Trustco Group Holdings has washed its hands of whatever activities attracted the attention of the South African regulatory authorities to launch an investigation into alleged market manipulation and insider trading practices on the Johannesburg Stock Exchange (JSE).
The Trustco Group, which is dual listed on the NSX, finds itself among the list of 24 JSE-listed companies whose stock trading is under investigation. The company is currently engaged in the final stretch of negotiations to close the sale of 20 percent shares in Legal Shield Holdings to USA’s Riskowitz Value Fund at a cost of N$1.2 billion. The deal is scheduled for finalisation by the end of May.
“The company is not involved in any way,” said Quinton van Rooyen, the founder, managing director and chief executive of Trustco. He added that no affairs or operations of Trustco and its subsidiaries are under investigation.
“Bear in mind that any such accusation or investigation relates to the trading of the shares from independent brokers, shareholders on the stock exchange and not the company,” said Van Rooyen.
South Africa’s Financial Service Board, which three days ago changed its name to Financial Sector Conduct Authority (FSCA), is investigating “possible insider trading cases” involving the shares of 13 companies listed on the JSE, one of which is Trustco.
Insider trading defines the illegal practice of trading on the stock exchange to one’s own advantage through having access to confidential information.
Further, the FSCA is also investigating “possible trading practices (market manipulation) cases” involving the shares of 11 companies listed on the JSE, one of which is Trustco.
The JSE monitors the trading of the stock listed on its bourse, and where suspicions of market abuse arise, such activities are referred to the FSCA for investigation. According to the FSCA, Trustco’s stock under investigation for possible market manipulation is that traded in the period between December 2017 and February 2018. The stock under investigation for possible insider trading is for the period November 2017.
NSX spokesperson Johene Saal declined to comment on whether or not they are keeping an eye on investigations involving one of its listed entities, saying any questions should be referred to the FSCA. “Secondly, we would never give comments on an ongoing investigation,” Saal said.
Van Rooyen was also emphatic that the “investigations would have no impact on the deadline or the transaction as the investigations do not have anything to do with Trustco Group Holdings but relate to the trading of the shares of the company on the stock exchange by independent third party (brokers).”
As to the coincidence of the trading period of the stock under investigation with the period Trustco appeared to have been in crucial stages of negotiations with Rizkowitz to buy 20 percent shares in Legal Shield, Van Rooyen said: “Trustco is a highly regulated entity and operates within strict rules and guidelines.”
“Trustco at all times adheres to the highest standards of corporate governance and ethical behaviour. Trustco has numerous policies and procedures in place to ensure that we comply with any and all requirements, and is at all times above reproach. Trustco does not control, nor has any bearing over, the trading of its shares on the stock exchange.”
In the 5 April 2018 circular to shareholders, Trustco asked shareholders to consider the finalisation of the deal in which Riskowitz would pay N$1.2 billion for 20 percent shares in Legal Shield Holdings. The money would be paid in a 50 percent deposit and the rest to be infused into the operations of Trustco.
The sale is expected to “significantly improve Trustco’s liquidity position and [help] accelerate Trustco’s growth prospects in other operating segments”, the company said in its circular to shareholders.
Van Rooyen was yesterday beating his own drum in saying Trustco at all times adheres to the highest standards of corporate governance and ethical behaviour and would give its full cooperation should an investigation be launched.
“Any shareholder who trades in Trustco’s shares or any other share on a stock exchange should welcome continuous investigation into all trades, as is the current market practice by the JSE and in conjunction with the FSCA to ensure the necessary safety measures and protection for shareholders are in place,” he said.