I don’t think Trustco can get off the JSE fast enough. The controversial Namibian investment company has had a nasty run-in with the JSE once before. Now it has proposed delisting from the local bourse and is intent on trying its luck on the Nasdaq, possibly via a new entity called VeldBridge.
But that still seems a long way off. The company has been suspended on the JSE since the beginning of the year for failing to publish its end-August 2024 financial results. By now the year to end-August 2025 results are almost due, which means shareholders are completely in the dark about Trustco’s financial status.
What shareholders do know is that the JSE recently publicly censured Trustco and fined it R5m for what would appear to be a serious breach of the JSE listings requirements for a transaction that was first mooted in 2002.
In short, Trustco did not bother getting shareholder approval before selling off a chunk of its shareholding in diamond venture Meya Mining. There’s no doubt this was a material transaction for Trustco — representing 89% of the company’s market capitalisation at the time.
So yes, the Meya deal would certainly have needed shareholder approval through the issuing of a circular and the hosting of a general meeting. The JSE listings requirements stipulate that specific and important information must be disclosed in a circular to allow shareholders to make informed decisions when contemplating and then voting on a transaction.
Seems reasonable enough. Trustco, however, thinks not. In a statement, the company says that since listing on the JSE in 2009 it has clinched up to three major transactions a year. It adds acerbically: “In recent years, however, regulatory delays and interference have extended even straightforward processes to eight months or longer, despite full shareholder support.”
On the Meya transaction, Trustco says there were numerous in-person meetings and requests for rulings ad nauseam regarding the categorisation of the transaction and a required preliminary economic assessment report. To quote: “Throughout the process, Trustco maintained open communication with the JSE while the JSE adopted an obstructive approach.”
One might imagine that regulatory delays in clinching the Meya deal might have irked — and probably worried — Trustco, with the diamond market’s prospects looking increasingly flawed in the past two years. We all know what can happen when deals drag on so long that underlying trading conditions change, or the world gets hit by a pandemic or political crisis.
Some market watchers might think a R5m fine is a small price to pay for getting such a critical deal away. But Quinton van Rooyen, CEO and founder of Trustco, is miffed as hell. He countered bluntly: “The JSE’s refusal to exercise proper discretion, in the best interest of shareholders, contradicts efficient capital market principles. Our shareholders overwhelmingly support this transaction as per their irrevocable undertakings and, as directors, we acted in shareholders’ best interests, choosing compliance with fiduciary duty over regulatory obstruction.”
Van Rooyen also asked if there might be a bigger structural issue at the JSE, arguing that since the JSE became a listed entity on its own stock exchange, operational inefficiency has been augmented with “regulatory income”.
“By day, the JSE is a regulator and by night a listed corporate entity that must satisfy shareholders, marking its own homework.”
This might be a bit of a cheap shot. All fines imposed by the JSE under the listings requirements are earmarked for the issuer regulation fine reserve, a ring-fenced account that is not available for distribution to the JSE’s shareholders. These funds must be used “exclusively in the enforcement of, or in connection with, the listings requirements”.
Of course, Trustco is not the first company to grumble about the JSE’s regulatory red tape — especially in the context of deal-making endeavours. But that’s unfortunately part and parcel of capital markets, where corporate malfeasance and dodgy dealings — as any local investor knows — are not entirely absent.
The JSE’s director of issuer regulation, Andre Visser, says the JSE conducts all investigations strictly in accordance with its regulatory responsibilities. “The JSE is, by virtue of the peremptory provisions of the Financial Markets Act, obliged to supervise and enforce compliance with the listings requirements by all issuers.” He says the objectives of the listings requirements are to provide the investing public with an orderly, fair, efficient and transparent marketplace for trading securities and to regulate the market accordingly.
“So, if there is noncompliance by an issuer with the listing requirements, the JSE must act as it is statutorily obliged to do.”
More importantly, the censuring and fining of Trustco should serve as a deterrent to discourage similar conduct by other listed companies — and underline the JSE’s efforts to safeguard investor confidence. It would be a dangerous precedent if the JSE looked past a company not taking a large transaction to shareholders via a circular and a vote at a general meeting. Frankly, I doubt it will be any different on the Nasdaq.
In any event, how things play out between Trustco and the JSE will provide some intrigue in the coming months. There is some progress on getting those long-delayed audited financials out, with the JSE agreeing to let Trustco submit two separate audit reports — one from the JSE-accredited audit firm in South Africa, Nexia SAB&T, and another from Namibian audit firm SML Thankfully, this will apply to annual financial statements up to the end of August this year. Specific timelines for the publication of the audited numbers, disappointingly, have not yet been communicated.
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