THE Securities and Exchange Commission (SEC) said it ordered Abacus Coal Exploration and Development Corp. (ACEDC) to pay a fine of P2 million “for the material deficiencies and material misstatements” in its 2008 and 2009 audited financial statements.
“The Appellant is hereby ordered to correct its 2008 and 2009 Audited Financial Statements to reflect the total misstatements of assets and equity amounting to P2.7 billion,” the SEC in an decision signed by its Chairman Emilio B. Aquino on July 16.
The SEC affirmed with modification the order of its Company Registration and Monitoring Department (CRMD) outlining the penalty. The fine amounts to P1 million for each year of misstatement pursuant to the Securities Regulation Code (SRC).
The CRMD order was issued on Jan. 19, 2011.
The SEC also directed CRMD “to investigate the misstatements carried forward to succeeding audited financial statements” and reserved the right “to impose additional penalties until such are corrected.”
The case stemmed from the execution on Sept. 23, 2008 of ACEDC’s parent firm Abacus Consolidated Resources and Holdings, Inc. (ACRHI) of a deed of assignment of coal mining rights with appraised value of P2.7 billion in exchange for P295 million worth of new shares issued by the coal company. The transaction’s intent was to gain further control of ACEDC.
On Nov. 13, 2008, ACEDC filed with the SEC an application to increase its authorized capital stock to P300 million from P20 million in a filing subsequently approved by the SEC on Dec. 24, 2008.
The issuance of P295 million worth of new shares was fully subscribed and paid for by ACRHI through the assignment of coal mining rights.
ACEDC filed its 2008 audited financial statements on May 7, 2009 and its 2009 audited financial statements on May 7, 2010. In both 2008 and 2009, the company did not record in its balance sheet the increased capital stock and the acquired coal mining rights. Instead, it disclosed the information in the notes to financial statements.
On Nov. 30, 2010, ACEDC received from the CRMD a notice of conference to show cause why it should not be penalized for material deficiencies and material misstatements in its 2008 and 2009 audited financial statements.
Despite the company’s explanation in the conference, the SEC unit directed ACEDC to settle the imposable fine for violation of SEC Memorandum Circular No. 8 Series of 2009. The company filed its appeal on Feb. 28, 2011.
However, the SEC said the subsequent disclosures made by ACEDC in its notes to financial statements “are incomplete/deficient not only for the missing amounts or values but also for failure to make a clear connection” to the deed of assignment of mining rights by ACRHI in exchange for the appellant’s shares of stock worth P295 million. — Victor V. Saulon