Days after the Competition Commission held a media briefing in 2017 alleging Standard Bank was part of an international cartel that manipulated the rand-dollar exchange rate, the bank’s share price dropped 3.8%. The value of the fall was R8.5bn.
The financial dent was not justified because the commission’s case was without evidence.
This was the argument that advocate Kate Hofmeyr presented on behalf of Standard Bank before the Constitutional Court on Wednesday, in pleading for the justices to dismiss the commission’s appeal case against the Competition Appeal Court (CAC) ruling, which freed 17 banks from prosecution.
The case stems from alleged conduct between 2007 and 2013 by 28 local and international banks accused of colluding to co-ordinate rand-dollar trading in chat rooms, therefore violating competition laws. The commission wants the banks to face fines, but the case has faced pushback from lenders, arguing the commission has no evidence to prosecute them.
The commission’s case against Standard Bank was weak and “it does not get out of the legal starting blocks”, the CAC found.
Hofmeyr told the top court the commission failed to establish facts during its cartel probe. When the bank attempted to correct matters of fact in the commission's affidavit, it hit a blank wall for years, she contended.
In its case, the commission alleges Bryan Brownrigg, identified as Standard Bank’s trader, and Barclays Capital trader Peter Taylor shared sensitive information in a chat room on September 19 2012.
Hofmeyr argued Brownrigg was not a trader but a salesperson and merely engaged with a customer about the prices at which forex was sold and bought on the day.
“The commission investigated the case for a year-and-a-half. In that period it did not meet Standard Bank once. It did not ask Standard Bank for a single document. It did not send it a single request for information and did not subpoena one of its representatives,” Hofmeyr said, arguing that because there was no thorough investigation, the commission got it wrong.
“The commission had an opportunity to redo its entire affidavit but did not do so. It stuck to its bloody-minded ignorance. It did not change its position to Brownrigg. It did not take any of the facts into account.”
Hofmeyr insisted the commission should have been responsible when conducting its cartel probe because the banks paid the price of the damning allegations.
“In moments after that press release in February 2017 when the commission went to the media before going to any of the banks, the bank’s share price dropped by 3.8% in the few days after that press announcement. It indicated at that time that drop in share value equated to R8.5bn.”
Hofmeyr, like Nedbank and FirstRand, maintained the case should be dismissed by the apex court because there was no substantial evidence against the banks to backup the case.
The commission did not link FirstRand and Nedbank to the chat rooms, which it claims traders employed by banks or representing the banks logged on and shared competitively sensitive information and made arrangements to assist each other by co-ordinating trading activities.
Acting for the commission, advocate Tembeka Ngcukaitobi argued the judges must consider the South African banks’ market conduct, which it argued linked them to the cartel. Ngcukaitobi said the commission did not have to present all the evidence because the trial had not started.
Advocate Anthony Gotz, representing Nedbank, argued the commission’s analysis of trading data as evidence to be linked to the cartel was “thumbsucked”.
“To be clear the information on the Reuters does not reflect trades. It merely reflects indicative quotes posted by the banks. The quotes are the prices at which the banks are willing to buy foreign currency and price [at which] it is willing to sell it.
“It is unclear how Nedbank can be said to have fixed the rand-dollar exchange rate. In many of the instances, Nedbank is accused of having done something nefarious by doing nothing else but posting a single quote. Why is that suspicious? Nedbank is in the business of posting quotes.”
The dates between the alleged conduct did not support a cartel allegation because they were months apart and some a year after, he argued.
“This is nonsensical.”
The hearing continues on Thursday.
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