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FSCA investigating two entities for ‘unauthorised’ OTC derivative trading

The FSCA says it is investigating Nirvesh Financial Services (Pty) Ltd and Veracity Markets (Pty) Ltd for allegedly conducting unauthorised over-the-counter (OTC) derivative business and for possible breaches of other financial sector laws.

In a media release dated 13 July, the FSCA said both entities were co-operating fully with the Authority.

Nirvesh Financial Services (NFS) has a Category I FSP licence for, among other products, derivative instruments. Veracity Markets is an appointed juristic representative of NFS.

The FSCA said neither NFS nor Veracity were authorised in terms of the Financial Markets Act to provide, originate, issue or sell OTC derivatives in South Africa.

Approached for comment, NFS said: “It should be noted that the FCSA has confirmed that, and is satisfied with the fact that, Veracity Markets is in a position to honour their current client positions. We are co-operating with the investigation and can only comment upon its conclusion.”

The Authority has directed Veracity Markets and NFS to, among other things:

  • Cease acting as OTC derivative providers and/or advertising and/or holding themselves out as OTC derivative providers, pending the finalisation of the investigation;
  • Cease conducting any new OTC derivative business;
  • Close all open OTC derivative trading positions of its clients; and
  • Pay out to clients all funds owing to them on request, within seven working days from the date of the request, irrespective of the basis for the liability.

Veracity told Moonstone it has started working on meeting the requirements of the FSCA’s directive “and will provide a formal response to the FSCA in this respect within the required timeline”.

Veracity said it has always maintained open and transparent communication with the FSCA, and it took pride in “the client-centric manner” in which it conducts its business.

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