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Noble Group fined $12.6 million for misleading financial statements after 4-year probe

SINGAPORE – Noble Group Limited (NGL) has been fined $12.6 million by the Singapore authorities, capping a nearly four-year probe into what was once Asia’s largest commodity trader before its collapse amid accusations of improper accounting and billions of dollars in losses.

The joint investigations by the Monetary Authority of Singapore (MAS),  Accounting and Corporate Regulatory Authority (Acra) and the Commercial Affairs Department, which began in November 2018, “involved complex accounting issues and required assistance from overseas authorities”, the agencies said in a joint statement on Wednesday (Aug 24).

MAS imposed the $12.6 million civil penalty on the firm for publishing misleading information in its financial statements in a breach of the Securities and Futures Act.

In addition, Acra issued “stern warnings” to two former directors of its then subsidiary Noble Resources International (NRI) for failing to prepare and table annual financial statements that complied with local accounting standards in a breach of the Companies Act.

The Public Accountants Oversight Committee also issued orders against the auditors of NRI from Ernst and Young in relation to the financial statements for 2012 to 2016.

The joint investigations revealed that NGL and NRI had applied an incorrect accounting treatment to some marketing agreements with mine owners and coal producers by classifying them as financial instruments instead of service contracts.

This inflated their reported profits and net assets, the statement said, NGL’s publication of materially misleading financial statements from 2016 to 2018 was likely to have induced the sale or purchase by investors of NGL’s securities listed on the Singapore Exchange.

Noble, which once had a market value of more than US$10 billion (S$13.9 billion) and was seen as a challenger to global commodity giants such as Glencore, embarked on a US$2 billion spending spree in 2009-2010. 

As its debt burden ballooned in the following years and losses piled up, an unknown analyst group called Iceberg Research published in 2015 a scathing critique of Noble’s accounting practices, which the firm denied.

In 2018, the firm collapsed into insolvency with US$1.5 billion in debt and was forced to restructure. Investors took fright and short sellers including Muddy Waters took aim at its shares.

The Nobel saga left many of its investors, including those in Singapore, with hefty losses. 

Assistant chief executive of Acra, Ms Kuldip Gill, said: “Acra expects financial statements to reflect a true and fair view of the financial position and performance of the company.

“Acra will continue to enforce accounting standards and take those involved in the financial reporting chain to task for unreliable information and/or non-compliance with the prescribed accounting and auditing standards.”

Noble Resources Trading Holdings (NRTH), which emerged after Noble Group’s restructuring, welcomed the conclusion of the Singapore investigation.

Its executive chairman Matt Hinds noted that NRTH, which has been under new ownership and management since December 2018, is now a separate business unrelated to Noble Group, with different owners, directors, senior management and external auditors.

“We are looking forward to continuing to work with our suppliers and serve our customers, building on the strong start to 2022,” said Mr Hinds in a statement on Wednesday.

Noble was one of several high-profile financial cases under investigation by the Singapore authorities in the past few years. Cases are ongoing for Hyflux, Eagle Hospitality Trust, and Hui Xun Asset Management along with Vickers Venture Partners.