FSCA is looking into two companies for engaging in "unauthorized" OTC derivative trading.

According to the Financial Sector Conduct Authority (FSCA), it is looking into Nirvesh Financial Services (Pty) Ltd and Veracity Markets (Pty) Ltd for allegedly engaging in illegal over-the-counter (OTC) derivative transactions as well as potential violations of other financial sector rules.

Both organizations, according to a media release from the FSCA dated July 13th, were completely cooperating with the Authority.

A Category I FSP license has been granted to Nirvesh Financial Services (NFS) for derivative instruments among other items. Veracity Markets has been designated as NFS's legal representative.

According to the FSCA, neither NFS nor Veracity was permitted to supply, originate, issue, or sell OTC derivatives in South Africa under the Financial Markets Act.

When contacted for comment, NFS stated: It should be emphasized that the FCSA has certified that Veracity Markets is in a position to honor their present client positions and is happy with this fact. We are helping the inquiry along and will only comment on its outcome.

Veracity Markets and NFS have received directives from the Authority to, among other things:

While the inquiry is still ongoing, stop functioning as OTC derivative suppliers, as well as stop advertising or representing oneself as such;

Stop starting new OTC derivatives businesses;

Close any open OTC derivative trading positions held by its clients. Pay out all money owed to clients upon request, within seven working days of the requested date, regardless of the reason for the debt.

Veracity informed Moonstone that it has begun to take steps to comply with the instruction of the FSCA and “will issue a written response to the FSCA in this respect within the appropriate deadline.”

Veracity said that company has always communicated with the FSCA in an open and transparent manner.

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