Tribunal finds Jooste only contravened one section of act in insider trading

The Financial Services Tribunal has found that former Steinhoff CEO Markus Jooste only contravened one section of the Financial Markets Act (FMA) regarding insider trading, although the Financial Conduct Authority (FSCA) found that he only tipped off three people who received a text message from him to sell their shares in the controversial company.

According to the published decision of the tribunal, Jooste contravened Section 78(5) of the FMA three times by encouraging people to trade in Steinhoff shares while he had inside information regarding the company, but not in the case of his driver, Marthinus Swiegelaar.

However, the tribunal referred the determination of an appropriate penalty to the FSCA for reconsideration and advised the regulator that the prescribed maximum penalties do not set a benchmark.

The tribunal also emphasised that deterrence is an elastic concept with grey borders and it is easy to justify a sanction that is actually retributory under the heading of deterrence. The Legislature highlighted deterrence to emphasise that the provision is not penal in the criminal sense and is not overriding.

“What is overriding is the appropriateness of the penalty, which means that it must be balanced, proportionate and fair,” the tribunal said.

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Ocsan finding dismissed

The tribunal dismissed the FSCA’s finding that former Springbok rugby player, Ockie Oosthuizen, traded on insider information through his company Ocsan Investment Enterprises in contravention of section 78(1) of the FMA because the content of the text message Jooste sent him was not sufficiently specific or precise to qualify as inside information as envisaged by the FMA. The administrative penalty of R38.622,374 against Ocsan was also set aside.

Consequently, the tribunal found that Jooste also did not contravene Section 78(4) of the FMA in respect of trades by certain other persons.

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FSCA’s penalties

The matter was referred to the tribunal for reconsideration after the FSCA imposed an administrative penalty of R161.568,068 on Jooste for breaches of section 78(4)(a) and section 78(5) of the FMA regarding share transactions in Steinhoff during November and December 2017 after it found in an investigation Jooste was privy to Steinhoff inside information on 30 November 2017, shortly before the much-publicised significant decrease in the market value of Steinhoff shares.

The FSCA found that Jooste then disclosed some of the information in a “warning SMS,” encouraging four individuals close to him to sell their Steinhoff shares before the publication of some of the inside information to the rest of the market. Three recipients then sold their Steinhoff shares.

The other two people who received the text message were Dr Gerhardus Diedericks Burger and Jaap Du Toit. Du Toit did not act on the text message and according to the tribunal, lost “a fortune” when the Steinhoff share price collapsed. Burger and Swiegelaar did not apply for reconsideration.

The FSCA said in a statement today that it notes the decision of the tribunal and is currently studying the decision.