Although every investor probably knows about insider trading, it’s very rare that you hear of someone being prosecuted for it. It seems to be an offence that’s both difficult to detect and hard to prove. Well that couldn’t be further from the truth as many recent high profile cases highlight illegal insider trading is actively prosecuted.
In 2015 the Financial Services Board (FSB) successfully defended an appeal in the High Court in Pretoria against a R1 million sanction it had imposed for insider trading. The case was not only precedent-setting, but it also brought into focus what’s being done to curb market abuse in South Africa.
At that time the majority of the administrative penalties that FSB had imposed since 1999 were for insider trading. And they’d had a total of around 360 cases, and imposed about R100 million in penalties. As stated in an article featured in the online finance paper “MoneyWeb”.
Fast Forward to March 2017. Coal of Africa Chief Operations Officer, Michiel Jakobus Bronn was fined for insider trading that took place even after he was instructed by the company’s chief executive officer not to trade shares, this according to a South African regulator.
Before the Insider Trading Act of 1998 came into force in early 1999. The insider trading offence fell under the Companies Act of 1973, which contained a criminal sanction only, requiring guilt to be proven beyond reasonable doubt. Under that legal framework, it was indeed very rare for anyone to be found guilty. However, the new dispensation is far more effective.