Just a week after the government declared plans to open Cambodia’s stock market by July next year, Phnom Penh Municipal Court yesterday tried a Cambodian-Australian on charges that he illegally made public offerings of securities.
Khit Udomvithourith, 43, director of Vistacard Cambodia Trading Post Company, a publishing firm in Phnom Penh, was arrested on March 23 for allegedly making a public offering for his company through an advertisement that appeared in the newspaper Koh Santepheap Daily, said Seang Thearith, head of the legal department of the Securities and Exchange Commission of Cambodia, which filed the law suit against Mr Udomvithourith.
“When we discovered this, we investigated the case and we saw that he had sold securities publicly,” Mr Thearith said.
Under the securities law adopted in 2007, a person may not make public offerings unless the securities are or have been issued by a company registered in Cambodia. Making unlawful public offerings is punishable by up to five years in prison and fines of up to $2,500.
Mr Thearith said that the suspect had also advertised classes on trading stocks and shares in Koh Santepheap, at which he planned to sell securities to the public.
Huot Rothchanpisey, a witness and employee at the SECC, told the court yesterday that she had attended Mr Udomvithourith’s classes in February during which she had bought a single share in his company valued at $399.
Chrea Dara, another witness and SECC employee, said he had also attended Mr Udomvithourith’s classes during which he allegedly claimed to have 100,000 shares up for sale. However, Mr Dara said he did not buy a share in the company.
During yesterday’s hearing, Mr Udomvithourith told the court that he had not sold any securities but admitted that he was looking for investors in his company, which he said had been struggling financially.
“I did not have the intention of selling securities,” he said.
Mr Udomvithourith’s case is like many the government may have to prosecute once the bourse is up and running. But it may also be an initial test of Cambodian authorities’ ability to protect the public from securities’ fraud in a market that is brand new and where investors lack experience.
“It is very important to apply the legal constraints properly in the initial stages,” said In Pyo-lee, project director of the Korea Exchange, which holds a 45 percent stake in the Cambodia Stock Exchange, adding that enough rules and regulations would exist in Cambodia before the stock market finally launches.
“However, [regulations are] expected to be difficult to impose well in the first stage because of a lack of experience,” he added.
SRP lawmaker Tioulong Saumura, former director-general of the National Bank of Cambodia, said that while publicly selling securities without being properly registered was illegal, the legal structure in Cambodia preventing such acts were yet to be fully established.
Still, Ms Saumura welcomed the actions taken by the SECC as a healthy sign that confidence can be installed into the Cambodian stock market.
“You need to have people who are going to make an evaluation of the kind of claims that you are making,” Ms Saumura said. “You have to protect the general public who can be the victims of manipulation of share prices.”
In court yesterday, deputy prosecutor Kry Sok Y said there was more than enough evidence provided by witnesses to show that Mr Udomvithourith had engaged in the illegal trading of securities.
“I still retain the charges for illegally selling public securities,” he said.
Yim Sary, a lawyer representing the SECC, said told the court that the law should be strictly upheld.
“We really have enough evidence to punish him,” he said.
Mr Udomvithourith’s lawyer Cheng Penghap denied yesterday that his client had sold securities while he conducted lessons on financial trading in Phnom Penh.
“The securities market in Cambodia is not yet functional so how can my client have traded anything,” he said. “I request that the judge acquit my client.”
Judge Chea Sok Heang said a verdict for the case would be announced on Thursday.