No insider trading in Steinhoff stock

Clear so far, but regulator says it has a few more trades to investigate

In a small win for Markus Jooste and his associates, the Financial Sector Conduct Authority says it has found no evidence of insider trading in Steinhoff shares before its meltdown

though it still has a few trades to check. In the week before the collapse, about 30.7-million shares were traded.

In a small win for Markus Jooste and his associates, the Financial Sector Conduct Authority (FSCA) says it has found no evidence of insider trading in Steinhoff shares before the retailer’s meltdown on the JSE though it still has a few trades to check.

Bloomberg reported previously that Jooste, Steinhoff’s former CEO, had advised friends to sell the company’s shares days before the stock collapsed. The message, sent in late November 2017 to at least two people, told recipients that bad news was on the way.

SHARE DECLINE

Then, on December 5 2017, the company announced it had discovered accounting irregularities and that Jooste had quit, sparking a 63% share decline in a single session. The stock has never recovered.

In March 2019, the longawaited release of the overview of PwC’s forensic investigation into the retailer was published, revealing that an estimated €6.5bn in fictitious transactions between 2009 and 2017 had inflated the group’s profits and asset value.

FILES CLOSED

The FSCA said on Thursday that in the week before the share collapse, about 30.7-million shares were traded with a total market value of more than R1.7bn. But the authority said it had “closed its files” on another three accounts under which more than R419m worth of shares were traded. It has investigated 56 accounts for insider trading so far “with no adverse findings”.

“We found no reason to believe that any of these shares were traded in contravention of the Financial Markets Act.” said Brandon Topham, divisional executive for investigation and enforcement at the FSCA.

While most trades have been investigated, the regulator has a few left to check.

It said other accounts, under which R46m worth of shares were traded, “will continue to be investigated and a press update will be issued upon finalisation of the investigation”.

In 2014, the FSCA in its previous guise as the Financial Services Board (FSB) said it had found no evidence of insider trading in technology group Pinnacle’s shares.

The FSB looked into trades after discovering that Pinnacle directors had sold shares in their company soon before the news that an executive director had been arrested on bribery charges. Those charges were eventually dropped because of a lack of evidence.

The FSB said at the time of the insider trading probe that there was “no or insufficient evidence that the Financial Markets Act was contravened.”

Meanwhile, in late March 2019, Steinhoff said it would give the FSCA the documents it needed to investigate alleged transgressions of the Financial Markets Act.

“Steinhoff has, in addition, confirmed that such disclosure will enable the FSCA to act against all persons implicated in the aforesaid transgressions,” the watchdog said at the time.

The retailer has been cooperating with other authorities in SA, including the Hawks, the national director of public prosecutions, and two branches of the Asset Forfeiture Unit.