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Nov. 22, 2024 TSE De-Designation of Securities on Special Alert and Securities Under Supervision (Examination): TOKYO KOKI CO.LTD.
The following issue has been de-designated as Securities on Special Alert and Securities Under Supervision (Examination).
*This decision is based on the results of the examination by Japan Exchange Regulation.
1.Issue Name | TOKYO KOKI CO.LTD. stock (Code: 7719, Market Segment: Standard Market) |
2.Date of De-Designation of Securities on Special Alert |
Nov. 23, 2024 (Sat.) |
Reason (Related Clause) |
Due to falling under cases where the Exchange does not deem there to be any problem in the internal management system, etc. on the basis of the Written Confirmation of Internal Management System resubmitted by the listed company (Rule 503, Paragraph 7 of the Securities Listing Regulations before the revisions pursuant to the provisions of the Securities Listing Regulations revised on Jan. 15, 2024 (*1)) |
3.Date of De-Designation of Securities Under Supervision (Examination) |
Nov. 23, 2024 (Sat.) |
Reason (Related Clause) |
Due to the Exchange not deeming that the internal management system, etc. did not improve on the basis of the Written Confirmation of Internal Management System resubmitted by the listed company (The main clause of Rule 604, Paragraph 3 and Rule 604, Paragraph 1, Item (12) of Enforcement Rules for Securities Listing Regulations (*2)) |
4.Details of Reason | On Mar. 3, 2023, TOKYO KOKI CO.LTD. (hereinafter "the Company") disclosed a third-party committee's investigation report concerning the Company's inappropriate accounting processing. The Company then disclosed corrections to its past earnings reports on Mar. 8, 2023. These disclosures revealed that the Company, with the involvement of the former director in charge of the trading business, had been conducting inappropriate accounting processing, such as by including transactions that should have been posted as commission income (calculated by deducting the purchase price from the selling price) in the sales figures at the full selling prices of the traded products. Based on the above, TSE deemed that improvement of the internal management system, etc. of the Company was highly necessary and designated its stock as a Security on Alert (currently "Security on Special Alert") on Mar. 30, 2023. After the designation, as a result of new suspicions of over-invoicing of sales costs at a subsidiary involving the Company’s former director in charge of trading operations, the Company established an investigative committee to investigate the matter and disclosed the results of its investigation on Mar. 29, 2024. The investigation determined that the Company’s subsidiary had been inflating costs and paying kickbacks through a subcontractor, and on May 1, 2024, the Company disclosed revisions to its earnings reports for previous years. After that, when TSE checked the contents of the Written Confirmation of Internal Management System submitted by the Company after one year had passed since the relevant designation, it was recognized that the Company had taken certain actions in relation to the improvement plan disclosed on Aug. 28, 2023. However, the Company was found to be in a situation that requires further action with regards to its internal management system, as described below, and it was therefore decided that it was necessary to continue to confirm the Company’s actions to improve this situation. Thus, the relevant designation was continued on May 24, 2024. - TSE found the application of the internal approval procedure to be inconsistent, as instanced by the fact that there were multiple cases where approvals were made by a person who did not have decision-making authority or by the same person who submitted the request for approval. - TSE found deficiencies in the measures based on the improvement plan, as instanced by the fact that one of the Company's subsidiaries failed to implement credit management based on its credit management rules. - Although the Company had fully revised its internal rules and regulations, it did not ensure a sufficient amount of time to check whether its actual operations were in line with the various revised rules and regulations because of the time it took to make the revisions. - The Company had not yet implemented measures to prevent recurrences (formulated and disclosed on May 2, 2024), including the development of a system to address the newly revealed deficiencies in the management of subcontractors at one of its subsidiaries. Having now confirmed the content of the Written Confirmation of Internal Management System that the Company resubmitted one year and six months after the relevant designation, it was recognized that the Company had taken the following measures to address the points that had not been sufficiently improved after one year had passed since the relevant designation. In addition, it was also recognized that a reasonable internal management system had been established and was being operated. - Successfully introduced a system for the approval of requests, which is being operated in accordance with the approval authority standards, and there are no operational deficiencies. - Successfully introduced a credit management system at all subsidiaries, and credit management under this system is being carried out in accordance with the internal regulations. - Other important revisions to internal regulations were completed by May 2024, and subsequent operations are being carried out in accordance with the various internal regulations. - In response to the newly discovered deficiencies in the management of subcontractors at the subsidiary, a system has been established and is being implemented to verify the adequacy of subcontractor management and subcontractor unit prices, and the Parent Company has established a system for managing its subsidiaries. As such, TSE has decided to de-designate the stock of the Company as a Security on Special Alert since it does not deem there to be any problem in the internal management system, etc. of the Company. Together with this decision, it will de-designate the stock as a Security Under Supervision (Examination). |
- Since the Company's stock was designated as a Security on Alert before the implementation date of "Partial Revisions to the Securities Listing Regulations and Other Rules in Response to Revisions to the Rules for Securities on Alert in Order to Improve the Effectiveness of Listed Companies' Improvements to Their Internal Management Systems" (Jan. 15, 2024), Rule 503, Paragraph 7 as it was before the revisions has been applied pursuant to the provision of Paragraph 4 of the Supplementary Provisions of the Securities Listing Regulations revised on Jan. 15, 2024.
- In the same way, pursuant to the provision of Paragraph 4 of the Supplementary Provisions of the Securities Listing Regulations revised on Jan. 15, 2024, an examination was conducted to determine whether or not the case fell under Rule 601, Paragraph 1, Item 9 of the Securities Listing Regulations before the revision.
Designation History of Securities Under Supervision & Securities to Be Delisted
Current Designations of Securities on Special Alert
Designation History of Designation of Securities on Special Alert
DISCLAIMER: This translation may be used for reference purposes only. This English version is not an official translation of the original Japanese document. In cases where any differences occur between the English version and the original Japanese version, the Japanese version shall prevail. This translation is subject to change without notice. Tokyo Stock Exchange, Inc. and/or Japan Exchange Regulation shall individually or jointly accept no responsibility or liability for damage or loss caused by any error, inaccuracy, misunderstanding, or changes with regard to this translation.
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