FirstRand Says Undisclosed U.S. Fine Was Properly Handled

  • FirstRand, Barclays Africa fined $150,000 for CME rule breach
  • Lenders' hedging had been cleared by South African regulators

FirstRand Ltd. and Barclays Africa Group Ltd. said they didn’t report that they were fined $150,000 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 spokeswoman for FirstRand.

“It was, however, properly dealt with through all of the necessary group compliance processes,” Moss said Wednesday in a response to e-mailed questions. Barclays Africa said it cooperated fully with U.S. regulators and the leniency of the penalty reflects this.

In August and September last year, the U.S. 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. Barclays Africa didn’t disclose the fine to investors in a statement or in its annual report.

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 e-mailed 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 1.7 percent to 49.45 rand and Barclays Africa declined 1.4 percent to 169.65 rand as of 4:33 p.m. in Johannesburg trading. The FTSE/JSE Africa Banks Index was 1.4 percent lower.

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

The U.S. fines were reported by the Johannesburg-based Business Day newspaper on Wednesday.

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