NZX-listed company censured and fined $150k
New Zealand stock exchange-listed company QEX Logistics has been censured and fined $150,000 for failing to advise the market of material information on three occasions.
An announcement yesterday by the New Zealand stock exchange’s (NZX) NZ Markets Disciplinary Tribunal said it found QEX Logistics breached two NZX listing rules.
It is the second time the company has been fined and censured in three months.
In October, QEX Logistics was ordered to pay $80,000 for not telling shareholders quickly enough that $4 million worth of stock had disappeared, believed stolen, from a Chinese warehouse.
QEX is a New Zealand-based export and cross border logistics company which facilitates the storage, supply, packaging, customs clearance and delivery of New Zealand products to China. It listed on the now defunct NXT market in February 2018 and migrated to the NZX main board in October 2018.
The tribunal determination says QEX failed to promptly and without delay advise the market:
■ Of prospective and actual breaches by its wholly owned subsidiary, New Y Trading, of its interest cover covenant with Westpac
■ That the Ministry of Primary Industries had filed charges against New Y and QEX chief executive and director Ronnie Xue, personally under the Animal Products Act
■ That its independent directors Conor English, Danny Chan and Martin MacDonald had resigned
■ That QEX failed to disclose promptly and without delay the change in directors.
The NZX suspended the trading of QEX shares in February following the resignation of most of its board. The company’s application for delisting was approved by the NZX in May, subject to some conditions.
The breaches are all alleged to have occurred before trading in QEX’s shares was suspended.
In November 2020, MPI filed charging documents in the District Court charging Xue with 12 breaches of the Animal Products Act and the Crimes Act for criminal offences relating to the export of animal products.
In December 2020, QEX’s then corporate counsel advised the QEX board that they ‘‘need to consider whether this development should be announced to the market. It feels like it is material information based upon my understanding of the facts at this stage, and requires disclosure’’.
QEX’s chair replied advising that he did not ‘‘know anything about it’’.
In January 2021, QEX’s then corporate counsel said that if all 12 charges were successfully prosecuted by MPI that could involve a sanction of up to a maximum of $1m, in addition to an imprisonment penalty.
He said given the sum compared to the company’s total cash reserves, the fact a term of imprisonment was a potential sanction and that the charges appeared to be very serious there was a genuine argument that the charges were material and required disclosure to the market.
QEX submitted that given the immaterial benefit gained from the alleged breaches and uncertainty as to how any prosecution may proceed, the board considered that the MPI charges were at that stage not material.
QEX said that this position changed when it engaged new legal advisers. Their advice differed to the QEX board’s earlier view, and their recommendation was that the information was material and should be disclosed without delay, which QEX did.
The tribunal said it was ‘‘very concerned’’ by the number and duration of the breaches.
‘‘This demonstrates to the tribunal that QEX was struggling with its compliance obligations on several fronts and either did not understand its obligations under the rules or inadequate consideration was being given to these matters by the QEX board.’’
The tribunal made a preliminary order that QEX pay up to $20,000 towards the costs incurred by NZX in considering the matter.
QEX’s share price is 28 cents.