Resilient wants regulators to speed up investigations

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The Resilient stable also includes Nepi Rockcastle, Fortress and Lighthouse Capital, wants regulators to step up. The Resilient stable also includes Nepi Rockcastle, Fortress and Lighthouse Capital, wants regulators to step up.

To bring closure about market manipulation allegations, Resilient Reit (JSE: RES) has challenged Financial Sector Conduct Authority (FSCA) to speed up investigations.

Resilient, the founding member of the stable of property companies whose share price collapse amid allegations of insider trading and market manipulation has cost investors more than R100bn, has challenged regulators to speed up their investigations and bring the matter to rest.

The company said on Thursday it had done all it could to assure shareholders that its management was not guilty of wrongdoing and that only the Financial Sector Conduct Authority (FSCA) could bring an end to the ongoing uncertainty.

It has rejected calls from the country’s biggest fund managers, including the Public Investment Corporation, Allan Gray and Coronation, for an independent probe into the group’s affairs.

The company said it wanted the FSCA, which has been investigating since March, to complete its probe so it could move forward with its normal business in 2019.

The Resilient stable also includes Nepi Rockcastle, Fortress and Lighthouse Capital. Resilient’s share price is down 56.6% since the start of 2018, with Nepi down 49.4%, Fortress B-class shares down 67% and Lighthouse Capital 45.5% lower. The uncertainty also weighed on the listed property sector, which is down 31%. The JSE’s all share index is down 13%.

Garreth Elston, a portfolio manager at Reitway Global, said the only way to bring closure was for the FSCA to step up and that an independent investigation into Resilient would be unnecessary. "It is an utterly pointless exercise while the primary regulator has an investigation outstanding. It is a waste of shareholders’ funds. If an independent investigation finds X, but the FSCA finds Y, Y is all that matters," he said.

The FSCA’s investigation is twofold: it is studying possible insider trading and price manipulation in its shares; and false and misleading reporting by Resilient. It has not given an indication as to when the investigation will be completed.

In January, there was a large sell-off of Resilient stock, followed by a number of reports accusing its management of inflating the share price through related party deals and other market-manipulation techniques. This included its cross-holding with Fortress and the two companies’ BEE trust.

Resilient responded by removing the cross-holding as well as restructuring the trust.

In August, 10 of SA’s largest institutions, some shareholders in Resilient, sent a letter to its board and the boards of the other members of the stable demanding a forensic probe by a top auditing firm. All four boards set up committees to deal with the allegations. Fortress is the only member that has so far agreed to an outside investigation, saying in December it had appointed PwC.

Resilient said "only the FSCA has the extensive investigative powers required to adequately probe and address unlawful third party share dealings".

Read more on:

Listed Property / REITs  |  Fortress REIT Limited  |  Resilient REIT  |  New Europe Property Investments (NEPI)  |  Garreth Elston  |  Nepi Rockcastle  |  Lighthouse Capital  |  Financial Sector Conduct Authority (FSCA)