CORPORATE JARGONS - WHAT THEY DON'T TELL YOU - THE BOMBASTIC TERMS THAT UNDERMINE GOVERNANCE PRACTICES

Disclaimer: The observations shared in this article highlight corporate practices that can obscure transparency, governance, and accountability. They are not meant to suggest that all corporations engage in such practices. Many organisations are upholding the highest standards of ethics, governance, and ESG compliance, and are demonstrating exemplary leadership and integrity in their operations. The purpose of this discussion is to encourage scrutiny, informed oversight, and continuous improvement in corporate practices.

In today’s corporate landscape, language has become a powerful shield.

Annual reports, sustainability statements, investor briefings and press releases are increasingly filled with impressive-sounding terms : order books, adjusted earnings, strategic partnerships, net-zero commitments. None of these are inherently wrong.

But when clarity, metrics, and accountability are missing, language becomes a tool of concealment rather than communication.

This is where credibility, good practices of management systems and board governance expectations quietly erode.

Below are common corporate terms that deserve closer scrutiny, especially by boards, auditors, regulators, and stakeholders.

1. ORDER BOOK VALUE

A large order book is often presented as proof of future strength.

Governance question: 

• How much is legally binding versus indicative?

• What is the cancellation risk and margin quality?

From governance standpoint, overstating certainty misleads stakeholders and distorts risk disclosure.

2. “MISCELLAENEOUS" or “OTHER” ITEMS

These are often dismissed as immaterial.

Red flag: When “miscellaneous” becomes material in size, it signals weak internal controls and poor financial transparency both inconsistent with good practices on accurate record-keeping.

3. ADJUSTED EBITDA

Adjustments are sometimes necessary.

Governance failure occurs when:  Recurring costs are repeatedly labelled “exceptional” to manufacture performance.

Boards should ask: Why does the business need constant adjustment to look viable?

4. NON-RECURRING/ONE-OFF ITEMS

If a “one-off” appears every year, it is no longer one-off.

This practice undermines truthful reporting, a core requirement of ethical governance and anti-corruption frameworks.

5. STRATEGIC PARTNERSHIPS

Often announced with fanfare.

Key oversight questions:

• Is there capital commitment or just an MoU?

• Are responsibilities and risks clearly allocated?

Anti Corruption Practices expects clear due diligence on partners, not headline-driven alliances.

6. PIPLELINE PROJECTS

A pipeline is potential not performance.

Boards should demand:

• Approval status,

• Funding certainty,

• Historical conversion rates

Without this, pipeline disclosures become optimism bias masquerading as strategy.

7. REVENUE GROWTH

Revenue growth alone does not indicate value creation.

From a governance lens:

• Are margins sustainable?

• Are receivables ballooning?

Is growth driven by discounting or risk-taking?

Cash integrity matters more than top-line numbers.

8. COST OPTIMIZATION AND EFFICIENCY INITIATIVES

Cost optimisation is often celebrated.

But what is being cut? Training? maintenance? safety? and compliance? - cuts from these items may boost short-term figures while creating long-term ESG and operational risks.

9. “STRONG BALANCE SHEET”

This phrase deserves interrogation.

Boards must look beyond headline ratios to:

• Off-balance-sheet obligations,

• Short-term liquidity dependence,

• Covenant exposure

True financial resilience is stress-tested, not asserted.

10. DEFERRED REVENUE

Often framed as future income.

In reality, it is a delivery obligation. Failure to deliver can trigger penalties, refunds, or reputational damage directly impacting ESG trust.

11. FAIR VALUE GAINS

Valuation gains are not cash.

When executive incentives are linked to unrealised gains, governance misalignment emerges, contradicting responsible remuneration principles.

12. RELATED PARTY TRANSACTIONS

Legal does not automatically mean "ethical".

Anti-Corruption practices and good governance require:

• Transparent pricing,

• Independent approval,

• Minority shareholder protection

13. GOING CONCERN STATEMENTS

A going concern statement signals survival, not strength.

Boards should ensure stakeholders understand the assumptions behind continuity, not just the conclusion.

14. DIGITAL TRANSFORMATION/AI-DRIVEN/ESG LED

Buzzwords are not strategies.

Boards should demand evidence of:

• Implementation,

• ROI

• Risk management and controls

PowerPoint compliance is not operational compliance.

15. GREENWASHING - THE ESG CREDIBILITY CRISIS

Perhaps the most damaging practice today.

Common patterns include:

• Selective emissions reporting (Scope 3 ignored),

• Heavy reliance on offsets instead of reductions,

• Sustainability claims without third-party assurance,

ESG without verifiable data, targets, and accountability is greenwashing branding not responsibility.

Governance reminds us that misrepresentation is a corruption risk, even when framed as sustainability.

What This Means for Boards

Modern boards are no longer judged only on financial performance. They are expected to ensure:

• Truthful, complete, and balanced disclosure,

• Ethical conduct embedded in systems, not slogans,

• ESG claims aligned with operational reality

Anti-Corruption principles reflected in decision-making (not just certification)

15. CORPORATE JARGON AND IMPACT ON STOCK MARKET PRICING

Corporate language doesn’t just influence internal governance, it can have a direct impact on market perception and stock valuation.

When public companies use bombastic terms, order books, adjusted EBITDA, pipeline projects, or ESG/green claims  without full transparency, Investors may overestimate future cash flows or profitability, driving share prices higher than fundamentals justify.

Short-term enthusiasm can mask long-term risks, such as margin erosion, unsustainable cost cuts, or one-off accounting adjustments. 

Greenwashing or exaggerated ESG claims can temporarily attract ESG-focused funds, yet may lead to reputational and financial risk if claims are later questioned.

Conversely, strong, transparent reporting builds credibility, leading to more stable valuation, lower cost of capital, and better investor confidence.

Stock markets react not just to actual performance, but to narratives, trust, and perceived governance quality. Boards, auditors, and investors should recognize that clarity and accountability in corporate communication are as critical as the underlying numbers themselves.

In short - the way a company presents itself is inseparable from how the market values it. Misleading or vague corporate language can inflate short-term pricing but undermines long-term shareholder trust and market efficiency.

BRIEF CONCLUSION (for now)

The louder the language, the greater the duty to question it.

Strong organisations do not hide behind terms. They explain them, evidence them, and invite scrutiny. That is the real test of governance, ESG integrity, and leadership accountability. 

WANT TO INVEST IN BURSA? HUMBLE GUIDE BY NIK ZAFRI

Disclaimer : I am not a share expert and I gave up my license a long time ago. What I’m sharing here is purely based on my personal experience and observation. It may not suit everyone’s risk appetite or investment goals, so please treat this only as an unqualified personal guide, not professional financial advice. Always do your own research or consult a licensed investment adviser before making decisions.

Before investing a single sen, get familiar with how the stock market works.

Bursa Malaysia is the main stock exchange in Malaysia. It’s where public companies list their shares, and investors buy/sell them.

1) When you buy share

It means that you own a small part of that company. You can profit in two ways:

• Capital gain : buying low and selling high,
• Dividends : regular payments from the company’s profits (many Malaysian companies are good dividend payers).

2) Open a CDS and Trading Account

a) To invest, you must have:

• Central Depository System (CDS) Account (managed by Bursa Malaysia),
• Trading Account (with a stockbroker or bank)

b) How to open:

Choose a broker (examples: Maybank , CIMB , RHB, Hong Leong Bank Berhad , or online platforms like Rakuten Trade  or M+ Online),

• Submit your IC and supporting documents,
• Fund your trading account (some start as low as RM100)

Rakuten Trade and MIDF Invest are good for beginners - based on my own experience, they’re user-friendly and low-cost.

3) Learn the Different Types of Stocks

Generally, Malaysian stocks can be grouped into:

• Blue Chips: Big, stable companies (e.g. Maybank, PETRONAS Chemicals Group Berhad (PCG), Tenaga Nasional Berhad ) – lower risk, steady dividends.
• Growth Stocks: Smaller or mid-sized companies with potential to grow fast (e.g. tech, healthcare) – higher risk, higher reward.
• Dividend Stocks: Companies that consistently pay dividends (e.g. REITs, utilities, telcos).
• Speculative/Penny Stocks: Cheap, volatile, high risk - avoid until you have experience.

4) Study Before You Buy

Wise investors look at both fundamental and technical factors.

4.1 Fundamental analysis : Earnings per share (EPS), Price-to-earnings ratio (P/E), Dividend yield, company management and business model, Industry trends

4.2 Technical analysis: Price charts (candlesticks), support and resistance, volume trends.

For beginners, focus more on fundamentals first! Learn to value a business, not just its share price.

5) Build a Small, Safe Portfolio

Start small : say RM500–RM1,000 per month.

This way, you’re not putting all your eggs in one basket.

6) Be Patient and Think Long-Term

Stock investing is not gambling.

The “wise choice” is:

• Investing in strong companies with good track records.
• Holding long enough for compounding to work.
• Reinvesting dividends.

Avoiding panic selling when the market dips.

You may not get rich overnight, but in 5–10 years, consistent and disciplined investing can grow your wealth significantly.

7.0 Keep Learning

Here are some tips and recommended resources:

• Bursa Academy (free online learning by Bursa Malaysia),
• InvestSmart by SC Malaysia

Some of the books that I've read:

• The Intelligent Investor (Benjamin Graham)
• One Up on Wall Street (Peter Lynch)

8.0 “Wise” Start

Let’s say you invest RM1,000 in Maybank at RM8.80 per share.

Annual dividend yield ≈ 6% → RM60 a year. If price rises to RM9.50, you gain ~8% in capital. Total gain ≈ 14% = RM140 (Yes, it's not big, but it's steady and definitely low risk).

Do that every month, and in 5 years you’ll have built a portfolio worth many thousands even more with reinvested dividends.

9.0 SIMULATED PORTFOLIO

Here's an example of simulated portfolio with low risk and expected annual return, based on your monthly budget and risk appetite

Let's assume RM1,000/month, moderate risk, and short-term (1–2 years).

That means your goal is to make steady gains without too much exposure to volatility - something practical and realistic for Bursa Malaysia .

Here’s a smart short-term portfolio simulation designed around those parameters.

9.1 Bursa Malaysia Stock Investment Plan (Moderate, Short-Term)

Monthly Investment = RM1,000/month. Time Frame = 12–24 months

a) Portfolio Allocation

b) Expected Performance (Estimates for 1–2 Years)

This may sound modest, but for short-term investing, it’s realistic and protects your capital while letting you learn market behaviour.

10.0 Strategy and Tips

• Use Dollar-Cost Averaging (DCA):

Invest RM1,000 every month regardless of price. This smooths out volatility.

• Monitor Quarterly Results:

Keep an eye on companies’ QRs (Quarterly Reports) - if profits drop for 2 straight quarters, reconsider holding.

• Set a Profit Target:

Aim to sell if a stock rises 10–15% within 6–12 months. Don’t get greedy - short-term means locking in profits wisely.

• Reinvest Dividends:

Even short-term, reinvesting dividends increases compounding effect.

• Avoid Chasing Hype:

Stay away from “goreng” or speculative counters unless you can afford the loss. Stick with sound fundamentals.

Let’s say you start with:

RM400 → Maybank (RM8.80/share)

RM250 → IGB REIT (RM1.80/share)

RM250 → Inari (RM3.00/share)

RM100 → kept as cash

After one year:

Maybank rises to RM9.30 (+6%) and pays 6% dividend → 12% total gain

IGB REIT pays 5% dividend, price stable → 5% gain

Inari rises 15% → 15% gain

Average total gain ≈ 10% (RM1,200 → RM1,320)

If reinvested monthly, your annual profit could reach RM800–RM1,000, not huge but safe and smart.

10.0 Your Simulated 12-Month Investment Roadmap

Here’s your 12-month Bursa Malaysia Stock Investment Roadmap - tailored for RM1,000/month, moderate risk, and a short-term horizon (1–2 years). 

(Total target investment: RM12,000)

This plan balances steady growth, dividend income, and learning experience without overexposing you to market risk.

a) Portfolio Mix at Year-End

b) Expected Return (Short-Term Estimate) 

c) Rebalancing and Exit Plan

• Rebalance every 6 months (or when a stock gains/loses >15%)
• Lock in profit when a counter exceeds +10–15%, then reinvest elsewhere.
• Cut loss if a company falls >10% and fundamentals worsen (check quarterly results).
• If market dips sharply but fundamentals remain intact → buy more (average down).

11.0 CONCLUSION

Investing in Bursa Malaysia can be both rewarding and educational when approached with patience, discipline, and a clear strategy. Even with a modest monthly commitment, wise investors can gradually build wealth through sound stock selection, consistent monitoring, and reinvestment of returns. While short-term profits are possible, the real value lies in understanding market behaviour and making informed choices rather than chasing quick gains.

Remember; as stated in the disclaimer ; this guide is not professional financial advice, but a reflection of personal experience. Every investor’s journey is unique, so always do your own research and invest only what you can afford to hold. The key is not to predict the market, but to prepare and participate in it wisely.

Exposing Modern Investment Frauds - Forex, Stock Market, and Cryptocurrency Traps - Overview by Nik Zafri

In the ever evolving world of digital finance, fraud and scams have also evolved becoming more sophisticated, harder to detect, and dangerously convincing. Investors, especially those new to online trading, are now increasingly vulnerable to elaborate schemes involving fake Forex platforms, stock market trading sites, and cryptocurrency exchanges.

1) The Illusion of Legitimacy

Fraudsters deploy advanced digital tactics to appear legitimate.

1. Fake Live Charts

Many fraudulent platforms use convincing, real-time charts to simulate active trading. These charts are entirely controlled by a back-end operator and bear no connection to actual market data. Investors are lured by apparent gains, only to be denied withdrawals later under false pretenses (e.g., needing to “upgrade accounts” or pay “taxes”).

2. Bogus Licensing and Fake Review Portals

Fraudsters create fake websites mimicking regulatory bodies or ranking agencies. These sites display fabricated ratings and licensing credentials, often appearing high on Google search results thanks to paid ads and SEO manipulation. Victims may believe they're investing through a "licensed broker" or "top-rated crypto exchange."

3. Interactive and Engaging Fake Platforms

Well-designed websites offer demo accounts, AI chatbots, and "account managers" to build trust. Some even use deepfake video calls or pre-recorded webinars to showcase fake testimonials and investor success stories.

4. Pretending to Fight Scams

In a bold twist, some fraudulent websites go to great lengths to appear trustworthy by displaying "anti-scam" warnings on their own platforms. They may even include links to real regulatory authorities like the SEC, FCA, or local police departments. This reverse psychology tactic is designed to lower your guard and convince you they are above suspicion.

2) Reducing the Risk - What You Can Do

1) Verify Licensing with Official Sources

In Malaysia, verify a broker or platform’s registration with:

Securities Commission Malaysia (SC) or Bank Negara Malaysia (BNM)

Both regulators provide Investor Alert Lists that identify unlicensed or suspicious entities.

1.1) International Verification

For international checks, refer to:

• Financial Conduct Authority (UK)
• U.S. SEC’s Investment Adviser Public Disclosure
• IOSCO (International Organization of Securities Commissions)

Avoid Platforms That:

• Pressure you into “urgent” investments
• Ask for payment via crypto or gift cards
• Block withdrawals without explanation
• Have no physical address or hide behind offshore jurisdictions

Report Immediately

Victims or whistleblowers can file reports with:

• CCID (Commercial Crime Investigation Department) – PDRM
• CyberSecurity Malaysia
• SC Malaysia Investor Affairs – hotline or online form
• The National Scam Response Centre (NSRC)

Conclusion

Financial scams today are not run by amateurs, they are often coordinated operations involving web developers, social engineers, and online marketers. The key defense is awareness, skepticism, and verification through official channels. Never let the appearance of legitimacy override proper due diligence.

#InvestmentScamAlert #CryptoFraudAwareness #ForexScamPrevention #VerifyBeforeYouInvest #StopOnlineScams

REFRESHER - INVESTMENT IN THE STOCK MARKET - Quick Overview by Nik Zafri

Disclaimer : The information comprised in this section is not, nor is it held out to be, a solicitation of any person to take any form of investment decision. The content of the article does not constitute advice or a recommendation by the author and should not be relied upon in making (or refraining from making) any decision relating to investments or any other matter. You should consult your own independent financial adviser and obtain professional advice before exercising any investment decisions or choices based on information featured in this article. The author can not be held liable or responsible in any way for any opinions, suggestions, recommendations or comments made nor do opinions of contributors necessarily reflect those of the author

Please always remember, stock market has nothing to do with fortune telling

WHICH PLATFORM IS THE BEST TO INVEST?

It’s been a while since I last talked about the stock market, but I’m still in the game, just as an investor, not an expert. I usually rely on my humble decades of experience to guide my decisions. So, here we go.

Whenever I'm asked the question, which platform should a person invest? Actually, I have no preference as there are many platforms that you can invest - it all depends on your goals, risk appetite, and time horizon. Common platforms include:

Stock Market (e.g. Bursa Malaysia, NYSE, NASDAQ): Suitable for medium- to long-term investment and active trading.

Unit Trusts/Mutual Funds: Good for passive investors,

ETFs (Exchange-Traded Funds): Offers diversification with lower risk,

Robo-Advisors: Automated, algorithm-driven platforms (e.g. StashAway, Wahed Invest),

REITs (Real Estate Investment Trusts): Good for income-focused investors,

Cryptocurrencies (e.g. Bitcoin, Ethereum): Very high risk, suitable only if you understand the volatility.

Real Estate: Tangible asset, but requires large capital and longer holding period.

For this explanation, I'll focus on the stock market.

2. TECHNICAL ANALYSIS

(example) Let’s take Maybank stock listed on Bursa Malaysia. 

(Note : Please read the above disclaimer before proceeding)

You want to know whether to buy, hold, or sell.

Tool Used: Moving Average Crossover

• Short-term MA (e.g. 20-day Moving Average)
• Long-term MA (e.g. 50-day Moving Average)

Scenario :

If the 20-day MA crosses above the 50-day MA ➜ Golden Cross ➜ Buy signal

If it crosses below ➜ Death Cross ➜ Sell signal

Result: On 15 March 2025, you observe that the 20-day MA of Maybank crosses above its 50-day MA. The trading volume also spikes. This may suggest a bullish trend and a potential buy signal.

But, you need to confirm this with other tools like:

RSI (Relative Strength Index) : to check if it's overbought or oversold.

MACD (Moving Average Convergence Divergence) : to confirm trend strength.

Support/Resistance levels : for better entry/exit.

Here's a more thorough analysis :

Current Stock Information

Last Traded Price: RM10.42​

Day's Range: RM10.16 - RM10.40​

52-Week Range: RM9.52 - RM11.04​

Market Capitalization: RM122.84 billion

PE Ratio: 12.18

Dividend Yield: 5.89%​

​Data as of March 20, 2025. ​

Technical Indicators:

Moving Averages:

• MACD (Moving Average Convergence Divergence):
• RSI (Relative Strength Index):
• Support and Resistance Levels:
• Support: RM10.34​
• Resistance: RM10.50​

​These levels are based on recent trading activity and volume. ​

Recent Performance:

Maybank's share price reached a record high of RM8.93 on September 18, 2024, before experiencing some profit-taking.

Analyst Outlook:

As of February 27, 2025, Maybank was downgraded to a 'Hold' with a target price raised to RM11.42. 

Conclusion

The technical indicators suggest that Maybank's stock is in a consolidation phase, with key support around RM10.34 and resistance near RM10.50. The MACD indicates bullish momentum, while the RSI suggests the stock is approaching oversold conditions. Investors should monitor these levels and indicators closely, considering both technical signals and fundamental factors before making investment decisions.

3. WHY DATA IS SOOOO IMPORTANT?

Accurate data is the backbone of any investment decision. Here’s why:

• Historical Price and Volume Data: Needed for technical analysis,
• Financial Reports: Show the company’s performance, debt level, profit margins, cash flow, etc,
• Economic Indicators: Inflation rate, interest rates, GDP growth influence market behavior,
• Sentiment & News: Public perception and events (e.g., CEO changes, legal issues) affect price.

Without reliable data, you’re investing blindly - it’s like driving in the fog without headlights. (I had few unpleasant experience on this one)

4. TRANSPARENCY BY LISTED COMPANIES 

Transparency builds trust and allows investors to make informed decisions.

Besides publishing prospectuses and undergoing audits, companies must:

a. Disclose Material Information

• Major contracts won/lost
• Changes in top management
• Corporate exercises (e.g. bonus issues, share splits)
• Legal disputes
• Mergers and acquisitions

b. Provide Forward Guidance

• Future outlook or business direction
• Expansion plans

c. Consistent Investor Relations (IR) : 

• Quarterly briefings
• Press releases
• Investor presentations

Finally...Does this all matter? The answer is a big "YES"

• It will reduces risk of Insider Trading
• It helps maintain fair valuation
• It gives investors confidence

A company that hides bad news or delays reporting is a red flag - transparency reduces uncertainty and helps maintain stock stability.

MAKE SOME INCOME (By Nik Zafri)

The strategies employed to invest and increase income are often complex and multifaceted when it comes to "practical".

However, I found some common themes emerge all the time which I sum up as the core investment strategies.

1) Diversification

Spreading investments across various asset classes (stocks, bonds, real estate, commodities) to reduce risk is one good move.

2) Long Term Perspective

Always focus on building income over time rather than quick gains. In short, greed will make you lose, so be patient.

3) Leverage

When you borrow, increase them on potential returns - it's risky but once you strike, it's worth. You can also get ASB loan and let them invest or reinvest for you. In the long run, you might get handsome returns

4) Get a good advice

Although Warren Buffet might not agree with me, but if you can afford it especially when you have no experience, it's logical to employ financial advisors or wealth managers to handle investments.

5) Always pay tax but optimize them

Draw up a good strategies to minimize tax liabilities but never avoid from paying tax

There are quite a number of investment vehicles.

1) Stocks and Bonds

Investing in publicly traded companies and if you have heard of government debt, go for them.

2) Real Estate

Own properties for rental income or appreciation.(REIT)

3) Private Equity and Venture Capital

Investing in startups and private companies.

4) Hedge Funds

Pooled investment funds that use various strategies to generate returns.

Alternative Investments can be purchase of assets like art, collectibles, and commodities.

Additional Soft Income-Building Sources

1) Business Ownership - Creating and growing businesses.

2) Intellectual Property - Developing and protecting patents, copyrights, and trademarks.

3) Inheritance - if you come from a rich family.

4) Risk-Taking - Pursuing high-reward, high-risk ventures.

5) Networking - Building relationships with influential people.

Also, think the way successful people think.

You must have access to information for e.g. exclusive investment opportunities and market insights

You must adopt a risk tolerance attitude - allowing yourself to pursue higher-return investments.

Have a long term perspective (Time Horizon) - enabling yourself to weather market fluctuations.

Good luck, just sharing my perspective from my so-called research. No guarantee of success unless you really work hard and do not let failure stop you. Remember, investing involves risk, and past performance is not indicative of future results. Just conduct thorough research or consult experts before making investment decisions.

HOW EXACTLY DO ARTIFICIAL INTELLIGENCE ANALYZE THE STOCK MARKET - From the draft notes of Nik Zafri

Knowledge Sharing (from my draft notes) :

Question : How exactly Artificial Intelligence predicts the stock market?

Nik Zafri : If I have to make an intelligence guess, it should look something like this

#artificialintelligence #AI #stockmarket

PREDICTING THE STOCK MARKET? HERE'S SOME TIPS (NIK ZAFRI)

Predicting the stock market with absolute certainty is an elusive goal because it's influenced by numerous unpredictable factors such as economic indicators, geopolitical events, investor sentiment, and even natural disasters. However, many analysts and researchers attempt to forecast stock market movements using various methods and tools.

I believe statistical models such as linear regression, ARIMA, GARCH are some of the most popular ones in analyzing historical price data and identify patterns or trends. There are few other typical analyses such as

(a) quantitative (maths (Black-Scholes) + statistics = pricing or Var for loses),

(b) fundamentals (company's financial health, quality, trends, and macroeconomic = intrinsic value and predict future stock prices),

(c) technical - past market data, primarily price and volume = identify patterns and trends = predict future price movements. Tools : moving averages, chart patterns, and technical indicators such as RSI and MACD and,

(d) sentiment - alternative news from social media, news, anything of public sentiment to gauge investor mood and predict market movements. NLP should be useful to extract insights from textual data.

And now here comes Artificial Intelligence (my gen used to call it machine learning - we don't have sophisticated tools like AI then) - the principles are much the same except the approach is far more advanced. Algorithms such as neural network, SVM, random forests (data mining) and make predictions. AI can handle non-linear relationships and capture complex patterns better than traditional statistical methods (although I may disagree with that :-) )

INSIDER TRADING IS A CRIME - Nik Zafri

Insider trading is a criminal offence under the CMSA 2007. Upon his or her conviction under either sections 188(2) or (3), the insider shall be punished to imprisonment for a term not exceeding 10 years and to a fine not less than RM1,000,000.00 (section 188(4) CMSA 2007)

Insider trading refers to the buying or selling of stocks by someone who has access to non-public, material information about a company. This practice is illegal because it undermines the fairness and integrity of the financial markets.

It erodes trust in the fairness of financial markets. When insiders use privileged information to gain an advantage in trading, it undermines the level playing field that is crucial for the proper functioning of stock markets. This can deter investors and reduce market efficiency. They give access to non-public information an unfair advantage over other market participants. This allows them to profit at the expense of uninformed investors, distorting the true value of securities and leading to market inefficiencies. Furthermore, it can create mistrust by investors in the financial system as if it has been rigged where investors may not participate, leading to decreased liquidity and reduced investment activity.

Insider trading can distort the allocation of capital by diverting investment to companies based not on their fundamentals but on insider information. This misallocation of resources can hinder economic growth and reduce the overall efficiency of the economy.

Overall, the danger of insider trading lies in its potential to undermine the fairness, efficiency, and integrity of financial markets, as well as erode investor confidence and distort capital allocation. As such, stringent regulatory measures are necessary to deter and punish insider trading and uphold the integrity of the financial system.