JSE-listed sugar and property firm Tongaat Hulett, which was rocked by an accounting scandal last year, has been handed down a reduced fine of R20 million by the Financial Sector Conduct Authority (FSCA).
In a statement on Monday, the financial watchdog said the fine relates to Tongaat Hulett’s contraventions of the Financial Markets Act (FMA) for “the period prior to the discovery of significant accounting irregularities at the company”.
An administrative penalty of just over R118 million was imposed on Tongaat Hulett for the contravention, however, this was reduced to R20 million as a concessionary move by FSCA.
“Noting Tongaat’s current financial position; to avoid penalising innocent Tongaat shareholders further and Tongaat’s commitment to continue co-operating fully with the FSCA in all future actions taken against any persons allegedly responsible for the wrongdoing, the FSCA has resolved, under Section 173 of the Financial Sector Regulation [FSR] Act, to remit a portion of the administrative penalty, resulting in the FSCA issuing an order for Tongaat to pay a penalty of R20 million, inclusive of the costs incurred by the FSCA in investigating this matter,” the regulator stated.
Tongaat Hulett noted the FSCA’s announcement and fine in a JSE Sens statement on Monday morning. However, the announcement saw its share price sliding just over 5% (by around 3.30pm).
The FSCA’s fine follows the JSE fining the embattled group R5 million (R7.5 million, but R2.5 million was suspended) in July for non-compliance of the bourse’s listing requirement. This also related to the accounting scandal, under the group’s previous management.
Commenting on the enforcement action, the FSCA said that Tongaat Hulett’s “multiple, significant restatements of its March 31, 2017 and March 31, 2018 financial results” supported the conclusion that the group had failed to meet its obligations under the FMA.
“The prior period errors extend back over the past six years and the cumulative correction has been reflected in the March 31, 2017 financial statements.
“The FSCA has therefore found that Tongaat made false, misleading or deceptive statements, promises or forecasts in its public statements to the markets in the prior period,” the regulator explained.
“The FSCA has applied section 167 of the FSR Act No.9 of 2017 to determine the level of administrative penalty to be paid by Tongaat and, having considered representations from the company, has also considered a number of mitigating factors.”
The regulator pointed out that events after the restated financial results “have highlighted the gap that existed between Tongaat’s prior public statements and the financial reality”. It said that the size of the headline penalty of R118 340 000 reflected the scale and severity of the regulatory breach.
“Nonetheless, considering Tongaat’s current financial position, we have made the decision to remit a substantial proportion of the penalty,” the FSCA stressed.
Tongaat Hulett noted in its Sens statement that prior to the publication of the financial regulator’s order, the group had approached the FSCA and applied for a remission of the initial penalty, which is provided for under Section 173 of the FSR Act.
“The FSCA considered Tongaat’s application for remission and has agreed to reduce a portion of the R118 340 000 penalty. The authority ordered… that Tongaat pay R20 million as an administrative penalty,” the group said.
Meanwhile, the FSCA thanked Tongaat Hulett’s current management team for their “co-operation and constructive engagement” through what it described as a “difficult and complex process”.