Investor comment sought
JSE seeks comment as ‘scandals and innuendo’ prompt review of listing rules
In a new consultation paper the JSE suggests lifting racial and gender diversity on boards and doubling the notice period before new stocks start trading
Proposed changes to the JSE’s listings rules could provide some protection to shareholders in scandal-dogged companies, and would prevent questionable companies from securing approval for listings.
The JSE has called for comments on proposals to strengthen regulation of listed companies, after a year in which it said financial markets were "shaken by a range of corporate scandals, rumours and innuendo".
The proposals include tougher initial listing requirements, increased qualifications for audit committee members and more effective disclosure of the interests of directors and senior management.
JSE CEO Nicky Newton-King described the proposals as the most substantial changes to the philosophical underpinning of the JSE’s listing requirements since 1994. They follow unprecedented interrogation of the JSE leadership by parliamentarians tasked with identifying the cause of the near collapse of Steinhoff, which lost over 95% of its share value after accounting irregularities were disclosed in December 2017.
The JSE did not name the subjects of the "range of scandals, rumours and innuendo" but its proposed changes would address criticisms raised in the wake of the Steinhoff scandal as well as the short-selling-prompted collapse in the share prices of Aspen Pharmacare and Resilient in January and the near listing of loss-making IT company Sagarmatha in April.
The JSE wants better disclosure of short sale positions such as occurred at Aspen and Resilient. It also wants improved disclosure of the use of shares as guarantees for financial commitments as former Steinhoff chairman Christo Wiese did.
While Steinhoff has dominated headlines in the past nine months, the near listing of Iqbal Surve’s Sagarmatha also caused controversy. Sagarmatha, which was loss-making and relied on prospective investors such as the Public Investment Corporation for capital injection, was hours away from a listing in April when the JSE halted the process. This followed notification from the Companies and Intellectual Property Commission that it had not submitted its annual financial statements.
The JSE is now considering increasing the R500m minimum subscribed capital amount required if an applicant listing has not made an annual audited profit of at least R15m. It also wants the applicant to have the subscribed capital amount in place before the listing.
The JSE is also considering increasing the notice period for a new listing from five business days before the listing to 10.
Responding to the proposals, shareholder activist Chris Logan said the JSE should not be required to police everything.
"Shareholders must be more involved," he said.
Newton-King said shareholders are among the "guardians of governance" who provide checks and balances "in a robust governance ecosystem" along with directors, asset managers, pension fund trustees, analysts and auditors.