“A lot of people do this kind of things,'' an industry source said. “But it gets uncovered at a public company. There should actually be a detailed report on the entire affair.''

Worldwide, there are plenty of such cases involving large amounts of losses not properly accounted for and explained. Just a look at the phenomenal write-downs at the US financial houses linked to subprime will indicate that till this day, nobody really knows what assets have been bundled and unbundled. And yet, the cash calls continue and the world willingly pours in money to “save'' these companies.

In the case of Golden Jomalina, industry players feel there may be a need to probe deeper as to how in-house rules could have been broken, where the instructions came from or whether there was a “blatant'' attempt to transfer funds legally out of Golden Hope before the merger.

Industry players estimated that to incur a loss of RM120mil, a trader might have transacted as many as 40,000 contracts or one million tonnes of palm oil, at a loss of more than RM100 per tonne over a period of time, and the trader kept adding short positions as the prices rose.

Refineries are supposed to conduct buy hedges and the notion of selling short in a rising market is highly questionable, traders said. There are also questions on whether the losses could have been higher, and if any plantation profits, for example, could have been used to offset those losses. If at all, industry players estimated it would not be much – maybe RM20mil to RM30mil.