KUALA LUMPUR (Feb 5): The Securities Commission (SC) has reprimanded XOX Bhd’s founders Ng Kok Heng and Wong Yip Kee for failing to ensure the company’s profit forecasts were reasonable and realistic.

SC also reprimanded the company’s principal banker AmInvestment Bank Bhd for failing to ensure XOX meets the regulator's relevant requirements.

In an announcement dated Feb 4, the SC said Ng and Wong, who were also XOX’s executive directors as at May 24, 2011, failed to ensure the company’s profit forecast was compiled with utmost care and objectivity.

Ng, who is also XOX’ chief executive officer, and Wong, also failed to ensure there was a reasonable basis for the profit forecast, and that the forecast was realistic and achievable.

The reprimand came after the significant variance between the profit forecast and XOX’ unaudited results for the financial year ended Dec 31, 2011, which was mainly attributable to inadequate consideration of the factors/risks present at the time that the profit forecast was prepared.

“Thus, the bases and assumptions used in arriving at the said profit forecast, were not reasonable,” SC said.

Meanwhile, SC noted that AmInvestment Bank had failed to comply with paragraph 3.15(a) of the GoDD to make due and careful enquiry and ensure it had reasonable grounds to believe that the application to the SC meets the regulator's relevant requirements.
 
The bank also failed to undertake a further and more detailed verification and investigation, when it did not take into account the realisation of multiple risk factors concurrently in the preparation of the profit forecast of XOX for the financial year ended Dec 31, 2011, which were appearing in XOX’ prospectus dated May 24, 2011, in conjunction with the listing and quotation of XOX’ entire enlarged issued and paid-up share capital on the ACE Market of Bursa Malaysia.

AmInvestment Bank, therefore, had breached section 354(1)(b)(i) of the CMSA (CMSA) read together with rule 4.07(3) of the ACE Market Listing Requirements (AMLR); and section 354(1)(b)(ii) of the CMSA read together with paragraph 3.21 of the Guidelines on Due Diligence Conduct for Corporate Proposals (GoDD).

The SC reprimanded and directed AmInvestment Bank to conduct a comprehensive review and assessment for adequacy of all policies and processes relating to AmInvestment’s role as principal adviser and/or sponsor for corporate proposals, which as defined in GoDD.

“Results of such review and assessment, together with recommendations (if any), must be reported to the SC within three (3) months from the date of action,” it said.