Former Steinhoff chief executive Markus Jooste has been fined R122 million by the Financial Sector Conduct Authority for insider trading.
This comes 10 days after the Johannesburg stock exchange fined the retailer a total of R13.5 million for breaching its listing requirements.
The market conduct regulator for financial services on Friday held a briefing where it announced its decision to fine Jooste and others, following an investigation into the Stellenbosch-headquartered retailer, which Jooste led until his abrupt resignation in early December 2017 at the start of an accounting fraud scandal.
According to the FSCA, prior to resigning, Jooste had shared insider information via an SMS to some shareholders close to him, to dispose of their shares.
Jooste himself made no money from the insider trading, the FSCA clarified. But as the "tipper" of insider information he is liable, with those to whom he gave inside information - including founding member of PSG Group Jaap du Toit, his acquaintance Dr Gerhardus Diedericks Burger, Jooste's driver Marthinus Swiegelaar and Ocsan Investment Enterprise. Jointly the fine is R241 million.
In its statement the FSCA pointed out that Du Toit "never acted on the contents of the warning SMS".
Jooste has 30 days to pay the fine, once issued as an invoice. The invoice will be issued within the next week, said Brandon Topham, divisional executive for investigations. Jooste may, however appeal the FSCA's decision, and it could potentially go to the Constitutional Court, said Topham.
Jooste and Ocsan have denied wrongdoing. While the others have acknowledged receiving the SMSes and have realised to an extent they were insiders, said Topham.
"We did not take the decision lightly. Our internal processes are quite robust. We have also made use of external counsel to make sure our legal arguments are sound and that we can defend them in any court of law," added Topham.
The FSCA will also likely lodge a criminal complaint with police, said Topham. Some authorities around the world may also pursue criminal processes for transsgressisons in the financial sector, he said. "It is an area we are looking at."
Topham read the SMS, which has been translated from Afrikaans: "You always ask my opinion, it will take Steinhoff a long time to work through all the bad new and America. So there are better places to invest your money. Take the current price immediately. And delete this SMS and don't mention it to anyone."
More fines to come
Topham explained there have been three parts to the FSCA investigation. One was into the company for breaching the Financial Markets Act for publishing "false and misleading" information. The second part of the investigation relates to the insider trading. The last area will look into those officials and executives responsible for the misrepresentation. Topham said that the FSCA is hoping to complete this part of the investigation by April 2021.
"This is probably the area that would end up with the largest impact in the form of administrative penaltes. These were the movers behind the journal entries... We are busy with it but we do not think it will be finished by April this year," he said.
South African authorities have faced criticism for not taking action against executives, despite an internal PWC report commissioned by Steinhoff finding evidence of wrongdoing and manipulation.
The report, which has not been made public, found that a "small group" of former Steinhoff executives inflated the profit and asset values of the Steinhoff group for years.
After Jooste's resignation, Steinhoff's share price plunged by more than 95%, costing shareholders billions of rands, and leading to multiple class action suites in South African and Europe.
Earlier in July, Steinhoff proposed a R16.5 billion settlement to resolve 90 claims against it. Among those shareholders is former Steinhoff board chairperson Christo Wiese. If the settlement is not accepted, Steinhoff may have to file for insolvency protection, shareholders heard at this year's annual general meeting, held in August.
*This article was updated at 14:00 on 30 October 2020, to clarify that Mr Jaap du Toit did not act on the contents of the SMS sent by Jooste.