In July 2025 the Gauteng high court set aside a rational November 2022 decision of the Financial Services Tribunal (FST) and declared that an administrative penalty under section 167 of the Financial Sector Regulation Act could be imposed on a foreign person because the administrative penalty had been served on the foreign persons by electronic means and that South Africa is “sufficiently closely connected to the events to make it appropriate and convenient for the regulatory power to be exercised” over the foreign persons.
The factual background to this finding was the manipulation by a US corporation and natural persons resident in England, France and Australia of the share price of a South African bank by deliberately publishing negative views about the bank in order to drive down the share price and to make for themselves a bounty of R92 million. The conduct beached South African financial markets laws.
As found by the FST, jurisdiction over a foreign person requires jurisdiction over the conduct as well as the arrest of the foreign person or attachment of their assets. In this case, no arrest had taken place, and the foreign persons had no assets in South Africa. According to previously developed South African common law, part of the jurisdiction requirement is met if there is a sufficient connection between the cause of action and the area of jurisdiction of the South African courts. However, the foreign defendant must be served with a summons while in South Africa to establish the requirement for personal jurisdiction. Although an administrative penalty “has the effect of a civil judgment and may be enforced as if lawfully given in a South African court according to section 157 of the FSR Act”, that does not itself create jurisdiction over foreign persons.
The high court decided to develop the common law. Development of the common law is permitted by section 173 of the Constitution if it “is in the interests of justice to do so”.
The court said “If one has regard to the purpose and object of the regulation of financial markets, its importance far outweighs the necessity to serve any documents that initiate the enforcement of foreign regulation on a foreign person personally in order to find jurisdiction. The development of the common law in this regard will ensure that effective regulation of financial activity takes place globally.”
The judgment overlooks that the extraterritorial enforcement of local laws and penalties is not a matter for South African common law. It relates to private international law. Private international law concerns itself with the comity of nations and the sovereignty principle that the punitive actions of one government should not be imposed on citizens of other governments. The suggestion that, in this context, electronic service on someone in a foreign country is equivalent to serving a summons on a person whilst in South Africa misunderstands the nature of the requirement in the context of the extraterritorial enforcement of South African laws on foreign persons. Who knows what penalties imposed by foreign governments would be enforced against South African citizens if this were international law?
The matter has been remitted to the FST to make a decision on the merits of the reconsideration application, which will be a difficult task for a body that has found that the application had no merits in law. We will have to wait to see whether there is an appeal against the high court decision or alternatively what the FST does with the remittal to it for a decision.
The remedy in these matters is for the South African regulator to report the misconduct to any foreign regulator that regulates the conduct of the foreign persons. That regulator can then deal with any honesty and integrity issues relating to the misconduct of the foreign persons. If the foreign persons are not regulated in any way, there is probably no remedy except suing for available relief in the foreign country.
Decision – Viceroy Research Partnership LLC v FSCA and Others.pdf