Starting in May last year Iqbal Surv\u00e9, through two of his companies, completely and utterly dominated the trading of shares in Ayo Technology Solutions. In many months practically no one except Surv\u00e9\u2019s family holding company, Sekunjalo Investment Holdings, and asset manager, 3 Laws Capital, bought shares.<\/p>\n\n\n\n
Details of the trades have been laid bare in a Financial Sector Conduct Authority (FSCA) affidavit used to obtain a search warrant targeting Surv\u00e9 premises in October. His companies are now challenging the warrant in the Western Cape High Court<\/p>\n\n\n\n
Surv\u00e9\u2019s domination of the market for Ayo shares was especially true during three months the share price was subject to a deeply flawed downside agreement that required minimum effort to squirm out of.<\/p>\n\n\n\n
Being the only person interested in your own company \u2013 he is indirectly Ayo\u2019s biggest shareholder by far \u2013 is however not a crime and Surv\u00e9\u2019s overwhelming role in the market for Ayo shares has been reported before<\/a>. He has denied market manipulation, saying that he simply sees Ayo as an \u201cattractive long-term investment\u201d.<\/p>\n\n\n\n More important is the way in which Surv\u00e9 traded the shares, which can be an offence under section 80 of the Financial Markets Act carrying a fine of up to R50-million and imprisonment of up to ten years.<\/p>\n\n\n\n The Johannesburg Stock Exchanged referred suspicious Ayo trading to the FSCA leading to the October raids. The FSCA has only successfully prosecuted or settled eight market manipulation cases in the past decade and none of those related to the owner of the company in question.<\/p>\n\n\n\n The FSCA is particularly interested in Surv\u00e9\u2019s trading during the operation of the downside protection agreement between his company Arican Equity Empowerment Investments (AEEI), which sold Ayo shares to the PIC and the PIC.<\/p>\n\n\n\n The agreement required that the Ayo share price stay at above R22 from 19 October 2018 to 19 January 2019, failing which AEEI would have to pay part of the difference to the PIC.<\/p>\n\n\n\n AmaBhungane has previously reported<\/a> how Ayo\u2019s share price was mysteriously maintained at just above R22 for that period and started its descent to the current level of R5.45 straight afterwards.<\/p>\n\n\n\n In a lengthy and technical affidavit<\/a> motivating for the search and seizure warrant, FSCA investigator Alfred Shimati noted that there was a \u201cnotable increase\u201d in Surv\u00e9\u2019s trading in Ayo shares during this period.<\/p>\n\n\n\n \u201cIt is reasonable to suspect that this potential liability \u2026 may serve as a motive to manipulate the Ayo share price,\u201d he said.<\/p>\n\n\n\n Before raiding the offices of three of Surv\u00e9\u2019s companies last month, the FSCA conducted an exacting study of what on the face of it was clear-cut manipulation of Ayo\u2019s share price.<\/p>\n\n\n\n \u201cProhibited practices\u201d under the Financial Markets Act (FMA) include at least three things the FSCA accuse Surv\u00e9 of doing.<\/p>\n\n\n\n Shimati\u2019s affidavit spelled out the evidence using a sample of trading days.<\/p>\n\n\n\n On 25 May last year for instance, there was a yawning gulf between the prices at which sellers were offering Ayo shares and which potential buyers (other than Surv\u00e9) were willing to pay. In practice this amounts to there being zero real demand for the shares.<\/p>\n\n\n\n In the morning the best bids were at R8.92 while the largest quantity of shares was bid for at only R1.03. People were only willing to sell them at R30. This was after Ayo shares had already tanked from R45 when the PIC invested in December 2017.<\/p>\n\n\n\n Just then, Surv\u00e9 put in a bid to buy 1 000 Ayo shares at R29.90. Less than a minute later Surv\u00e9 put in another bid to buy 1 000 shares at R29.90 \u2013 much more than the other bids on offer.<\/p>\n\n\n\n Surv\u00e9 kept this up throughout the day, sometimes putting in bids for Ayo shares three times higher than any other bids on the market. Thanks to Surv\u00e9\u2019s purchases, and his purchases alone, the Ayo share price had shot up to R43 in the course of the day. He put in a last bid of R40, which would have been the closing price, but he was too late and it was rejected by the JSE\u2019s trading system.<\/p>\n\n\n\n Watch: Dewald van Rensburg takes us through his ‘Iqbal and friends’ investigation.<\/p>\n\n\n\n \u201cIf Sekunjalo did not trade, it is highly probable that the Ayo share would have closed at R26.99,\u201d Shimati said in his affidavit. Creating this kind of false impression of demand contravenes section 80(3)(b) of the FMA.<\/p>\n\n\n\n This pattern was repeated on the other days canvassed in the affidavit. On 29 May 2018 Surv\u00e9 also tried to buy a tiny amount of extra Ayo shares at R44.28 just as the market closed at R40 (also thanks to him).<\/p>\n\n\n\n \u201cThe significantly higher bid entered by Surv\u00e9 at or near the close of market and the higher price he paid for a small volume of shares give rise to the reasonable suspicion that \u2026 the primary purpose of which was to change the closing price of the Ayo share,\u201d said Shimati.<\/p>\n\n\n\n Surv\u00e9\u2019s trades that day \u201cmake no commercial sense\u201d, Shimati added.<\/p>\n\n\n\n 30 November, in the middle of the downside protection agreement, is particularly suspicious. Only Sekunjalo bought any shares that day. Dangerously for Surv\u00e9, the share price was hovering at R22.25 \u2013 cents above the level it had to stay at.<\/p>\n\n\n\n Sekunjalo then spent the entire day buying tiny tranches of 100 shares at successively higher prices to get Ayo up to R23. It did the same thing for a number of preceding days.<\/p>\n\n\n\n These case studies secured Shimati a warrant to raid Surv\u00e9\u2019s Sekunjalo and 3 Laws Capital as well as AEEI, the listed investment vehicle he controls and is run by his brother-in-law, Khalid Abdullah. The raids on 9 October were not without incident. Among other things Surv\u00e9 conveniently \u201clost\u201d his cellphone when investigators needed it.<\/p>\n\n\n\n In a report<\/a> following the raid, Shimati recorded that Surv\u00e9 had \u201ctemporarily disturbed\u201d the search when he arrived on the scene.<\/p>\n\n\n\n \u201cHe [Surv\u00e9] made allegations inter alia that the investigation of his Company was a political plot aimed at intimidating him and bringing his Company’s name into disrepute as well as to bring reputational harm to him personally. He submitted that had the documents been requested from him by the FSCA, he would have willingly produced them.\u201d<\/p>\n\n\n\n The \u201cmissing\u201d cellphone incident came with Surv\u00e9 accusing investigators of already taking it. \u201cWhen he was requested to provide his cell phone, he responded that he did not know where his cell phone was. He stated that he arrived with the cell phone at the premises and that it may have been taken by someone from the investigating team.\u201d<\/p>\n\n\n\n \u201cDr Surve again expressed that he did not have his cell phone with him and was unaware where it may have vanished to\u2026 When attempts were made by one of Sekunjalo’s Attorneys to call his cell phone, it went straight to voicemail.\u201d<\/p>\n\n\n\n There were also clumsy attempts to stop the raid. The company the FSCA uses to clone hard drives, Exactech, wrote up \u201cinvestigation diaries<\/a>” throughout the day to register noteworthy events. Two of these, relating to the copying of hard drives, say that a \u201ccompany representative\u201d came and physically pulled the machine\u2019s plug out of the wall \u201ceven though we advised them \u2026 it might destroy the hard drives\u201d.<\/p>\n\n\n\n Surv\u00e9 has applied to the Western Cape High Court to have the warrant for the raid scrapped and all seized records returned; alternatively that some of it be returned on the grounds that the FSCA seized more than it was entitled to. A separate case was filed by AEEI, through which Surv\u00e9 controls Ayo.<\/p>\n\n\n\n Surv\u00e9 argues the raid was an unconstitutional infringement of his privacy as there were less invasive means of getting the information \u2013 like asking him for it.<\/p>\n\n\n\n He also claims that judge Patrick Gamble, who gave the FSCA the warrant, was not given the full facts.<\/p>\n\n\n\n What was allegedly withheld is that Surv\u00e9 had earlier lodged his own complaint to the FSCA claiming that conspirators were intentionally driving down the share prices of not only Ayo, but also AEEI and his other listed company, Premier Fishing and Brands.<\/p>\n\n\n\n Like this story? Be an amaB Supporter<\/a> to help us do more. Sign up for our newsletter<\/a> to get more.<\/em><\/p>\n\n\n\n Surv\u00e9 had previously met with the FSCA and been very willing to discuss his own allegations. Even though this is completely unrelated to the JSE complaint that led to the raid, Surv\u00e9 says this demonstrates he would also have cooperated when the tables were turned.<\/p>\n\n\n\n In his affidavit, Surv\u00e9 again alleged a conspiracy against him.<\/p>\n\n\n\n \u201cThere may be asset managers and\/or hedge funds working with the media to short the shares of the JSE-listed companies, i.e. by employing a strategy aimed at creating the impression that the shares were losing value in order to try to get unsophisticated shareholders to sell their shares in order to further lower the share price,\u201d he said.<\/p>\n\n\n\n Although the FSCA investigation only covers the period up to the end of February this year, JSE market data shows that both Sekunjalo and 3 Laws have kept on buying Ayo shares through the year. They still dominate the market.<\/p>\n\n\n\n Surv\u00e9 has previously defended his dominance in the market for Ayo shares.<\/p>\n\n\n\n \u201cThe Sekunjalo Group is an investor in many companies on the JSE and sees Ayo as an attractive long term investment. Sekunjalo generally invests in companies and takes a 5 to 10 year view like Warren Buffet, Berkshire Hathaway,\u201d he said by Whatsapp as far back as September last year.<\/p>\n\n\n\nBack at Surv\u00e9 Inc<\/h5>\n\n\n\n