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8 December 2016

Listing Circular

Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) publicly reprimands Malaysia Steel Works (KL) Berhad (MASTEEL) and 3 executive directors for breaches of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Main LR). In addition, the 3 executive directors of MASTEEL are fined a total of RM130,500.

 

MASTEEL is publically reprimanded for committing the following breaches of the Main LR:-

  1. paragraph 9.23(2) of the Main LR for failing to announce the Company’s annual audited accounts for the financial year ended (FYE) 31 December 2014 (AFS 2014) on or before 30 April 2015 and instead announced the AFS 2014 on 19 June 2015;
  2. paragraph 9.23(1) of the Main LR for failing to issue the Company’s annual report for the FYE 31 December 2014 (AR 2014) on or before 31 May 2015 and instead issued the AR 2014 on 9 July 2015; and
  3. paragraph 9.22(1) of the Main LR for failing to announce the Company’s quarterly report for the financial period ended 31 March 2015 (1st QR 2015) on or before 31 May 2015 and instead announced the 1st QR 2015 on 2 July 2015.

 

MASTEEL is also required to ensure 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 reporting.  In addition, MASTEEL is required to ensure 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 3 executive directors of MASTEEL are publically reprimanded for breaching paragraph 16.13(b) of the Main LR where they had permitted MASTEEL to commit the above breaches.  In addition, fines are imposed on them as follows:-

No. Directors Penalty Imposed
1. Dato’ Sri Tai Hean Leng @ Tek Hean Leng

Managing Director / Chief Executive Officer

Public Reprimand and total fines of RM43,500
2. Lee Kean Binh

Executive Director

(Resigned on 30 September 2015)

Public Reprimand and total fines of RM43,500
3 Lau Yoke Leong

Executive Director

Public Reprimand and total fines of RM43,500

 

The finding of breach and imposition of the above penalties on MASTEEL and its directors are 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 MASTEEL 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 Securities and necessary to aid informed investment decisions.

 

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

 

BACKGROUND

 

The delay in the announcement / issuance of the AFS 2014, AR 2014 and 1st QR 2015 was essentially due to MASTEEL’s failure to resolve the following audit issues with the external auditors which led to the external auditors not being able to express an opinion on the AFS 2014:-

  1. The veracity of sales transactions recorded by the company with certain customers whose total outstanding balances as at 31 December 2014 amounts to RM287,171,341 and consequently, the recoverability of these balances which represented 86% of the Company’s trade receivables of RM334,541,368; and
  2. The nature and classification of a sale arrangement with a foreign trading house where the amount of advances outstanding to the foreign trading house amounts to RM101,075,929 as at 31 December 2014.

 

The unresolved audit issues resulted in the appointment of a special auditor and upon completion of the special audit, the financial statements were issued where the external auditors had expressed a qualified opinion in respect of the audit issues in the AFS 2014 announced on 19 June 2015.

 

MASTEEL and the executive directors had failed to discharge their duties to ensure the timely announcement / issuance of the AFS 2014, AR 2014 and 1st QR 2015 in accordance with the Main LR as:-

  1. Reasonable notice and reminders (since 26 November 2014) were given to the company by the external auditors as to the audit issues towards addressing and resolving the same to ensure timely finalization of the audit and issuance of the financial statements; and
  2. Notwithstanding the various reminders by the external auditors and the materiality of the audit issues including implication of the same to the AFS 2014, MASTEEL and the executive directors had failed to demonstrate expeditious  and reasonable steps / actions taken to address, procure and/or provide the external auditors with the necessary appropriate documents / audit evidence (including reasonable explanation) as would sufficiently / reasonably explain / account for the transactions and address the concerns of the external auditors to facilitate the proper audit and finalisation of the financial statements.

 

The executive directors were involved in the day to day and/or financial management of the company including liaising with the external auditors to resolve the audit issues and they were or should be in a position to ascertain, address and resolve the audit issues particularly in the light of their involvement / knowledge of the transactions.  They also had supervisory obligation over MASTEEL and hence, control over how the company should effectively address and resolve the audit issues towards ensuring compliance of the obligations under the Main LR. However, they had failed to demonstrate reasonable steps taken to monitor, expeditiously address and resolve the audit issues and ensure timely preparation and finalisation of the AFS 2014.  It was only upon the audit committee’s recommendations to the board to appoint a special auditor to conduct an independent and comprehensive review of the audit issues on 27 April 2015 that the board proceeded to approve and appoint the special auditor towards resolving the audit issues.

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