JSE ‘not in partnership’ with virtual AGM service provider TMS

The Johannesburg Stock Exchange (JSE) has retracted its end-March announcement that it had “partnered with The Meeting Specialist (TMS) to launch the first virtual AGMs in South Africa” and now says there is no partnership arrangement between the two entities.

It gave no reason why it was retracting the reference to a “partnership”, but one competition law expert said a partnership arrangement could have been deemed problematic given the JSE’s status as a regulator with a near-dominant position in the market.

TMS is one of four companies that provide platforms for virtual shareholder meetings.

Link Market Services, Computershare and Ince have also offered similar services to clients for a number of years.

Ahead of the Covid-19 lockdown, there was limited demand for the service, with shareholders and companies giving preference to in-person meetings.

The JSE’s end-March announcement was issued just days ahead of one of the busiest AGM seasons on the local calendar as companies with December year-ends were faced with holding their annual meetings in the midst of Covid-19 lockdown restrictions.

The JSE said on March 30 it had partnered with TMS “to enable clients to engage with shareholders when the country is faced with tackling the Covid-19 pandemic”.

It added that the JSE, which is deemed an essential service, plays a key role in maintaining the South African capital markets infrastructure and enabling economic momentum. “The launch of the virtual AGM platform comes at a time where business continuity is paramount to ensuring the running of the SA economy.”

‘Service provider’, not partner

Earlier this week, in a statement to Moneyweb, the JSE said: “In an unfortunate misuse of wording, the JSE incorrectly referred to the arrangement as a ‘partnership’. TMS is a service provider of the JSE and there is no partnership arrangement between the two entities.”

It also stressed that the services provided by TMS are not services that are regulated by the JSE.

The competition law expert said that given its status as a regulator and a dominant market player it was problematic for the JSE to enter into arrangements with third-party service providers for downstream services. “The JSE needs to avoid appearing to leverage its regulatory power for private gain; that would create an uneven playing field,” said the legal expert.

Acquisition prohibited by CompCom

Last November the Competition Commission prohibited the JSE’s planned acquisition of the country’s second-largest share registry, Link Market Services South Africa (LMS SA), saying that it would lead to the JSE being able to provide a range of products and services that none of the other parties in the capital market would be able to mimic or reproduce. In its ruling, the commission said the JSE would be the only player able to provide end-to-end listing and associated services, some of which are required to maintain a listing on the exchange.

“The JSE’s reputation and its relationship with sponsors and issuers is likely to encourage issuers to use the JSE’s suite of services to the possible exclusion of competitors to LMS SA,” said the commission. It added that the JSE is likely to tie and bundle different services across the capital market value chain to the detriment of competition.

The JSE has asked the Competition Tribunal to reconsider the commission’s decision. The matter is scheduled to be heard by the Tribunal on 15 June.

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