COMMENTARY
NEDBANK has taken exception to the article published in Business Report yesterday about the bank’s odd-lot offer to shareholders owning less than 100 of its shares, requesting “an urgent correction or retraction” of the article.
The article said Nedbank’s oddlot offer was at odds with the principles applied by the former Consumer Affairs Committee, now replaced by the National Consumer Commission, when it prohibited inertia or negative option marketing in 2004 in terms of the Unfair Business Practices Act.
Nedbank claimed the article was “misleading, contradictory and inaccurate”.
“Nedbank does not understand what ‘at odds’ means as we can only work within the confines of legislation and a values-driven framework.
“Nedbank’s odd-lot offer complies with all relevant legal and regulatory requirements, including JSE Regulations for listed companies.
“The article quotes the spokesperson for the National Consumer Commission stating ‘the prohibition would not apply to Nedbank’s odd-lot offer, because shares were not defined as goods in terms of the Consumer Protection Act’ and then proceeds to say the offer is at odds with prohibition.
“There isn’t a single fact presented in the article that proves Nedbank to be in contravention of any law.
“Notwithstanding this lack of any legal basis, the article proceeds to create the misleading impression that Nedbank has breached the Unfair Business Practices Act (which is a piece of legislation that was in fact repealed and replaced by the Consumer Protection Act) by acting contrary to the findings of the National Consumer Commission.
“The article inappropriately brings the Nedbank brand into disrepute and we urgently request a correction or retraction,” Nedbank said.
Business Report specifically stated the odd-lot offer was at odds “with the principles applied” by the former Consumer Affairs Committee. It did not state or imply that Nedbank had contravened any prohibition or law.
In fact, Business Report highlighted that Nedbank’s odd-lot offer complied with the JSE’s listing requirements, and the National Consumer Commission said the prohibition on inertia selling or negative option marketing would not apply because shares were not defined as “goods” in terms of the Consumer Protection Act.
Solly Keetse, the head of department of market infrastructure in the market integrity division at the Financial Sector Conduct Authority, said yesterday that as could be gleaned from the JSE Listing Requirement 5.124(d), expropriation resulting from 5.124(a) (ii), being the default action applicable if securities holders do not make any election in terms of 5.124, will only be allowed where the issuer’s MOI (Memorandum of Incorporation) is amended to make provision for expropriation of odd-lots and where the specific odd-lot offer has been approved by shareholders in a general meeting.
The Consumer Affairs Committee investigation into negative option marketing concluded: “It is unfair to expect a consumer who does not wish to enter into a transaction to take active steps to prevent the transaction from going through.”
Nedbank said in its circular: “Those odd-lot holders who do not make an election will automatically be regarded as having accepted the odd-lot offer and chosen to dispose of their Nedbank Group shares to Nedbank Group and receive the cash consideration.”
The harsh facts are that Nedbank’s odd-lot holders would lose an asset without doing anything – and possibly even without their knowledge.
While this practice might be legal, and many other companies might have previously done the same, it is ethically questionable in much the same way Momentum’s repudiation of a life policy was on the basis of the insured’s high blood sugar levels when the person had died after being shot during a hijacking.
Tellingly, Nedbank in its response to Business Report’s request for comment, failed to respond to this question: Does Nedbank believe the forfeiture provision in its odd-lot offer is good business practice and morally right and, if so, for what reasons?