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Back to square one: What JP Markets’ exoneration means for the forex trading industry


Jeff Cammack has been the COO of since 2012. His focus has been establishing the educational and research processes that ensure the company’s independence and credibility.

Just in time for Halloween, JP Markets — until recently the most vilified forex broker in South Africa — has risen from its grave. Its once boastful slayer, the Financial Sector Conduct Authority, has been left helpless and shame-faced.

A quick background: In June 2020, a Financial Sector Conduct Authority (FSCA) investigation found that JP Markets had been cheating its own forex traders by increasing their costs without notification, manipulating market data and ignoring withdrawal requests.

In addition, JP Markets had not applied for an Over the Counter Derivative Provider (ODP) licence, a new requirement for all forex brokers from 2020. The FSCA suspended JP Markets’ licence and filed a liquidation order, which was granted by the Gauteng High Court in September. Most observers thought this would be the end of the matter. But JP Markets appealed against the judgment.

Last Wednesday, following a lengthy legal battle, the Supreme Court of Appeal (SCA) exonerated JP Markets completely, removing the threat of liquidation and paving the way for a countersuit for damages. 

One of the Supreme Court of Appeal’s main concerns was that the FSCA had not investigated other brokers who had not applied for an ODP licence, of which there were many. That the FSCA used JP Markets’ failure to apply as a central argument for the liquidation smacked of persecution.

The SCA also pointed out that JP Markets was a solvent company, with 70 employees, R220-million in cash and more than 300,000 clients. JP Markets showed the court that it had paid out more than R1-billion to traders in the three months before its suspension. To liquidate a healthy company with that many clients and employees, the FSCA needed a clear mandate, which the court says did not exist.

At the time of the liquidation order, both concerns were discussed by us at TradeForexSA and many others in the Forex trading community. There was muttering of the FSCA overstepping its authority. But there was little public fuss, as many brokers were aware that without an ODP licence they could be next on the FSCA’s hitlist. The FSCA had made it clear in their public statements regarding JP Markets that they were investigating other brokers in the country for similar practices. To speak against the FSCA at such a time would have been unwise in the extreme.

So, to see the FSCA publicly chastised and declawed is a relief for many. But it should also be a great cause for concern. South African forex traders need to know they are protected by a strong regulator with the power to bring reckless brokers to book. Forex traders also need to know that when the FSCA acts, it does so legally and without prejudice. Finally, forex traders need to know that the courts will guarantee their rights as consumers of financial services. 

So, it will worry many South African traders that the SCA also argued in its judgment that “because traders were free to accept or decline the spreads [fees] offered to them, it was not objectionable to quote differentiated spreads to clients that had been regarded as ‘toxic’ ”. 

With that one remarkably consumer-unfriendly statement, forex brokers in South Africa are now free to raise their fees for clients they deem unsatisfactory, for whatever reason and without notification. 

The court also found that the other grievances against JP Markets were unfounded: The complaints made directly to the FSCA were too few to matter when compared with its 300,000 clients. The fault here must lie with the FSCA; with more groundwork it could have made a better case for those it is meant to protect. 

And in one of the stranger judgments, the court seems to take JP Markets at its word that it never manipulated the trading platform:

“[JP Markets] further explained that because trading takes place on an automated trading platform, interruptions in access thereto would be detrimental to its business. It therefore employed all precautions at its disposal to prevent such interruptions or system failures.” 

So, the FSCA has been admonished and will have to be more careful next time it takes on another forex broker, which is no bad thing. Perhaps it will be better prepared and less overzealous next time. 

But make no mistake, there are many unethical forex brokers in South Africa who will be celebrating this judgment today. The SCA has made it more difficult for the FSCA to protect South African citizens from predatory financial companies. DM/BM


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