JP Markets SA (Pty) Limited v The Financial Sector Conduct Authority (FSCA)

JP Markets SA (Pty) Ltd was a company operating as an over-the-counter (OTC) derivatives provider through offering contracts-for-difference (CFDs) to approximately 300,000 client accounts. The Financial Markets Act Regulations introduced in February 2018 required OTC derivative providers to obtain authorization (an ODP licence) from the Financial Sector Conduct Authority (FSCA). Despite grace periods and ongoing consultations with the FSCA about the licensing process from July 2019 onwards, JP Markets had not submitted its ODP licence application by the time the FSCA launched liquidation proceedings on 7 July 2020. JP Markets submitted its ODP licence application on 20 August 2020, after the liquidation application was launched. The FSCA had received over 100 complaints from JP Markets' clients regarding failure to make payments and interrupted access to the trading platform. The FSCA applied for liquidation under s 96 of the Financial Markets Act 19 of 2012 (FMA) on grounds it was just and equitable. The Gauteng High Court granted the liquidation order. JP Markets appealed with leave.

• Whether the FSCA had the jurisdictional power under s 96 of the FMA to apply for liquidation, specifically whether an investigation had to be 'concluded' before the power could be exercised
• Whether it was just and equitable to wind up a solvent company (JP Markets) on grounds it operated as an ODP without a licence
• Whether the objects of the FMA would be achieved by winding up JP Markets
• Whether alternative remedies were available and should be considered before ordering liquidation

The appeal was upheld with costs, including costs of two counsel. The order of the High Court granting liquidation was set aside and replaced with an order dismissing the application with costs, including costs of two counsel.

The binding legal principles established are: (1) Under s 96 of the Financial Markets Act, the phrase 'after an investigation has been conducted' does not require the investigation to be concluded or finalized - an ongoing investigation satisfies the jurisdictional requirement; (2) When determining whether it is just and equitable to wind up a company under s 96 of the FMA (read with s 81 of the Companies Act), the court must assess whether the liquidation would achieve the objects of the FMA as set out in s 2; (3) A court considering whether to wind up a solvent company on just and equitable grounds must consider the availability of alternative remedies, particularly where the FMA serves public interest purposes; (4) Where a company has applied for the regulatory licence it requires and that application is pending, liquidating the company before determination of the application would not serve the regulatory objects and is not just and equitable; and (5) Operating without a required licence, without more (such as evidence of systemic risk, fraud, or significant consumer harm), does not necessarily make it just and equitable to wind up a substantial, solvent business.

The Court expressed doubt (obiter) about whether s 38B of the FAIS Act could find application in this case, noting: (1) the winding-up was not about JP Markets' conduct as a financial services provider (FSP) qua FSP, but rather about its OTC derivatives business; (2) the phrase 'in accordance with the Companies Act' in s 38B appears problematic as s 81 of the Companies Act does not enumerate the FSCA among classes of persons who may apply for winding up of a solvent company, suggesting the FSCA could only apply under s 157(1)(d) when acting in the public interest with leave of court. However, the Court found it unnecessary to determine these issues given its conclusions under s 96 of the FMA. The Court also noted that while the traditional categories of 'just and equitable' grounds for winding up (developed in older case law) remain applicable under the Companies Act, most apply where the applicant is a shareholder, and none applied to JP Markets' circumstances. The Court observed that JP Markets was not the only entity operating as an ODP without a licence - eight other providers were similarly operating, and only one had submitted a licence application, yet the FSCA had taken no action against them, raising questions about selective enforcement.

This judgment is significant in South African financial markets law as it clarifies: (1) the jurisdictional requirements for the FSCA to exercise its statutory power to apply for liquidation under s 96 of the FMA - an ongoing investigation suffices and need not be concluded; (2) the test for determining whether liquidation is 'just and equitable' under s 96 must be linked to achieving the objects of the FMA as set out in s 2; (3) courts must consider the availability of alternative remedies before ordering the drastic measure of liquidating a solvent company, particularly in regulatory contexts; (4) the importance of regulatory fairness - allowing a pending licence application to be determined before liquidating the applicant entity; and (5) that operating without a required licence alone, without evidence of systemic risk or harm, may not justify winding up a substantial, solvent business. The decision emphasizes proportionality in regulatory enforcement and protection of legitimate business interests while balancing public interest objectives in financial regulation.