Viceroy Research will appeal the FSCA fine of R50 million, the short-seller said in a statement on Wednesday, hours after the fine was announced for the partnership’s false statements about Capitec.
And instead of backing down, Viceroy’s statement also contains more adverse comments about Capitec, while questioning the FSCA’s investigation.
The Financial Sector Conduct Authority (FSCA) said the partnership was fined because it contravened Section 81(1) of the Financial Markets Act when it published false, misleading, or deceptive statements, promises or forecasts regarding material facts about Capitec in January 2018 that the partners should have known were not true.
FSCA ‘did not investigate Viceroy Research’s claims’
Approached for comment, Viceroy Research said: “To be abundantly clear: the FSCA’s findings and list of grievances are entirely predicated on Viceroy not publishing ‘full and frank corrections’ to our analysis after Capitec’s open response to our report. The grievances were not based on an investigation into Viceroy’s claims, but into Viceroy itself from the onset.”
Viceroy says it met with the FSCA and provided its working papers, as well as detailed responses, which has been “apparently ignored”. “We believe the purpose of the investigation, therefore, is purely to make a utilitarian example of critics who dare publish insightful contrarian analysis into South African companies.
“We say utilitarian, because the FSCA’s grievances in our reports have been duplicated and published by dozens of other journalists and financial analysts alike. We will not be the scapegoat.”
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Why not investigate Capitec too?
According to the statement, the FCSA avoided placing Capitec under any scrutiny.
“When reading the FSCA report presented to the Tribunal, you would be left wondering if Capitec is a Grade A credit reference agency, rather than the most expensive deposit-taking institution in the world, with a loan book of almost exclusively unsecured loans to financially vulnerable demographics.”
Viceroy says it was investigated by the US Securities and Exchange Commission (SEC), which did not recommend any enforcement and closed the case.
“This is the ‘outcome’ of our discussions with the SEC and FSCA, which the FSCA has refused to comment on to the press. The FCSA has set about attacking a thesis that has been backed up by many, including the media in South Africa.”
FSCA ‘protecting SA institution’
Calling the ‘level of prejudice’ the FSCA has used to ‘protect’ a South African institution ‘appalling’, Viceroy Research says the FSCA further ‘insulted’ the public by claiming that it will hold everyone liable for saying things, even on your personal blog if that personal blog is in the public domain and those statements are negligent.
“If this was actually the case, we would like to know how many fines have been issued to Steinhoff analysts who had jockeyed the company’s share price for years in the midst of obvious fraud.”
According to the statement Viceroy Research was not notified of the Tribunal date or time, but only of its findings. Viceroy will appeal.
Capitec said it notes the FSCA ruling and is pleased with the outcome, but did not want to comment further.