The Monetary Authority of Singapore (MAS), Accounting and Corporate Regulatory Authority (ACRA), and Commercial Affairs Department (CAD) of the Singapore Police Force (SPF) have concluded their joint investigations into Noble Group Limited (NGL) and Noble Resources International Pte Ltd (NRI), which was NGL’s wholly owned subsidiary in Singapore at the material time. The following actions have been taken:
- MAS has imposed a civil penalty of $12.6 million on NGL for publishing misleading information in its financial statements, in breach of section 199(b)(ii) of the Securities and Futures Act (SFA).
- ACRA, in consultation with the Attorney-General’s Chambers (AGC), has issued stern warnings to two former directors of NRI for failing to prepare and table annual financial statements in compliance with the prescribed accounting standards in Singapore, in breach of section 201(2) of the Companies Act (CA).
2. The Public Accountants Oversight Committee (PAOC), which administers ACRA’s Practice Monitoring Programme (PMP)1 under the Accountants Act, has also issued orders against the auditors of NRI from Ernst and Young in relation to the financial statements for the financial years ended 31 December 2012 to 31 December 2016.
3. The joint investigations, which commenced in November 2018, involved complex accounting issues and required assistance from overseas authorities. It was found that NGL, through NRI, entered into long term marketing agreements with mine owners and coal producers to either assist them to build a brand name for their mines, or act as a salesperson for the commodities produced from the mines. Under these marketing agreements, NGL would not take delivery of the commodities produced but would earn fees based on a pre-determined percentage of the counterparty’s sales value.
4. The joint investigations revealed that NGL and NRI had applied an incorrect accounting treatment to these marketing agreements by classifying them as financial instruments instead of service contracts, and by recognising future fees from these agreements before rendering the services. This inflated NGL’s and NRI’s reported profits and net assets. NGL’s publication of materially misleading financial statements from 2016 to 2018 were likely to have induced the sale or purchase by investors of NGL’s securities listed on the Singapore Exchange (SGX).
5. Assistant Chief Executive of ACRA, Ms Kuldip Gill, said, “Quality financial information is crucial for a trusted and vibrant business environment in Singapore. ACRA expects financial statements to reflect a true and fair view of the financial position and performance of the company as market participants rely on the financial statements to obtain an accurate picture of the value the business generates, and the risks involved. ACRA will continue to enforce accounting standards and take those involved in the financial reporting chain to task for unreliable information and/or non-compliance with the prescribed accounting and auditing standards.”
6. Ms Loo Siew Yee, Assistant Managing Director (Policy, Payments & Financial Crime), MAS, said, “Materially false or misleading statements by listed entities have no place in Singapore’s capital markets. If left unchecked, they will erode investors’ trust in the quality of information released by issuers, and have an adverse impact on the integrity of our capital markets. The present action demonstrates that MAS takes breaches of disclosure obligations seriously and will take firm action against persons found to have fallen short.”
7. Based on presently available facts, the actions announced today marks the closure of the investigations against NGL and NRI in relation to the matters set out in the joint statement by the SPF, MAS and ACRA published on 20 November 2018 .
Additional information
(A) The civil penalty regime
A civil penalty action is not a criminal action and does not attract criminal sanctions. The civil penalty regime, designed to complement criminal sanctions and provide a nuanced approach to combat market misconduct, became operational at the beginning of 2004.
Under section 232 of the SFA, MAS may enter into an agreement with any person for that person to pay, with or without admission of liability, a civil penalty for contravening any provision of Part XII of the SFA. The civil penalty may be up to three times the amount of the profit gained or loss avoided by that person as a result of the contravention, subject to a minimum of $50,000 (if the person is not a corporation) or $100,000 (if the person is a corporation).
(B) False or misleading statements under Section 199(b)(ii) of the SFA
Under this section, no person shall, make a statement, or disseminate any information, that is false or misleading in a material particular and is likely to induce the sale or purchase of securities, securities-based derivative contracts or units in a collective investment scheme, by other persons, or if, when he makes that statement or disseminates the information, he knows or ought reasonably to have known that the statement or information is false or misleading in a material particular.
(C) Compliance with accounting standards under Sections 201(2) and 201(5) of the CA
Under these sections, directors are responsible for preparing and tabling annual financial statements in compliance with the prescribed accounting standards in Singapore.
(D) Compliance with auditing standards
The PMP was set up to ascertain whether public accountants have complied with the prescribed auditing standards, methods, procedures and requirements. The PAOC decides on the review outcome and may order the public accountant to undertake remedial actions, or it may impose sanctions, depending on the severity of non-compliance. Find out more about PMP orders in the attached link https://www.acra.gov.sg/public-accountants/practice-monitoring-programme-pmp/pmp-orders .
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[1] The Practice Monitoring Programme (PMP) is a regulatory instrument to ascertain the auditors’ compliance with prescribed standards and requirements when providing public accountancy services.
