JOHANNESBURG – Questions have been raised over whether the Financial Sector Conduct Authority (FSCA) was soft on embattled retailer Steinhoff after saying the group needed to pay only R53 million out of a R1.5 billion fine for flouting regulations due to its financial position.
The FSCA said yesterday that it had imposed a R1.5bn administrative penalty on Steinhoff under Section 81 of the Financial Markets Act No 19 of 2012 (FMA 2012) in the period prior to the discovery of significant accounting irregularities at the company in December 2017.
Ron Klipin, an investment analyst at Cratos Capital, said reducing the fine to R53m seemed to be a bit light.
“Does the punishment fit what was perpetrated? The results of the findings could be the green light for both institutional and private investors to proceed with further litigation. They now have solid evidence of wrongdoings,” said Klipin.
The FCSA launched an investigation into Steinhoff, which collapsed 19 months ago following accounting irregularities that resulted in South Africa’s largest corporate fraud.
“The FSCA has, therefore, found that the Steinhoff Group made false, misleading or deceptive statements, promises or forecasts in its public statements to the markets in the prior period,” FSCA said.
FSCA, however, said even after revising the fine it was the biggest penalty it had imposed to date.
“We have made the decision to remit a substantial proportion of the penalty, even after this reduction it remains the largest single fine ever imposed by the FSCA,” it said.
FSCA said it had applied section 109 of the FMA 2012 to determine the level of administrative penalty to be paid by Steinhoff and, having considered representations from the company, took into account a number of mitigating factors.
“Noting Steinhoff’s current financial position; to avoid penalising innocent Steinhoff shareholders further; in recognition of the fraud perpetrated on the Steinhoff Group by former employees and officers of the company; and in acknowledgement of the co-operation of management to date, and Steinhoff’s commitment to continue co-operating fully with the FSCA in all future actions taken against any persons allegedly responsible for the wrongdoing, the FSCA said it had resolved, under Section 173 of the Financial Regulation Act No 9 of 2017, to remit a portion of the administrative penalty resulting in Steinhoff paying a penalty of R53m."
The retailer last month secured a restructuring agreement on about €9 billion ($145.64bn) of debt.
Last month, embattled retailer Steinhoff told legislators in Parliament that it was in the process of implementing claims against executives and directors implicated in the financial irregularities that nearly brought the company to its knees in 2017.
Steinhoff group executive Louis du Preez said yesterday that the company was pleased that the matter had now been brought to a conclusion and that the FSCA had "recognised our full co-operation with the investigation".
“There is no further enforcement of FSCA actions outstanding against the Steinhoff Group,” said Du Preez.
Earlier this month, however, lawmakers accused the group and law enforcement agencies of dragging their feet on those responsible for the irregularities.
Steinhoff shares closed 3.77 percent higher at R1.10 on the JSE on Thursday.