Contributed by Cassandra Lee and Fahri Azzat
This informative session was moderated by Roger Chin and the speakers were Wong Tat Chung, Anand Raj and Domingo Castillo, who hails from the Philippines.
Wong was the first speaker and spoke on the practical steps which a company should take when it is investigated by the relevant regulatory bodies, for example, the Securities Commission. Regulatory bodies like the Securities Commission are given vast powers, for instance, under the Capital Markets and Services Act 2007 and under generic legislation like the Penal Code, the Companies Act 1985 and the Anti-Money Laundering Act 2001. Aside from that there are also various statutory guidelines which require compliance by corporations. According to Wong, certain corporate finance transactions or exercises require approvals from the Securities Commission.
Wong advised that corporations should be mindful of all these requirements and ensure that they do not disclose false information or act in a deceptive manner. Companies should expect the Securities Commission to carry out investigations when things go wrong. Wong explained that in determining the course of action to take, the Securities Commission may take into consideration factors such as the seriousness of the matter concerned, the seriousness of non-disclosure, the stage at which the transaction or exercise is at, and the potential damage to investors. It may decide not to mount a full investigation and instead send a letter to the relevant parties to obtain an explanation from them. If it is unsatisfied with the explanation, it may take administrative actions like issue warnings. In such circumstances, where administrative actions are taken, it will not carry out a full investigation. However, the Securities Commission may also decide to prosecute the responsible parties, offer a compound in lieu of prosecution, or institute public interest civil litigation for damages on behalf of investors.
Finally, Wong advised that corporations should be mindful that the regulatory bodies can seize and gain access to electronic records which may very likely reveal incriminating information. He also advised that in any due diligence exercise, the “paper trail” is very important and such records must show that the company or corporation has covered all necessary grounds and have asked all the right questions.
The second speaker, Anand Raj, focused on what to do when confronted with an investigation by the tax authorities. His paramount advice is that it is never a good idea to resist them. One may be prosecuted for obstruction. He said that the difference between an audit and an investigation is that an audit is friendlier than an investigation. An audit, according to Anand Raj, is one which is expected whilst an investigation is when the authorities are acting on a tip off or is targeting a specific industry. In the case of investigations, no notice will be given whereas in the case of an audit, notice will normally be given to the party subjected to the audit.
Anand Raj also said that when being investigated, one must obtain search lists of all documents taken by the authorities and be prepared to go to the authority’s offices to review, copy or scan documents before responding. One should never send a junior to meet with the authorities and should be consistent. Never respond in haste, he warns. In responding to the authority’s queries etc., one should be careful. In all cases, the necessary legal advice should be sought.
He stressed that the problem with many Malaysian companies is that they do not have policies which put legal compliance ahead of business results in comparison to overseas companies. He advised that if a company wants to benchmark, it should benchmark against global standards and not against local standards.
The final speaker, Castillo spoke on customs investigations in the Philippines. He advised that when one receives a customs assessment, the first thing to do is to read the letter from the authority carefully and study the basis of the assessment. One should then determine whether the allegations in the assessment are correct including whether the classification under the Harmonised Code (adopted by the WTO) is correct and the tariff rate is used correctly. If they are wrong, one should consult its customs broker or lawyer to formally write to the authorities disputing the same. Finally, he advised that in customs related matters, it is best to engage a lawyer who is an expert in this area of law.