Penalties for insider trading in South Africa
When it comes to Insider Trading the Financial Services Board (FSB) oversees the non-banking financial services industry. This includes collective investment schemes unit trusts and stock market and financial advisors and brokers.
FSB is responsible for the regulation and supervision of securities exchanges central securities depositories. Clearing houses, central counterparties and trade repositories with the aim of ensuring that the South African capital markets are fair, efficient and transparent.
While also upholding the confidence in the South African capital markets, promotion of the protection of investors, reduction of systemic risk and promotion of the international and domestic competitiveness of the South African capital markets.
The Securities Regulatory Framework enables issuers to list its securities shares, derivatives and bonds on an exchange. And create a safe environment for investors to buy and sell listed securities and to place their securities for safe custody with a central securities depository.
FSB curb market abuse in South Africa of illegal insider trading, along with the Johannesburg Stock Exchange (JSE). As part of its licensing requirements, the JSE is required to have market surveillance capabilities, and it’s constantly detecting suspicious trading activity.
The following are penalties for illegal Insider trading in South Africa.
Penalties can include fines which could amount to thousands if not a couple of hundred thousand rands.
The result is that it’s not that rare for matters of insider trading to be investigated and sent to the FSB’s enforcement committee by the JSE. If it’s warranted, it’s possible that cases of market abuse could be referred for criminal prosecution as they remain criminal offences.
However, criminal prosecution of any offence is the business of the National Prosecuting Authority (NPA), not the FSB. The FSB could refer cases to the NPA, through an investigative file, for the NPA to prosecute.
The Insider Trading Act in South Africa defines illegal insider trading as “buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.” Cases of insider trading often lead to civil charges levied by the FSB. If enough evidence warrants a criminal indictment, the culprits are also arrested and handed over to the NPA for criminal prosecution.