The Financial Sector Conduct Authority (FSCA) has imposed an administrative penalty of R161 million on former Steinhoff CEO Markus Jooste for breaching sections of the Financial Markets Act that prohibit an insider from disclosing inside information and/or encouraging or discouraging another person to deal in securities related to the inside information.
These breaches are related to share transactions in Steinhoff International Holdings NV (Steinhoff) during November and December 2017.
He disclosed some of the information in a “warning SMS” to encourage four individuals close to him to dispose of their Steinhoff shares before some of the inside information was disclosed to the rest of the market. Three of the people contacted acted on his disclosure and encouragement and sold their Steinhoff shares.
In calculating insider trading related penalties, the starting point is a determination of the losses avoided, or profits made, by those who traded whilst in possession of inside information.
These provisions permit the FSCA to order them to pay back their ill-gotten benefit (in this case the losses they avoided). They may also be required in each case to pay an amount for penalty purposes that does not exceed three times their benefit.
As the “tipper” Jooste is jointly and severally liable with the other three and the FSCA considered factors such as the amounts of the losses avoided by the recipients of the warning SMS, Jooste’s level of cooperation 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 and an appropriate penalty.
The R161 million penalty imposed on 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 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 warning SMS.
The FSCA also ordered Jooste to pay interest on the penalty amount of R161,568,068, as well as FSCA’s costs for the investigation.
Another recipient of the warning SMS, Dr Gerhardus Diedericks Burger, an acquaintance of Jooste, breached the Act on 30 November 2017, shortly after receiving the SMS, when he sold the entire Steinhoff holding held by two of his family trusts. Burger’s fine of R3,002,630 represents twice the loss avoided as a result of his offending transactions.
The FSCA imposed a fine of R18,328 on Marthinus Swiegelaar, Jooste’s chauffer at the time, who also received the SMS because it found that he provided the highest level of cooperation during the investigation and sold significantly less shares than the others. He is jointly and severally liable with Jooste to pay the R18,328.
Ocsan Investment Enterprises (Pty) Limited was fined R115,867,122. Ocsan was controlled by the late Okkie Oosthuizen, a longtime acquaintance of Jooste. Oosthuizen instructed Ocsan’s sale of Steinhoff shares on 30 November 2017 following receipt of the warning SMS.
The FSCA found that Oosthuizen deliberately misled investigators during questioning and failed to provide meaningful cooperation. Ocsan is solely responsible for R77,244,748 and the remaining portion of R38,622,374 is payable by Ocsan based on joint and several liability with Jooste.
Jooste is solely liable for R122 million out of the R161 million.