FSCA clamps down on market abuse with almost R1bn penalties issued and the 1 061 licences suspended

FSCA clamps down on market abuse with almost R1bn penalties issued and the 1 061 licences suspended

Nicola Mawson

The Financial Sector Conduct Authority (FSCA) imposed penalties of almost R1 billion against more than 30 people last year for flouting market conduct rules among other issues, up 843% in rand terms from last year, when it penalised 44 people.

Speaking during the media roundtable on Friday afternoon at the launch of its 2023/24 annual report, Gerhard van Deventer, divisional executive of the FSCA’s enforcement division, said it was now so much more relevant to demonstrate that the authority was ensuring compliance within the context of greylisting.

“We do want to emphasise that, when we take decisive and visible actions, we send a clear message to the financial sector, financial institutions and to individuals in the financial sector that non-compliance will not be tolerated,” he said.

Significant penalties detailed in the Authority’s 2023/24 report included R475 million against Steinhoff’s former boss and kingpin behind fraudulent accounting, Markus Jooste for market abuse contraventions.

Jooste allegedly killed himself a day after the fine was issued, which will now be claimed from his estate.

Coenraad Botha, who solicited investors to place money with him at ridiculous returns, was disbarred for a decade and fined R216m for contravening the Banks Act in April.

This fine is subject to reconsideration by the Financial Services Tribunal.

Jacobus Geldenhuis was fined R143m for allegedly running a Ponzi scheme.

Van Deventer said that while penalties were vital, they also needed to be coupled with behavioural change in the sector.

The FSCA has collaborated with the National Prosecuting Authority, which has led to significant successes including a case against Craig Warriner for operating a fraudulent investment scheme.

Warriner was found guilty of 207 counts of fraud and sentenced to 537 years of imprisonment, which will run concurrently.

In addition, he received a 10-year term for conducting unregistered financial services businesses, which will result in an effective imprisonment of 25 years.

The report said that the substantial increase in the value of administrative penalties was primarily due to the FSCA’s approach to enhance effective deterrence.

“As such, a penalty must reflect the nature, seriousness and extent of the misconduct, the harm caused to financial customers, and the extent of financial benefit to the investigated party,” it said.

The authority also considers the extent to which the conduct was deliberate or reckless, and whether the party being investigated cooperated with the investigation team, it stated.

During the year, the FSCA suspended the licences of 1 061 financial service providers (FSPs), which is about 9% of the total number of licenses.

At least 97% of suspensions were because of the non-submission of statutory returns and/or non-payment of levies.

In 58% of matters, the authority lifted the suspension while at the same time, it withdrew the licences of 75 FSPs.

The authority also debarred 156 people from providing financial services, a slight decrease from the previous period’s total of 210 debarments.

“Most of these debarments were due to dishonest conduct. As in the previous year, a significant number of debarments resulted from representatives submitting false policies,” the report stated.

In a statement, the FCSA said it was concerned about trends in the sector that included construction guarantee policies being issued by unregistered entities, deepfake scams (AI-generated images or video meant to lure people into clicking a link placed there by a cyber scammer), the impersonation of financial services providers, and exploitation via social media platforms.

During the reporting period, the FSCA published 104 public warnings, a 121% increase compared to the previous period.

“These warnings mainly related to unregistered financial services, social media-based scams and impersonations,” the report said.

BUSINESS REPORT