Johannesburg’s stock exchange said it’s proposing tighter listing rules after South African financial markets were “shaken by a range of corporate scandals, rumours and innuendo” over the past year.
The bourse published a consultation paper Wednesday, saying recent events showed a need for it to review its responsibilities and strengthen aspects of regulation. Recommendations range from boosting racial and gender diversity on boards, to doubling the notice period before new stocks start trading. It proposes greater disclosure when directors use shares as collateral and supports plans for information on short-selling transactions to be made public.
The exchange said incidents “have led to questions about how certain alleged activities were able to happen, apparently undetected, whether regulators such as the JSE could have taken action to prevent certain activities and whether those events have highlighted any regulatory provisions that might need to change.” Its comments come nine months after the near-collapse of retailer Steinhoff International Holdings NV, which lost more than 90 per cent of its value when it was engulfed in an accounting scandal in December.
“The speed and the unexpectedness of the Steinhoff event obviously caught everybody off guard and I would say that that was the point of ignition,” Nicky Newton-King, chief executive officer of exchange operator JSE Ltd., said in an interview. “People started to raise questions that they had not raised before. But when it comes to the proposals, the theme here is disclosure.
In December, EOH Holdings Ltd. said forced stock sales due to margin calls involving two directors caused a 35 per cent plunge in its share price. In January, regulators said they were studying sharp drops in stocks including Aspen Pharmacare Holdings Ltd. and Resilient REIT Ltd. amid speculation they were about to be the subject of a negative report by short seller Viceroy Research.
Two months later, the financial services watchdog said it was probing trading in shares including Capitec Bank Holdings Ltd., EOH and Mr Price Group Ltd.
“We as regulators learn, we learn from mistakes and loopholes people make,” John Burke, director of issuer regulation at the JSE, told reporters Wednesday. The JSE said it’s seeking comment on the proposals and that these can be submitted to Burke until 22 October.