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Why Bursa sought Serba Dinamik to be compelled to make public announcement on independent review

Why Bursa sought Serba Dinamik to be compelled to make public announcement on independent review
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KUALA LUMPUR (Nov 24) : Since Oct 21, this year Bursa Malaysia had advised Serba Dinamik Holdings Bhd to make a public announcement with regards to the Ernst and Young Consulting Sdn Bhd (E&Y) findings over the four scope of its Special Independent Review (SIR) of the company.

In an affidavit in support by Julian Mahmud Hashim, Bursa's chief regulatory officer (CRO),  it was stated that a joint meeting was held on Oct 21, attended by representatives from Bursa, Serba Dinamik independent non-executive directors (INED), and E&Y, and in the meeting Bursa felt in its considered judgement there are “material information” from E&Y initial report which must be disclosed to the public.

“This follows the findings are reasonably expected to have a material effect on the price, value or market activity of Serba Dinamik and the decision of a holder of securities of the company or an investor in determining its, or his or her choice of action,” in court documents sighted by theedgemarkets.com.

The court documents filed by Messrs Chooi & Company + Cheang & Ariff, are in relation to Bursa's announcement on Tuesday (Nov 23) evening, to seek a court order to compel Serba Dinamik to make a public announcement of the SIR findings.

In Bursa's application, it is seeking a declaration that Serba Dinamik had contravened or breached and is in continuing contravention and breach of its obligations under the Main Market Listing Requirements (MMLR), when it refused or failed to comply with Bursa's instructions on Oct 22.

It also sought Serba Dinamik to be compelled to disclose the E&Y's SIR and the KPMG findings.

It also sought a court order directing Serba Dinamik to complete the SIR with E&Y or in the event of EY's premature resignation or its termination, the court orders the company to appoint an independent reviewer with international affiliation within 14 markets days for the SIR to be completed.

The SIR was done to assess the veracity and accuracy in matters raised by KPMG, as the auditor found questions regarding the recognition of Serba Dinamik and its subsidiaries revenue, purchases, receivables, payables and materials on site balances which may affect the company's financial position.

In the Oct 21 joint meeting, Bursa also informed Serba Dinamik's obligations to announce the SIR findings.

“However, the INED of the company who were present, expressed their concern on the timing of making the announcement, in light of the absence of the chairman at the joint meeting.”

“The next day, Bursa contacted Serba Dinamik to advise it and present its views again for them to make an immediate announcement of the findings, to which the company was of the opinion that the findings are not material information and does not warrant an announcement,” the affidavit states.

Suspension of trading

In light of Serba Dinamik's refusal to make the announcement, and pursuant to Bursa's powers under the MMLR, Bursa decided to suspend the trading of the company's securities on Oct 22.

“After the suspension, on Oct 22, Bursa issued a directive to Serba Dinamik to disclose the findings and directs it to make an announcement on the findings by Oct 26, failing which it shall effect a suspension of trading of it’s securities on the next market day.

“However, Serba Dinamik failed to comply with the directive,” the court document said adding this led to Serba Dinamik's securities trading to be suspended with effect from 9am on Oct 27.

Bursa further alleged that Serba Dinamik's refusal and failure to disclose the findings is a contravention of MMLR requirements.

“Its continuing refusal and/or failure to comply with the directive (by Bursa) warrants Bursa to do all acts necessary to enforce and give effect to the directive.

“This honourable court has the power to make such orders pursuant to Section 360(1)(c)(i) and/or (ii) (J) and/or (K) and/or (M) and read together with s 360(4) of the Capital Markets and Services Act, inter alia for Serba Dinamik to make an announcement on the findings,” the legal document said.

Serba Dinamik seeks to remove presiding judge

Meanwhile, Serba Dinamik had earlier this month filed two separate actions at the High Court against Bursa and also E&Y to stop them from releasing the findings.

A case management of the case was done on Tuesday (Nov 23), before Justice Datuk Ahmad Fairuz Zainol Abidin, where it is understood the company sought to have the judge removed from presiding over the case.

This follows Justice Ahmad Fairuz had previously served with the Securities Commission (SC) as its deputy chief executive before becoming a High Court judge.

Serba Dinamik, which had sought an injunction against Bursa and E&Y from releasing the report, earlier this month had sought more time from the judge to respond and answer Bursa and E&Y's affidavit in reply to oppose the application.

Following that the application for the hearing of the injunction has now been fixed on Dec 8 by Justice Ahmad Fairuz.

The judge however, on Nov 11, dismissed the company's application for an ad-interim injunction to bar Bursa and E&Y from releasing the findings before the hearing date on Dec 8.

Read also:
Bursa seeks court order to compel Serba Dinamik to disclose update on independent review factual findings
Serba Dinamik stumbles in attempt to block Bursa and EY from releasing findings of special audit

Surin Murugiah