The JSE has censured and fined a former executive of Ayo and one from AEEI R250,000 each for failing to comply with the bourse’s listing requirements.
The fines for former Ayo CFO Naahied Gamieldien and Abdul Malick Salie, a former director of African Equity Empowerment Investments (AEEI), relates to dealings in 2017.
Ayo, which is now valued at R1.04bn on the JSE, listed on December 21 2017. The next day it entered into three performance management agreements (PMAs) with asset manager 3 Laws Capital to manage money invested for and on behalf of Ayo.
Independent Media owner Iqbal Survé’s Sekunjalo Investment Holdings was the majority shareholder in 3 Laws, with an 85% stake, while it also held a 61% interest in AEEI, which owned 49% of Ayo.
That meant 3 Laws was related to Ayo in terms of the JSE’s listing requirements, which would have required it to disclose any dealings between them on Sens.
The cost of the three PMAs totalled R870m which was paid to 3 Laws.
The first amount of R70m was paid in December 2017 and returned to Ayo on February 22 2019.
The second included a R400m payment to the asset manager on March 5 2018, which was returned to Ayo on August 20 the same year.
A further R400m was transferred to 3 Laws in November 2018 and returned to Ayo on February 22 2019.
Ayo’s accounting has also been under scrutiny after a controversial investment by the Public Investment Corporation (PIC), one of several investments probed in the Mpati commission of inquiry into the PIC.
The inquiry’s report included an analysis of 3 Laws’ Nedbank current account, which showed money being moved between Ayo, Sekunjalo Capital and 3 Laws.
“Based thereon and after robust investigation and engagement with Ayo, the JSE discovered that the funds were not invested by Ayo with 3 Laws in accordance with the terms and provisions of the PMAs, and that the transfer of funds to 3 Laws therefore constituted related party transactions in terms of the listings requirements,” the JSE said on Tuesday.
Gamieldien made the payments and therefore, according to the JSE, “through her actions, caused and/or contributed to Ayo’s breach” of the listing requirements.
It added that Gamieldien omitted the R400m payment to 3 Laws in the company’s unaudited interim financial statements to end-February under “events after reporting period” in line with international accounting standards.
“In arriving at this decision, the JSE considered, among other factors, that Ms Gamieldien was constructive and transparent in admitting her shortcomings to the JSE and fully co-operated with the JSE’s investigation,” the JSE said.
On April 26 2018, she emailed a copy of the draft unaudited interim results to Ayo nonexecutive director Khalid Abdulla and Salie, a former director of AEEI who served as AEEI’s chief investment officer from February 2018 to January 2019, before going on leave.
In Gamieldien’s absence, Abdulla instructed Salie, who was not a director or employee of Ayo, to effect adjustments to specific line items in the 2018 unaudited interim results, which Ayo management later approved and published.
“Mr Salie, as a director of AEEI and Ayo’s parent company and major shareholder, had no authority to involve himself in the financial and other affairs of Ayo and complied with instructions placed on him by Mr Abdulla to alter the financial information of Ayo,” the JSE said.
It added that the adjustments Salie made did not comply with international accounting standards and the figures were later restated, which affected AEEI’s results.
“Mr Salie was a chartered accountant with more than 10 years of post-qualification experience at the time, and he knew or ought to have known that effecting adjustments to certain line items in Ayo’s financial statements for which he had no knowledge, context or understanding could result in non-compliance with IFRS (International Financial Reporting Standards),” the JSE said.
It added that the accuracy and reliability of financial information published by companies is of “critical importance in ensuring a fair, efficient and transparent market”.
However, it noted that Salie was constructive, transparent and co-operated with the investigation in its censure.
The investigation into the conduct of Gamieldien, Salie and others continues.
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