Bursa Malaysia Securities Berhad [Registration No.: 200301033577 (635998-W)] (Bursa Malaysia Securities) has publicly reprimanded and imposed a fine of RM300,000 on KAF Investment Bank Berhad (KAF IB) as the Sponsor for an applicant seeking admission to the ACE Market of Bursa Malaysia Securities (Applicant) for breaches of the Bursa Malaysia Securities ACE Market Listing Requirements (ACE LR).
Bursa Malaysia Securities found that KAF IB had breached the following provisions of the ACE LR: -
- Rule 3.02(4) and Rules 4.07(1) & (2) of the ACE LR for failing to make all reasonable due diligence enquiries and consider all relevant matters vis-à-vis the noncompliances of the certificate of completion and compliance (CCC) of the 2 core manufacturing facilities/plants owned by the Applicant (Non-Compliances) in assessing suitability of the Applicant’s admission to the ACE Market.
- Rule 2.18(1) of the ACE LR for failing to ensure that the pre-admission consultation pack and draft prospectus submitted to Bursa Malaysia Securities in relation to the proposed listing of the Applicant were accurate, did not contain material omission and/or were not false or misleading in view of the Non-Compliances and the failure to disclose the Non-Compliances together with the fact that the Applicant was in the process of obtaining a new/revised CCC for the 2 core manufacturing facilities/plants.
KAF IB was also required to table Bursa Malaysia Securities’ decision to its Board of Directors and conduct a comprehensive review and assessment on the adequacy and effectiveness of its internal policies, processes and procedures relating to its role as an adviser/Sponsor for submissions to Bursa Malaysia Securities.
The findings of breach and imposition of the public reprimand and fine on KAF IB were made pursuant to paragraph 16.19 of the ACE LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including the materiality of the breaches and the roles and responsibilities of KAF IB as a Sponsor.
Bursa Malaysia Securities views the breaches seriously in view of the primary and crucial role played by the Sponsors and advisers in the assessment of the suitability of an applicant for admission to the ACE Market which is a ‘sponsor-driven’ market and ensuring quality, accurate and adequate disclosures in the submission documents and prospectus for the proposed listing of an applicant.
Bursa Malaysia Securities wishes to remind the Sponsors and advisers to maintain the highest standards of integrity, accountability and responsibilities in discharging their role effectively and competently towards ensuring compliance of the ACE LR and be more vigilant in ensuring the quality, proper and sufficient due diligence and a thorough review of the application and prospectus prior to the submission to Bursa Malaysia Securities.
BACKGROUND
KAF IB had in the pre-admission consultation pack submitted to Bursa Malaysia Securities in relation to the proposed listing of the Applicant represented that: -
- there were no other material non-compliances of the Applicant with the relevant laws, regulations, rules and requirements governing conduct of the business of the Applicant, including compliance of property assets owned or rented by the Applicant; and
- there were no other key licences or approvals which would materially affect the business or operations of the Applicant or affect the suitability of the Applicant for listing but has not been obtained or the application for renewal was pending approval.
KAF IB had also represented in the subsequent draft prospectus submitted to Bursa Malaysia Securities that the Applicant was in compliance with the governing laws, regulations, rules or requirements relating to its business. However, it was noted from the disclosure on the material properties owned by the Applicant in the draft prospectus, that one of the manufacturing plants had a newly issued CCC. The Non-Compliances were disclosed upon Bursa Malaysia Securities’ query, and the due diligence solicitors had further confirmed with the local authorities that a revised CCC was required due to the alterations to the previous building plan. KAF IB then withdrew the initial listing application and only resubmitted the application after obtaining the new CCC for the other manufacturing plant.
KAF IB had knowledge of the pending applications for the new/revised CCC for both manufacturing plants months before submission of the listing application, yet the preadmission consultation pack and draft prospectus omitted to disclose the NonCompliances and ongoing CCC process. KAF IB had merely relied on the due diligence working group’s/architects’ assessment on the validity of the old CCCs which was subjective/uncertain/inconclusive. However, KAF IB had failed to conduct reasonable due diligence to require independent verification with the local authority notwithstanding the materiality of the 2 manufacturing plants which were core assets of the Applicant and the regulatory uncertainty over their CCC status, which was a key listing suitability assessment and disclosure.
The breaches underscore a lack of transparency and a serious failure of the obligations under Rules 2.18(1) & 4.07 of the ACE LR, undermined the integrity of the due diligence process and compromised Bursa Malaysia Securities’ ability to assess the suitability of the Applicant for listing based on complete and accurate information.
