Tribunal amends aspects of JSE’s public censure of listed company’s director

The Financial Services Tribunal (FST) last month amended aspects of the Johannesburg Stock Exchange’s censure of the executive deputy chairman of AYO Technology Solutions Limited, Khalid Abdulla (pictured).

As Moonstone reported in September last year, the JSE publicly censured Abdulla and fined him R2 million for non-compliance with the JSE’s Listings Requirements.

The non-compliance arose from (a) “related-party transactions” between AYO and asset manager 3 Laws Capital (Pty) Ltd and (b) adjustments to line items in AYO’s unaudited 2018 interim results.

A “related-party transaction” is a transaction, an agreement, or the variation or novation of an existing agreement between two parties that have a pre-existing business relationship. Section 10 of the Listings Requirements sets out the nature of the disclosures and consents that are required when an issuer on the JSE proposes to enter a related-party transaction.

The JSE found that AYO and 3 Laws Capital were related parties when, in 2017 and 2018, AYO entered three performance management agreements (PMAs) with 3 Laws, in terms of which 3 Laws would manage funds invested for and on behalf of AYO.

The Exchange said AYO did not, before completing or implementing two of the three transactions with 3 Laws, inform the JSE and the market of the details of the transactions, obtain the approval of shareholders where required, or confirm to shareholders that the terms of the transactions were fair, as required. Abdulla, through his role in these transactions, caused and/or contributed to AYO’s breach of the Listings Requirements in respect of the two PMAs.

The JSE also censured for Abdulla for instructing a person who neither a director nor an employee of AYO to amend certain line items in AYO’s draft unaudited 2018 interim results. These amendments were improper and not in accordance with the requirements of the International Financial Reporting Standards, which culminated in AYO’s misstated financial information that had to be corrected through restatement.

Furthermore, Abdulla was one of the AYO board members who approved the unaudited 2018 interim results which contained the improper adjustments for dissemination to shareholders and the market, the JSE said.

Reconsideration application partially upheld

In March 2023, Abdulla applied to the Tribunal for the reconsideration of the JSE’s decision. He also applied to the FST for an order suspending the JSE’s decision, pending the outcome of the reconsideration application.

In April, the FST suspended the R2m fine but dismissed the application for the suspension of the public censure.

The reconsideration application was heard in September.

On 14 December 2023, the FST partially upheld the reconsideration application.

The Tribunal set aside the JSE’s finding that Abdulla had breached the provisions of paragraph 10.4 of the Listings Requirements for his role in facilitating and negotiating the payments directly into 3 Laws Capital’s bank contrary to the provisions of PMA1 and PMA2. Instead, the FST decided that Abdulla had breached the provisions of paragraph 10.7, which apply when a transaction meets the definition of a “small related-party transaction”.

The FST also set aside the JSE’s decision to fine Abdulla R2m and substituted it with a decision to fine him R1.2m.

The rest of reconsideration application was dismissed.

In a SENS announcement on 14 December, the JSE said the Tribunal confirmed the Exchange’s decision to impose a public censure on Abdulla, and the fine R1.2m because of his failure to comply with the Listings Requirements is immediately due and payable.