Ayondo shares in limbo pending clarity over unit's compliance with UK authority

Singapore

CATALIST-LISTED Ayondo, which runs a social trading platform, said on Thursday night that auditors KPMG and Ernst & Young are in a disagreement over how a key metric of financial strength for one of its operating subsidiaries is calculated.

Ayondo Markets Limited (AML), a 99.91 per cent-owned subsidiary of Ayondo, is one of two primary subsidiaries through which the group offers social trading and brokerage services in the UK.

Since AML carries on activities which are regulated by the UK's Financial Conduct Authority (FCA), such as dealing in CFDs (contracts for difference) as principal and spread betting, it is required to maintain a prescribed Common Equity Tier 1 (CET1) ratio for the purpose of compliance with the FCA requirements.

In January 2019, following feedback by one of Ayondo's employees regarding the calculation of CET1 ratio, KPMG in the UK was engaged to assess the appropriate accounting and regulatory treatment of certain items, including the treatment of software costs, inter-company loan balances and the scope of regulatory consolidation related to the determination of AML's regulatory capital position under the UK's financial reporting standards.

It turns out that KPMG's views are different from the accounting treatment process adopted by AML in the past.

If KPMG's views with respect to technology software expenditures and inter-company balances and transactions were adopted by AML, it would have a negative impact on AML's CET1 ratio.

On the other hand, Ernst & Young, Ayondo's independent auditor, had audited Ayondo and its subsidiaries including AML during the group's IPO exercise and opined that the group's financial statements gave a true and fair view of the state of the company's affairs as at Dec 31, 2017.

AML continues to operate its business as usual.

But in order to address KPMG's concerns, Ayondo plans to strike a deal with BUX Holding, a company registered in the Netherlands, to inject fresh capital into AML.

Trading in Ayondo shares has been suspended pending clarity about the matters above, including the FCA's position on AML's compliance with the CET1 ratio.

Ayondo's board and its sponsor UOB Kay Hian are in close communication with SGX RegCo in relation to the findings by KPMG.

SGX RegCo has directed UOB Kay Hian to provide a full account of the developments, and the sponsor has asked Ayondo to provide it with a chronology of events leading to the above developments.

Ayondo was listed in Singapore in March last year.

Its shares were halted and then suspended from trading since Jan 30, and last traded at S$0.048 on Jan 29. Its chief executive Robert Paul Lempka had resigned earlier that month to pursue other interests.

Amendment note: Ernst & Young is the independent auditor of Ayondo and is not the independent auditor of AML, as earlier stated.