Bursa Malaysia Securities Publicly Reprimands Tecnic Group Berhad And Fines Three Of Its Directors A Total Of RM150,000

Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded TECNIC GROUP BERHAD (TECNIC) and 3 of its directors for breaching the Bursa Malaysia Securities Main Market Listing Requirements (Main LR). In addition, the 3 directors of TECNIC at the material time has been fined a total of RM150,000.

TECNIC had breached paragraph 9.16(1)(a) of the Main LR in respect of the company’s announcement dated 7 September 2015 which was its  response to the unusual market activity query (UMA Query) from Bursa Malaysia Securities. The announcement had stated / confirmed amongst others that there was no corporate development relating to the Group’s business and affairs that had not been previously announced that might account for the trading activity including those in the stage of negotiation / discussions. TECNIC’s announcement was not factual, inaccurate and did not contain sufficient information to enable investors to make informed investment decisions as it did not disclose and in fact, denied knowledge of the on-going negotiations / discussions on a proposed reverse take-over of TECNIC by a third party (the Proposed RTO Negotiation) at the material time.  

The Proposed RTO Negotiation subsequently led to the signing of the Memorandum of Understanding which was announced on 21 September 2015 (i.e. approximately 2 weeks after TECNIC’s announcement in response to the UMA Query on 7 September 2015).

The following directors of TECNIC at the material time had breached paragraph 16.13(b) of the Main LR for permitting knowingly or where they had reasonable means of obtaining such knowledge, TECNIC to release the announcement in contravention of the standard of disclosure prescribed under paragraph 9.16(1)(a) of the Main LR. The penalties imposed on them are as follows:-

Bursa Malaysia Securities views the contravention seriously in view of the importance of timely and accurate disclosure of material information to enable the market to be fully apprised of the state of affairs of the listed company to enable proper informed investment decision which is critical to preserve and sustain market integrity and investor confidence.

The finding of breach and imposition of the above penalties on TECNIC 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 following:-

1. The disclosure obligations / framework under the Main LR where notwithstanding that listed companies are allowed the right to withhold material information in circumstances where the information is in a state of flux, the right to withhold ceased where there is unusual market activity which signifies that a ‘leak’ of the information may have occurred.  In such a situation and particularly in view that the UMA Query was very specific / clear as to the scope requiring the company’s confirmation which covered any corporate development including ‘those in the stage of negotiation / discussion’ that may account for the trading activity, the company must ensure the accuracy and comprehensiveness of its response to the UMA Query.  Further, the Corporate Disclosure Guide provides clear guidance and illustrations of a listed issuer’s obligation in responding to an UMA Query such as the listed issuer must disclose an impending proposal that may gave rise to the unusual market activity.

   Hence, TECNIC in responding to the UMA query must make factual disclosure of the Proposed RTO Negotiation in its announcement on 7 September 2015.  Instead, TECNIC’s material omission in failing to highlight the Proposed RTO Negotiation as well as the misstatement in its denial of any corporate development including those in the stage of discussion / negotiation in its announcement were clearly in contravention of the disclosure obligations under the Main LR;

2. The materiality of the Proposed RTO Negotiation and significant increase of 33% in TECNIC’s share price and volume traded on 7 September 2015;

3. The involvement and/or knowledge of directors vis-à-vis the meetings, discussions and email communications on the Proposed RTO Negotiation. Their total reliance on the adviser with regards to the response to the UMA Query was unreasonable in the absence of any evidence of proper inquiries and independent assessment made; and

4. TECNIC and the directors were or should be aware of the importance to ensure full, accurate and timely disclosure of material information in the response to the UMA Query which was critical and relied upon by investors to make informed investment decisions.