New Email sent out. Its easy to forget how bad their rap sheet is and how bad the ASX response has been
LWP Technologies – A Regulatory Failure and Corporate Governance Disgrace.
According to the ASX website, the ASX operated in a highly regulated environment overseen by two independent government agencies – ASIC and the Reserve Bank of Australia. These government regulators have extensive power to enforce the laws and regulations that govern financial markets in Australia. The ASX has various regulatory obligations under the Corporations Act including having adequate arrangements for monitoring and enforcing compliance with its Listing Rules and its other Operating Rules. Also according to the ASX website, the responsibility for ensuring that the ASX has adequate arrangements for monitoring and enforcing compliance with the Listing Rules resides primarily with the Listings Unit in ASX Compliance. In addition, the website mentions that the ASX conducts various monitoring and surveillance activities to detect possible breaches of the Listing Rules.
Instead of a proactive system of monitoring and compliance, the ASX appears to work on a reactionary system where it is up to shareholders to raise complaints which are then dealt with.
The ASX listing rules are intended to serve the interests of listed entities and investors, both of whom have a vital interest in maintaining the reputation and integrity of the ASX market. The principles which underpin the obligations imposed by the Listing Rules include:
– timely disclosure of information which may have a material effect on the price of value of an entity’s securities
– an entity should disclose information about its corporate governance practices and explain any departure from generally accepted standards of good corporate governance.
Listed Entities are expected to comply with the general law and to maintain high standards of corporate integrity and accountability.
But what happens when they do not?
The ASX may, at any time, suspend an entity’s securities or remove them from the official list if, in the ASX’s opinion,
–
the entity is unable or unwilling to comply with, or breaks, a listing rule.
However, under Listing Rule 18.5, the ASX
may decide to take no action in response to a breach of a listing rule.
The ASX can only take action against a listed company if it is doing or failing to do something that breaches ASX’s Listing Rules.
Issues to do with whether its directors are complying with their statutory duties under the Corporations Act are regulated by the Australian Securities and Investments Commission (ASIC), rather than by ASX. Any concerns or complaints about a suspected breach of duties by the directors of the listed company should be directed to ASIC.
LWP Technologies and its directors – including director Siegfried Konig and ex-director Sean Corbin – have built up quite the rap sheet in their time running the company.
1. Director Shell Companies, undisclosed trading in shares, falsifying accounts, issuing shares to family members
ASX Listing Rule Breaches – 3.1, 3.19, 10.11
ASX Response – suspension of company, require undisclosed director shares to be sold
http://www.asx.com.au/asxpdf/20160404/pdf/43691kjrk4qylb.pdf
Company Response: errors blamed on family member, shares sold as per ASX requirement, updated corporate governance statement released. New Shell Companies registered by the LWP directors within days of the suspension to facilitate the future related party Franchise Retail Brands Transaction.
2. Misleading Announcement – Lanstead $6million cornerstone investment. Due to share placement restrictions, the $6million figure was false from the outset as this amount was not possible. The entire $6million figure, which is a figure spread out over 18 months, was added to current assets by the company to try and justify non-disclosure of the related party Franchise Retail Brands transaction
http://www.asx.com.au/asxpdf/20160725/pdf/438s4km3yrjp7p.pdf
ASX Listing Rule Breaches – 3.1
ASX Response – Nil
Company Response – 75% of transaction value written off in recent half yearly accounts.
3. Misleading Announcement – Independent Test Results Announcement
http://www.asx.com.au/asxpdf/20170313/pdf/43gr0hdlxxjhrw.pdf
As previously discussed, this announcement had redacted text which hid the fact that the results were done by inventor of the technology and ex-LWP Chief Scientist Dr Ralph Enderle. The results were not independent and efforts were made to hide this information from investors.
ASX Listing Rule Breaches – 3.1
ASX Response – Announcement required to be retracted and re-released.
Company Response – Remove “independent” from announcement title, blaming oversight in drafting the announcement. No mention of why certain parts of the announcement were redacted. Redacted information still present in re-released announcement
4. Related Party Transaction – $500,000 of LWP money invested into Franchise Retail Brands
http://www.asx.com.au/asxpdf/20161006/pdf/43brw9gnhxdlhz.pdf
New Shell companies set up just days after the ASX suspension for Shell companies used to facilitate the investment of $500,000.
ASX Listing Rule Breaches – 10.9
ASX Response – Transaction to be cancelled
Company Response – Disputed the Related Party ruling despite LWP Directors Siegfried Konig and Sean Corbin being listed as directors of Franchise Retail Limited, with the investment facilitated by 1AA Investments whose directors are also Siegfried Konig and Sean Corbin. LWP Technologies then added the full $6million Lanstead Investment – an 18 month monthly instalment setup – to current assets to claim the $500,000 was under the 5% threshold and therefore disclosure not required. $400,000 listed as refunded as per Half Yearly Report.
5. Incorrect Issue of Milestone Shares using incorrect VWAP
LWP use an incorrect VWAP to overissue 41.3 million shares at 1c to Ecopropp shareholders, which includes LWP Technologies directors Siegfried Konig and David Henson, with a value in excess of $400,000.
ASX Listing Rule Breaches – 7.1, 10.11
ASX Response – Require excess shares to be sold by directors only
Company Response – Announced that shares had been sold by Siegfried Konig and Devid Henson. Later announced that shares had been sold by Siegfried Konig but not David Henson. Shares sold represent a value of approximately $20,000, a mere fraction of the overissue amount.
6. Misleading Announcement – Graphenera Joint Venture
http://www.asx.com.au/asxpdf/20160707/pdf/438dvq3lqyr47p.pdf
http://lwp.host22.com/2017/02/01/addendum-to-yesterdays-update/
LWP announce that they had undertaken additional checks on the Graphenera JV in response to shareholder concerns over the technology, IP rights and the JV partner and found nothing of concern in either the due diligence undertaken or the battery technology. Recent Supreme Court Documentation reveals that Bruce Dwyer was sent over to Thailand in response to those shareholder concerns and reported back concerns regarding the money spent and the abilities of the JV partner.
ASX Listing Rule Breaches – 3.1
ASX Response – Suspension in trading until a reply to ASX is received
Company Response – announce that their previous announcement was in regard to the technology only despite shareholder concerns over the due diligence undertaken, the JV partner AND the technology. Issues with the Joint Venture not disclosed to the market at all.
7. Breach of Director Duties
http://lwp.host22.com/2017/02/25/further-update-on-court-case/
LWP directors sign Graphenera Shareholders Agreement while not directors of the JV company. LWP attempt to open a bank account under the Graphenera Banner but are not able to due to them not being directors of the JV company. LWP proceed to deposit approximately $700,000 into the JV partners personal bank account. On 5 September, LWP lawyer back dates ASIC Change of Company Details form to before the Shareholders Agreement is signed.
ASX Response – Nil
Company Response – Announce update on court case will be provided in due course. Fail to mention any of these issues and that their JV partner is seeking costs be paid by LWP.
8. Company Enabled Insider Trading
http://www.asx.com.au/asxpdf/20160607/pdf/437qzlfb3v88ry.pdf
Company employees and contracts are issued shares in lieu of salary after the Graphenera Joint Venture company is registered but before the Joint Venture is announced to the market allowing employees and contractors to then sell these shares into the subsequent share price spike.
Corporations Act Breach – Section 1043A
ASX Response – Nil
9. Transacting in Shares in Restricted Periods
http://www.asx.com.au/asxpdf/20160407/pdf/436cf1t8styjbr.pdf
In the amended Appendix 3Y announcement provided by ex-LWP Technologies director Sean Corbin following the ASX enforced suspension in April 2016, a number of transactions appeared in time periods just before price sensitive announcements.
ASX Listing Rule Breaches – 12.10
ASX Response - Nil
10. Failure to lodge a Becoming a Substantial Holder Notice
http://www.asx.com.au/asxpdf/20150324/pdf/42xh0c2zh761xv.pdf
http://www.asx.com.au/asxpdf/20161202/pdf/43dflfw2p5hhbv.pdf
LWP Technologies director Siegfried Konig became a substantial holder in LWP Technologies in April 2015, although the announcement regarding this incorrectly states no Ecopropp vendor will become a significant shareholder following this transaction. The substantial holder notice was lodged in December 2016.
Corporations Act Breach – RG 5
Other items include the employee loans provided for relocation and capital raise expenses (but not to buy shares), the $300,000 loan to Omnet written off shortly after, the numerous misleading company announcements including the Quantum Leap announcement, LWP Technologies “Plan B” revenue stream that never eventuated, missing test results and the list goes on.
Where has ASIC been during all this? After all, they are supposed to be the custodians of the Corporations Act. We found the words of Mike Carlton sum up the situation quite well.
“ASIC is utterly, scandalously useless.
It is there to protect big banks, not the small investor.”
(
https://twitter.com/mikecarlton01/status/569358330897891328)
ABC’s Ian Verrender also sums up ASIC quite well:
“Even describing ASIC as a regulator is stretching things. The truth is, it hasn't regulated anything for years.”
“…shareholders now are being forced to run a class action against the very company in which they've invested for restitution.
This has become ASIC's modus operandi. It has abrogated its responsibility to public company shareholders, effectively outsourcing litigation, and actively encouraging shareholders to proceed with class actions.
The message is, if you've lost money through corporate malfeasance, you're on your own.”
It is our view that the handling of regulatory issues by both the ASX and ASIC have been severely lacking with the interests of shareholders not taken into account at all. Shareholders have lots tens of millions of dollars with little more than a slap on the wrist to date which is just not good enough. ASIC look to shy away from their responsibilities of regulator of the Corporations Act and encourage shareholders to take their own class action. Their record in court is abysmal.
We encourage as many people to lodge complaints with ASX - regarding both misconduct and their handling of the matter - as well as to ASIC to make your voice heard. You don’t have to still hold shares in order to do this.
To Report Misconduct to the ASX
To report a possible listing rule breach to the ASX, use the following link
http://www.asx.com.au/contact/#/reportmisconduct
Identify the issue and supporting information. The ASX has a set timeframe to provide a response to your report.
To Complain about the ASX
To lodge a complaint about the ASX’s handling of the numerous breaches of the ASX Listing Rules and good corporate governance principles, use the following link
http://www.asx.com.au/contact/#/complain
We have outlined a few examples and the lack lustre response from the ASX, contact us through our webpage at
http://lwp.host22.com/#contact-lwp-action-group if you need a hand lodging a complaint.
To Repost Misconduct to ASIC
To report a possible breach of the Corporations Act, use the following link
http://asic.gov.au/about-asic/contact-us/how-to-complain/report-misconduct-to-asic/
Depending on the complaint, ASIC will acknowledge receipt of the complaint but may not be able to respond further.
To Complain about ASIC
To lodge a complaint about a decision, or lack of action, by ASIC, use the following link
http://asic.gov.au/about-asic/contact-us/how-can-we-help-you/complaints-about-asic/
If you are not happy with the outcome from this complaint, you can then complain further to the Commonwealth Ombudsman.
What happens if you are not happy with the outcome?
Generally speaking, where you are unhappy with how we handled your matter, you can contact the Commonwealth Ombudsman:
• On the National Complaints Line: 1300 362 072
• At
ombudsman.gov.au
• By writing to:
The Ombudsman
GPO Box 442 Canberra ACT 2601
