Contracts for difference (CFDs) are appearing repeatedly in the Financial Sector Conduct Authority’s enforcement work, both as high-risk products used in retail trading schemes and as instruments linked to more technical forms of market abuse.
The FSCA’s Regulatory Actions Report for the year to 31 March 2026 identifies equity CFD manipulation and gatekeeper failures among the market-integrity risks that require continued supervisory and enforcement attention.
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The report says the Authority is investigating conduct in which prices in the underlying equity market are allegedly manipulated to generate profits from significantly larger transactions in related derivative instruments.
During a media briefing on 31 July, Gerhard van Deventer, the FSCA’s head of enforcement, said South Africa has a regulatory framework for intermediaries who advise on or facilitate CFD transactions. This includes obligations around suitable advice and the requirement that intermediaries ensure clients deal with properly regulated providers.
He said CFDs are, in his view, high-risk products because of their gearing effect, which means they will not be suitable for many investors. He also said CFDs are frequently present in matters where the FSCA is investigating scams or misconduct.
Van Deventer drew a distinction between genuine, lawful CFD operations and cases that are effectively “fraud disguised as a CFD trading platform”. In some cases, he said, the financial services provider is effectively behind the product provider as well, creating a significant conflict of interest because the transaction can operate as a zero-sum arrangement: if the client loses, the provider wins.
CFDs featured in several matters discussed elsewhere in the report, including cases involving online trading platforms, trading signals, and unauthorised discretionary trading. But the FSCA’s market-integrity concern is not limited to unauthorised advice or consumer-facing scams. The report also identifies a separate risk: the manipulation of underlying equity prices to benefit related CFD positions.
Equity CFD manipulation
The FSCA says certain forms of market manipulation emerge periodically as market participants seek to exploit weaknesses in pricing mechanisms across interconnected markets. One trend currently under investigation involves manipulating prices in the underlying equity market to generate profits from larger transactions in related derivative instruments. The FSCA says it has three investigations involving this type of conduct.
The common scheme described in the report targets CFD issuers whose pricing models are linked directly to the best bid and offer in the underlying equity market. In these cases, CFD prices are determined from the prevailing best bid or offer, regardless of the volume available at those price levels and often without the issuer first hedging its exposure.
This creates the possibility that a small order in the underlying equity market can influence the price at which a much larger CFD position is opened or closed. The report explains that a CFD issuer may be prepared to sell a substantial quantity of CFDs at the best offer price in the underlying market or buy a substantial quantity at the best bid price, even where that price has been influenced by a very small equity order.
The FSCA says conduct that appears commercially unjustifiable when viewed in isolation may become explicable when considered alongside related activity in another market. It will therefore assess potentially manipulative conduct holistically and consider whether transactions in related markets, or surrounding circumstances, provide a motive for orders that otherwise appear to lack a legitimate commercial rationale.
Van Deventer told the media that the FSCA has expanded the way it looks at market manipulation. He said the apparent motive may not always be obvious in the equities market itself but may become clear when the related CFD or online trading position is considered.
The report notes that similar forms of cross-market manipulation have been identified by regulators in other major jurisdictions, including the United Kingdom, where the Financial Conduct Authority has highlighted the risk of market participants using orders in the underlying market to narrow the spread and obtain advantageous pricing in related CFD and spread-betting products.
Gatekeepers and market integrity
The FSCA also places emphasis on the role of gatekeepers in maintaining fair, orderly, and efficient financial markets. The report identifies traders, brokers, compliance officers, and auditors as market participants whose functions help ensure that market prices reflect accurate information, transactions are executed transparently, and market abuse is detected and prevented.
The report says traders are often well placed to identify unusual trading patterns, potential market manipulation, insider trading or other misconduct. By complying with regulatory requirements, avoiding orders that constitute market abuse, and reporting suspicious activity where appropriate, traders support market integrity and investor protection.
Van Deventer told the media that the FSCA values gatekeeper functions and that every industry has participants who are expected to prevent abuse. In securities trading, he said, traders dealing with clients are often the people who know the client, understand what the client is trying to do, and can see when a trade is suspicious.
Two case studies in the report, involving Labat Africa Ltd and Texton Property Fund Ltd, illustrate the FSCA’s view that traders cannot simply execute suspicious client instructions where the trading amounts to a prohibited practice. In both matters, the FSCA found that traders had participated in prohibited trading practices and failed in their gatekeeping role.
Labat: orders aimed at driving the share price lower
In the Labat matter, the FSCA found that Mr Osman, the client, and Mr Doherty, the trader, participated in 10 prohibited transactions as part of a practice that sought to drive the Labat share price to lower levels.
The report says Doherty did not benefit in a material monetary manner from the transactions and had reported the transactions to his compliance officer. However, the FSCA found that the intent behind the transactions was clear from, among other things, the lack of economic rationale for the orders, the trading patterns, and what the client had said.
The report quotes conversations in which the client allegedly made statements such as, “I am trying to drop it now”, and “You will just play with it and see how low you can go.” It also records an exchange in which the trader asked, “You want to push the price higher?” and the client answered, “Ja.”
The FSCA did not accept arguments that the Financial Intelligence Centre Act required the trader to continue placing orders even where doing so would result in prohibited trading practices. It found that Osman and Doherty contravened section 80(1)(a) of the Financial Markets Act (FMA).
The FSCA imposed a R2-million administrative penalty on Osman and a R250 000 penalty on Doherty. Doherty’s conduct was also referred to the JSE for consideration of the conduct of its member.
Texton: small uneconomical orders to increase the price
In the Texton matter, the FSCA found that Mr Van Heerden, the client, and Mr Dateline, the trader, placed small uneconomical orders with the sole or dominant purpose of increasing the Texton Property Fund Ltd share price.
The FSCA did not accept the argument that Dateline had not contravened the law because he was merely executing the client’s instructions. It found that Van Heerden and Dateline contravened section 80(1)(a) of the FMA.
The authority imposed a R2m administrative penalty on Van Heerden and a R500 000 penalty on Dateline. Dateline’s conduct was also referred to the JSE.
At the time of the report, Dateline had launched a reconsideration application with the Financial Services Tribunal. The report says he admitted having contravened section 80 of the FMA and asked for the penalty to be reduced. The FSCA was opposing the application, and the matter remained ongoing.
A broader message to market professionals
The Labat and Texton cases show that the FSCA’s focus is not limited to the clients who initiate suspicious trades. The regulator is also willing to act against traders who participate in prohibited trading practices or fail to exercise their gatekeeping responsibilities.
The report says effective gatekeepers are essential to fostering trust in the financial system. Without vigilance, professionalism and ethical conduct by frontline market participants, markets become more vulnerable to abuse, inefficiency and loss of investor confidence.
Van Deventer said the FSCA may do more in this area, indicating that market professionals who are expected to identify and prevent suspicious transactions may face closer scrutiny where they allow such conduct to proceed.
Taken together, the FSCA’s discussion of CFDs, cross-market manipulation, and trader misconduct points to a more holistic approach to market abuse. The Authority is looking not only at the visible equity-market order, but also at related derivative positions, the economic motive behind the trading, and whether gatekeepers fulfilled their role in protecting market integrity.
Click here to download the 2026 Regulatory Actions Report.
