SA's Financial Services Board (FSB) has agreed to a R40 000 fine with Michael Ralston for his trade in 190 000 Africa Cellular Tower (ACT) shares, while in possession of inside information during 2011.
The fine was handed down this month, several months after ACT was finally wound up and its shares suspended on the JSE due to its precarious financial situation and its inability to turn around its loss-making situation. The liquidation move was prompted by an application from a creditor.
According to the FSB's Web site, this is at least the second investigation into ACT share trades, the previous one spanning between 2009 and 2010. The most recent trade took place in 2011 and was investigated by the FSB's Directorate of Market Abuse.
Inside view
The settlement agreement notes Ralston, a chartered accountant employed by Harrison and White Investments Group as MD, came into inside information and purchased shares while in possession of that knowledge.
The settlement agreement notes that a 75%-owned subsidiary of Harrison and White, AJP Investments, conducted due diligence into ACT between December 2010 and February 2011 with a view to acquire a majority stake.
As a result, Ralston came into information that included revenue forecasts for the period between 2011 and 2015, and details of a loan granted to ACT by the Industrial Development Corporation worth R99 million.
However, notes the FSB, the forecast information was not available to the public and, if it was made public, would have had a material effect on ACT's share price.
ACT's last published results, for the six months to August 2011, indicated it had not been able to turn around its loss-making position. In the first half of 2011, it turned over R109.2 million, compared with R102.8 million in the first half of 2010. It reported a net loss of R54.7 million, an improvement on the previous R85.5 million loss.
On 24 February 2011, Ralston bought 190 000 ATC shares, at 10c each, while in possession of the information, he admits, according to the settlement. The company's share was suspended at 5c.
The FSB found there were mitigating circumstances, such as Ralston not being aware he was breaching the law relating to securities trade, making a contribution towards the cost of the investigation, being a first-time offender, and admitting guilt.
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