Legal Update 10 of 2011
The extent of safeguards to be put in place for the security of a trading room by a stockbroking company.
CASE:
Saamah binti Saruan v Norhisham bin Tahir & 2 ors [2011] 3 AMR 251
ISSUE: extent of safeguards to be put in place for the security of a trading room by a stockbroking company.
BRIEF FACTS:
• The plaintiff (Saamah) had a share trading account with the third defendant (RHB Securities).
• Saamah believed the second defendant (her remisier) and the first defendant (her remisier's assistant, Norhisham) that it was ok to pay into a third party account rather than into the stock broking firm's account.
• Norhisham had defrauded her. She sued both the remisier and Norhisham and obtained a judgment in default but by that time the both of them had been adjudged bankrupts by other creditors.
• Effectively this suit is against RHB Securities and Saamah claims that the firm had contributed to the fraud perpetrated by Norhisham.
• RHB denies that it is liable for Norhisham's action as he was never employed by it nor was he an agent for it. RHB claims that it never represented to Saamah that Norhisham was its remisier or assistant remisier.
• Furthermore, RHB contends that Saamah ought to have been aware that Norhisham had no authority to act or represent RHB.
• Saamah argues that RHB's failure to safeguard the security of the trading room and the terminals in it had caused her losses.
DECISION: RHB found negligent but Saamah also contributorily negligent.
• The fault of RHB in failing to safeguard the trading room does not apply to the fact that Saamah deposited money into a third party account. Being a seasoned trader, Saamah should have known such transactions would not have been with RHB's consent. Indeed, such private arrangements are prohibited by the KLSE rules.
• However RHB had been negligent in not ensuring that only properly authorised remisers were allowed to transact through its system. RHB had by default, provided a platform for Norhisham to perpetrate his fraud.
• Saamah is contributorily negligent in not having alerted RHB earlier when she had discovered discrepancies in her monthly statements of accounts.
• She should have written officially to RHB but instead chose to believe implicitly in Norhisham.
