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Some Comments on the Enforcement Committee's Jurisdiction in the Adjudication and Settlement of Market Manipulation Cases: Pather and Another v Financial Services Board and Others [2014] 3 All SA 208 (GP)
Published online by Cambridge University Press: 10 September 2018
Abstract
The article examines the court judgment in Pather and Another v Financial Services Board and Others [2014] 3 All SA 208 (GP) to explore the Enforcement Committee (EC)’s jurisdiction to settle market abuse cases in South Africa.
- Type
- Case Note
- Information
- Copyright
- Copyright © SOAS, University of London 2018
Footnotes
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LLB (cum laude), LLM (University of Fort Hare), LLD (Nelson Mandela Metropolitan University). Associate professor, Faculty of Law, North-West University, South Africa. This research article was supported in part by the National Research Foundation of South Africa (NRF), grant no 106056. In this regard, the author wishes to thank the NRF for its valuable support.
References
1 Market abuse includes insider trading and market manipulation. Notably, this article focuses on a discussion of the Enforcement Committee jurisdiction in accordance with the Pather case. Consequently, any comparative analysis with other jurisdictions with similar regulatory bodies is beyond the scope of the article.
2 Henning, JJ and Du Toit, S “The regulation of false trading, market manipulation and insider trading” (2000) 24/2 Journal for Juridical Science 155 at 156–65Google Scholar; Henning, JJ and Du Toit, S “High-pressure selling of securities: From rigging the market to false trading, market manipulation and insider dealing” (2000) 21 The Company Lawyer 29Google Scholar.
3 Cassim, R “An analysis of market manipulation under the Securities Services Act 36 of 2004 (part 1)” (2008) 20 South African Mercantile Law Journal 33 at 34–35Google Scholar; Chitimira, H “A historical overview of the regulation of market abuse in South Africa” (2014) 17/3 Potchefstroom Electronic Law Journal 937CrossRefGoogle Scholar; Osode, PC “The new South African Insider Trading Act: Sound law reform or legislative overkill?” (2000) 44/2 Journal of African Law 239CrossRefGoogle Scholar; and Jooste, R “A critique of the insider trading provisions of the 2004 Securities Services Act” (2006) 123 South African Law Journal 437Google Scholar.
4 B Chanetsa “Insider trading is notoriously hard to prosecute” (26 April 2004) Business Report; and Botha, D “Control of insider trading in South Africa: A comparative analysis” (1991) 3 South African Mercantile Law Journal 1Google Scholar.
5 Luiz, S “Market abuse and the Enforcement Committee” (2011) 23 South African Mercantile Law Journal 151Google Scholar.
6 Ibid; Cassim, R “An analysis of market manipulation under the Securities Services Act 36 of 2004 (Part 2)” (2008) 20 South African Mercantile Law Journal 177 at 184–85 and 198–99Google Scholar; Chitimira, H “Overview of the market abuse regulation under the Financial Markets Act 19 of 2012” (2014) 35/2 Obiter 254Google Scholar.
7 “Market manipulation” refers to any conduct, activity or practice that interferes or attempts to interfere with the free and fair operation of the financial markets by creating an artificial, false or misleading appearance with respect to the price of, or market for, a security, commodity or financial instrument.
8 Act 36 of 2004, as amended by the Financial Services General Laws Amendment Act 22 of 2008 (General Laws Amendment Act) that came into effect on 1 November 2008. Notably, relevant provisions of the Securities Services Act are discussed comparatively with related provisions under the Financial Markets Act 19 of 2012.
9 Pather, paras 28–55.
10 Its predecessor was All Joy Foods Limited (All Joy). Ah-Vest Limited and All Joy are referred to as the second applicant in this article. Pather, paras 2–7.
11 Securities Services Act, sec 76; Pather, paras 17–23.
12 The DMA is an investigative committee of the first respondent introduced by the Securities Services Act, sec 83(1)(b), which was replaced by the Financial Markets Act, sec 85.
13 The first respondent was established under sec 2 of the Financial Services Board Act 97 of 1990 as an independent regulatory body that oversees the enforcement of anti-market abuse laws in South Africa; see id, sec 3(a)–(c). Pather, para 5.
14 Pather, paras 17–23.
15 Securities Services Act, sec 82; Pather, paras 17–23.
16 The appellants violated the Securities Services Act, sec 76. Disclosure-based market manipulation is currently outlawed under the Financial Markets Act, sec 81.
17 Pather, para 25.
18 The second respondent is an independent committee of the FSB; see repealed secs 94(e) and 97 of the Securities Services Act. The Financial Markets Act has no similar provisions. The referral and functions of the second respondent are now enumerated in sec 10(3) of the Financial Services Board Act and sec 6A–I of the Financial Institutions (Protection of Funds) Act 28 of 2001 as amended (Protection of Funds Act).
19 Securities Services Act, sec 94(e); Pather, paras 17–18.
20 This referral was executed under the Securities Services Act, sec 102(1). No similar provision is found under the Financial Markets Act, since referrals are effected through the Protection of Funds Act, sec 6A.
21 Pather, paras 9 and 22–26.
22 Id, paras 8–27.
23 Id, paras 9 and 17–23; Securities Services Act, secs 94(e), 101 and 102; Protection of Funds Act, sec 6A–I.
24 Sec 81(2) and (3).
25 The General Laws Amendment Act, sec 78(4) indicates that the repeal of secs 94(e), 97, 98, 99, 100–06 and 111(1)(b) of the Securities Services Act does not affect transactions of the second respondent that were pending at the date those amendments came into operation.
26 See the Financial Markets Act, sec 84 and Protection of Funds Act, secs 6A(2), 6B and 6C.
27 Pather, paras 70–97.
28 Id, paras 10.2 and 27.2.
29 Act 33 of 1957; Pather, paras 126, 127 and 137.
30 There were now two ECs (second respondents), the first being the old or initial EC that had jurisdiction under the Securities Services Act and the second or new EC, which had jurisdiction under the Protection of Funds Act through the General Laws Amendment Act. S v Acting Regional Magistrate, Boksburg 2011 (2) SA SACR 274 (CC).
31 The rule of law is entrenched in sec 1(c) of the Constitution of South Africa, 1996.
32 Pather, paras 147 and 151.
33 Id, paras 10.4, 27.4 and 166–69.
34 Also known as the “plain meaning rule” or the “literal meaning rule” of statutory interpretation in South Africa.
35 Botha, C Statutory Interpretation: An Introduction for Students (5th ed, 2012, Juta & Co) at 91–97Google Scholar.
36 Ebrahim v Minister of the Interior 1977 (1) SA 665 (A) at 678A–B.
37 Protective Mining & Industrial Equipment Systems (Pty) Ltd (formerly Nampo (Pty) Ltd) v Audiolens (Cape) (Pty) Ltd 1987 (2) SA 961 (A) at 991G–H.
38 The Constitution, sec 39(2); Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Others 2004 (4) SA 490 (CC).
39 The Constitution, sec 39(2) and chap 2.
40 Sec 104(1) and (2).
41 AH-Vest Ltd, Maslamoney Theegarajan Pather and the DMA (16 July 2009), available at: <https://www.fsb.co.za/Departments/communications/Documents/16072009.pdf> (last accessed 13 July 2018).
42 Protection of Funds Act, sec 6C(3).
43 Securities Services Act, sec 104(1) and (2)(d).
44 Protection of Funds Act, sec 6D(2)–(5).
45 Pather, paras 74–77 and 96.
46 Securities Services Act, sec 104(6) and (7).
47 Thus, the legal effect of prohibited conduct should ordinarily be assessed under the law that existed when that conduct took place. National Director of Public Prosecutions v Basson 2002 (1) SA 419 (SCA), paras 11 and 12.
48 Chairman of the Board on Tariffs and Trade v Volkswagen of South Africa (Pty) Ltd and Another [2001] 1 All SA 519 (A), para 13.
49 FSB Annual Report 2009 at 90.
50 See S v Acting Regional Magistrate, Boksburg 2011 (2) SA SACR 274 (CC) for related comments.
51 Pather, paras 117–18 and 125.
52 Minister of Public Works v Haffajee NO 1996 (3) SA 745 (A), para 753B.
53 Pather, para 121.
54 Sec 82.
55 Protection of Funds Act, sec 6D(5).
56 Interpretation Act, sec 12(2) states that the mere repeal of a statute by another statute shall not affect prior legal proceedings.
57 Case no 12/2008 (15 March 2010).
58 The Constitution, sec 35(3)(h).
59 2010 (6) SA 108 (SCA), paras 112B–E.
60 Pather, paras 147–49.
61 Act 51 of 1977, chap 27.
62 Luiz “Market abuse”, above at note 5 at 169–70.
63 Case no 1/2007 (31 October 2007), para 12, available at: <https://www.fsb.co.za/enforcementCommittee/Documents/StaceyBerman_2007-10-31.pdf> (last accessed 13 July 2018).
64 Ibid; Luiz “Market abuse”, above at note 5 at 166–67; and Yeung, K “Quantifying regulatory penalties: Australian competition law penalties in perspective” (1999) 23 Melbourne University Law Review 440 at 445Google Scholar.
65 Financial Services and Markets Tribunal (FSMT) case 031, 2006 (16 May 2006).
66 [2006] FSMT FSM037 (11 May 2006).
67 De Lange v Smuts NO and Others 1998 (3) SA 785 (CC), para 74.
68 See Nel v Le Roux and Others 1996 (3) SA 562 (CC), para 11, stipulating that a section 205 Criminal Procedure Act examinee is not an accused person.
69 Federal-Mogul Aftermarket Southern Africa (Pty) Ltd v Competition Commission and Another [2005] 1 CPLR 50 (CAC), para 64.
70 See above at note 67, paras 37 and 66.
71 2002 (4) SA 60 (W), paras 7 and 39–43.
72 See Prince v President, Cape Law Society 2001 (2) SA 388 (CC).
73 Act 3 of 2000, sec 1; Pather, paras 181–85.
74 Pather, ibid.
75 Id, paras 188–200.
76 Mann, K “Punitive civil sanctions: The middle ground between criminal and civil law” (1992) 102 Yale Journal 1795 at 1803–31Google Scholar.
77 A detailed analysis of the old and new EC's jurisdictions and related recommendations is beyond the scope of this article.
78 See above at note 59, paras 112B–E.