Breaking Borders To Combat Financial Misconduct

Introduction

On 9 July 2025, the High Court of South Africa, Gauteng Division, Pretoria (the “High Court”) broadened the requirements for the jurisdiction of South African regulatory bodies over foreign persons (known as peregrini) in the case of Financial Sector Conduct Authority v Financial Services Tribunal and Others. This judgment shows the importance of a dynamic and robust regulatory framework in our fast-developing digital world.

Background

This case arose following the publication of a document titled “Capitec: A wolf in sheep's clothing” on 30 January 2018 by an American entity called Viceroy Research Partnership LLC (“Viceroy”). The distribution and publication of this document by persons residing outside South Africa (collectively, the “Respondents”) caused the share price of Capitec Bank Holdings Limited (“Capitec”) to plummet by more than 20%, resulting in a loss of over ZAR25 000 000 000 of its market capitalisation before it recovered to end 3% down on the day.

On 30 August 2021, The Financial Sector Conduct Authority (“FSCA”) found that the conduct of Viceroy and the Respondents amounted to false, misleading or deceptive statements, promises and forecasts in terms of section 81 of the Financial Markets Act 19 of 2012. The FSCA imposed an administrative penalty of ZAR50 000 000 on Viceroy and the Respondents in terms of section 167 of the Financial Sector Regulation Act 9 of 2017 (“FSRA”).

On 15 November 2022, The Financial Services Tribunal (the “Tribunal”) upheld an application for reconsideration brought by the Respondents and set aside the administrative penalty. The Tribunal held that the FSCA did not have jurisdiction over the persons of the Respondents, despite having jurisdiction over their conduct.

The FSCA subsequently launched an application in July 2025 for the Tribunal's decision to be reviewed and set aside on one of three grounds.

First ground of review: Common law requirements for personal jurisdiction not applicable

The first ground of review advanced by the FSCA was that it was not required to satisfy the common law requirements for personal jurisdiction before imposing the administrative penalty.

In Bid Industrial Holdings (Pty) Ltd v Strang  (“Strang”), the Supreme Court of Appeal (“SCA”) developed the common law position by providing that either of the following must occur to found or confirm a superior court's jurisdiction over the person of a peregrinus in a claim sounding in money:

1. the property of the peregrinus must be attached; or
2. to the extent that attachment is impossible, the summons must be served on the defendant while in South Africa and there must be sufficient connection between the suit and the area of jurisdiction of the court concerned.

The High Court gave the following reasons for dismissing the FSCA's first ground of review:

1. the FSRA does not deal with jurisdiction, therefore whether the FSCA has jurisdiction to impose an administrative penalty depends on whether a superior court has such jurisdiction under the common law; and
2. the common law requirements for personal jurisdiction do apply to an administrative penalty imposed by the FSCA, as it is deemed to be a monetary debt payable in terms of a civil judgement lawfully given in a superior court and is not merely the exercise of a regulatory power. This is in terms of sections 170(1) and (2), read with the definition of “Court” in section 1, of the FSRA.

The High Court therefore held that to give a lawful civil judgment, a superior court and by implication the FSCA, must have jurisdiction under the common law over the persons on whom the penalty is imposed.

Second ground of review: Respondents consented to jurisdiction

The second ground of review advanced by the FSCA was that the Respondents consented to jurisdiction.

In National Arts Council and Another v Minister of Arts and Culture and Another, the court held that the party alleging submission to jurisdiction bears the onus of proving that it took either of the following forms:

1. the parties agreed to submit to the jurisdiction of the court at the time the contract was concluded or when the dispute arose; or
2. the defendant consented to the jurisdiction of the court.

The High Court rejected the FSCA's argument that the Respondents consented to jurisdiction on a balance of probability because:

1. the Respondents did not have full knowledge of their right to raise a jurisdiction point;
2. the Respondents' refusal to respond to the FSCA's notice of intention to impose an administrative penalty mitigated against any notion that they consented to jurisdiction; and
3. the lodgement of the application for reconsideration by the Respondents did not constitute consent to jurisdiction.

Third ground of review: Common law requirements for personal jurisdiction were met

The third ground of review advanced by the FSCA was that the common law requirements for personal jurisdiction were met.

The High Court dismissed this argument on the following grounds:

1. the FSCA's notice of intention to impose an administrative penalty constituted a “summons” for purposes of the FSRA. The notice of intention was therefore required to be served on the Respondents in South Africa to confer jurisdiction on the FSCA; and
2. the Tribunal was bound by the SCA's decision in Strang and therefore service in South Africa was necessary to establish jurisdiction.

Judgment: Development of common law

Despite the dismissal of the FSCA's grounds for review, the High Court held that an administrative penalty may be imposed in terms of section 167 of the FSRA if this section's requirements have been satisfied. The High Court also developed the common law to provide that jurisdiction over the person of a peregrinus can be established through the delivery of notice by any means (including electronically) provided that the conduct of the peregrinus is sufficiently closely connected to South Africa.

Impact of this judgment

This judgment is in line with South Africa's transition to the Twin Peaks model of regulation which is a fundamental restructuring of South Africa's financial sector regulation to strengthen the stability, integrity and fairness of its financial system. The FSRA and the Conduct of Financial Institutions Bill (the “COFI Bill”) are both central pillars of South Africa's Twin Peaks model. The FSRA was signed into law on 21 August 2017 and established two main regulators, namely the Prudential Authority responsible for prudential regulation and the FSCA responsible for market conduct supervision. The COFI Bill, which has not yet taken effect as law, will consolidate and modernise market conduct requirements for all financial institutions.

This judgment illustrates the evolution towards a more transparent and accountable financial regulatory system in South Africa for the following reasons:

1. first, the previous common law position prevented the FSCA from taking action against peregrini whose conduct was deliberately aimed at causing financial harm in South Africa. This judgment enables South Africa's regulatory system to respond timeously to misconduct in the digital age;
2. second, the importance of regulating financial markets far outweighs the requirement to serve documents initiating the enforcement of financial regulation on a peregrinus This is evident by the catastrophic impact of the publication on Capitec, one of South Africa's leading financial institutions;
3. third, it is essential that actors both inside and outside South Africa are held to the same standards to promote fairness and prevent the exploitation of jurisdictional loopholes. This promotes trust in South Africa's financial system and encourages both domestic and international investment; and
4. fourth, the imposition of an administrative penalty serves as a deterrent and contributes to South Africa's fiscus, which is crucial in light of the country's economic challenges.

Conclusion

This High Court ruling is an important step in the development of South Africa's financial regulatory framework in response to global and technological changes, ensuring the protection of market integrity and the national economy.

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