Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded FOCUS DYNAMICS TECHNOLOGIES BERHAD (FOCUS or the Company) and its directors for breaches of the Bursa Malaysia Securities ACE Market Listing Requirements (ACE LR). In addition, the Executive Chairman of the Company was fined RM25,000.
FOCUS was publicly reprimanded for failing to ensure that the Company’s announcement dated 28 February 2012 on the quarterly report for the 17 months financial period ended (FPE) 31 December 2011 (Unaudited Results) took into account the adjustment as stated in the Company’s announcement dated 30 April 2012.
The failure to take into account the adjustments was in contravention of Rule 9.16(1)(a) of the ACE LR where a listed company must ensure that each announcement is factual, clear, unambiguous, accurate, succinct and contains sufficient information to enable investors to make informed investment decisions.
FOCUS is 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 external auditors for four quarterly reports commencing no later from the quarterly report for the financial period ended 31 March 2014. In addition, FOCUS must ensure all its directors and relevant personnel attend a training program on compliance with the ACE LR pertaining to financial statements.
The following directors of FOCUS 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, FOCUS to commit the breach of Rule 9.16(1)(a) of the ACE LR. The penalties imposed on them are as follows:-
| No | Director | Penalty |
|---|---|---|
| 1. | Datuk Manan bin Haji Md. Said Executive Chairman |
Public Reprimand and fine of RM25,000 |
| 2. | Dr. Quah Cheang Siew Independent Non-Executive Director Audit Committee Member |
Public Reprimand |
| 3. | Tan Aik Heang Independent Non-Executive Director Audit Committee Chairman |
Public Reprimand |
| 4. | Abdul Menon bin Arsad @ Abdul Manan bin Arshad Independent Non Executive Director Audit Committee Member |
Public Reprimand |
Bursa Malaysia Securities views the contravention seriously as the requirement for listed companies to submit financial statements that are factual, clear, unambiguous, accurate, succinct and contained sufficient information to enable investors to make informed investment decisions is of paramount importance in ensuring the integrity and reliability of financial statements and a fair and orderly market for securities that are traded on Bursa Malaysia Securities.
BACKGROUND
On 28 February 2012, FOCUS had reported an unaudited loss after tax and minority interest of RM4.496 million in its Unaudited Results. However, on 30 April 2012, FOCUS announced an audited loss after tax and minority interest of RM7.952 million in its annual audited accounts for the FPE 31 December 2011. The difference of RM3.456 million between FOCUS’ unaudited and audited results for the FPE 31 December 2011 represented a variance of 76.86%.
The variance of RM3.456 million was mainly due to the provision for impairment losses on trade receivables and products development expenditure (PDE) amounting to RM2.901 million and RM0.546 million respectively in the audited results subsequently.
The Company had only provided RM2.358 million for impairment of trade receivables in the Unaudited Results without proper / reasonable justification and basis. This is particularly so as there was objective evidence that the trade receivables were impaired as the trade receivables had been long outstanding (approximately 1-4 years), there was no response from the debtors to the reminders to pay and there were no collections / repayments received from the debtors from 31 December 2011 until the issuance of the audited results on 30 April 2012. There was no change to the status of the impaired debtors and there was no change of any other circumstances which justified FOCUS’ decision not to fully impair the trade receivables in the Unaudited Results and for FOCUS to do so only subsequently in its audited results.
In respect of the provision for impairment loss on PDE, the circumstances giving rise to the adjustment i.e. the decrease in revenue/losses incurred were not “new” and existed prior to the issuance of the Unaudited Results.
The finding of breach and imposition of the above penalties on FOCUS and its 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 matter including the nature and materiality of the breach and the following:-
(a) The directors’ knowledge on the long outstanding trade receivables and the status of its collection as well as the concerns raised by the external auditors vis-à-vis adequacy of allowance for doubtful debts and possible impairment on the PDE prior to the issuance of the Unaudited Results;
(b) The respective roles and responsibilities of the directors as follows:
- The executive chairman was the only executive director of FOCUS at the material time responsible for FOCUS’ management and day to day operation.
- The audit committee members had the specific function under the ACE LR to review financial statements focusing on compliance with accounting standards.
(c) The directors’ failure to ascertain and undertake reasonable assessment and enquiries in approving the Unaudited Results. Their mere reliance on the management and the external auditors were not acceptable.
