Former Steinhoff CEO Markus Jooste was fined R161 million by the Financial Sector Conduct Authority (FSCA) for insider trading prior to its share collapse on November 30, 2017.
Although Jooste, who departed days after the sell off, did not directly benefit from this knowledge, his warning four friends via a text message of the issues the company was going through led to them acting on information other shareholders did not have access to.
The message Jooste allegedly sent was: “You will always ask my opinion. It will take Steinhoff a long time to work through all the bad news and America. So they are better places to invest your money. Take the current price immediately and delete this SMS and don’t mention it to anyone.”
The FSCA’s penalty is one of the largest imposed on an individual.
“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,” it said in a statement.
This penalty also includes an amount of R1 million for disclosing inside information and encouraging Jaap du Toit to sell his Steinhoff shares. Du Toit never acted on the contents of the warning SMS.
Aside from the fine against Jooste, there was also a fine against Ocsan Investment Enterprises, a company that was controlled by a long-time acquaintance of Jooste, the late Ockie Oosthuizen. Oosthuizen had instructed Ocsan’s sale of Steinhoff shares on November 30, 2017 following receipt of Jooste’s warning.
“Out of (a) R115 867 122 penalty, Ocsan is solely responsible for R77 244 748 and the remaining portion being R38 622 374 is payable by Ocsan based on joint and several liability with Mr Jooste,” FSCA said.
Aside from Oosthuizen, Jooste’s acquaintance Dr Gerhardus Diedericks Burger was fined R3 002 630 and Jooste’s chauffeur at the time, Marthinus Swiegelaar, was fined R18 328 for acting on the warning to them.
Effectively the fines for the breaches of section 78 (4) (a) and section 78 (5) of the Financial Markets Act, 19 of 2012 come to R241 million for all four individuals.
FSCA divisional executive for enforcement Brandon Topham, in a media briefing on the issue, says this is not the end of its investigations into Steinhoff and Jooste and it expects to conclude its inquires by the end of April 2021.
Jooste will have 30 days to pay the fine from the day the invoice for it is received. Topham notes that has he has the right to appeal it could go as far as the Constitutional Court.
Topham said Jooste cooperated with the FSCA investigation but like the late Oosthuizen denied any wrongdoing. Burger and Swiegelaar, however, admitted fault.
He said one of the reasons the investigation into Steinhoff has taken so long was that the FSCA wanted to take “extra precautions” given the scale of the matter. This saw it consult with outside legal councils to see if the interpretation of the law and findings were correct.