It looks as though Steinhoff will be paying much of the bill for the JSE’s investigation into possible wrongdoing by former executives of the international retail group.
On Monday the local bourse announced it had imposed R13.5 million of fines on Steinhoff for various contraventions related to the group’s accounting contraventions, which were disclosed to a shocked market in December 2017.
The contraventions perpetrated by key executives resulted in the share price plummeting within weeks and shareholders losing around R200 billion of value.
In a move that is likely to address criticisms of the JSE fining companies that are already struggling to deal with the consequences of malfeasance, the JSE has said it will draw on the R13.5 million to pay any costs incurred in future enforcement actions.
Move against directors
In Monday’s statement, the JSE made clear that its investigation into the company has been concluded but that it is continuing to investigate potential breaches of the Listings Requirements by directors. It is costs related to these investigations that the JSE will be drawing from Steinhoff – up to an amount of R13.5 million.
One investor who has been critical of the JSE levying fines on cash-strapped companies such as Tongaat and EOH said the Steinhoff fine was substantially the same but the presentation was excellent.
“As a regulator the JSE has to take action, few people, particularly shareholders who suffered considerable losses, would quibble with the idea of the offending company paying for an investigation into its errant directors.”
While Steinhoff has initiated legal action for repayment of remuneration awarded to former CEO Markus Jooste and former CFO Ben la Grange, there has been no sign of a concerted move against the directors.
The R13.5 million fine comprises R7.5 million for incorrect, false and misleading statements, which is the maximum possible for any one offence; R5 million for failing to disclose the disposal of a business; and R1 million for the sale of operational rights related to its then Austrian subsidiary Kika-Leiner.
Louis du Preez, current Steinhoff CEO, said on Monday that the company noted the JSE’s decision, which relates to the period predating the discovery of accounting irregularities in December 2017. “We are pleased that this concludes the JSE’s process in respect of the company.”
Investigation faced ‘unique challenges’
Andre Visser, director of issuer regulation at the JSE, told Moneyweb the investigation had posed unique challenges that resulted in it taking longer than usual.
“Although the matter arose in December 2017, the company only restated its results in May 2019, which in itself contained a disclaimed opinion from the auditors,” said Visser. The legal privilege claimed by the PwC report added further challenges to the JSE’s investigation efforts.
Visser, who said the costs incurred by the JSE have not been quantified, stressed that the JSE would have preferred to have concluded the matter more quickly but is required to follow due process, establishing the relevant facts and allowing the company to make representations.
“The consequences of these decisions are serious and it is therefore critical that we follow due process before reaching the final decision.”
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