By Lehlohonolo Lehana.
The Financial Sector Conduct Authority (FSCA) has imposed penalties exceeding R2-billion on Banxso, alongside lengthy debarments for its directors.
The regulator has also reported the matter to the South African Police Service (SAPS) for criminal investigation.
Banxso, which describes itself as “not your grandfather’s bank”, offers access to forex, stocks, indices, cryptocurrencies and commodities. One product it offers is a “contract for difference” (CFD), which is an agreement between a buyer and a seller in terms of which the buyer will pay the seller the difference between the current value of an asset and its value when the contract was started. This is a way to invest in the movement of an asset (a share, for instance) without actually owning the asset.
But CFDs are considered very risky investments and investors can lose all their money very quickly. CFD trading is banned in the United States.
In a statement, FSCA stated that the regulatory action followed an extensive investigation, which “found that Banxso and its key persons, inter alia, misappropriated client funds, provided false and/or misleading information to clients and to the FSCA, promised clients unrealistic returns and failed to act in the best interests of its clients”.
“The FSCA also considered the seriousness, deliberateness, extent and impact of the conduct on clients and on the integrity of the financial sector.
These factors collectively informed the quantum of the penalties and serve as a strong deterrent against similar misconduct in the market.”
The statement added that: “Given the seriousness and extent of the misconduct, the FSCA has decided to report the matter to the South African Police Service (SAPS) and to share all the evidence obtained during the investigation with SAPS. The Authority will also provide active assistance to SAPS, if requested.”
The R2 billion administrative penalties were imposed on Banxso and its directors, Harel Sekler and Warwick Sneider.
The FSCA has also imposed a R20 million fine on the Banxso CEO at the time, Manuel de Andrade.
A R10 million fine has been imposed on Mohammed Bux, and a R5 million fine on Henry James Simpson, both former key individuals.
In a separate ruling, the FSCA also finalised the withdrawal of Afrimarkets Capital’s licence. The licence had been provisionally withdrawn on 4 July this year, following an investigation. After the company’s licence was provisionally withdrawn, Afrimarkets was given the opportunity to defend itself. However, the FSCA investigation found that Afrimarkets misappropriated client funds, provided advice to clients while it was not authorised to do so, provided false and/or misleading information to clients and to the FSCA, promised clients unrealistic returns and failed to act in the best interests of its clients.
“The FSCA is of the view that Afrimarkets materially contravened various financial sector laws, and no longer meets the fit and proper requirements to operate as a financial services provider,” it said.
In a statement issued a few hours after the FSCA ruling was released, Banxso said: “Our legal teams have been immediately engaged and are conducting a comprehensive review of the findings, the process followed and the basis for the penalties imposed.”
The Banxso statement noted: “We are not in a position to detail our legal strategy at this stage, but we can confirm that we are exploring all available mechanisms to address what we believe to be fundamental concerns with this outcome.”