JSE fines two former directors linked to Survé’s businesses
Naahied Gamieldien and Abdul Malick Salie have been censured and fined by the JSE. By
Two former directors of businesses linked to Iqbal Survé’s Sekunjalo group of companies have landed in hot water with the JSE for engaging in various business practices that contravene the bourse’s listing rules.
The JSE has censured and fined the former CFO of AYO Technology Solutions, Naahied Gamieldien, and the former director of African Equity Empowerment Investments (AEEI), Abdul Malick Salie, for business dealings dating as far back as 2017. They have each been fined R250,000 by the JSE.
AEEI is indirectly controlled by Survé through his family firm, Sekunjalo Investment Holdings, which owns 62% of AEEI at the last count. AEEI is the largest shareholder in AYO, owning 49.3% of its shares, and Sekunjalo also owns a small direct stake in AYO.
The sanctions imposed by the local bourse against Gamieldien and Salie relate to AYO shortly after the technology investment firm listed on the JSE on 21 December 2017.
The listing of AYO has since been stalked by several controversies.
First, several asset managers regarded AYO as being overvalued on the JSE, with each of its shares set at R43. Since AYO’s debut on the JSE in 2017, its shares have been in free fall, closing at R3.02 on 29 November.
Second, the Public Investment Corporation (PIC) invested R4.3-billion invest in AYO when other asset managers refused to do so. The PIC acquired a 29% stake, valuing the company at R14.8-billion. AYO’s former chief investment officer, Siphiwe Nodwele, testified at a commission of inquiry into the PIC’s governance affairs that even a R1-billion
valuation on AYO “would have been extreme”.
Today, AYO is worth R1-billion on the JSE, meaning that the PIC got burnt, as its investment in the company has soured.
Events that led to censure and fines
On 22 December 2017, AYO entered into three agreements with 3 Laws Capital, an investment management firm that would manage AYO’s investments. For managing AYO’s investments, 3 Laws Capital would be paid management fees by AYO. Survé, through Sekunjalo Investment Holdings, is also invested in 3 Laws Capital, with an 85% shareholding in the firm.
This meant that 3 Laws Capital was related to AYO (as was AEEI) in terms of the JSE’s listing requirements, which would have required it to disclose any business dealings between them to shareholders via the JSE’s news service (called Sens).
AYO would also be required to provide the JSE with written confirmation from an independent professional expert, making the bourse aware of the relatedness among the companies, and confirm that any business dealings would be conducted fairly.
But in a series of business dealings with 3 Laws Capital from 22 December 2017 to 22 February 2019, AYO did not inform the JSE or its shareholders. In these dealings, funds worth R870-million moved back and forth from the bank accounts of 3 Laws Capital and AYO in several instances.
Flouting of rules and agreements
In the asset management world, it is normal for investment firms to transfer money to investors on whose behalf they invest.
But what made the money transfers pernicious in AYO’s case is that neither its shareholders nor the JSE were ever informed of the transfers. And the transfers, according to the JSE, breached the terms and conditions of various agreements between AYO and 3
Laws Capital.
Sanctions
Gamieldien, the former CFO of AYO, made the payments and therefore, according to the JSE, “through her actions, caused and/or contributed to AYO’s breach” of the listing requirements.
On 26 April 2018, and before going on leave, Gamieldien emailed a copy of the draft unaudited interim results to AYO nonexecutive director Khalid Abdulla and Salie, a former director of AEEI, who served as AEEI’s chief investment officer from February 2018 to January 2019.
In Gamieldien’s absence, Abdulla instructed Salie, who was not a director or employee of AYO, to effect adjustments to specific line items in AYO’s 2018 unaudited interim results, which AYO management later approved and published.
“Mr Salie … had no authority to involve himself in the financial and other affairs of AYO…” the JSE said.
It added that the adjustments Salie made did not comply with international accounting standards and the figures were later restated, which affected AEEI’s results.
This paved the way for Salie to be slapped with a fine by the JSE.
What made the money transfers pernicious in AYO’s case is that its shareholders or the JSE were never informed of the transfers. And the transfers … breached the terms and conditions of
various agreements