Report by the Directorate of Market Abuse

14 February 2006 SARS

The Insider Trading Act came into operation on 17 January 1999. This Act created the ITD (Insider Trading Directorate) that had a mandate to investigate, and in appropriate circumstances, take civil legal action against offenders.

The Securities Services Act
On 1 February 2005 the Insider Trading Act was incorporated into the Securities Services Act. In terms of this Act a new directorate called the DMA (Directorate of Market Abuse) was created which replaced the ITD. Unlike its predecessor which only dealt with insider trading, the DMA is responsible for investigating and taking enforcement action in all cases of financial market abuse.

Since 1 February 2005, the DMA has been investigating cases of insider trading, prohibited trading practices (market manipulation) and false, misleading or deceptive statements (false reporting), made in respect of listed securities.

The Securities Services Act created an additional enforcement option for the FSB in the form of the Financial Markets Enforcement Committee (Enforcement Committee). The Enforcement Committee has the authority to impose administrative penalties, cost orders and compensatory orders on offenders. It is believed that the creation of the Enforcement Committee will enhance the FSBs ability to enforce anti-market abuse legislation substantially.

The DMA can refer cases of insider trading to the Enforcement Committee or take civil legal action against an alleged offender. In such cases the civil court or the Enforcement Committee may order that the alleged offender pay the profit made, or the losses avoided, as a result of the offending transactions, to the FSB, and a penalty of up to three times such amount. These funds are distributed, after recovery of costs, to persons who could have been prejudiced by the offending transactions.

Market manipulation and false reporting cases can be referred to the Enforcement Committee that can impose a penalty and a cost order on the alleged offender.

In addition market abuse transgressions are criminal offences in terms of the Act. The Director of Public Prosecutions may institute criminal action against any person. It is not the function of the DMA to institute criminal prosecutions but would provide all information necessary to assist the Director of Public Prosecutions.

Below is a list detailing the current status of insider trading and market manipulation investigations. It should be noted that the investigations are not into the affairs of the companies listed but into trading in shares on the stock exchange.

Possible insider trading cases  
1.  CS Computer Services Holdings Limited - CSH - Ongoing 
2.  Glenrand MIB Limited - GMB - Ongoing 
3.  Hosken Consolidated Investments Limited - HCI - Closed 
4.  Intervid Limited - ITV - Closed 
5.  Liberty Group Limited - LGL - Ongoing 
6.  McCarthy Limited - MCC - Closed 
7.  Omega Alpha International Info Technology Holdings Limited -
     OAI - Ongoing 
8.  Redefine Income Fund Limited - RDF - Ongoing 
9.  Relyant Retail Limited - RLY - Closed 
10.Scharrig Mining Limited - SCN - Referred for legal action 
11.Sempres International Technology Holdings Limited - SEM -  Ongoing 
12.Spescom Limited -SPS - Ongoing 
13.Thabex Exploration Limited - TBX - Referred for legal action 
14.Wetherlys Investment Holdings Limited - WET - Closed 

Possible market manipulation cases 

1. iFour Properties Limited - IFR - Referred for legal action 
2. S A Retail Properties Limited - SAR - Referred for legal action 
3. Stratcorp Limited - STA - Ongoing 

Investigations are "closed" once it becomes evident that no, or insufficient evidence has been obtained to warrant action in terms of the Act. 

Two cases of possible false reporting were registered, of which one is under investigation and one has been referred for legal action.

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