The FSCA fines Mr Markus Jooste and three others around R241 Million for insider trading related breaches

The Financial Sector Conduct Authority (the Authority) has imposed an administrative penalty of R161 568 068 on Mr Markus Johannes Jooste (Mr Jooste) for breaches of section 78 (4) (a) and section 78 (5) of the Financial Markets Act, 19 of 2012 (the Financial Markets Act). The provisions prohibit, respectively, an insider from disclosing inside information and/or encouraging or discouraging another person to deal in securities which the inside information relates to.

The insider trading breaches were in respect of share transactions in Steinhoff International Holdings NV (Steinhoff) during November and December 2017.

The administrative penalty imposed on Mr Jooste is pursuant to an investigation by the Authority which found that on 30 November 2017, shortly before the much-publicised significant decrease in the market value of Steinhoff shares, Mr Jooste was privy to Steinhoff related inside information. Whilst privy to inside information, he disclosed some of the information in a “warning SMS” encouraging four individuals close to him to dispose of their Steinhoff shares prior to the publication of some of the inside information to the rest of the market. Three recipients acted on his disclosure and encouragement and sold Steinhoff shares.

Liability Resulting from Insider Trading Breaches

The legislated approach in calculating insider trading related penalties, as outlined in the Financial Markets Act, requires as a starting point a determination of the losses avoided, or profits made (“the ill-gotten gains/ benefit”) by those who traded whilst in possession of inside information.

The applicable provisions permit the Authority to order them to pay back their ill-gotten benefit (in this case the losses they avoided). This is a legal principle called disgorgement. In addition, they may be required in each case to pay an amount for penalty purposes that does not exceed three times their benefit.

In cases of disclosure or encouragement (as in Mr Jooste’s case as a “tipper”), the applicable provisions permit the Authority to order the tipper to be jointly and severally liable with those he tipped for their ill-gotten gains.

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