This is the inaugural post under my column “On the Mak”. They are short posts intended for sharing my thoughts on a very specific issue or company on a timely basis. Going forward, longer articles covering a range of issues or companies, and reports, case studies, etc. will be under “Articles”.

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I had recently posted a four-part series on Raffles Education Corporation (REC) and an article titled “Raffles Education: An Inexcusable Disclosure Breach”. This post is about the latter – specifically, the fact that the company disclosed several writs and statements of claims that amounted to about 60% of the total market cap of the company, more than two months after the writs were filed. So far, REC has issued two sets of responses to SGX queries on 25 August and 30 August. The board said that it did not disclose those writs because it felt they were “bound to fail”. Its responses to SGX queries are “far from clear”.

In Volume 7 of the Corporate Governance Case Studies published by CPA Australia which I edit, there is a case study called “Can It ‘Trive’ Again? about a company, Trive Property Group Berhad (Trive) listed on the Main Market of Bursa Malaysia, which includes events that bore similarities to REC. Trive had failed to disclose credit defaults, which were in breach of Bursa rules. It finally disclosed in January 2013 and March 2013.  At that time, Bursa had a Practice Note stating that credit defaults amounting to 5% or more of net assets must be immediately announced. On 26 June 2013 – that is, within a matter of months – Bursa had reprimanded the company. Even though it recognised that the directors had not instigated or approved the breach, it is their duty to uphold appropriate standards. In recent years, Bursa has shifted its focus to reprimanding and imposing fines on directors, rather than companies.

In REC case, it was a failure to disclose writs which are highly material. The directors approved the non-disclosure. Given how Bursa reprimanded Trive for failure to disclose credit defaults even though it recognised the directors had not instigated or approved the breach, it would seem highly likely that it would have taken action  against the directors in a case like REC. It would be interesting to see if we will see a timely investigation and action by SGX and other regulators. Queries issued so far are part of surveillance – they are not enforcement actions.

It is also interesting that in the Trive case, directors were also sanctioned after the company failed to issue its annual report within four months of the year end. Within five days after the deadline, Bursa notified that it was suspending trading and did it three days later. Trive cited difficulties faced in resolving audit issues with the external auditors. This cut no ice with Bursa. On SGX, companies would often apply for extensions citing exactly this reason. I have not seen sanctions for late issue of annual reports or results on SGX. Securities Commission Malaysia also reprimanded and fined five directors a total of RM2.55 million for the company’s failure to perform an impairment assessment. Again, this is unheard of for SGX-listed issuers.

I notice more Malaysian companies seem to be listing on SGX. I hope they are not escaping the strict enforcement there and we end up with more scandals involving Malaysian companies on SGX.

As I have said before, enforcement statistics clearly show Malaysia is far more vigorous in taking action against errant companies and directors. The Trive case is just one specific example. Let’s see whether REC will be another case which shows we are lagging on enforcement.