The JSE's move to suspend Tongaat Hulett's listing this week was "not an easy or quick decision", says John Burke, director of issuer regulation for Africa's largest stock exchange.
"Our mantra is always that a share must trade, and to lock people in or out of the market is not an easy decision for us."
The JSE will only suspend shares if convinced that investors cannot make an informed decision about a company's shares based on available information, he says.
"At the end of the day, we have to make sure that all the information is out there for investors to make an informed investment decision."
The once blue-chip agri-processing company, whose shares have fallen by almost 90% since January 2018, requested the suspension after deciding that none of the financial information disclosed to investors since May 2018 could be relied on.
Burke says there was no discussion about the decision with the London Stock Exchange, where Tongaat has a secondary listing.
"Its primary listing is here, so we make the decision."
The only reason the JSE didn't suspend Steinhoff, whose corporate collapse dwarfed that of Tongaat, was that its primary listing is in Frankfurt, where authorities have refused to suspend trading in its shares.
"There's no doubt in my mind that if they'd had a primary listing in SA, we would have suspended," says Burke.
Without a request from the Steinhoff board?
90%
The slide in Tongaat Hulett's share price since January last year
"I can't say. Sometimes we believe that the risk to investors is just too high, so if a company does not apply for suspension we would go out and suspend it ourselves."
Tongaat's request came after "weeks" of discussions between it and the JSE, says Burke.
"They had some serious board meetings over the weekend. We had discussions with them again on Monday, and they applied for suspension."
He won't say if the JSE, which has been criticised for suspending shares too easily, leaned on the country's largest sugar producer or not.
The JSE "probed" the board about whether it was "absolutely certain" that all the information was out in the market and reliable.
"They knew that if they couldn't confirm we would probably have suspended on our own."
Is he concerned about the quality of information in the market about other listed companies?
"That's quite a wide-ranging question."
A review by the Independent Regulatory Board for Auditors (Irba) last year found that 44% of audit statements by JSE-accredited firms were unreliable.
When Irba makes a finding on an audit firm, it can be for a range of relatively innocent reasons such as working documents not having been filed, Burke says.
"It does not necessarily cast doubt on the veracity of the information and the audit."
Is the JSE concerned about the quality of audits?
"To be quite frank, we do have concerns. We look at the financial statements of listed companies and the mistakes we find are a cause of concern to us."
Burke, 53, a BCom Hons graduate from Rand Afrikaans University who has been dealing with regulatory issues at the JSE for 29 years, talks about its "proactive monitoring". But given the list of corporate scandals, is it being proactive enough?
"We can't order companies, that's not our role. Our role is to ensure that the regulated parties do their job. People in this whole ecosystem have a job to do, and that includes auditors and analysts."
Is he happy that these role players are doing what they're meant to be doing?
"I can't answer that. To a certain extent people are doing a very good job, and to a certain extent they're not."
People in this whole ecosystem have a job to do, and that includes auditors and analysts
It is not the JSE's job to pick up on those who're not, he says.
"We're not the regulator of audit firms. We regulate listed companies. But to a large extent we rely on the information coming out of audit firms, the financial statements being signed off by the audit firms."
Which the JSE knows cannot be relied on?
"Yes. And that is a very big concern."
So is it good enough to say the JSE relies on such information being correct?
"What do you suggest we do? We're not the auditors, we can't audit listed companies. That's the dilemma we're sitting with. The audit firms must do their job. I think in the past year or so they've had to do a lot of soul searching about whether they are doing the right level of work."
A lot of them are not, he says. "But we at the JSE still have to rely on them. We can't do the audit."
Proposed amendments to JSE regulations are going through the public consultation process and should be implemented towards the end of the year, he adds.
Is this an admission that JSE regulations have been too lax?
"A regulation is a living document. There are always things people find holes in that you have to close. I wouldn't say our listings requirements are lax."
Is it a concern that businessman Iqbal Surve's Sagarmatha Technologies, with no profit history and R2.3bn of debt, ticked the JSE's regulatory boxes and only a technicality, failure to submit an annual financial statement to the Companies & Intellectual Property Commission on time, prevented it from listing?
"It wasn't a technicality. It was something they didn't comply with which they said they had complied with."
The amendments will oblige listing companies to have a track record, he says.
Was Sagarmatha a wake-up call for the JSE?
"No. It complied with our listings requirements. There are certain things they didn't comply with."
Shouldn't its prelisting statement, which gave it a valuation almost seven times the collective value of listed media counters Caxton, Tiso Blackstar (which owns the Sunday Times) and eMedia, have been a massive red flag?
"We don't check up on that. People who put money into a company must do their own work. That's what analysts are being paid for. That had nothing to do with us."
The JSE is responsible for protecting investors, he says, "but we can't protect investors from themselves".
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