A Battle for Transparency: Inhlanhla Ventures and the JSE
A small company, Inhlanhla Ventures, found itself in a precarious financial situation after investing in shares on the stock market. Through a broker, it received credit to invest, with shares held as security for those loans. However, when the value of these shares dropped significantly, the broker had the right to demand additional security or repayment of the debt. If Inhlanhla failed to comply, the broker could take ownership of the shares.
During the first quarter of 2020, the broker held all the shares owned by Inhlanhla as security. A significant portion of these were shares in enX Group Limited, a public company listed on the Johannesburg Stock Exchange (JSE). By May 2020, the share price of enX had plummeted from 700c per share to as low as 320c per share. This sudden drop forced Inhlanhla to relinquish its portfolio to the broker. However, just days later, the share price rebounded, benefiting the broker substantially.
Inhlanhla suspected that there was something amiss. After examining the trade in enX shares between April and June 2020, the company believed there were grounds to suspect market manipulation. If this was the case, Inhlanhla might be entitled to restitution for its losses. However, without access to the details of all the trades made in respect of the shares, it could not confirm its suspicions.
The Access to Information Act and the JSE’s Refusal
Inhlanhla filed a request for access to information under the Promotion of Access to Information Act (Paia), seeking details on the identities of buyers and sellers of the shares and the sale values. It also narrowed its focus to the key period from 3 May to 19 May 2020. As a public body, the JSE is bound by Paia and must disclose any information requested unless there is a legitimate ground for refusal.
The JSE refused the request, stating that the information sought contained personal, confidential, or commercial information and was prohibited by the Financial Markets Act (FMA) and Paia from disclosure. Believing the JSE was incorrect in its refusal, Inhlanhla approached the Information Regulator (IR).
The IR’s Investigation and the JSE’s Response
The IR investigated and issued a report finding that the JSE had no justification in refusing the request, ordering it to disclose the requested information to Inhlanhla. However, this order remains preliminary, and Inhlanhla is waiting for a final decision from the IR’s enforcement committee. Lawyers acting for the JSE have already written to Inhlanhla, warning that if the regulator rules in its favor, the JSE will go to court to review the decision.
This story highlights South Africa’s broken access to information system and how a culture of secrecy within powerful institutions operates to stymie accountability. Similar stories occur daily across the country, with public bodies regularly refusing Paia requests based on a misguided interpretation of the law.
The JSE’s Misreading of the Law
The JSE’s reasons for refusing the request are common among public bodies. One frequent argument is that they cannot disclose information because doing so would violate a statutory obligation to protect personal, private, or confidential information. The JSE cited the FMA as a reason for its refusal, claiming it prevented it from disclosing any confidential information.
However, this must be a misreading of the law. Parliament could not have intended the FMA to act as a justification for refusing Paia requests. The Act states that confidential information cannot be disclosed “unless disclosure is required or permitted in terms of a law or court order.” Paia is one such law.
The Public Interest Override
Paia provides that, even if other prohibitions apply, the public body must assess whether the disclosure of the records would reveal evidence of a substantial contravention of, or failure to comply with, the law. The IR noted that Inhlanhla had clearly invoked concerns regarding market manipulation. The IR took the view that the JSE had not properly engaged in the balancing exercise required by Paia to determine whether the public interest override applied.
What Comes Next?
As mentioned, the IR enforcement committee still needs to review and make a determination on the investigator’s preliminary report. After that, either party can take the IR decision to court. The JSE has already indicated it will do so if ordered to make the requested disclosures.
The process to challenge a refusal is often onerous and lengthy, forcing many to give up. Public bodies know this and may rely on it, despite their misreading of the law and judicial precedent. With public bodies defaulting to secrecy rather than transparency, and access to information mechanisms taking years to resolve complaints, it is no wonder that South Africa faces an accountability vacuum.
