Will Wiese run rings around the FSB's probe?

28 June 2015 - 02:04 By Rob Rose

Contrary to expectations in some quarters, it seems the Financial Services Board might actually have the stomach for a battle with the country's richest man, the formidable Dr Christo Wiese. This week, the FSB's directorate of market abuse revealed it had launched an insider trading probe into share trades in the weeks leading up to South Africa's largest corporate deal yet, Steinhoff's R63-billion purchase of 92.3% of Pepkor.Sure, it might be seven months after the deal was announced on November 25 - but better late than never.story_article_left1The facts are these: between September 9 and 18, five Steinhoff directors, including Wiese and CEO Markus Jooste, bought shares in their own company worth R146-million, paying between R51.85 and R54.95 a share.Directors, of course, aren't allowed to buy shares if they have undisclosed price-sensitive information - for example, if they know a major deal is brewing.So was a deal likely at that stage?That's hard to say, but we do know that on September 19 - one day after the last of those directors' purchases - Brait thought the talks on Pepkor were so far advanced that it issued a cautionary warning of price-sensitive "negotiations" .Eyebrow-raising? Certainly, especially in the context of anonymous e-mails sent to journalists, including at the Sunday Times, saying that Steinhoff had been working on the deal "for at least four months" - in other words, during the time when the directors were buying shares.Clearly, this could also have been considered "price-sensitive" information because in November, when Jooste sprang the news, Steinhoff's stock soared.Today, the stock is worth R76.92 per share, mainly thanks to a deal that injected new pep into the price.Asked about this case, Steinhoff investor relations head Mariza Nel said: "It's not a Steinhoff issue, so I don't know."story_article_right2Now, it's true that the FSB investigates only the share trades and not the company, and it's also true that it doesn't say exactly who it is investigating.But given that this probe covers those exact weeks from September to November, it's a fair implication that Steinhoff top brass, including Wiese and Jooste, are in the FSB's sights.One official at the regulator laughed this week when I suggested this investigation might be considered somewhat surprising, given Wiese's not-inconsiderable bank balance, and the fabled legion of bloodthirsty corporate lawyers who are reputed to feed only on bone marrow.Throw in the fact that Wiese himself is a legal graduate from Stellenbosch University, and actually worked at the Cape Bar for a number of years before joining Pepkor, and you have a sense of just how daunting an opponent he could be.He also doesn't lose too often. A few years ago, Wiese was stopped at London's Heathrow airport carrying a briefcase with £700000 in cash, which the authorities promptly confiscated.But, as Wiese told the Daily Maverick: "I got every penny back with interest because they were wrong. So that matter played out very well for me in the end."Solly Keetse, the head of the FSB's department of market abuse, says he can't pick and choose battles based on the opponent. "We are a regulator; that's what we do."Asked whether the FSB had already begun summonsing people, Keetse said "yes, we have commenced doing this".Wiese, who was overseas this week on holiday, says he isn't troubled by the regulator's investigation."I've no idea [why the FSB did this], but I'm totally relaxed about it," he says.story_article_left3Separately, the FSB also said this week it had launched a new insider trading probe into share trades involving Brait, a private equity company in which Wiese held, at last count, 34.6%.In this case, it seems inside information may have leaked out before Brait announced in April that it would buy 80% of gym chain Virgin Active for R12-billion.What sparked a closer look is that in the weeks before the deal, Brait's share price climbed 10.8%, from R78.22 to R86.71. After the Virgin deal was announced on April 16, the stock climbed again to R90.45.Wiese says he knows nothing of the Brait case and, in general, says his companies run a tight ship with no leaks.So how watertight does Wiese believe the system really is? Is it really true, as some investors believe, that traders still manage to extract advance news of big deals and make a killing on it?"I'm sure, in some cases, there will be cases. But in our case, we're very, very confident there are no leaks," says Wiese.To date, the regulators haven't exactly got a great record of outwitting or outlawyering CEOs. Think Gary Porritt and Brett Kebble, who both ran rings around the authorities for years. So whatever happens, this will be an intriguing tussle.As a final word, this is my last column for this newspaper. Thank you to the many people who read it, and who wrote letters, spiced with either approbation or vitriol - it was all appreciated. The fun will continue in the pages of the Financial Mail...

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