In the first case, the listed issuer failed to announce and seek shareholders’ approval for a number of loan transactions. There were certain controls and procedures in place for business transacted by the listed issuer and/or its subsidiary including the reporting of any business transacted to the board.  In this instance, the directors involved in the loan transactions did not properly follow internal procedures.

The relevant directors in this case were executive directors of the issuer. They were reasonably expected to keep themselves apprised of the affairs of the issuer/subsidiary. Although they were not aware of the transactions at the time, records of the issuer/subsidiary’s business transactions were available for their review at any time. However, they did not take reasonable steps to monitor the affairs of the subsidiary or ensure the internal procedures were complied with or whether any business transacted was Rule compliant.

The relevant directors failed to proactively follow up on the subsidiary’s business, even though it was evident from the listed issuer’s management accounts that the subsidiary was engaged in significant lending activity. The relevant directors in this case simply relied on those involved in the transactions to ensure the internal procedures would be followed.  

Two cases involved listed issuers which failed to comply with the procedural requirements for a number of transactions, including the failure to announce the transactions in a timely manner and/or seek shareholders’ approval. 

In both cases, among other deficiencies, there were inadequate and ineffective internal controls and risk management systems to support the identification, reporting and/or execution of notifiable transactions. 

One of the cases involved connected transactions but there was no mechanism for identifying conflicts. The directors failed to ensure their respective listed issuers established and maintained an adequate and effective internal controls system.  One of the directors failed to take proactive steps to raise enquiries with the listed issuer in respect of a transaction that was referred to in a document that had been circulated to the board.

In deciding to impose the private reprimands, the Exchange took into account the affirmative steps and remedial measures that had been taken by those involved.  For example:

• A director had made specific enquiries on the policies and procedures for connected transactions after certain Listing Rule changes came into effect.
• After the transactions and the Rule breaches were discovered, some directors had taken remedial steps to discuss the listed issuer’s breaches with the then auditor, initiate an independent investigation into the issue, and to conduct an independent internal control review with a view to improving the internal controls.
• Some directors had made some suggestions on the listed issuer’s corporate governance and/or internal controls.

The next case concerned directors’ responsibilities as members of the Nomination and Remuneration Committees.  The Nomination Committee and Remuneration Committee are an important part of the listed issuer’s corporate governance – the directors on these committees should properly evaluate candidates, scrutinize the requisite skills and characteristics for the role, and make appropriate recommendations to the board in a formal and transparent manner of both candidates for appointment, and for their remuneration.  The directors in this case breached their duties and undertakings by failing to: (a) carry out and ensure due diligence was carried out on the candidate, and/or (b) properly consider the candidate’s proposed remuneration.

In one case, a private reprimand was imposed on a listed issuer for providing inaccurate information to the Exchange during the course of an investigation.  In determining the sanction, the Exchange took into account that the listed issuer later provided the correct information and admitted the breach, and that the listed issuer had been separately and publicly sanctioned in connection with the matters under investigation.