KZN businessman fined R4m for price manipulation: Erris van Kerken - senior forensic investigator, FSB
ALEC HOGG: Wayne, have you been watching any of the cricket - Sri Lanka test series?
WAYNE McCURRIE: A little bit, yes.
ALEC HOGG: You would have noticed the name Sunfoil, which was sponsoring it. Well, the guy who owns Sunfoil is in hot water. Erris van Kerken, the senior forensic investigator from the Financial Services Board joins us now. You’ve just slapped a fine of R4m onto Mahomed Zubeir Moosa, the owner of the company that owns the Sunfoil brand. What happened?
ERRIS van KERKEN: Alec, we were notified by the JSE’s surveillance department that there were some suspicious transactions on the Safex market. As you know, futures are legally binding agreements that give an investor the right to buy and sell an underlying commodity at a fixed price on a future date. And in this case the commodity was sunflower seed. The FSB commenced the investigation and the matter was placed before the DMA [Directorate of Market Abuse], and they effectively decided that we must proceed with enforcement action. We were eventually able to settle the matter with Mr Moosa and his legal team.
ALEC HOGG: Four million bucks! Have you ever had a fine like that before?
ERRIS van KERKEN: This is actually the biggest fine that we've dealt out in a market manipulation case to date.
ALEC HOGG: But it must have been substantial manipulation if you are imposing that big a fine – what were the quantums involved?
ERRIS van KERKEN: Well, the DMA takes various factors into account when deciding what penalty to impose, such as the nature and extent of the transaction – in other words, what effect the transactions would likely have had on other market participants, the duration of the transgressions, the benefit that the person derived from the transaction and whether the respondent cooperated with the investigations.
ALEC HOGG: I know you have to be careful on the legal side, but what exactly did he do if he was manipulating the sunflower price? Did people lose money as a result of it?
ERRIS van KERKEN: Well, effectively you’ll see from the order that has been placed on our website that all his transactions reduced the price of the sunflower future contract and that created an artificial price for the sunflower future contract.
ALEC HOGG: So that presumably his business could benefit? Seems like we are just pointing fingers at people tonight. But this is a horrible way of manipulating prices, isn't it?
WAYNE McCURRIE: Ja, these things are normally very complex, but the mere fact that the FSB has given a fine of that magnitude – it's good and bad. It shows you the FSB is actually working, but it's bad news that you do get these price manipulations. I must admit I didn’t think the market was that small that one player could actually influence it, to be honest.
ALEC HOGG: Sunflower futures contract.
WAYNE McCURRIE: I've never heard of Sunflower futures contracts myself. We don’t deal in agricultural futures.
ALEC HOGG: Well, it just shows – where there's an incentive. And I suppose in this case you’ve got a big business called the Willowton group – Sunshine D margarine and Sunfoil, which is sunflower oil that people cook with – and you have an incentive to drop the price for the product. I wonder if the consumers saw any of that, or if it went into their profits.
WAYNE McCURRIE: I don’t know. But I'm sure if you go and look on the FSB’s website, we'll probably get more information about this. Obviously this is an unlisted company, so it's not as though it's in the forefront of what we look at every day.
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