Niël Terblanché
The Supreme Court of Appeal of South Africa has dismissed an appeal by Trustco Group Holdings Limited.
The ruling confirmed the Johannesburg Stock Exchange’s (JSE) authority to mandate the restatement of financial statements to ensure compliance with international standards.
This decision marks a crucial step in upholding financial transparency and accountability in the South African financial markets.
The appeal, brought by Trustco against the JSE and the Financial Services Tribunal, challenged the directive to restate its financial statements for the year ending March 2019.
Trustco argued that the JSE lacked the authority to enforce such directives and questioned the constitution of the Tribunal panel that heard its case.
However, the court’s judgment, delivered by Acting Judge of Appeal J E Smith, upheld the JSE’s powers under the Financial Markets Act and dismissed Trustco’s contentions regarding the Tribunal’s panel.
The controversy stems from the JSE’s 2020 directive requiring Trustco to correct financial statements involving loans from its CEO, Dr Quinton van Rooyen, and the reclassification of properties.
The JSE’s scrutiny revealed that loans amounting to N$1.546 billion were initially recorded as equity and later reclassified as liabilities, resulting in inflated profits.
Additionally, properties in Windhoek were reclassified from inventory to investment property, leading to further discrepancies.
Trustco’s initial objection to the JSE’s directive was dismissed by the Financial Services Tribunal, prompting the company to seek judicial review.
The Gauteng Division of the High Court also ruled against Trustco, leading to the appeal to the Supreme Court.
In its ruling, the Supreme Court reiterated that the JSE has broad powers under its Listings Requirements to enforce the restatement of financial statements, ensuring they accurately reflect the financial position of listed entities.
The court found no merit in Trustco’s claims that the Tribunal’s panel lacked the necessary financial expertise, affirming that a panel of legal experts is well-suited to adjudicate such matters.
The court’s decision reinforces the importance of adherence to international financial reporting standards and the role of regulatory bodies like the JSE in maintaining market integrity.
Trustco is now required to comply with the directive, which includes reversing the profits declared from the contentious transactions and correcting its financial statements.
The ruling sets a precedent for future cases involving financial compliance and regulatory oversight in South Africa.
It highlights the JSE’s commitment to ensuring that listed companies provide accurate and reliable financial information, thereby protecting investors and maintaining confidence in the financial markets.
