Insider Trading

The Insider Trading Act 1998 became effective on 17 January 1999.

Essentially, Insider Trading is the sale or purchase of shares of a company after obtaining information about its affairs, which, if publicly known, would materially affect the value of such shares before such information becomes publicly known, thereby securing a profit for, or preventing a loss to oneself or one's relations or friends or associates.

Inside information is defined by section 2 of the Act as specific or precise information which has not been made public and which:

1. is obtained or learned as an insider; and
2. if it were made public, would be likely to have a material effect on the price or value of any securities or financial instruments.

The Insider Trading Act prohibits any person who possesses “price sensitive information” (which relates to the internal affairs of the company or its operations and is information that is not readily available to the investor or any information that may affect the price of such securities if it were generally available), from trading in the securities of the Company.

The Financial Services Board is now monitoring insider trading and is serious about implementing the provisions of the abovementioned Act.

Members who are involved in companies with primary listings on the London and other stock exchanges are also reminded of the more stringent requirements of certain of those stock exchanges.

The purpose of the prohibition is to penalise any person who (i.e. through one's nominee) directly or indirectly, knowingly deals in a security on the basis of unpublished price-sensitive information in respect of that security where such information can influence the value or price of the security concerned and is not generally available to the public or potential investors.

Price sensitive information which may not be available to the public, includes information relating to the following:

• unusual or significant losses or profits incurred by the company during the course of the year ;
• an offer to take over the company;
• restructuring of the company;
• major acquisition/s or disposal of assets;
• knowledge of financial results; and
• knowledge of dividends.

1. it is published in accordance with the rules of the relevant regulated market for the purpose of informing investors and their professional advisors;
2. it is maintained in records by the relevant statutory regulator which, by virtue of any enactment are open to inspection by the public, or
3. it can be readily acquired by those likely to deal in any securities or financial instruments to which such information relates; or
4. it is derived from information which has been made public.

Conviction for insider trading

Insider trading in shares of a company is prohibited by law and such person shall be guilty of an offence if he/she knows that such information has been obtained by virtue of a relationship of trust or any contractual relationship, whether or not that person is a party to that relationship or through theft, bribery, misrepresentation or any other wrongful method, irrespective of the nature thereof.

Persons affected by the prohibition are directors, employees and shareholders of an issuer of securities or financial instruments to which the inside information relates as well as:

• a) professional advisers such as attorneys, accountants and auditors;
• b) outsiders such as stock market analysts and recipients of windfall information;
• c) anyone having access to such information by virtue of his/her employment, office or profession; or
• d) tippees i.e. people to whom insiders consciously give information.

A conviction for insider trading could result in the convicted individual being:

• required to make good losses or damage suffered by the other party to the transaction, as a result of the contravention;
• liable in respect of certain common law remedies;
• accountable to the company for any profits;
• fined an amount not exceeding R2 million or imprisonment for up to 10 years or both.

Disclosure

The required disclosures must be made in a statement that must be lodged with the Financial Services Board. The statement must set out the amount of all equity securities held by the specified person and any changes thereto.

Direct and indirect ownership must be disclosed, which means that ultimate beneficial ownership must be ascertained.
The persons who are obliged to make the disclosures are:

• a) directors or officers of a company that has issued equity securities; and
• b) any person who is or will become directly or indirectly the beneficial owner of more than 10 per cent, or of a percentage as may be prescribed by notice in the Government Gazette, of any class of equity securities which is dealt with on a stock exchange, lodge at the time of the listing of the security on the stock exchange, or within 10 days after he or it becomes such beneficial owner.

• Primary or direct insider trading where a person, namely the insider, is directly involved in the trading of the shares; or
• Secondary or indirect insider trading where a person who is not an insider trades on the strength of information derived from an insider, eg
  • an employee passes information to a relative or friend who then trades in the company's shares;
  • the company and/or its employees obtain information about the company's business associate by virtue of the relationship with that associate or its staff, and then trade in the associate's shares.

Window or Closed Period

A window period is a period during which the company's directors and employees are prohibited from dealing in the company's shares, unless they have the consent of the Compliance Officer/Company Secretary acting on the authority of the Chairman or the Group Chief Executive Officer. The ad-hoc window periods are imposed by the Group Chief Executive Officer or by the Compliance Officer/Company Secretary on instruction from the Group Chief Executive Officer. The window periods will be implemented in the following circumstances:

• When there is a negotiation or a material event involving price-sensitive information in progress an ad-hoc window period in respect of the company's ordinary and/or preference shares will be implemented from the date of successful conclusion of the event until the close of business on the day before a public announcement is made.
• The sale of shares releasable from the company's Employees' Share Incentive Scheme by or on behalf of an employee during a window period is prohibited unless the Compliance Officer/Company Secretary with the authority of the Group Chief Executive gives consent;
• This is also applicable to the company's ordinary shares for four weeks prior to the date of publication of the interim results and interim ordinary dividend declarations and the final results and final ordinary dividend declaration.
• There is a window period of two weeks in respect of the company's preference shares, before the date of publication of a declaration to
  • withhold dividend payments;
  • pay a cumulative dividend; and
  • resume dividend payments.

Announcements of window periods in relation to the company's shares will be communicated to directors and employees as and when necessary by the Secretary.

The directors and employees who have unpublished price-sensitive information in respect of business associates and partners, should refer the intended transactions in shares or other securities to the Compliance Officer/Company Secretary of the relevant organisation.

• a) notify directors and officers, as a matter of routine, before the commencement of a closed
  period, of shares purchased and/or sold; and
• b) monitor dealings to ensure that directors' and officers' dealings are not effected in closed periods.

Employees who, by virtue of their positions, have access to or possess sensitive information on the group or its subsidiaries and associates, may not use such information for personal or other purposes, or to their own advantage or to the advantage of any other person.

Directors and employees who wish to trade during a window period must refer the matter to the Compliance Officer/Company Secretary.

A breach by an employee of the prohibition against insider trading and these instructions, constitutes a breach of the employee's terms of employment. The company will then be entitled to take any action it ordinarily would take in the event of a breach of contract.

Directors and employees are urged to clear share dealings with the Company Secretary, before dealing to ensure that they do not deal in a closed period.

Employees and directors who wish to deal in the company's shares outside a window period are advised to notify the Compliance Officer/Company Secretary of the intention to do so. Dealing in securities outside a window period will not automatically give immunity.

Great care should be exercised to avoid insider-trading problems, especially in respect of multi-function corporate activities such as giving financial advice to subsidiaries and associates or even policyholders.

Unauthorised flow of sensitive information between various business units in the organisation must be limited as far as possible. Conflicts of interest and insider trading arise when sensitive information is allowed to flow freely between members of staff and their business units. Suitable communication barriers must be established and reviewed periodically in order to limit the number of persons with prior knowledge.

Window periods should be kept as short as possible. Undue delays between the date of decision to go public and the date of the actual announcement must be avoided at all times.

Members of Board Committee are regarded as persons with prior access to information and are requested to inform the Compliance Officer/Company Secretary of any other persons who should be regarded as having prior knowledge of particular material information.

The company reserves the right to amend its policy when required, as well as to issue supplementary and ancillary instructions and regulations related to it.

These guidelines are not intended to be exhaustive. An employee's conscience is the best guide in determining whether or not he/she ought to deal in the shares of a company at any given time and should base his/her decision on the type of information he/she is privileged to possess.