Financial regulators have a sole purpose – ensuring the fairness of their respective country’s financial markets.
However, the 2020 JP Markets scandal in South Africa raised serious questions about the limits of regulatory authority and the consequences of overreach.
In this high-profile case, the Financial Sector Conduct Authority (FSCA) moved to suspend JP Markets’ license and secured a liquidation order against the company.
While their actions were ostensibly to protect consumers, the Supreme Court of Appeal later found that the liquidation was unjust, highlighting a troubling instance where regulatory intervention may have exceeded its mandate.
This TRU Insight walks you through the multi-year rocky relationship between JP Markets and the Financial Sector Conduct Authority.
What Is JP Markets in South Africa?
JP Markets was founded by Justin Paulsen in 2016. Created to provide forex trading opportunities, JP Markets gained popularity as a brokerage service provider for forex and contract-for-difference (CFD) traders.
To ensure accessibility for traders at all levels, the platform offers an easy-to-use interface, various trading accounts, and a seamless JP Markets login process on its website.
JP Markets Account Types and Minimum Deposit
JP Markets offers various account types to ensure suitability for every trader’s needs.
| Account Type | Minimum Deposit | Account Description |
|---|---|---|
| Standard Account | R100 | A beginner-friendly option with basic trading features. |
| Premium Account | R1,500 | Ideal for intermediate traders seeking tighter spreads. |
| VIP Account | R5,000 | Designed for professionals with lower spreads and premium benefits. |
| Islamic Account | R1,500 | Swap-free account tailored for compliance with Islamic finance principles. |
| Micro Account | R100 | Perfect for new traders practicing with smaller investments. |
| Zero Stop Account | R100 | Offers high leverage for traders aiming for aggressive strategies. |
What Happened to JP Markets?
Founded in 2016, Pretoria-based JP Markets was once the largest South African forex broker. Its brokerage service has penetrated the South African financial markets, garnering more than 320,000 clients.
JP Markets has around 20,000 to 40,000 active traders out of hundreds of thousands of clients. Its high-volume transactions made the company secure around R1 billion in deposits monthly.
However, everything changed when the FSCA provisionary suspended JP Markets’ license and proposed liquidation of the company in July 2020.
The regulatory sanction was due to flooded complaints against the largest forex broker. Among the claimed issues are the denial of withdrawal requests, unposted deposits, and, the most pressing of all, the alleged manipulation of data feeds.
Two months later, the Gauteng High Court ordered the final liquidation of JP Markets.
June 2020 – JP Markets Complaints Surface
The 2020 JP Markets scandal erupted due to allegations that JP Markets was not paying out client withdrawals, failing to post client deposits to their trading accounts, and manipulating data feeds.
Declining Withdrawal
JP Markets faced numerous complaints from clients who reported that their withdrawal requests were delayed or declined.
This issue became particularly severe in early 2020, leading to significant client dissatisfaction and suspicion.
The FSCA received multiple reports of clients being unable to access their funds, a major factor in the regulatory scrutiny and subsequent legal actions against the company.
Failure to Post Account Deposits
Another critical issue was JP Markets’ failure to post client deposits to their trading accounts. Clients reported that the funds were not reflected in their accounts after making deposits, preventing them from trading.
This not only caused financial losses but also eroded trust in the platform. The FSCA’s investigation revealed that these failures were systemic and contributed to the decision to seek the liquidation of JP Markets.
Manipulation of Data Feeds
The most technical and severe allegation was the manipulation of data feeds.
JP Markets was accused of manipulating market data to disadvantage certain profitable clients. Often referred to as stop hunting or price shading, this practice involves altering the data feed to trigger stop-loss orders or create unfavorable trading conditions for clients.
An insider revealed that the company had a practice of placing profitable clients into a special group with higher spreads, effectively reducing their chances of making profits.
July 2020 – FSCA Urges the High Court to Liquidate JP Markets
The regulator took a bold step in July 2020 by applying to the High Court to liquidate JP Markets. This marks the first action that steered the multi-year conflict between the broker and the regulator.
This application was made under section 96 of the Financial Markets Act No. 19 of 2012 (FMA) and section 38B of the Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act).
The FSCA’s rationale was centered on safeguarding the public interest following several concerns about JP Markets’ operations.
The FSCA alleged JP Markets was involved in irregularities, including conducting Over-the-Counter Derivative Provider (ODP) business without proper licensing.
The liquidation request followed multiple complaints from clients who claimed to have suffered losses, particularly during periods of market volatility, such as the COVID-19 crash of March 2020.
September 2020 – The Gauteng High Court Ordered the Final Liquidation of JP Markets
On 8 September 2020, the Gauteng High Court granted the FSCA’s application for liquidation.
The court’s decision meant JP Markets was forced to cease operations, and its assets were frozen to protect creditors and clients.
The liquidation order was a rare and decisive action, reflecting the seriousness of the allegations against the broker.
It was one of the most prominent cases involving a South African forex broker at the time, drawing widespread attention within the financial industry.
October 2021 – The Supreme Court of Appeal (SCA) Overturned the Liquidation Order Against JP Markets
In a landmark decision on 20 October 2021, the Supreme Court of Appeal (SCA) overturned the liquidation order against JP Markets.
The unanimous verdict by all five judges declared that liquidation was not a “just and equitable remedy” in this case.
The SCA’s decision highlighted a critical evaluation of the FSCA’s actions. While the court acknowledged the broker’s operational shortcomings, it emphasized that alternative remedies could have been pursued instead of liquidation.
The ruling reinstated JP Markets’ ability to operate, albeit with lingering reputational damage and regulatory scrutiny.
May 2023 – FSCA Imposed R100,000 Fine Against JP Markets
Despite the SCA overturning the liquidation order, the FSCA continued its regulatory oversight of JP Markets.
The Supreme Court defined the broker as an Over-the-Counter Derivative Provider (ODP), which meant it was required to obtain a license to operate legally under South African law.
JP Markets’ failure to secure this license led the FSCA to impose a R100,000 fine in May 2023. This penalty was issued under section 2 of the ODP Regulations, which prohibits unauthorized ODP business operations. The fine served as a reminder of the FSCA’s commitment to enforcing compliance within South Africa’s financial markets.
Read the full press release of the FSCA regarding the matter:
Did FSCA Overstep in the Matter?
The FSCA’s intervention was prompted by customer complaints during the March 2020 “Covid crash.”
A technical glitch caused JP Markets to continue trading while other global markets were paused due to extreme price fluctuations. This anomaly raised suspicions about the broker’s operations and compliance with market regulations.
While the liquidation was overturned, the FSCA’s actions highlight the regulatory challenges faced by brokers and underscore the importance of compliance in South Africa’s financial markets.
2020 JP Markets Forex Scandal’s Implication in the SA Financial Markets
The JP Markets saga underscores the importance of regulatory compliance and transparent operations within the financial services sector.
While the SCA’s decision to overturn the liquidation order demonstrated a commitment to fairness and due process, the FSCA’s enforcement actions highlighted the critical role of regulators in protecting public interests.
This case serves as a cautionary tale for brokers and clients alike, emphasizing the need for proper licensing, robust operational systems, and adherence to market regulations.
It also raises important questions about the balance between regulatory authority and judicial oversight in safeguarding South Africa’s financial markets.
