Bursa Malaysia Securities Publicly Reprimands And/or Fines FSBM Holdings Berhad And 6 Directors

Bursa Malaysia Securities Berhad [Registration No.: 200301033577 (635998-W)] (Bursa Malaysia Securities) has publicly reprimanded FSBM Holdings Berhad (FSBM) and 6 of its directors for breaches of the Bursa Malaysia Securities Main Market Listing Requirements (Main LR).  In addition, the 6 directors of FSBM were imposed total fines of RM375,600.

FSBM was publicly reprimanded for breach of paragraph 9.23(1) of the Main LR where the company had failed to issue its annual report that included the annual audited financial statements (AFS) together with the auditors’ and directors’ reports for the financial year ended (FYE) 30 June 2018 () on or before 31 October 2018 ().FSBM had only issued the AR 2018 on 31 December 2019, after a delay of 14 months.

FSBM was also required to review and ensure the adequacy and effectiveness of its financial reporting function. In addition, FSBM must ensure all its directors and relevant personnel attend a training programme in relation to compliance with the Main LR pertaining to financial statements.

All the 6 directors of FSBM at the material time were publicly reprimanded and fined for breach of paragraph 16.13(b) of the Main LR for permitting knowingly or where they had reasonable means of obtaining such knowledge, FSBM to commit the Breach as follows:-

The finding of breach and imposition of the above penalties on FSBM 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 Breach; impact of the Breach to FSBM and shareholders/investors, the roles, responsibilities, knowledge and conduct of the directors.

Bursa Malaysia Securities views the contravention seriously as the timely submission of financial statements is one of the fundamental obligations of listed companies and is of paramount importance in ensuring a fair and orderly market for securities traded on Bursa Malaysia Securities and necessary to aid informed investment decisions.

BACKGROUND

The delay in issuance of the AR 2018 was mainly due to the disagreement with the external auditors in issuing a disclaimer opinion for the AFS 2018 (Disclaimer) which would have resulted in the company triggering the prescribed criteria under paragraph 2.1(d) of Practice Note 17 (PN17).  The external auditors had on 31 October 2018 issued the Disclaimer on the basis that they were unable to obtain sufficient appropriate audit evidence to satisfy themselves as to the appropriateness of the carrying amounts of the trade and other receivables due from Technitium Sdn. Bhd. (Technitium) of RM7.6 million and a business consultant of RM3.2 million in accordance with the Malaysian Financial Reporting Standards and whether any adjustments to these amounts were necessary. 

Notwithstanding the following:-

• the amounts due from Technitium and the business consultant were long outstanding and represented 61% and 26% of the Group’s total assets respectively;
• the Technitium’s debts were under various debt recovery proceedings where the outcome could not be ascertained and there was no repayment by the business consultant; and
• there were numerous communications from the external auditors for FSBM to assess the recoverability and ensure adequacy of impairment on these amounts,

FSBM and the directors had failed to provide full impairment of these amounts or undertake reasonable enquiries, steps and supervision to ensure the issue on impairment was addressed or resolved with the external auditors towards timely issuance of the AR 2018 on or before 31 October 2018.  FSBM and the directors had merely assumed that the external auditors would maintain similar qualified opinion on the Technitium’s debts only in the AFS 2017 for the AFS 2018. 

FSBM and the directors had also disregarded compliance with the Main LR by refusing or neglecting to finalise and issue the AR 2018 to avoid the company triggering PN17 which would purportedly jeopardise the company’s prospects in securing a project.  In this respect, while issuance of the AR 2018 with the Disclaimer might have an unfavourable impact to the company, the timely issuance of the AR 2018 was crucial to shareholders/investors to make informed investment decision and the non-disclosure was prejudicial to the interest of shareholders/investors.  The failure of the directors to discharge their duties was all the more unacceptable particularly as they knew the consequences of the Breach including that failure to issue the AR 2018 would lead to suspension, de-listing and enforcement actions by the regulators.    

Bursa Malaysia Securities had commenced de-listing procedures against FSBM pursuant to paragraph 9.28(6) of the Main LR and the AR 2018 was issued on 31 December 2019 which was the dateline stipulated by Bursa Malaysia Securities, failing which the company would be de-listed. The new external auditors had also expressed a disclaimer of opinion in the AFS 2018 and FSBM had made the First Announcement on 30 December 2019 that the company was considered as a PN17 company.

In view of the directors’ blatant disregard, refusal or neglect to finalise and issue the AR 2018, a continuing fine until the date of issuance of the AR 2018  was imposed on the directors (except for Chang Wei Ming who had resigned with effect from 19 December 2018).  A higher fine was imposed on Dato’ Tan Hock San @ Tan Hock Ming as he was the Managing Director primarily responsible for managing the company and group operations and resources; the financial management of FSBM for FYE 30 June 2018 and preparation of the Company’s financial statements. Further, the Board had relied on his numerous representations in agreeing to the delay in issuance of the AR 2018.