(Provisional Translation)
June 19, 2014
Securities and Exchange Surveillance Commission
The Securities and Exchange Surveillance Commission, today, made a recommendation to the prime minister and the commissioner of the Financial Services Agency that an administrative monetary penalty payment order be issued in regard to misstatements of financial reports on material issues by AIREX INC. (“AIREX”), pursuant to Article 20(1) of the Act for Establishment of the Financial Services Agency. This recommendation is based on the findings of the disclosure statements inspection of the company, whereby the following violations of laws and ordinances were identified.
AIREX, whose registered office is located at 4-8-14, Nihonbashi-Honcho, Chuo-ku, Tokyo, is a firm engaged in information-communication business including system development. AIREX submitted to the Director-General of the Kanto Local Finance Bureau its annual securities report, etc., containing false statements on material issues by recording fictitious sales calculated on falsified data overstating working hours of staff members dispatched temporarily and engaging in system development projects, as well as by overstating products-in-progress for a system development project which should have been stated as such expenses as labor costs paid after the completion of the project, as stipulated under Article 172-4(1) and (2) of the Financial Instruments and Exchange Act (FIEA), as described in the table below.
| No. | Disclosure Document | False Statement | ||||
|---|---|---|---|---|---|---|
| Submission date | Document | Accounting period | Document related to financial calculation | Content (note) | Type | |
| 1 | June 25, 2012 | Annual securities report for consolidated accounting period of the 70th business year (Annual securities report for fiscal year ended March 2012) | Consolidated accounting period from April 1, 2011, to March 31, 2012 | Consolidated income statement | Consolidated ordinary income was found to be 211 million yen, but was stated as 335 million yen. Consolidated net income was found to be 124 million yen, but was stated as 248 million yen. |
-Recording fictitious sales, etc. |
| 2 | August 14, 2012 | Quarterly report for 1st quarter consolidated accounting period of the 71st business year (Quarterly report for 1st quarter ended June 2012) | 1st quarter consolidated accounting period from April 1 to June 30, 2012 | Quarterly consolidated balance sheet | Consolidated net assets were found to be 596 million yen, but were stated as 806 million yen. | -Overstating inventory assets, etc. |
| 3 | November 14, 2012 | Quarterly report for 2nd quarter consolidated accounting period of the 71st business year (Quarterly report for 2nd quarter ended September 2012) | 2nd quarter consolidated cumulative period from April 1 to September 30, 2012 | Quarterly consolidated income statement | Consolidated ordinary loss was found to be 14 million yen, but positive 190 million yen was stated as income. Consolidated quarterly net loss was found to be 68 million yen, but positive 135 million yen was stated as income. |
-Recording fictitious sales -Overstating net assets, etc. |
| 2nd quarter consolidated accounting period from July 1 to September 30, 2012 | Quarterly consolidated balance sheet | Consolidated net assets were found to be 545 million yen, but were stated as 899 million yen. | ||||
| 4 | February 14, 2013 | Quarterly report for 3rd quarter consolidated accounting period of the 71st business year (Quarterly report for 3rd quarter ended December 2012) | 3rd quarter consolidated cumulative period from April 1 to December 31, 2012 | Quarterly consolidated income statement | Consolidated ordinary loss was found to be 16 million yen, but positive 129 million yen was stated as income. Consolidated quarterly net loss was found to be 75 million yen, but positive 69 million yen was stated as income. |
-Recording fictitious sales -Overstating net assets, etc. |
| 3rd quarter consolidated accounting period from October 1 to December 31, 2012 | Quarterly consolidated balance sheet | Consolidated net assets were found to be 551 million yen, but were stated as 846 million yen. | ||||
| 5 | June 10, 2013 | Amendment report for 2nd quarterly securities report for the 71st business year | 2nd quarter consolidated cumulative period from April 1 to September 30, 2012 | Quarterly consolidated income statement | Consolidated ordinary loss was found to be 14 million yen, but positive 68 million yen was stated as income. Consolidated quarterly net loss was found to be 68 million yen, but positive 13 million yen was stated as income. |
-Recording fictitious sales -Overstating net assets, etc. |
| 2nd quarter consolidated accounting period from July 1 to September 30, 2012 | Quarterly consolidated balance sheet | Consolidated net assets were found to be 545 million yen, but were stated as 715 million yen. | ||||
Note: Rounded down to the nearest million yen.
Pursuant to the FIEA, the amount of the administrative monetary penalty applicable to the above violation is 15,000,000 yen.