SGX ready to act on FibreChem findings
The Singapore Exchange (SGX) stands ready to take action against any breach of its listing rules after investigations into FibreChem Technologies pointed to potential breaches.
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Exchange says it has been keeping tabs on probe and will act accordingly
By LYNETTE KHOO
29 December 2011
The Singapore Exchange (SGX) stands ready to take action against any breach of its listing rules after investigations into FibreChem Technologies pointed to potential breaches.
‘We have been closely monitoring the development of the investigation,’ an SGX spokesman told BT. ‘Based on the findings of the report, we will review and take appropriate enforcement action against breaches of the SGX listings rules.
‘For possible breaches of the Securities and Futures Act (SFA) or Companies Act, the exchange will refer the matter to the relevant agencies.’
SGX was responding to queries on FibreChem, which released on Wednesday the findings of its independent investigator, nTan Corporate Advisory.
When contacted, some independent directors of the Bermuda-incorporated S-chip declined to comment.
nTan was appointed in February 2009 to carry out an independent assessment of FibreChem’s trade receivables and cash balances as at Dec 31, 2008.
Three years of investigations, costing the group about $4.64 million in fees to nTan, have unearthed several discrepancies at FibreChem ‘over an extended period of time’ since its listing in 2004.
nTan found that there were numerous financial and accounting irregularities, an unauthorised change of corporate structure, and HK$777 million (S$130 million) in missing cash.
If the unaccounted cash balance of HK$777 million did not in fact exist, the overstatement of cash balance and profits and the omission of the PRC bank loans over an extended period of time ‘are possibly attempts to artificially inflate the group’s cash balance and profitability’, nTan said.
Once a market darling with sterling published earnings year after year, FibreChem shares plummeted in early 2009 on news that its auditors could not finalise an audit of its trade receivables and cash balances for the year ended Dec 31, 2008. A trading suspension has since been imposed.
nTan noted that if the group’s financial results had in fact been overstated in its initial public offering prospectus or quarterly financial results, ‘it would be reasonable to draw the conclusion that such misleading, false or deceptive disclosure of inflated financial performance of the group was made to induce or an attempt to induce the investing public to purchase or trade in FibreChem’s shares’.
These financial mis-statements may constitute breaches of a provision in the SFA relating to false or misleading statements or fraudulent inducement of persons to deal in securities, nTan added.
Corporate lawyers also highlighted other provisions in the SFA that could have been breached, including disclosure requirements for prospectuses.
Under the SFA, an entity is guilty of making a false or misleading statement if, a) there is a false or misleading statement in its prospectus; b) it fails to include any information that relates to its assets and liabilities, profits and losses, and financial position and performance in its prospectus; or c) it fails to state a new circumstance that has arisen since the prospectus was lodged with MAS.
Continual disclosure requirements of the SFA and SGX listing rules also state that companies must notify the exchange of ‘information on specified events or matters as they occur’ so that the SGX can disseminate the information to the stock market.
The board and audit committee (AC) of FibreChem probably should offer their views on the report before a call can be made on whether any relevant law has been breached, said Robson Lee, corporate lawyer and deputy secretary of the Securities Investors Association (Singapore).
‘The AC should state its position on the findings of the report,’ Mr Lee said. ‘In particular, the AC should advise the market whether the disclosure and other listing rules have been adhered to with respect to the relevant transactions identified by the report.’