The JSE has censured and fined software and technology group Ayo Technology Solutions R1.5m for not publicly disclosing money that was moved around between related companies.
This is the latest episode in the saga over Ayo, its holding company and major shareholder African Equity Empowerment Investment Holdings Limited (AEEI) and transactions with asset manager 3 Laws Capital, which led to fines for former Ayo CFO Naahied Gamieldien and Abdul Malick Salie, a former director of AEEI, last month.
Ayo, which is now valued at R826m 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 and had to disclose dealings between them on the JSE’s stock exchange news service (Sens).
A total R870m was paid to 3 Laws in terms of the performance management agreements.
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.
The agreements stated no funds could be transferred to 3 Laws or to any account in the name of 3 Laws for its duties, but must be placed in a custodian or bank account of Ayo for the benefit of the software and technology group as are “typical with such asset management agreements”, according the JSE’s statement on Thursday.
Also, 3 Laws was only entitled to earn a market-related fee, and that any investment instructions given by 3 Laws must be made in Ayo’s name and recorded as part of Ayo’s assets in the financial statements.
However, Ayo’s accounting came 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, into Ayo.
The inquiry’s report, published in 2020, included an analysis of 3 Laws’ current account, which showed money was moved between Ayo, Sekunjalo Capital and 3 Laws.
It found that the money was not invested by Ayo with 3 Laws in line with the PMAs, therefore transferring money to 3 Laws was a transaction to a related party, which should have been made public in line with the JSE’s listing requirements.
Ayo subsequently applied to the Financial Services Tribunal (FST) to overturn the JSE’s decision, but on Wednesday judge Louis Harms, FST deputy chairperson, dismissed Ayo’s application.
The JSE reiterated that the listing requirements provide safeguards to prevent companies from taking advantage of their positions “as a related party and/or exert undue influence for their own benefit”.
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