Insider Trading Act

2 December 1998 No. 1560.

2 Desember 1998 that the President has assented is hereby published to the for general Hierby word bekend gemaak dat die President keuring geheg het aan die onderstaande Wet wat hicrby algemene inligting gepubliseer word:- sy goed- ter No. 135 of 1998: Insider Trading Act, 1998. No. 135 van 1998: Wet op Binnekennistransaksies, 1998. 7 _ No. 19546 (;O\ ERNMENT GAZETTE,

2 DECEMBER 1 W-4 Act No. 135, 1998 INSIDER TRADING ACT. 1998 ACT information instruments for criminal and civil individuals who have from dealing relating inside in such securities or financial or To prohibit to financial provide the Financial Services Board to investigate matters relating to such dealing, to institute the proof of claims and proceedings to establish distribution of payments received as a result of any such proceedings; the Directorate as a committee of the Financial Services Board for exercising the power to institute proceedings; to repeal a section of the Companies Act, 1973; and to provide for matters connected to securities instruments; to empower for such dealing; to administer law penalties thereto and in relation therewith. B E IT ENACTED follows:- Definitions by the Parliament of the Republic of South Africa as

1. In this Act, unless the context indicates otherwise- (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) referred for considering and determining instrument” means a financial the Insider Trading Directorate established by section director” means a person appointed as such in terms of section claims to in sections 6(5) and 6(7); (v) “claims officer” means the person appointed by the Financial Services Board in terms of section to be responsible 6(6) and for the distributions “Directorate” means 12; (iv) “executive 12( 12); (xiii) “financial instrument as defined in section 1 of the Financial Markets Control Act, 1989 (Act No. 55 of 1989), and any instrument to any such financial “Financial Services Board” means Financial Services Board Act; (x) “Financial 1990 (Act No. 97 of 1990); (xiv) “inside been made public and which- (a) (b) is obtained or learned as an insider; and if it were made public would be likely price or value of any securities or financial and which is dealt in on a regulated market; (vi) the board established by section 2 of the information” means specific or precise the Financial Services Board Act, to have a material effect on the Services Board Act” means similar characteristics or right bearing instrument; “insider” means an individual who has inside information- (a) substantially instrument (iii) through- (i) (ii) being a director, employee or shareholder of an issuer of securities relates; or to which the inside or financial by virtue of his or her having employment, information office or profession; or information instruments to such access (b) where such individual knows that the direct or indirect source of the information was a person contemplated “Minister” means the Minister of Finance; (ix) in paragraph (a); (ii) (viii) 5 10 15 25 30 information which has not 20 No. 19516 GOL’ERNMENT GAZE-I-I-E. 2 DECEMBER 1998 Act No. 135, 1998 INSIDER TRADING ACT, 1998 the Republic, the Republic; in the Republic or outside the Public Investment Commissioners; of the Republic or of any other country or territory; the government a regional or local sokernment the South African Rcsorve Bank; or the central bank ot‘ any country or territory outside (ix) “public sector body” meant-- (n) (0) (u) (tl) but excludes “regional court” means a court established Magistrates’ Courts Act. 1944 (Act No. 32 of 1944); “regulated market” means any market, whether domestic or foreign, which is regulated that market conducts business in securities or financial instruments; “rules” means the rules made under section 1 l(2); (xi) “securities” means any securities those defined as such in section 1 including of the Stock Exchanges Control Act, 1985 (Act No. 1 of 1985), and any instruments to such securities which are dealt in on a regulated market. (i) for a regional division under the in terms of the relevant similar characteristics or rights bearing of the country as a market substantially for dealing legislation in which (vii) (x) (xi) (xii) (xiii) (xiv) Offences 2. (1) Subject to section 4(l), any individual who knows that he or she has inside for his or her own account or for any other person, relates or to which such information instruments in the securities or financial relates or which are likely to be affected by it, instruments to which such 25 to deal or discourages or stops another information and who- (n) deals directly or indirectly, (b) in the securities or financial which are likely to be affected by it; or encourages or causes another person person from dealing information shall be guilty of an offence. and who discloses that information information offence. Publication 3. (1) For the purposes of this Act, information (2) Subject to section 4(2), any individual who knows that he or she has inside to another person, shall be guilty of an public I( ir (0) (W W shall be regarded as having been made _ to those when- investors and their professional in accordance with the rules of the relevant regulated market for in records maintained by the relevant statutory regulator which circumstances which include but are not limited it is published the purpose of informing it is contained by virtue of any enactment it can be readily acquired by those likely to deal in any securities or financial instruments- (i) relates; or (ii) of an issuer to which the information it is derived from information which has been made public. are open to inspection by the public; or to which the information advisers; or relates; or information may be regarded as having been made public even though- it can be acquired only by persons exercising diligence, or expertise or by observation; it is communicated it is communicated it is only published outside to a section of the public and not to the public at large; only on payment of a fee; or the Republic. (6) (c) (d) (d) (2) Inside (u) 5 10 15 20 30 35 40 45 6 No. 19546 GOVERNMENT GAZETI-E. 2 DECEMBER 1998 Act No. 135, 1998 INSIDER TRADING ACT, 1998 Defences 4. (1) An individual such individual proves on a balance of probabilities shall not be guilty of any offence contemplated that he or she- in section 2( 1) if (u) was acting on specific instructions from a client, save where the inside information was disclosed to him or her by that client; ((9) would have acted in the same manner even without (c) was acting on behalf of a public sector body in pursuit of monetary policy, of public debt or rates, in respect of exchange the inside information; the management policies foreign exchange reserves; or (ti) was acting transaction 61 of 1973). in pursuit of the completion as defined of an affected in section 440A of the Companies Act, 1973 (Act No. or implementation (2) An individual shall not be guilty of the offence set out in section 2(2) if such that he or she- individual proves on a balance of probabilities (n) believed, on reasonable grounds, that no person would deal in the securities or 5 10 15 financial (6) disclosed instruments the inside information as a result of such disclosure; or his or her employment, office or profession and at the same time disclosed the information was inside information. in the proper performance of the function of that (3) The defences set out in subsections (1) and (2) are not intended to be the only 20 defences available in any proceedings under this Act. Penalty

5. Any individual convicted of an offence in terms of section 2 shall be liable to a fine for a period not exceeding 10 years, or to not exceeding R2 million or to imprisonment both such fine and such imprisonment. 25 Civil liability 6. (1) Any individual who knows that he or she has inside information and- (n) who deals directly or indirectly, for his or her own account financial be affected by it; instruments to which such information in the securities or relates or which are likely to (h) who profits or avoids a loss through such dealing; and (c) who fails to prove, on a balance of probabilities, out in section 4( 1) or any other defence available any one of the defences set to him or her, shall be liable, at the suit of the Financial Service Board, to pay to the Financial Services Board the amounts contemplated in subsection (4)(a). (2) An individual who knows that he or she has inside information and who- (u) discloses that information to an individual fails to prove on a balance of probabilities section 4(2) or any other defence available encourages instruments affected by it and fails to prove on a balance of probabilities defences set out in section 4( 1) or any other defence available or causes another person to which such to deal in the securities or financial to be any one of the to him or her; referred (1) and to in subsection any one of the defences set out in to him or her; or relates or which are likely information (b) (c) i:als directly or indirectly person and fails to prove on a balance of probabilities set out in section 4( 1) or any other defence available liable, together with the individual in such securities or financial for any any one of the defences to him or her, referred to in subsection shall be jointly and severally ( 1 ), at the suit of the Financial Services Board to pay to the Financial Services Board the amounts set out in subsection (iii) and (iv). instruments (4)(a)(i), (3) The individual referred to in subsection of the Financial Services Board determined calculated ation for disclosing, in terms of subsection encouraging, to pay to the Financial (2) shall, in addition, be liable at the suit Services Board such sum the amount or consider- together with all commission three times (4)(a)(i), discouraging or dealing. in the discretion of the court but not exceeding 30 35 40 45 50 55 8 No. 19546 GOL’E:RSMENT GAZETTE. 2 DECEMBER 1998 Act No. 135, 1998 INSIDER TRADING ACT. 1998 5 10 15 20 25 30 35 40 (4) (a) The Financial proceedings in any court of competent Services Board shall be entitled jurisdiction for payment of- referred to in subsection the amount by which the individual loss which he or she avoided as a result of such dealing; and a penalty, for compensatory discretion of the court but not exceeding gained or the loss avoided as a result of such dealing; and interest; and costs of suit on such scale as may be determined by the court. or punitive purposes, (9 (ii) (iii) (iv) (b) The amount of the profit gained or loss avoided to sue by way of civil (1) profited or the in the in a sum determined three times the amount of the profit proceedings Board directly (a) discretion of the court which shall have regard to factors such as the consideration the dealing referred to in subsection publication of the inside information (l), the time between and any other relevant factors. shall be determined in the for the relevant dealing and the (5) Any amount recovered contemplated by the Financial Services Board as a result of the in this section shall be deposited by the Financial Services into a specially designated trust account and- to reimbursement the Financial Services Board shall, as a first charge against be entitled bringing claimants gross amount so recovered the other party prior to the finalisation of the distribution the trust account, incurred by it in the distributions made to (6) and an additional sum equal to 10% of the from such proceedings in terms of subsection of all expenses and in administering less any amount of costs actually reasonably recovered account; (19) the balance, if any, shall be distributed by the claims officer to the claimants (6) in accordance with the provisions of subsection referred to in subsection (7): any amount distribution of payments Board. not claimed within to claimants, three years the date of the first shall accrue to the Financial Services from (6) The balance referred to in subsection referred (5)(b) shall be distributed to all claimants (1) and who prove to the who are affected by the dealings reasonable satisfaction of the claims officer that- to in subsection (7) Subject referred to in subsection in the case where the inside information was made public within a week after in the same the individual securities or financial referred to (1) so dealt and before the inside information was made public; in subsection in every other case, they dealt in the same securities or financial instruments (1). on the same day as the individual (8), a claimant to in subsection referred shall receive an amount- at any time after the individual to subsection they dealt instruments (1) dealt, equal to the difference between profit gained or loss avoided as determined equal to the pro rata portion of the balance calculated according paragraph (a) bears claimants, is the lesser, unless the price at which the claimant dealt and the (4)(b); or in terms of subsection referred (5)(b), in (6) by to the relationship which the amount contemplated to all amounts proved the claims officer on good cause shown determines in terms of subsection to in subsection that 45 whichever the claimant should receive a lesser or no amount. (8) Any amount awarded in proceedings contemplated in section 10 shall be deducted from any amount claimed in terms of this section. (9) Any person aggrieved by a decision of the claims officer, shall be entitled furnished with the reasons for the decision and may appeal against such decision board of appeal established by section 26 of the Financial Services Board Act. to be to the 50 (10) Notification of amounts of for the lodging and proof of claims and the distribution of in respect of claims shall be in accordance with rules made from time to time in terms of this section, the administration the procedure recovered trust accounts, payments by the Financial Services Board. 55 (11) The common law principles of vicarious liability apply to the civil liability established by this section. (c) (a) (b) (a) (b) IO No 19546 GO\ ERNMEKT GALE-I-X. Z DECEMBER 1998 Act No. 135,1998 INSIDER TRADING ACT, 1998 Assessment of fines and penalties 7. (1) In the assessment of any penalty in terms of section 5, the court shall take into account any award previously made under section 6 which arises from the same cause. (2) In the assessment of any award under section 6, the court shall take into account in terrns of section 5 which arises from the same cause. any penalty previously imposed Attachments and interdicts 8. ( I ) On application by the Financial Services Board, it shall be competent their concealment, to prevent for a court removal, to order the attachment of assets or evidence dissipation or destruction. (2) The Financial Services Board may or interlocutory institute against a person who profited or avoided a loss or who the Financial proceedings Services Board reasonably believes may have profited or avoided a loss as contemplated in section 6. interdict any (3) Such proceedings may include proceedings to obtain an interdict to prevent the disposal of assets or of evidence. Jurisdiction mentioned 9. ( I) Only a High Court or a regional court shall have jurisdiction (2) For the purposes of sections 6(4) and 9( 1). a court of competent to try any offence in section 2 and to impose a penalty up to the maximum set out in section 5. shall include the regulated market has its principal place of business or head office or in which any element of the dealing occurred and it shall not be necessary the court within whose jurisdiction to found or confirm jurisdiction. to make any attachment jurisdiction Protection of existing rights

10. Nothing in this Act shall prejudice by any dealing contemplated portion of such amount has been recovered by such person under section 6. law rights of any person aggrieved in this Act to claim any amount save to the extent that any the common 5 10 15 20 25 Powers and duties of Financial Services Board 11. ( 1) The Financial Services Board shall be responsible for the regulation of insider trading. (2) In addition to its powers in terms of the Financial Services Board Act, the 30 Financial Services Board may- trading in this Act; to insider trading, in terms of section as are contemplated including but not limited the proof of claims and distribution of payments to, in terms of this Act and section 440F of the Companies Act, investigate any matter relating insider 1973; institute such proceedings administer 6; to be able to furnish any information on summon any person who is believed the subject of any investigation or to have in his or her possession or under his or her control any book, document or other object which has bearing upon that subject, Services Board, or to appear at a time and place specified be interrogated or to produce such book, document or other object; and interrogate any such person under oath or affirmation duly administered, any such book, document or other object: examine or retain for examination that any person from whom any book, document or other object has Provided been taken and retained under shall, so long as such book, this subsection document or object is in possession of the Financial Services Board, at his or her request be allowed, at his or her own expense and under the supervision of to lodge such book, document or other object with the Financial in the summons, to 35 40 45 12 No. 19546 GOVERNMENT GAZETTE, 2 DECEMBER 1998 Act No. 135,1998 INSIDER TRADING (,f) (g) (W (0 to make copies thereof or to take in terms of paragraph (a), on the authority the production of any document; for any documents; 5 safe or other container which it suspects contains time; in charge of the investigation, the person therefrom at any reasonable extracts in relation to a matter investigated of a warrant, at any time without prior notice- (i) enter any premises and require enter and search any premises (ii) open any strongroom, (iii) any document; examine, make extracts issue of a receipt, remove such document against retain any seized document or other proceedings, (v) (vi) (iv) from and copy any document or, against the temporarily for that purpose; 10 the issue of a receipt, seize any document; for as long as it may be required for criminal but the Financial Services Board may proceed without a warrant, in control of any premises paragraph; make rules- (0 the administration consents to the actions contemplated of this Act by the Financial Services Board if the person in this 15 (ii) (iii) (iv) (v) the manner concerning and the Directorate; concerning be conducted; concerning procedure accounts and the distribution concerning meetings of the Directorate; which are generally designed and the Directorate Act; are able to perform the notification of amounts received for the lodging and proof of claims, the administration in respect of claims; of payments in terms of section 6, the of trust and to ensure that the Financial Services Board in terms of this their functions in which investigations in terms of this Act are to 20 make rules or guidelines dealing with the manner should be disclosed and, generally, with the conduct expected of persons with regard to such information; in consultation with the relevant such markets monitoring to implement and identification require for the effective such systems as are necessary in which inside information of possible contraventions regulated markets in the Republic, of this Act. (3) (u) A warrant contemplated in subsection the Financial Services Board, by a judge or magistrate who has jurisdiction where the premises in question are located. (2)(f) may be issued, on application of in the area (6) Such a warrant may only be issued if it appears from information under oath that in to the matter being investigated to believe relating there is reason terms of subsection that a document (2)(a), is kept at the premises in question. (c) Any person from whom a document has been seized under subsection (2)(f), or his and make extracts the supervision of the Financial Services Board during normal office representative, may examine such document or her authorised therefrom under hours. (4) Notwithstanding the power Directorate; (u) subsection to institute (l)- any civil proceedings under this Act vests in the (b) no rule may be made or amended without the prior consent of the Directorate; (2)(d), shall also have the powers contemplated (c) in subsection the Directorate (e) and cf). (5) The Financial Services Board may, subject to such conditions as it may determine, the power to investigate an alleged contravention delegate it deems fit and such person shall have the powers set out in subsection Cf). of this Act to such person as (2)(d), (e) and (6) The Financial Services Board shall cause the publication in the Gazette of a notice of a rule, calling upon all interested persons who of any proposed have any objections to lodge their objections with rule or amendment, the Financial Services Board within a period of 30 days from the date of publication of the notice. rule or amendment to the proposed 25 30 35 40 45 50 55 14 No. 19546 GOVERNMENT GAZE-I-I-E, 2 DECEMBER 1998 Act No. 135,1998 INSIDER TRADING ACT, 1998 with (7) If there are no such objections Services Board has, in to and has decided consultation introduce in the G’azerte, the rule shall come into effect on the expiry of a period of 10 days after the last date on which objections the objections in the form published the proposed rule or amendment or if the Financial the Directorate, could have been lodged in terms of the notice. (8) If the Financial Services Board has, after considering considered such objections, decided in (6) and (7) rule, subsections consultation with the Directorate shall apply to such amendment. to amend the proposed (9) Any rule, but not a guideline, made under subsection (2) shall be binding on all members of the public. ( 10) In the event of the Attorney-General in terms of this Act, the Financial Services Board may prosecute offence in any court competent (3) of the Criminal Procedure Act, 1977 (Act No. 5 1 of 1977), shall not apply. to prosecute for an alleged offence in respect of such to try that offence and the provisions of section 8(2) and declining (11) Aside from its other duties the Financial Services Board shall, at the request of any matter and summon and interrogate any the Directorate, be obliged person to investigate in respect of the matters referred to in subsection (2)(a), (d) and (e). Establishment and powers of Directorate 12. (1) The Insider Trading Directorate is hereby established to exercise the power of the Financial Services Board as contemplated in this Act in the name of the Financial as a committee of the to Financial Services Board institute any civil proceedings Services Board. (2) The Minister shall appoint as members of the Directorate- (4 e-4 (4 (4 (4 VI (8) lawyer and an alternate of appropriate experience nominated the executive officer of the Financial Services Board or his or her deputy; one person and an alternate nominated by each of the regulated markets in the Republic; one commercial by the Law Society of South Africa; one accountant South African one person and an alternate of appropriate insurance one person and an alternate of appropriate banking two business persons and alternates. and an alternate of appropriate Institute of Chartered Accountants; experience nominated by the experience experience nominated nominated industry; industry; by the by the two other persons of appropriate (3) The Minister may, appoint to serve as members of the Directorate. in addition, experience 5 IO 15 20 25 30 35 (4) The persons referred to in subsections (2) and (3) shall be nominated by reason of their availability members of a regulated financial instrument principals. and knowledge of financial markets and may not be practising financial market or stockbrokers, financial instrument traders or 40 (5) The chairperson of the Directorate shall be a member of the Directorate nominated by the Directorate to exercise (6) The members of the Directorate additional members of the Directorate. the powers and perform shall be entitled the duties of the chairperson. to co-opt one or more persons as (7) All members of the Directorate, other than the additional members, shall have one vote in respect of matters considered by the Directorate, but alternate members shall only have a vote in the absence is representing. from a meeting of the member whom the alternate (8) The meetings of the Directorate chairperson may determine, writing to the chairperson of the Directorate demand held within seven business days of such notice. but four members of the Directorate may by notice shall be held at such times and places as the in that a meeting of the Directorate be (9) The person presiding at a meeting of the Directorate shall determine the procedure of such meeting. (10) The decision of a majority of the members of the Directorate at any meeting at the decision of the there are at least four members present shall constitute which Directorate. 45 50 55 16 No. 19546 GOVERNMENT GAZE-T-I-E. 2 DECEMBER 1998 Act No. 135,1998 INSIDER TRADING ACT, 1998 (11) No proceedings of the Directorate shall be invalid by reason only of the fact that a vacancy existed on the Directorate or that any member was not present during such proceedings or any part thereof. (12) The Directorate of its functions, be assisted by an executive director, appointed by the Financial Services Board in consultation with the Directorate, who shall be entitled to attend all meetings of the Directorate but shall not be entitled to vote at such meetings. in the performance shall, (13) The Directorate instituted proceedings made an order of court and compromise must be made public. shall be entitled any civil in terms of section 6, but any agreement of compromise must be in terms of such the amount of any payment made to withdraw, abandon or compromise (14) Where civil proceedings have not been instituted, any agreement of settlement to the court by the Financial Services Board after due notice to the may, on application other party or parties, be made an order of court. Financing of Directorate

13. The costs of performing of the Directorate section 16(I)(b) of the Financial Services Board Act. in terms of this Act shall be paid out of the funds contemplated the functions of the Financial Services Board and those in 5 10 15 Confidentiality and sharing of surveillance information 14. (1) No person shall, except for the purposes of performing his or her functions in 20 terms of this Act or for the purpose of any legal proceedings under required information Act. this Act or when to any other person any acquired by him or her in the performance of his or her functions under this to do so by a court or any other law, disclose (2) Any person who contravenes the provisions of subsection (1) shall be guilty of an 25 offence and shall be liable on conviction exceeding two years or to both a fine and such imprisonment. to a fine or to imprisonment for a period not persons (3) Notwithstanding any provision nominated to the Directorate, African Reserve Bank shall be entitled market practices and abuses with each other and with the persons whether Republic or elsewhere fulfilling the institutibns which have to the contrary, the Securities Regulation Panel and the South insider trading, to share information the inside such abuses so as to assist them in their regulatory and statutory for prosecuting responsibilities. responsible concerning Limitation of liability the Financial Services Board, the Directorate nor any officer, employee, or committee member of the Financial Services Board or the Directorate

15. Neither representative shall be liable for any loss sustained by or damage caused to any person as a result of or committee member anything done or omitted by the officer, employee, in the bona j-de but not grossly negligent performance of any function in terms of this Act or the rules. representative Failure to appear, give evidence or produce books, documents or other objects

16. Any person who, without sufficient cause, fails to appear or to give evidence or in section 11(2)(d) and (e), for a produce any book, document or other object as contemplated shall be guilty of an offence and liable on conviction period not exceeding two years or to both a fine and such imprisonment. to a fine or to imprisonment Repeal of section 440F of Act 61 of 1973

17. Section 440F of the Companies Act, 1973, is hereby repealed. 30 35 40 45 18 No. 19516 GOVERNMENT GAZETTE. 2 DECEMBER 1998 Act No. 1351998 INSIDER TRADING ACT, 1998 Transitional provisions 18. (1) Notwithstanding Financial Services Board shall be responsible section, allegedly committed before such repeal, and for that purpose powers and duties contemplated the repeal of section 440F of the Companies Act, 1973. the for investigating offences in terms of that it shall have the in section 11. (2) The Securities Regulation Panel constituted in terms of section 440B of the in its relating to an alleged offence in terms of section 440F of the Companies Act, Companies Act, 1973, may disclose to the Financial Services Board all information possession 1973, or in terms of this Act. 5 (3) The Financial Services Board may disclose information or persons contemplated received in section 14(3). in terms of 10 subsection (2) to any of the institutions Short title and commencement

19. This is the Insider Trading Act, 1998, which takes effect on a date fixed by the President by proclamation in the Gazette.