The Financial Services Board (FSB) has fined a Dimension Data manager R68 460 for trading in 13 000 shares before the R24.2 billion buyout by Japan-based Nippon Telegraph and Telephone Corporation was announced.
More than ten million shares changed hands in the few days leading up to Dimension Data's announcement of the offer.
Kevin Handelsman, who used to handle investor relations queries before the company was delisted at the end of 2010, was found to have traded in 13 000 Dimension Data shares between 8 July 2010 and 13 July 2010 "whilst in possession of inside information".
The FSB's Directorate of Market Abuse (DMA) referred the matter to the Enforcement Committee. The DMA took several mitigating circumstances into account, including the fact that Handelsman is a first time offender, showed contrition and cooperated with the DMA.
Handelsman says the trade was "just an unfortunate mistake" and the number of shares had no impact on the market as the number of shares was not material.
The FSB, which has the power to impose unlimited penalties, has been investigating whether information around the buyout was leaked, leading to suspicious trade in Dimension Data shares, since July 2010.
On 15 July 2010, Dimension Data announced the bid, which sent its shares shooting more than 20% higher in early morning trade, before settling to close at R14.12. However, in the days just before the announcement, shares in the company changed hands more rapidly than usual.
On 12 July, 1.6 million shares changed hands, while another 5.2 million were traded the next day. On 14 July, the day before the announcement, 3.9 million trades took place, while on the day the news was published, 37.6 million stocks were exchanged.
The FSB investigated the volume of shares traded between 12 July and the day the sale was announced. In terms of the Securities Services Act, it is an offence to disclose sensitive information that could have an effect on a company's share price before the market is informed, or to use such information to benefit from a movement in the share price.
The investigation, which is not probing the company but rather trade in its stock, continues. Dimension Data is not commenting on the matter.
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