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Singapore: MAS slaps Noble Group with USD 9 mil fine

25 Aug 2022

The Monetary Authority of Singapore (MAS) has imposed a civil penalty of SGD 12.6 million (USD 9 million) against Noble Group for publishing misleading information in its financial statements, said MAS, Accounting and Corporate Regulatory Authority (ACRA) and Commercial Affairs Department of the Singapore Police Force on Wednesday (24 August). 

The authorities said this after concluding 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 are details of actions that have been taken:

  • MAS has imposed a civil penalty of SGD 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).

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.

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.

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).

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.”

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.”

Related: Noble Group pushes restructuring effort, disagrees with ACRA
Related: Singapore: Noble Group under investigation by SPF, MAS, ACRA
Related: UPDATE: Singapore-listed Noble sells oil trading desk
Related: Noble Group disposing global oil trading desk

 

Photo credit: Justin Lim on Unsplash
Published: 25 August, 2022

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