Former Steinhoff CEO Markus Jooste fined R161 million for insider trading

The FSCA fined Jooste for releasing information to four acquaintances regarding the shares of Steinhoff.

The Financial Sector Conduct Authority (FSCA) has imposed a fine of around R161 million on former Steinhoff CEO Markus Jooste for insider trading allegations.

According to the FSCA, Jooste breached section 78 (4) (a) and section 78 (5) of the Financial Markets Act, which prohibits an insider from disclosing inside information and encouraging or discouraging another person to deal in securities which the inside information relates to.

In its investigation, the FSCA found that on 30 November 2017, shortly before the significant decrease in the market value of Steinhoff shares, Jooste disclosed Steinhoff-related inside information in a “warning SMS” before the information was made available to the rest of the market. The SMS encouraged four people close to him to dispose of their Steinhoff shares.

The SMS, translated from Afrikaans, read:

“You always ask for my opinion, it will take Steinhoff a long time to work through all the bad news 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.”

Three of the recipients acted on his “warning” and sold their shares in the company. Dr Gerhardus Diedericks Burger, an acquaintance of Jooste, sold the entire Steinhoff holding helf by two of his family trusts. The administrative penalty imposed on Burger represents two times the loss avoided as a result of his offending transactions resulting in a penalty amount of around R3 million.

Jooste’s chauffeur at the time, Marthinus Swiegelaar, was fined R18,328 for the loss he avoided when he sold his shares a few days after he received the SMS. It also imposed a penalty of around R115 million on Ocsan Investment Enterprises, a company that was controlled by Ockie Oosthuizen, a long-time acquaintance of Jooste. Oosthuizen instructed Ocsan’s sale of its Steinhoff shares after receiving the SMS. The fourth recipient, Jaap du Toit, never acted on the SMS and was not fined.

According to the FSCA, the penalty of R161,568,068 imposed on Jooste includes a multiple of three times the losses avoided due to the transactions executed by the recipients of the warning SMS, as well as R1 million for disclosing inside information and encouraging Du Toit to sell his Steinhoff shares. Jooste is solely liable for around R122 million of the R161 million, and has been ordered to pay interest on the penalty amount, as well as the FSCA’s cost incurred during the investigation.