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

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

Insider trading is statutorily prohibited in both Namibia and South Africa. Nonetheless, insider trading activities are reportedly still occurring with some degree of frequency in the Namibian and South African financial markets. 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... (see full summary)

 
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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,

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