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BURSA MALAYSIA SECURITIES PUBLICLY REPRIMANDS INTELLIGENT EDGE TECHNOLOGIES BERHAD AND FINES THREE DIRECTORS A TOTAL OF RM150,000
Bursa Malaysia Securities Berhad (Bursa Malaysia Securities) has publicly reprimanded Intelligent Edge Technologies Berhad (IE) and 6 of its directors for breaching Bursa Malaysia ACE Market Listing Requirements (ACE LR). In addition, 3 of the 6 directors were fined a total of RM150,000.
IE was publicly reprimanded for breaching Rule 9.16(1)(a) of the ACE LR for failing to ensure its announcement dated 25 February 2010 on the fourth quarterly report for the financial year ended (FYE) 31 December 2009 (4th QR 2009) take into account the adjustments as stated in IE’s announcement dated 29 April 2010. The adjustments resulted in a 1,156% difference between the company’s unaudited and audited results.
Notwithstanding that IE was de-listed on 11 September 2012, the breach had been committed while IE was listed on the Official List of Bursa Malaysia.
The following directors of IE at the material time were found to have breached Rule 16.13(b) of the ACE LR for permitting knowingly, or where they had reasonable means of obtaining such knowledge, IE to commit the above breach. The penalties imposed are as follows:
No. | Name | Penalties |
1. | Cheong Cheng Onn Executive Director [Chief Financial Officer since 2007] | Public Reprimand and fine of RM100,000 |
2. | Dato’ Kamaruddin Bin Ahmad Independent Non-Executive Director Audit Committee Chairman | Public Reprimand and fine of RM25,000 |
3. | Gerard Thiagarajan a/l Rajaratnam Independent Non-Executive Director Audit Committee Member | Public Reprimand and fine of RM25,000 |
4. | Dato’ Hj. Nabil Bin Abd Kadir Non-Independent Non-Executive Chairman [Appointed on 24 December 2009 and re-designated to Executive Chairman on 12 January 2010] | Public Reprimand |
5. | Yeoh Yuan Ting Independent Non-Executive Director [Appointed on 24 December 2009] | Public Reprimand |
6. | Haji Osman Bin Haji Ismail Non-Independent Non-Executive Director [Appointed on 24 December 2009 and re-designated to Executive Director on 12 January 2010] | Public Reprimand |
The findings of breach and imposition of the above penalties on IE and the directors were made pursuant to Rule 16.19 of the ACE LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including factors giving rise to and materiality of the deviation, the impact of the breach and in relation to the directors, their respective roles and responsibilities in the Company, particularly pertaining to financial management, preparation and review of financial statements and their conduct.
Bursa Malaysia Securities views the contravention seriously as listed companies are required to submit financial statements that are factual, clear, unambiguous, accurate, succinct and contains sufficient information to enable investors to make informed investment decisions.
BACKGROUND
(I) PUBLIC REPRIMAND ON IE
On 25 February 2010, IE reported an unaudited net profit of RM486,000 in its 4th QR 2009. However, on 29 April 2010, IE announced an audited net loss of RM5,131,463 in its annual audited accounts for the FYE 31 December 2009. The difference of RM5,617,463 between the unaudited and audited results for the FYE 31 December 2009 represented a variance of 1,156%.
The variance was mainly due to the following:-- allowance for doubtful debts amounting to RM2,567,171;
- development costs written-off amounting to RM1,123,400;
- reversal of payables amounting to RM669,030; and
- reversal of provision for sales amounting to RM900,000.
As a result of the adjustments, IE had reported a deficit of RM1,544,152 of IE’s shareholders equity from RM4,074,000 in the 4th QR 2009 and triggered the prescribed criteria in paragraph 2.1(a) of Guidance Note 3 (GN3).
There was also a significant decrease of 46% in IE’s share price from RM0.065 on 28 April 2010 to RM0.035 on 29 April 2010 upon IE’s announcement on 28 April 2010 that the company was an Affected Listed Company pursuant to GN3.
(II) PUBLIC REPRIMAND AND A TOTAL FINE OF RM150,000 IMPOSED ON THREE DIRECTORS
The directors of IE had failed to undertake reasonable assessment and enquiries in approving the 4th QR 2009 particularly in respect of the following:
(a) The directors had failed to ensure that there was provision for doubtful debts as required by them in the previous Audit Committee and Board of Directors’ (BOD) meetings. Their mere reliance on the assurance by the management that this had been incorporated was unacceptable as it was apparent from the Income and Cash Flow Statements of the 4th QR 2009 tabled for their approval that there was no provision made at all for doubtful debts; and
(b) The directors were aware of the concern that IE might fall into GN3 and they were also cautioned of the company’s lack of business and financial resources during the BOD meeting on 22 April 2009. Despite this, the directors did not query / discuss on the net profit reported in the 4th QR 2009 which was unusual, particularly as:-
- IE had consistently reported net losses since the FYE 31 December 2003 and for the 9 months ended 30 September 2009; and
- IE reported a substantially higher profit before tax of approximately RM1.217 million for the 4th quarter as compared to the profit before tax of about RM275,000 achieved in the preceding quarter despite the lower revenue of RM301,000, a substantial drop of 50% as compared to the preceding quarter and this was expressly highlighted in the explanatory notes to the 4th QR 2009.
The directors’ representations on the lack of finance personnel and sufficient information, that the 4th QR 2009 was only given to them at the time of the meeting on 25 February 2010 and was not reviewed by the external auditors were unacceptable and did not absolve them from discharging their duties under the ACE LR.