By Karl Gernetzky.
Iqbal Survé-linked IT group AYO Technology Solutions has been fined R1.5 million by the JSE for a series of disclosure failures related to how it engaged with shareholders over related-party transactions.
On Wednesday, the Financial Services Tribunal dismissed AYO’s application for the suspension of the JSE’s decisions, making them enforceable, the local bourse said in a statement.
AYO has also applied for a reconsideration of the JSE’s decisions, while it shares slumped more than a fifth to R2.40 in early trade on Thursday, having once fetched more than R40.
AYO listed on the JSE on 21 December 2017. A day after listing, it entered into the first of three performance management agreements with an asset manager, 3 Laws, providing for the management of funds invested for and on behalf of the company.
When it entered into the agreements, the majority shareholder in 3 Laws was Sekunjalo Investment Holdings, which was founded and is chaired by Survé.
Sekunjalo held 85% of 3 Laws, as well as 61% of African Equity Empowerment Investments, which in turn held 49% of AYO. Therefore, 3 Laws was a related party to AYO.
After probing transactions between 2017 and 2019, the JSE concluded that AYO had failed to comply with its listing requirements, in terms of both informing the market about sizeable related-party transactions, and failing to properly inform shareholders about the nature of the agreements.
Among the breaches, AYO omitted to disclose that an amount of R400 million was paid to 3 Laws on 5 March 2018.
In addition, “the JSE identified discrepancies in certain disclosures, information and dates contained in AYO’s group annual financial statements for the year ended 31 August 2019 and in AYO’s correspondence to the JSE.”
The R1.5 million fine isn’t the first time the JSE has taken action against AYO.
In August 2020, the bourse censured AYO and fined it R6.5 million for the publication of a number of material errors in its 2018 interim results, while in February 2022, it disqaulified two former board members from acting as directors of listed companies for five years.
Mbuso Khoza and Telang Ntsasa were disqualified for failing to fulfil their responsibilities as directors and audit committee members of AYO with “the necessary due care and skill”.
Investment troubles
AYO has also been in the spotlight since the release of the report of the Mpati Commission of Inquiry in March 2020, which found that members within the boards of the Sekunjalo Group of companies were “not independent”.
The report concluded that the R4.3 billion investment by the Public Investment Corporation (PIC) in AYO demonstrated the “malfeasance of the Sekunjalo Group [and] the impropriety of the process and practice of the PIC”.
It recommended that the PIC conduct a forensic review of all transactions entered into with the Sekunjalo Group and take all “necessary steps” to recover the money it is owed, with the PIC then launching legal action.
AYO has denied wrongdoing, and has accused the PIC, together with officials from National Treasury, of plotting to destroy it, something which the PIC has denied.
Following the release of the report, a number of banks started to close their accounts with Sekunjalo, citing reputational risk. But Sekunjalo also won interim relief in September,, with the Competition Tribunal granting the group six months of interim relief pending the conclusion of an investigation by competition authorities.
Objection
On 9 December 2022, AYO applied to the Financial Services Tribunal for an order suspending the decisions of the JSE, while also applying for a reconsideration of the decisions of the JSE related to the R1.5 million fine. The JSE will oppose AYO’s reconsideration application, Thursday’s statement read.
The JSE did not oppose AYO’s initial suspension application, and agreed not to implement the decision and sanctions pending the finalisation of AYO’s bid.
The Tribunal dismissed AYO’s suspension application on 21 December. The investigation into the conduct of the individuals that presided at the company during the periods in question and who were bound by the listings requirements is ongoing, the JSE said.