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CompliNEWS   |   Financial Service Intelligence Watch Friday 16 May 2025

FST case summary involving Blue Financial Services Ltd and Johannesburg Stock Exchange Ltd

By Shamaa Sheik

The following matter was heard in the Financial Services Tribunal (FST) on 19 February 2019 in Pretoria:

  • Blue Financial Services Ltd (Appellant) and Johannesburg Stock Exchange Ltd (Respondent), case number: A17/2018

Fast facts

Appeal – application for reconsideration of decision of Issuer Regulation Appeal Committee
Financial Markets Act – JSE – decision-maker – market infrastructure
JSE – listing requirements – delisting–failure to comply with listing requirements – public interest

Summary

Background
In 2018, the appellant, Blue Financial Services Ltd (Blue), was informed of the respondent’s (Johannesburg Stock Exchange Ltd (JSE)) decision to terminate their listing on the JSE.

After a failed appeal to the Issuer Regulation Appeal Committee (the Committee) of the JSE on 2 February 2018, an appeal for reconsideration of the decision of the Committee was brought before the FST. Blue requested the JSE to suspend its securities in June 2013 and had remained in voluntary suspension. After due process Blue was eventually delisted following an unsuccessful internal appeal.

Reason for Blue’s delisting
Blue was delisted for failure to comply with the JSE listing requirements in the following respects:

  • the failure to prepare and publish audited annual financial statements and interim and provisional financial reports;
  • the failure to appoint a designated adviser; and
  • the failure to appoint an executive financial director.

The legislative framework
The JSE is a licensed stock exchange as defined in s 1 of the Financial Markets Act 19 of 2012 (FMA), and falls within the definition of ‘market infrastructure’. In terms of s 105(1)(c) of the FMA, a person aggrieved by a decision of an exchange has a right of appeal.

Laws governing appeals
Appeals are regulated by chapter 15 of the Financial Sector Regulation Act 9 of 2017 (FSR Act). According to s 218 of the FSR Act, for purposes of the chapter, the term ‘decision’ includes ‘a decision in relation to a specific person by a market infrastructure', and the term ‘decision-maker’ means in this regard a market infrastructure, i.e. the JSE.

In terms of s 230(1)(a) of the FSR Act, a person aggrieved by such a decision may apply to the FST for a reconsideration of the decision and according to s 234, the FST may set the decision aside and remit the matter to the decision-maker for further consideration. Alternatively, the FST may –

  • make an order setting aside the decision and substituting it with its decision; or
  • dismiss the application.

Financial Markets Act
The FMA aims to –

  • ensure that the South African financial markets are fair, efficient and transparent;
  • increase confidence in the South African financial markets by–
    • requiring that securities services be provided in a fair, efficient and transparent manner; and
    • contributing to the maintenance of a stable financial market environment;
  • promote the protection of regulated persons, clients and investors;
  • reduce systemic risk; and
  • promote the international and domestic competitiveness of the South African financial markets and of securities services in the Republic.

In terms of s 11(1), an exchange must make listing requirements which prescribe–

  • the way securities may be listed or removed from the list or in which the trading in listed securities may be suspended;
  • the requirements with which issuers of listed securities and of securities which are intended to be listed, as well as such issuers’ agents, must comply; and
  • the standards of conduct that issuers of listed securities and their directors, officers and agents must meet.

A breach or failure to comply with the listing requirements, will result in the exchange suspending or terminating the listing per s 11(1)(g)(iv).

Additionally, the JSE may remove securities from the list, or suspend the trading in listed securities, per s 12.

JSE listing requirements
The FST summarised the applicable provisions of the JSE listing requirements as follows:

  • Section 1.10 of the Listing Requirements permits the JSE to suspend the listing of an issuer (such as Blue) at the request of the issuer under defined circumstances.
  • If an issuer’s securities are suspended, it must, continue to comply with all the Listings Requirements that apply to it (section 1.11).
  • Section 1.12 specifies the following requirements for the removal of a listing by the JSE:

The JSE may, subject to the removal provisions of the FMA, and if one of the following applies:
(a)      if it will further one or more of the objects contained in Section 2 of the FMA, which may also include if it is in the public interest to do so; or
(b)      if the issuer has failed to comply with the Listings 15 Requirements and it is in the public interest to do so,
remove from the List any securities previously included therein; provided that the listing of such securities shall first have been suspended in accordance with the above provisions.

Application of listing requirements
A delisting under (a) is if the delisting would further one or more of the objects set out in s 2 of the FMA. Failure to comply with a listing requirement is not a jurisdictional fact under (a); neither is public interest, although it might be considered.

The jurisdictional facts for delisting under (b) are different as it must be shown that there had been a failure to comply with the listing requirements. The delisting must be in the public interest.

The FST found that Blue had failed to comply with the listing requirements over a long period. Two considerations had to be made:

  • under (a), whether the delisting would further the aims of the Act; or
  • under (b), whether the delisting was in the public interest.

JSE Appeal Committee proceedings
The FST relooked the basis of the appeal and considered the following arguments:

  • Blue disputed non-compliance relating to the number of directors, something that became a non-issue because the JSE and the Committee accepted Blue’s version.
  • Blue stated that their inability to render financial statements for the financial years following 2012 was due to events outside its control and in most instances arose from events prior to an earlier recapitalisation in December 2010.
  • Blue anticipated that the audits would be completed by July 2018 at which juncture the annual financial statements could be completed together with the consolidated annual financial statements however, this had not taken place.
  • Without the necessary audits Blue resolved to delay the appointment of a designated advisor and financial director until the various subsidiaries had completed their audits. The intention was to appoint a financial director and a designated advisor as part of the new recapitalisation plan.

Blue accordingly requested that the delisting be set aside until the end of July 2018, to enable them to submit a recapitalisation plan to the JSE.

Application for Reconsideration
The application for reconsideration was based on two grounds:

  • non-compliance with ‘certain sections’ of the listing requirements was not because of willful default or negligence but the result of key events which were beyond Blue’s control.
  • that the Committee did not consider whether the termination of the listing was in the public interest.

Rulings on the issues
Regarding the non-compliance with ‘certain sections’ of the listing requirement, the FST stated that Blue sought to rely on the principle of impossibilium nulla est obligatio, arguing that because it found it impossible to comply with a listing requirement it should be released from the obligation to comply. The principle applies in the law of contract and does not enable someone to escape a public law obligation.

The FST ruled that if a company is unable to comply with the listing requirements it should be delisted otherwise the aims of the FMA and the listing requirements would be defeated.

Regarding the issue of whether the termination of the listing was in the public interest, the FST found that the Committee dealt with this issue in detail. The delisting was in the public interest to protect the public and ensure the integrity of the JSE, and to protect the fairness, efficiency and transparency of financial markets in South Africa. It would be unfair to the public if the fairness, efficiency and transparency of financial markets was compromised.

Order
The application is dismissed. Blue was ordered to pay the costs of the JSE (perusing, consideration and preparation of argument by the JSE) on the appropriate High Court scale in respect of the papers filed since December 2018 in conflict with the rules of the FST.

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The law

  • Financial Markets Act 19 of 2012 – ss 1; 1(1)(c); 2; 11(1); 11(1)(g)(iv); 12; 105
  • Financial Sector Regulation Act 9 of 2017 – ss 218; 230; 230(1)(a); 234; 234(2); ch 15
  • JSE Listing Requirements – s 1.10-12
  • Rules of the Tribunal

Full FST Decision