Abstract
In an early attempt to combat market abuse in the South African financial markets, legislation such as the Companies Act, the Financial Markets Control Act and the Stock Exchanges Control Act were enacted. However, these Acts failed to effectively curb market abuse activities that were allegedly rife in the financial markets. Consequently, the Insider Trading Act was enacted and came into effect on 17 January 1999. While the introduction of the Insider Trading Act brought some confidence in the financial markets, market abuse activities were still not extinguished. The provisions of the Insider Trading Act were to some extent inadequate and ineffectively implemented. Eventually, the Securities Services Act was enacted to repeal all the flawed provisions of the Insider Trading Act. Notwithstanding these efforts on the part of the legislature, more may still need to be done to increase the number of convictions and settlements in cases involving market abuse in South Africa. It is against this background that a historical overview analysis of the regulation of market abuse is carried out in this article to expose the flaws that were previously embedded in the South African market abuse laws prior to 2004. This is done to raise awareness of the situation on the part of the relevant stakeholders, as they consider whether such flaws were adequately resolved or subsequently re-introduced under the Securities Services Act and the Financial Markets Act. To this end, the article firstly discusses the historical development and regulation of market manipulation prior to 2004. Secondly, the regulation and enforcement of insider trading legislation prior to 2004 are examined. Moreover, where possible, certain flaws of the previous market abuse laws that were re-incorporated into the current South African market abuse legislation are isolated and recommendations are made in that regard.
Highlights
Its reputation for high levels of market abuse practices associated with the South African financial markets in the mid 1990s is a case in point
The enactment of the Insider Trading Act and the Securities Services Act could be seen as valuable attempts on the part of the South African legislature to improve the general regulation of market abuse, more may still need to be done to increase the number of convictions and settlements in cases involving market abuse in South Africa
This is done by briefly examining the regulation of market manipulation under the Stock Exchanges Control Act and the Financial Markets Control Act
Summary
The consequences of market abuse have been felt in a number of jurisdictions globally, including in South Africa. Its reputation for high levels of market abuse practices associated with the South African financial markets in the mid 1990s is a case in point. In an early attempt to combat market abuse practices in the South African financial markets, legislation such as the Companies Act, the Financial Markets Control Act and the Stock Exchanges Control Act were enacted. The enactment of the Insider Trading Act and the Securities Services Act could be seen as valuable attempts on the part of the South African legislature to improve the general regulation of market abuse, more may still need to be done to increase the number of convictions and settlements in cases involving market abuse in South Africa. It is against this background that a historical overview analysis of the regulation of market abuse is carried out in this article to expose the flaws that were previously embedded in the South African market abuse laws prior to 2004. Where possible, certain flaws of the previous market abuse laws that were re-incorporated into the current South African market abuse legislation are isolated and recommendations are made in this regard.
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