| LIVE STEINHOFF BLOG: Regulator probing insider trading, market manipulation

Executives from Steinhoff, together with the Hawks, the National Prosecuting Authority, the JSE and other regulatory bodies will on Tuesday morning appear before a joint sitting of three Parliamentary committees.

On Friday Steinhoff made public an 11-page overview of a 3 000-page forensic report into Steinhoff. The report, by PwC, found that a “small group” of former executives inflated the profit and asset values of the Steinhoff group for years.

Financial Sector Conduct Authority probing three Steinhoff offenses (10:00)

The head of investigations and enforcement at FSCA said it was investigating three offenses at Steinhoff: insider trading, market manipulation and false and misleading information. 

The FSCA said that, for the next three to six months, the Steinhoff matter will be its number one priority. 

It said it was awaiting the full PwC report, and had already received some of it. 

Potential penalties would be known once the investigation was complete. The FSCA also asked anyone who had been advised to sell Steinhoff shares by executives to come forward as part of its insider trading investigation. 

CIPC seeking to declare former directors delinquent (09:50)

The Companies and Intellectual Commission will be seeking applications to declare former Steinhoff directors as delinquent directors, the committee heard. 

The CIPC said it was also working with the Hawks and NPA in terms of pursuing criminal prosecutions.

JSE has taken some disciplinary action against Steinhoff – CEO Nicky Newton-King (09:40)

Newton-King was first to give evidence. She told the committee that disciplinary action had been taken against Steinhoff and its subsidiary Pepkor. The JSE fined Steinhoff R1m for failing to disclose a downgrade in the immediate aftermath of reports of its accounting irregularities. The JSE similarly fined Pepkor R5m.

Newton-King said the JSE issued a consultative document in September 2018, with the purpose of working on proposals for the JSE to strengthen its regulatory approach to new and existing listings.

The document also provided information to enhance investor confidence in the secondary market trading in JSE listed securities. The JSE received 74 responses to the document, which were generally supportive. 

She also said that the JSE could not freeze Steinhoff shares for not submitting its financials, as the company was dual-listed on the Frankfurt Stock Exchange. The FSE said it would not freeze the group’s shares, meaning the JSE could not freeze them either.

Newton-King said the JSE would still consult and consider the full PwC report. 

Forensic probe

The PwC forensic probe found that an unnamed “senior management executive” instructed a small group of other executives to execute instructions, often with the assistance of a “small number of persons not employed by the Steinhoff Group”.Steinhoff said none of the executives identified in the PwC report are currently employed by the group.

The overview states that the small clique of executives used “fictitious and/or irregular transactions” to inflate the group’s profits and assets by about €6.5bn (roughly R105bn) between the 2009 and 2017 financial years.

* Follow this live blog throughout the day as further details unfold

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