The Financial Services Board (FSB) has granted an appeal against the JSE after the bourse fined Huge Group CEO James Herbst and then chairman Anton Potgieter R5 million each for allegedly flouting its rules.
The FSB has amended the JSE's decision, after deciding that Huge breached its authority by entering into derivative transactions without the necessary shareholder approval. The R5 million fine has been set aside and replaced with a R3 million sanction for each of the directors.
Herbst and Potgieter have to pay the costs of their application, while the bourse has to fork out for a wasted hearing on 3 March. Herbst and Potgieter are “satisfied that the appeal was upheld with costs,” says Herbst.
Stock stake
Both Herbst and Potgieter were fined R5 million each in 2009, in their personal capacity, for not following the bourse's rules after buying future shares in Huge, worth R8 million, which were then sold back to the company. However, minority shareholders were not informed of the deal, and had no say in the matter.
As a result, the Johannesburg-based bourse found the directors had contravened its rules around related-party transactions, and fined the two men in their personal capacity. Huge bought the 12.3 million shares between July and October last year, at an average price of 360c each. The company's shares closed unchanged at 90c yesterday.
In March 2011, the directors lodged an appeal against the fine with the FSB. Yesterday, the bourse, which was defending the appeal, issued a statement saying the FSB had allowed the appeal with costs.
No authority
The FSB set aside the JSE's finding that Huge acted contrary to the provisions of the Companies Act and that the company, Herbst and Potgieter breached a part of the JSE's Listings Requirements by having Huge carry out a specific repurchase of its securities from related parties.
Instead, the FSB found that Huge and the directors involved breached another part of the listing requirements by entering into “derivative transactions that might or would result in the repurchase by Huge of its securities in terms of a general authority” without the necessary shareholders' approval.
The JSE's fine was hailed as unprecedented and a step forward for governance issues at listed companies.
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