DAIICHI COMMODITIES CO LTD has been hit with a fine by the TSE, to the tune of 20 million Japanese Yen (JPY). Furthermore, TSE has designated its stock as a Security On Alert alongside this listing agreement violation penalty.
Obfuscation And Deception
DAIICHI had, on the 30th of April, 2020, disclosed an investigation report of a third-party committee. This report concerned the inappropriate processing of accounts by the company itself, as well as corrections being made to the past earnings report, such as what happened on the 1st of May, 2020. Within these disclosures, it was revealed that the company had conducted inappropriate processing of user accounts, and did so over a long period of time. This was done, according to the disclosures, by the direction of the successive representative directors.
These failures include fictitious advertising expenses needed to secure funds, which were then used to fabricate fictitious receivable collections. Alongside this, their failure was of overstating the reversal of allowance for doubtful receivables when it was unwarranted. These receivables pertained to a fictitious collection of accounts receivables for customers with margin shortfalls, as well as a fictitious collection of unrecoverable loan receivables.
Hiding All The Facts
Due to both these violations, it was deemed that the company had disclosed earning reports and other such documents that contained falsehoods within them, from March of 2015 to March of 2020. With the corrections to these falsehoods, it’s revealed that the income of each step of the company’s multi-step income statements for March 2018 and March 2019’s fiscal years was completely reversed, becoming positive instead of negative
Everyone Being On Board
Alongside this, the TSE had concluded that there was an overall lack of awareness in regards to compliance within the company’s top management. This can be demonstrated by the fact that the past representative president and director had shown compliance when it comes to the intention of the chairman and representative director.
He had further directed the start of this fictitious collection of unrecoverable loans. Furthermore, the successive representative director and presidents had continued to carry out this fictitious collection, going as far as to conducting a fictitious collection of account receivables. They did so through the increase of advertising expenses.
Further indications show that there was no form of questions raised at the board of director meetings regarding material agenda items. This includes the purposes of these large amounts of money lent out, as well as the various delays in collection.