The Financial Sector Conduct Authority (FSCA) has published press releases warning the public against foreign entities, ByBit Fintec Limited and FXT Trading Ltd.

The FSCA suspects that these entities are offering the South African public access to their online derivative trading platforms, despite not being properly licensed in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002 (FAIS Act) and the Financial Markets Act, 19 of 2012 (FMA).

The Regulations to the FMA prohibit any person from acting as, or holding itself out as, an Over-the-counter Derivatives Provider (ODP) without being authorised thereto by the FSCA.

Any entity applying for authorisation as an ODP must do so in the prescribed manner and submit evidence of its compliance with the FMA, the Regulations, and FMA Conduct Standards 1 and 2 of 2018.

There is a clear distinction between facilitating the entry into derivative transactions by a client, for which an entity requires authorisation as a financial services provider in terms of the FAIS Act, and issuing over-the-counter derivative instruments, for which an entity must be licensed as an ODP.

FSPs should be aware of this distinction and carefully examine their business model to ensure they do not fall foul of the regulations.