19
A landmark judgment in South Africa has made it clear that foreign companies and individuals can no longer assume they are safe from punishment simply because they are not physically based in the country. The ruling, delivered by the High Court, has expanded the powers of the Financial Sector Conduct Authority (FSCA), ensuring that misconduct which affects the country’s financial markets will not go unpunished, regardless of where the wrongdoer is located.
This decision came after a case involving a controversial report released in 2018 titled Capitec: A wolf in sheep’s clothing. The report accused Capitec Bank of serious irregularities. Its publication caused panic in the financial market, wiping off more than R25 billion in value from Capitec’s shares in just a few hours, although the stock recovered slightly before closing down by about 3%.
Following investigations, the FSCA concluded that the claims in the report were false, misleading, and deceptive, in violation of Section 81 of the Financial Markets Act of 2012. As a result, the FSCA imposed an administrative fine of R50 million on the foreign individuals and entities behind the report. However, the accused parties challenged the decision, arguing that since they were not residents of South Africa and had no physical presence in the country, the FSCA lacked the jurisdiction to penalise them.
In 2022, the Financial Services Tribunal agreed with the foreign companies, stating that while the FSCA could regulate the conduct, it could not enforce penalties on the individuals because they were not physically within South Africa. This raised fears that foreign entities could freely interfere with South African markets without facing consequences.
But now, the High Court has overturned that decision. The court ruled that the FSCA indeed has the authority to take action against foreign individuals and organisations as long as certain legal requirements are met. These include proving a close connection between the foreign conduct and South Africa, serving notice electronically if necessary, and showing that the case falls within the provisions of the Financial Sector Regulation Act.
Mtho Maphumulo, a partner at the law firm Adams & Adams who specialises in financial sector law, described the judgment as a landmark development. He explained that the ruling shows distance does not guarantee immunity. According to him, the judgment has modernised outdated common law rules, which previously required that a foreign person must be physically served with legal documents within South Africa before facing sanctions.
He added that in today’s global economy, where financial transactions and digital communications cross borders instantly, insisting on physical presence would have allowed offenders to escape justice simply by staying offshore. With this ruling, the FSCA now has stronger powers to deal with cross-border financial crimes.
The High Court decision ensures that foreign companies and individuals who deliberately target South Africa’s financial markets will face consequences. The court emphasised that protecting the integrity of the local financial system is vital for both the economy and the public.
Maphumulo also highlighted that the ruling brings South Africa in line with global best practices. Many countries are already adjusting their laws to cover digital markets and cross-border financial activities. By expanding the FSCA’s powers, South Africa has now closed a significant regulatory gap that wrongdoers had previously exploited.
“This is a progressive and necessary step,” Maphumulo said. “It sends a clear message that if anyone, no matter where they are in the world, tries to manipulate or destabilise South Africa’s markets, they will be held accountable.”
Legal experts believe the judgment is a major milestone in the development of South African common law. It adapts old principles to modern realities where financial harm can be done across borders with just a report, a click, or an online transaction. The case has also been referred back to the Tribunal for reconsideration based on the merits, now under the clear authority of the FSCA.
For businesses and financial players around the world, the judgment is a strong warning. South Africa’s markets are open and connected globally, but they are not open to manipulation without consequences. The ruling demonstrates that regulatory frameworks are evolving to match the challenges of the digital era. It also reassures investors that South Africa is serious about protecting market integrity and stability.
As financial markets continue to grow in complexity, this case may serve as a reference point for other African countries dealing with similar cross-border issues. It shows that distance or jurisdiction will not shield foreign actors from accountability when their actions cause harm in another country’s financial space.
