The JSE has waded into the ongoing debacle surrounding listed distributor Pinnacle Holdings, the arrest of one of its executives, and a Financial Services Board (FSB) probe into share trades made in March.
The bourse is investigating whether the company released timeously and in terms of its listing requirements an announcement saying the executive had been arrested, says Andre Visser, GM of the bourse's Issuer Services.
This follows an FSB investigation covering R28 million-worth of trades that took place between when Takalani Tshivhase was arrested on charges of bribery, and when Pinnacle told shareholders - 20 days later - after he was charged.
Grave matter
Noah Greenhill, head of corporate finance at Sasfin, explains the bourse has several options in terms of penalties if its probe unveils a breach of its requirements. These range from lightweight private or public censure, to suspension, or a maximum fine of R5 million against directors and the company.
Greenhill is only aware of one other incident in which the bourse rolled out its heaviest guns: when Huge Group's then chairman Anton Potgieter and CEO James Herbst were fined R5 million each for trading stock without the necessary permission.
The JSE will take this probe seriously, says Greenhill, because it needs to ensure the integrity of the bourse and the listed stocks. The possible fines the bourse can levy are in addition to steps the FSB can take.
Share trade probe
Solly Keetse, head of the Department of Market Abuse at the FSB, says if someone is found guilty of insider trading, they can be fined three times the profit they made, or the loss they avoided, as well as R1 million.
During the 20 days it took Pinnacle to tell the market about Tshivhase's arrest, three separate directors dabbled in Pinnacle stock, selling more than a million shares. Between them, director George Wiehahan, CEO Arnold Fourie and Tshivhase netted R28.6 million from their sales.
Pinnacle has explained Tshivhase had asked for permission to trade the stock on 27 January, which was granted on 10 March, after the end of the close period. The listed company said the sale represented a "very small percentage" of Tshivhase's holdings and "was related to the need to fund a specific transaction of a personal nature".
News of the bribery charge, released in a short statement, sent Pinnacle's shares into free fall, as the stock lost 25% from its opening price of R20, with loses mounting the next day, dragging the share to R11.45.
Hindsight
Absa Investments analyst Chris Gilmour says it would have, with hindsight, been wise of Pinnacle to alert shareholders, much closer to the event, to the fact that Tshivhase was arrested. Pinnacle said it acted on legal advice when it told the market on 25 March that Tshivhase had been charged, because that was the "appropriate time" and was no longer a "matter of speculation whether any charge would, indeed, be brought".
Gilmour says had Pinnacle told the market earlier, and Tshivhase was not charged for allegedly trying to bribe a police official with R5 million so the company could win a R182 million contract, the issue would have blown over quickly.
Tshivhase has taken a "leave of absence" until criminal proceedings have been wrapped up, and the trial is set for 2 June. Pinnacle, which has not responded to requests for comment, has said, once the matter has been resolved, "Tshivhase's association with the company can be reviewed".
Share