Resilient cleared of allegations

ACCUSATION: INSIDER TRADING, SHARE PRICE MANIPULATION Nothing untoward in share dealings – Fakie.

An independent, Resilient-commissioned investigation has cleared the group’s key directors and related parties of misconduct relating to insider trading and share price manipulation.

The findings of the investigation – led by former auditor-general Shauket Fakie – exonerates Resilient from allegations in reports by 36ONE, Navigare and Arqaam Capital.

Resilient is accused of using a complex web of cross-shareholdings in sister companies Fortress, Nepi Rockcastle and Greenbay Properties with the purchase of shares by directors and related parties to unlawfully influence share prices, create the illusion of liquidity and artificially increase the net asset values (NAV) of the four companies’ shares.

The reports’ authors also accuse Resilient of extending loans to its black economic empowerment vehicles like the Siyakha Education Trusts, to charge artificially-high interest rates that boosted earnings to Resilient.

However, Fakie’s investigation found no evidence of wrongdoing relating to the allegations in the three reports.

Fakie’s main findings are that there’s no evidence of executive misconduct and/or breaches of applicable governance rules and policies by Resilient, its executives and the Siyakha Trusts; or of market manipulation or insider trading.

As to questionable share trading by four companies owned and directed by one Hendrik Oberholzer, “Mr Fakie was informed by Mr H Oberholzer that an entity associated with Mr R Hafner is the financier of the four ‘Oberholzer K-companies’ referred to in the reports. The ultimate beneficiary of the Hafner-associated entity is his family trust”.

Fakie undertook to meet with 36ONE Asset Management. This didn’t happen.

36ONE found the report’s conclusions “surprising and inconsistent” with its own report and that of other asset managers.

It said the scope of Fakie’s mandate was limited, he didn’t have access to the trade data that the JSE and Financial Sector Conduct Authority (FSCA) did, and related parties’ property transactions weren’t investigated.

“No explanation is given why these companies trade at such premiums to NAV and are an aberration in comparison to their peers locally and internationally.”

36ONE hasn’t changed its views.

An analyst, who didn’t want to be named, said the investigation’s integrity would be questioned as its scope was initially set by Resilient and Fakie, and its capacity to review individual share trades wouldn’t be thorough enough.

Resilient admitted to the latter, saying Fakie and independent advocate Tony Ferreira didn’t have access to the full set of records of Resilient’s JSE share transactions “to identify potential insider trading or share price manipulation”.

“However, the board has done all it can to facilitate an appropriately thorough review within these limitations.”

Two investigations are under way by the FSCA (formerly the Financial Services Board).