THE FSCA'S LANDMARK PENALTY ON VICEROY RESEARCH OVERTURNED BY THE FINANCIAL SECTOR TRIBUNAL
The Financial Sector Conduct Authority (FSCA) imposed a historic fine of fifty million Rands on Viceroy Research and its associates for disseminating false information about Capitec, a major South African financial institution. This penalty underscores the importance of adhering to financial regulations and addresses the challenges of regulating cross-border financial activities.
The saga began in January 2018 when Viceroy Research released a damning report titled "Capitec, a Wolf in Sheep's Clothing," alleging predatory lending practices and financial mismanagement within Capitec.
The report sent shockwaves through the financial markets. The impact that the Viceroy statement had on South African financial markets prompted immediate scrutiny from regulators. Despite warnings about the inaccuracies in their claims, Viceroy failed to correct them as required by law.
Unathi Kamlana, FSCA Commissioner, emphasized the seriousness of the penalty, highlighting the obligation of market participants to comply with financial laws. The case also brings attention to jurisdictional complexities in regulating foreign entities.
While the FSCA imposed the penalty, questions arose regarding jurisdiction over foreign entities. In 2022, the Financial Services Tribunal, in a majority decision, found limitations in its personal jurisdiction over a foreign peregrinus, highlighting the challenges in regulating cross-border financial activities. The Tribunal ultimately granted Viceroy Research Partnership's application for reconsideration, leading to the overturning of the FSCA's order.
The ruling of the Tribunal is significant because it established that the Tribunal itself as well as the FSCA lacked personal jurisdiction over a foreign entity, thereby underscoring the challenges inherent in regulating cross-border financial activities.
