Beleaguered MTD Walkers’ directors pay Rs.36.3 m in SEC fines
On the dock MTD Walkers PLC’s problems has exacerbated after the capital market regulator slapped a fine on its directors for violating five rules relating to non-compliance and default.
The Securities and Exchange Commission (SEC) fined Rs.1.1 million compounding fee per director, per offence for breaching the listing rules of the Colombo Stock Exchange (CSE) and violating SEC rule number 6 in the SEC Act which captures the mentioned rule of the CSE, official sources said.
The compounding happened after the SEC ‘show-caused’ the directors on the offences giving them an option to either compound or go to jail. They obviously took up the former and had paid their dues last week, sources added.
The regulator had issued two notices of actions in April 2019 on the directors of MTD serving on the board during May 2016 to May 2018 on their failure to make any immediate disclosure on the rating downgrade of MTD listed debentures on four occasions.
The SEC issued a second notice of action in July 2019 on directors for making a misleading disclosure to the market on January 17 of that year.
After these actions the MTD directors who were on the board on the mentioned periods made an application to the SEC through their lawyers to compound the said offences.
The regulator, in October last year approved the compounding by 11 directors in respect of the first notice of action for Rs.30.8 million.
On the second notice of action, the SEC approved the compounding subject to the payment of Rs.5.5 million by the directors. Despite this, the directors sought certain extensions to pay and the SEC had granted them. But when the final timeline lapsed, the regulator was in the process of forwarding criminal charges when the relevant directors paid the amount.
The Rs. 36.3 million fine is the largest ever compounding collection by the SEC in its 30-year history. The Business Times found out that the total collection for the entirety of SEC fines prior to this was Rs.63 million. The money was credited to the Compensation Fund of the SEC.
In 2016, some directors at MTD included Tan Sri Dr. Azmil Khalid Bin Dato’ Khalid, Jehan Prasanna Amaratunga (Group Executive Deputy Chairman), Keith George Cowling (Non-Independent Non-Executive Director), Leong Yow Lee, Albert Rasakantha Rasiah and Niranjan Joseph de Silva Deva-Aditya (Independent Non-Executive Directors).
The SEC, late last month appointed an external firm of chartered accountants to advise future course of action against MTD Walkers Plc taking grave notice of default in payment by the company on the type B debentures issued, the non-submission of the Annual Reports for the financial years ended 2018/2019, interim financial statements after June 30, 2019 and on the complaints received alleging that the assets of MTD Walkers were being sold and funds being siphoned out without proper internal controls. “The members of the commission, having taken grave notice of the above, have decided to appoint an external firm of chartered accountants to conduct ‘An Agreed Upon Procedure’ to conduct a Special Purpose Audit and to report back to the SEC within a short period of time in order to ascertain whether the SEC is required to take further measures to safeguard the interests of the company, its shareholders, debenture holders and the investing public,” a SEC directive said noting that MTD Walkers PLC, its Board of Directors, Chief Executive Officer, Chief Financial Officer and all management personnel are directed to desist in any manner from destroying, concealing, altering, removing, amending or cause the destruction, concealment, alteration, amendment or removal of any information that is in the records or books of the company maintained in the ordinary course of business; to extend full co-operation to the external firm of chartered accountants that will be “appointed to facilitate the smooth conduct of an ‘Agreed Upon Procedure’ to conduct a Special Purpose Audit; and to pay the fees to the external firm of chartered accountants.