The JSE must make sure two of the Huge Group's directors, who last year were fined for not following the rules, stick to its listing requirements, say commentators.
Both the chairman and CEO were fined R5 million each last year, in their personal capacity, for breaking JSE rules. However, the bourse could not indicate this morning whether the fine has been paid, or whether it is being appealed.
The fine, levied against chairman Anton Potgieter and CEO James Herbst, last November, was hailed as unprecedented and a step forward for governance issues at listed companies. Herbst and Potgieter declined to comment, saying it is a “private matter”.
Shareholder activist Theo Botha says he expects the directors to delay paying the fine for as long as possible, and to likely appeal the issue. He questions why the matter has not been settled yet, and seems to be dragging on.
Botha adds that, ultimately, the matter may well go to court. “We will see how vigorous the JSE is when Huge [directors] come with attorneys.” Botha says he has never heard of the JSE defending an issue such as this in the courts. “I've never seen the JSE take a listed company to court.”
He is concerned the JSE is not as vigilant as it should be, because enforcing its rules could be a conflict of interest with its aim of getting companies to list. He says there should be an independent oversight authority that implements rules and regulations.
However, the JSE's head of investor relations, Michelle Joubert, points out that the bourse can only act within the limits of its regulatory framework.
Make it count
Chris Gilmour, an analyst with Absa Investments, says “the JSE has to make an example” of Herbst and Potgieter. He suspects that if the matter goes on appeal and the JSE wins, but the fine is not paid, the directors could be booted off the Huge board.
The directors were censured 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.
Since then, the company's shares have slid, and were unchanged at 85c in mid-morning trade today, a recovery from its 52-week low, on 10 November, of 30c, two days before the JSE announcement was made.
Defensive
The company has previously defended the share trade, saying it was within the boundaries of the JSE's rules.
It said last March: “We have since obtained written opinion from senior legal counsel that supports the fact that this transaction was neither a related party transaction, nor a repurchase of shares.”
After the JSE's announcement, Huge breathed a sigh of relief that it was not fined as an entity, and that it won't face any costs if Herbst and Potgieter fight the fine. The company has said it wants to put the issue behind it and get on with business.
Related story:
Huge governance concerns
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