Court finds FSCA acted correctly
Accusations that correct procedure was not followed during an investigation and allegations of unfair treatment are the standard defence when attorneys defend clients accused of wrongdoing – and an effective delaying tactic. On cue, lawyers acting for former Tongaat Hulett executive Michael Deighton approached the court with arguments that the investigation by the Financial Sector Conduct Authority (FSCA) was unlawful on the basis that it was procedurally unfair.
First, they won. The court set aside the investigation insofar as Deighton was concerned and declared the outcome of the investigation invalid. The court also ordered that the three FSCA investigators who conducted the investigation should not be involved if the FSCA decided to conduct a new investigation. However, the FSCA appealed the ruling and the high court concluded that the previous court had erred in its judgment. That ruling was set aside.
“The FSCA notes and welcomes the judgment delivered by the full bench of the High Court, Gauteng Division, Pretoria (sitting as an Appeal Court) on 7 February 2024, in an appeal application brought by the FSCA against the decision of the High Court delivered on 1 August 2022,” the FSCA said in a statement.
Background
The FSCA instituted an investigation during 2020 to determine whether any individuals were involved in the publication of false, misleading or deceptive statements regarding the performance of Tongaat Hulett during certain reported financial periods and in breach of the Financial Markets Act 19 of 2012.
When the accounting problems emerged in 2019, Tongaat’s share price immediately crashed from more than R46 to less than R16, and to barely R2 a year later. It opted for business rescue, and trading in the share was suspended in July 2022.
The court documents state that Deighton became a subject of the investigation due to his position as a senior executive at Tongaat. Allegations were made that sales of properties were booked as revenue before the sales were finalised.