Following the release of a statement in relation to Steinhoff International NV on 6 December 2017, the JSE wishes to provide an update on the matter, and to clarify its role as market regulator and the action it is taking.
In support of the objectives of South Africa’s financial markets legislation, set out in the Financial Markets Act No. 19 of 2012 (FMA), the role of the JSE, as a licensed exchange, includes ensuring that the markets that it operates are fair and transparent, and that investors in these markets are adequately protected.
In regulating its securities markets, the JSE requires listed companies to adhere to its Listing Requirements. The main objective of these Listing Requirements is to ensure that listed companies make full, equal and timeous disclosure on matters that are important to investors when making investment decisions. This includes disclosure on the financial position of a listed company.
In applying its Listings Requirements, there are instances where the JSE needs to decide, in the interests of investors, whether to temporarily suspend trade on the JSE of a listed company’s shares.
The Listing Requirements contemplate a suspension of trading in a listed company’s shares under the following circumstances:
- if the listed company has breached the Listings Requirements and it is in the public interest to suspend the listing; or
- if it will further the objectives of the FMA, including promoting a fair and transparent market and the protection of investors, again giving consideration to whether it will be in the public interest to suspend the trading in a listed company’s shares.
As the regulator of Steinhoff International’s secondary listing on the JSE, the JSE has been in continuous engagement with the company and its sponsor. To date, Steinhoff has disclosed as much information regarding its current financial position as it is able to, pending the release of its 2017 audited financial results which, in terms of the requirements of the Frankfurt Stock Exchange where the company has its primary listing, are required to be published by 31 January 2018.
The JSE recognizes the serious impact the recent disclosures by Steinhoff International regarding accounting irregularities has had on investors. The exchange has launched an investigation to determine if there have been any breaches of its Listing Requirements. This includes any breaches in relation to previous financial disclosures made to the public by Steinhoff International.
The JSE considered whether a suspension of trading in Steinhoff International’s shares would be in the public interest if it could help to promote a fair and transparent market and protect the interests of investors. We believe that under the circumstances where Steinhoff International has disclosed as much price sensitive information as it is able to, it would be detrimental to the interest of investors to prevent them from trading Steinhoff International shares on the JSE.
It should also be noted that the Frankfurt Stock Exchange has not suspended trading in Steinhoff International shares. This means that if the JSE were to suspend trading in Steinhoff International, it would place investors trading on the JSE at a disadvantage to those who are able to trade the Steinhoff International share in Frankfurt.
Therefore, with all of the information currently at our disposal, the JSE remains of the view that Steinhoff International’s listing on the JSE should not be suspended and that trading in its shares on the JSE should be allowed to continue.
In a media statement issued by National Treasury on 7 December 2017, the Minister of Finance noted that the Financial Services Board (FSB) has also instituted an investigation in terms of the FMA into possible false and misleading reporting by Steinhoff International. In addition to its own investigation, the JSE will support and assist the FSB with its investigation to ensure that this matter is fully investigated and that appropriate enforcement action is taken against any parties that are found to be responsible for any irregularities that have caused financial prejudice to Steinhoff International investors.
The JSE Market Regulation Division is also reviewing trading in Steinhoff International shares ahead of the company’s announcements on 4 and 6 December 2017. Once completed, the details of the review will be provided to the Directorate of Market Abuse at the FSB for it to consider investigating possible insider trading.