Trustco Group Holdings yesterday stated it will formally appeal both the public censure and a N$5 million fine imposed on it by the Johannesburg Stick Exchange (JSE). The JSE imposed the penalties on Trustco after accusing the Namibian company of selling off shareholding in its mining subsidiary, Meya Mining, without shareholder approval. 

A censure by the JSE means a formal expression of disapproval or criticism towards a listed entity for breach of the exchange’s listing rules, market integrity requirements, or corporate governance standards. This public reprimand can range from a warning to a more severe penalty and serves to highlight a company’s non-compliance and the potential risks for investors. 

The JSE stated that Trustco had undertaken at the time to distribute a circular detailing the transaction and a notice to convene a general meeting so shareholders could approve the transaction. 

“However, the JSE investigation uncovered that Trustco’s subsidiaries had already started implementing the transaction by disposing of shareholding in Meya Mining before Trustco had distributed a circular to shareholders and obtained their approval…in contravention of the JSE Listings Requirements,” the JSE stated. “The result of this was, in effect, that the transaction whereby Trustco’s shareholding in Meya Mining collectively reduced from 65% to 19.5% was implemented prior to shareholder approval being obtained,” the JSE elaborated. 

Trustco figures for the year ended 31 August 2022, indicate its shareholding in Meya Mining through its subsidiaries reduced from 65% to 55.25%. Furthermore, Trustco’s results for the year ended 31 August 2023 show its shareholding in Meya Mining had, in fact, reduced further from 55.25% to 19.5%. 

In a statement issued yesterday, Trustco stated that the JSE’s public announcement “contained material inaccuracies”, which the company stated it had previously highlighted to the JSE, and which it accused the JSE of ignoring. 

“Trustco will formally appeal both the censure and the fine, reserving all rights. For investors, one fact is clear: when the regulatory process becomes an end in itself rather than a means of protecting shareholder interests, it fails its intended purpose,” Trustco stated. 

“The JSE’s refusal to exercise a proper discretion, in the best interest of shareholders contradicts efficient capital market principles. Our shareholders overwhelmingly support this transaction as per their irrevocable undertakings, and as directors, we acted in shareholders’ best interests, choosing compliance with fiduciary duty over regulatory obstruction. But there might be a bigger structural issue at the JSE. Since the JSE became a listed entity on its own stock exchange, operational inefficiency has been augmented with ‘regulatory income’. By day, the JSE is a regulator and by night a listed corporate entity that must satisfy shareholders, marking its own homework by night,” stated Trustco chief executive officer, Quinton van Rooyen. 

In a media statement, Trustco elaborated that on 1 August 2022 it’s subsidiary entered into an agreement for the investment of US$75 million into Meya Mining, diluting its interest. 

“The agreement was fully supported by written irrevocable shareholder undertakings to carry the shareholders’ vote. On 4 August 2022, Trustco announced the complete transaction details. Trustco had numerous in-person meetings and filed requests for rulings ad nauseam regarding the categorisation of the Transaction and a required PEA report. Throughout the process, Trustco maintained open communication with the JSE while the JSE adopted an obstructive approach,” Trustco stated. 

Meanwhile, Van Rooyen added: “The JSE’s refusal to exercise a proper discretion, in the best interest of shareholders contradicts efficient capital market principles. Our shareholders overwhelmingly support this transaction as per their irrevocable undertakings, and as directors, we acted in shareholders’ best interests, choosing compliance with fiduciary duty over regulatory obstruction. But there might be a bigger structural issue at the JSE. Since the JSE became a listed entity on its own stock exchange, operational inefficiency has been augmented with ‘regulatory income’. By day, the JSE is a regulator and by night a listed corporate entity that must satisfy shareholders, marking its own homework by night”. 

Trustco, which is engaged in business activities including the real estate, mining, insurance, micro-finance, and education, further stated: “For investors, one fact is clear: when the regulatory process becomes an end in itself rather than a means of protecting shareholder interests, it fails its intended purpose”.