MAS imposes S$12.6 million penalty on Noble Group over misleading financial statements
Authorities also issued stern warnings to two former directors of Noble Resources International for failing to prepare financial statements that complied with accounting standards.
SINGAPORE: Authorities on Wednesday (Aug 24) imposed penalties on commodity trader Noble Group (NGL) and issued stern warnings to former directors of its then-wholly-owned subsidiary Noble Resources International (NRI) after both were found to have inflated reported profits and net assets.
A civil penalty of S$12.6 million was imposed on NGL by the Monetary Authority of Singapore (MAS) for publishing misleading information in its financial statements in breach of the Securities and Futures Act, a joint press release by the MAS, Accounting and Corporate Regulatory Authority (ACRA) and the Singapore Police Force issued on Wednesday stated.
ACRA, in consultation with the Attorney-General’s Chambers, also 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 breach of the Companies Act.
The Public Accountants Oversight Committee (PAOC), which administers ACRA’s Practice Monitoring Programme, has also issued orders against the auditors of NRI from Ernst and Young in relation to the financial statements for the financial years ended Dec 31, 2012, to Dec 31, 2016.
Joint investigations against both entities commenced in November 2018 and involved complex accounting issues as well as assistance from foreign authorities, stated the press release.
"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," added the press release.
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.
REPORTED PROFITS, NET ASSETS WERE INFLATED
Joint investigations revealed that NGL and NRI applied incorrect accounting treatment to these marketing agreements by classifying them as financial instruments rather than service contracts, and by recognising future fees from these agreements before rendering the services.
As a result, NGL and NRI's reported profits and net assets were inflated.
"NGL's publication of materially misleading financial statements from 2016 to 2018 (was) likely to have induced the sale or purchase by investors of NGL’s securities listed on the Singapore Exchange," added the press release.
Commenting on the case, ACRA's assistant chief executive 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."
MAS' assisting managing director (policy, payments and financial crime) Loo Siew Yee said that false or misleading statements by listed entities would erode investors' trust in the quality of information released by issuers, and have an adverse impact on the integrity of 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," said Ms Loo.
In response to Wednesday's joint statement by the authorities, Noble Resources Trading Holdings' executive chairman Matt Hinds said the company welcomed the conclusion of the investigation.
Mr Hinds said in a press release that Noble Resources Trading Holdings, a commodity trading business, has been under new ownership and management since Dec 20, 2018, and is now unrelated to Noble Group.
The company has "focused on the highest standards of corporate governance, reporting and transparency" since the separation.
"We are looking forward to continuing to work with our suppliers and serve our customers, building on the strong start to 2022," said Mr Hinds.