BURSA MALAYSIA SECURITIES PUBLICLY REPRIMANDS AND/OR FINES APFT BERHAD AND 6 FORMER DIRECTORS
Bursa Malaysia Securities Berhad [Registration No.: 200301033577 (635998-W)] (Bursa Malaysia Securities) has publicly reprimanded APFT Berhad (APFT) and 6 of its former directors for breaches of the Bursa Malaysia Securities Main Market Listing Requirements (Main LR). In addition, the 6 former directors of APFT were imposed total fines of RM475,000.
APFT was publicly reprimanded for the following breaches:-
(1) QR Breach
Breach of paragraph 9.16(1)(a) of the Main LR in respect of APFT’s amended quarterly report for the financial period ended (FPE) 30 April 2017 (Amended QR 30/4/2017) announced on 16 June 2017 which was inaccurate for recognising RM2.15 million of other income arising from the write back of over-provision of expenses from previous years (Other Income). The Other Income was subsequently reversed out in APFT’s audited financial statements for the financial period from 1 August 2016 to 31 January 2018 (AFS 31/1/2018) announced on 31 May 2018.
(2) FA Breach
Breach of paragraph 8.04(3)(b) of the Main LR read together with paragraph 4.1(a) of Practice Note 17 (PN17) for failing to make the First Announcement pursuant to PN17 on an immediate basis upon announcement of APFT’s quarterly report for the FPE 30 September 2017 (QR 30/9/2017) on 30 November 2017.
APFT had triggered the prescribed criteria under paragraph 2.1(e) of PN17 as the external auditors had expressed an emphasis of matter on the company's ability to continue as a going concern (Emphasis of Matter) in APFT’s latest audited financial statements for the financial period ended 31 July 2016 (AFS 31/7/2016) and based on the QR 30/9/2017, APFT’s shareholders’ equity on a consolidated basis of RM19.261 million represented 34.6% of the issued and paid-up capital of RM55.638 million as at 30 September 2017.
APFT only made the First Announcement pursuant to PN17 on 19 January 2018.
APFT was also required to review and ensure the adequacy and effectiveness of its financial reporting function and carry out a limited review on its quarterly report submissions. The limited review must be performed by the company’s external auditors for four quarterly reports commencing no later from the quarterly report for the FPE 31 July 2020. In addition, APFT must ensure all its directors and relevant personnel attend a training programme in relation to compliance with the Main LR pertaining to financial statements.
6 former directors of APFT were publicly reprimanded and fined for breaches of paragraph 16.13(b) of the Main LR for permitting knowingly or where they had reasonable means of obtaining such knowledge, APFT to commit the QR Breach and/or FA Breach as follows:
[td] | | | | 1. | Dato’ Faruk Bin Othman Executive Chairman (appointed on 22 June 2010 and resigned on 6 November 2017)
| paragraph 16.13(b) of the Main LR for permitting the QR Breach | Public reprimand and fine of RM200,000
| 2. | Arif Bin Faruk Executive Director (appointed as Non-Executive Director on 22 June 2010, re-designated as Executive Director on 1 August 2011 and resigned on 2 August 2017)
| paragraph 16.13(b) of the Main LR for permitting the QR Breach | Public reprimand and fine of RM50,000
| 3. | Tan Nyap Keong @ Tony Tan Independent Non-Executive Director Audit Committee member (appointed on 6 December 2010 and resigned on 29 December 2017) | paragraph 16.13(b) of the Main LR for permitting the QR Breach | Public reprimand and fine of RM50,000 | paragraph 16.13(b) of the Main LR for permitting the FA Breach
| Public reprimand and fine of RM50,000
| 4. | Edwin Silvester Das Executive Director (appointed on 2 August 2017 and removed on 18 January 2019)
| paragraph 16.13(b) of the Main LR for permitting the FA Breach | Public reprimand and fine of RM50,000
| 5. | Chow Hung Keey Independent Non-Executive Director Audit Committee Chairman (appointed on 2 August 2017 and retired on 26 July 2018)
| paragraph 16.13(b) of the Main LR for permitting the FA Breach | Public reprimand and fine of RM50,000
| 6. | Datin Seri Anizah Binti Musa Independent Non-Executive Director (appointed on 8 November 2017 and resigned on 3 April 2018)
| paragraph 16.13(b) of the Main LR for permitting the FA Breach | Public reprimand and fine of RM25,000
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The finding of breach and imposition of the above penalties on APFT and its directors were made pursuant to paragraph 16.19 of the Main LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including the materiality of the breaches, impact of the breaches to APFT and shareholders/investors and the roles, responsibilities and conduct of the directors.
Bursa Malaysia Securities views the contraventions seriously as the requirements for listed companies to submit financial statements that are factual, clear, unambiguous, accurate, succinct and contains sufficient information and to make the First Announcement on an immediate basis in accordance with paragraph 4.1(a) of PN17 upon fulfilling the prescribed criteria under paragraph 2.1 of PN17 are fundamental obligations of listed companies and of paramount importance in ensuring a fair and orderly market for securities traded on Bursa Malaysia Securities and to enable investors to make informed investment decisions.
BACKGROUND
QR Breach
APFT had on 15 June 2017 announced the QR 30/4/2017 without recognising the Other Income and reported a shareholders’ equity of RM12.892 million representing 46.98% of APFT’s issued and paid up capital of RM27.441 million. In this respect, the Board had during the Board of Directors meeting on 14 June 2017 agreed with the advice and recommendation of the auditors to reverse the Other Income in the QR 30/4/2017, ensure it was properly verified and justified and the Board would review the same in the subsequent fourth quarterly report for FPE 31 July 2017.
However, upon receipt of Bursa Securities’ email on 16 June 2017 (at 2.27 p.m.) indicating that APFT had triggered the prescribed criteria under paragraph 2.1(e) of PN17 based on the QR 30/4/2017 and the Emphasis of Matter in the AFS 31/7/2016, APFT had reinstated/recognised the Other Income in the Amended QR 30/4/2017 which was announced on 16 June 2017 (at 5.37 p.m.). Consequently, the Amended QR 30/4/2017 reported a lower loss attributable to the owners of the Company of RM9.541 million as compared to RM11.691 million reported in the QR 30/4/2017 and the Company’s shareholders’ equity had increased to RM15.042 million representing 54.82% of the Company’s issued and paid up capital (i.e. above the threshold and did not trigger the prescribed criteria under paragraph 2.1(e) of PN17).
The Other Income was subsequently reversed out in the AFS 31/1/2018 as APFT was not able to provide the auditors with sufficient audit evidence to support the recognition.
Dato’ Faruk Bin Othman (Dato’ Faruk) was the Executive Chairman at the material time responsible for overseeing the Group and the personnel reporting to him, amongst others, were the chief executive officer, heads of the subsidiaries and the chief financial officer or finance manager. There was no reasonable justification for Dato’ Faruk to amend the QR 30/4/2017 to recognise the Other Income which was contrary to the advice of the auditors and the Board’s decision on 14 June 2017. The Amended QR 30/4/2017 was essentially made to circumvent triggering the prescribed criteria under paragraph 2.1(e) of PN17 by APFT upon receipt of Bursa Securities’ email dated 16 June 2017 which was copied to him.
Arif Bin Faruk and Tan Nyap Keong @ Tony Tan had failed to undertake reasonable assessment and inquiries where they had proceeded to approve the Amended QR 30/4/2017 vide a Directors Circular Resolution dated 16 June 2017 after a mere telephone call from Dato’ Faruk on the same day and had relied on Dato’ Faruk’s representations of a purported mistake and that the Amended QR 30/4/2017 was proper.
FA Breach
Pursuant to paragraph 4.1(a) of PN17, a listed company is required to make the First Announcement on an immediate basis upon fulfilling the prescribed criteria under paragraph 2.1 of PN17. Thereafter, the listed company is required to regularise its financial condition expeditiously and within the timeframes prescribed in paragraph 8.04 of the Main LR and PN17 to warrant continued trading or listing on the Official List of Bursa Securities.
One of the prescribed criteria under paragraph 2.1(e) of PN17 is where the auditors have highlighted a material uncertainty related to going concern or expressed a qualification on the listed company’s ability to continue as a going concern in the listed company’s latest audited financial statements and the shareholders’ equity of the listed company on a consolidated basis is 50% or less of the issued and paid up capital (excluding treasury shares) of the listed company.
APFT had clearly triggered the prescribed criteria under paragraph 2.1(e) of PN17 upon announcement of the QR 30/9/2017 on 30 November 2017 in view of the Emphasis of Matter in the AFS 31/7/2016 and APFT’s shareholders’ equity only represented 34.6% of the company’s issued and paid-up capital.
In approving the QR 30/9/2017 during the Audit Committee and Board of Directors meeting on 30 November 2018, the Board had made an assessment of APFT’s position in respect of triggering PN17 including the prescribed criteria under paragraph 2.1(e) of PN17 and was clearly aware of the Emphasis of Matter in the AFS 31/7/2016 and that APFT’s shareholders equity had decreased to 34.6% of the company’s issued and paid-up capital. However, Board had merely formed the opinion that the Emphasis of Matter in the AFS 31/7/2016 was outdated/redundant as the auditors had resigned, management had embarked on a restructuring exercise and concluded that APFT did not trigger PN17 which was unreasonable and unacceptable.
The directors had also failed to undertake reasonable enquiry including seek clarification on the application of paragraph 2.1(e) of PN17 with other parties and/or Bursa Malaysia Securities to ensure APFT’s compliance with the Main LR and make the First Announcement immediately.
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