| （５）Reason |
On Dec. 22, 2011, KEIOZU HOLDINGS COMPANY (hereinafter "the Company") submitted amendment reports for securities reports, etc. from the fiscal year ended Oct. 2006 through to the third quarter of the fiscal year ended Oct. 2011 due to inappropriate fund outflows to the founder and former representative director, overstatement of sales performance by using incentives, and other inappropriate acts (hereinafter "previous inappropriate acts").
TSE deemed long-term and significant deficiencies in the internal management system and framework such as inadequacy of directors' oversight functions and statutory auditors' monitoring functions at the Company, as well as not appropriately improving and operating the accounting organization. TSE deemed improvements to the internal management system, etc., of the Company to be highly necessary and designated the stock of the Company as a security on alert on Jan. 18, 2012.
In addition, the Company disclosed that it would improve its internal management system, etc. and take preventive measures against similar acts, which included the fundamental overhaul of its corporate culture, audit system reform, ensuring effective audit by its internal audit unit, and punishing those involved. However, as TSE did not recognize sufficient improvement in the internal management system, etc. of the Company on Apr. 30, 2013 and May 30, 2014, it decided to continue designating the stock of the Company as a security on alert. Then, on Jun. 27, 2014, the Company disclosed further improvement measures that included appropriately developing and implementing internal rules and internal control, and conducting appropriate internal audit.
After three years had elapsed from the designation, on Jan. 18, 2015, TSE designated the stock of the Company as a security under supervision (examination) on the same day and reviewed the internal management system of the Company.
In Jan. 2015, TSE found that inappropriate fund outflows to a former representative director continued until Mar. 2014 (hereinafter "this inappropriate act") even though the Company had explained to TSE that there was progress on the preventive measures mentioned above. This inappropriate act was found to have been conducted using other means by the then representative director and those who had been removed from their positions as directors but remained with the company as employees.
A part of this inappropriate act was discovered in internal audit, and some board members and a statutory auditor were aware of the fact by around Apr. 2014. However, thinking that the revelation of the fact would negatively impact an examination for removing the designation as a security on alert, the Company did not appropriately respond or implement measures that should have been taken upon the discovery of an inappropriate act, until an external agency pointed out the issue in Dec. 2014.
The Company was also found to have, generally, not established a system to prevent such inappropriate acts or handle such cases upon discovery.
Also, due to this inappropriate act, etc., between Jan. 15 and 19, 2015, the Company submitted amendment reports for securities reports, etc., from the fiscal year ended Oct. 2011 through to the third quarter of the fiscal year ended Mar. 2015. However, the Company overlooked errors related to this inappropriate act in the amendment reports, etc., which were outsourced and prepared by another company, and corrected the amendment reports, etc. again on Feb. 19 and 20, 2015. Furthermore, on Apr. 21, 2015, TSE found inappropriate accounting processing regarding sales of subsidiary companies. Other matters, including failure to comply with rules on internal approval, were also identified.
Based on these facts, TSE deems that the Company had given the impression of making progress on improving its internal management system, etc. while continuing to conduct inappropriate fund outflows and compromising oversight by board members and monitoring by auditors, as well as internal audit. Even after that, the Company was deemed to have failed to establish a system to prevent such inappropriate acts and handle such acts upon discovery. Furthermore, TSE deems that problems exist in its earnings disclosure system and the development and implementation of its internal rules. |
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