(Provisional Translation)
December 7, 2015
Securities and Exchange Surveillance Commission
Recommendation for Administrative Monetary Penalty Payment Order for Violation of Disclosure Requirements by TOSHIBA CORPORATION
1. Contents of the Recommendation
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 TOSHIBA CORPORATION (the "Company") pursuant to Article 20(1) of the Act for Establishment of the Financial Services Agency. This recommendation is based on the findings of inspections focusing on false statements with regard to disclosure statements produced by the Company, whereby the following violations of the laws and ordinances were identified.
2. Summary of the Findings Regarding Violations of Laws and Ordinances
(1)Ongoing disclosure documents
The Company understated provisions for contract losses and overstated sales in some of the projects using the percentage-of-completion method. Among others, the Company also understated costs of sales and expenses in part of the businesses such as the Visual Products Business, the PC Business and the Semiconductor Business.
As a result, the Company submitted to the Director-General of the Kanto Local Finance Bureau the following annual securities reports "containing false statements on material issues" as stipulated in Article 172-4(1) of the Financial Instruments and Exchange Act (the "FIEA"), which are indicated in Appendix 1.
Annual securities report for the fiscal year ended March 31, 2012 (submitted on June 22, 2012)
Annual securities report for the fiscal year ended March 31, 2013 (submitted on June 25, 2013)
(2)Offering disclosure documents
The Company submitted to the Director-General of the Kanto Local Finance Bureau the following offering disclosure documents "containing false statements on material issues" as stipulated in Article 172-2(1)-1 of the FIEA, and had investors acquire securities in public offerings based on the offering disclosure documents.
A.On December 9, 2010, the Company submitted a shelf registration supplement in which the annual securities report for the consolidated fiscal year ended March 31, 2010 was incorporated by reference. The annual securities report contained a consolidated income statement including false statements such as a misstatement of a consolidated net loss for the fiscal year as 19,743 million yen (rounded down to the nearest million yen; the same shall apply hereinafter in this Section 2) by means such as understating of costs of sales where the correct amount of the consolidated net loss was found to be 53,943 million yen. In a public offering based on the shelf registration supplement, the Company had investors acquire its bonds for 120 billion yen in total on December 15, 2010.
B.On January 17, 2013, the Company submitted a shelf registration supplement in which the annual securities report containing false statements on material issues for the fiscal year ended March 31, 2012 (see #1 in Appendix 1) was incorporated by reference. In a public offering based on the shelf registration supplement, the Company had investors acquire its bonds for 30 billion yen in total on January 28, 2013.
C.On May 24, 2013, the Company submitted a shelf registration supplement in which the annual securities report containing false statements on material issues for the fiscal year ended March 31, 2012 (see #1 in Appendix 1) was incorporated by reference. In a public offering based on the shelf registration supplement, the Company had investors acquire its bonds for 90 billion yen in total on May 30, 2013.
D.On July 12, 2013, the Company submitted a shelf registration supplement in which the annual securities report containing false statements on material issues for the fiscal year ended March 31, 2013 (see #2 in Appendix 1) was incorporated by reference. In a public offering based on the shelf registration supplement, the Company had investors acquire its bonds for 30 billion yen in total on July 26, 2013.
E.On December 5, 2013, the Company submitted a shelf registration supplement in which the annual securities report containing false statements on material issues for the fiscal year ended March 2013 (see #2 in Appendix 1) was incorporated by reference. In a public offering based on the shelf registration supplement, the Company had investors acquire its bonds for 50 billion yen in total on December 11, 2013.
3. Total Amount of Administrative Monetary Penalties
The total amount of the administrative monetary penalties to be imposed on the Company in accordance with the FIEA will be 7,373,500,000 yen. Details of the calculation are presented in Appendix 2.
Appendix 1: False Statements Contained in the Annual Securities Reports of TOSHIBA CORPORATION
| No. | Disclosure Documents | False Statements | ||||
|---|---|---|---|---|---|---|
| Submission date | Document | Accounting period | Statement on Finance and Accounting | Content a | Accounting Items | |
| 1 | June 22, 2012 | Annual securities report for the 173rd business year (annual securities report for the consolidated fiscal year ended March 31, 2012) |
Consolidated accounting period from April 1, 2011 to March 31, 2012 |
Consolidated income statement | Consolidated net income was found to be 3,194 million yen, but stated as 70,054b million yen. | Findings include the following: ·Understating provision for contract loss and overstating sales ·Understating cost of sales ·Understating expenses |
| 2 | June 25, 2013 | Annual securities report for the 174th business year (annual securities report for the consolidated fiscal year ended March 31, 2013) |
Consolidated accounting period from April 1, 2012 to March 31, 2013 |
Consolidated income statement | Consolidated net income was found to be 13,425 million yen, but stated as 77,366c million yen. | Findings include the following: ·Understating provision for contract loss and overstating sales ·Understating cost of sales ·Understating expenses |
Note
a: Amounts have been rounded down to the nearest million yen.
b: This figure is in the consolidated net income for the fiscal year ended March 31, 2012, which was retroactively restated in the annual securities report for the fiscal year ended March 31, 2013.
c: This figure is in the consolidated net income for the fiscal year ended March 31, 2013, which was retroactively restated in the annual securities report for the fiscal year ended March 31, 2014.
Appendix 2: Method of Calculation of the Amount of the Administrative Monetary Penalty
(1)Pursuant to Article 172-4(1) of the FIEA, the amount of the administrative monetary penalty recommended to be imposed on the Company for submitting the annual securities report for the fiscal year ended March 31, 2012, is calculated as follows:
Because (a) the amount obtained by multiplying the market capitalization of the Company by 6/100,000 (= 92,277,727 yen) is more than (b) 6,000,000 yen, the amount of the administrative monetary penalty shall be 92,270,000 yen, which is rounded down to the nearest ten thousand pursuant to Article 176(2) of the FIEA.
(2)Pursuant to Article 172-4(1) of the FIEA, the amount of the administrative monetary penalty recommended to be imposed on the Company for submitting the annual securities report for the fiscal year ended March 31, 2013, is calculated as follows:
Because (a) the amount obtained by multiplying the market capitalization of the Company by 6/100,000 (= 81,236,859 yen) is more than (b) 6,000,000 yen, the amount of the administrative monetary penalty shall be 81,230,000 yen, which is rounded down to the nearest ten thousand pursuant to Article 176(2) of the FIEA.
(3)Pursuant to Article 172-2(1)-1 of the FIEA, the amount of the administrative monetary penalty recommended to be imposed on the Company for offering disclosure documents containing false statements on material issues is equivalent to 2.25/100 of the total amount of the issue price of securities that the Company had investors acquire in public offerings based on the offering disclosure documents.
A.The amount of the administrative monetary penalty related to the shelf registration supplement submitted on December 9, 2010 is:
120,000,000,000 x 2.25/100 = 2,700,000,000 yen
B.The amount of the administrative monetary penalty related to the shelf registration supplement submitted on January 17, 2013 is:
30,000,000,000 x 2.25/100 = 675,000,000 yen
C.The amount of the administrative monetary penalty related to the shelf registration supplement submitted on May 24, 2013 is:
90,000,000,000 x 2.25/100 = 2,025,000,000 yen
D.The amount of the administrative monetary penalty related to the shelf registration supplement submitted on July 12, 2013 is:
30,000,000,000 x 2.25/100 = 675,000,000 yen
E.The amount of the administrative monetary penalty related to the shelf registration supplement submitted on December 5, 2013 is:
50,000,000,000 x 2.25/100 = 1,125,000,000 yen