It could be several years before former Steinhoff CEO Markus Jooste has to pay any of the hefty R161.6 million administrative fine, levied by the Financial Sector Conduct Authority (FSCA) for insider trading in Steinhoff shares just days before the share price collapsed in December 2017.
Jooste, who has used a high-powered, expensive legal team to fight every challenge related to the spectacular Steinhoff implosion, was accompanied by four senior lawyers for his engagements with the FSCA. During this engagement he described the FSCA’s investigation as unreasonable and unfair and said it undermined his constitutional rights. A description the FSCA roundly refutes.
If unable to set the fine aside through the FSCA’s internal processes, Jooste can take it on review to the High Court, going as far as the Constitutional Court if necessary.
However, if he is not successful, Jooste will be liable for interest on the R161.6million from the date at which it was initially levied.
It is the largest insider trading fine levied by the FSCA, dwarfing the previous record of R24 million slapped on Deutsche Bank in 2019.
Although Jooste did not trade in the shares the Financial Markets Act prohibits “an insider from disclosing inside information and/or encouraging or discouraging another person to deal in securities, which the inside information relates to”. The case rests on a warning SMS Jooste sent on November 30, 2017 encouraging four individuals close to him to dispose of their Steinhoff shares prior to the publication of inside information to the general public. Three of the four recipients did sell their shares but the fourth, Cape-based businessman Jaap du Toit, did not.
Brandon Topham, FSCA’s divisional executive for enforcement, said that as the ‘tipper’, Jooste is jointly and severally liable with those he tipped for “their ill-gotten gains”.
The “ill-gotten” gains were calculated as the difference between the share price on the day of the trade and, said Topham, “the price a few days later”.
Of the three who sold, former Springbok prop and long-time associate of Jooste, Ockie Oosthuizen, along with his company Ocsan Investment Enterprises were the biggest beneficiaries of the ‘ill-gotten gains’.
They were fined R115.8 million. Oosthuizen, who died last year, denied receiving the SMS. Topham said the FSCA found that Oosthuizen deliberately misled investigators during questioning and failed to provide meaningful cooperation.
Dr Gerhardus Burger, an acquaintance of Jooste, was fined R 3million, which represents two times the loss he avoided as a result of trading on the SMS tip. The fourth tippee was Jooste’s driver Marthinus Swiegelaar who was fined R18 328 for selling his 400 Steinhoff shares. Both Burger and Swiegelaar acknowledged receipt of the SMA.
The FSCA’s order reveals that Du Toit was the first to receive the SMS; it pinged on his cellphone at 10:38am on November 30. Thirty minutes later Burger received the same message on his phone. It was over an hour later, at 11.56 am, that both Oosthuizen and Swiegelaar received the same SMS message.
Burger sold his Steinhoff shares on the afternoon of November 30, while Oosthuizen called his broker within minutes of receiving Jooste’s SMS and instructed him to sell all of his Steinhoff shares.
- Swiegelaar, who initially thought he had received the SMS by mistake, did nothing until December 4. At that stage, “after hearing gossip that there were irregularities at Steinhoff, he was able to make sense of the warning SMS, then understood that it was probably meant for him, and sold his shares,” states the FSCA’s order.
Topham said the FSCA would provide the police and the NPA with their findings. “The NPA will then decide whether to prosecute for this or the other cases that have been opened up against Jooste.”
He also reiterated that the FSCA was continuing to investigate the individuals behind the publication of false and misleading information released by Steinhoff. This is related to the mid-October announcement that the FSCA had fined Steinhoff, the company, for releasing false and misleading information.