The Securities Commission (SC) publicly reprimands Affin Merchant Bank Berhad (Affin) and imposes a penalty of non-acceptance of all types of submissions under Section 32 of the Securities Commission Act 1993 by Affin for three months beginning today. The sanctions were imposed as Affin had failed to discharge its responsibilities as a principal adviser and independent placement agent to a restructuring scheme proposed by Omega Holdings Berhad (Omega).
In that restructuring scheme, a newco, Energro Berhad (Energro) was to take over the listing status of Omega. The scheme involved the injection of a new business into Energro, namely the business of sale and distribution of Alfa Romeo vehicles in Malaysia , pursuant to a Sales Concession Agreement (Agreement) between Milan Auto (M) Sdn Bhd (Milan Auto), the controlling shareholder of Energro, and Fiat Auto S.p.A of Italy (Fiat Auto). The validity of the Agreement was an integral part and central to the viability of the restructuring scheme. Affin, as the principal adviser, had submitted to the SC the proposal for the restructuring scheme of Omega on 31 January 2003.
The SC, subsequent to granting its approval on 28 August 2003, discovered that the said Agreement had been terminated. As there was no longer in existence any core business as represented in the scheme, the SC had, on 2 August 2004, revoked its approval.
The SC found that Affin had failed to undertake the necessary steps to verify the status and validity of the Agreement with Fiat Auto, despite notification by the SC of the termination. Affin had instead continued to rely on the representations made by Milan Auto and Energro that the Agreement was still valid and subsisting.
Further, in its capacity as independent placement agent, Affin had failed to exercise its responsibilities and had instead allowed Milan Auto to directly place out Energro shares. This constituted a breach of the SC’s Policies and Guidelines on the Issue/Offer of Securities and a breach of the SC’s condition of approval of the restructuring scheme.
In taking the action against Affin, the SC took note that Affin had, under the direction of their new President/Chief Executive Officer, taken measures to mitigate risks by taking pro-active steps to strengthen Affin’s business operations and by establishing a set of internal risk assessment procedures and guidelines.