MONEYWEB / 30 JULY 2018 - 00:22 / RAY MAHLAKA
Market regulator’s probe into possible insider trading and market manipulation within the Resilient group is expanded.
The Financial Sector Conduct Authority (FSCA) has broadened its investigation into the Resilient group of companies, casting its net wide to include Nepi Rockcastle and Greenbay Properties for possible insider trading and market manipulation.
The FSCA investigation will have access to a full set of Resilient’s JSE share transactions. Picture: Supplied.
An FCSA update of investigations dated July 26 reveals that JSE-listed Nepi Rockcastle and Greenbay have been included in the market regulator’s roll of ongoing investigations.
The two are new additions to the FSCA’s probe. The regulator began an investigation in March 2018 to scrutinise trades in Resilient and Fortress Income Fund shares after scathing allegations of share price manipulation by key directors and associates surfaced.
Nepi Rockcastle is being probed for possible market manipulation while the investigation into Greenbay centres on both possible market manipulation and insider trading. The FSCA will review the share trades of Nepi Rockcastle and Greenbay for the period beginning 2017 to 2018.
Nepi Rockcastle, Greenbay and Fortress have long been considered by market watchers to be associated companies or stablemates of Resilient, given their complex web of cross-shareholdings in each other.
To recap: Resilient holds a 14% stake in Nepi Rockcastle and more than 10% in Greenbay. Fortress holds a 9.9% stake in Resilient and 23% in Nepi Rockcastle. Resilient recently unwound its shareholding in Fortress, disposing of its 15.5% stake to existing shareholders.
Scathing reports by asset managers 36One and Mergence, stockbroker Navigare, and independent sell-side research house Arqaam Capital, have put the spotlight on questionable practices in the Resilient group of companies.
The property group has been accused of using its cross-shareholdings, black economic empowerment trust Siyakha, and questionable accounting policies to artificially boost share prices, dividend payments, and net asset values.
36One’s report concluded that Resilient’s related parties – meaning companies associated with it and individuals close to Resilient executives – traded large volumes of Resilient, Fortress, Nepi Rockcastle and Greenbay shares with the intention of boosting share prices.
36One concluded that the high valuation of shares in the four companies was not because of “normal market activity but from deliberate (and frequently concealed) actions by some of the influential owners and key management of the group.”
However, an independent investigation – commissioned by Resilient and led by former auditor general Shauket Fakie – has cleared the property group’s key directors and related parties of any wrongdoing relating to insider trading and share price manipulation.
Market watchers have been highly critical of the independent review, calling it a “whitewash” as its scope was set by Resilient in the first place and its capacity to review individual share trades was limited.
The FSCA investigation will have access to a full set of Resilient’s JSE share transactions as the market regulator will collaborate with the JSE.
The FSCA said its investigation is not centred on the company affairs of Nepi Rockcastle and Greenbay, but that it will probe the share trades of both companies to determine if there has been market manipulation or insider trading.
If found guilty of unfair trading, the four companies or the company directors could face administrative sanctions including monetary fines. The findings of the FSCA might be referred to the National Prosecuting Authority, where the directors could face penalties of R15 million or 10 years’ imprisonment.
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