Malaysia’s civil litigation system is largely based on the former English Rules of the Supreme Court. However, as the law of England and Wales has developed, Malaysia’s is developing but at a lesser rate.
Malaysia’s civil litigation system is largely based on the former English Rules of the Supreme Court. However, as the law of England and Wales has developed, Malaysia’s is developing but at a lesser rate.
Representative action in Malaysia has served as the equivalent of class actions. Such actions are conducted according to Order 15 rule 12 of the Rules of the High Court 1980 and other rules which affect whether a case is thrown out are often invoked alongside it.
In 2008, Malaysia’s Corporate Law Reform Committee acknowledged in its consultative document titled, “Members’ Rights and Remedies” that Order 15 rule 12 possesses several flaws in the protection of minority shareholders and that class actions would also provide stronger accountability.
It stated that the opportunity to pool resources was likely to provide a better outcome for minority shareholders as the cost of bringing separate proceedings would be reduced and, in turn, increase the amount of compensation/damages obtainable.
Despite this evaluation, the Corporate Law Reform Committee decided against introducing a provision for class actions under the Malaysian companies Act 1965. The committee believed that 2008’s new amendments concerning derivative actions would provide enough of a remedy to such issues for the time being.
It is fair to acknowledge Malaysia’s gesture towards class actions and the court’s awareness of the potential benefits of providing specific legislation in this area. Despite its current deferment, specific securities class action legislation may well be developed in the near future due to the globalisation of class actions which has stimulated activity in the Asia-Pacific region.
International legislatures are now developing frameworks to allow non-US investors in shares listed on a non-US exchange, to pursue securities class actions in their courts. This is arguably as a result of the US Supreme Court’s ruling in the Morrison v National Australia Bank case.
It ruled that US securities laws only apply to companies listed on US exchanges, wiping out the eligibility of what have become known as f-cubed actions. An f-cubed action involves a non-US shareholder suing a non-US company whose stock was purchased on a non-US exchange, and who is bringing a case in a US court.
Countries such as Australia, the Netherlands and Canada now have class action legislation firmly entrenched. Being able to participate in a class action within one’s own jurisdiction is beneficial, however, it is just as important that investors and fiduciaries successfully monitor securities class action opportunities throughout the world.
Such vigilance would be advantageous for Malaysian investors as Malaysian investment portfolios often have an ample proportion of shares held abroad. In addition, Goal Group has recently reported that between 2000 and 2012, a failure by Malaysian investors’ to identify and participate in US securities class actions has resulted in over $13.6 million being left unclaimed.
The globalisation of class actions has highlighted the fiduciary duty of fund managers and custodians to identify relevant securities class actions and ensure client participation, therefore enabling them to recoup some of their investment losses. In recent years, fiduciaries have been presented with a growing risk of being sued if they do not ensure their investors participate in relevant securities class actions across the globe.
Keeping track of the opportunities to make a claim, and the processes required to do so successfully can appear a complicated and daunting task, however. Institutional investors have, in some cases, believed that the cost and time involved is likely to outweigh the benefits. Although this is often not true, it perhaps explains why nearly a quarter of claims that could be filed by entitled parties, are left unprocessed.
Specialist service providers can now automate the complex process of class action participation across international legislatures at a relatively low cost. On this basis, any argument that complexity, cost and time should be a reason for not making a claim would appear to be very weak indeed.
Goal Group has calculated that securities class action settlements for the Asia-Pacific market will reach $3.435 billion by 2020 and Malaysian fiduciaries and investors must secure all possibilities to participate in relevant securities class actions despite the fact that its own domestic securities class actions legislation is not yet confirmed.
