Markus Jooste, from the “Steinhoff” matter, was the CEO of Steinhoff International Holdings and the FSCA held him responsible for his actions and for his part in the loss of millions, concluding that his actions were deliberate, premeditated and calculated. The FSCA also recently dealt with the case of Markus Johannes Jooste vs FSCA, where Jooste applied for reconsideration of his R20 million penalty, claiming that it was not appropriate. Administrative penalties in the financial industry play an important role in maintaining the integrity of financial markets and ensuring that individuals and entities adhere to the regulations that govern the financial market. The penalty came from and was calculated in terms of three contraventions of section 78(5) of the Financial Market Act which deals with insider trading.
The Nature of the Case
The case revolves around the Tribunal’s reconsideration of this administrative penalty, specifically focusing on the aspect of whether the penalty imposed by the FSCA is appropriate, as required by section 167(2) of the Financial Sector Regulation Act read with section 82 of the Financial Markets Act.
While the case addresses various complex legal and financial concepts of appeal and the Tribunal’s role, it is primarily deals with the appropriate level of a financial penalty, considering factors such as deterrence, cooperation and the nature and seriousness of the contravention.
Factors included in the reconsideration
In its consideration, the Tribunal discusses several factors and principles that are core to its reconsideration and determining whether a penalty is appropriate, these can be summarised as follows:
- Scope of Reconsideration: The case clarifies that a reconsideration, as a type of appeal, is not a complete re-hearing but focuses on the appropriateness of the penalty. This means that the Tribunal cannot replace the Authority’s decision with its own based on a pure merit review.
- Appropriate Penalty Determination: The key issue in the case is the determination of what constitutes an appropriate administrative penalty under sec 167(2) of the Financial Sector Regulation Act. The legislation provides a list of factors to consider, including deterrence, cooperation, and the nature and seriousness of the contravention.
- Importance of Deterrence: The case highlights the importance of deterrence in financial regulation. The financial penalty should deter not only the offender but also others from committing similar transgressions, underlining the significance of maintaining market integrity and public confidence.
- Cooperation with Regulators: The degree of cooperation with regulators is a relevant factor in assessing the appropriateness of a penalty. In this case, the applicant’s level of cooperation was examined to determine its impact on the penalty.
- Consideration of the Nature and Seriousness of the Contravention: The nature and seriousness of the contravention play a pivotal role in penalty assessment. In this instance, the deliberate and premeditated nature of the contravention was a significant factor.
- Impact on Financial Stability: The potential effect of the conduct on financial stability and the financial system is a relevant consideration, as it highlights the broader implications of regulatory violations.
- Balancing of Factors: The case underscores the need to balance various factors when determining an appropriate penalty. While one’s personal circumstances may be considered, they should not outweigh the gravity of the contravention and the need for deterrence.
Conclusion
The case serves as an illustration of the complexities surrounding administrative penalties in the financial sector and serves as a warning to FSPs and industry participants that actions of this nature will result in sanctions being levied against individuals in their personal capacity. It emphasises the importance of the Authority’s role in applying a holistic value judgment of what is appropriate in ensuring the protection of the financial industry and highlights the delicate balance between upholding market integrity and protecting the interests of investors and the public.