Yesterday saw the imposing of a R25 000 penalty against Wolfgang Reinecke (the respondent), after his case was referred to the Enforcement committee of the Financial Service Board (FSB). The case was referred by the directorate of market abuse, in relation to a contravention of the Financial Markets Act (FMA).
“During the period from 13 January to 21 January 2015 the Respondent had access to an Over the Counter platform to buy large volumes of Contracts for Difference (CFDs) including CFDs in Comair Limited (Comair).
“CFDs are contracts between a market participant and a CFD provider wherein the parties agree to exchange the difference between the current values of the underlying share, in this case Comair, and the value of the share at the expiry date of the CFD. A holder of a CFD does not own the underlying share but has exposure to the full price movement of the share whilst using less capital,” explained the FSB.
During, the period mentioned above, the respondent proceeded to place orders, on a recorded ten instances, of the same Comair share on the JSE Equity market.
“His conduct enabled him to acquire Comair CFDs at a lower price than he otherwise would have in the absence of his equity orders. The purpose of his equity orders was to exploit the interrelatedness between the Comair share and the pricing of the Comair CFDs,” the FSB stated.
This constituted a false sense of supply or demand for Comair shares and a potentially artificial price for the share.
“The respondent admitted that he ought reasonably to have known that his conduct constituted a prohibited trading practice as provided in section 80 (1) (b) of the FMA,” said the FSB.
The parties then met and agreed on the penalty, which was ultimately enforced by the chair of the Enforcement Committee, yesterday.
“In arriving at an appropriate penalty the directorate took into account inter alia that the respondent was an inexperienced investor; that he immediately ceased trading in the manner mentioned above once he was made aware of the wrongfulness of his actions; that the main purpose with the transactions related to his CFD trading, and it was not to affect other market participants in any manner; that the respondent has never been found to have contravened the FMA prior to this matter; that he has expressed regret for his actions and that he gave his full cooperation to bring the matter to finality,” added the FSB.