NEWS

The FSB Is Probing Possible Insider Trading Before Gordhan's Firing

A new investigation is looking at whether anyone benefitted financially from Gordhan's axing.

02/05/2017 13:43 SAST | Updated 02/05/2017 14:20 SAST
Rogan Ward / Reuters
Former finance minister Pravin Gordhan reacts during a South Africa Communist Party rally in Durban, South Africa, April 22, 2017. REUTERS/Rogan Ward

An investigation has been launched into allegations that some people might have financially benefitted from knowing that Pravin Gordhan would be fired. The Financial Services Board (FSB) is reportedly investigating some foreign exchange futures contracts, Business Day reported on Tuesday. This comes amid allegations that insider trading took place just before former finance minister Pravin Gordhan was fired in March.

CEO of the FSB, Dube Tshidi wrote to DA finance spokesperson David Maynier, the paper reported, confirming the investigation.

Tshidi reportedly said: "We are currently analysing both the report from the Johannesburg Stock Exchange (JSE) as well as the article, which was published by Stuart Theobald of Intellidex. The investigation is ongoing."

In the article, Theobald noted that it would be possible to profit from the axing of Gordhan and the subsequent crashing of the Rand "if you knew of such an event in advance".

He highlighted a sharp increase in dollar-rand futures contracts traded on the day that Gordhan was recalled from an investor roadshow abroad, March 17. He was fired two days later.

"It is not clear whether there are any clear laws that would have been violated. It is obviously highly unethical, as it basically profits from someone else's ignorance in that you have information they don't. And let's not even ponder the political implications of a politician giving information to people prior to major market-moving announcements. But insider trading rules are currently focused on company shares rather than foreign exchange.

"This was technically a derivative being traded on the JSE, so it may be covered by insider trading rules for that reason, but if its just treated as a currency exposure, there may be a gap in the regulations through which these traders could slip.

"Either way, using JSE-listed instruments was a pretty dumb move. A trader wanting to profit from such advance knowledge would be better able to do it offshore, where it is much harder to see big movements in market exposures. You can also get much more leverage. Someone trading in this way out of, say, Dubai, would be almost impossible to detect," Thobald wrote.

Business Day interviewed the head of investor relations at the JSE, Michelle Joubert, who said the JSE routinely reviewed all trades.

Mayner told the paper: "We have to get to the bottom of whether anybody benefitted materially from prior knowledge that the former minister would be fired..."