CEO of mineral giant Sibelco risks fine for market manipulation at Nyrstar

The stock exchange watchdog FSMA is asking its sanctions committee to fine Hilmar Rode, the CEO of the Belgian mineral giant Sibelco, for market manipulation as a former director of the zinc group Nyrstar. If it comes to that, the question is whether he can stay on at Sibelco.

Nyrstar, listed in Brussels

is the former owner of the zinc producer of the same name, one of the largest in the world. The production of zinc and other metals is now with the Singaporean commodities trader Trafigura. That takeover, in 2019, is controversial. A group of small shareholders of listed Nyrstar argue that the transaction is the result of a sophisticated strategy to weaken Nyrstar. According to the small shareholders, this strategy was devised from within, due to the numerous ties between Nyrstar and Trafigura, the largest shareholder.

The group of small shareholders has been trying to prove its point through legal proceedings for more than four years, but this has not yielded much. There are, however, the findings of the stock exchange watchdog FSMA. After an extensive investigation in the autumn of 2022, it decided that Nyrstar may have been guilty of market manipulation in 2018. The FSMA then asked its auditor to extend the investigation to Nyrstar’s directors.

In both cases – Nyrstar and the directors – there is now a final report from the auditor. The entire file is now with the sanctions committee of the FSMA, an independent body of the supervisory authority that mainly consists of magistrates. This does not alter the fact that the FSMA can propose penalties to the committee.

At the end of last year it was announced that the FSMA is asking Nyrstar to impose a fine. De Tijd learned that the stock exchange watchdog is also asking for a fine for six (ex) directors of the listed company. In addition to Rode, Nyrstar’s CEO from the end of 2016 to the end of 2019, it also concerns Martyn Konig, the chairman of the board of directors since 2016. The FSMA also targets Carole Cable and Anne Fahy, two other current directors, and Christopher Cox and Jesus Fernandez, two former members of the board.

According to our information, the auditor concluded that they participated in disseminating information about Nyrstar that was found to be false and misleading (see inset). As a result, they are alleged to have violated the 2014 European Regulation on Market Abuse, which may have harmed investors. The FSMA asks the sanctions committee to impose an administrative fine of 80,000 euros on each of them. For Nyrstar itself it is about the same.

That seems a low amount at first glance, especially considering that the fine for the directors can theoretically amount to 5 million euros. But the FSMA management takes into account the fact that they have previously not been sanctioned for similar facts. On the other hand, 80,000 euros is the highest fine that a criminal court can impose (in addition to a possible prison sentence). The FSMA therefore attaches great importance to the facts, seems to be the signal.

The possible fine is a stain on the reputation of the six (ex) directors. In the case of Rode, the question arises whether he can stay on at Sibelco. The Belgian minerals group of the Emsens family presents a code of conduct on its website, with a foreword by Rode and with attention to integrity and ethics in business. Sibelco is listed on the Expert Market, a niche segment of Euronext Brussels for rarely traded shares.

The question also applies to the other (former) directors whether they can retain their current positions, such as those at Nyrstar. A fine does not lead to a legal ban on directors in our country, but the Belgian Corporate Governance Code does stipulate that directors ‘maintain the highest standards of integrity and honesty’. The FSMA proposes that any fines be announced by name, which is often seen as the most severe penalty.

It remains to be seen whether the sanctions committee will follow the FSMA and whether the decision will survive if it is challenged before the Brussels Court of Appeal. As far as can be determined on the FSMA website, only five fines have been imposed for market manipulation since 2006, ranging between 29,740 and 500,000 euros (halved on appeal). That shows the exceptional character.

The possible fines could potentially be used by the minority shareholders in their lawsuits. According to them, the market manipulation was part of Trafigura’s strategy to acquire Nyrstar. In a response, they call any fines a very important step forward in their fight. ‘It is now evident that improper action was taken to the detriment of Nyrstar and all its shareholders with the exception of Trafigura.’ The shareholders hope that this will convince the auditors, lawyers and advisors involved to ‘cooperate resolutely towards full transparency and the defense of the interests of the company and all its stakeholders’.

Another question is whether the fines will still have a criminal tail. Violations of the regulation are punishable by law in our country. The FSMA therefore informed the Antwerp public prosecutor’s office, but it decided to dismiss its investigation to avoid double punishment (the legal principle ‘non bis in idem’).

Some lawyers share the view that that principle applies here, but others do not. The latter point out that the court can investigate other crimes or target other parties, such as Trafigura or the auditors. The hearing officer does not venture to a definitive conclusion about the criminal liability of the accused, De Tijd learned.

Nyrstar maintains that it has always followed the rules and legislation. The FSMA does not wish to comment. Sibelco only said that appointing the CEO is the prerogative of the board of directors and that it remains committed to ‘working with the CEO’.