I have written before about Scan Associates, and the rather curious case of suing Bursa Malaysia.
As detailed by KiniBiz:
"Scan Associates also said it had no means to announce Bursa Malaysia’s directive on the GN3 reclassification as its company secretaries had left."
Tough luck, but I guess that if the company secretary leaves, you need to appoint a new one, quickly.
Not too long afterwards, Scan withdrew its case, RM 30K in money poorer and hours in effort spend.
However, this was not the end of the story, since Bursa decided to reprimand the company and its directors and fine the directors RM 350K.
The company announced its first half year results: its operations are tiny, it has a negative net asset value, and is involved in numerous legal disputes.
Showing posts with label reprimand. Show all posts
Showing posts with label reprimand. Show all posts
Saturday, 2 April 2016
Friday, 5 February 2016
XOX: from bad to worse ..... (3)
I wrote before about XOX:
XOX was a loss making company before its IPO, it is quite a surprise for me that it was allowed to be listed on Bursa. What probably helped was a rather optimistic (with hindsight) profit forecast that it issued in its IPO prospectus.
XOX was not able to hit the revenue and profit forecasts, it wasn't even close:
The above numbers are for the year up to 31 December 2011, while the company was listed on June 10, 2011 and knew already the numbers up to then. In other words, it only needed to forecast another seven months or so. And still it was able to overestimate its revenue by a factor 4, and instead of a forecasted PAT of RM 20 Million it booked a loss of RM 20 Million. Forecasting is probably not XOX's forte.
It looks like the Securities Commission was also not exactly "impressed" by XOX's forecast, and announced the following administrative actions: a reprimand for two executive directors of XOX and for AmInvest Bank as the principal adviser for the IPO of XOX.
Is a reprimand really enough, will it act as a future deterrent? I strongly doubt it.
XOX was a loss making company before its IPO, it is quite a surprise for me that it was allowed to be listed on Bursa. What probably helped was a rather optimistic (with hindsight) profit forecast that it issued in its IPO prospectus.
XOX was not able to hit the revenue and profit forecasts, it wasn't even close:
The above numbers are for the year up to 31 December 2011, while the company was listed on June 10, 2011 and knew already the numbers up to then. In other words, it only needed to forecast another seven months or so. And still it was able to overestimate its revenue by a factor 4, and instead of a forecasted PAT of RM 20 Million it booked a loss of RM 20 Million. Forecasting is probably not XOX's forte.
It looks like the Securities Commission was also not exactly "impressed" by XOX's forecast, and announced the following administrative actions: a reprimand for two executive directors of XOX and for AmInvest Bank as the principal adviser for the IPO of XOX.
Is a reprimand really enough, will it act as a future deterrent? I strongly doubt it.
Saturday, 23 February 2013
Can-One reprimanded, seven directors fined RM 350K
Bursa Malaysia issued the following Media Release:
"Bursa Malaysia Securities publicly reprimands Can-One Berhad and fines seven directors a total of RM350,000"
The facts are rather clear:
The share of Can-One suddenly took off in high volume:
On January 5, 2012 Bursa issued an "UMA" (Unusual Market Activity) query. This is pretty standard when the share price of a company changes a lot.
Can-One replied the same day:
One day later, on January 6, 2012 however, Can-One issued the following announcement:
"The Board of Directors of Canone is pleased to announce that the Company has on 6 January 2012 been advised by its solicitors that the Federal Court had on 5 January 2012 allowed the Liquidators' Appeals, including the Liquidators' Appeal to proceed with the completion of the sale of 146,131,500 ordinary shares of RM0.25 each held by KJ Holdings in Kian Joo at RM1.65 per share for an aggregate consideration of RM241,116,975.00 to CISB."
Bursa Malaysia was probably not too pleased with the two statements which seem to contradict each other, and concluded:
"CANONE’s announcement dated 5 January 2012 (issued at 7.20 p.m.) was inaccurate, not factual and hence, in contravention of its disclosure obligation under the Listing Requirements.
Bursa reprimanded the company and reprimanded and fined the seven directors each RM 50,000.
Good action by Bursa, also within a reasonable time limit. Too often I noticed the rather "automatic" reply "we are not aware of any rumour/report/explanation" by companies on an UMA query, so a decisive action will hopefully deter future breaches of the rules.
Trading in the share should have been suspended by the company the moment the Federal Court made its decision, giving all shareholders a reasonable time (say one day) to digest the information.
For me just one question remains: why did the directors breach the rules? Just an honest/lazy mistake, a case of miscommunication, or was something else going on, did (any of) the directors benefit from their action?
"Bursa Malaysia Securities publicly reprimands Can-One Berhad and fines seven directors a total of RM350,000"
The facts are rather clear:
The share of Can-One suddenly took off in high volume:
On January 5, 2012 Bursa issued an "UMA" (Unusual Market Activity) query. This is pretty standard when the share price of a company changes a lot.
Can-One replied the same day:
"1. There is no corporate development relating to Canone Group’s business and affairs that has not been previously announced that may account for the unusual market activity including those in the stage of negotiation/discussion.
2. We are not aware of any rumour or report concerning the business and affairs of Canone Group that may account for the unusual market activity.
3. We are not aware of any other possible explanation to account for the unusual market activity."
One day later, on January 6, 2012 however, Can-One issued the following announcement:
"The Board of Directors of Canone is pleased to announce that the Company has on 6 January 2012 been advised by its solicitors that the Federal Court had on 5 January 2012 allowed the Liquidators' Appeals, including the Liquidators' Appeal to proceed with the completion of the sale of 146,131,500 ordinary shares of RM0.25 each held by KJ Holdings in Kian Joo at RM1.65 per share for an aggregate consideration of RM241,116,975.00 to CISB."
Bursa Malaysia was probably not too pleased with the two statements which seem to contradict each other, and concluded:
"CANONE’s announcement dated 5 January 2012 (issued at 7.20 p.m.) was inaccurate, not factual and hence, in contravention of its disclosure obligation under the Listing Requirements.
Bursa reprimanded the company and reprimanded and fined the seven directors each RM 50,000.
Good action by Bursa, also within a reasonable time limit. Too often I noticed the rather "automatic" reply "we are not aware of any rumour/report/explanation" by companies on an UMA query, so a decisive action will hopefully deter future breaches of the rules.
Trading in the share should have been suspended by the company the moment the Federal Court made its decision, giving all shareholders a reasonable time (say one day) to digest the information.
For me just one question remains: why did the directors breach the rules? Just an honest/lazy mistake, a case of miscommunication, or was something else going on, did (any of) the directors benefit from their action?
Monday, 21 January 2013
MMM and 4 directors reprimanded, fined 494K
Bursa Malaysia has taken action against MMM (Malaysian Merchant Marine Bhd) and 4 of its directors: Dato’ Ramesh Rajaratnam, Kamil bin Abdul Rahman, Datuk K. Anthony @ Merlyn Kasimir and Dato’ Khairil Anuar bin Aziz.
"Bursa Malaysia Securities Berhad (Bursa Malaysia Securities) has publicly reprimanded Malaysian Merchant Marine Berhad (MMM) and its four directors for various breaches of the Listing Requirements of Bursa Malaysia Securities (LR) / Bursa Malaysia Securities Main Market Listing Requirements (Main LR). The four directors were also fined a total of RM493,750.
MMM was publicly reprimanded for committing various disclosure breaches arising from its failure to disclose/make accurate disclosures in respect of the termination/non-completion of certain vessel acquisitions and financial reporting breaches as follows:-"
And then a long list of incidents, for example:
"The QR Disclosures were not factual, unclear, ambiguous, inaccurate, not succinct, not balance, not fair, did not contain sufficient information to enable investors to make informed investment decisions and particularly misleading as to the funding and continuance of the Bow Santos Acquisition. There was also blatant omission of the termination / non-completion of the Bow Santos Acquisition and forfeiture of the deposit in MMM’s 1st QR 2010, 2nd QR 2010 and 3rd QR 2010. In respect of the statement on funding, there was no evidence of any confirmation from lenders to grant MMM credit facilities for the Bow Santos Acquisition before MMM executed the MOA and paid the deposit."
Etc, etc, etc.
Kudos to Bursa for taking action and giving a detailed description of the facts.
Still, questions remain, most incidents happened in 2009 and 2010, could Bursa not take action more early? The company was officially delisted on March 17, 2011, its shares were suspended since August 2010. The punishment seems rather late to offer any solace to its long suffering minority shareholders. Also, are fines really a sufficient deterrent?
MMM has been a controversial company for a long time, something Bursa was well aware off: since its listing in 1999 MMM had to reply a whopping 36 times to queries from Bursa.
Other events have well been documented by Where is Ze Moola.
MMM was linked to M3nergy, a company that was delisted in October 2010, and which was also reprimanded and its directors fined on August 17, 2010.
"Bursa Malaysia Securities Berhad (Bursa Malaysia Securities) has publicly reprimanded Malaysian Merchant Marine Berhad (MMM) and its four directors for various breaches of the Listing Requirements of Bursa Malaysia Securities (LR) / Bursa Malaysia Securities Main Market Listing Requirements (Main LR). The four directors were also fined a total of RM493,750.
MMM was publicly reprimanded for committing various disclosure breaches arising from its failure to disclose/make accurate disclosures in respect of the termination/non-completion of certain vessel acquisitions and financial reporting breaches as follows:-"
And then a long list of incidents, for example:
"The QR Disclosures were not factual, unclear, ambiguous, inaccurate, not succinct, not balance, not fair, did not contain sufficient information to enable investors to make informed investment decisions and particularly misleading as to the funding and continuance of the Bow Santos Acquisition. There was also blatant omission of the termination / non-completion of the Bow Santos Acquisition and forfeiture of the deposit in MMM’s 1st QR 2010, 2nd QR 2010 and 3rd QR 2010. In respect of the statement on funding, there was no evidence of any confirmation from lenders to grant MMM credit facilities for the Bow Santos Acquisition before MMM executed the MOA and paid the deposit."
Etc, etc, etc.
Kudos to Bursa for taking action and giving a detailed description of the facts.
Still, questions remain, most incidents happened in 2009 and 2010, could Bursa not take action more early? The company was officially delisted on March 17, 2011, its shares were suspended since August 2010. The punishment seems rather late to offer any solace to its long suffering minority shareholders. Also, are fines really a sufficient deterrent?
MMM has been a controversial company for a long time, something Bursa was well aware off: since its listing in 1999 MMM had to reply a whopping 36 times to queries from Bursa.
Other events have well been documented by Where is Ze Moola.
MMM was linked to M3nergy, a company that was delisted in October 2010, and which was also reprimanded and its directors fined on August 17, 2010.
Friday, 6 January 2012
Mulpha International reprimanded
(lightly edited version)
On January 3, 2012 Mulpha International (Mulpha) was reprimanded by the Securities Commission:
http://www.sc.com.my/main.asp?pageid=770&linkid=3002&yearno=2012&mod=paper
The description of the misconduct was rather vague, to say the least:
"Failure to ensure the final basis of allocation of excess rights shares was consistent with the basis disclosed in the abridged prospectus of Mulpha International Berhad dated 24 February 2010"
In what way was it not consistent? The rights issue in 2010 was a massive 1-for-1 exercise worth almost RM 500 million in which the the market capital of the company would almost double. If anything was wrong with that exercise, surely the minority shareholders deserve a clear explanation.
An article in The Star of today sheds more light on this issue:
http://biz.thestar.com.my/news/story.asp?file=/2012/1/6/business/10213165&sec=business
By JOHN LOH
PETALING JAYA: Mulpha International Bhd's directors are disappointed at a reprimand from the Securities Commission (SC) that claimed the property developer failed to disclose information in a 2010 prospectus in “a full and true manner.”
Mulpha said in a statement that it would write to the regulator for further clarification before considering its next course of action, which may include an appeal.
“The company fully cooperated and provided all required information to the SC when queried on Sept 30, 2010.
“The company is also disappointed that this matter has been announced without giving the company the benefit of its 30-day right to appeal the decision,” it said.
The SC had on Wednesday posted the reprimand on its website, saying Mulpha's actions had breached Paragraph 1.03 of its guidelines for abridged prospectuses.
Essentially, it described Mulpha as inconsistent in the way it allocated the excess rights shares to what was disclosed in the abridged prospectus.
Mulpha's abridged prospectus, which was issued on Feb 24, 2010, was for a renounceable one-for-one two-call rights issue of up to 1,526,559,774 new ordinary shares of 50 sen each. However, the rights issue was undersubscribed, raising only RM471.2mil.
Its board said it believed the SC's reprimand specifically related to the manner in which it had allocated the excess rights shares to shareholders and renouncees who applied for them.
In its defence, the company explained that there was a minority of shareholders and renouncees, many of whom held a miniscule number of shares at the entitlement date, who applied for the excess rights shares at unusually high multiples, some even up to thousands of times what they were entitled.
“Two renouncees, for example, put in excess rights shares applications of 29,999 and 598,000 times of their initial entitlements.
“The directors of Mulpha, after receiving formal legal advice and invoking the authority granted to the Board in Section 4.4 of the abridge prospectus, fixed the allocation of excess rights shares to all applicants to generally 10 times of their initial entitlements.
“The board exercised its rights as it believed these extremely high excess applications could potentially give rise to adverse and irregular trading in its shares post the completion of the capital raising, which would be detrimental to the interest of the company.
“It could also potentially reduce the number of excess shares allocated to the remaining shareholders and renouncees who had put in excess applications that were not grossly and artificially inflated,” it pointed out.
(Section 4.4 authorises the board to allot the excess rights shares in a fit and expedient manner and in the best interest of the company as well as to accept any excess rights shares application in full or in part without assigning any reason, in a fair and equitable manner and on a pro-rata basis.)
Mulpha added that while the reprimand was given to the present board, Datuk Yusli Mohamed Yusoff and Caesar Loong were not directors at the material time when the abridged prospectus was issued.
“Furthermore, as the underwriter to the rights issue was the company's major shareholder in which Lee Seng Huang has an indirect interest, Lee consequently abstained, as required by law, from the board's deliberations on the formula to allocate the excess rights shares,” it said.
Through various investment holding companies, Lee and his family have an indirect 35% equity interest in Mulpha, based on its latest annual report.
Mulpha's stock shed 0.5 sen to 38 sen yesterday, with 6.7 million shares traded.
Why did Mulpha not announce the above when they published the allocation? Here is the allocation table from the website of Bursa Malaysia:
It says "total excess applications", not "total approved excess applications", it appears that all excess applications have been approved since even with the excess applications the rights issue has been undersubscribed. If indeed excess applications were restricted, then Mulpha should have been transparent about it.
What probably happened is that some shareholders put in large applications for excess rights shares, these amounts were strongly reduced, but when these shareholders later checked on the Bursa Malaysia's website it turned out that the rights issue was actually undersubscribed (even including the applications for excess rights shares) and that the unsubscribed rights shares (about 37 million) were allocated to Magic Unicorn Ltd, linked to the majority shareholders. After seeing this they probably filed a complaint with the Securities Commission.
Some issues:
On January 3, 2012 Mulpha International (Mulpha) was reprimanded by the Securities Commission:
http://www.sc.com.my/main.asp?pageid=770&linkid=3002&yearno=2012&mod=paper
The description of the misconduct was rather vague, to say the least:
"Failure to ensure the final basis of allocation of excess rights shares was consistent with the basis disclosed in the abridged prospectus of Mulpha International Berhad dated 24 February 2010"
In what way was it not consistent? The rights issue in 2010 was a massive 1-for-1 exercise worth almost RM 500 million in which the the market capital of the company would almost double. If anything was wrong with that exercise, surely the minority shareholders deserve a clear explanation.
An article in The Star of today sheds more light on this issue:
http://biz.thestar.com.my/news/story.asp?file=/2012/1/6/business/10213165&sec=business
Mulpha disappointed with SC reprimand, seeking clarification
By JOHN LOH
PETALING JAYA: Mulpha International Bhd's directors are disappointed at a reprimand from the Securities Commission (SC) that claimed the property developer failed to disclose information in a 2010 prospectus in “a full and true manner.”
Mulpha said in a statement that it would write to the regulator for further clarification before considering its next course of action, which may include an appeal.
“The company fully cooperated and provided all required information to the SC when queried on Sept 30, 2010.
“The company is also disappointed that this matter has been announced without giving the company the benefit of its 30-day right to appeal the decision,” it said.
The SC had on Wednesday posted the reprimand on its website, saying Mulpha's actions had breached Paragraph 1.03 of its guidelines for abridged prospectuses.
Essentially, it described Mulpha as inconsistent in the way it allocated the excess rights shares to what was disclosed in the abridged prospectus.
Mulpha's abridged prospectus, which was issued on Feb 24, 2010, was for a renounceable one-for-one two-call rights issue of up to 1,526,559,774 new ordinary shares of 50 sen each. However, the rights issue was undersubscribed, raising only RM471.2mil.
Its board said it believed the SC's reprimand specifically related to the manner in which it had allocated the excess rights shares to shareholders and renouncees who applied for them.
In its defence, the company explained that there was a minority of shareholders and renouncees, many of whom held a miniscule number of shares at the entitlement date, who applied for the excess rights shares at unusually high multiples, some even up to thousands of times what they were entitled.
“Two renouncees, for example, put in excess rights shares applications of 29,999 and 598,000 times of their initial entitlements.
“The directors of Mulpha, after receiving formal legal advice and invoking the authority granted to the Board in Section 4.4 of the abridge prospectus, fixed the allocation of excess rights shares to all applicants to generally 10 times of their initial entitlements.
“The board exercised its rights as it believed these extremely high excess applications could potentially give rise to adverse and irregular trading in its shares post the completion of the capital raising, which would be detrimental to the interest of the company.
“It could also potentially reduce the number of excess shares allocated to the remaining shareholders and renouncees who had put in excess applications that were not grossly and artificially inflated,” it pointed out.
(Section 4.4 authorises the board to allot the excess rights shares in a fit and expedient manner and in the best interest of the company as well as to accept any excess rights shares application in full or in part without assigning any reason, in a fair and equitable manner and on a pro-rata basis.)
Mulpha added that while the reprimand was given to the present board, Datuk Yusli Mohamed Yusoff and Caesar Loong were not directors at the material time when the abridged prospectus was issued.
“Furthermore, as the underwriter to the rights issue was the company's major shareholder in which Lee Seng Huang has an indirect interest, Lee consequently abstained, as required by law, from the board's deliberations on the formula to allocate the excess rights shares,” it said.
Through various investment holding companies, Lee and his family have an indirect 35% equity interest in Mulpha, based on its latest annual report.
Mulpha's stock shed 0.5 sen to 38 sen yesterday, with 6.7 million shares traded.
Why did Mulpha not announce the above when they published the allocation? Here is the allocation table from the website of Bursa Malaysia:
It says "total excess applications", not "total approved excess applications", it appears that all excess applications have been approved since even with the excess applications the rights issue has been undersubscribed. If indeed excess applications were restricted, then Mulpha should have been transparent about it.
What probably happened is that some shareholders put in large applications for excess rights shares, these amounts were strongly reduced, but when these shareholders later checked on the Bursa Malaysia's website it turned out that the rights issue was actually undersubscribed (even including the applications for excess rights shares) and that the unsubscribed rights shares (about 37 million) were allocated to Magic Unicorn Ltd, linked to the majority shareholders. After seeing this they probably filed a complaint with the Securities Commission.
Some issues:
- Mulpha should have clearly written how and why it allocated the excess rights shares, especially since Mulpha's majority shareholders received more excess rights shares because of this and thus conflict of interest is a serious possibility
- Mulpha should (even now, two years later) be forced to give a clear overview how the excess rights shares were allocated, grouped by Related Parties and Non-Related Parties
- The Securities Commission should write more clear descriptions of misconduct, readers should not have to guess what was actually the issue
- I hope that the Securities Commission gave Mulpha sufficient chance to appeal, although it does seem to me (given the above information) that (at least) a reprimand was indeed in order
- This case took almost two years to complete, why so unbelievable long? This is not a very difficult case and should easily be dealt with within one year (before the end of 2010)
- It might be wise in general to cap the amount of excess rights shares a shareholder can apply for relative to his entitlement to some reasonable number. This would require a change in the rules. If certain parties are applying for 598,000 times their entitlement, then that smells like exploiting a loophole, and that is not what investing should be about
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