The Financial Sector Conduct Authority has released an update on various market abuse investigations. The Financial Sector Conduct Authority has been mandated to investigate, an in appropriate instances, take enforcement action in cases of market abuse on the financial markets.
There are three kinds of market abuse prohibited in South Africa; namely insider trading, market manipulation (prohibited trading practices) and false reporting relating to the affairs of a public company.
The investigation procedures include interviews under oaths, acquiring documentary evidence and obtaining assistance from foreign regulators. In matters of insider trading, the Financial Sector Conduct Authority may offer that the alleged offender pays an amount equal to the profit made or the losses avoided because of the offending transactions and, a penalty of up to three times such amount. These funds are distributed, after recovery of costs, to persons who may have been prejudiced by the offending transactions. In addition, the Financial Sector Conduct Authority may impose a range of administrative sanctions on the alleged offenders.
Market abuse transgressions are criminal offences in the terms of the Financial Markets Act No. 19 of 2012. The Director of Public Prosecutions may institute criminal action against any person. It is not the function of the Financial Sector Conduct Authority to institute criminal prosecutions, but the authority would provide all information necessary to assist the Director of Public Prosecutions.
Since 1999, the Financial Sector Conduct Authority, its predecessors (the Directorate of Market Abuse and the Insider Trading Directorate) investigated a total of 421 cases. A total of 307 cases were closed because there was a lack of evidence or insufficient evidence existed to indicate that the Financial Market Act (or the now repealed Insider Trading Act and Securities Services Act) was contravened. In 91 cases, the Financial Sector Conduct Authority / Directorate of Market Abuse decided to proceed with enforcement action. The penalties imposed on offenders to date amounts to approximate R138 million.
The Financial Sector Conduct Authority’s investigations into share trading patterns and complaints should not be construed as an indication that any violation of a law has occurred, or, as a reflection upon any person, entity or security. The Financial Sector Conduct Authority has the responsibility to investigate these matters in an impartial and objective manner. If no evidence of wrongdoing is uncovered, the investigations are closed.
Below is a list detailing the status of insider trading and prohibited trading practices investigations. It should be noted that these investigations are not into the affairs of the companies listed but into the trading in shares on the stock exchange:
Possible insider trading cases
Possible prohibited trading practices (market manipulation) cases
Possible false or misleading reporting cases
Below is a list detailing the status of possible false or misleading reporting investigations:
Investigations are “Closed” once it becomes evident that no, or insufficient evidence has been obtained to warrant administrative action. In the event of further evidence arising at any stage after a decision has been taken the investigation will be re-opened.
The Financial Sector Conduct Authority has decided to provide more detail on the cases mentioned below due to the extent of public interest and impact on the market:
Resilient REIT Limited, Fortress Income Fund Limited, NEPI Rockcastle PLC, Greenbay Properties Limited (now known as Lighthouse Capital Limited)
The FSCA has decided to close three insider trading (Section 78 of the FMA) cases being, Resilient (Resilient REIT Limited), Nepi Rockcastle (Nepi Rockcastle Limited) and Fortress (Fortress REIT Limited). These investigations focused on the following announcements:
- Resilient and Fortress – SENS announcement dated 7 March 2018 which relates to inter alia the unwinding of the cross shareholding between Resilient REIT Limited and Fortress.
- Resilient – SENS announcement dated 22 August 2017 which relates to a book build by Resilient.
- Nepi Rockcastle – SENS announcements dated 3 October 2017 which relates to a book build by Nepi Rockcastle.
The The Financial Sector Conduct Authority has closed one of the allegations of possible price manipulation (Section 80 of the FMA) relating to Greenbay Properties Limited share price. The investigations into the other allegations of price manipulation remain ongoing