On Tuesday, just weeks after the Financial Services Board (FSB) slapped a hefty R100,000 fine on trader James Gubb for his artistic work on the Oakbay Resources & Energy share price, the regulator confirmed it had launched an investigation into alleged market manipulation in the share dating back to 2014.
The FSB did not reveal the subject of the investigation, which is believed to be Singapore-based Unlimited Electronics & Computers. It said it may seek help from international supervisory bodies. The trades being probed were conducted around the time that Oakbay was listed in November 2014.
Bloomberg recently reported that the Gupta family lent $1m to UEC to be used to trade the Oakbay shares. E-mails seen by Bloomberg revealed that UEC traded the shares at R10 in early December 2014. This trading gave the company a market value of more than R8bn. It was instrumental in determining the share price at which the Industrial Development Corporation (IDC) converted the R250m loan it had extended to Oakbay in 2010 into equity.
On Tuesday, the FSB’s head of market abuse, Solly Keetse, confirmed that in July the JSE had referred trades in Oakbay to the FSB for investigation. "We conducted a preliminary investigation into the matter, which gave us enough reason to launch a formal investigation in October 2017," said Keetse. He confirmed the investigation was into trades in Oakbay around the period it was listed in November.
Asked what penalties the FSB could impose on a Singapore firm, Keetse said: "We cannot pre-empt the outcomes of any investigation. The enforcement committee of the FSB will decide on an appropriate sanction, through an enforcement order, should there be breaches found to any sections of the Financial Markets Act."
Gubb said on Tuesday he hoped that in its investigation of the November 2014 trading "the FSB is as sharp and fast as it was with me". During the nationwide day of protest in March after former finance minister Pravin Gordhan and his deputy Mcebisi Jonas were removed from the Cabinet, Gubb traded Oakbay shares in order to create a price chart depicting a middle-finger salute. "I traded one Oakbay share 23 times to create the price chart. The total value of all the trading was less than R400 and no profit was made," Gubb told Business Day.
He said he could easily have hidden the trades but wanted to be upfront about his protest action. "The bottom line is that my trading proved Oakbay should never have been listed; that listing allowed a massive transfer of wealth from the taxpayer-funded IDC to Oakbay."
The FSB’s reaction was prompt and harsh. It investigated Gubb’s trading and flew people to Cape Town to question him. Two weeks ago Gubb signed acceptance of the R100,000 fine, having appealed against the initial R159,000 the FSB had wanted to levy.
Keetse said he could not give any indication of how long the latest investigation would take. "Due to the complex nature of market abuse investigations, we cannot give a definite period."