KUALA LUMPUR, Nov 27 (Reuters) – Shares in Supermax Corp fell sharply on Monday after the rubber gloves manufacturer’s founder was convicted of insider trading in a landmark Malaysian court decision.
The Malaysian company’s group managing director, Stanley Thai, was convicted of insider trading offences relating to another company he used to head and was sentenced to five years in jail on Friday.
It is the first custodial sentence imposed in such a case, the Securities Commission Malaysia told Reuters on Monday.
“(The Commission) will continue to relentlessly pursue those who breach securities laws, including those involved in insider trading, to ensure that we maintain a fair and orderly market,” a spokesman said via email.
Thai, whose jail sentence has been suspended while he appeals against the verdict, was also fined 5 million ringgit ($1.2 million).
He was found guilty of communicating non-public information about APL Industries in 2007, when he was chief executive of the company. APL Industries was delisted and ceased operating in 2009.
Thai’s lawyers said in a statement that they have filed appeals against both the decision and sentence, adding that there is a “substantial” case for the court to reverse the conviction.
A corporate legal advisor said the Securities Commission has been very keen on custodial sentences for securities offences to create a real deterrent.
“They felt that fines would not have the deterrent effect because many white collar criminals would be able to afford the fines. The market has been forewarned,” he said.
Supermax Chairwoman Rafidah Aziz said in a statement released on Monday that the company stood strongly behind Thai and that the company was conducting business as normal.
Shares in Supermax closed 5.3 percent down at 1.98 ringgit, having slid as much as 14 percent in earlier trading.
CIMB Research cut its rating on Supermax to a “hold” from “add” and lowered its target price on the company to 2.03 ringgit from 2.46 ringgit.
But CIMB analyst Walter Aw also said that Supermax’s business operations should remain unscathed, though reputional risks are likely to weigh on the stock.
Supermax is the world’s second-largest manufacturer of rubber gloves by volume, exporting to at least 155 countries. It also makes contact lenses and recently said it wants to acquire a Japanese contact lens company. ($1 = 4.1130 ringgit) (Reporting by Liz Lee; Editing by David Goodman)