FSCA defends R2bn enforcement action against Banxso as liquidation process unfolds

The Financial Sector Conduct Authority (FSCA) has defended its regulatory action against online trading platform Banxso and its directors, saying it followed due process in a complex investigation that ultimately led to the freezing of the company’s bank accounts and its provisional liquidation.

This comes after the FSCA imposed a staggering R2 billion in administrative penalties on Banxso and its key individuals for a range of serious financial misconduct offences.

Alongside the hefty penalty confirmed on Banxso and its directors, Harel Adam Sekler and Warwick David Sneider, the regulator also levied an additional fine of R16 million on the company for various other contraventions.

Individual penalties were imposed on directors Manuel de Andrade, Mohammed Bux, and Henry James Simpson, amounting to R20m, R10m, and R5m, respectively.

All four directors — Sekler, Sneider, de Andrade, and Bux — face a blanket debarment from the industry for a period of 30 years, while Simpson has received a lesser debarment of 10 years.

Responding to questions from Business Report on Friday, the regulator said that following the announcement of administrative penalties against Banxso and its directors, the safeguarding of client funds now falls largely within the liquidation process.

The FSCA said it had referred its preliminary investigation findings to the Financial Intelligence Centre (FIC) in September 2024 for possible intervention, including the freezing of Banxso’s bank accounts.

In October 2024, the FIC froze the accounts, after which some clients approached the courts to apply for the company’s liquidation. The Western Cape High Court subsequently placed Banxso under provisional liquidation and appointed provisional liquidators.

"Therefore, clients may contact the liquidators for further details in this regard," said the FSCA.

On whether it would seek to attach or freeze additional assets belonging to Banxso or its directors to secure the administrative penalties, the FSCA said it would “follow its due processes” in order to recover the fines.

The regulator also confirmed that it has referred the matter to the Directorate for Priority Crime Investigation, commonly known as the Hawks. However, it declined to provide further details, including whether a criminal case had been formally opened, the police station involved or the charges under consideration.

The FSCA concluded that Banxso's conduct materially contravened several key regulations, including the Financial Sector Regulation Act, the Financial Advisory and Intermediary Services Act, and the General Code of Conduct for Authorised Financial Services Providers, among others. These violations reflect a serious breach of trust and duty within the financial services industry.

In determining the scale of the administrative penalties, the FSCA evaluated the financial gains that Banxso and its directors accrued through their misconduct, alongside the widespread impact their actions had on clients and the financial sector's integrity. 

Banxso has indicated that it may legally challenge the FSCA’s ruling, despite previously resisting remedial action and failing to mitigate the imposed penalties.

"Our legal teams have been immediately engaged and are conducting a comprehensive review of the findings, the process followed, and the basis for the penalties imposed," it said in a statement.

"While we respect the regulatory framework within which we operate, we maintain our position that there are significant issues that warrant thorough legal examination. We are not in a position to detail our legal strategy at this stage, but we can confirm that we are exploring all available mechanisms to address what we believe to be fundamental concerns with this outcome." 

In response, the FSCA said Banxso has the right to apply for reconsideration of its decisions, and that the regulator would consider the appropriate course of action should such an application be lodged.

"Banxso has a right to apply for reconsideration of the FSCA’s decisions. The FSCA will consider the appropriate course of action if and when such application is received," it said.

Addressing criticism that regulatory action took too long, the FSCA said the investigation was complex, resource-intensive and faced challenges beyond the regulator’s control.

"This was a complex investigation which required a lot of resources and which encountered challenges, some of which were not in the FSCA’s hands. Further, due processes had to be followed in order to reach finality of the investigation and enforcement," saud the FSCA.

BUSINESS REPORT