Singapore knobbles Noble with SGD12.6m fine, warnings to former directors, Ernst and Young

Regulatory authorities in Singapore have hit commodities trader Noble with a fine, issued "stern warnings" to two former directors in the business, and flagged up orders against auditors from Ernst and Young in regards to audited statements between 2012-16.

The action follows a multi-year, multi-agency investigation into failures linked to financial statements involving Noble Group Limited (NGL) and its Singapore subsidy Noble Resources International Pte Ltd (NRI).

The Monetary Authority of Singapore (MAS) has issued a civil penalty of SGD12.6m against NGL for "publishing misleading information in its financial statements".

Singapore's Accounting and Corporate Regulatory Authority (ACRA) issued two "stern warnings" to two former directors of NGL for "failing to prepare and table annual financial statments in compliance with the prescribed accounting standards in Singapore, in breach of section 201(2) of the Companies Act (CA)."

"The Public Accountants Oversight Committee (PAOC), which administers ACRA's Practice Monitoring Programme (PMP)1 under the Accountants Act, has also issued orders against the auditors of NRI from Ernst and Young in relation to the financial statements for the financial years ended 31 December 2012 to 31 December 2016," a statement issued by MAS also said.

The investigation also involved the Commercial Affairs Department (CAD) of the Singapore Police Force (SPF).

The investigation found that NGL through NRI entered into marketing agreements with mine owners and coal producers. These agreements would see NGL not take delivery of the commodities produced, but instead earn fees based on a pre-determined percentage of the counterparty's sales value.

However, it was deemed that NGL and NRI applied an incorrect accounting treatment to these marketing agreements, by classifying them as financial instruments instead of service contracts, and by recognising future fees from the agreements before rendering the services.

The effect was to inflate NGL's and NRI's reported profits and net assets. This led to publication of "materially misleading financial statements from 2016 to 2018", which "were likely to have induced the sale or purchase by investors of NGL's securities listed on the Singapore Exchange", MAS said.