The Financial Sector Conduct Authority (FSCA) has imposed a R50 million administrative penalty on Viceroy Research and its partners for peddling false and misleading information about Capitec Bank in 2018.
The penalty, said the authority in a statement on Wednesday, was imposed jointly and severally payable by the respondents within 30 days from the date of the order.
The FSCA found that the Respondents had contravened Section 81(1) of the Financial Markets Act 19 of 2012 (FMA) in that during January 2018 they published false, misleading or deceptive statements, promises or forecasts regarding material facts about Capitec, which they ought reasonably to have known were not true.
The FSCA said: “Further, notwithstanding being made aware that what they had published was false, they failed to publish full and frank corrections thereof, as required by Section 81(2) of the FMA.”
In determining an appropriate administrative penalty for the above contraventions, the FSCA took into account the need to deter such conduct, saying it was a “serious offense that can cause significant harm to investors, listed entities and the broader market, hence the need to impose a penalty that would serve as a deterrent”.
The authority said the degree of co-operation in relation to the contravention, the FSCA had to enlist the assistance of the Securities and Exchange Commission (SEC) of the USA to compel a representative of the Viceroy Research partnership to be questioned under oath.
Additionally, the FSCA said it had to consider the nature, duration, seriousness and extent of the contravention, saying Viceroy had made a concerted effort to publish these statements as widely as possible, knowing that Capitec was “a systemically important financial institution in South Africa, and that these statements had the potential to trigger a run on the bank”.
The FSCA also considered that the publication of the statements immediately caused the Capitec share price to decline by 23.12% while the research company gained financially
“Capitec is a systemically important financial institution in South Africa, therefore the Respondent’s false statements, and their failure to subsequently publish corrections of these statements, posed a clear and present threat to the stability of the South African financial system,” reads the statement.
FSCA Commissioner Unathi Kamlana said the penalty was particularly significant as it demonstrated how far the FMA reaches.
“Although the Viceroy Research Partnership, and its partners, are not financial institutions, and are domiciled in a different jurisdiction, their comments about South African listed securities make them subject to the stipulations of the Act.
“The penalty also makes it clear that breaching our financial sector laws has serious consequences,” said Kamlana.
The FSCA also investigated possible Insider Trading (Section 78 of the FMA) and Prohibited Trading Practices (Section 80 of the FMA) in Capitec securities during the period of the publications but has not found any evidence of such contraventions. Those two investigations have therefore been closed without any enforcement proceedings being instituted. – SAnews
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