The Financial Services Tribunal has ruled that the Financial Sector Conduct Authority cannot impose administrative penalties on two or more persons jointly and severally under section 167 of the Financial Sector Regulation Act (FSRA).
The Tribunal held that section 167 requires the FSCA to determine an appropriate penalty for the particular person who contravened the law, taking into account factors relating to that person and that person’s conduct.
The Tribunal set out its views on the competence of joint-and-several penalties in two related decisions delivered on 23 September 2026 involving an unlicensed investment scheme. Both decisions should be read together.
Although the Tribunal upheld findings that the applicants, Simiso Anthony Manatha and Ephraim Nqobi Hlatshwayo, had contravened section 7(1) of the Financial Advisory and Intermediary Services Act, it found that the FSCA’s sanction analysis was affected by several errors.
The Tribunal also warned about the consequences of unverified legal citations after finding that several authorities cited by Manatha either did not exist or did not support the propositions for which they were cited.
The investment clubs behind the case
The cases stem from the activities of two investment clubs, operated through Khanyazania Holdings (Pty) Ltd and later Azania Investors (Pty) Ltd, that pooled members’ contributions and used some of the funds to trade shares and exchange-traded funds through the Easy Equities platform.
Manatha was a director of both entities and the sole director of Azania Investors, while Hlatshwayo (then known as Thwala) was a co-director of Khanyazania Holdings. Neither company held a financial services provider licence, and neither Manatha nor Hlatshwayo was licensed or appointed as a representative.
Following an investigation triggered by a complaint received in 2023, the FSCA found that Khanyazania Holdings, Manatha, and Hlatshwayo had contravened section 7(1) of the FAIS Act between July 2020 and January 2021. It also found that Manatha and Azania Investors had contravened the same provision between January 2021 and November 2023. A third individual, Khwezi Jackson, was found to have contravened section 13(1)(a) of the Act between June 2020 and June 2022.
The FSCA initially proposed two administrative penalties of R1.5 million each but reduced each to R200 000 in its final decision. It debarred Manatha for 15 years, Hlatshwayo for 10 years, and Jackson for five years. It also imposed two administrative penalties of R200 000 each: one on Khanyazania Holdings, Manatha and Hlatshwayo, jointly and severally, and the other on Azania Investors and Manatha on the same basis.
Manatha and Hlatshwayo applied to the Tribunal for reconsideration of the FSCA’s decisions.
The Tribunal concluded that the FSCA was entitled to find that the investment clubs had contravened section 7(1) of the FAIS Act. In reaching that conclusion, it found that members were invited to contribute money that would be pooled and invested in shares, that they were told how the funds would be invested, and that their contributions were collected, administered, and used to trade in financial products.
The Tribunal found that telling members and prospective members that their pooled contributions would be invested in shares constituted advice in respect of a financial product. It also found that soliciting and receiving members’ money, placing it in a trading account, and causing shares to be bought and sold with it constituted intermediary services. In the Tribunal’s view, these activities amounted to the provision of financial services without the required authorisation.
The Tribunal also rejected the argument that the arrangements were sufficiently private to fall outside FAIS. It found that the stokvel and burial-society exemption relied upon did not apply because it concerned financial services rendered in respect of an assistance policy, whereas no insurance policy was involved.
The Tribunal said that a person who accepts or manages other people’s money for the purpose of investing in shares must be duly licensed. An honest belief to the contrary is not a defence to the contravention, although it may be relevant to sanction.
Penalties must be assessed individually
The Tribunal drew a distinction between its powers in relation to administrative penalties and debarments. Although it may substitute its own decision when reconsidering an administrative penalty imposed under Chapter 13 of the FSRA, it may only set aside and remit a debarment for further consideration.
The Tribunal identified two related but distinct problems with the administrative penalty orders. First, it held that section 167 does not authorise the FSCA to impose an administrative penalty on two or more persons jointly and severally. Second, it found that the FSCA had not carried out the individualised assessment contemplated by section 167. Its assessment of the sanctions was also affected by a number of evidential and reasoning errors.
Under the FSCA’s orders, each person named in a joint-and-several penalty could be held liable for the full R200 000, even though the penalty had been determined for their combined conduct rather than assessed separately for each person.
The Tribunal held that section 167 authorises the imposition of an appropriate penalty on a particular person for that person’s contravention. The factors in section 167(2), including co-operation with the regulator, submissions in mitigation, financial or commercial benefit, previous contraventions, and whether the conduct was deliberate or reckless, require consideration of the particular person and that person’s conduct.
It said a single penalty fixed for several persons jointly and severally could not be the product of that assessment. Joint-and-several liability was also not a default feature of statutory liability, and Chapter 13 did not confer the power to impose it on the FSCA.
The Tribunal found further support for this interpretation in the structure of Chapter 13. Section 173 provides for remission of a penalty on application by the person penalised, while section 174 renders an undertaking to indemnify another person against an administrative penalty void. The Tribunal reasoned that these provisions contemplate penalties borne personally by those on whom they are imposed, whereas joint-and-several liability could make one person answerable for another’s penalty.
The problem was illustrated by the different levels of involvement of Manatha and Hlatshwayo. Manatha’s contraventions spanned 41 months across two entities, whereas Hlatshwayo’s involvement was confined to seven months and one entity. The FSCA recognised differences in culpability when imposing debarment periods of 15 years on Manatha, 10 years on Hlatshwayo, and five years on Jackson. Yet its joint-and-several penalty orders did not distinguish between the monetary liability of Manatha and Hlatshwayo for the contravention involving Khanyazania Holdings.
The Tribunal said the connection between participants in the same scheme did not overcome this problem. A joint-and-several order could expose a person to the full amount of a penalty determined for several parties’ combined conduct, even where that amount had never been assessed as appropriate for that particular person.
The Tribunal noted that the FSCA had previously imposed a joint-and-several administrative penalty in the Viceroy Research Partnership LLC matter. However, the lawfulness of that form of order had not been considered in that case, and the Tribunal had found no previous decision by it or a court determining whether section 167 permits such orders.
During the hearing, the Tribunal sought an explanation from the FSCA of the legal and practical basis for joint-and-several liability, particularly where one wrongdoer might be more culpable than another. The FSCA referred to having “ways” of collecting the penalty, but the Tribunal found that this did not explain the legal or practical basis for the order or demonstrate how it would operate within the statutory framework.
Flaws in the sanction analysis
The Tribunal’s concerns extended beyond the use of joint-and-several penalties. It found that several of the factors relied on by the FSCA in determining the sanctions were either unsupported by the evidence or inadequately explained.
One of the Tribunal’s main criticisms related to the number of investors involved in the schemes. The FSCA treated approximately 128 clients as an aggravating factor when determining sanction. However, the Tribunal found that the figure had been derived from payment references rather than verified membership records and had not been established on the evidence. Although it accepted that the number of contributors substantially exceeded the 14 investors claimed by Manatha, it held that the FSCA was not entitled to treat 128 clients as an established fact.
The Tribunal was even more critical of the figures used to quantify investor losses and benefits derived from the schemes. The FSCA relied on a figure of R368 691.79 both as the loss suffered by investors and as the financial or commercial benefit obtained by the contraveners. The Tribunal said it could not reconcile that figure with the investigation report and found that the same amount had effectively been counted twice, once as investor loss and again as respondent benefit. It also found that loss could not simply be equated with money paid into the schemes, particularly where some funds had been invested and some had been repaid.
The Tribunal identified R111 971.77 as the investor funds established on the record but said no finding of actual loss could be made from the evidence.
The Tribunal further rejected the FSCA’s finding that investors had been promised a guaranteed return of 17.9%. It found that the allegation rested largely on an unproduced WhatsApp message and was contradicted by the regulator’s own witnesses, who testified that they understood the investments carried risk. In the Tribunal’s view, the alleged guarantee had not been established on a balance of probabilities and should not have been weighed as an aggravating factor.
Another point of disagreement concerned the applicants’ state of mind. The FSCA characterised the conduct as deliberate, relying in part on the knowledge of Jackson, who was an appointed representative of an authorised FSP. The Tribunal rejected the reliance on Jackson’s knowledge to characterise the applicants’ conduct as deliberate.
In Manatha’s case, the Tribunal found that his conduct was reckless rather than deliberate, taking into account, among other things, his role in the club, the duration of his involvement, and his admitted lack of knowledge about financial products. In Hlatshwayo’s case, the Tribunal likewise found the conduct reckless rather than deliberate, while taking account of his more limited involvement.
The Tribunal also identified errors in the FSCA’s assessment of the duration of the contraventions. In Manatha’s case, it noted inconsistent dates and an incorrect calculation of the overall duration. In Hlatshwayo’s case, the Tribunal emphasised that his relevant involvement was confined to seven months and one entity, materially narrower than Manatha’s.
Taken together, these deficiencies led the Tribunal to conclude that the statutory factors in section 167 had not been applied in the individualised manner required by the Act. The joint-and-several form of liability was independently found to be unauthorised under section 167. Because the administrative penalties were Chapter 13 decisions, the Tribunal could substitute its own penalties rather than remit the matter to the FSCA for reconsideration.
In Manatha’s case, the Tribunal replaced the two R200 000 joint-and-several penalties with individual penalties of R60 000 for the contravention involving Khanyazania Holdings and R100 000 for the contravention involving Azania Investors, reducing his total liability to R160 000. It emphasised that these penalties were Manatha’s sole liability and that he could not be held responsible for any portion of the penalties imposed on the companies or any other person.
In Hlatshwayo’s case, the Tribunal set aside the R200 000 joint-and-several penalty insofar as it applied to him and substituted an individual penalty of R40 000. In determining the amount, it took into account, among other factors, his more limited involvement, the absence of personal enrichment, the lack of any prior contravention, and the fact that his conduct was reckless rather than deliberate.
The Tribunal did not set aside the penalties insofar as they applied to the companies, which had not applied for reconsideration, but drew its reasoning to the FSCA’s attention.
The substituted penalties contained no reimbursement component under section 167(3) because the FSCA had not quantified any such costs.
Debarments remitted
The Tribunal did not find that debarment was inappropriate.
In Manatha’s case, it held that the jurisdictional requirements for a debarment had plainly been met because he had materially contravened a financial sector law and, as a key person in both entities, procured them to do the same. A debarment was therefore competent and, in the Tribunal’s view, called for.
Its concern was with the period selected by the FSCA. The Tribunal found that the regulator had provided no meaningful explanation for why it settled on debarment periods of 15 years for Manatha, 10 years for Hlatshwayo, and five years for Jackson, or why it had reduced the longer periods originally proposed in its notice of intention. It noted that the choice of a debarment period involves the exercise of a discretion that can determine whether a person is able to earn a living in the sector and therefore requires reasons.
The Tribunal also found that the FSCA’s assessment of the seriousness of the misconduct had been affected by the same flaws that undermined its penalty analysis, including errors relating to investor numbers, investor losses, the alleged guaranteed return, the applicants’ state of mind and the duration of the contraventions.
It therefore set aside Manatha’s 15-year debarment and remitted the matter to the FSCA for reconsideration of the period. The Tribunal expressed no view on what period would ultimately be appropriate.
Hlatshwayo’s position was different. He made it clear that his application was directed primarily at the administrative penalty and that he did not persist with a challenge to the debarment. As a result, the Tribunal did not interfere with his 10-year debarment while substituting a lower administrative penalty.
Tribunal warns against unverified legal citations
The Tribunal found that a number of authorities cited by Manatha either did not exist, were inaccurately cited, or did not support the propositions for which they were relied upon.
The pattern was “consistent with reliance on a generative artificial-intelligence tool without verification”, the Tribunal said, although it made no finding on how the citations came to be included in the papers. It also noted that Manatha had represented himself and was not a legal practitioner.
The Tribunal nevertheless issued a pointed warning: “A party who places invented authority before a tribunal wastes public resources, corrupts the record and potentially destroys the credibility of everything else he says.”
It imposed no consequence beyond disregarding the authorities. However, the Tribunal indicated that if Manatha had been legally represented, section 234(2) of the FSRA, which empowers the Tribunal in exceptional circumstances to make a costs order against a party, would have required consideration.
