The Malaysian financial market has seen one major, if not shocking development on the first quarter of 2014.
The Bank won in Pesaka Astana case vs the bondholders. According to The Star, the decision by the Federal Court rattles the bond market. Well, this is the first Malaysian case whereby the Federal Court favoured the Principal Adviser / Lead Arranger, on the basis of veracity of information contained in the Information Memorandum (IM). Similar to prospectus issued by IPO, IM is a sales brochure containing the information on the bonds, which usually are sent to the institutional investors. In Malaysia IM are also available on the SC website, therefore it is a public document. One of the ways bond is different from shares and funds is that the bondholders are sophisticated investors where they are mainly institutional investors, the likes of Employee Provident Funds, Pilgrimage Funds, banks and other fund management companies. These institutional investors have vast capital market knowledge and experience, hence the difference in regulatory treatment and requirement for them as opposed to retail investors in shares, people like you and me.
Below are the chronology of this case, prepared by The Star:
However Maybank Trustees is not spared from the liability.
I personally don’t think that efficiency of the market will be affected after this. Ever since the first issuance of bond in our market, it has always been targeted to sophisticated investors, whom are expected to conduct their own research and due diligence before making their investment decisions. Therefore with this new court ruling, which not in favour of the bondholders it would mean a greater checks and balances on the investment decisions made by the fund managers.