Financial Services Board quizzes Bidvest after suspicious Adcock trades tip-off

INDUSTRIAL conglomerate Bidvest has been questioned by the Financial Services Board (FSB) in an insidertrading probe involving drugs giant Adcock Ingram shares.

The regulator launched the probe after getting a tip-off on suspicious trades in Adcock stock in March, when Bidvest announced that it wanted to buy 60% of the drug firm for R6.2-billion.

This week, Bidvest financial director David Cleasby confirmed to Business Times that the FSB had sent his company questions a few weeks back.

“We simply don’t know what’s going on,” said Cleasby. “All they’ve done is request some information from us to which we’ve responded, but since then we haven’t heard a word.”

Bidvest’s bid for Adcock, however, appears to have been trumped.

This week, Adcock said it had entered into talks with CFR Pharmaceuticals SA, a Chilean-listed multinational, which could result in CFR acquiring the South African manufacturer for R12.9-billion.

Solly Keetse, head of the FSB’s directorate of market abuse (DMA), wouldn’t reveal why the regulator had sent questions to Bidvest.

“The FSB cannot comment on the matter, but it’s important to note that at this stage, all we are investigating is allegations, and once the DMA has finalised its report we will either close the case or send it through to the enforcement division for enforcement action,” he said.

It is not clear exactly which trades the FSB is investigating. Adcock’s share price was relatively stable at about R56 until March 22, when it revealed that Bidvest had launched an offer. After that, the share price climbed 9.2% to R61.40.

However, on March 15, a few days before Bidvest launched the offer, there was a sudden surge in investors buying Adcock shares.

On that day, more than R249-million in Adcock stock changed hands — more than six times the R38-million of the previous day, as investors ploughed into Adcock’s stock. The share price rose less than 1% that day.

Keetse wouldn’t say where the tip-off originated. “We were sent a tip-off to look into some of the trades in Adcock Ingram shares ahead of the announcement of a possible bid by Bidvest during March 2013. Following that tip-off, we’ve logged a formal investigation.”

Insider-trading probes can be prompted by media reports, anonymous sources, or the JSE’s surveillance department.

Keetse said that in most cases, the regulator is tipped off on irregular trades by the JSE’s surveillance department.

“That’s because they have the best, sophisticated market surveillance tools and are better able to pick up on any potential red flags,” said Keetse

The JSE was tight-lipped when contacted by Business Times, saying it could not discuss investigations.

Under the new Financial Markets Act, a person found guilty of insider trading can be fined up to R1-million, or three times the amount of profit that the insider would have made had he or she sold the securities at any stage, or managed to avoid a loss through such dealings.