Tribunal agrees with FSCA insider trading ruling against Markus Jooste

THE Financial Services Tribunal (FST) on Wednesday confirmed the Financial Services Conduct Authority’s (FSCA) finding that disgraced former Steinhoff chief executive Markus Jooste contravened Section 78(5) of the Financial Markets Act (FMA) for insider trading after he sent SMSes encouraging people to sell their shares.

The tribunal, however, dismissed the FSCA’s finding that Ocsan Investment Enterprises through its former director traded on inside information in contravention of section 78(1) of the FMA.

The tribunal said the content of the SMS sent was not sufficiently specific or precise to qualify as inside information as envisaged by the FMA.

“Thus, the administrative penalty against Ocsan was set aside. Consequently, Jooste was also found not to have contravened Section 78(4) of the FMA in respect of trades by certain other persons,” said the FSCA.

The tribunal requested the FSCA to determine an appropriate penalty for Jooste for encouraging four persons to trade in Steinhoff shares, while he was in possession of inside information regarding Steinhoff.

Shares in Steinhoff the global furniture and clothing retailer lost more than 90 percent in December 2017 when the accounting scandal surfaced, threatening its survival.

Last year the FSCA slapped the disgraced Jooste with a R161 million fine for breaches of section 78 (4) (a) and section 78 (5) of the FMA of 2012.

The FSCA’s investigations found that at the end of November 2017, shortly before the much publicised implosion of Steinhoff shares, Jooste was privy to inside information.

He sent a “warning SMS” to Jaap du Toit, Gerhardus Diedericks Burger, Marthinus Swiegelaar his chauffeur, and the late Ockie Oosthuizen, his long time friend who controlled Oscan Investement Enterprises, to sell their Steinhoff shares prior to the publication of some of the insider information to the rest of the market. Only Du Toit never acted on the contents of the SMS.

The FSCA last year imposed a penalty of R115 867 122 on Oscan Investment Enterprises. The FSCA found Oosthuizen instructed Ocsan to sell Steinhoff shares at the end of November 2017 following receipt of the warning SMS and thus caused Ocsan to breach section 78 (1) of the FMA.

The authority among others found that Oosthuizen had deliberately misled investigators during questioning and thus failed to provide meaningful co-operation.

The FSCA imposed an R18 328 penalty on Swiegelaar for a breach of section 78 (1) of the Financial Markets Act. Burger’s penalty amounted to R3 002 630.

By October Steinhoff International Holdings NV gained the approval of a Dutch court and South African court to compensate shareholders who lost their money when the company’s share price collapsed in 2017. Steinhoff, the majority owner of Pepkor in Africa and Pepco in Europe, proposed a global settlement that will see it paying out R25 billion to shareholders. The settlement is expected to allow management to focus on the ongoing restructuring and improving the group’s underlying businesses.

BUSINESS REPORT