Huge fine for former Steinhoff CEO Markus Jooste for insider trading
Former Steinhoff CEO Markus Jooste and three other people have been fined around R241m for insider trading by the Financial Sector Conduct Authority (FSCA).
The authority announced that Jooste alone was fined R161m for breaching section 78 (4) (a) and section 78 (5) of 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 authority said.
It reported that its investigations found that on November 30 2017, shortly before the much-publicised significant decrease in the market value of Steinhoff shares, Jooste was privy to Steinhoff-related inside information and shared this with some of his friends and acquaintances who had interests in Steinhoff.
In 2018, the Sunday Times had reported on this damning message, which Jooste was alleged to have sent to several people. In it, he said there was impending, unspecified bad news coming.
At the time, Steinhoff was in discussions with Deloitte LLP about the viability of its accounts. On December 5, the company said it had uncovered accounting irregularities and that Jooste had quit, causing the shares to plunge 63% in a single session.
The authority on Thursday said three of the people who received the message acted on the disclosure and encouragement and sold Steinhoff shares.
The FSCA explained how it determined the penalty amount.
It said it had considered among other factors, the amounts of the losses avoided by the recipients of the warning SMS as a result of the offending transactions; Jooste’s level of co-operation during the investigation; the seriousness of the breaches; the need to deter such conduct; and his submissions regarding the merits of the case against him.
“The penalty of R161,568,068 imposed on Mr Jooste includes a multiple of three times the losses avoided due to the transactions executed by the recipients of the warning SMS, plus the amounts discussed further in this statement regarding his joint and several liability with two recipients of the SMS,” the authority said.
“The penalty imposed on Mr Jooste also includes an amount of R1m for disclosing inside information and encouraging Mr Jaap du Toit to sell his Steinhoff shares. Notwithstanding the disclosure and encouragement, Mr du Toit never acted on the contents of the warning SMS.
“Mr Jooste has also been ordered to pay interest on the penalty amount of R161,568,068. The interest is in respect of any unpaid portion of the administrative penalty until the penalty is fully paid. He has also been ordered to pay the authority’s costs incurred in connection with investigating the contraventions in this matter.”
The recipients of Jooste’s message who acted on it were less harshly penalised.
The authority said Dr Gerhardus Diedericks Burger, who was an acquaintance of Jooste, had breached section 78 (2) of the act. Upon receiving the message, he sold the entire Steinhoff holding held by two of his family trusts.
“After due consideration of the relevant factors, including his submissions, the administrative penalty imposed on Dr Burger represents two times the loss avoided as a result of his offending transactions, resulting in a penalty amount of R3,002,630,” the FSCA said.
Marthinus Swiegelaar was imposed a penalty of R18,328 for also breaching of section 78 (1) of the act.
“Mr Swiegelaar was Mr Jooste’s chauffeur at the time of the contravention, and he also received the warning SMS on November 30 2017. The authority found Mr Swiegelaar, comparatively speaking, to have provided the highest level of co-operation during the investigation and he sold significantly less shares than the rest of the investigated parties,” the authority said.
“The penalty imposed on him represents the loss he avoided when he sold his shares a few days after he received the warning SMS. Mr Swiegelaar is jointly and severally liable with Mr Jooste to pay the R18,328,” the authority said.
It imposed a penalty of R115,867,122 on Ocsan Investment Enterprises (Pty) Ltd, a company that was controlled by a long-time acquaintance of Jooste's — the late Ockie Oosthuizen.
“Mr Oosthuizen instructed Ocsan’s sale of Steinhoff shares on November 30 2017 following receipt of the warning SMS and thus caused Ocsan to breach section 78 (1) of the Financial Markets Act. Among other relevant considerations, the authority found that Mr Oosthuizen deliberately misled investigators during questioning and thus failed to provide meaningful co-operation,” the authority said.