News analysis

SGX refutes Iceberg's attacks over handling of Noble

Allegations made by anonymous blogger Iceberg Research against Noble Group might make for great reading, but a market regulator would have to weigh the actions taken by the commodities trading firm to tackle the concerns raised to see if further action was needed.

And it is true that Noble has become a lot more transparent in its financial statements over the past two years after first being attacked by Iceberg.

The company now offers disclosures that go well beyond what a listed firm is required to provide, such as "key audit matter" discussions that touch on issues which Iceberg said were of the most pressing concern to investors.

Indeed, it might be difficult to press Noble for even more disclosures, given the loads of information that it has already furnished, as this could lead to it giving away prized business know-how that puts it at a competitive disadvantage to its rivals.

What is more, Mr Tan Boon Gin, the chief regulatory officer of the Singapore Exchange (SGX), told The Straits Times that the bourse must be mindful of any action it takes against any listed firm and must consider the evidence presented carefully before it proceeds.

He said: "Iceberg makes all these allegations against Noble, but we don't really know who Iceberg is."

That raises the question: How can Iceberg expect to be taken seriously by Singapore regulators if nobody even knows the identity of those behind Iceberg?

To recap, for the past two years, Iceberg has been attacking Noble over its accounting practices. For Noble, that turned out to be a big nightmare as it struggled to retain investors' confidence in the wake of tough business conditions that caused its share price to plummet, shrinking its market capitalisation to $460 million currently from $8.12 billion in 2015, just before the attacks started.

Then, last week, Iceberg turned its guns on regulators here, accusing both SGX and the Monetary Authority of Singapore (MAS) of failing in their roles as regulators by not taking any action against Noble - and for allowing the beleaguered commodities trading firm to raise more money on a balance sheet that has attracted questions over its veracity.

However, the issue could boil down simply to whom to believe - the words of an anonymous blogger or the considered opinions of reputable international audit firms.

As Mr Tan noted, Noble's financial statements for 2015 and last year received clean audit opinions from Ernst & Young (E&Y), one of the Big Four accounting firms, in Hong Kong, where it is based. This is the best type of opinion that a company can get from an auditor.

Mr Tan said: "After Iceberg's attacks, E&Y had also been very careful in explaining all the concerns raised by Iceberg under key audit matters."

Moreover, to answer questions raised by Iceberg over unrealised profits that it was booking on its derivatives contracts, Noble had of its own volition appointed the local arm of another Big Four accounting firm, PwC Singapore, in 2015 to review the methodology it used.

Mr Tan said: "When you have conclusion from both the auditors and independent reviewer that the methodology used is in compliance with international accounting standards, what basis do we have for further action? We cannot simply override the auditor's opinion."

This is because E&Y is a Big Four accounting firm with global standards that are rigorously enforced, he added.

It leaves us to wonder about Iceberg's intentions. Mr David Gerald, who is president of the Securities Investors Association (Singapore), the local investor watchdog, said investors should treat with caution any report from an unregulated research firm of unknown origins and motive.

"Some of them are serving their own interests, especially by shorting the stock first and thereafter publishing negative reports."

A version of this article appeared in the print edition of The Straits Times on August 11, 2017, with the headline 'SGX refutes Iceberg's attacks over handling of Noble'. Print Edition | Subscribe