South African stock exchange hit with major fine

South Africa’s financial sector watchdog has hit A2X markets with a R700,000 administrative penalty for using an opt-out process to list companies on the exchange.

Trading platform A2X is an alternative stock exchange launched in 2017 with the goal of creating a new bourse in South Africa to compete with the JSE.

It aimed to create an exchange that was more efficient than the JSE with lower fees for investors to trade.

On Thursday, 27 November, the Financial Sector Conduct Authority (FSCA) announced that it has imposed an administrative penalty on A2X. This R700,000 penalty must be paid within 30 days. 

This comes after the exchange came under scrutiny for using an opt-out process to list companies’ shares on the bourse.

A2X would list the securities of certain issuers on the exchange platform for trading without subjecting those issuers to the application process outlined in the Financial Markets Act and A2X’s listing requirements.

A2X would then require these issuers to either accept ot decline their securities being listed. If an issuer did not respond within a certain timeframe, A2X would proceed to list their securities.

The 43 companies listed through this process had been trading, clearing and settling on A2X for over 15 months.

While A2X has since stopped using this process, the FSCA said this admissions model contravened the Financial Markets Act and A2X’s own listing requirements.

In addition to paying the administrative penalty, A2X was also required to tender an Enforceable Undertaking and commit to taking immediate steps to engage with the issuers whose securities were listed on A2X under the “opt-out” model.

On Thursday, 27 November, A2X confirmed that, of the 43 companies that were listed through this model, 40 chose to remain listed on the exchange.

This includes key large-cap companies such as Richemont, Glencore, Gold Fields, Harmony Gold Mining, Bid Corporation, Mondi, Clicks, Bidvest, Shaftesbury, Quilter, and Redefine.

“The decision by 40 companies, including all our major large-cap issuers, to remain listed demonstrates corporate South Africa’s support of the tangible benefits A2X and competition deliver to South African capital markets,” A2X CEO and founder Kevin Brady said.

“We welcome the clarity this process has brought to our listing procedures and look forward to enhancing South Africa’s capital markets with the FSCA.”