JP Markets was in 2016 issued with a category 1 licence to ‘provide advice and render intermediary services in respect of derivative instruments and deposits as defined in the Banks Act’.
JP Markets has responded to queries over papers filed by the Financial Sector Conduct Authority (FSCA) in the High Court in Johannesburg about how the South African-based online forex broker allegedly operated in “absolute conflict” with its clients.
The firm allegedly traded against them, meddling with the trading conditions to drive down high earners’ profitability and hike up the firm’s. The FSCA suspended JP Markets’ financial services provider licence in June and is now moving to liquidate the company.
“Our client is opposing the FSCA’s application for liquidation and we are in the process of filing answering papers,” JP Markets attorney Darren Hanekom said. “The liquidation application itself is predicated upon statements made by purported ‘whistleblowers’ who have not filed any affidavits under oath.
“We believe the FSCA ought to have engaged role-players in the space rather than rushing to court on hearsay evidence.” FSCA business supervision division head Kedibone Dikokwe’s founding affidavit said JP Markets FSP licence had been provisionally suspended on an urgent basis .
The firm had to inform all affected clients of this and that it was and prohibited from concluding any new business . The investigation into JP Markets, which is still ongoing, came in response to a barrage of clients’ complaints, mainly that the firm had not paid out or that they had suffered losses due to interrupted access to the platform.
Described on its website as a “global forex powerhouse”, JP Markets was in 2016 issued with a category 1 licence to – as Dikokwe explained – “provide advice and render intermediary services in respect of derivative instruments and deposits as defined in the Banks Act”.
But during investigations, a different picture of its operations emerged. “JP Markets offered their clients access to a platform to trade in CFDs [contracts for difference]. Clients opened accounts and deposited funds into one of the bank accounts in the name of and under the full control of JP Markets.
“A deposit would then permit the client to trade in forex exchange CFDs to the extent of the deposited funds. Clients would enter transactions and make profits or make losses, as the underlying forex exchange moved up or down,” she said.
“However, clients were not trading on an online decentralised global financial market; they were merely entering trades on a platform that was no more than an off-the-shelf software application that recorded these trades. “In fact, clients were purchasing CFDs issued by JP Markets … JP Markets required an overthe-counter derivative provider licence to conduct these services lawfully.”