A comparative study of the statutory prohibition of insider trading in Namibia and South Africa

• Author: Thabang Terrance Mabina, Howard Chitimira
• Pages: 492-514

A comparative study of the statutory prohibition of insider trading

in Namibia and South Africa1

LLM student Thabang Terrance MABINA2

Associate professor Howard CHITIMIRA3

Abstract

Insider trading is statutorily prohibited in both Namibia and So uth Africa.

Nonetheless, insider trading activities are reportedly s till occurring with some degree of

frequency in the Namibian and South A frican financial markets. Given this back ground, the

article comparatively explores the regulation of insider trading in Namibia and South

Africa. This is done to investigate and scrutinise the adequacy of such regulation. In this

regard, the relevant provisions, penalties, remedies and other enforcement approaches

contained in the Namibian and South African anti-insider trading legislation are discussed.

The au thors submit that the Namibian anti-insider trading regulatory framework is

relatively more flawed and inadequate than that of South Africa. Accordingly, the article

discusses the statutory prohibition of insider trading in Namibia prior to, and subsequent to

2004 in order to isolate such flaws. Thereafter, recommendations and enforcement

approaches that could be incorporated in the relevant Namibian insider trading laws from

the South African anti-insider trading regulatory framework are briefly d iscussed.

Keywords: insid er trading, enforcement framework, market abuse, penalties,

regulation.

JEL Classification: K22, K33

1. Introduction

Insider trading is a very difficult concept to define. Therefore, it is not

surprising that insider trading is not expressly defined in most anti-insider trading

legislation that have been enacted in several countries to date. Accordingly, in

many countries, practices that could lead to insider trading offences are merely

stated in such legislation. This approach is also followed in both the Namibian4 and

South African5 insider trading legislation. Nonetheless, for the purposes of this

article, insider trading is defined as a practice by which one person armed with

1 This article was influenced in part by Mabina’s LLM Dissertation entitled The Statutory Prohibition

of Insider Trading in Namibia: Lessons from South Africa. In this regard, he wishes to acknowledge

the expert input of Prof H Chitimira.

2 Thabang Terrance Mabina - LLB, LLM, Faculty of Law, Nor th West University, South Africa,

terrancemabina@gmail.com.

3 Howard Chitimira - LLB, LLM (UFH), LLD (NMMU), Faculty of Law, North West University,

South Africa, Howard.Chitimira @nwu.ac.za.

4 See generally s 241 of the Companies Act 28 of 2004 (Companies Act 2004). See also clauses 155;

156 & 160 of the Financial Institutions and Markets Bill, 2012 (Financial Institutions and Markets

Bill 2012).

5 See ss 77; 78 & 82 of the Financial Markets Act 19 of 2012 (Financial Markets Act).

Juridical Tribune Volume 9, Issue 2, June 2019 493

price-sensitive non-public (confidential) information, concludes a transaction in

securities or financial instruments to which that information relates without sharing

that information with others, to the detriment of such persons or other innocent and

unwitting investors.6

As indicated above, insider trading is prohibited in both Namibia7 and

South Africa.8 Nevertheless, insider trading activities are reportedly still occurring

with some degree of frequency in the Namibian and South African financial

markets.9 Given this background, the article comparatively explores the regulation

of insider trading in Namibia and South Africa. This is done to investigate and

scrutinise the adequacy of such regulation. In this regard, the relevant provisions,

penalties, remedies and other enforcement approaches contained in the Namibian

and South African anti-insider trading legislation are discussed. The authors submit

that the Namibian anti-insider trading regulatory framework is relatively more

flawed and inadequate than that of South Africa. For instance, unlike the position

in South Africa,10 there is no legislation that adequately and expressly prohibits

insider trading in Namibia. Put differently, insider trading is narrowly and

indirectly prohibited in section 241 of the Companies Act 2004, which outlaws any

dealing in shares by directors or anyone with inside information before a public

announcement is made. On the other hand, South Africa has to some extent,

managed to develop a relatively adequate anti-insider trading regulatory framework

under the Financial Markets Act, the Protection of Funds Act and the Financial

Sector Regulation Act.11 Thus, notwithstanding the fact that the Financial Sector

Regulation Act does not expressly prohibit insider trading, it requires the South

African Reserve Bank to create the Prudential Authority (PA) and it replaces the

Financial Services Board (FSB) with the Financial Sector Conduct Authority

(FSCA) in order to strengthen consumer protection and enhance the integrity of the

South African financial markets and financial services industry. South Africa also

has the best anti-insider trading regulatory framework in the Southern African

Development Community (SADC).12 It is further submitted that the Johannesburg

6 Osod e "Defending the Regulation of Insider Trading" 303; Chitimira 2016 Journal of Corporate

and Commercial Law & Practice 30-31.

7 See s 241 of the Companies Act 2004 read with clauses156 & 160 of the Financial Institutions and

Markets Bill 2012.

8 See ss 78 & 82 of the Financial Markets Act read with ss 6A-6I of the Financial Institutions

(Protection of Funds) Act 28 of 2001 as amended (Protection of Funds Act).

9 Osode "Defending the Regulation of Insider Trading" 303; Osode 2000 Journal of African Law 241

& Haoseb Regulation of the Offence of Insider Trading 4-42.

10 See ss 78 & 82 of the Financial Markets Act read with sections 6A-6I of the Protection of Funds

Act.

11 Financial Sector Regulation Act 9 of 2 017 (Financial Sector Regulation Act). See ss 46; 52; 69; 74

& 265.

12 Notably, the SADC was established in 1992, to promote regional integration and combat poverty in

member states by ensuring peace and security and optimum economic development in Southern

Africa. Thus, like the European Union (EU), the SADC is a regional economic community of

countries with common political and socio-economic needs and objectives. It comprises 15

member states namely, Angola, Botswana, Democratic Republic o f Congo, Lesotho, M adagascar,

Malawi, Mauritiu s, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania,