In a statement it released on February 12, EPF has denied allegations of misconduct or regulatory breaches in the buying and selling of Malaysia Airports Holdings Bhd (MAHB) shares which according to sources, resulted in a purported loss of between RM 500 million to RM 900 million.
The reason that EPF used to deny the allegation is because of something called the “Chinese Wall” policy. According to EPF, since there is a strict boundary that separates the teams that have access to material non-public information and teams that deal in the public markets, there is no way that any privileged information crosses between them.
“The public markets team operates independently, making trading decisions based solely on publicly available information,” it said.
I find this explanation by EPF to be unconvincing, because I don’t see how one short phrase, like the “Chinese Wall” policy, is supposed to alleviate any of our suspicion that inside dealing is not the reason that EPF lost RM 500 to 900 million.
You can’t just say that you are absolutely sure that no inside dealing occurred to cause EPF such a huge lost, just by saying that you practise something called called a “Chinese Wall” to prevent it, when you don’t explain how exactly does this “Chinese Wall” work, and how it can effectively prevent two teams that work for the same organisation, and who likely know each other, from passing privileged information to each other.
For context, the issue in contention is in regards to why EPF had bought back the MAHB shares it sold for RM 5 at RM 11 just a few months later.
In other words, that EPF had to fork out an extra RM 6 per share in re-purchasing the same shares that it owned just a few months earlier, is where the allegation that EPF lost RM 500 million to RM 900 million has come about.
In the way I see it, for this strange “sell low, buy high” trade to occur, all that the party with the decision making power to buy shares in EPF needs to do with another party that is empowered to sell shares in EPF, is to assure each other that if one party acts in a certain manner in regards to the MAHB shares, the other party will act in tune with it, for the purpose of shifting RM 500 to 900 million out of EPF without anyone being wiser about it.
Despite EPF's claim that the "Chinese Wall" policy it practises prevents such a collusion to occur, I don’t see why two conspiring parties can't give each other such an assurance over tea or coffee!
EPF also, by the way, is not denying that it has suffered a RM 500 to RM 900 million loss as alleged, unlike what some others have been claiming.
Considering that EPF seems to have tacitly admit that it indeed suffered such a huge loss, almost a month after the allegation has surfaced, perhaps EPF needs to act more responsibly, and speak more plainly about why it had suffered the loss.
The monetary loss itself is not so much the issue as the reason for the loss.
No one expects EPF to always make a profit in every transaction that it does. We all understand that losses and profits will happen in the process of buying and selling shares.
What we need to know is whether the people who are handling the buying and selling of shares in EPF are reasonable and rational people with unquestionable integrity.
If they are reasonable people with unquestionable integrity, the reasoning behind their actions should be clear, they would have followed a process before making a decision and the reason as well as the process they followed would have been well documented.
When EPF sold the MAHB shares it had at RM 5, all we need EPF to tell us, is the reason why it believed that the price of the MAHB shares it had will not go any higher than RM 5, or go lower, in the future, and also perhaps also tell us why it believed that at that time, it thought that investing in some other share would be more profitable, and we will understand why it chose to sell the MAHB shares and pursue some other investment activity.
When it repurchased the MAHB shares that it sold at RM 5 for RM 11 a few months later, all it has to do is explain to us why it has changed its mind about the value of MAHB shares it had earlier, and why unlike earlier, it is now anticipating that the MAHB shares will go much higher in the future.
As a reasonable, rational organisation that practises integrity, the reasons and reason and rationale for its sales and repurchase of the MAHB shares should be clearly documented.
As educated people, the higher ups in EPF should also not find it difficult to explain its decisions and actions in a simple, straightforward and confidence inspiring manner.
If they can just assure us that the decision was rational, reasonable and made by people who practise unimpeachable integrity, who practise due process to a T and document every decision and option they exercise, then I am sure the public we will all be ok with their explanation, even if the result of their decision was that EPF had lost a big amount of money.
Unlike any other organisation or company, EPF is a body that is responsible for the lives and future of most Malaysians, and thus Its dealing must be clearly above board and undoubtedly free from suspicion and doubt.
Once a grave doubt about EPF has been raised, by personalities and institutions of standing in society, in regards to how EPF might have acted improperly in a way that resulted in a huge loss, a responsible body like EPF should do more to remove the aspersion and clear any doubts in the public's heart, than just cursorily throw a phrase like “Chinese Wall”, as if that means anything to us.
The very fact that EPF has been quite silent about the matter, despite the fact that the issue of the MAHB transaction has been brewing in the public consciousness for at least a month, and then came out to not only not deny the fact that it lost RM 500 million as alleged, but simply deny any impropriety on its part, by giving us one meaningless and cursory word like the “Chinese Wall”, is itself already causing a lot of unrest and anxiety in the public.
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