Kuala Lumpur-based RHB Investment Bank Bhd (RHB IB) has pledged to enhance its due diligence processes after being publicly reprimanded and fined RM 350,000 by Bursa Malaysia Securities Bhd. The bank was penalized for two breaches of listing requirements related to the proposed initial public offering (IPO) of an ACE Market applicant, for which it served as the sponsor and principal adviser.
RHB IB's CEO, Ganesh Sabaratnam, stated on Friday that the bank takes these breaches seriously and has reviewed and reinforced its processes to be more robust. The bank is also working with an external adviser to align its due diligence processes and procedures with market best practices.
The first breach was regarding RHB IB's failure to conduct proper due diligence, resulting in a misstatement or material omission in the IPO applicant's submission and disclosures to Bursa. This lapse led to a material omission about the advance/financing arrangement by the applicant with its major suppliers, and the credit risk/recoverability of advances to one major supplier that had been wound up prior to the initial submission.
The second breach relates to RHB IB's failure to immediately notify Bursa of significant developments concerning the applicant's business, operations, future plans, and prospects after the initial submission. The regulator noted that RHB IB only disclosed this material information upon being queried by Bursa.
Bursa stated that these breaches led to the rejection of the proposed listing of the applicant. It added that there were also numerous key shortcomings and deficiencies in the submission and disclosures made in the draft prospectus.
This is not the first time RHB IB has breached listing requirements, according to Bursa. The regulator said its decision to publicly reprimand and fine RHB IB was made after considering all facts and circumstances of the matter, "including the materiality of the breaches, the roles and responsibilities of RHB IB as the sponsor and principal adviser, and the fact that RHB IB had previously breached the listing requirements."
In addition to the fine and reprimand, RHB IB has been required to present Bursa Malaysia Securities' decision to its board of directors and conduct a comprehensive review and assessment of the adequacy and effectiveness of its internal policies, processes, and procedures relating to its role as an adviser/sponsor for submissions to Bursa.
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