In order to maintain professional industry standards and follow best practices in relation to the rules, regulations and laws that govern gaming operations, NagaCorp Ltd., (“the Company”) has established a Compliance Program to ensure that the Company and its subsidiaries operate both legally and ethically in all aspects of their operations. The Compliance Program will also enhance and protect the reputation of the Company and its subsidiaries.
The Company’s primary business as a gaming operator requires particular sensitivity to possible legal liabilities and reputational harm resulting from Company employees having associations with persons or businesses with a criminal background. Inappropriate judgment, which may not involve illegal activity, but reflects poorly on the reputation of the Company, or exposes the Company to civil liability, is also a concern.
It is required that all Directors, and Company employees act with sound judgment to prevent inappropriate situations or the appearance of wrongdoing. For these reasons, the Company has developed this program to gather and report relevant information concerning the suitability of individuals and organizations to engage in joint business endeavors with the Company.
1.Internal System of Information
The success of the Company’s information systems depends on effective coordination and information sharing between departments. The quality of internal information requires effective processes to disseminate and receive information. Effective planning requires good information.
All departments and working units within the Company must fully cooperate and coordinate their actions with the Compliance Officer regarding internal investigations, licensing matters, negotiations, due diligence matters, and other subject matter areas that require the involvement of the Compliance Officer.
The Compliance Committee will establish and maintain an internal system of information under the supervision of the Compliance Officer. The Compliance Officer is responsible for informing the Compliance Committee of any significant activities and/or relevant information involving company compliance issues and requirements to meet the standards set by government laws and regulations. The Compliance Officer will use the internal resources of the Company, or external consultants, in order to carry out the responsibility of administrating the compliance program and procedural requirements.
The Compliance Officer may carry out any investigation, meeting or propose actions regarding any topic that may arise from the Compliance Program policies and procedures adopted by the Company.
The Compliance Officer will be the link between the Company’s various business units and the Compliance Committee.
2. Responsibilities of Directors and Departments to Provide Information
2.1 It is mandatory that all directors, key managers, and others involved in the Company’s business projects, report in detail and in a timely manner to the Compliance Officer, regarding new locations, domestic and international projects, as well as compliance requirements and needed support.
Timely reporting means that prior to the execution of major contracts and business agreements, the initiation of operations, or material transactions as described in the Compliance Program, the department or business entity involved will report, in writing, to the Compliance Officer providing a summary of the project details, and goals and objectives to be achieved. The relevant disclosure of basic facts and information will facilitate proper coordination and allow proper planning in terms of resources required.
New projects include any of the following:
2.2 Prior to hiring personnel that will be placed in a position of management for the organization, including Directors, relevant documentation will be submitted to the Compliance Committee for review. Additional background may be required. No hiring of significant personnel may be performed without the prior review and concurrence of the Compliance Committee.
2.3 Prior to any modification to the organizational or corporate structure of the Company, a proposal will be submitted to the Compliance Officer for the purpose of having it reviewed by the Compliance Committee. The proposed changes should identify the specific legal changes to the structure and the operational or administrative reasons for the proposed changes.
2.4 Prior to any acquisition, merger or incorporation of new companies, or an increase or decrease of the Company’s capital stock or debt, a report directed to the Compliance Officer or Committee is required.
2.5 The activities described above will be reviewed and subject to written evaluation by the Compliance Committee. The review will occur prior to entering into any contract, or new association.
For such purposes, the Compliance Officer will have the assistance of the Directors and departments of the Company, to prepare and respond to questionnaires, and other relevant documents regarding the organizational structures, as well as financial and legal information required in the disclosure process. Additionally, information pertaining to officers, shareholders and other legal entities involved with a project will be disclosed prior to the execution of any contract, or formal agreement.
2.6 All entities, or individuals, having a commercial relationship or new association with the Company will be informed that they will be subject to a background check and verification process. The review will include the legal structure of the companies involved, as well as providing relevant financial, operational, legal and personal history information regarding individuals with a significant financial or operational interest in the proposal. Such information will be sent to the Compliance Committee.
For such purposes, the Legal Department of the Company will include in all contracts a clause reciting the following stipulation: “(…) Agrees to respond and provide the information concerning the structure of the Company, its financial, and legal aspects, and the personal information if the contracting party is an individual, in order that such information could be verified and submitted to the Compliance Committee of the Company. In addition, he/ she agrees that the Compliance Officer of the Company or a contracting party working under the direction and authority of the Company, may request any additional information to complete the due diligence check. Furthermore, he/she agrees to hold harmless the Company, its Directors and Officers, and any parties contracted to perform a due diligence review. The non-liability, hold harmless agreement applies whether or not the proposed operation or agreement is or is not approved by the Board of Directors of NagaCorp Ltd.”
3. Record of Due Diligence Matters
The Compliance Officer will prepare and keep a chronological record of all due diligence matters performed by, or on behalf of, the Compliance Committee. The Compliance Officer should keep at all times a record of completed and on-going investigations.
4. Review and Evaluation of Information Provided to the Committee
The Compliance Committee is responsible for reviewing and evaluating the information gathered and reported as part of the verification process. Prior to any quarterly meeting of the Compliance Committee, the Compliance Officer will prepare and inform the Committee concerning on-going projects and highlight reports previously prepared. A copy of completed reports should be available for review by Committee members at scheduled meetings or upon request. The Compliance Officer should note any recommendations made in the reports concerning relevant compliance findings and results.
5. Content of Reports
All reports delivered to the Compliance Committee, as well as those minutes prepared from the meetings of the Committee will contain adequate information to allow members of the Compliance Committee to make informed decisions and offer professional opinion and expertise to Company management and Board members.
Unless compelling circumstances exist, or questions are raised about the fairness or accuracy of a report prepared under the Committee’s direction, investigative work products will not be routinely disseminated to each Compliance Committee member, but each report will be presented for review and discussion at a Committee meeting.
5.1 Due Diligence Verification Process
5.1.1 General Transactions According to Amount
Business operations entered into by the Company with service providers or suppliers that involve an amount greater than $1,000,000 US dollars per year, will be subject to a procedure of verification (due diligence). The forms to be used in connection with these transactions are available through the Compliance Officer. This policy includes situations when the Company and its subsidiaries offer collateral or guarantees in support of the operation, and may directly or indirectly expose the Company to third party claims.
The reports will include at least the following information regarding the transaction and about any individual who is significantly involved in the agreement:
In addition, the Compliance Officer will carry out a background screening of each key person involved in the material transaction. The Compliance Officer may contract the background check to qualified private firms who handle these matters, or retain audit expertise in order to verify the information provided. The Compliance Officer will provide the results to the Compliance Committee for review and determination if the parties are suitable to conduct business transactions with the Company and its subsidiaries.
5.1.2 Financial Transactions
In regards to Company transactions establishing financial obligations exceeding $1,000,000, the Financial Director will prepare a report for review by the Compliance Committee that identifies the following information:
The Compliance Committee will direct any additional investigation required based on the facts and evaluations provided in the report prepared by the Financial Director.
5.1.3 Sale or Lease of Gaming Machines
Reports will be prepared about all sales and leases of gaming machines utilized at any geographic area. Such report will include the following information:
The Compliance Officer will keep an updated list of the jurisdiction that allow for the importing of gaming machines. The export and import of gaming machines from any other jurisdiction is prohibited until it is approved by the Compliance Officer. Questions and concerns regarding which jurisdictions allow importation or export of gaming machines will be directed to the Compliance Officer.
5.1.4 Records Regarding the Purchase or Lease of Gaming Machines
Due to the sensitive nature of the gaming industry and recognition of variations in local and national laws, the Company will maintain reports about all purchases or leases of gaming machines, whether new or used, placed in service by the Company. The reports will be filed to the Compliance Officer within thirty (30) calendar days following the date of purchase or lease of a gaming machine. The report will specify the following information:
The Compliance Officer will determine the suitability of any person involved in such transactions.
5.2 Exceptions to the Due Diligence Process
The Compliance Committee may determine that there is no need to conduct a new due diligence review under the following conditions:
The reasons on which such exceptions will apply will be included in the minutes of the Compliance Committee Meetings.
5.3 Listing of lawsuits and administrative actions
The Legal Department will issue an annual report of lawsuits and administrative actions involving the Company. This will be included in the internal system of information by the Compliance Officer.
In addition, the Compliance Officer will provide a written report to the Compliance Committee regarding, any director, manager, or the Company that is subject to an administrative sanction or judgment.
Such report will include at least the following information:
The Compliance Officer may request relevant records concerning these matters. All departments are obligated to comply with said request.
The Compliance Committee will analyze the particular circumstances of these matters and develop recommendations to the Board of Directors if necessary.
The Compliance Procedures May Be Amended By the Board of Directors of NagaCorp Ltd.
This material contains information that is proprietary to NagaCorp Ltd. and shall not be circulated beyond Naga without permission.