KUALA LUMPUR (Dec 24): Audit firm Deloitte PLT today failed to set aside the RM2.2 million imposed on the firm by the Securities Commission Malaysia (SC) over its failure to report breaches linked to the RM2.4 billion sukuk issued by Bandar Malaysia Sdn Bhd (BMSB).

This was after High Court Justice Datuk Seri Mariana Yahya dismissed the audit company's judicial review application for the imposition of the fine ruling under Section 276 (3)(b) of the Capital Markets and Services Act 2007 (CMSA), with her ruling that it was correct in law.

Justice Mariana pointed out that there was a proper notice to show cause issued by the SC, and Deloitte was given an opportunity to be heard on the charges.

She added that the sanction imposed by the SC on the firm to pay the RM2.2 million fine showed the seriousness of the decision, and there was no bias in the regulatory body's decision to impose the penalty.

“For these reasons, I would like to dismiss the application for judicial review,” she said.

Justice Mariana also ordered Deloitte to pay RM20,000 costs.

The SC was represented by counsel Brendan Navin Siva, while senior lawyer Datuk Malik Imtiaz Sarwar appeared for Deloitte.

Malik, when met after the decision, said he would take instructions on whether to appeal against today's decision.

It was reported on Dec 13 last year that Deloitte had filed a judicial review to challenge the imposition of the RM2.2 million fine for its failure to report the breaches.

“On Nov 14, 2019, we filed for a judicial review against the SC’s decision to dismiss our application to review the administrative sanctions, [and] to seek clarity in the application of the relevant laws for the benefit of us and all stakeholders in the capital markets,” said Deloitte in the statement then.

On Jan 30, 2019, the SC announced that it had imposed administrative sanctions on the audit firm for four purported breaches of provisions involving reporting to the SC and to the trustee of the RM2.4 billion sukuk programme.

The SC had slapped a RM2 million fine on Deloitte for failing to discharge its statutory obligations, including not immediately reporting irregularities it found. It also fined the audit firm an additional RM200,000 for not submitting a copy of the financial statements to the trustee within the legally stipulated time.

The SC previously said the fines were in relation to the RM2.4 billion sukuk murabahah programme issued by BMSB, a subsidiary of 1Malaysia Development Bhd (1MDB), in 2014.

Deloitte was the statutory auditor of BMSB and 1MDB Real Estate Sdn Bhd (1MDB RE) for the financial year ended March 31, 2015 (FY15) and FY16.

The SC said it found Deloitte to have committed two breaches under Section 276(3)(b) of the CMSA for failure to immediately report to the commission irregularities which may have a material effect on the ability of BMSB to fulfil its obligations in repaying the sukuk holders any amount under the sukuk programme.

This, it added, was despite Deloitte having included an audit qualification and emphasis of matter in BMSB and 1MDB RE’s audited financial statements (AFS).

The SC also found Deloitte to have committed two other breaches under Section 276(1) of the CMSA for the firm’s failure to send a copy of BMSB’s FY15 and FY16 AFS to MTrustee Bhd — the trustee of the sukuk — within seven days after furnishing the financial statements to BMSB. For this, Deloitte was fined RM200,000.