The Financial Services Tribunal has found former Steinhoff CEO Markus Jooste liable for a R20 million penalty which was imposed on him by the Financial Services for insider trading.

This comes after the Financial Sector Conduct Authority (FSCA) in December issued a revised penalty of R20m to Jooste, down from the R162m announced in October 2020.

Jooste approached the tribunal for recourse, arguing that the R20m fine was incorrectly calculated. He will also have to pay interest on the R20m penalty.

Judge Louis Harms, who chaired the Financial Services Tribunal panel, ruled: “While Mr Jooste did not benefit financially from sending the warning SMSes to his friends, two benefited.

“This, by implication, caused loss and damage to others. Indeed, those persons were ignorant as to the problems at Steinhoff, and who therefore purchased the shares sold by the two recipients suffered substantial losses when the share price dropped dramatically.”

It has been alleged that Jooste breached the Financial Markets Act when he sent Jaap du Toit, Gerhardus Burger, Marthinus Swiegelaar and the late Ockert Oosthuizen text messages warning them to sell their Steinhoff shares. Du Toit was allegedly the only one that didn't trade his shares in Steinhoff

Harms said Jooste was not only the CEO of Steinhoff, a multinational company, but he was also Steinhoff.

“He knew Steinhoff and the rights and wrongs within the company. If he, uninvited, advises three friends to dispose of their Steinhoff shares and destroy his advice SMSes, it shows, as Mr Marcus submitted, that his actions were deliberate, premeditated, and calculated,” Harms said.

The tribunal found that Jooste sent an SMS to three people, but only two acted on the information. This led to them avoiding the crash of Steinhoff’s share price in 2017.

“While Mr Jooste did not benefit financially from sending the warning SMSes to his friends, two of them benefited. This, by implication, caused loss and damage to others.”

Jooste’s legal team had argued that his income had dropped since his exit from Steinhoff in December 2017.

“Despite being invited to disclose his financial position, Mr Jooste only referred to his last after-tax income from Steinhoff, which exceeded R100m for the tax year. For the rest he kept mum.

"Whether his legal problems and destruction of his business career were self-inflicted or due to external factors over which he had no control are matters we are not called upon to speculate since Mr Jooste did not enlighten us,“ the tribunal found.

Jooste was fined using the closing share prices of Steinhoff, the FSCA had arrived at a maximum permissible penalty of R24.35 million.

In the United Kingdom, the maximum punishment for anyone found guilty of the crime of insider dealing is ten years imprisonment. No one can be imprisoned for breaching civil law, but anyone found liable of market abuse offences can face unlimited fines. The implications for any individual or organisation accused either offence are serious.

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Financial Services Tribunal finds Steinhoff’s former CEO liable for R20m imposed for insider trading