Bursa Malaysia Securities Publicly Reprimands Nakamichi Corporation Berhad And Fines 4 Directors A Total Of Rm545,600

Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded NAKAMICHI CORPORATION BERHAD (NAKA) and its 4 directors for breaches of the Bursa Malaysia Securities Main Market Listing Requirements (Main LR). In addition, the 4 directors of NAKA were also fined a total of RM545,600.

NAKA was publicly reprimanded for committing breaches of paragraphs 9.22(1) and 9.23 read together with paragraph 9.28(1) of the Main LR where NAKA had failed to announce and/or issue the following financial statements within the timeframe of 18 September 2015 stipulated by Bursa Malaysia Securities:-

• the quarterly reports from the financial period ended 30 June 2013 until 30 June 2015 which were only announced on 30 October 2015;
• the annual audited financial statements for the financial year ended 31 December 2013 and 31 December 2014 which were only announced on 31 December 2015 and 4 January 2016 respectively; and
• the annual reports for the financial year ended 31 December 2013 and 31 December 2014 which were only announced on 29 February 2016. 

NAKA was also required to ensure:-

(a)   all its directors and the relevant personnel of the company attend a training programme in relation to compliance with the Main LR particularly pertaining to financial statements; and

(b)   its Board of Directors review and assess the adequacy and competency of its finance and accounting resources and adequacy, comprehensiveness and effectiveness of the company’s policies and procedures in respect of financial reporting and implementation of the same.

The following penalties were imposed on the 4 directors of NAKA for breaching paragraph 16.13(b) of the Main LR where they had permitted NAKA to commit the above breaches: -

The finding of breach and imposition of the above penalties on NAKA 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 / impact of the breach to NAKA and shareholders / investors and the role, responsibilities, knowledge and conduct of the directors.

Bursa Malaysia Securities views the contraventions seriously as the timely and accurate 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. 

Bursa Malaysia Securities has also reminded NAKA and its Board of Directors of their responsibility to maintain appropriate standards of corporate responsibility and accountability to its shareholders and the investing public.

BACKGROUND

NAKA had on 29 May 2015 announced that as Tamabina Sdn Bhd (Tamabina), its 51% owned major subsidiary had been wound-up via a Court Order dated 3 February 2015 by the High Court of Sabah and Sarawak, the Company was in the midst of preparing all the outstanding financial statements to comply with the Main LR by writing off the 51% investment in Tamabina.

Bursa Malaysia Securities had on 10 July 2015 allowed NAKA to submit all the outstanding financial statements by 18 September 2015 as requested.  However, NAKA had only submitted the financial statements after a delay of approximately 1.5 – 5.5 months. 

NAKA had blamed the actions of the former director/chief executive officer and chief financial officer who had deprived NAKA of its full financial records particularly the financial records of Tamabina and the external auditors for the delay.  However, the delay in submission of the financial statements by the stipulated timeframe of 18 September 2015 was in fact due to NAKA’s failure to:-

• maintain/provide such accounting and other records on a timely basis and/or in such manner so as to enable them to be conveniently and properly audited by the external auditors. In particular, NAKA had failed to maintain/prepare crucial and proper accounting records including for transactions after 31 May 2013 which were under the control of the new management to facilitate the audit. NAKA had not only failed to provide all the relevant accounting records to the external auditors on a timely basis but provided the same on a staggered/piece meal basis which had hindered the commencement and finalisation of the audit and NAKA was also lackadaisical vis-à-vis preparation of the annual reports;
• establish a proper and effective finance function including the necessary resources, procedures and processes to ensure timely preparation of the financial statements in accordance with the Main LR; and
• monitor and address/resolve all issues expeditiously.

The directors were found to be in breach of their obligations under paragraph 16.13(b) of the Main LR where they had permitted NAKA’s failure to announce/issue the financial statements by 18 September 2015 premised on the following:-

1. The respective roles and responsibilities of the directors in respect of financial management including the preparation and finalization of the financial statements of the company –
   
   • See Thoo Chan was the director primarily responsible for the financial management of NAKA;
   • Darren Solomon Low Jun Ket was the Executive Director of NAKA in-charge of the day to day operations of the company; and
   • Goh Tai Wai and Mak Siew Wei were the Independent Non-Executive Directors of NAKA and members of the Audit Committee who had the specific function under the Main LR to, amongst others, review the financial statements of NAKA.
     
     
2. The conduct of the directors where -
   • notwithstanding the various communications and engagements by the external auditors with the company, clear legal obligations for proper accounts to be kept, the directors had failed to demonstrate that (i) proper structure/framework was in place to ensure proper records were kept and maintained; (ii) proper records were provided expeditiously to facilitate proper auditing as well as (iii) take reasonable steps/efforts to provide and resolve all issues expeditiously to ensure timely announcement/issuance of the financial statements; and
   • in addition, Goh Tai Wai, Mak Siew Wei and Darren Solomon Low Jun Ket had failed to demonstrate that they had taken reasonable efforts to inquire, follow up, monitor, supervise and address/resolve the issues to enable timely submission of the financial statements.  There were clearly lapses of supervision/close monitoring by the directors as to the clear timeframes for submission of the financial statements particularly as there was no/minimal involvement/supervision by the directors despite the long delays including lack of deliberation by the board or inquiry by the directors on the issues.  Their mere reliance on See Thoo Chan and the external consultant to finalise the financial statements which gave rise to the failure and/or delay in addressing the issues was not acceptable in the discharge of their obligations and tantamount to abdication of their responsibilities.