R2m US fine for top SA banks uncovered

Johannesburg - FirstRand [JSE:FSR] and Barclays Africa Group [JSE:BGA] said they didn’t report that they were fined $150 000 (R2.1m) by the Chicago Mercantile Exchange last year because the penalty didn’t warrant disclosure to the South African bourse.

The banks, two of South Africa’s largest lenders, received the administrative fines after the CME investigated trades in corn and soybean futures contracts. The penalty didn’t require reference on the Johannesburg Stock Exchange’s news service or in the bank’s annual financial statements, said Sam Moss, a spokesperson for FirstRand.

“It was, however, properly dealt with through all of the necessary group compliance processes,” Moss said on Wednesday in a response to emailed questions.

Barclays Africa said it cooperated fully with US regulators and the leniency of the penalty reflects this. The bank didn’t disclose the fine to investors in a statement or in its annual report.

In August and September last year, the US Commodity Futures Trading Commission ordered the fines and said the lenders had executed “prearranged, non-competitive trades” on several occasions between June 2009 and August 2011.

The two banks inadvertently breached CME rules, even though the hedging process that they followed had been cleared by South African regulators, FirstRand’s Moss said.

Customers unharmed

“No customers or clients were financially impacted as a result of the transaction,” Barclays Africa said in an emailed statement. “Given its quantum, the penalty did not require a stock exchange news service release and is substantially below International Financial Reporting Standards’ materiality thresholds.”

FirstRand dropped 2.01% to close at R49.30 on Wednesday and Barclays Africa declined 1.16% to R170 in Johannesburg trading. The FTSE/JSE Africa Banks Index was 1.27% lower.

“The group will always exercise judgement on both the materiality and the nature of fines in terms of our disclosure to shareholders,” FirstRand’s Moss said.

The US fines were reported by the Business Day newspaper on Wednesday.