Golden Plus: public reprimands, fined and delisted

I wrote several times about one of the "bad boys" of Malaysian corporate governance, Golden Plus.

Bursa Malaysia apparently had enough of it, and reprimanded and fined the directors and delisted the company.

Errol Oh from The Star wrote "From Golden Plus to black box", adding historical context and raising several issues, for instance:


"It’s one of the greatest mysteries of corporate Malaysia that a Main Market company’s minority shareholders — close to 5,000 of them — can be starved of updates on the company’s performance for years.

The last GPlus annual report was for a two-in-one edition covering 2008 and 2009, and after the release of the results for the fourth quarter ended December 2010, there has been little information about the state of the company’s operations and assets.

As remarkable as it sounds, a listed company worth about RM150mil (just before its shares were suspended in August 2009) has transformed into a black box."


And one final question:


"How do we make sure that there’s no way another listed company can leave its minority shareholders in the dark for years?"

Timing of Earnings Announcements

Interesting article, although the outcome of the research is not exactly shocking:


This study examines the value relevance of the timing of earnings announcement dates relative to prior expectations. It shows that when firms advance their earnings announcements at least four days prior to expectations, the earnings surprises in those quarters tend to be positive and the abnormal returns from two days after the earnings release date was announced through one day after earnings are actually announced are positive and significant. The converse is true for firms that delay their earnings announcement at least four days relative to prior expectations. The study also shows that firms which delay their earnings release date at least four days after previously setting the date earlier are characterized by both negative earnings surprises and abnormal returns from the delay announcements through one day after the actual earnings announcement date. These results can be used by investors to earn abnormal returns, by security analysts in revising their forecasts, and by option traders when earnings announcement dates cross option expiration dates.


My guess is that the same holds in the Malaysian environment, companies with good results want the news quickly out, while companies with bad results will wait until the last day of the month.

Companies that further delay their results beyond what is allowed: a big red flag, often horrific news is waiting.

And the title of "champion in delaying" will go to Golden Plus:

Four audited financial statements, four annual reports and fifteen quarterly financial reports, all delayed. Not a bad score!

Bursa reprimands Nakamichi, fines ED

Bursa announced enforcement against Nakamichi and its Executive Director, some snippets:


Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded Nakamichi Corporation Berhad (NAKA or the Company) and its former executive director, Lo Man Heng for breaches of the Bursa Malaysia Securities Main Market Listing Requirements (Main LR). In addition, Lo Man Heng was fined a total of RM1,432,000 as at 8 October 2014.

Lo Man Heng, the former executive director of NAKA was found to have breached paragraph 16.13(a) of the Main LR for causing NAKA’s failure to announce the 2nd QR 2013, 3rd QR 2013, 4th QR 2013 and AAA 2013 within the stipulated timeframes resulting in the breaches of paragraphs 9.22(1) and 9.23(2) of the Main LR.  A public reprimand and fine of RM2,000 per market day for each delay of the financial statements (subject to a maximum fine of RM500,000 for each financial statement) until the relevant accounts, information / documents of the subsidiary, Tamabina Sdn. Bhd. (Tamabina) was furnished to NAKA to enable preparation and finalisation of the 2nd QR 2013 were imposed on Lo Man Heng.

....

The finding of breach and imposition of the above penalties on NAKA and Lo Man Heng were made pursuant to paragraph 16.19 of the Main LR upon completion of due process and after taking into consideration all the facts and circumstances of the matter including the following:-

• the aggravating conduct of Lo Man Heng; and
• the materiality / impact of the breach vis-à-vis the material price and volume movement of NAKA’s securities upon the announcement that the Company would not be able to submit its 2nd QR 2013 within the timeframe stipulated and the non-submission of the 2nd QR 2013 had led to the suspension in the trading of NAKA’s securities from 9 September 2013 pursuant to paragraph 9.28(5) of the Main LR.

The people behind Golden Plus (about which company I wrote before, here and here) might want to take notice of the above.

Maemode, Golden Plus, China Stationary, HB Global

I wrote about the possible delisting of Maemode. I am afraid that nothing has happened (as was expected), the company didn't announce any plans or objection against the delisting, and thus it was announced that Maemode will be delisted on July 2, 2014.


This is in contrast with Golden Plus, about which I wrote here. The company again announced delays in all their financial reporting, but still remains listed (although the share is suspended).


China Stationary announced that Bursa "rejected the Company’s application for a further extension of time of one (1) month from the Extended Deadline till 31 July 2014."


HB Global announced  "that the Company requires an additional time of approximately two to three weeks to finalise its Audited Financial Statements for the financial year ended 31 December 2013 (“AFS 2013”) and the Company is expecting the said AFS 2013 will be completed on or before 21 July 2014."

Golden Plus or Golden Minus?

Good article in The Star ("Missing Numbers") about Golden Plus Holdings, not having issued a financial statement for many years:


"If you like numbers, here are some to crunch on. They’re all related to Golden Plus Holdings Bhd (GPlus) and the fact that the counter has been suspended for years because it has not lodged a financial report with the stock exchange since February 2011.

Let’s start with this – 1,742. That’s the number of days (including today) that there hasn’t been any trading of GPlus shares. Bursa Malaysia imposed this suspension on Aug 3, 2009, after GPlus had missed the deadline for the release of its audited financial statements for the year ended Dec 31, 2008.

The audited accounts for 2008 and 2009 were finally issued in July 2010, but the suspension hasn’t been lifted because GPlus still has a long list of outstanding financial reports.

This brings us to the next number – 19. That’s how many financial reports that the company has yet to issue. These are the audited financial statements for four years (2010 to 2013), annual reports for three years (2010 to 2012) and results for the 12 consecutive quarters between 2011 and 2013.
  
Naturally, this dismal record has resulted in Bursa Malaysia taking enforcement action, which leads us to more numbers.

Since the suspension, GPlus has been publicly reprimanded four times. Its directors have been similarly penalised twice and have been fined a total of RM1.52mil.

Despite all this, there’s no sign of an end to the drought of information. On April 30, GPlus told the exchange that “there is no change or further development in the status of issuance of the outstanding financial reports”.

The latest news – if you can call it that – about GPlus is an investor alert announcement on the Bursa Malaysia website yesterday to say the company has failed to submit its 2013 audited accounts.

While it’s mildly amusing to note that the GPlus case has yielded a set of numbers precisely because of the company’s lack of publicly available numbers, it’s no laughing matter that such an example of poor governance and appalling transparency has dragged on for so long.

It’s understandable that the authorities want to see the GPlus financial reports before acting further, but the resolution has to come soon. Every day that this is delayed is another day that the listing rules are subject to mockery."


The last annual report of GPlus concerned the years 2008 and 2009 was issued on Septmber 7, 2010, two snippets:

Apparently the Board of Directors was not too happy being reprimanded and fined. Did the above "complaint" help? Not really, two more reprimands and a large fine followed, on June 22, 2011 and January 16, 2012.

With the last reprimand being issued more than two years ago, may be it is time for a new enforcement?

Some information about the court cases of the past can be found in an article from Shearn Delamore and Co: "Removal of Directors in Public Company".

Harsh fines for non-executive independent directors?

I noticed the following article in The Star, July 2, 2011:
http://biz.thestar.com.my/news/story.asp?file=/2011/7/2/business/9005490&sec=business

The writer, Datuk Jeyaraj Ratnaswamy, was chairman of the Audit committee of Golden Plus Holdings Bhd (GPlus), he was reprimanded and fined RM 200,000, the same as all fellow Board members. 

"To subject these directors to such hefty fines and penalties seem rather harsh, more so when they are not in any position to control events, which are mainly the domain of the executives. The members of the audit committee and in particular, the audit committee chairman, are there by reason of a Bursa Malaysia listing requirement. At least one of them must be a member of the Malaysian Institute of Accountants (MIA).
They are only able to play a role of advising at directors’ meetings and/or not approving questionable acts and transactions, but are never in a position to dictate when an act is to be accomplished by the company, for example, the issuance of quarterly financial statements, annual audited financial statements and the like.
These matters are directly under the control of the executives, who if they choose not to comply on a timely basis for whatever reason, leave the non-executive directors with almost little or no choice in being able to ensure timely adherence."

I strongly object to the above opinion. Directors have a fiduciary duty to act in the best interest of the shareholders. It is their obligation to perform their duties and report back to the shareholders or authorities, also in the case that they are not able to do their duty. If they don't do that, and even consistently so, they should be punished severely. Bare in mind that the above Director joined GPlus in 2006.

Here is the link to the reprimands from Bursa Malaysia, dated 22 June 2011:

http://www.bursamalaysia.com/website/bm/media_centre/listing.jsp?mode=date&sel=2011&a=%2Fbm%2Fmedia_centre%2Fmedia_releases%2Fyears%2F2011%2F20110622_184608234.html

"Bursa Securities first issued a directive for GPLUS to appoint a SA (Special Auditor) on 26 August 2008 due to various facts and circumstances including the numerous breaches of the listing requirements at the material time by the company and uncertainty and concern with regards to the management of the business and financial affairs of GPLUS by the provisional liquidator (“PL”) appointed over GPLUS and its subsidiaries on 27 March 2008 vis-a-vis compliance of the listing requirements by GPLUS.

Notwithstanding the removal/cessation of the PL on 10 May 2010 and that GPLUS had submitted its outstanding financial statements, Bursa Securities maintained and required compliance of the SA Directives. In this regard, Bursa Securities remained concern of the uncertainty as to the management of business and financial affairs of GPLUS and the financial figures and various items set out in GPLUS’ annual audited accounts for the financial year ended 31 December 2009, particularly pertaining to GPLUS’ subsidiaries in China which contributed more than 99% and 87% of the total revenue and assets of GPLUS Group respectively as at 31 December 2009.

The directors had refused to comply and blatantly disregarded Bursa Securities’ directives to appoint PWC as the SA and allow the commencement of the special audit notwithstanding the numerous directives by Bursa Securities, the court orders procured on 10 August 2009 and 10 May 2010 by Bursa Securities and GPLUS’ execution of PWC’s letter of engagement dated 11 August 2009.

GPLUS and the directors only proceeded to appoint PWC on 17 December 2010 and paid the mobilisation fee to PWC on 27 December 2010 after Bursa Securities had obtained an order from the High Court on 29 November 2010 to specifically compel GPLUS to appoint PWC as the SA and perform all the obligations pursuant to PWC’s letter of engagement, failing which, the directors of GPLUS may be in contempt of the court order and liable to committal proceedings."

I think actually, given the explanation of Bursa Malaysia, that the fines are rather light, not heavy.

The following article is from BusinessInsider, August 31, 2011:

http://www.businessinsider.com/cayman-islands-court-fines-hedge-fund-managers-of-collapsed-fund-111-million-each-for-neglecting-duties-2011-8

2 Hedge Fund Managers Fined $111 Million Each For Being Empty Suits

"The Grand Court of the Cayman Islands recently found two hedge fund managers of a now-defunct fund guilty of willful neglect their duties fining them $111 million each. This case is significant because it's the first time in the context of a failed fund that the court has found two directors guilty of willful neglect or default in the discharge of their duties, HedgeWeek reported. Long story short, they were fined for sitting on the board of their relative's hedge fund and doing nothing. They were empty suits who never attended a board meeting and signed documents without reading them, according to the Cayman Islands court judge who ruled on the case. “Directors of Cayman Islands investment funds can no longer live under the misconception that they are immune from liability for a company's losses if they do not themselves take an active role in the company's business," said Shaun Folpp, a managing associate at Olgier Cayman who acted on behalf of the plaintiff."

To fine two managers for USD 111 million each and to actually collect that money is two different things, but the message off this judgment is loud and clear.

I haven't witnessed a single case of a Director in Malaysia standing up against the management of the company (often the same as the Majoriy Shareholder), voicing his/her concerns, voting against any of the numerous questionable proposals. I therefore encourage Bursa Malaysia & Securities Commission to strongly increase enforcement, name and shame the perpetrators through public reprimands, hand out meaningful fines in relation to the offences and to aim for multi-year jail sentences in the more serious cases.