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BURSA MALAYSIA SECURITIES PUBLICLY REPRIMANDS XINGQUAN INTERNATIONAL SPORTS HOLDINGS LIMITED AND ITS DIRECTORS AND FINES 4 DIRECTORS

29 Mar 2019

Bursa Malaysia Securities Berhad (635998-W) (“Bursa Malaysia Securities”) has publicly reprimanded Xingquan International Sports Holdings Limited (“XINQUAN” or “the Company”) and its 4 directors for breaches of the Bursa Malaysia Securities Main Market Listing Requirements (“Main LR”). In addition, the 4 directors of XINQUAN were also imposed total fines of RM3,026,900 as at to-date.

XINQUAN was publicly reprimanded for committing the following breaches of the Main LR (“XINQUAN’s Breaches”):-

No.

Breach

1.

Financial Reporting Breaches

XINQUAN had breached the following provisions of the Main LR:-

(a)   paragraph 9.22(1) of the Main LR for failing to announce the Company’s quarterly reports for the financial period ended 31 March 2017 (“QR March 2017”), 30 June 2017 (“QR June 2017”), 30 September 2017 (“QR Sept 2017”), 31 December 2017 (“QR Dec 2017”), 31 March 2018 (“QR March 2018”) and 30 June 2018 (“QR June 2018”) within the stipulated timeframes; and 

(b)   paragraph 9.23(1) of the Main LR for failing to issue the Company’s annual report that includes the annual audited financial statements together with the auditors’ and directors’ reports for the financial year ended (“FYE”) 30 June 2017 (“AR 2017”) on or before 31 October 2017. 

(The QR March 2017, QR June 2017, AR 2017, QR Sept 2017, QR Dec 2017, QR March 2018 and QR June 2018 are collectively referred to as “the Outstanding Financial Statements” where applicable.)

As at date hereof, the Company has yet to announce/issue the Outstanding Financial Statements.

2.

Corporate Governance Breaches

XINQUAN had breached the following provisions of the Main LR with regard to the composition of its Board of Directors (“BOD”) and Audit Committee (“AC”):-

(a)     paragraph 15.02(1) read together with paragraph 15.02(3) of the Main LR for failing to ensure that there were at least 2 independent directors in the BOD of XINQUAN after 3 months from the resignation of the independent director, Dato’ Haji Ramly bin Haji Zahari (“Dato’ Haji Ramly”) on 31 July 2017. Further, after the resignation of the other independent director, Zhou Liyi on 3 August 2017, the Company did not have any independent director in its BOD; and

(b)     paragraph 15.09(1)(a) read together with paragraph 15.19 of the Main LR for failing to ensure the AC composed of not fewer than 3 members after 3 months from the resignation of Tan Eng Choon, who was also the Chairman of the AC, on 29 May 2017. Further, after the resignations of Dato’ Haji Ramly on 31 July 2017 and Zhou Liyi on 3 August 2017, the Company did not have an AC.

As at date hereof, the Company has yet to comply with the above requirements.

3.

Foreign Listing Requirements Breaches

XINQUAN had breached the following provisions of the Main LR with regard to the requirements for foreign listing:- 

(a)     paragraph 4A.04(2) read together with paragraph 4A.08 of the Main LR for failing to have at least 2 independent directors whose principal or only place of residence is within Malaysia after the resignation of the Malaysian independent director, Tan Eng Choon on 29 May 2017.

Further, after the resignation of Dato’ Haji Ramly on 31 July 2017, the Company did not have any independent director whose principal or only place of residence is within Malaysia;

(b)     paragraph 4A.04A read together with paragraph 4A.08 of the Main LR for failing to ensure that the Company’s AC has at least 1 independent director who has a principal or only place of residence in Malaysia after the resignation of the Malaysian independent director, Dato’ Haji Ramly on 31 July 2017; and

(c)     paragraph 4A.05 read together with paragraph 4A.08 of the Main LR for failing to appoint an agent or representative in Malaysia to be responsible for communication with Bursa Malaysia Securities on behalf of the Company since 31 August 2017. The Company had on 25 August 2017 announced the resignations of Kang Shew Meng and Seow Fei San as company secretaries with effect from 31 August 2017.  Kang Shew Meng and Seow Fei San were also the Company’s secretarial agent and local agent. 

As at date hereof, the Company has yet to comply with the above requirements.

4.

Non-Compliance with Bursa Malaysia Securities’ Instruction/Directive

XINQUAN had breached paragraph 2.23(1) of the Main LR for failing to comply with the following instruction/directive of Bursa Malaysia Securities:-

(a)        the instruction of Bursa Malaysia Securities vide letter dated 19 September 2017 for XINQUAN to, amongst others, confirm and clarify the accuracy of the litigation cases against the Company’s subsidiaries and where necessary, furnish the required additional information for public release by 20 September 2017 (“outstanding information”); and 

(b)        the directive of Bursa Malaysia Securities vide letter dated 21 September 2017 for XINQUAN to make an announcement on the outstanding information,

(collectively referred to as “Bursa Malaysia Securities’ Instruction/Directive”).

5.

Disclosure Breaches

XINQUAN had  breached the following disclosure requirements under the Main LR:-

(a)      paragraph 9.28(3) of the Main LR for failing to make immediate announcements on the delay in the issuance of the Outstanding Financial Statements not later than 3 market days before the expiry of the stipulated timeframes under paragraphs 9.22(1) and 9.23(1) of the Main LR.

Other than the announcement on 1 June 2017 that the Company was unable to submit the QR March 2017 by 31 May 2017, the Company did not announce the delay in the issuance of the other Outstanding Financial Statements; and

(b)      paragraph 9.28(3A) of the Main LR for failing to make the monthly announcements on the status of the issuance of the Outstanding Financial Statements.

The Company had only announced the status of the issuance of the outstanding QR March 2017 on 30 June 2017 and 31 July 2017.  Thereafter, there was no announcement on the status of the issuance of the outstanding QR March 2017 and the other Outstanding Financial Statements by the Company.

The following 4 directors of XINQUAN were imposed the following penalties for breach of paragraph 16.13(b) of the Main LR where they had permitted XINQUAN to commit all or some of XINQUAN’s Breaches:- 

No.

Director 

Breach

Penalties Imposed

1.

 

Dato’ Wu Qingquan (“Dato’ Wu”)

Executive Chairman and Chief Executive Officer (“CEO”)

(Appointed on 6 February 2009)

 

paragraph 16.13(b) of the Main LR for permitting XINQUAN to commit the Financial Reporting Breaches

Public Reprimand and total fines of RM1,082,500*

paragraph 16.13(b) of the Main LR for permitting XINQUAN to commit the Corporate Governance Breaches, the Foreign Listing Requirements Breaches, the Non-Compliance with Bursa Malaysia Securities’ Instruction/Directive and the Disclosure Breaches 

Public Reprimand and Fine of RM1,000,000

2.

 

Wu Lianfa

Executive Director

(Appointed on 6 February 2009)

paragraph 16.13(b) of the Main LR for permitting XINQUAN to commit the Financial Reporting Breaches

Public Reprimand and total fines of RM427,400*

paragraph 16.13(b) of the Main LR for permitting XINQUAN to commit the Corporate Governance Breaches, the Foreign Listing Requirements Breaches, the Non-Compliance with Bursa Malaysia Securities’ Instruction/Directive and the Disclosure Breaches

Public Reprimand and Fine of RM500,000

3.

Zhou Liyi

Senior Independent Non-Executive Director

Audit Committee member

(Appointed on 1 June 2009 and resigned on 3 August 2017) 

paragraph 16.13(b) of the Main LR for permitting XINQUAN’s failure to announce the QR March 2017 on or before 31 May 2017

 

Public Reprimand and total fines of RM8,800

 

4.

Dato’ Haji Ramly

Independent Non-Executive Director

Audit Committee member

(Appointed on 5 June 2015 and resigned on 31 July 2017)

paragraph 16.13(b) of the Main LR for permitting XINQUAN’s failure to announce the QR March 2017 on or before 31 May 2017

 

Public Reprimand and total fines of RM8,200

 

[*A fine of RM500 per market day was imposed on Dato’ Wu and a fine of RM200 per market day was imposed on Wu Lianfa for each delay of the financial statements (subject to a maximum fine of RM1,000,000 for each financial statement) until the financial statements are issued/announced. The fines imposed on Dato’ Wu and Wu Lianfa were computed as at 29 March 2019.]

The finding of breach and imposition of the above penalties on XINQUAN and its directors were made pursuant to paragraph 16.19 of the Main LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including the materiality/impact of the breaches to XINQUAN and shareholders/investors and the roles, responsibilities, knowledge and conduct of the directors.

Bursa Malaysia Securities views the contraventions seriously as the timely and accurate disclosure of material information and submission of financial statements are fundamental obligations of listed companies. These obligations are of paramount importance in ensuring a fair and orderly market for securities traded on Bursa Malaysia Securities and necessary to aid informed investment decisions. 

Bursa Malaysia Securities has also reminded XINQUAN and its BOD of their responsibility to maintain the appropriate standards of corporate responsibility and accountability to its shareholders and the investing public.

XINQUAN had also committed breaches under the securities laws where actions had been taken by the Securities Commission (“SC”). The media release on actions taken by the SC is accessible here and here.