It has also been suggested that the problem was so serious with listed property loan stock company, Paramount, that there could even have been a contravention of the JSE Securities Exchange’s insider trading regulations.

Adding grist to the mill was the fact that the company hasn’t exactly turned in sparkling results in the recent past. It declared a quarterly distribution of 12 cents for the quarter ended January 2003, which is, as anticipated, a significant drop in distribution per unit as compared to the same period last year. This was put down to a combination of market conditions, and Paramount’s particular financial structure.

A search of the Stock Exchange News Service (SENS) archive shows that between July last year and the end of March directors in the company had sold nearly 300 000 Paramount-linked units while there had been only one purchase of 4 000 shares by the MD Rodney Squire-Howe.

The issue seemed sufficiently serious for the JSE insider-trading unit to have a look at the matter, but their verdict was that there seemed to be no indication of any shenanigans at this stage. This begs the question: Why were the directors selling so many shares, didn’t they have any confidence in their own company, and their ability to run it?

When the question was put to Squire-Howe he didn’t bat an eyelid. “No,” he assured us, “this isn’t a case of loss of confidence in the Cape Town Company. “What actually happened is that when the company listed in March 2001 we acquired properties from developers rather than the institutions because we felt we were better able to obtain better quality stock. In order to pay for the investments we paid a portion in cash and the balance in non-interest bearing B-debentures and linked equities.

“The result was that that these vendors became major shareholders in Paramount and in order to retain their vibrancy and energy anyone with a stake of more than 10% was able to nominate a board member.” As the company has matured, he adds, these investors have sold off sections of their shares with the result that they now probably account for less than 50% of the total holding where they were 90% stakeholders in 2001.

Going forward, Squire-Howe says, “We are looking to significantly change our financial structure. The issue of non-interest bearing B-debentures was essential to enable the fund to list at the higher initial yield required by the market and will be phased out in future. "