Irba withdraws disciplinary charges against former Sharemax auditors

Auditors’ attorney says it is ‘a huge relief’ for his clients to no longer have the matter hanging over their heads.

The Independent Regulatory Board for Auditors (Irba) has withdrawn the disciplinary hearing charges it brought against the former auditors of the failed Sharemax investment scheme.

Attorneys for Irba officially notified the legal representatives of the auditors of the decision on Wednesday.

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In the Irba disciplinary hearing, the former Sharemax auditors – Danie Dreyer, Jacques Andre van der Merwe and Petrus Johannes Jacobus Bekker, who were all directors of ACT Audit Solutions Incorporated – were collectively facing a total of 413 improper conduct charges related to work they performed for various Sharemax entities between 2007 and 2010.

They pleaded not guilty to all the charges.

Read: Three former Sharemax auditors, 413 improper conduct charges

Reacting to Irba’s decision, the auditors said via their attorneys that the initial complaint was filed with Irba as far back as 2010, and the initial draft charges were made available in 2015.

“The withdrawal of charges after all these years, as well as the fact that [the] disciplinary hearing is no longer hanging over their heads, is a huge relief for the auditors,” their attorney said.

Comment was requested from Irba but has not yet been received.

End to 11-year saga

The decision to withdraw the charges brings to an end a process that began in 2013 when Irba’s investigating committee started investigating a complaint against the auditors.

In its court papers opposing an application by the auditors to review the partly heard disciplinary hearing, Irba said Sharemax embarked upon a number of public property syndication schemes in the early 2000s, including the Zambezi Retail Park and the Villa Retail Park schemes.

Read: Did regulators scuttle Sharemax and other property syndication schemes? CIPC investigation into who sank Sharemax and other schemes has ground to a halt

It said the practitioners audited the financial statements of the Sharemax entities and provided assurance reports regarding the forecast and pro forma financial information contained in the prospectuses, which were included in the prospectuses presented to investors.

It said the SA Reserve Bank (Sarb) determined in September 2010 that Sharemax entities were engaged in illegal deposit taking contrary to the Banks Act, resulting in the deputy registrar of banks issuing a directive to the Sharemax companies under Section 83 of the Banks Act requiring that all investor monies be repaid.

Read:
Did Sharemax contravene the Banks Act? [Mar 2017]
Was Sharemax illegal, or did the Reserve Bank screw up? [Oct 2022]

Sharemax Investments collapsed in 2010 after the finding by the registrar of banks that Sharemax’s funding model had contravened the Banks Act became public knowledge.

About 18 700 investors invested an estimated R4.6 billion in Sharemax’s various investment schemes.

Nova Property Group was tasked in terms of the original scheme of arrangement to repay investors.

Where it all began

Irba said that as the auditing regulator established in terms of the Auditing Profession Act, it bears a statutory responsibility to take disciplinary action against registered auditors, where warranted, to protect the public from practitioners’ improper conduct.

It said that in line with these statutory obligations, Irba’s investigating committee in 2013 began investigating a complaint against the practitioners relating to their work for the Sharemax syndications.

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This investigation culminated in Irba charging the auditors and convening a disciplinary hearing before a panel of Irba’s disciplinary committee.

The hearing commenced in March 2020, but the Covid-19 pandemic and lockdown caused the matter to be postponed.

The hearing continued in January 2021, but after the hearing had been underway for three weeks and the auditors had presented the evidence of their first expert witness, they brought an application for the recusal of two committee members, Suren Sooklal and Horton Griffiths.

Read: Three former Sharemax auditors, 413 improper conduct charges Objection to witness evidence delays former Sharemax auditors’ disciplinary hearing Independence of Irba’s expert witness at Sharemax hearing questioned
Former auditors of Sharemax lodge high court review application

The disciplinary committee on 18 March 2021 refused the auditors’ recusal application, which led to the auditors lodging a high court application to review and set aside Irba’s disciplinary hearing charge sheet against them and for the recusal of Sooklal and Griffiths.

Judge Jabulani Nyathi, in a judgment handed down in the High Court in Pretoria in December 2023, ordered Sooklal and Griffiths to recuse themselves because of bias.

Irba applied for leave to appeal this judgment but this was dismissed by Judge Nyathi in the High Court in Pretoria in July this year.

Read:
Irba members in former Sharemax auditors case ordered to recuse themselves
Irba applies to appeal Sharemax disciplinary committee member recusal order
Case against former Sharemax auditors rocked by appeal judgment

The regulator then lodged a petition to the Supreme Court of Appeal (SCA) for leave to appeal the judgment ordering Sooklal and Griffiths to recuse themselves.

Application withdrawal

However, Irba last month withdrew its petition to the SCA to appeal the judgment.

Irba CEO Imre Nagy confirmed to Moneyweb at the time that the regulator withdrew its application after considering advice received from its legal team on the prospects of success of the application.

However, Nagy was guarded in his comments on how Irba now plans to proceed in regard to the partially heard and adjourned disciplinary hearing of the three auditors.

Read: Irba surprisingly withdraws SCA application to appeal former Sharemax auditors’ judgment

“We have sought legal advice in this regard and will make a decision upon receipt and consideration of the legal opinion on the options available to the Irba,” he said.

It appeared Irba had three options in regard to this adjourned disciplinary hearing:

• Continue with the disciplinary hearing, with Sooklal and Griffiths excluded from the disciplinary committee;
• Abandon the disciplinary hearing against the former Sharemax auditors; or
• Start the disciplinary hearing against the auditors afresh with a new disciplinary committee.

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