The Financial Sector Conduct Authority (FSCA) in South Africa has taken decisive action against two financial services firms, FXNovus and The Grand Trading, due to concerns about their operations being controlled from overseas. The FSCA provisionally withdrew the licences of both firms, citing a real risk of harm to clients or the public if allowed to continue operating. This move is part of the FSCA's increased scrutiny of trading platforms, investment offers, and financial qualifications.
The FSCA raised concerns about people based in Cyprus exercising control over financial services operations without their roles and authority being adequately established. In the case of FXNovus, preliminary findings indicated that its financial services business was directed, monitored, and controlled by people based in Cyprus. Similarly, The Grand Trading faced concerns after the FSCA found preliminary evidence that people outside its management structure, some based in Cyprus, were exercising operational control over the business.
Both FXNovus and The Grand Trading have been prohibited from conducting further financial services business or accepting additional client funds while their provisional licence withdrawals remain in force. The companies have been given an opportunity to make representations before the regulator decides whether the withdrawals should become final. This action by the FSCA highlights its focus on ensuring that financial services providers are properly authorised, supervised, and accountable.
The FSCA has also been actively investigating other financial services providers. On 5 October, the regulator announced an investigation into Sanus Financial Services, which trades as EZInvest and Financix, following complaints from clients. The investigation includes Sanus directors Nicolaas Louw and Bradley Bickham Distras, as well as its sole key individual, Annette Smyth. The FSCA stressed that it had not made any findings of wrongdoing against the company or the individuals concerned.
In addition to the investigation into Sanus Financial Services, the FSCA issued public warnings about Uwen Paulsen and Geefx, and Sandile Arnold Ngubane and EduMe with Sandile November. The regulator confirmed that neither Paulsen nor Geefx is authorised by the FSCA to provide financial services, and warned consumers about the risks of unsolicited investment opportunities. The FSCA also alleged that EduMe was unlawfully producing and selling regulatory examination certificates.
The FSCA's actions are part of its efforts to maintain fair and effective regulatory outcomes in an increasingly complex financial sector. According to FSCA commissioner Unathi Kamlana, the regulator operated in a rapidly evolving financial sector during the year, requiring it to respond to emerging risks, technological innovation, and changing market dynamics. The FSCA reported R2.8 billion in administrative penalties and fines, alongside 678 investigations finalised, compared with 633 the previous year.
Despite the significant penalties imposed, the FSCA received only R1.23 million on Treasury's behalf, highlighting the challenges in collecting penalties. The regulator also withdrew 14 licences, suspended 31, debarred 68 individuals from rendering financial services, and issued 140 scam alerts during the year. The FSCA received 7,842 complaints and queries during the year and resolved 79% of them.
Key points
- The FSCA has barred two financial services firms from accepting new client funds due to concerns about their operations being controlled from overseas.
- The regulator has also launched an investigation into Sanus Financial Services and issued public warnings about Uwen Paulsen and Geefx, and Sandile Arnold Ngubane and EduMe with Sandile November.
- The FSCA reported R2.8 billion in administrative penalties and fines, but received only R1.23 million on Treasury's behalf.
