A year on and regulator is yet to rule on Resilient probe
The FSCA is keeping mum about when it will release findings into allegations of market manipulation and insider trading
One year after the biggest scandal to hit listed property began, fund managers and other investors are desperate for the Financial Sector Conduct Authority (FSCA) to conclude its long-awaited investigation.
Analysts say that the sector, which lost investors 25% in 2018, will not see any meaningful improvement in its fortunes until the FSCA releases findings on its investigation into the allegations of share price manipulation that have plagued the Resilient stable of companies since January 2018.
Ian Anderson, chief investment officer at Bridge Fund Managers, said while the FSCA was being cautious as it was not the first time the group was under investigation or allegations had been levelled at the companies within it, the investment community was becoming desperate.
“While it’s frustrating for investors, I’d rather the FSCA and JSE do their jobs properly and turn over every stone in their investigation and make the judgment in the end, and one the market can trust given the time taken to reach that judgment," he said.
Garreth Elston, portfolio manager at Reitway Global, said: “I’m sure that the entire investment community remains hopeful that its investigation will be resolved as soon as possible. A year of market uncertainty is a very long time.”
The JSE can suspend companies for not meeting its listing requirements but the FSCA has the ultimate authority on the conduct of companies listed in SA.
Ridwaan Loonat, an analyst at Nedbank CIB, said the FSCA was dealing with a number of cases apart from those involving the Resilient stable.
"The timing delay was expected given the number of cases and the complexity of some of them that the FSCA currently have opened [including] Capitec, Steinhoff and Resilient. Unfortunately while these investigations are ongoing, uncertainty will weigh on share prices," he said.
The Resilient stable includes Resilient, Fortress, Nepi Rockcastle and Lighthouse Capital, previously known as Greenbay Properties. The FSCA began investigating events around Resilient and Fortress in March. The other stable members were later added to the investigation.
The FSCA’s investigation is twofold: it is studying possible insider trading and price manipulation in its shares; and false and misleading reporting by and on the Resilient stable.
Attempts to reach the FSCA on Thursday were unsuccessful. The leader of the directorate of the market abuse investigation team at the FSCA, Alex Pascoe, in December referred Business Day to a report released earlier that month which said the probe was ongoing.
In January 2018 there was a large sell-off in the four companies, followed by a number of reports accusing their management of inflating the share prices through related party deals and other market-manipulation techniques.
Resilient and Fortress fell 7.32% ad 11.22% respectively on January 10 2018 and then continued to fall for the rest of the month. The other two stablemates also saw their prices drop.
The allegations persisted and a group of short sellers aggressively bet against the companies' shares, with up to R120bn being lost at one point.
Resilient’s share price ended 2018 down 58.3%, while Fortress's price lost 66.5%, Nepi Rockcastle’s price lost 43.5% and Lighthouse Capital’s price lost 46%.