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In the corporate and commercial legal sphere, transparency is the essential operating standard. For a company listed on the Johannesburg Stock Exchange (JSE), the Stock Exchange News Service (SENS) is the official and mandatory channel for sharing information with the market. Recent high-profile disputes, such as the one involving Mantengu Limited, have created a legal point of friction: What is the extent of the JSE's legal power to override a listed company's Board of Directors regarding the disclosure of information via SENS?
This issue highlights a fundamental tension between the market regulator's oversight role and the listed company's core governance responsibilities.
The Board's right vs the Regulator's veto
A listed company's Board of Directors bears the primary responsibility for the company's disclosure obligations. This stems from their fiduciary duties to act in the best interest of the company and its shareholders. If the Board determines that certain information—even if sensitive or contentious—is material and must be shared with the market, that decision represents the collective judgment of the company's highest governing body.
The JSE's power to oversee disclosures is derived from the Financial Markets Act (FMA) and the JSE Listings Requirements. The JSE ensures compliance with rules requiring the disclosure of price-sensitive information (PSI) and aims to maintain an orderly market. However, when the JSE rejects a SENS announcement that the Board has approved, the following questions arise:
- Who is the ultimate arbiter of materiality? The Board is intimately aware of the facts, risks, and strategic impact of the information. Its decision to disclose, particularly concerning alleged market manipulation that could be distorting the share price, suggests a finding of materiality. Should the JSE's technical definition of PSI supersede the Board's assessment of what is crucial for its investors?
- To what extent does the JSE's authority infringe upon governance? The JSE's veto essentially substitutes its judgment for that of the Board. While the JSE is justified in preventing the dissemination of demonstrably false or non-compliant information, the criteria for rejecting a legitimate disclosure must be exceptionally high and clearly defined. The market depends on the Board's willingness to communicate openly, and a regulatory veto risks chilling this essential governance function.
Defining the criteria for intervention
If the JSE is to reject an announcement and effectively force silence on an issuer, it must demonstrate that its action is a justifiable and proportionate remedy.
- The Companies Act Mandate: The overarching spirit of the Companies Act, No. 71 of 2008, and broader corporate law principles favours shareholder access to information. The JSE's power to maintain an orderly market, while essential, must be reconciled with this fundamental principle. The regulator's decision should be strictly confined to ensuring the announcement is authentic, not misleading, and compliant with the formal procedural rules, rather than acting as a content censor based on a subjective assessment of controversy or market risk.
- A Call for Clarity: The legal friction points to a need for greater clarity in the Listings Requirements on the precise, non-subjective grounds for rejecting a Board-approved SENS submission. The threshold for regulatory veto should be high, allowing the Board a maximal degree of autonomy in communicating material risks and facts to the owners of the company.
Is the legal standard efficient?
The JSE has the legal authority to reject a SENS announcement based on technical non-compliance and adherence to the general principles of market order. However, this legal basis is often criticised for its lack of granular clarity in highly contentious situations, and the existing resolution mechanisms are often inefficient.
The core question facing the South African market remains: Does a clear and efficient legal standard exist for the JSE to reject a content-based disclosure?
The legal basis for refusal often relies on broad principles concerning "market order" and "investor protection," leaving considerable room for interpretative disputes. While the Financial Sector Regulation Act (FSR Act) offers an avenue for reconsideration before the Financial Sector Tribunal (FST), and the High Court is the ultimate recourse, these formal processes are generally too slow to meet the requirement for timeous public disclosure. This lack of a rapid, statutory resolution mechanism is what creates the practical inefficiency, often forcing issuers into costly High Court applications to challenge a refusal.
To fortify market integrity, it may be time to consider whether the current legal parameters should be developed to specifically address this gap. This could entail:
- Refined Veto Criteria: Implementing more objective criteria within the Listings Requirements for rejecting contentious information, balancing the need for absolute accuracy with the Board's duty of prompt disclosure.
- A Fast-Track Review Body: Establishing a specialised, rapid-response panel within the FST or JSE structure, mandated to issue an urgent, binding ruling on SENS publication disputes within an extremely short timeframe.
The JSE's role is to supervise the platform, but the Board's role is to inform the shareholder. A transparent legal standard that is also efficient must ensure this balance is maintained, providing certainty for both issuers and investors and safeguarding the market's reputation for fair disclosure.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
