KUALA LUMPUR (April 28): United Plantations Bhd, which last year saw an executive director queried by authorities for potential conflict of interest in derivatives trading, has assured shareholders that additional checks have been put in place to prevent a repeat of such an incident.

“I can furthermore vouch, reiterate and assure all shareholders that United Plantations' board of directors and its executive directors have always safeguarded the interest of its shareholders by doing its level best to create long-term value.

“Our past track record is a testimony to this and I remain supremely confident that this will continue into the future in spite of this incident that has caused no damage and no losses to its shareholders, and which I can assure [shareholders] will not happen again with the introduction of the annual declaration of conflict of interest [to prevent potential conflicts],” United Plantations chief executive director Datuk Carl Bek-Nielsen told theedgemarkets.com in an email.

The fact that authorities had highlighted to United Plantations’ audit committee last year “of an appearance of a potential conflict of interest in the trading of derivatives in that an executive director, who has been authorized to trade on behalf of the company in crude palm oil (CPO) futures also in his personal capacity entered into trades on such derivatives amongst others” was revealed in a four paragraph disclosure on page 176 of United Plantation’s 2016 annual report.

The matter was raised at United Plantations’ annual general meeting on April 22 and, according to Carl, the chairman of the audit committee Datuk Jeremy Derek Campbell Diamond had “appraised the shareholders of what had transpired”.

The director in question, Martin Bek-Nielsen, was not named in the 222-word disclosure made under the heading “review on trade of derivatives” with other activities of the audit committee during the year in the company’s annual report.

The independent professional reviewer engaged to check the matter was also not named in the disclosure, but United Plantations’ audit committee (which comprises three independent directors) said it is supported by the in-house internal audit department and outsourced internal auditors KPMG. Ernst & Young is its external auditor.

According to the disclosure, the executive director “had stopped from personal trading in CPO futures since the potential conflict of interest was highlighted and addressed to the satisfaction of the audit committee and the board”. It also said the independent review found “no evidence that the executive director had benefited from the trading activities at the expense of United Plantations Group or that group had incurred losses from these activities”.

These findings were presented to the authorities, but there was no mention of whether the authorities were satisfied with the review.

Carl, who is Martin’s elder brother and is deemed interested in over 47% of UP’s equity, also said he was “not at any point personally involved in the investigation or in the formulation of the conclusions”.

“This issue involving a conflict of interest situation was transparently highlighted. The entire issue has been handled independently and with much professionalism by the board's audit committee which implemented a thorough investigation into this issue,” Carl said, adding that a “big four” audit firm was appointed to investigate independently.

“Diamond wrote a serious letter to Martin on this oversight and to eliminate any further potential conflicts of interest situations in relation to CPO futures trades, a professional manager has since been given the responsibility to carry out this function under the guidance and oversight of the executive committee,” he added.

Diamond, who was general manager and CEO of Socfin Co Bhd from 1977 to 2001, has been on United Plantations’ board since July 2001.

The other two audit committee members are Ahmad Riza Basir, a lawyer by training, and R. Nadarajan, who was appointed to the board in June 2013 after retiring in 2012 as group financial adviser. Nadarajan was previously company secretary and senior group manager (finance).

United Plantations board comprises four executive directors (including Carl and Martin), four independent non-executive directors (including United Plantations’ chairman Tan Sri Johari Mat) and one non-independent non-executive director, being the Employees Provident Fund’s deputy CEO (Investment) Datuk Mohamad Nasir Ab. Latif, United Plantations’ 2016 annual report show.

The EPF has a 14.73% stake in United Plantations as at Jan 31, 2017.