The Financial Sector Conduct Authority (FSCA) has found former Steinhoff CEO Markus Jooste guilty of disclosing insider information related to the sale of company shares in 2017.
According to a statement sent by the authority, Jooste shared information with four of his friends to warn them to dispose of their shares.
“The administrative penalty imposed on Jooste is pursuant to an investigation by the authority which found that, on November 30 2017, shortly before the much-publicised significant decrease in the market value of Steinhoff shares, Jooste was privy to Steinhoff-related inside information.”
While privy to inside information, he disclosed some of the information in a “warning SMS” encouraging four individuals close to him to dispose of their Steinhoff shares prior to the publication of some of the information to the rest of the market. Three recipients acted on his disclosure and encouragement, and sold their Steinhoff shares, the statement read.
In December 2017, Steinhoff’s shares plunged following Jooste’s sudden resignation and allegations of accounting irregularities. Following a lengthy internal investigation conducted by an independent expert, it was revealed that a range of “fictitious and/or irregular” transactions “substantially” inflated the profits and assets of the group by more than €6.5 billion between 2009 and 2017.
The investigation also found “a pattern of communication” showing that executives “instructed a small number of other Steinhoff executives to execute their instructions, often with the assistance of a small number of persons not employed by the Steinhoff Group”.
Jooste has been fined an administrative penalty of more than R161 million for breaching section 78(4)(a) and section 78(5) of the Financial Markets Act.
“In cases of disclosure or encouragement (as in Mr Jooste’s case as a ‘tipper’), the applicable provisions permit the authority to order the tipper to be jointly and severally liable with those he tipped for their ill-gotten gains. Additionally, for penalty purposes, the tipper may also be liable to pay an amount not exceeding three times the gains made by those he tipped, an additional amount of up to R1 million, cost of the investigation and interest.
“The 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,” they said.
The investigation found that Jooste tipped off his acquaintance Gerhardus Diedericks Burger. Burger is said to have also breached the Financial Markets Act when, on November 30 2017, shortly after receiving the warning SMS, he sold the entire Steinhoff holding held by two of his family trusts.
The authority imposed a penalty of more than R3 million and a penalty of more than R18 000 on Marthinus Swiegelaar for a breach of the Financial Markets Act. Swiegelaar was Jooste’s chauffeur at the time of the contravention, and he also received the warning SMS on November 30 2017.
“The authority imposed a penalty of R115 million on Ocsan Investment Enterprises, a company that was controlled by a long-time acquaintance of Jooste, the late Ockie Oosthuizen,” they added.
Last year, the FSCA found that Steinhoff provided false, misleading or deceptive statements to the market and accordingly breached the provisions of the Financial Markets Act.
As a consequence of this breach, the FSCA fined Steinhoff R1.5 billion, but has remitted a portion of the fine due to the precarious financial position of the Steinhoff group, resulting in Steinhoff paying a penalty of R53 million. This is the largest fine to be levied by the FSCA so far.
These “fictitious and/or irregular transactions were entered into with parties said to be, and made to appear to be, third party entities independent of the Steinhoff group and its executives”, but which the investigation found appeared instead to be “closely related to” those executives who were issuing the instructions to perform these transactions.