South African financial watchdog FSCA fines Tongaat Hulett US$1.1m for accounting irregularities

SOUTH AFRICA – JSE-listed sugar and property firm Tongaat Hulett, which was rocked by an accounting scandal last year, has been handed down a reduced fine of R20 million (US$1.1m) by the Financial Sector Conduct Authority (FSCA).

The country’s top capital markets regulator, had initially slapped the sugar producer with a R118.3m (US$7.05m) fine for publishing deceitful financial information, but the watchdog slashed the sum to R20m (US$1.1m), acknowledging the company’s co-operation during the investigation and seeking to limit harm on investors.

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In a statement, the financial watchdog said the fine relates to Tongaat Hulett’s contraventions of the Financial Markets Act (FMA) for “the period prior to the discovery of significant accounting irregularities at the company”.

FSCA’s investigations into alleged contraventions of the Financial Markets Act by Tongaat followed after the group had to make multiple, significant restatements of its March 31, 2017, and March 31, 2018, financial results.

The prior-period errors extend over the past six years, and the cumulative correction has been reflected in the March 31, 2017, financial statements.

“The FSCA has found that Tongaat made false, misleading or deceptive statements, promises or forecasts in its public statements to the markets in the prior period,” the FSCA said.

The FSCA’s fine follows the JSE fining the embattled group R7.5 million (US$447.25K), but R2.5 million (US$149k) of the penalty for five years on condition that the group did not breach the listing rules during that time.

Tongaat Hulett noted in its Sens statement that prior to the publication of the financial regulator’s order, the group had approached the FSCA and applied for a remission of the initial penalty, which is provided for under Section 173 of the FSR Act.

“The FSCA considered Tongaat’s application for remission and has agreed to reduce a portion of the R118 340 000 (US$7.5m) penalty. The authority ordered… that Tongaat pay R20 million as an administrative penalty,” the group said.

Meanwhile, the FSCA thanked Tongaat Hulett’s current management team for their “co-operation and constructive engagement” through what it described as a “difficult and complex process”.

Following the investigations, the group has been taking civil action against some of its former directors and former CEO Peter Staude.

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