In spite of the recent worldwide regulatory reforms which have extended highly detailed oversight criteria toward the retail and institutional FX industry sectors, evidently not all regulatory authorities are immune to possible error of judgement.
Forex Magnates has been made aware of an event which occurred in June this year which could be construed as a possible oversight by South Africa's financial markets regulator, in which it suspended the license of South African FX company ACM Gold, subsequently reinstating it after having been unable to ascertain the full extent and validity of the complaint.
Background
During the periods of May and June this year, the South African Financial Services Board (FSB) released a document which publicized a list of companies across all sectors of the financial services spectrum which had been the subject of a license revocation or suspension by the FSB.
The FSB Oversees All
Non-Bank Financial Services
In South Africa
Among these companies were some FX firms which operate in South Africa, as depicted by the full list displayed below.
In order to investigate, Forex Magnates spoke to a series of FX market participants in South Africa with a view to ascertain the cause of this.
Saad Sidat, Head of Product Development at South African FX firm ACM Gold, explained to Forex Magnates today that his firm had indeed experienced this.
Mr. Sidat outlined that, "This was our previous license number which was temporarily suspended due to a false accusation by a particular client which then turned out that the client was attempting to make illicit gains from us. The instigator of the complaint was indeed not a client of ACM Gold, but an imposter and was using the name of an actual client of ours without permission in order to present a written statement, signed by lawyers."
According to Mr. Sidat, the FSB did not make contact with ACM Gold at any stage prior to suspending the FSB license. Only afterwards did the FSB request a statement or details from ACM Gold, and at the time of suspension did not investigate the company's records which would have clearly shown that this complaint had no basis. Instead, the FSB suspended the company's regulatory license and appended it to the list.
Baseless Allegations
Mr. Sidat stated that this particular complaint had not only been raised by an individual who was not an actual client of the firm, but the entire circumstance on which the complaint was based should be a cause for regulators such as the FSB to gain substantiated evidence rather than take it at face value.
"The originator of the complaint was a resident of Ghana rather than South Africa, and had never been a client of ACM Gold. He detailed that he was a banker, and had $500,000 invested in the company which he was unable to withdraw. He further explained that he had more money than this and his initial $500,000 was insignificant, all of which was a fabrication so we took a statement from him," said Mr. Sidat.
Reinstatement – But No Apology
ACM Gold's senior management were indeed surprised by the FSB's decision, and upon raising this issue with the regulator, the FSB reinstated the company's license forthwith, under a new license number, 19015. Indeed, no apology was proffered to ACM Gold, neither was it published on FSB's website that this had been an oversight and that the license had been restored.
Forex Magnates posed questions to the FSB in order to ascertain the exact circumstances surrounding this matter, to which Tembia Morele, a specialist within the FSB's Communication and Liaison Department explained, "The ACM Gold license was provisionally withdrawn because the firm no longer met the fit and proper requirements and such provisional withdrawal was lifted after they complied with the conditions for lifting the provisional withdrawal."
Ms. Morele further explained to Forex Magnates that the regulator is precluded by section 22 (1)(a) of the Financial Services Act from disclosing details of their investigation, and did not elaborate on exactly what the reasons for this action had been.
Whether this was an isolated case of misjudgment or failure to follow procedure on the part of the regulatory authority, or whether it is a common occurrence is not quantifiable.
Stephen Nefdt, Director of FXB Africa, explained to Forex Magnates that the FSB has a process that it must follow when responding to customer complaints, and that he has "Never noticed something like this happening. Usually, if there is a complaint, the FSB must investigate it and I am sure that it they would not revoke a license without any type of consultation."
Forex Magnates attempted to contact the FSB to gain further information as to the methodology by which it addresses these procedures, with no response having been offered via email or telephone.
The document displaying the entire list of companies whose licenses were suspended by the FSB can be viewed here:
https://www.scribd.com/doc/179852857/FSB-pdf
