Trustco’s bid to reverse JSE censure falls flat

Trustco Group International’s (TGI) efforts to have the Johannesburg Stock Exchange (JSE) reconsider its decision to censure them for breach of listing requirements through petitioning the Financial Services Tribunal (FST) have been unsuccessful.

This follows the decision by the FST on Monday to uphold the decision taken by the JSE.

Trustco earlier petitioned the FST to reconsider the JSE’s decision.

“Trustco was censured for its failure to promptly inform shareholders about the effects of a change in the terms of a loan advanced to Huso Investments Proprietary by Trustco’s chief executive officer and shareholder, Quinton van Rooyen,” stated the JSE on Monday in a general notice.

Trustco, however, maintains that it acted in good faith throughout the process, adhered to the prescribed JSE Listings Requirements regarding Stock Exchange News Service announcements and disclosure to its shareholders, obtained the necessary approvals from accredited independent JSE auditors and International Financial Reporting Standards experts and received approval on its circulars from the JSE itself during the process.

DISAPPOINTED

In a statement released on Tuesday by Trustco spokesperson Neville Basson in response to the JSE’s general statement, Trustco group managing director Quinton van Rooyen said: “It is regrettable that we’ve reached a point where it’s presumed that regulators are infallible.

It is essential for justice to be not only done but also seen to be done.

Furthermore, it’s evident from the track record of companies’ subject to censure that the JSE exercises its rules with complete discretion and the FST has never been found against the JSE, indicating that the JSE is not capable of making a wrong decision.”

The Namibian company said although it is disappointed by the censure, it accepts the FST’s ruling upholding the JSE’s decision.

“Trustco will always abide by the rule of law. Trustco, with a well-established history as a publicly traded company, remains unaffected by the recent ruling, which has had no impact on its investment portfolio or growth strategy.

Notably, Trustco’s share price has shown exceptional performance this year, nearly doubling in value, representing an impressive gain of 95,1%.

“The JSE disagreed with the company that it did not need to inform shareholders and the market that subsequent to their approval of the Huso Transaction, there was a significant change in the make-up of the entity being acquired by Trustco, which was in the JSE’s view, specific, precise and had the potential to influence the economic decisions of shareholders and investors.

“ … Accordingly, the JSE found the company to be in breach of paragraph 9.19(b) read with 3.4(a) of the Listings Requirements.”

According to the JSE, the suspension is a result of a transaction involving Huso Investments, which was previously under the ownership of Van Rooyen.

“Huso Investments Proprietary Limited (‘Huso’) was previously owned by Trustco chief executive and shareholder, Quinton van Rooyen. Van Rooyen provided a loan to Huso of N$295 million.

Based on the original terms of agreement between the parties, the loan was initially accounted for in Huso’s financial statements as an equity loan,” the general notice stated.

“Issuers have a duty to comply with the Listings Requirements at all times.

Compliance with the Listings Requirements is aimed at, but not limited to, investor protection and investor confidence.

To aid in this objective of transparency and a trusted marketplace, issuers are obliged to inform the market if there has been a significant change to a matter or transaction after the relevant shareholder’s meeting that is price sensitive,” the general notice added.

In 2018, this loan was subsequently reclassified from an equity loan to a liability loan.

This change had a significant impact on Huso’s financial standing.

However, Trustco failed to fulfill its obligation of informing shareholders and the market about this change, as stipulated by regulatory rules.

“It was only after the transaction, in which Trustco acquired Huso from Van Rooyen, became effective on 4 September 2018, and was disclosed in the company’s interim financial statements, that shareholders and the market became aware of the impact of Huso’s change in financial position on the Trustco group.”

BACKGROUND

Trustco undertook to acquire Huso from Huso Transaction, which shareholders approved in 2015 and 2017, respectively, based on Huso’s financial position that reflected an equity loan of N$295 million.

Shareholders approved the Huso Transaction on the facts presented by the company in its circulars to shareholders dated 11 September 2015 and 11 May 2017, respectively.

In 2018, after the relevant shareholders meeting, there was a change in the terms of the loan from Van Rooyen to the Huso group, which resulted in the loan to Huso being reclassified from equity to a liability.

Although Trustco was acquiring the issued share capital of Huso, the change in the terms of the loan significantly affected the net equity position of Huso as the entity to be acquired by the company. – shania@namibian.com.na