FSB fines former Basil Read director R850 000
Penalty for insider trading ahead of bleak financial results
A FORMER human resources director of listed construction group Basil Read has been fined R850 000 by the directorate of market abuse at the Financial Services Board (FSB) for contravening South Africa’s insider trading legislation.
This follows an investigation by the directorate that established that Bernard Melvin Johnson during May 2014, while employed by Basil Read Holdings, had knowledge that the group had incurred a loss of R54 million during the fourmonth period ended April 30, 2014, and the company expected to report a loss of R100m for the six months to June 2014.
Between May 22 and June 4, 2014, and before the publication of Basil Read’s financial results for this period, Johnson sold 67 575 Basil Read shares at prices ranging from 904c a share to 810c, which was a contravention of the Financial Markets Act (FMA).
The directorate said that Johnson also encouraged an unnamed third party to sell their Basil Read shares, with the third party selling 23 352 Basil Read shares at 870c prior to the announcement of the group’s losses to the market, which also constituted a contravention of the FMA.
Basil Read’s share price dropped from a closing price of 778c a share on June 6, 2014, to a closing price of 700c a share on June 9, 2014, following the publication of the group’s losses at 4.45pm on June 6, 2014.
The directorate said the parties agreed on a penalty of R850 000, imposed by the chairperson of the enforcement committee last week.
In arriving at an appropriate penalty, the directorate said it took into account that Johnson did not apply his mind to the applicable legislation prohibiting insider trading at the time of the contraventions and the implications of breaching these prohibitions.
Contravention
The directorate said Johnson subsequently realised the implications of his conduct and had since expressed regret.
Jenny von Ehrenberg, the investor relations manager at Basil Read, said the group was unable to comment because it was a matter between the individual concerned and the FSB.
Basil Read’s 2010 annual report listed Johnson as the group’s human resources director and indicated he had then been employed by the group for 23 years. Johnson was listed as Basil Read’s group remuneration and services manager in the group’s 2012 annual report but is not mentioned in group’s subsequent annual reports.
Basil Read shares closed 0.31 percent up at R3.25.
R100m Expected losses for Basil Read in the six months to June 2014