28 June 2018
On 17 May 2018, Securities Commission Malaysia (“SC”) issued a technical note providing clarification on the short selling of shares in a rights issue exercise before the rights shares are listed on Bursa Malaysia Securities Bhd. (“Exchange”) for trading (“Technical Note”).
The Technical Note clarifies that any person:
- having subscribed and fully paid for the rights shares (“Rights Shares”); and
- having reasonable grounds to believe that the Rights Shares will be allotted to him,
is deemed to have a presently exercisable and unconditional right to vest the Rights Shares with himself or in accordance with his directions pursuant to subsection 98(3)(a) of the Capital Markets and Services Act 2007 (“CMSA”). The Technical Note clarifies that this person will not contravene the short selling provision in subsection 98(1) of the CMSA if he chooses to sell the Rights Shares.
The Technical Note further provides that investors who sell the Rights Shares are subject to, and will bear the risk of buying-in under, the rules of the Exchange in the event the Rights Shares are not available for settlement for any reason.
The Technical Note does not apply to applications for subscription of shares beyond a shareholder’s entitlement in a rights issue exercise, as the award of such excess Rights Shares is at the absolute discretion of the management of the company.