| ４．Reason |
DAIICHI COMMODITIES CO.,LTD. (hereinafter "the Company") disclosed an investigation report of a third party committee on Apr. 30, 2020 concerning inappropriate accounting processing by the Company, and corrections to past earnings reports, etc. on May 1, 2020.
These disclosures revealed that, the Company had conducted inappropriate accounting processing over a long period of time under the direction of successive representative directors, such as (i) unduly overstating reversal of allowance for doubtful receivables from fictitious collection of unrecoverable loans receivables and fictitious collection of accounts receivables regarding customers with margin shortfalls as well as (ii) fictitiously posting advertising expenses to secure funds that were used to fabricate said fictitious collections.
As a result, the Company was deemed to have disclosed earnings reports, etc. that contained falsehoods from the fiscal year ended Mar. 2015 through to the third quarter of the fiscal year ended Mar. 2020, and the corrections revealed that the Company's income at each step of its multi-step income statements for the fiscal years ended Mar. 2018 and Mar. 2019 were reversed to become positive instead of negative.
It was deemed that the following points contributed to the occurrence of these disclosures:
- There was a severe lack of awareness toward compliance among the top management of the Company, as demonstrated by such facts as that the past representative director & president, who showed absolute obeisance with the intention of the representative director & chairman, had directed to start the fictitious collection of unrecoverable loans and that successive representative director & presidents continued to carry out said fictious collection and went further to conduct fictitious collection of accounts receivables by increasing advertising expenses;
- Oversight and monitoring by the board of directors were deemed to have not functioned adequately to check the Company's business execution, as demonstrated by such facts as that there were no traces of questions being raised at board of directors meetings on material agenda items, including the purposes of use of the large amount of money lent out and the background of the delays in collection
- Statutory auditors were deemed to have not adequately performed their supervisory functions despite attending board of directors meetings, as demonstrated by the fact that there were no traces of questions, comments, or such acts made toward providing check and balance on the performance of duties by the board of directors for making important decisions;
- Internal audit was deemed to have not been performed effectively, as demonstrated by such facts that (i) there was a chronic shortage of staff in the internal audit division in response to the representative director & chairman's disregard of internal audit, (ii) there were no traces of internal audit being conducted at branch offices over a long period of time, and (iii) internal audits did not go beyond pointing out superficial matters, such as documents not being stamped; and
- There was severely inadequate awareness of compliance throughout the Company, as demonstrated by such facts that (i) some officers and employees did not point out nor blow the whistle despite being aware of the irregularity of the advertising expenses and (ii) employees of several departments blindly followed instructions that were clearly irregular from the representative director & presidents.
This case involves inappropriate disclosure that has considerable impact on investment decisions, and improvements in the Company's internal management system, etc. are deemed highly necessary. Therefore, TSE designates its stock as a Security on Alert.
Furthermore, TSE deems that the fact that inappropriate accounting processing was conducted at the Company for a long time under the direction of successive representative director & presidents has undermined the confidence of shareholders and investors in the TSE market. As such, TSE shall impose a listing agreement violation penalty on the Company. |
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